SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential. For Use of the Commission
[X] Definitive proxy statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PERFORMANCE TECHNOLOGIES, INCORPORATED
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee previously paid with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration no.:
(3) Filing party:
(4) Dated filed:
Notes:
May 1, 2003
To Our Stockholders:
You are cordially invited to attend the 2003 Annual Meeting of the
Stockholders of Performance Technologies, Incorporated at the Performance
Technologies headquarters located at 205 Indigo Creek Drive, Rochester, New York
14626 on Tuesday, June 3 at 10 a.m. local time.
The matters expected to be acted upon at the meeting are described in
detail in the attached Notice of Annual Meeting of Stockholders and Proxy
Statement. The Company's 2002 Annual Report, which is contained in this package,
sets forth important financial information concerning the Company.
A brief report will be made at the meeting of the highlights for the year
2002, and there will be an opportunity for questions of general interest to the
stockholders.
We sincerely hope you will be able to attend the Annual Meeting, but if you
cannot do so, it is important that your shares be represented. Please sign, date
and return the proxy card in the enclosed return envelope, which requires no
postage if mailed in the United States. For some stockholders, information
regarding telephone and Internet voting is included in the proxy card
instructions.
On behalf of the officers and directors, I wish to thank you for your
interest in the Company and your confidence in its future.
Very truly yours,
/s/ John M. Slusser
------------------------
John M. Slusser
Chairman of the Board
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 3, 2003
The Annual Meeting of Stockholders (the "Meeting") of PERFORMANCE
TECHNOLOGIES, INCORPORATED (the "Company") will be held at Performance
Technologies, 205 Indigo Creek Drive, Rochester, New York 14626 on Tuesday, June
3, 2003 at 10 a.m., local time, for the following purposes, which are more fully
described in the accompanying Proxy Statement:
1. To elect two nominees to the Board of Directors of the Company for a
three-year term.
2. To consider and act upon a proposal to adopt the Performance Technologies,
Incorporated 2003 Omnibus Incentive Plan.
3. To consider and act upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent public accountants
for the fiscal year ending December 31, 2003.
4. To transact such other business as may properly come before the Meeting or
any adjournments thereof.
The Board of Directors has fixed the close of business on April 4, 2003 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Meeting.
A Proxy Statement and Proxy are enclosed.
By Order of the Board of Directors,
/s/ Reginald T. Cable
-----------------------------------
Reginald T. Cable
Secretary to the Board
Dated at Rochester, New York
May 1, 2003
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
PLEASE PROMPTLY SIGN AND RETURN THE ENCLOSED PROXY CARD. FOR SOME STOCKHOLDERS,
INFORMATION REGARDING TELEPHONE AND INTERNET VOTING IS INCLUDED IN THE PROXY
CARD INSTRUCTIONS.
PERFORMANCE TECHNOLOGIES, INCORPORATED
205 Indigo Creek Drive
Rochester, New York 14626
May 1, 2003
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 3, 2003
GENERAL INFORMATION
This proxy statement is furnished to stockholders in connection with the
solicitation of proxies by the Board of Directors of PERFORMANCE TECHNOLOGIES,
INCORPORATED (the "Company") to be used at the Annual Meeting of Stockholders of
the Company, which will be held on Tuesday, June 3, 2003 (the "Meeting"), and at
any adjournments thereof. This proxy statement and accompanying form of proxy
are first being mailed to stockholders on or about May 1, 2003. The proxy, when
properly executed and received by the Secretary of the Company prior to the
Meeting, will be voted as therein specified unless revoked by filing a written
revocation or a duly executed proxy bearing a later date with the Secretary
prior to the Meeting. A stockholder may also revoke his or her proxy in person
at the Meeting. Unless authority to vote for one or more of the director
nominees is specifically withheld, a signed proxy will be voted FOR the election
of the director nominees named herein and, unless otherwise indicated, FOR the
adoption of the Performance Technologies, Incorporated 2003 Omnibus Incentive
Plan and FOR the selection of PricewaterhouseCoopers LLP as the Company's
independent public accountants for the fiscal year ending December 31, 2003.
The cost of soliciting proxies will be borne by the Company. In addition to
the solicitation by use of the mails, directors, officers or regular employees
of the Company, without extra compensation, may solicit proxies personally, by
telephone, e-mail, telegraph or facsimile transmission. The Company has
requested persons holding stock for others in their names or in the names of
nominees to forward soliciting material to the beneficial owners of such shares
and will, if requested, reimburse such persons for their reasonable expenses in
so doing.
VOTES REQUIRED
Stockholders may vote by mail, telephone or the Internet. For some
stockholders, information regarding telephone and Internet voting is included in
the proxy card instructions. The total outstanding shares of capital stock of
the Company as of April 4, 2003, the record date for the Meeting (the "Record
Date"), consisted of 12,189,992 shares of Common Stock, par value $.01 per share
(the "Common Stock"). Only holders of Common Stock of record on the books of the
Company at the close of business on the Record Date are entitled to notice of
and to vote at the Meeting and at any adjournments thereof. Each holder of
Common Stock is entitled to one vote for each share of Common Stock registered
in his or her name. A majority of the outstanding shares of Common Stock,
represented in person or by proxy at the Meeting, will constitute a quorum for
the transaction of all business.
Pursuant to the provisions of the Delaware General Corporation Law,
directors shall be elected by a plurality of the votes cast by the holders of
shares of Common Stock present in person or represented by proxy at the Meeting
and entitled to vote at the Meeting. Because directors are elected by a
plurality of the votes cast, withholding authority to vote with respect to one
or more nominees will have no effect on the outcome of the election, although
such shares would be counted as present for purposes of determining the
existence of a quorum. Similarly, any broker non-votes (which occur when shares
held by brokers or nominees for beneficial owners are voted on some matters but
not on others in the absence of instructions from the beneficial owner) are not
considered to be votes cast and therefore would have no effect on the outcome of
the election of directors, although they would be counted for quorum purposes.
The affirmative vote of holders of a majority of shares of Common Stock
represented at the Meeting and entitled to vote on the proposal to adopt the
Performance Technologies, Incorporated 2003 Omnibus Incentive Plan is required
for approval of that proposal. Accordingly, abstentions and any broker
non-votes, since they are considered to be represented at the Meeting, would
have the same effect as votes cast against the proposal.
The affirmative vote of a majority of the votes cast is required to ratify
the selection of PricewaterhouseCoopers LLP as independent public accountants
for the Company for the fiscal year ending December 31, 2003. Abstentions and
any broker non-votes are not considered to be votes cast and therefore would
have no effect on the outcome of this proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table, with notes thereto, sets forth as of April 4, 2003
certain information regarding the Common Stock held by (i) the persons known to
the Company to own beneficially more than 5% of the Company's Common Stock, (ii)
each director of the Company, (iii) each executive officer of the Company, and
(iv) all directors and executive officers of the Company as a group. Unless
otherwise indicated immediately beneath the beneficial owner's name, the address
of each beneficial owner listed in the table below is c/o Performance
Technologies, Inc., 205 Indigo Creek Drive, Rochester, New York 14626.
Shares Beneficially Owned
Name of Beneficial Amount and Nature
Owner of Beneficial Ownership Percent of Class (1)
FMR Corp. 1,596,500(2) 13.1%
82 Devonshire Street, Boston, MA 02109
FleetBoston Financial Corporation 1,101,696(3) 9.0%
100 Federal Street, Boston, MA 02110
Putnam, LLC d/b/a Putnam Investments 1,046,908(4) 8.6%
One Post Office Square, Boston, MA 02109
Reginald T. Cable 788,199(5) 6.4%
150 Metcalfe Street, Ottawa, ON K2P 1P1 Canada
Royce & Associates, LLC 786,250(6) 6.4%
1414 Avenue of the Americas, New York, NY 10019
Charles E. Maginness 695,360(7) 5.7%
John M. Slusser 471,511(8) 3.9%
Bernard Kozel 437,923(9) 3.6%
Donald L. Turrell 316,496(10) 2.5%
William E. Mahuson 239,500(11) 2.0%
Dorrance W. Lamb 150,529(12) 1.2%
John J. Grana 119,894(13) *
John J. Peters 99,446(14) *
John E. Mooney 50,295(15) *
Paul L. Smith 15,000(16) *
Stuart B. Meisenzahl 13,250(17) *
Robert L. Tillman 10,000(18) *
All Directors and Officers as a Group (12 persons) 2,619,204(19) 20.3%
* Less than 1%.
(1) Percentage based upon 12,189,992 shares of Common Stock outstanding as
of April 4, 2003.
(2) The following information is derived from Amendment No. 6 to Schedule
13G dated February 14, 2003 filed by FMR Corp. Fidelity Management &
Research Company ("FMRC"), a wholly-owned subsidiary of FMR Corp, is the
beneficial owner of 1,596,500 shares as a result of acting as investment
advisor to various investment companies. The ownership of one investment
company, FA Value Strategies Fund, amounted to 1,223,100 shares. Edward
C. Johnson 3d, FMR Corp., through its control of FMRC, and the various
Fidelity Funds each has sole power to dispose of the 1,596,500 shares
owned by the Fidelity Funds. Neither FMR Corp. nor Edward C. Johnson 3d,
Chairman of FMR Corp., has the sole power to vote or direct the voting
of the shares owned directly by the Fidelity Funds, which power resides
with the Funds' Boards of Trustees. FMRC carries out the voting of the
shares under written guidelines established by the Funds' Boards of
Trustees.
(3) The following information is derived from Amendment No. 1 to Schedule
13G dated February 14, 2003 filed by FleetBoston Financial Corporation.
Fleet National Bank and Fleet Investment Advisors, Inc. are the listed
subsidiaries which acquired the security being reported by the parent
holding company. FleetBoston Financial Corporation has sole dispositive
power over 1,101,696 shares and sole power to vote or to direct the
voting of 726,396 shares.
(4) The following information is derived from a Schedule 13G dated February
6, 2003 filed by Putnam, LLC d/b/a Putnam Investments on behalf of
itself, Marsh & McLennan Companies, Inc. (its parent holding company),
Putnam Investment Management, LLC (a wholly-owned subsidiary of Putnam
Investments and investment adviser to the Putnam family of mutual funds)
and The Putnam Advisory Company, LLC (a wholly-owned subsidiary of
Putnam Investments and investment adviser to Putnam's institutional
clients). Both Putnam Investment Management, LLC and The Putnam Advisory
Company, LLC have dispositive power over the shares as investment
managers. However, each of the mutual fund's trustees has voting power
over the shares held by each fund, and The Putnam Advisory, LLC has
shared voting power over the shares held by institutional clients.
Putnam Investments and The Putnam Advisory Company, LLC have shared
voting power with respect to 440,460 of such shares. Putnam Investments
and The Putnam Advisory Company, LLC have shared dispositive power with
respect to 718,308 shares. Putnam Investments and Putnam Investment
Management, LLC have shared dispositive power with respect to 328,600
shares.
(5) Includes (a) 67,084 shares of Common Stock issuable upon exercise of
options currently exercisable; (b) 53 shares owned by Mr. Cable
directly; (c) 120,000 shares, owned by 3414850 Canada Inc., a
corporation organized under the laws of Canada, of which (i) Mr. Cable
is a 70% shareholder, and (ii) a trust for the benefit of Mr. Cable is a
30% shareholder; (d) 601,062 exchangeable shares of the Company's
wholly-owned subsidiary, 3688283 Canada Inc., which are exchangeable
into shares of the Company's Common Stock currently held by American
Stock Transfer and Trust Company as Exchange Agent and Voting Trustee,
in the following amounts: (i) 6,006 shares that will be owned by Mr.
Cable directly; and (ii) 595,056 shares that will be owned by 3414850
Canada Inc. Excludes 22,916 shares of Common Stock issuable upon
exercise of options not yet vested.
(6) The following information is derived from a Schedule 13G dated February
4, 2003 filed by Royce & Associates, LLC. Royce & Associates, LLC has
sole dispositive power and sole power to vote or to direct the voting of
786,250 shares.
(7) Includes (a) 10,000 shares of Common Stock issuable upon exercise of
options currently exercisable; and (b) 103,247 shares of Common Stock
owned of record by Mr. Maginness' wife. Mr. Maginness disclaims
beneficial ownership of the shares owned by his wife. Excludes 10,000
shares of Common Stock issuable upon exercise of options not yet vested.
(8) Includes (a) 19,000 shares of Common Stock issuable upon exercise of
options currently exercisable; and (b) 15,000 shares of Common Stock
owned of record by Mr. Slusser as custodian for his minor children
living in his household. Excludes 10,000 shares of Common Stock issuable
upon exercise of options not yet vested.
(9) Includes (a) 19,000 shares of Common Stock issuable upon exercise of
options currently exercisable; (b) 39,000 shares of Common Stock owned
of record by The Jayme E. Fund Trust U/A, Benjamin J. Fund Trust U/A and
Ariel D. Fund Trust U/A over which Mr. Kozel has voting and investment
powers; (c) 186,279 shares of Common Stock owned of record by the Kozel
Family, LLC, over which Mr. Kozel has voting and investment power; and
(d) 189,144 shares of Common Stock owned of record by The Kozel Holding
Company, LLC, over which Mr. Kozel has voting and investment power.
Excludes 10,000 shares of Common Stock issuable upon exercise of options
not yet vested.
(10) Includes (a) 223,645 shares of Common Stock issuable upon exercise of
options currently exercisable; (b) 87,876 shares owned jointly by Mr.
Turrell and his wife; and (c) 4,975 shares of Common Stock owned of
record by Mr. Turrell's wife as custodian for their child. Mr. Turrell
disclaims beneficial ownership of the shares owned by his wife as
custodian for their child. Excludes 40,105 shares of Common Stock
issuable upon exercise of options not yet vested.
(11) Includes 75,000 shares of Common Stock issuable upon exercise of options
currently exercisable.
(12) Includes 116,909 shares of Common Stock issuable upon exercise of
options currently exercisable. Excludes 28,646 shares of Common Stock
issuable upon exercise of options not yet vested.
(13) Includes (a) 119,334 shares of Common Stock issuable upon exercise of
options currently exercisable; and (b) 150 shares of Common Stock owned
of record by Mr. Grana's wife as custodian for their child living in
their household. Excludes 22,916 shares of Common Stock issuable upon
exercise of options not yet vested.
(14) Includes 98,884 shares of Common Stock issuable upon exercise of options
currently exercisable. Excludes 26,666 shares of Common Stock issuable
upon exercise of stock options not yet vested.
(15) Includes (a) 19,000 shares of Common Stock issuable upon exercise of
options currently exercisable; and (b) 29,045 shares of Common Stock
owned of record by Mr. Mooney's wife. Mr. Mooney disclaims beneficial
ownership of the shares owned by his wife. Excludes 10,000 shares of
Common Stock issuable upon exercise of options not yet vested.
(16) Includes 14,500 shares of Common Stock issuable upon exercise of options
currently exercisable. Excludes 10,000 shares of Common Stock issuable
upon exercise of options not yet vested.
(17) Includes 10,000 shares of Common Stock issuable upon exercise of options
currently exercisable. Excludes 10,000 shares of Common Stock issuable
upon exercise of options not yet vested.
(18) Excludes 1,667 shares of Common Stock issuable upon exercise of options
not yet vested.
(19) Includes 725,272 shares of Common Stock issuable upon exercise of stock
options currently exercisable. Excludes 180,000 shares of Common Stock
issuable upon exercise of stock options not yet vested.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. The Company currently
has eight directors, three in two classes and two in one class. Terms are
staggered so that only one class is elected at each Annual Meeting of
Stockholders. Each director so elected serves for a three-year term and until
his or her successor is elected and qualified, subject to such director's
earlier death, resignation or removal.
The Board of Directors recommends the election of the two nominees named
below, both of whom are currently directors of the Company. The Board of
Directors does not contemplate that any of the nominees will be unable to serve
as a director, but if that contingency should occur prior to the voting of the
proxies, the persons named in the enclosed proxy reserve the right to vote for
such substitute nominee or nominees as they, in their discretion, shall
determine.
Paul L. Smith, who has been a director since 1993, has chosen not to stand
for reelection to the Board of Directors due to changes in his personal
priorities and obligations that would make it difficult for him to actively and
fully participate as a director.
Information about the Directors
The following table sets forth certain information with respect to the
director of the Company who is being proposed for reelection at the Meeting for
a three-year term expiring in 2006 and the nominee for director of the Company
who is being proposed for a three-year term expiring in 2006.
PROPOSED FOR ELECTION AS DIRECTORS AT THE 2003 ANNUAL MEETING
FOR A THREE-YEAR TERM EXPIRING IN 2006
Director
Name and Background Since
Donald L. Turrell, age 55, has served as Chief Executive Officer of
the Company since 1997, and President and Chief Operating Officer 1995
since 1995. From 1985 to 1990, he held the position of Vice President
of Sales and Marketing and from 1990 to 1993, he held the position
of Vice President and General Manager of the Workstation Products
business unit. From 1993 to 1995, he held the position of President
of the Company's Performance Computer business unit. From 1977 to
1984, Mr. Turrell held various positions with Rochester Instrument
Systems, including Sales Manager, Product Marketing Manager, Vice
President of Sales and Vice President of Marketing.
Robert L. Tillman, age 55, is an independent business consultant.
From 2000 to 2002, he served as General Manager in Intel's Embedded March
Intel Architecture Division, where he was responsible for the 2003
operations of Ziatech Corporation. From 1997 to 2000 he held the
position of President of Ziatech Corporation. From 1971 until 1997,
he held various positions including division general manager at
four different locations with Hewlett-Packard Company. Mr. Tillman
was appointed to the Board of Directors on March 26, 2003 by the
Board of Directors to fill the vacancy created by the resignation
of Arlen Vanderwel on October 1, 2002. He has served on the Board of
Directors for a number of industrial trade organizations and
charitable organizations.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 1
The following table sets forth certain information with respect to each
director of the Company whose term in office does not expire at the Meeting.
DIRECTORS WHOSE TERMS DO NOT EXPIRE
AT THE 2003 ANNUAL MEETING
Director
Name and Background Since
John M. Slusser, age 50, a founder of the Company, has served as
Chairman of the Board since June 2001, as a director since the 1981
Company's inception in 1981 and as the Company's Chief Strategic
Officer since January 2003. From 1981 through 1995, he held various
positions within the Company, including President and Chief Executive
Officer. From 1995 until 2000, he served as Chairman of the Board of
InformationView Solutions Corporation and from 1995 to 1999 he served
as that company's Chief Executive Officer. Since 2000, he has
served as President of Radio Daze LLC.
Bernard Kozel, age 81, has served as a director of the Company since
1983. He is the former Chairman of the Board of J. Kozel & Son, a 1983
Rochester, New York-based structural steel company. He is President
of K.G. Capital Corporation.
Charles E. Maginness, age 70, served as Chairman of the Board from
1986 to 2001 and served as Chief Executive Officer of the Company 1983
from 1995 to 1997. From 1984 through 1986, he held the position of
President and from 1984 through 1995 was also Chief Financial Officer.
From 1970 to 1983, Mr. Maginness was employed by Kayex Corporation
where he held several positions, including President and Chief
Executive Officer, and President of its Hamco Division.
Stuart B. Meisenzahl, age 61, has served as a director of the Company
since 2001. He is a former partner in the law firm of Harter, 2001
Secrest & Emery LLP, general counsel to the Company. He was
affiliated with the firm for 36 years, retiring in 1999, and he
practiced principally in the areas of federal securities law and
biotechnology licensing. Following his retirement, Mr. Meisenzahl
has acted as a business consultant to a number of biotechnology
companies and is Acting General Counsel to Vaccinex, Inc., a
biotechnology company in Rochester, New York. In addition, he has
served as director or trustee of a number of charitable organizations
in Rochester, New York.
John E. Mooney, age 58, has served as a director of the Company since
1984. He is Chairman and Chief Executive Officer of Essex Partners, 1984
Inc., a property development and management company in Rochester, New
York.
Committees of the Board of Directors
The Board has a Compensation Committee to evaluate executive compensation.
Messrs. Kozel, Mooney and Smith comprise the Compensation Committee.
Additionally, the Board has a Stock Option Committee to determine option grants
pursuant to the Company's 2001 Stock Option Plan. For purposes of complying with
Securities Exchange Act Rule 16b-3, the Company has at least two non-employee
directors administer the 2001 Stock Option Plan. Messrs. Maginness, Smith, and
Tillman currently comprise the Stock Option Committee. The Board also has an
Audit Committee for the purposes of reviewing the Company's financial reporting
procedures. Messrs. Meisenzahl, Mooney and Smith comprise the Audit Committee.
The written charter for the Audit Committee, which was adopted by the Board of
Directors, more specifically sets forth the duties of the Audit Committee and
was attached as Appendix B to the Company's proxy statement dated April 23,
2001. The Board also has a Nominating Committee to identify potential new
directors and to designate officers of the Company. Messrs. Kozel and Meisenzahl
comprise the Nominating Committee. The Nominating Committee considers and
establishes procedures regarding recommendations for nomination to the Board of
Directors submitted by stockholders. Such recommendations should be sent to the
Company, to the attention of the Secretary.
The Compensation Committee, Stock Option Committee, Audit Committee, and
Nominating Committee met three, one, four, and three times, respectively, in
2002. The Company's Board of Directors held eight meetings in 2002. All of the
directors attended at least 75 percent of the Board of Directors' meetings and
committee meetings that required their attendance.
Compensation of Directors
Members of the Board of Directors who are not employees of the Company
receive $1,000 for each meeting attended. Each Board member also receives
$10,000 per year if he attends at least 75 percent of the scheduled meetings. In
addition, each committee member receives $400 for each meeting attended if the
meeting is not scheduled on the same day as a Board of Directors meeting. The
Company's 2001 Stock Option Plan currently provides that on the day of the
Company's Annual Meeting of Stockholders, each individual elected, reelected or
continuing as an Outside Participating Director will automatically receive a
non-statutory option for 10,000 shares of Common Stock. The exercise price for
these options will be the fair market value of the Company's Common Stock on the
date of the option grant. Options vest on the first anniversary of the grant
date and expire five years from the date of grant. From time to time, the
Company may grant additional options to directors. At the 2002 Stockholders
Meeting, Messrs. Kozel, Maginness, Meisenzahl, Mooney, Slusser, and Smith each
received a non-qualified option to purchase 10,000 shares at an exercise price
of $8.60 per share. Mr. Tillman received a non-qualified option to purchase
1,667 shares at an exercise price of $3.44 upon his appointment to the Board on
March 26, 2003.
EXECUTIVE OFFICERS
The Company is currently served by the following executive officers, who
are elected annually by the Board of Directors and serve until their successors
are elected and qualify.
Executive
Name and Background Officer
Since
John J. Grana, age 47, has served as Vice President, Engineering
since 1994. From 1997 to 2000, he held the position of Vice President 2000
and General Manager of the Controller Products Group. From 1994 to
1997, he held the position of Vice President of Software Engineering.
From 1990 to 1994, he held the position of Technical Director of the
Workstation Products business unit, and from 1986 to 1990, he served
in various engineering positions. Prior to joining the Company,
he held various engineering positions with Computer Consoles, Inc.
(now a division of Nortel Networks). Mr. Grana holds a BS degree in
Computer Science from Rochester Institute of Technology.
Dorrance W. Lamb, age 55, has served as Chief Financial Officer of
the Company since 1995 and as Vice President of Finance since 1992. 1995
Prior to joining the Company, he was Senior Vice President for
Finance and Administration at Infodata Systems, Inc. based in
Fairfax, Virginia. Mr. Lamb is a certified public accountant and
holds a BS degree in Accounting from Benjamin Franklin University.
William E. Mahuson, age 52, has served as Vice President since 1987.
From 1987 to 1990, he served as Vice President, Engineering and 1987
from 1992 to 1995 he served as General Manager of the UconX business
unit of the Company. Prior to joining the Company, he held various
technical and technical management positions with Computer Consoles,
Inc. (now a division of Nortel Networks) and the Xerox Corporation.
Mr. Mahuson holds a BS degree in Electrical Engineering from
Rensselaer Polytechnic Institute.
John J. Peters, age 44, has served as Vice President, Engineering
since 1994. From 1997 to 2000, he held the position of Vice 2000
President of Development, Network Switching Products. From 1994 to
1997, he held the position of Vice President of Hardware Engineering.
From 1990 to 1994, he served as Technical Director of the Hardware
Products business unit, and from 1986 to 1990, he served in various
engineering positions. Prior to joining the Company, he held various
engineering positions with Computer Consoles, Inc. (now a division
of Nortel Networks). Mr. Peters holds a BS degree in Engineering from
the Rochester Institute of Technology.
John M. Slusser, age 50, has served as Chief Strategic Officer of the 1981
Company since January 2003. Further information about Mr. Slusser is through
set forth under "DIRECTORS WHOSE TERMS DO NOT EXPIRE 1995 and
AT THE 2003 ANNUAL MEETING" above. 2003
Donald L. Turrell, age 55, has served as Chief Executive Officer of
the Company since 1997. Further information about Mr.Turrell is set 1985
forth under "PROPOSED FOR ELECTION AS DIRECTORS AT THE 2003 ANNUAL
MEETING FOR A THREE-YEAR TERM EXPIRING IN 2006" above.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers and
directors and persons who own more than 10% of a registered class of the
Company's equity securities to file certain reports regarding ownership of, and
transactions in, the Company's securities with the Securities and Exchange
Commission (the "SEC"). Such officers, directors, and 10% stockholders are also
required by SEC rules to furnish the Company with copies of all Section 16(a)
forms that they file.
Based solely on its review of such forms furnished to the Company and
written representations from certain reporting persons, the Company believes
that all filing requirements applicable to the Company's executive officers,
directors and more than 10% stockholders were complied with.
Report of the Compensation Committee with Respect to Executive Compensation
General
The Compensation Committee, in conjunction with the Stock Option Committee
of the Board of Directors, administers the Company's executive compensation
program. The Compensation Committee is comprised of three outside directors,
Paul L. Smith, Chairman, John E. Mooney and Bernard Kozel. The Compensation
Committee considers internal and external information in determining executive
officer compensation, including data provided by KPMG LLP.
The Company's executive pay program is designed to attract and retain
executives who will contribute to the Company's long-term success, to reward
executives for achieving short and long-term strategic Company goals, to link
executive and stockholder interests through equity-based plans and to provide a
compensation package that recognizes individual contributions and Company
performance.
The three key components of the Company's executive compensation are base
salary, short-term incentives (cash bonus) and long-term incentives (stock
options).
Base Salary. Annually, the Compensation Committee reviews with the Chief
Executive Officer and approves, with any modifications it deems appropriate, a
salary plan for all of the Company's executives, none of whom have a written
employment agreement with the Company. The salary plan is developed under the
ultimate direction of the Chief Executive Officer based on performance judgments
as to the past and expected future contributions of each executive.
Annual Short-term Incentive Awards. The short-term incentive award program
is intended to be variable and is directly related to the Company's financial
performance. The parameters of the short-term incentive program for the
Company's employees, including executive officers, are generally established at
the beginning of each year. Amounts contributed to this program are based upon
the Company's performance and comparisons with the performance of a peer group
of companies.
Long-term Incentive Awards. Stock options are granted to executive officers
and employees under the Performance Technologies, Incorporated 2001 Stock Option
Plan administered by the Stock Option Committee. The Compensation Committee, in
conjunction with the Stock Option Committee, believes that stock options have
been an important means of aligning the long-range interests of all employees,
including executives, with those of the Company's stockholders by providing them
with the opportunity to acquire an equity stake in the Company. The size of the
stock option award has been based primarily on the individual's responsibilities
and position with the Company, as well as on the individual's performance. Stock
options are granted at an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant and options generally vest in three
to five years. This approach has been designed to encourage the creation of
stockholder value over the long term since no benefit is realized from a stock
option grant unless the price of the Company's Common Stock rises.
Executive Officer Compensation
Due to the changes in economic climate in 2002, the Compensation Committee
recommended that the Company retain the services of KPMG LLP to perform a
comparative analysis of the compensation of its executive officers. KPMG
compared the total compensation of the Company's executives to a peer group of
companies with similar products and target markets. The analysis indicated that
the total compensation levels for executive officers is generally appropriate in
the years that short term incentive bonuses are earned and stock options are
granted. However, the analysis indicated that the base salary compensation
levels of executives could be adjusted upward to become more comparable. The
Company is addressing executive officer compensation deficiencies outlined in
the KPMG analysis and increased executive salaries accordingly in 2002.
The Company exceeded the performance measurement in comparison to a peer
group established in the Company's 2002 annual short-term incentive plan, which
resulted in a cash incentive bonus being earned by the executives and employees
in 2002.
Stock options granted for 2002 were issued to executive officers in March
2002.
President and Chief Executive Officer
Mr. Turrell's base salary, short-term incentive and long-term incentive
awards are determined by the Compensation Committee based upon the same factors
as those employed by the Compensation Committee for executive officers
generally. Mr. Turrell's base salary for 2002 was $190,772, which was lower than
reported in the peer companies in the KPMG analysis. Mr. Turrell earned a
short-term incentive bonus, associated with the Company's performance relative
to the peer group, in the amount of $70,000 for 2002 and was granted stock
options for 35,000 shares in March 2002 as part of his compensation plan. A
restricted stock award in the amount of $25,000 was recommended for Mr. Turrell
but is subject to stockholder approval of the Performance Technologies,
Incorporated 2003 Omnibus Incentive Plan.
Compensation Committee
Paul L. Smith, Chairman
John E. Mooney
Bernard Kozel
Compensation Committee Interlocks and Insider Participation
The Chief Executive Officer of the Company, Donald L. Turrell, consults
with the Compensation Committee and makes recommendations. He participates in
discussions with the Compensation Committee but does not vote or otherwise
participate in the Compensation Committee's determinations. None of the
Company's executive officers has served as a member of a compensation committee
of a board of directors of any other entity which has an executive officer
serving as a member of the Company's Board of Directors, and there are no other
matters regarding interlocks or insider participation that the Company is
required to report.
EXECUTIVE COMPENSATION
Shown on the table below is information on the annual and long-term
compensation for services rendered to the Company in all capacities for the
fiscal years ended December 31, 2002, 2001 and 2000, paid by the Company to
those persons who were, during the fiscal year ended December 31, 2002 (i) the
Chief Executive Officer of the Company and (ii) the other executive officers of
the Company who earned over $100,000 during the fiscal year ended December 31,
2002 (the "Named Executives"):
SUMMARY COMPENSATION TABLE
Name and Long Term All Other
Principal Position Annual Compensation Compensation Compensation (2)
------------------ ------------------- ------------ -------------
Securities Underlying
Year Salary Bonus Options (#)(1)
---- ------ ----- -----------
Donald L. Turrell 2002 $190,772 $ 70,000 35,000 $10,756
Chief Executive Officer 2001 $180,381 $ 35,000 $12,680
and President 2000 $174,519 60,000 $15,434
Dorrance W. Lamb 2002 $153,682 $ 60,000 25,000 $ 2,689
Vice President - Finance 2001 $150,885 $ 28,000 $ 6,359
Chief Financial Officer 2000 $139,615 40,000 $11,314
William E. Mahuson 2002 $124,459 $ 55,000 $ 3,877
Vice President 2001 $120,193 $ 20,000 $ 5,175
2000 $113,808 $ 9,004
John J. Grana 2002 $142,301 $ 50,000 20,000 $ 305
Vice President 2001 $125,770 $ 22,000 $ 1,910
2000 $115,615 35,000 $ 4,413
John J. Peters 2002 $141,652 $ 50,000 25,000 $ 4,194
Vice President 2001 $124,192 $ 22,000 $ 4,856
2000 $106,808 30,000 $ 7,215
(1) Stock options granted in 2002 were issued to executive officers in March
2002, while options granted for 2001 were issued to executive officers in
December 2000, and options granted for 2000 were issued to executive
officers in February 2000.
(2) Includes payments for life insurance, car allowances and car expenses, and
401(k) allowance.
Employment Agreements
The Company does not have employment agreements with any of its executive
officers.
Stock Option Grants And Exercises
The following sets forth information with respect to stock options granted
to the Named Executives during the fiscal year ended December 31, 2002 pursuant
to the Performance Technologies, Incorporated 2001 Stock Option Plan.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
Potential Realizable Value at
Number of % of Total Assumed Annual Rates of Stock Price
Securities Options Granted Exercise Appreciation for Option Term (2)
Underlying Options to Employees in Price Expiration --------------------------------
Name Granted (1) Fiscal Year ($/Share) Date 5%($) 10%($)
---- ----------- ----------- --------- ---- ----- ------
Donald L. Turrell 35,000 5.7% $8.50 3/18/08 $101,180 $229,551
Dorrance W. Lamb 25,000 4.1% $8.50 3/18/08 $72,271 $163,965
William E. Mahuson 0 - - -
John J. Grana 20,000 3.3% $8.50 3/18/08 $57,817 $131,172
John J. Peters 25,000 4.1% $8.50 3/18/08 $72,271 $163,965
(1) These options vest in four annual increments of 25% per year commencing on
the first anniversary of the grant date. Option shares consist of both
non-qualified and qualified stock options.
(2) Amounts represent potential gains that could be achieved for the options
granted in 2002 based on assumed annual growth rates of 5% and 10% in the
price of the Company's Common Stock over six-year life of the option
(which would equal a total increase in stock price of 34% and 77% for six-
year options, respectively). Actual gains, if any, will depend upon market
conditions and the Company's future performance and prospects.
The following table sets forth information with respect to the exercise of
stock options by the Named Executives, if any, during the year ended December
31, 2002, and it also sets forth information with respect to status of
unexercised stock options as of December 31, 2002.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
Number of Shares Underlying Value of Unexercised
Unexercised Options at In-The-Money Options at
FY-End (#) FY-End ($) (1)
- ----------- --------------
Shares Acquired Value
Name on Exercise (#) Realized ($)(2) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- --------------- ----------- ------------- ----------- -------------
Donald L. Turrell 221,064 65,186 $0 $0
Dorrance W. Lamb 111,763 45,042 $0 $0
William E. Mahuson 81,000 0 $0 $0
John J. Grana 117,470 37,530 $0 $0
John J. Peters 98,154 40,146 $0 $0
(1) Represents the difference between the fair market value of the Common
Stock as of December 31, 2002 and the exercise price of the option.
Options that are not in-the-money have been excluded from the
computation.
(2) Represents the difference between the fair market value of the Common
Stock underlying the options as of the exercise date and the exercise
price of the options.
Report of the Audit Committee to Stockholders
The Audit Committee of the Board of Directors is comprised of three members
of the Company's Board of Directors, each of whom is independent pursuant to the
NASDAQ National Market's listing standards. Among other things, the Audit
Committee recommends to the Board that the Company's audited financial
statements be included in the Annual Report on Form 10-K and recommends the
selection of the independent auditors to audit the Company's books and records.
The Audit Committee has:
o reviewed and discussed all of the regulatory changes occurring during the
past year including the Sarbanes-Oxley Act passed on July 30, 2002 and
new Securities and Exchange Commission and NASDAQ Stock Market
requirements;
o reviewed and discussed the Company's audited financial statements for
2002 with management and with PricewaterhouseCoopers LLP, the Company's
independent auditors;
o reviewed and discussed management's selection, application and disclosure
of critical accounting policies;
o reviewed and discussed the adequacy of the Company's internal controls and
accounting and financial personnel;
o discussed with PricewaterhouseCoopers LLP the matters required to be
discussed by SAS 61, as amended (Codification for Statements on
Auditing Standards);
o discussed the process used by management in formulating accounting
estimates and the basis for the auditors' conclusions regarding the
reasonableness of those estimates; and
o received and discussed the written disclosures and the letter from the
independent auditors required by Independence Standards Board Statement
No. 1 (Independent Discussions with Audit Committees) and has discussed
with the independent auditor the independent auditor's independence.
Based on such review and discussions with management and the independent
auditors, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Company's Annual Report on Form
10-K for 2002 for filing with the SEC.
Audit Fees and All Other Fees
Audit Fees: PricewaterhouseCoopers LLP billed fees to the Company for
fiscal years 2002 and 2001 of $54,000 and $52,000, respectively, for the audit
of the Company's annual financial statements and review of Quarterly Reports on
Form 10-Q.
Audit-Related Fees: PricewaterhouseCoopers LLP billed fees of $37,000 in
2002 for acquisition assistance. In 2001, the audit-related fees totaled zero.
Tax-Related Fees: PricewaterhouseCoopers LLP billed $112,000 for
tax-related services in 2002. Tax-related fees in 2001 totaled $44,000.
All Other Fees: PricewaterhouseCoopers LLP billed no other fees in 2002 and
2001.
Prior to approving PricewaterhouseCoopers LLP as the Company's independent
accountants for 2003, the Audit Committee considered whether
PricewaterhouseCoopers LLP's provision of other than audit services is
compatible with maintaining the accountants' independence and has concluded that
PricewaterhouseCoopers LLP meets the independence standards.
Audit Committee
John E. Mooney, Chairman
Paul L. Smith
Stuart B. Meisenzahl
Report of the Stock Option Committee to Stockholders
General
The Stock Option Committee of the Board of Directors administers the
Company's stock option program. The Stock Option Committee is comprised of three
outside directors, Charles E. Maginness, Chairman, Paul L. Smith and Robert
Tillman. The Stock Option Committee considers internal and external information
in determining overall guidelines for stock option grants, including data
provided by KPMG LLP.
Stock options are granted to executive officers and employees under the
2001 Performance Technologies, Incorporated Stock Option Plan administered by
the Stock Option Committee. The Stock Option Committee believes that stock
options are a means of aligning the long-range interests of all employees,
including executives, with those of the Company's stockholders by providing them
with the opportunity to acquire an equity stake in the Company. The size of the
stock option award is based primarily on the individual's responsibilities and
position with the Company, as well as on the individual's performance. Stock
options are granted at an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant and options generally vest in three
to five years. This approach is designed to encourage the creation of
stockholder value over the long term since no benefit is realized from a stock
option grant unless the price of the Company's Common Stock rises.
Annually, the Stock Option Committee reviews specific option requests along
with option grant guidelines submitted by the Chief Executive Officer, and
approves, with any modifications it deems appropriate, stock option grants
requested for several categories of employees throughout the Company.
The Stock Option Committee in cooperation with the Executive Compensation
Committee approves stock option grants for the executive officers, key employees
and the Chief Executive Officer. Stock option requests for executive officers
are developed under the direction of the Chief Executive Officer, based on
criteria that evaluate past and expected future contributions of each executive.
In 2002, the Stock Option Committee referenced a year 2002 report from KPMG
LLP, to review the status of the Company's option grant level for a variety of
employee groups. The KPMG report analyzed the Company's stock option program
with respect to option program trends in the high technology industry and the
impact of such programs on attracting, retaining and motivating necessary
skilled personnel.
Stock Option Committee
Charles E. Maginness, Chairman
Paul L. Smith
Robert L. Tillman
Stock Performance Graph
The following graph compares the cumulative total return on the Company's
Common Stock at the end of each calendar year since December 31, 1997 to the
NASDAQ Stock Market (U.S.) Index, and the NASDAQ Computer Manufacturer Index.
The stock performance shown in the graph below is not intended to forecast or
necessarily be indicative of future performance.
[The following descriptive data is supplied in accordance with Rule 304(d) of
regulation S-T.]
Performance NASDAQ NASDAQ
Technologies, Stock Computer
Incorporated Market Manufacturer
12/31/97 100 100 100
12/31/98 91 141 217
12/31/99 180 261 462
12/31/00 141 158 263
12/31/01 138 125 181
12/31/02 34 87 120
CERTAIN TRANSACTIONS
Until May 2002, the Company leased a facility at 315 Science Parkway from
Vortex Enterprises, LLC ("Vortex"), a New York limited liability company of
which Mr. Maginness and Mr. Slusser, directors of the Company, are equal
members. Vortex acquired the property and constructed the facility with the
proceeds of an industrial development revenue bond with the County of Monroe
Industrial Development Agency ("COMIDA") in September 1990. Pursuant to the
terms of the facility lease, the Company was obligated to pay annual rental of
$270,000 plus annual increases based on the Consumer Price Index, together with
real property taxes and assessments, expenses and other charges associated with
the facility.
Arlen Vanderwel, who resigned from the Board of Directors for personal
reasons on October 1, 2002, is an employee of Sun Microsystems, Inc., serving as
that company's Vice President of Technology since 1999. During the past fiscal
year, Sun Microsystems was a customer of the Company from which the Company
received payments for goods or services in excess of five percent of the
Company's consolidated gross revenues for that fiscal year.
PROPOSAL 2
ADOPTION OF PERFORMANCE TECHNOLOGIES INCORPORATED 2003 OMNIBUS INCENTIVE PLAN
The Board of Directors is proposing the adoption of the Performance
Technologies, Incorporated 2003 Omnibus Incentive Plan ("Omnibus Plan"), which
is attached as Appendix A to this proxy statement. The Omnibus Plan reserves
1,500,000 shares of the Company's Common Stock for future issuance. The purpose
of the Omnibus Plan is to provide motivation to selected employees, directors
and consultants to put forth the maximum efforts toward the growth,
profitability and success of the Company by providing incentives to attract and
retain such individuals through the ownership and performance of the Company's
Common Stock. The Board of Directors believes that the successful conduct of the
business largely depends on these individuals.
The Omnibus Plan would permit the Stock Option Committee of the Board of
Directors, or such other committee as may be designated by the Board of
Directors (the "Committee") to grant various types of stock-based incentive
awards to the Company's executive officers, key employees, directors and
consultants. The Performance Technologies, Incorporated 2001 Stock Option Plan
would continue if the Company's stockholders approve the Omnibus Plan.
The Board of Directors believes that it is important to have shares
available for the recruitment, retention and motivation of employees, directors
and consultants. The Board of Directors has approved the Performance
Technologies, Incorporated 2003 Omnibus Incentive Plan, subject to stockholder
approval, and recommends a vote in favor of the adoption of the Performance
Technologies, Incorporated 2003 Omnibus Incentive Plan. Unless otherwise
indicated the shares represented by the enclosed proxy will be voted FOR such
proposal.
Summary of 2003 Omnibus Incentive Plan
Purpose
The purpose of the Omnibus Plan is to provide motivation to selected
employees, directors and consultants to put forth the maximum efforts toward the
continued growth, profitability, and success of the Company by providing
incentives to such individuals through the ownership and performance of the
Company's Common Stock. (See Section 1.1)
Shares Available
A total of 1,500,000 shares of the Company's Common Stock will be available
for grant of awards under the Omnibus Plan. The Omnibus Plan provides that
equitable adjustments will be made in the number of shares of Common Stock
covered by outstanding awards, the price per share applicable to outstanding
awards and the number of shares that are thereafter available for awards in the
event of a change in the capital or capital stock of the Company or any special
distributions to stockholders. Any shares of Common Stock under awards that
terminate by reason of expiration, forfeiture, cancellation or otherwise become
available for grant again under the Omnibus Plan. (See Article 6)
Administration
The Stock Option Committee of the Board of Directors, or such other
committee as may be designated by the Board of Directors (the "Committee"), will
administer the Omnibus Plan. The Committee has the authority to interpret the
Plan, establish rules and regulations for the operation and administration of
the Plan, select the individuals to receive awards, determine the form, size,
terms, conditions, limitations, and restrictions of awards, and take all other
action it deems necessary or advisable to administer the Omnibus Plan; provided,
however, the Committee does not have the authority to reprice stock options
without stockholder approval. The Committee may allocate all or any portion of
its responsibilities and powers under the Plan to any one or more of its
members, the Chief Executive Officer or other senior members of management as
the Committee deems appropriate. The Company also has the right to redeem any
outstanding stock options or SARs at any time for an amount equal to the fair
market value of the underlying stock and the exercise price. (See Article 4)
Eligible Participants
The following persons are eligible to participate in the Omnibus Plan (See
Article 3):
o all employees of the Company and its subsidiaries;
o certain foreign nationals who, but for the laws of their countries,
would be employees of the Company or its subsidiaries;
o the Company's directors; and
o the consultants, advisors and independent contractors retained by the
Company or its subsidiaries.
The selection of those participants who will receive awards is entirely
within the discretion of the Committee.
Types of Awards
The Omnibus Plan authorizes the grant of:
o non-qualified and incentive stock options;
o stock appreciation rights ("SARs");
o restricted and unrestricted stock awards;
o performance shares (which are stock or stock-based awards contingent
upon attaining performance objectives during a performance period);
o performance units (which are units valued by reference to criteria
chosen by the Committee); and
o any other award established by the Committee which is consistent with
the Omnibus Plan's purpose.
Stock Options. The Committee may grant awards in the form of stock options
to purchase shares of the Company's Common Stock. For each stock option grant,
the Committee will determine the number of shares subject to the option, the
manner and time of the option's exercise and the exercise price. Stock options
must be granted for a term of 10 years or less. The exercise price of a stock
option may not be less than 100% of the fair market value of the Company's
Common Stock on the date the stock option is granted. Upon exercise, a
participant may pay the exercise price in cash, shares of Common Stock, a
combination thereof, or such other consideration as the Committee determines.
Any stock option granted in the form of an incentive stock option will satisfy
the requirements of Section 422A of the Internal Revenue Code. (See Article 8)
Stock Appreciation Rights. The Committee may grant SARs either in tandem
with a stock option ("Tandem SARS") or independent of a stock option
("Freestanding SARs"). (See Article 9)
A Tandem SAR may be granted either at the time of the grant of the related
stock option or at any time thereafter during the term of the stock option. A
Tandem SAR will be exercisable to the extent its related stock option is
exercisable, and the exercise price of such a SAR will be the same as the option
price of its related stock option. Upon the exercise of a stock option as to
some or all of the shares covered by the award, the related Tandem SAR will
automatically be canceled to the extent of the number of shares covered by the
stock option exercise.
The Committee will determine the number of shares subject to a Freestanding
SAR, the manner and time of the SAR's exercise, and the exercise price of the
SAR. Freestanding SARs must be granted for a term of 10 years or less. The
exercise price of a Freestanding SAR may not be less than 100% of the fair
market value of the Company's Common Stock on the date of grant.
Performance Awards. Only those employees who are "covered employees" within
the meaning of Section 162(m) of the Internal Revenue Code are eligible to
receive "Performance Awards." Generally, "covered employees" means the Chief
Executive Officer and the other four highest paid executive officers.
Performance Awards are structured to qualify as deductible "Performance-Based"
compensation for purposes of Section 162(m) of the Internal Revenue Code. See,
"Limitation on Income Tax Deduction" below.
Within the first 90 days of a performance period, the Committee will, in
its sole discretion, designate which covered employees will be eligible for
performance awards for the performance period, the length of the performance
period, the types of performance awards to be issued, the performance criteria
that are to be used to establish performance goals, the kind or level of
performance goals and other relevant matters.
After the close of each performance period, the Committee will determine
whether the performance goals for the cycle have been achieved. In determining
the actual award to be paid to a participant, the Committee has the authority to
reduce or eliminate the award earned by the participant, based upon any
objective or subjective criteria it deems appropriate. (See Articles 7, 11 and
12)
Payment Terms
Awards may be paid in cash, Common Stock, a combination of cash and Common
Stock, or any other form of property, as the Committee determines. If an award
is granted in the form of a stock award, stock option, or performance share, or
in the form of any other stock-based grant, the Committee may include as part of
the award an entitlement to receive dividends or dividend equivalents. At the
discretion of the Committee, a participant may defer payment of a stock award,
performance share, performance unit, dividend, or dividend equivalent. (See
Article 13)
Effect of Certain Events
Death or Disability. The Committee shall have the authority to promulgate
rules and regulations to determine the treatment of a participant under the Plan
in the event of such participant's death or disability. Unless otherwise
provided in an Award Notice, in the event that a participant shall die or become
disabled prior to the complete exercise of the stock options or complete
maturity of the SARs held by such participant may be exercised in whole or in
part within one year after the date of the participant's death or disability.
(See Sections 14.1(a), (b) and (c))
Retirement or Approved Reason. The Committee shall have the authority to
promulgate rules and regulations to determine the treatment of a participant
under the Omnibus Plan in the event of such participant's retirement or
termination for an "Approved Reason" (as defined in the Omnibus Plan). Unless
otherwise provided in an Award Notice, upon a participant's retirement or
termination from the Company for an Approved Reason, any vested stock options or
matured SARs held by such participant may be exercised in whole or in part
within one year after the date of the participant's retirement or termination
for an Approved Reason. (See Sections 14.1 (a) and (d))
Other Termination. Unless otherwise provided in an Award Notice, if a
participant's employment with the Company terminates for any reason other than
death, disability, retirement or an "Approved Reason," any vested stock option
or matured SAR held by such participant may be exercised in whole or in part
within 30 days after the date of the participant's termination. (See Sections
14.1(a) and (e))
Termination and Amendment of Omnibus Plan
The Board of Directors or the Committee may, at any time and from time to
time, suspend, amend, modify or terminate the Plan without stockholder approval;
provided, however, that the Board or Committee may condition any amendment or
modification on the approval of stockholders of the Company if such approval is
necessary or deemed advisable with respect to tax, securities or other
applicable laws, policies or regulations. (See Section 17.5)
Award Limits
The maximum performance award payable to any one participant under the
Omnibus Plan for a calendar year is 150,000 shares of Common Stock or, in the
event the performance award is paid in cash, $500,000. The maximum number of
shares for which stock options may be granted under the Omnibus Plan to any one
participant for a calendar year is 250,000. The maximum number of shares for
which SARs may be granted under the Omnibus Plan to any one participant for a
calendar year is 100,000. The maximum number of shares for which stock awards
may be granted under the Omnibus Plan to any one participant during a calendar
year is 100,000. (See Section 6.3)
Securities Act Registration
The Company will register the shares of Common Stock purchasable under the
Omnibus Plan pursuant to a Registration Statement on Form S-8.
Non-U.S. Jurisdictions
To facilitate the granting of awards to participants who are employed
outside of the United States, the Omnibus Plan authorizes the Committee to
modify and amend the terms and conditions of an award to accommodate differences
in local law, policy or custom. (See Section 5.2)
Federal Tax Treatment
Non-Qualified Stock Options. Under present federal income tax regulations,
there will be no federal income tax consequences to either the Company or the
participant upon the grant of a non-qualified stock option. However, the
participant will realize ordinary income on the exercise of the option in an
amount equal to the excess of the fair market value of the Common Stock acquired
upon the exercise of such option over the exercise price, and the Company will
receive a corresponding deduction. The gain, if any, realized upon the
subsequent disposition by the participant of the Common Stock will constitute
short- or long-term capital gain, depending on the participant's holding period.
Incentive Stock Options. Under present federal income tax regulations,
there will be no federal income tax consequences to either the Company or the
participant upon the grant of an incentive stock option (an option that meets
the requirement of Section 422 of the Internal Revenue Code) or the exercise
thereof by the participant. If the participant holds the shares of Common Stock
underlying the option for the greater of two years after the date the option was
granted or one year after the acquisition of such shares of Common Stock (the
"required holding period"), the difference between the aggregate exercise price
and the amount realized upon disposition of the shares of Common Stock will
constitute a long-term capital gain or loss, and the Company will not be
entitled to a federal income tax deduction. If the shares of Common Stock are
disposed of in a sale, exchange or other disqualifying disposition during the
required holding period, the participant will realize taxable ordinary income in
an amount equal to the excess of the fair market value of the Common Stock
purchased at the time of exercise over the aggregate exercise price, and the
Company will be entitled to a federal income tax deduction equal to such amount.
SARs. Under present federal income tax regulations, a participant receiving
a non-discounted SAR will not recognize income, and the Company will not be
allowed a tax deduction, at the time the Award is granted. When a participant
exercises the SAR, the amount of cash and the fair market value of any shares of
Common Stock received will be ordinary income to the participant and will be
allowed as a deduction for federal income tax purposes to the Company.
Performance Shares. Under present federal income tax regulations, a
participant receiving performance shares will not recognize income and the
Company will not be allowed a tax deduction at the time the Award is granted.
When a participant receives payment of performance shares, the amount of cash
and the fair market value of any shares of Common Stock received will be
ordinary income to the participant and, subject to Code Section 162(m)
limitations, if applicable, will be allowed as a deduction for federal income
tax purposes to the Company.
Restricted Stock. Under present federal income tax regulations, and unless
the participant makes an election to accelerate recognition of the income to the
date of grant, a participant receiving a restricted stock Award will not
recognize income, and the Company will not be allowed a tax deduction, at the
time the Award is granted. When the restrictions lapse, the participant will
recognize ordinary income equal to the fair market value of the Common Stock,
and, subject to Code Section 162(m) limitations, if applicable, the Company will
be entitled to a corresponding tax deduction at that time.
Unrestricted Stock. Under present federal income tax regulations, a
participant receiving an unrestricted stock Award will recognize ordinary income
and, subject to Code Section 162(m) limitations, if applicable, the Company will
be allowed a tax deduction, at the time the Award is granted.
Limitation on Income Tax Deduction
Pursuant to Section 162(m) of the Internal Revenue Code, the Company may
not deduct compensation in excess of $1 million paid to the Chief Executive
Officer and the four next most highly compensated executive officers of the
Company (each, a "Covered Employee"). The Board had the Omnibus Plan approved by
the stockholders in order to permit the grant of certain awards thereunder, such
as options, SARs and certain performance shares, that will constitute
"Performance-Based" compensation, which is excluded from the calculation of
annual compensation of Covered Employees for purposes of Section 162(m) and is
fully deductible by the Company. The Committee may grant awards under the Plan
that do not qualify as "Performance-Based" compensation under Section 162(m).
The payment of any such non-qualifying awards to a Covered Employee could be
non-deductible by the Company, in whole or in part, under Section 162(m),
depending on such Covered Employee's total compensation in the applicable year.
Performance Goals for Certain Section 162(m) Awards. Under the Omnibus
Plan, the Committee may determine that, in order to meet the "Performance-Based"
award criteria of Section 162(m) and the regulations thereunder, a particular
award granted under the Plan will be determined solely on the basis of one or
more of the following measures of corporate performance, alone or in
combination, for the Company as a whole: increase in total revenue, earnings
before interest and taxes, earnings before interest, depreciation, taxes and
amortization ("EBIDTA"), return on stockholders' equity, gross margin, earnings
per share, net income, operating income, net profit, operating profits, profits
before tax, Net Cash Provided by Operating Activities, ratio of operating
earnings to capital spending, free cash flow, return on assets, equity or
stockholder's equity and Common Stock price per share. Measurement of the
Company's performance against such goals established by the Committee shall be
objectively determinable, and to the extent such goals are expressed in standard
accounting terms, performance shall be measured in accordance with generally
accepted accounting principles. The Committee shall have the right for any
reason to reduce (but not increase) any such award, notwithstanding the
achievement of a specified goal. If an award is made on such basis, the
Committee shall establish goals prior to the beginning of the period to which
such performance goal relates (or such later date as may be permitted under
Section 162(m) or the regulations thereunder). Any payment of an award granted
with performance goals under this section of the Plan will be conditioned on the
written certification of the Committee in each case that the performance goals
and any other material conditions were satisfied.
Although the Omnibus Plan contains provisions regarding "Performance-Based"
compensation for purposes of complying with Section 162(m) of the Internal
Revenue Code, the Company historically has not compensated its executives at
levels that would trigger the application of that section and does not
anticipate doing so in the foreseeable future.
The above summary of the Plan is qualified in its entirety by reference to
the full text of the 2003 Plan, which is attached as Appendix A to this proxy
statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2
PROPOSAL 3
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP served as the independent public
accountants of the Company for the fiscal year ended December 31, 2002 and the
Board of Directors has again selected PricewaterhouseCoopers LLP as the
Company's independent public accountants for the fiscal year ending December 31,
2003. This selection will be presented to the stockholders for their approval at
the Meeting. The Board of Directors recommends a vote in favor of the proposal
to approve and ratify this selection and (unless otherwise directed therein) it
is intended that the shares represented by the enclosed properly executed proxy
will be voted FOR such proposal. If the stockholders do not ratify this
selection, the Board of Directors may reconsider its choice.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Meeting. The representative will be given an opportunity to make a statement
if he so desires and will be available to respond to appropriate questions
concerning the audit of the Company's financial statements.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3
STOCKHOLDER PROPOSALS FOR 2004 ANNUAL MEETING
In order for any stockholder proposal to be included in the Company's proxy
statement to be issued in connection with the 2004 Annual Meeting of
Stockholders, such proposal must be delivered to the Company no later than
January 1, 2004. If the proposal is in compliance with all of the requirements
of Rule 14a-8 under the Securities Exchange Act, the Company will include the
stockholder proposal in its proxy statement and place it on the form of proxy
issued for the 2004 Annual Meeting of Stockholders. Stockholder proposals that
are not submitted for inclusion in the Company's proxy materials pursuant to
Rule 14a-8 under the Securities Exchange Act may be brought before the 2004
Annual Meeting of Stockholders only if written notice of the proposal is
delivered to the Company's Secretary no earlier than March 6, 2004 and no later
than April 5, 2004, and if the stockholder complies with all of the other
provisions of Article II, Section 12 of the Company's By-laws. All such notices
should be delivered to Reginald T. Cable, Secretary of Performance Technologies,
Inc., 205 Indigo Creek Drive, Rochester, New York 14626.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to present, and has not been informed that any other person intends to
present, any matter other than those specifically referred to in this Proxy
Statement. If any other matters properly come before the Meeting, it is intended
that the holders of the proxies will act in respect thereto in accordance with
their best judgment.
By Order of the Board of Directors,
/s/ Reginald T. Cable
------------------------------------
Reginald T. Cable
Secretary to the Board
Dated at Rochester, New York
May 1, 2003
Appendix A
PERFORMANCE TECHNOLOGIES, INCORPORATED
2003 OMNIBUS INCENTIVE PLAN
Effective _______________, 2003
TABLE OF CONTENTS
Article 1 PURPOSE AND TERM OF PLAN............................................23
Section 1.1 Purpose............................................23
Section 1.2 Term...............................................23
Article 2 DEFINITIONS.........................................................23
Section 2.1 "Approved Reason"..................................23
Section 2.2 "Award"............................................23
Section 2.3 "Award Notice".....................................23
Section 2.4 "Board"............................................23
Section 2.5 "Cause"............................................23
Section 2.6 "CEO"..............................................23
Section 2.7 "Code".............................................23
Section 2.8 "Committee"........................................23
Section 2.9 "Common Stock".....................................24
Section 2.10 "Company"..........................................24
Section 2.11 "Consultants"......................................24
Section 2.12 "Covered Employee".................................24
Section 2.13 "Director".........................................24
Section 2.14 "Disability".......................................24
Section 2.15 "Effective Date"...................................24
Section 2.16 "Employee".........................................24
Section 2.17 "Exchange Act".....................................24
Section 2.18 "Fair Market Value"................................24
Section 2.19 "Negative Discretion"..............................24
Section 2.20 "Net Cash Provided by Operating Activities"........24
Section 2.21 "Participant"......................................24
Section 2.22 "Performance Awards"...............................24
Section 2.23 "Performance Criteria".............................24
Section 2.24 "Performance Formula"..............................25
Section 2.25 "Performance Goals"................................25
Section 2.26 "Performance Period"...............................25
Section 2.27 "Plan".............................................25
Section 2.28 "PTI"..............................................25
Section 2.29 "Retirement".......................................25
Section 2.30 "Stock Award"......................................25
Section 2.31 "Subsidiary".......................................25
Section 2.32 "Unit".............................................25
Article 3 ELIGIBILITY.........................................................25
Section 3.1 In General.........................................25
Section 3.2 Incentive Stock Options............................26
Article 4 PLAN ADMINISTRATION.................................................26
Section 4.1 Responsibility.....................................26
Section 4.2 Authority of the Committee.........................26
Section 4.3 Option Repricing...................................26
Section 4.4 Company's Right to Redeem Stock Options and SARs...26
Section 4.5 Discretionary Authority............................26
Section 4.6 Section 162(m) of the Code.........................26
Section 4.7 Action by the Committee............................26
Section 4.8 Allocation and Delegation of Authority.............26
Article 5 FORM OF AWARDS......................................................27
Section 5.1 In General.........................................27
Section 5.2 Foreign Jurisdictions..............................27
Article 6 SHARES SUBJECT TO PLAN.............................................28
Section 6.1 Available Shares...................................28
Section 6.2 Adjustment to Shares...............................28
Section 6.3 Maximum Award Payable..............................28
Article 7 PERFORMANCE AWARDS..................................................28
Section 7.1 Purpose............................................28
Section 7.2 Eligibility........................................29
Section 7.3 Discretion of Committee with Respect to Performance
Awards.............................................29
Section 7.4 Payment of Performance Awards......................29
Article 8 STOCK OPTIONS.......................................................29
Section 8.1 In General.........................................29
Section 8.2 Terms and Conditions of Stock Options..............30
Section 8.3 Restrictions Relating to Incentive Stock Options...30
Section 8.4 Additional Terms and Conditions....................30
Section 8.5 Exercise...........................................30
Article 9 STOCK APPRECIATION RIGHTS...........................................30
Section 9.1 In General.........................................30
Section 9.2 Terms and Conditions of Tandem SARs................30
Section 9.3 Terms and Conditions of Freestanding SARs..........30
Section 9.4 Deemed Exercise....................................31
Section 9.5 Additional Terms and Conditions....................31
Article 10 STOCK AWARDS.......................................................31
Section 10.1 Grants.............................................31
Section 10.2 Award Restrictions.................................31
Section 10.3 Rights as Stockholders.............................31
Section 10.4 Evidence of Award..................................31
Article 11 PERFORMANCE UNITS..................................................31
Section 11.1 Grants.............................................31
Section 11.2 Performance Criteria...............................31
Section 11.3 Additional Terms and Conditions....................31
Article 12 PERFORMANCE SHARES.................................................31
Section 12.1 Grants.............................................31
Section 12.2 Performance Criteria...............................31
Section 12.3 Additional Terms and Conditions....................32
Article 13 PAYMENT OF AWARDS..................................................32
Section 13.1 Payment............................................32
Section 13.2 Withholding Taxes..................................32
Article 14 EFFECT OF CERTAIN EVENTS...........................................32
Section 14.1 Stock Options and SARs.............................32
Section 14.2 Other Awards.......................................33
Article 15 DIVIDEND AND DIVIDEND EQUIVALENTS..................................33
Article 16 DEFERRAL OF AWARDS.................................................33
Article 17 MISCELLANEOUS......................................................33
Section 17.1 Nonassignability...................................33
Section 17.2 Amendments to Awards...............................34
Section 17.3 Regulatory Approvals and Listings..................34
Section 17.4 No Right to Continued Employment or Grants.........34
Section 17.5 Amendment/Termination..............................35
Section 17.6 Governing Law......................................35
Section 17.7 No Right, Title, or Interest in Company Assets.....35
Section 17.8 Section 16 of the Exchange Act.....................35
Section 17.9 No Guarantee of Tax Consequences...................35
PERFORMANCE TECHNOLOGIES, INCORPORATED
2003 OMNIBUS INCENTIVE PLAN
Effective __________, 2003
Article 1
PURPOSE AND TERM OF PLAN
Section 1.1 Purpose. The purpose of the Plan is to provide motivation to
selected Employees, Directors and Consultants to put forth maximum efforts
toward the continued growth, profitability, and success of the Company by
providing incentives to such Employees, Directors and Consultants through the
ownership and performance of Common Stock.
Section 1.2 Term. The Plan was approved by the Board on March 26, 2003, and
will become effective upon the date of the approval by PTI's stockholders at the
2003 Annual Meeting of the Stockholders. The Plan and any Awards granted
thereunder shall be null and void if stockholder approval is not obtained at the
2003 Annual Meeting of the Stockholders.
Article 2
DEFINITIONS
In any necessary construction of a provision of this Plan, the masculine gender
may include the feminine, and the singular may include the plural, and vice
versa.
Section 2.1 "Approved Reason" means a reason for terminating employment
with the Company which, in the opinion of the Committee, is in the best
interests of the Company.
Section 2.2 "Award" means any form of stock option, stock appreciation
right, Stock Award, performance unit, performance share, Performance Award, or
other incentive award granted under the Plan, whether singly, in combination, or
in tandem, to a Participant by the Committee pursuant to such terms, conditions,
restrictions and/or limitations, if any, as the Committee may establish by the
Award Notice or otherwise.
Section 2.3 "Award Notice" means the written document establishing the
terms, conditions, restrictions, and/or limitations of an Award in addition to
those established by this Plan and by the Committee's exercise of its
administrative powers. The Committee will establish the form of the written
document in the exercise of its sole and absolute discretion.
Section 2.4 "Board" means the Board of Directors of PTI.
Section 2.5 "Cause" means (a) the willful and continued failure by a
Participant to substantially perform his or her duties with the Company after
written warnings identifying the lack of substantial performance are delivered
to the Participant by the Company to specifically identify the manner in which
the Company believes that the Participant has not substantially performed his or
her duties, (b) the willful engaging by a Participant in illegal conduct which
is materially and demonstrably injurious to the Company, (c) the commission of a
felony by a Participant, (d) the breach by a Participant of a material fiduciary
duty owed by that Participant to the Company, (e) the intentional unauthorized
disclosure by a Participant to any person of confidential information or trade
secrets of a material nature relating to the Company's business, or (f) the
engaging by a Participant in any conduct that the Company's written rules,
regulations or policies specify as constituting grounds for discharge.
Section 2.6 "CEO" means the Chief Executive Officer of PTI.
Section 2.7 "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including the regulations thereunder and any successor provisions
and the regulations thereto.
Section 2.8 "Committee" means the Stock Option Committee of the Board, or
such other Board committee as may be designated by the Board to administer the
Plan; provided that the Committee shall consist of two or more Directors, all of
whom are both a "Non-Employee Director" within the meaning of Rule 16b-3 under
the Exchange Act and an "outside director" within the meaning of the definition
of such term as contained in Proposed Treasury Regulation Section
1.162-27(e)(3), or any successor definition adopted under Section 162(m) of the
Code.
Section 2.9 "Common Stock" means the common stock, $.01 par value per
share, of PTI that may be newly issued or treasury stock.
Section 2.10 "Company" means PTI and its Subsidiaries.
Section 2.11 "Consultants" means the consultants, advisors and independent
contractors retained by the Company.
Section 2.12 "Covered Employee" means an Employee who is a "covered
employee" within the meaning of Section 162(m) of the Code.
Section 2.13 "Director" means a non-Employee member of the Board.
Section 2.14 "Disability," for a Participant who is an Employee, means a
disability under the terms of the long-term disability plan maintained by the
Participant's employer, or in the absence of such a plan, the Performance
Technologies, Incorporated Long Term Disability Plan; and for all other
Participants, means a disability under the Performance Technologies,
Incorporated Long Term Disability Plan.
Section 2.15 "Effective Date" means the date an Award is determined to be
effective by the Committee upon its grant of such Award, which date shall be set
forth in the applicable Award Notice.
Section 2.16 "Employee" means any person employed by the Company on a full
or part-time basis.
Section 2.17 "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including the rules thereunder and any successor
provisions and the rules thereto.
Section 2.18 "Fair Market Value" means the fair market value determined by
the Committee, in good faith, based upon a reasonable method of valuation
adopted by the Committee, or such method as may be permitted by the Code, or the
regulations or rulings thereunder.
Section 2.19 "Negative Discretion" means the discretion authorized by the
Plan to be applied by the Committee in determining the size of an Award for a
Performance Period if, in the Committee's sole judgment, such application is
appropriate. Negative Discretion may only be used by the Committee to eliminate
or reduce the size of an Award. By way of example and not by way of limitation,
in no event shall any discretionary authority granted to the Committee by the
Plan, including, but not limited to Negative Discretion, be used to: (a) grant
Awards for a Performance Period if the Performance Goals for such Performance
Period have not been attained under the applicable Performance Formula; or (b)
increase an Award above the maximum amount payable under Section 6.3 of the
Plan.
Section 2.20 "Net Cash Provided by Operating Activities" means net cash
provided by operating activities computed in accordance with generally
acceptable accounting principles, consistently applied, and shall exclude
investing and financing activities.
Section 2.21 "Participant" means either an Employee, Director or Consultant
to whom an Award has been granted by the Committee under the Plan.
Section 2.22 "Performance Awards" means the Stock Awards, performance units
and performance shares granted to Covered Employees pursuant to Article 7. All
Performance Awards are intended to qualify as "performance-based compensation"
under Section 162(m) of the Code.
Section 2.23 "Performance Criteria" means the one or more criteria that the
Committee shall select for purposes of establishing the Performance Goal(s) for
a Performance Period. The Performance Criteria that will be used to establish
such Performance Goal(s) shall be limited to the following: increase in total
revenue, earnings before interest and taxes, earnings before interest,
depreciation, taxes and amortization ("EBIDTA"), return on stockholders' equity,
gross margin, earnings per share, net income, operating income, net profit,
operating profits, profits before tax, Net Cash Provided by Operating
Activities, ratio of operating earnings to capital spending, free cash flow,
return on assets, equity or stockholders' equity and Common Stock price per
share. To the extent required by Section 162(m) of the Code, the Committee
shall, within the time period required by Section 162(m) of the Code (generally,
the first 90 days of a Performance Period), define in an objective fashion the
manner of calculating the Performance Criteria it selects to use for such
Performance Period.
Section 2.24 "Performance Formula" means, for a Performance Period, the one
or more objective formulas (expressed as a percentage or otherwise) applied
against the relevant Performance Goal(s) to determine, with regards to the Award
of a particular Participant, whether all, some portion but less than all, or
none of the Award has been earned for the Performance Period.
Section 2.25 "Performance Goals" means, for a Performance Period, the one
or more goals established by the Committee for the Performance Period based upon
the Performance Criteria. The Committee is authorized at any time during the
time period permitted by Section 162(m) of the Code (generally, the first 90
days of a Performance Period), or at any time thereafter, in its sole and
absolute discretion, to adjust or modify the calculation of a Performance Goal
for such Performance Period in order to prevent the dilution or enlargement of
the rights of Participants (a) in the event of, or in anticipation of, any
unusual or extraordinary corporate item, transaction, event or development; (b)
in recognition of, or in anticipation of, any other unusual or nonrecurring
events affecting the Company, or the financial statements of the Company, or in
response to, or in anticipation of, changes in applicable laws, regulations,
accounting principles, or business conditions; and (c) in view of the
Committee's assessment of the business strategy of the Company, performance of
comparable organizations, economic and business conditions, and any other
circumstances deemed relevant.
Section 2.26 "Performance Period" means the one or more periods of time,
which may be of varying and overlapping durations, as the Committee may select,
over which the attainment of one or more Performance Goals will be measured for
the purpose of determining a Participant's right to and the payment of a
Performance Award.
Section 2.27 "Plan" means the 2003 Omnibus Incentive Plan.
Section 2.28 "PTI" means Performance Technologies, Incorporated.
Section 2.29 "Retirement" means, in the case of a Participant employed by
the Company, voluntary termination of employment on or after age 62.
Section 2.30 "Stock Award" means an award granted pursuant to Article 10 in
the form of shares of Common Stock, restricted shares of Common Stock, and/or
Units of Common Stock.
Section 2.31 "Subsidiary" means a corporation or other business entity in
which PTI directly or indirectly has an ownership interest of 50 percent or
more, except that with respect to incentive stock options, "Subsidiary" shall
mean "subsidiary corporation" as defined in Section 424(f) of the Code.
Section 2.32 "Unit" means a bookkeeping entry used by the Company to record
and account for the grant of the following Awards until such time as the Award
is paid, canceled, forfeited or terminated, as the case may be: Units of Common
Stock, performance units, and performance shares which are expressed in terms of
Units of Common Stock.
Article 3
ELIGIBILITY
Section 3.1 In General. Subject to Section 3.2, all Employees, Directors
and Consultants are eligible to participate in the Plan. The Committee may
select, from time to time, Participants from those Employees who, in the opinion
of the Committee, can further the Plan's purposes. In addition, the Committee
may select, from time to time, Participants from those Directors and Consultants
(who may or may not be Committee members) who, in the opinion of the Committee,
can further the Plan's purposes. Once a Participant is so selected, the
Committee shall determine the type(s) of Awards to be made to the Participant
and shall establish in the related Award Notice(s) the terms, conditions,
restrictions and/or limitations, if any, applicable to the Award(s) in addition
to those set forth in this Plan and the administrative rules and regulations
issued by the Committee.
Section 3.2 Incentive Stock Options. Only Employees shall be eligible to
receive "incentive stock options" (within the meaning of Section 422 of the
Code).
Article 4
PLAN ADMINISTRATION
Section 4.1 Responsibility. The Committee shall have total and exclusive
responsibility to control, operate, manage and administer the Plan in accordance
with its terms.
Section 4.2 Authority of the Committee. The Committee shall have all the
authority that may be necessary or helpful to enable it to discharge its
responsibilities with respect to the Plan. Without limiting the generality of
the preceding sentence, the Committee shall have the exclusive right to: (a)
select the Participants and determine the type of Awards to be made to
Participants, the number of shares subject to Awards and the terms, conditions,
restrictions and limitations of the Awards; (b) interpret the Plan; (c)
determine eligibility for participation in the Plan; (d) decide all questions
concerning eligibility for and the amount of Awards payable under the Plan; (e)
construe any ambiguous provision of the Plan; (f) correct any default; (g)
supply any omission; (h) reconcile any inconsistency; (i) issue administrative
guidelines as an aid to administer the Plan and make changes in such guidelines
as it from time to time deems proper; (j) make regulations for carrying out the
Plan and make changes in such regulations as it from time to time deems proper;
(k) determine whether Awards should be granted singly, in combination or in
tandem; (l) to the extent permitted under the Plan, grant waivers of Plan terms,
conditions, restrictions, and limitations; (m) accelerate the vesting, exercise,
or payment of an Award or the Performance Period of an Award when such action or
actions would be in the best interest of the Company; (n) establish such other
types of Awards, besides those specifically enumerated in Article 5 hereof,
which the Committee determines are consistent with the Plan's purpose; (o)
subject to Section 4.3, grant Awards in replacement of Awards previously granted
under this Plan or any other executive compensation plan of the Company; (p)
establish and administer the Performance Goals and certify whether, and to what
extent, they have been attained; (q) determine the terms and provisions of any
agreements entered into hereunder; (r) take any and all other action it deems
necessary or advisable for the proper operation or administration of the Plan;
and (s) make all other determinations it deems necessary or advisable for the
administration of the Plan, including factual determinations.
Section 4.3 Option Repricing. Except for adjustments pursuant to Section
6.2, the Committee shall not reprice any stock options unless such action is
approved by the Company's stockholders. For purposes of the Plan, the term
"reprice" shall mean the granting of a stock option(s) to a Participant in
exchange for such Participant's agreement to cancel a higher-priced stock
option(s) that was previously granted to such Participant.
Section 4.4 Company's Right to Redeem Stock Options and SARs. Every stock
option vested and granted under this Plan may be redeemable by PTI at any time.
The purchase price for any stock option redeemed by the Company shall be the
Fair Market Value of the Common Stock underlying such stock option, less the
exercise price of such stock option. The purchase price for any SAR redeemed by
PTI shall be the Fair Market Value of the Common Stock underlying such SAR, less
the exercise price of such SAR. The purchase price, less any amount of federal
or state taxes attributable to the redemption that PTI deems it necessary or
advisable to pay or withhold, shall be paid in cash.
Section 4.5 Discretionary Authority. The Committee shall have full
discretionary authority in all matters related to the discharge of its
responsibilities and the exercise of its authority under the Plan including,
without limitation, its construction of the terms of the Plan and its
determination of eligibility for participation and Awards under the Plan. It is
the intent of Plan that the decisions of the Committee and its actions with
respect to the Plan shall be final, binding and conclusive upon all persons
having or claiming to have any right or interest in or under the Plan.
Section 4.6 Section 162(m) of the Code. With regards to all Covered
Employees, the Plan shall, for all purposes, be interpreted and construed in
accordance with Section 162(m) of the Code.
Section 4.7 Action by the Committee. The Committee may act only by a
majority of its members. Any determination of the Committee may be made, without
a meeting, by a writing or writings signed by all of the members of the
Committee. In addition, the Committee may authorize any one or more of its
number to execute and deliver documents on behalf of the Committee.
Section 4.8 Allocation and Delegation of Authority. The Committee may
allocate all or any portion of its responsibilities and powers under the Plan to
any one or more of its members, the CEO or other senior members of management as
the Committee deems appropriate and may delegate all or any part of its
responsibilities and powers to any such person or persons, provided that any
such allocation or delegation be in writing; provided, however, that only the
Committee may select and grant Awards to Participants who are subject to Section
16 of the Exchange Act or are Covered Employees. The Committee may revoke any
such allocation or delegation at any time for any reason with or without prior
notice.
Article 5
FORM OF AWARDS
Section 5.1 In General. Awards may, at the Committee's sole discretion, be
paid in the form of Performance Awards pursuant to Article 7, stock options
pursuant to Article 8, stock appreciation rights pursuant to Article 9, Stock
Awards pursuant to Article 10, performance units pursuant to Article 11,
performance shares pursuant to Article 12, any form established by the Committee
pursuant to Section 4.2(n), or a combination thereof. All Awards shall be
subject to the terms, conditions, restrictions and limitations of the Plan. The
Committee may, in its sole judgment, subject an Award to such other terms,
conditions, restrictions and/or limitations (including, but not limited to, the
time and conditions of exercise and restrictions on transferability and
vesting), provided they are not inconsistent with the terms of the Plan. Awards
under a particular Article of the Plan need not be uniform and Awards under two
or more Articles may be combined into a single Award Notice. Any combination of
Awards may be granted at one time and on more than one occasion to the same
Participant.
Section 5.2 Foreign Jurisdictions.
(a) Special Terms. In order to facilitate the making of any Award to
Participants who are employed or retained by the Company outside the United
States as Employees, Directors or Consultants (or who are foreign nationals
temporarily within the United States), the Committee may provide for such
modifications and additional terms and conditions ("special terms") in Awards as
the Committee may consider necessary or appropriate to accommodate differences
in local law, policy or custom or to facilitate administration of the Plan. The
special terms may provide that the grant of an Award is subject to (1)
applicable governmental or regulatory approval or other compliance with local
legal requirements and/or (2) the execution by the Participant of a written
instrument in the form specified by the Committee, and that in the event such
conditions are not satisfied, the grant shall be void. The special terms may
also provide that an Award shall become exercisable or redeemable, as the case
may be, if an Employee's employment or Director or Consultant's relationship
with the Company ends as a result of workforce reduction, realignment or similar
measure and the Committee may designate a person or persons to make such
determination for a location. The Committee may adopt or approve sub-plans,
appendices or supplements to, or amendments, restatements, or alternative
versions of, the Plan as it may consider necessary or appropriate for purposes
of implementing any special terms, without thereby affecting the terms of the
Plan as in effect for any other purpose; provided, however, no such sub-plans,
appendices or supplements to, or amendments, restatements, or alternative
versions of, the Plan shall: (a) increase the limitations contained in Section
6.3; (b) increase the number of available shares under Section 6.1; (c) cause
the Plan to cease to satisfy any conditions of Rule 16b-3 under the Exchange Act
or, with respect to Covered Employees, Section 162(m) of the Code; or (d)
revoke, remove or reduce any vested right of a Participant without the prior
written consent of such Participant.
(b) Currency Effects. Unless otherwise specifically determined by the
Committee, all Awards and payments pursuant to such Awards shall be determined
in U.S. currency. The Committee shall determine, in its discretion, whether and
to the extent any payments made pursuant to an Award shall be made in local
currency, as opposed to U.S. dollars. In the event payments are made in local
currency, the Committee may determine, in its discretion and without liability
to any Participant, the method and rate of converting the payment into local
currency.
(c) Modifications to Awards. The Committee shall have the right at any time
and from time to time and without prior notice to modify outstanding Awards to
comply with or satisfy local laws and regulations or to avoid costly
governmental filings. By means of illustration, but not limitation, the
Committee may restrict the method of exercise of an Award to facilitate
compliance with applicable securities laws or exchange control filings, laws or
regulations.
(d) No Acquired Rights. No Employee in any country shall have any right to
receive an Award, except as expressly provided for under the Plan. All Awards
made at any time are subject to the prior approval of the Committee.
Article 6
SHARES SUBJECT TO PLAN
Section 6.1 Available Shares. The maximum number of shares of Common Stock
which shall be available for grant of Awards under the Plan (including incentive
stock options) during its term shall not exceed 1,500,000. Such amount shall be
subject to adjustment as provided in Section 6.2. Any shares of Common Stock
related to Awards which terminate by expiration, forfeiture, cancellation or
otherwise without the issuance of such shares, are settled in cash in lieu of
Common Stock, or are exchanged with the Committee's permission for Awards not
involving Common Stock, shall be available again for grant under the Plan.
Moreover, if the option price of any stock option granted under the Plan or the
tax withholding requirements with respect to any stock option granted under the
Plan are satisfied by tendering shares of Common Stock to the Company (by either
actual delivery or by attestation), only the number of shares of Common Stock
issued net of the shares of Common Stock tendered will be deemed delivered for
purposes of determining the maximum number of shares of Common Stock available
for delivery under the Plan. The maximum number of shares available for issuance
under the Plan shall not be reduced to reflect any dividends or dividend
equivalents that are reinvested into additional shares of Common Stock or
credited as additional performance shares. The shares of Common Stock available
for issuance under the Plan may be authorized and unissued shares or treasury
shares. For the purpose of computing the total number of shares of Common Stock
granted under the Plan, where one or more types of Awards, both of which are
payable in shares of Common Stock, are granted in tandem with each other, such
that the exercise of one type of Award with respect to a number of shares
cancels an equal number of shares of the other, the number of shares granted
under both Awards shall be deemed to be equivalent to the number of shares under
one of the Awards.
Section 6.2 Adjustment to Shares.
(a) In General. The provisions of this Section 6.2(a) are subject to the
limitation contained in Section 6.2(b). If there is any change in the number of
outstanding shares of Common Stock through the declaration of stock dividends,
stock splits or the like, the number of shares available for Awards, the shares
subject to any Award and the option prices or exercise prices of Awards shall be
automatically adjusted. If there is any change in the number of outstanding
shares of Common Stock through any change in the capital account of PTI, or
through a merger, consolidation, separation (including a spin off or other
distribution of stock or property), reorganization (whether or not such
reorganization comes within the meaning of such term in Section 368(a) of the
Code) or partial or complete liquidation, the Committee shall make appropriate
adjustments in the maximum number of shares of Common Stock which may be issued
under the Plan and any adjustments and/or modifications to outstanding Awards as
it, in its sole discretion, deems appropriate. In the event of any other change
in the capital structure or in the Common Stock of PTI, the Committee shall also
be authorized to make such appropriate adjustments in the maximum number of
shares of Common Stock available for issuance under the Plan and any adjustments
and/or modifications to outstanding Awards as it, in its sole discretion, deems
appropriate. The maximum number of shares available for issuance under the Plan
shall be automatically adjusted to the extent necessary to reflect any dividend
equivalents paid in the form of Common Stock. Subject to Section 6.2(b), if the
maximum number of shares of Common Stock available for issuance under the Plan
are adjusted pursuant to this Section 6.2(a), corresponding adjustments shall be
made to the limitations set forth in Section 6.3.
(b) Covered Employees. In no event shall the Award of any Participant who
is a Covered Employee be adjusted pursuant to Section 6.2(a) to the extent it
would cause such Award to fail to qualify as "performance-based compensation"
under Section 162(m) of the Code.
Section 6.3 Maximum Award Payable. Notwithstanding any provision contained
in the Plan to the contrary, the maximum Award payable (or granted, if
applicable) to any one Participant under the Plan for a calendar year is: (a)
for Performance Awards, 150,000 shares of Common Stock or, in the event the
Performance Award is paid in cash, $500,000; (b) for stock options, 250,000
shares of Common Stock; (c) for SARs, 100,000 shares of Common Stock; (d) for
Stock Awards (including those issued in the form of Performance Awards under
Article 7), 100,000 shares of Common Stock.
Article 7
PERFORMANCE AWARDS
Section 7.1 Purpose. For purposes of grants issued to Covered Employees,
the provisions of this Article 7 shall apply in addition to and, where
necessary, in lieu of the provisions of Article 10, Article 11 and Article 12.
The purpose of this Article is to provide the Committee the ability to qualify
the Stock Awards authorized under Article 10, the performance units under
Article 11, and the performance shares under Article 12 as "performance-based
compensation" under Section 162(m) of the Code. The provisions of this Article 7
shall control over any contrary provision contained in Article 10, Article 11 or
Article 12.
Section 7.2 Eligibility. Only Covered Employees shall be eligible to
receive Performance Awards. The Committee will, in its sole discretion,
designate within the first 90 days of a Performance Period (or, if longer,
within the maximum period allowed under Section 162(m) of the Code) which
Covered Employees will be Participants for such period. However, designation of
a Covered Employee as a Participant for a Performance Period shall not in any
manner entitle the Participant to receive an Award for the period. The
determination as to whether or not such Participant becomes entitled to an Award
for such Performance Period shall be decided solely in accordance with the
provisions of this Article 7. Moreover, designation of a Covered Employee as a
Participant for a particular Performance Period shall not require designation of
such Covered Employee as a Participant in any subsequent Performance Period and
designation of one Covered Employee as a Participant shall not require
designation of any other Covered Employee as a Participant in such period or in
any other period.
Section 7.3 Discretion of Committee with Respect to Performance Awards.
With regards to a particular Performance Period, the Committee shall have full
discretion to select the length of such Performance Period, the type(s) of
Performance Awards to be issued, the Performance Criteria that will be used to
establish the Performance Goal(s), the kind(s) and/or level(s) of the
Performance Goal(s), whether the Performance Goal(s) is(are) to apply to the
Company or any one or more subunits thereof, and the Performance Formula. Within
the first 90 days of a Performance Period (or, if longer, within the maximum
period allowed under Section 162(m) of the Code), the Committee shall, with
regards to the Performance Awards to be issued for such Performance Period,
exercise its discretion with respect to each of the matters enumerated in the
immediately preceding sentence of this Section 7.3 and record the same in
writing.
Section 7.4 Payment of Performance Awards.
(a) Condition to Receipt of Performance Award. Unless otherwise provided in
the relevant Award Notice, a Participant must be employed by the Company on the
last day of a Performance Period to be eligible for a Performance Award for such
Performance Period.
(b) Limitation. A Participant shall be eligible to receive a Performance
Award for a Performance Period only to the extent that: (1) the Performance
Goals for such period are achieved; and (2) and the Performance Formula as
applied against such Performance Goals determines that all or some portion of
such Participant's Performance Award has been earned for the Performance Period.
(c) Certification. Following the completion of a Performance Period, the
Committee shall meet to review and certify in writing whether, and to what
extent, the Performance Goals for the Performance Period have been achieved and,
if so, to also calculate and certify in writing the amount of the Performance
Awards earned for the period based upon the Performance Formula. The Committee
shall then determine the actual size of each Participant's Performance Award for
the Performance Period and, in so doing, shall apply Negative Discretion, if and
when it deems appropriate.
(d) Negative Discretion. In determining the actual size of an individual
Performance Award for a Performance Period, the Committee may reduce or
eliminate the amount of the Performance Award earned under the Performance
Formula for the Performance Period through the use of Negative Discretion, if in
its sole judgment, such reduction or elimination is appropriate.
(e) Timing of Award Payments. The Awards granted for a Performance Period
shall be paid to Participants as soon as administratively practicable following
completion of the certifications required by Section 7.4(c).
Article 8
STOCK OPTIONS
Section 8.1 In General. Awards may be granted in the form of stock options.
These stock options may be incentive stock options within the meaning of Section
422 of the Code or non-qualified stock options (i.e., stock options which are
not incentive stock options), or a combination of both. All Awards under the
Plan issued to Covered Employees in the form of non-qualified stock options
shall qualify as "performance-based compensation" under Section 162(m) of the
Code.
Section 8.2 Terms and Conditions of Stock Options. An option shall be
exercisable in accordance with such terms and conditions and at such times and
during such periods as may be determined by the Committee. The price at which
Common Stock may be purchased upon exercise of a stock option shall be not less
than 100 percent of the Fair Market Value of the Common Stock, as determined by
the Committee, on the Effective Date of the option's grant.
Section 8.3 Restrictions Relating to Incentive Stock Options. Stock options
issued in the form of incentive stock options shall, in addition to being
subject to the terms and conditions of Section 8.2, comply with Section 422 of
the Code. Accordingly, the aggregate Fair Market Value (determined at the time
the option was granted) of the Common Stock with respect to which incentive
stock options are exercisable for the first time by a Participant during any
calendar year (under this Plan or any other plan of the Company) shall not
exceed $100,000 (or such other limit as may be required by Section 422 of the
Code). Furthermore, stock options issued in the form of incentive stock options
must be issued within ten years from the effective date of the Plan, and the
term of such stock options may not exceed ten years (or any shorter period
required by Section 422 of the Code).
Section 8.4 Additional Terms and Conditions. The Committee may, by way of
the Award Notice or otherwise, establish such other terms, conditions,
restrictions and/or limitations, if any, of any stock option Award, provided
they are not inconsistent with the Plan.
Section 8.5 Exercise. Upon exercise, the option price of a stock option may
be paid in cash, or by tendering, by either actual delivery of shares or by
attestation, shares of Common Stock, a combination of the foregoing, or such
other consideration as the Committee may deem appropriate. Any shares of Common
Stock tendered by a Participant upon exercise of a stock option must have been
purchased on the open market or, if acquired by the Participant pursuant to a
previous stock option exercise, be owned by the Participant for at least six
months prior to the date of exercise of the stock option. The Committee shall
establish appropriate methods for accepting Common Stock, whether restricted or
unrestricted, and may impose such conditions as it deems appropriate on the use
of such Common Stock to exercise a stock option. Subject to Section 17.8, stock
options awarded under the Plan may also be exercised by way of the Company's
broker-assisted stock option exercise program, if any, provided such program is
available at the time of the option's exercise.
Article 9
STOCK APPRECIATION RIGHTS
Section 9.1 In General. Awards may be granted in the form of stock
appreciation rights ("SARs"). SARs entitle the Participant to receive a payment
equal to the appreciation in a stated number of shares of Common Stock from the
exercise price to the Fair Market Value of the Common Stock on the date of
exercise. The "exercise price" for a particular SAR shall be defined in the
Award Notice for that SAR. A SAR may be granted in tandem with all or a portion
of a related stock option under the Plan ("Tandem SARs"), or may be granted
separately ("Freestanding SARs"). A Tandem SAR may be granted either at the time
of the grant of the related stock option or at any time thereafter during the
term of the stock option. All Awards under the Plan issued to Covered Employees
in the form of a SAR shall qualify as "performance-based compensation" under
Section 162(m) of the Code.
Section 9.2 Terms and Conditions of Tandem SARs. A Tandem SAR shall be
exercisable to the extent, and only to the extent, that the related stock option
is exercisable, and the "exercise price" of such a SAR (the base from which the
value of the SAR is measured at its exercise) shall be the option price under
the related stock option. However, at no time shall a Tandem SAR be issued if
the option price of its related stock option is less than the Fair Market Value
of the Common Stock, as determined by the Committee, on the Effective Date of
the Tandem SAR's grant. If a related stock option is exercised as to some or all
of the shares covered by the Award, the related Tandem SAR, if any, shall be
canceled automatically to the extent of the number of shares covered by the
stock option exercise. Upon exercise of a Tandem SAR as to some or all of the
shares covered by the Award, the related stock option shall be canceled
automatically to the extent of the number of shares covered by such exercise.
Moreover, all Tandem SARs shall expire not later than ten years from the
Effective Date of the SAR's grant.
Section 9.3 Terms and Conditions of Freestanding SARs. Freestanding SARs
shall be exercisable or automatically mature in accordance with such terms and
conditions and at such times and during such periods as may be determined by the
Committee. The exercise price of a Freestanding SAR shall be not less than 100
percent of the Fair Market Value of the Common Stock, as determined by the
Committee, on the Effective Date of the Freestanding SAR's grant. Moreover, all
Freestanding SARs shall expire not later than ten years from the Effective Date
of the Freestanding SAR's grant.
Section 9.4 Deemed Exercise. The Committee may provide that a SAR shall be
deemed to be exercised at the close of business on the scheduled expiration date
of such SAR if at such time the SAR by its terms remains exercisable and, if so
exercised, would result in a payment to the holder of such SAR.
Section 9.5 Additional Terms and Conditions. The Committee may, by way of
the Award Notice or otherwise, determine such other terms, conditions,
restrictions and/or limitations, if any, of any SAR Award, provided they are not
inconsistent with the Plan.
Article 10
STOCK AWARDS
Section 10.1 Grants. Awards may be granted in the form of Stock Awards.
Stock Awards shall be awarded in such numbers and at such times during the term
of the Plan as the Committee shall determine.
Section 10.2 Award Restrictions. Stock Awards shall be subject to such
terms, conditions, restrictions, and/or limitations, if any, as the Committee
deems appropriate including, but not by way of limitation, restrictions on
transferability and continued employment; provided, however, they are not
inconsistent with the Plan. The Committee may modify or accelerate the delivery
of a Stock Award under such circumstances as it deems appropriate.
Section 10.3 Rights as Stockholders. During the period in which any
restricted shares of Common Stock are subject to any restrictions imposed under
Section 10.2, the Committee may, in its sole discretion, grant to the
Participant to whom such restricted shares have been awarded all or any of the
rights of a stockholder with respect to such shares, including, but not by way
of limitation, the right to vote such shares and, pursuant to Article 15, the
right to receive dividends.
Section 10.4 Evidence of Award. Any Stock Award granted under the Plan may
be evidenced in such manner as the Committee deems appropriate, including,
without limitation, book-entry registration or issuance of a stock certificate
or certificates.
Article 11
PERFORMANCE UNITS
Section 11.1 Grants. Awards may be granted in the form of performance
units. Performance units, as that term is used in this Plan, shall refer to
Units valued by reference to designated criteria established by the Committee,
other than Common Stock.
Section 11.2 Performance Criteria. Performance units shall be contingent on
the attainment during a performance period of certain performance objectives.
The length of the performance period, the performance objectives to be achieved
during the performance period, and the measure of whether and to what degree
such objectives have been attained shall be conclusively determined by the
Committee in the exercise of its absolute discretion. Performance objectives may
be revised by the Committee, at such times as it deems appropriate during the
performance period, in order to take into consideration any unforeseen events or
changes in circumstances.
Section 11.3 Additional Terms and Conditions. The Committee may, by way of
the Award Notice or otherwise, determine such other terms, conditions,
restrictions, and/or limitations, if any, of any Award of performance units,
provided they are not inconsistent with the Plan.
Article 12
PERFORMANCE SHARES
Section 12.1 Grants. Awards may be granted in the form of performance
shares. Performance shares, as that term is used in this Plan, shall refer to
shares of Common Stock or Units that are expressed in terms of Common Stock.
Section 12.2 Performance Criteria. Performance shares shall be contingent
upon the attainment during a performance period of certain performance
objectives. The length of the performance period, the performance objectives to
be achieved during the performance period, and the measure of whether and to
what degree such objectives have been attained shall be conclusively determined
by the Committee in the exercise of its absolute discretion. Performance
objectives may be revised by the Committee, at such times as it deems
appropriate during the performance period, in order to take into consideration
any unforeseen events or changes in circumstances.
Section 12.3 Additional Terms and Conditions. The Committee may, by way of
the Award Notice or otherwise, determine such other terms, conditions,
restrictions and/or limitations, if any, of any Award of performance shares,
provided they are not inconsistent with the Plan.
Article 13
PAYMENT OF AWARDS
Section 13.1 Payment. Absent a Plan provision to the contrary, payment of
Awards may, at the discretion of the Committee, be made in cash, Common Stock, a
combination of cash and Common Stock, or any other form of property as the
Committee shall determine. In addition, payment of Awards may include such
terms, conditions, restrictions and/or limitations, if any, as the Committee
deems appropriate, including, in the case of Awards paid in the form of Common
Stock, restrictions on transfer and forfeiture provisions; provided, however,
such terms, conditions, restrictions and/or limitations are not inconsistent
with the Plan.
Section 13.2 Withholding Taxes. The Company shall be entitled to deduct
from any payment under the Plan, regardless of the form of such payment, the
amount of all applicable income and employment taxes required by law to be
withheld with respect to such payment or may require the Participant to pay to
it such tax prior to and as a condition of the making of such payment.
Article 14
EFFECT OF CERTAIN EVENTS
Section 14.1 Stock Options and SARs.
(a) Committee Rules. The Committee shall have the authority to promulgate
rules and regulations to determine the treatment of a Participant under the Plan
in the event of such Participant's death, Disability, Retirement, termination
for an Approved Reason and other termination.
(b) Death. Unless otherwise provided in an Award Notice, upon a
Participant's death, any stock option or SAR may be exercised in whole or in
part within one year after the date of the Participant's death and then only:
(a) by the beneficiary designated by the Participant in a writing submitted to
the Company prior to the Participant's death, or in the absence of same, by the
Participant's estate or by or on behalf of such person or persons to whom the
Participant's rights pass under his or her will or the laws of descent and
distribution, (b) to the extent that the Participant would have been entitled to
exercise the stock option or SAR at the date of his or her death and subject to
all of the conditions on exercise imposed by the Plan and the Award Notice, and
(c) prior to the expiration of the term of the stock option or SAR.
(c) Disability. Unless otherwise provided in an Award Notice, upon a
Participant's Disability, any stock option or SAR may be exercised in whole or
in part within one year after the date of the Participant's Disability and then
only to the extent that the Participant would have been entitled to exercise the
stock option or SAR at the date of his or her Disability, subject to all of the
conditions on exercise imposed by the Plan and the Award Notice and prior to the
expiration of the term of the stock option or SAR.
(d) Retirement or Termination for an Approved Reason. Unless otherwise
provided in an Award Notice, upon a Participant's Retirement or termination for
an Approved Reason, any stock option or SAR may be exercised in whole or in part
within one year after the date of the Participant's Retirement or termination
for an Approved Reason and then only to the extent that the Participant would
have been entitled to exercise the stock option or SAR at the date of his or her
Retirement or termination for an Approved Reason, and subject to all of the
conditions on exercise imposed by the Plan and the Award Notice and prior to the
expiration of the term of the stock option or SAR.
(e) Other Termination. If a Participant's employment with the Company
terminates for a reason other than death, Disability, Retirement, or an Approved
Reason, and unless otherwise provided in an Award Notice, any stock option or
SAR may be exercised in whole or in part within 30 days after the date of
termination of employment and then only to the extent such stock option or SAR
is vested and exercisable at the time of the termination of employment, and
subject to all of the conditions on exercise imposed by the Plan and the Award
Notice and prior to the expiration of the term of the stock option or SAR.
(f) Acceleration and Extension. Notwithstanding this Section or the terms
of an Award Notice, the Committee may: (i) accelerate the vesting and
exercisability of a stock option or SAR in order to allow its exercise by the
estate or beneficiary of a deceased Participant or by the disabled, retired or
terminated Participant; and (ii) extend the period for exercise of a stock
option or SAR, provided such extension does not exceed the term of such stock
option or SAR.
Section 14.2 Other Awards. The Committee shall have the authority to
promulgate rules and regulations to determine the treatment of the other Awards
of a Participant under the Plan in the event of such Participant's death,
Disability, Retirement, or termination from the Company.
Article 15
DIVIDEND AND DIVIDEND EQUIVALENTS
If an Award is granted in the form of a Stock Award, stock option, or
performance share, or in the form of any other stock-based grant, the Committee
may choose, at the time of the grant of the Award or any time thereafter up to
the time of the Award's payment, to include as part of such Award an entitlement
to receive dividends or dividend equivalents, subject to such terms, conditions,
restrictions and/or limitations, if any, as the Committee may establish.
Dividends and dividend equivalents shall be paid in such form and manner (i.e.,
lump sum or installments), and at such time(s) as the Committee shall determine.
All dividends or dividend equivalents which are not paid currently may, at the
Committee's discretion, accrue interest, be reinvested into additional shares of
Common Stock or, in the case of dividends or dividend equivalents credited in
connection with Stock Awards or performance shares, be credited as additional
Stock Awards or performance shares and paid to the Participant if and when, and
to the extent that, payment is made pursuant to such Award. The total number of
shares available for grant under Section 6.1 shall not be reduced to reflect any
dividends or dividend equivalents that are reinvested into additional shares of
Common Stock or credited as additional Stock Awards or performance shares.
Article 16
DEFERRAL OF AWARDS
At the discretion of the Committee, payment of any Award, dividend, or
dividend equivalent, or any portion thereof, may be deferred by a Participant
until such time as the Committee may establish. All such deferrals shall be
accomplished by the delivery of a written, irrevocable election by the
Participant prior to the time established by the Committee for such purpose, on
a form provided by the Company. Further, all deferrals shall be made in
accordance with administrative guidelines established by the Committee to ensure
that such deferrals comply with all applicable requirements of the Code.
Deferred payments shall be paid in a lump sum or installments, as determined by
the Committee. Deferred Awards may also be credited with interest, at such rates
to be determined by the Committee, and, with respect to those deferred Awards
denominated in the form of Common Stock, with dividends or dividend equivalents.
Article 17
MISCELLANEOUS
Section 17.1 Nonassignability.
(a) In General. Except as otherwise determined by the Committee or as
otherwise provided in Section 17.1(b), no Awards or any other payment under the
Plan shall be subject in any manner to alienation, anticipation, sale, transfer
(except by will or the laws of descent and distribution), assignment, pledge, or
encumbrance, nor shall any Award be payable to or exercisable by anyone other
than the Participant to whom it was granted.
(b) Non-qualified Stock Options. The Committee shall have the discretionary
authority to grant Awards of non-qualified stock options or amend outstanding
Awards of non-qualified stock options to provide that they be transferable,
subject to such terms and conditions as the Committee shall establish. In
addition to any such terms and conditions, the following terms and conditions
shall apply to all transfers of non-qualified stock options:
(1) Permissible Transferors. Except as otherwise permitted by the
Committee, the only Participants permitted to transfer their non-qualified stock
options are those Participants who are, on the date of the transfer of their
non-qualified stock option, a corporate officer of PTI, or a Director.
(2) Permissible Transferees. Transfers shall only be permitted to: (i)
the Participant's "Immediate Family Members," as that term is defined in Section
17.1(b)(9); (ii) a trust or trusts for the exclusive benefit of such Immediate
Family Members; or (iii) a family partnership or family limited partnership in
which each partner is, at the time of transfer and all times subsequent thereto,
either an Immediate Family Member or a trust for the exclusive benefit of one or
more Immediate Family Members.
(3) No Consideration. All transfers shall be made for no consideration.
(4) Subsequent Transfers. Once a Participant transfers a non-qualified
stock option, any subsequent transfer of such transferred option shall,
notwithstanding Section 17.1(b)(1) to the contrary, be permitted, provided,
however, such subsequent transfer complies with all of the terms and conditions
of this Section 17.1, with the exception of Section 17.1(b)(1).
(5) Transfer Agent. In order for a transfer to be effective, the
Committee's designated transfer agent must be used to effectuate the transfer.
The costs of such transfer agent shall be borne solely by the transferor.
(6) Withholding. In order for a transfer to be effective, a Participant
must agree in writing prior to the transfer on a form provided by the Company to
pay any and all payroll and withholding taxes due upon exercise of the
transferred option. In addition, prior to the exercise of a transferred option
by a transferee, arrangements must be made by the Participant with the Company
for the payment of all payroll and withholding taxes.
(7) Terms and Conditions of Transferred Option. Upon transfer, a non-
qualified stock option continues to be governed by and subject to the terms and
conditions of the Plan and the option's applicable administrative guide and
Award Notice. A transferee of a non-qualified stock option is entitled to the
same rights as the Participant to whom such non-qualified stock options was
awarded, as if no transfer had taken place. Accordingly, the rights of the
transferee are subject to the terms and conditions of the original grant to the
Participant, including provisions relating to expiration date, exercisability,
option price and forfeiture.
(8) Notice to Transferees. The Company shall be under no obligation to
provide a transferee with any notice regarding the transferred options held by
the transferee upon forfeiture or any other circumstance.
(9) Immediate Family Member. For purposes of this Section 17.1, the
term "Immediate Family Member" shall mean the Participant and his or her spouse,
children or grandchildren, whether natural, step or adopted children or
grandchildren.
Section 17.2 Amendments to Awards. The Committee may at any time
unilaterally amend any unexercised, unearned, or unpaid Award, including, but
not by way of limitation, Awards earned but not yet paid, to the extent it deems
appropriate; provided, however, that any such amendment which, in the opinion of
the Committee, is adverse to the Participant shall require the Participant's
consent.
Section 17.3 Regulatory Approvals and Listings. Notwithstanding anything
contained in this Plan to the contrary, the Company shall have no obligation to
issue or deliver certificates of Common Stock evidencing Stock Awards or any
other Award resulting in the payment of Common Stock prior to (i) the obtaining
of any approval from any governmental agency which the Company shall, in its
sole discretion, determine to be necessary or advisable, (ii) the admission of
such shares to listing on the stock exchange on which the Common Stock may be
listed, and (iii) the completion of any registration or other qualification of
said shares under any state or federal law or ruling of any governmental body
which the Company shall, in its sole discretion, determine to be necessary or
advisable.
Section 17.4 No Right to Continued Employment or Grants. Participation in
the Plan shall not give any Employee any right to remain in the employ of the
Company. The Company reserves the right to terminate any Employee at any time.
Further, the adoption of this Plan shall not be deemed to give any Employee or
any other individual any right to be selected as a Participant or to be granted
an Award. In addition, no Employee having been selected for an Award, shall have
at any time the right to receive any additional Awards.
Section 17.5 Amendment/Termination. The Committee may suspend or terminate
the Plan at any time for any reason with or without prior notice. In addition,
the Committee may, from time to time for any reason and with or without prior
notice, amend the Plan in any manner, but may not without stockholder approval
adopt any amendment which would increase the number of shares available under
the Plan, or which would require the vote of the stockholders of PTI pursuant to
Section 162(m) of the Code, but only insofar as such amendment affects Covered
Employees, or if such approval is necessary or deemed advisable with respect to
tax, securities, or other applicable laws, policies, or regulations.
Notwithstanding the foregoing, and subject to Section 4.4, the Committee may not
revoke, remove or reduce any vested right of a Participant without the prior
written consent of such Participant.
Section 17.6 Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Delaware, except as superseded by
applicable federal law, without giving effect to its conflicts of law
provisions.
Section 17.7 No Right, Title, or Interest in Company Assets. No Participant
shall have any rights as a stockholder as a result of participation in the Plan
until the date of issuance of a stock certificate in his or her name, and, in
the case of restricted shares of Common Stock, such rights are granted to the
Participant under the Plan. To the extent any person acquires a right to receive
payments from the Company under the Plan, such rights shall be no greater than
the rights of an unsecured creditor of the Company and the Participant shall not
have any rights in or against any specific assets of the Company. All of the
Awards granted under the Plan shall be unfunded.
Section 17.8 Section 16 of the Exchange Act. In order to avoid any Exchange
Act violations, the Committee may, from time to time, impose additional
restrictions upon an Award, including but not limited to, restrictions regarding
tax withholdings and restrictions regarding the Participant's ability to
exercise Awards under the Company's broker-assisted stock option exercise
program, if any.
Section 17.9 No Guarantee of Tax Consequences. No person connected with the
Plan in any capacity, including, but not limited to, the Company and its
directors, officers, agents and employees, makes any representation, commitment,
or guarantee that any tax treatment, including, but not limited to, federal,
state and local income, estate and gift tax treatment, will be applicable with
respect to the tax treatment of any Award, any amounts deferred under the Plan,
or paid to or for the benefit of a Participant under the Plan, or that such tax
treatment will apply to or be available to a Participant on account of
participation in the Plan.