SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of
1934 (Amendment No. ____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
COLUMBUS MCKINNON CORPORATION
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(Name of Registrant as specified in its charter)
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: __/
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously 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 Statement No.:
(3) Filing Party:
(4) Date Filed:
COLUMBUS MCKINNON CORPORATION
140 JOHN JAMES AUDUBON PARKWAY
AMHERST, NEW YORK 14228-1197
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 31, 2006
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Columbus
McKinnon Corporation, a New York corporation (the "Company"), will be held at
the Ramada Hotel and Conference Center, 2402 North Forest Road, Amherst, New
York, on July 31, 2006, at 10:00 a.m., local time, for the following purposes:
1. To elect seven Directors to hold office until the 2007 Annual Meeting
and until their successors have been elected and qualified;
2. To take action and vote upon the adoption of the Columbus McKinnon
Corporation 2006 Long Term Incentive Plan;
3. To take action and vote upon the adoption of the Columbus McKinnon
Corporation Executive Management Variable Compensation Plan; and
4. To take action upon and transact such other business as may be properly
brought before the meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on June 9, 2006, as
the record date for the determination of shareholders entitled to receive notice
of and to vote at the Annual Meeting.
It is important that your shares be represented and voted at the Annual
Meeting. Whether or not you plan to attend, please sign, date and return the
enclosed proxy card in the enclosed postage-paid envelope or vote by telephone
or using the internet as instructed on the enclosed proxy card. If you attend
the Annual Meeting, you may vote your shares in person if you wish. We sincerely
appreciate your prompt cooperation.
TIMOTHY R. HARVEY
Secretary
Dated: June 20, 2006
COLUMBUS MCKINNON CORPORATION
140 JOHN JAMES AUDUBON PARKWAY
AMHERST, NEW YORK 14228-1197
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PROXY STATEMENT
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This Proxy Statement and the accompanying form of proxy are being furnished
in connection with the solicitation by the Board of Directors of Columbus
McKinnon Corporation, a New York corporation ("our Company", "we" or "us"), of
proxies to be voted at the Annual Meeting of Shareholders (the "Annual Meeting")
to be held at the Ramada Hotel and Conference Center, 2402 North Forest Road,
Amherst, New York, on July 31, 2006, at 10:00 a.m., local time, and at any
adjournment or adjournments thereof. The close of business on June 9, 2006 has
been fixed as the record date for the determination of shareholders entitled to
receive notice of and to vote at the meeting. At the close of business on June
9, 2006, we had outstanding 18,716,147 shares of our common stock, $.01 par
value per share, the holders of which are entitled to one vote per share on each
matter properly brought before the Annual Meeting.
The shares represented by all valid proxies in the enclosed form will be
voted if received in time for the Annual Meeting in accordance with the
specifications, if any, made on the proxy card. If no specification is made, the
proxies will be voted FOR the nominees for Director named in this Proxy
Statement, FOR the adoption of the Columbus McKinnon 2006 Long Term Incentive
Plan and FOR the adoption of the Columbus McKinnon Executive Management Variable
Compensation Plan.
In order for business to be conducted, a quorum must be present at the
Annual Meeting. A quorum is a majority of the outstanding shares of common stock
entitled to vote at the Annual Meeting. Abstentions, broker non-votes and
withheld votes will be counted in determining the existence of a quorum at the
Annual Meeting.
Directors will be elected by a plurality of the votes cast at the Annual
Meeting, meaning the seven nominees receiving the most votes will be elected. A
majority of the votes cast is required to approve the adoption of our 2006 Long
Term Incentive Plan and the adoption of our Executive Management Variable
Compensation Plan. Under the law of the State of New York, our state of
incorporation, only "votes cast" by the shareholders entitled to vote are
determinative of the outcome of the matter subject to shareholder vote.
Abstentions and broker non-votes will be counted in determining the existence of
a quorum, but will not be counted towards any other nominee's achievement of
plurality or in determining the votes cast on any other proposal.
The execution of a proxy will not affect a shareholder's right to attend
the Annual Meeting and to vote in person. A shareholder who executes a proxy may
revoke it at any time before it is exercised by giving written notice to the
Secretary, by appearing at the Annual Meeting and so stating, or by submitting
another duly executed proxy bearing a later date.
This Proxy Statement and form of proxy are first being sent or given to
shareholders on or about June 20, 2006.
PROPOSAL 1
ELECTION OF DIRECTORS
Our Certificate of Incorporation provides that our Board of Directors shall
consist of not less than three nor more than nine Directors to be elected at
each annual meeting of shareholders and to serve for a term of one year or until
their successors are duly elected and qualified. Mr. Herbert P. Ladds, Jr., who
has been a Director since 1973, has announced that he plans to retire as a
Director effective as of the date of the Annual Meeting. Accordingly, Mr. Ladds
has not been nominated for re-election as a Director and, effective as of the
Annual Meeting, the Board of Directors will be reduced to seven members.
Unless instructions to the contrary are received, it is intended that the
shares represented by proxies will be voted for the election as Directors of
Timothy T. Tevens, Carlos Pascual, Richard H. Fleming, Ernest R. Verebelyi,
Wallace W. Creek, Stephen Rabinowitz and Linda A. Goodspeed, each of whom is
presently a Director and has been previously elected by our shareholders. If any
of these nominees should become unavailable for election for any reason, it is
intended that the shares represented by the proxies solicited herewith will be
voted for such other person as the Board of Directors shall designate. The Board
of Directors has no reason to believe that any of these nominees will be unable
or unwilling to serve if elected to office.
The following information is provided concerning the nominees for Director:
ERNEST R. VEREBELYI was appointed a Director of the Company in January 2003
and was elected Chairman of the Board in August 2005. Mr. Verebelyi retired from
Terex Corporation, a global diversified equipment manufacturer, in October 2002
where he held the position of Group President. Prior to joining Terex in 1998,
he held executive, general management and operating positions at General Signal
Corporation, Emerson, Hussmann Corporation, and General Electric. Mr. Verebelyi
also serves as a director of CH Energy Group, Inc.
TIMOTHY T. TEVENS was elected President and a Director of our Company in
January 1998 and assumed the duties of Chief Executive Officer in July 1998.
From May 1991 to January 1998 he served as our Vice President - Information
Services and was also elected Chief Operating Officer in October 1996. From 1980
to 1991, Mr. Tevens was employed by Ernst & Young LLP in various management
consulting capacities.
CARLOS PASCUAL has been a Director of our Company since 1998. Mr. Pascual
currently serves as Chairman of the Board of Directors of Xerox de Espana S.A.
(Spain). From January 2000 through December 2003, Mr. Pascual was Executive Vice
President and President of Developing Markets Operations for Xerox. From January
1999 to January 2000, Mr. Pascual served as Deputy Executive Officer of Xerox's
Industry Solutions Operations. From August 1995 to January 1999, Mr. Pascual
served as President of Xerox Corporation's United States Customer Operations.
Prior thereto, he has served in various capacities with Xerox Corporation.
RICHARD H. FLEMING was appointed a Director of our Company in March 1999.
In February 1999, Mr. Fleming was appointed Executive Vice President and Chief
Financial Officer of USG Corporation. Prior thereto, Mr. Fleming served USG
Corporation in various executive financial capacities, including Senior Vice
President and Chief Financial Officer from January 1995 to February 1999 and
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Vice President and Chief Financial Officer from January 1994 to January 1995.
Mr. Fleming also serves as a member of the Board of Directors for several
not-for-profit entities including UCAN, the Child Welfare League of America, and
Chicago United.
WALLACE W. CREEK was appointed a Director of the Company in January 2003.
From December 2002 through June 2004, he served as Senior Vice President of
Finance for Collins & Aikman, a leading manufacturer of automotive interior
components. Prior to that, Mr. Creek served as Controller of the General Motors
Corporation from 1992 to 2002 and held several executive positions in finance at
General Motors over a forty-three year career. Mr. Creek is also a director of
CF Industries Holdings, Inc.
STEPHEN RABINOWITZ was appointed a Director of the Company in October 2004.
He retired in 2001 from his position as Chairman and Chief Executive Officer of
General Cable Corporation, a leading manufacturer of electrical, communications
and utility cable. Prior to joining General Cable as President and Chief
Executive Officer in 1994, he served as President and CEO of AlliedSignal
Braking Systems, and before that as President and CEO of General Electric's
Electrical Distribution and Control business. He also held management positions
in manufacturing operations and technology at the General Electric Company and
the Ford Motor Company. Mr. Rabinowitz is also a Director of Energy Conversion
Devices, Inc. and JLG Industries, Inc..
LINDA A. GOODSPEED was appointed a Director of the Company in October 2004.
In 2001, she joined Lennox International, Inc., a global supplier of climate
control solutions, and currently serves as Executive Vice President and Chief
Technology Officer of that company. Prior to that, Ms. Goodspeed served as
President and Chief Operating Officer of PartMiner, Inc., a global supplier of
electronic components. She has also held management positions in product
management and development, research and development and design engineering at
General Electric Appliances, Nissan North America, Inc. and the Ford Motor
Company. Ms. Goodspeed also serves as a director of American Electric Power Co.,
Inc. and is a member of the Development Board of the University of Texas at
Dallas.
THE BOARD OF DIRECTORS RECOMMENDS UNANIMOUSLY A VOTE "FOR" EACH OF THE DIRECTOR
NOMINEES.
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CORPORATE GOVERNANCE
GENERAL CORPORATE GOVERNANCE POLICY
Our Board of Directors believes that its overriding responsibility is to
offer guidance and the benefit of its collective experience to help our
management understand the risks confronting, and opportunities available to, our
Company. In furtherance of this responsibility, our Board of Directors has
adopted a General Corporate Governance Policy setting forth certain policies,
guidelines and procedures it deems important to the successful satisfaction of
this responsibility. These policies and procedures include guidelines as to the
eligibility, independence, evaluation, education, compensation and
indemnification of our Directors, as well as with respect to specific
transactions requiring the prior formal approval of our Board of Directors. A
copy of our General Corporate Governance Policy is posted on the Investor
Relations section of the Company's website at WWW.CMWORKS.COM.
BOARD OF DIRECTORS INDEPENDENCE
Our Board of Directors has determined that each of its current members,
other than Mr. Tevens, is independent within the meaning of the NASDAQ Stock
Market, Inc. listing standards as currently in effect.
BOARD OF DIRECTORS MEETINGS AND ATTENDANCE
The Board of Directors and its committees meet regularly throughout the
year and also hold special meetings and act by written consent from time to time
as appropriate. All Directors are expected to attend each meeting of the Board
of Directors and the committees on which he or she serves, and are also invited,
but not required, to attend the Annual Meeting. Agendas for meetings of the
Board of Directors generally include executive sessions for the independent
Directors to meet without management Directors present. During the year ended
March 31, 2006, our Board of Directors held 15 meetings. Each Director attended
at least 75% of the aggregate number of meetings of our Board of Directors and
meetings held by all committees of our Board of Directors on which he or she
served. All Directors attended the 2005 Annual Meeting, except for Messrs.
Verebelyi and Pascual, who missed the meeting due to flight cancellations, and
Ms. Goodspeed.
AUDIT COMMITTEE
Our Board of Directors has a standing Audit Committee comprised of Mr.
Fleming, as Chairman, and Messrs. Verebelyi, Creek and Rabinowitz and Ms.
Goodspeed. Each member of our Audit Committee is independent as defined under
Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and under the NASDAQ Stock Market, Inc. rules currently in
effect. In addition, pursuant to the requirements of Section 407 of the
Sarbanes-Oxley Act of 2002, our Board of Directors has determined that each of
Messrs. Fleming, Creek and Rabinowitz qualifies as an "audit committee financial
expert." The duties of our Audit Committee consist of (i) appointing or
replacing our independent auditors, (ii) pre-approving all auditing and
permitted non-audit services provided to us by our independent auditors, (iii)
reviewing with our independent auditors and our management the scope and results
of our annual audited financial statements, our quarterly financial statements
and significant financial reporting issues and judgments made in connection with
the preparation of our financial statements, (iv) reviewing our management's
assessment of the effectiveness of our internal controls, as well as our
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independent auditors' report on this assessment, (v) reviewing insider and
affiliated party transactions and (vi) establishing procedures for the receipt,
retention and treatment of complaints received by us regarding accounting or
internal controls. The Audit Committee is governed by a written charter approved
by the Board of Directors. A copy of this charter is posted on the Investor
Relations section of the Company's website at WWW.CMWORKS.COM. Our Audit
Committee held 12 meetings in fiscal 2006.
COMPENSATION AND SUCCESSION COMMITTEE
Our Compensation and Succession Committee consists of Mr. Pascual, as
Chairman, and Messrs. Fleming, Ladds and Rabinowitz, all of whom are independent
directors. The principal functions of this Committee are to (i) review and make
recommendations to our Board of Directors with respect to our compensation
strategy, (ii) evaluate the performance of our executive officers in light of
our compensation goals and objectives, (iii) evaluate the performance of our
chief executive officer and chief financial officer and review and establish
their compensation, (iv) administer and make recommendations for grants and
awards to our employees under our incentive compensation programs and (v) review
and make recommendations with respect to our succession plans for all key
management positions and provide assurance to our Board of Directors that our
process in preparing our succession plans is appropriate. The Compensation and
Succession Committee is governed by a written charter approved by the Board of
Directors which is posted on the Investor Relations section of the Company's
website at WWW.CMWORKS.COM. Our Compensation and Succession Committee held four
meetings in fiscal 2006.
CORPORATE GOVERNANCE AND NOMINATION COMMITTEE
Our Corporate Governance and Nomination Committee is responsible for (i)
evaluating the composition, organization and governance of our Board of
Directors and its committees, (ii) monitoring compliance with our system of
corporate governance and (iii) developing criteria, investigating and making
recommendations with respect to candidates for membership on our Board of
Directors. This Committee is chaired by Mr. Creek and also includes Messrs.
Ladds and Pascual and Ms. Goodspeed. Each of these members is an independent
director. Our Corporate Governance and Nomination Committee does not solicit
direct nominations from our shareholders, but will give due consideration to
written recommendations for nominees from our shareholders for election as
directors that are submitted in accordance with our by-laws. See the information
contained herein under the heading "Shareholders' Proposals." Generally, a
shareholder who wishes to nominate a candidate for Director must give us prior
written notice thereof, which notice must be personally delivered or mailed via
registered first class mail, return receipt requested, to our Secretary and must
be received by our Secretary not less than 60 days nor more than 90 days prior
to the first anniversary of the date our proxy statement was first mailed to
shareholders in connection with our previous year's Annual Meeting. If such
nomination is given in connection with a special meeting for the election of
Directors, it must be received no later than the tenth day following the day on
which the date of the special meeting is publicly announced or disclosed. The
shareholder's recommendation for nomination must contain the following
information as to each nominee for Director: the nominee's name, age, business
address and residence address; the nominee's principal occupation or employment
for the previous five years; the number of shares of our common stock owned by
such candidate; and any other information relating to the nominee that is
required to be disclosed in solicitations of proxies for elections of directors
pursuant to Regulation 14A under the Exchange Act. A shareholder's
recommendation must also set forth: such shareholder's name and address as they
5
appear on our books and records; the number of shares of each class of our
capital stock that are beneficially owned and held of record by such
shareholder; any material interest of such shareholder in such nomination; any
other information that is required to be provided by such shareholder pursuant
to Regulation 14A under the Exchange Act in his or her capacity as a proponent
to a shareholder proposal; and a signed consent from each nominee recommended by
such shareholder that such nominee is willing to serve as a Director if elected.
Any nomination not made in strict accordance with the foregoing provisions will
be disregarded at the direction of our Chairman of the Board. The Corporate
Governance and Nomination Committee is governed by a written charter approved by
the Board of Directors which is posted on the Investor Relations section of the
Company's website at WWW.CMWORKS.COM. Our Corporate Governance and Nomination
Committee held five meetings in fiscal 2006.
CODE OF ETHICS
Our Board of Directors adopted a Code of Ethics which governs all of our
Directors, officers and employees, including our Chief Executive Officer and
other executive officers. This Code of Ethics is posted on the Corporate
Information section of the Company's website at WWW.CMWORKS.COM. The Company
will disclose on its website any amendment to this Code of Ethics or waiver of a
provision of this Code of Ethics, including the name of any person to whom the
waiver was granted.
DIRECTOR COMPENSATION
Effective August 1, 2006, we will pay an annual retainer of $80,000 to each
of our outside directors, 30% of which will be paid in our common stock and the
balance paid in quarterly cash installments. Our Chairman of the Board will
receive an additional annual retainer of $40,000. Directors who are also our
employees do not receive an annual retainer. Committee chairmen each receive an
additional annual retainer of $6,000, except for the chairman of the Audit
Committee who receives an additional annual retainer of $12,000. No additional
fees will be paid for attendance at Board of Director or committee meetings. Our
Directors will be reimbursed for any reasonable expenses incurred in attending
such meetings.
DIRECTORS' AND OFFICERS' INDEMNIFICATION INSURANCE
Effective April 1, 2006, we placed our directors and officers
indemnification insurance coverage with the Cincinnati Insurance Company, Axis
Reinsurance Company and Federal Insurance Company for a term of one year at a
cost of $278,903. The total insurance coverage is $25,000,000, with Cincinnati
Insurance Company providing coverage of $10,000,000, Axis Reinsurance Company
providing coverage of $5,000,000 and Federal Insurance Company providing
$10,000,000 of "Side A" coverage. This insurance provides coverage to our
executive officers and directors individually where exposures exist for which we
are unable to provide direct indemnification.
CONTACTING THE BOARD OF DIRECTORS
Although we do not have a formal policy regarding communications with our
Board of Directors, shareholders may communicate with our Board of Directors by
writing to: Board of Directors, Columbus McKinnon Corporation, 140 John James
Audubon Parkway, Amherst, New York 14228-1197. Shareholders who would like their
submission directed to a particular Director may so specify and the
communication will be forwarded, as appropriate.
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OUR DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding our Directors
and executive officers:
NAME AGE POSITION
---- --- --------
Ernest R. Verebelyi (1 ) 58 Chairman of the Board
Timothy T. Tevens 50 President, Chief Executive
Officer and Director
Herbert P. Ladds, Jr. (2)(3)(4) 73 Director
Carlos Pascual (2)(3) 60 Director
Richard H. Fleming (1)(2) 59 Director
Wallace W. Creek (1)(3) 67 Director
Stephen Rabinowitz (1 )(2) 63 Director
Linda A. Goodspeed (1)(3) 44 Director
Derwin R. Gilbreath 58 Vice President and Chief
Operating Officer
Ned T. Librock (5) 53 Vice President - Sales
Karen L. Howard 44 Vice President - Finance,
Treasurer and Chief
Financial Officer
Joseph J. Owen 45 Vice President and Hoist
Group Leader
Robert H. Myers, Jr. (6) 63 Vice President
Timothy R. Harvey 55 General Counsel and Secretary
Richard A. Steinberg 53 Vice President -
Human Resources
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(1) Member of our Audit Committee.
(2) Member of our Compensation and Succession Committee.
(3) Member of our Corporate Governance and Nomination Committee.
(4) Mr. Ladds has announced that he plans to retire as a Director effective as
of the date of the Annual Meeting and is not seeking re-election as a
Director.
(5) Mr. Librock resigned in May 2006.
(6) Mr. Myers retired in March 2006.
All of our officers are elected annually at the first meeting of our Board
of Directors following the Annual Meeting of Shareholders and serve at the
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discretion of our Board of Directors. There are no family relationships between
any of our officers or Directors. Recent business experience of our Directors is
set forth above under "Election of Directors." Recent business experience of our
executive officers who are not also Directors is as follows:
DERWIN R. GILBREATH was appointed Vice President and Chief Operating
Officer in February 2005. Mr. Gilbreath has more than thirty years of experience
in industrial operations and management, including as Chief Operating Officer of
the Metalworking Solutions and Services Group of Kennametal, Inc. (NYSE: KMT).
Prior to joining Kennametal in 1994, he served in senior operations management
positions at General Signal Corporation and NL Industries.
KAREN L. HOWARD was elected Vice President in January 1997, Treasurer in
2004, and named our Chief Financial Officer in August 2005. From January 1997 to
August 2004, Mrs. Howard served as Vice President - Controller. From June 1995
to January 1997, Ms. Howard was employed by us in various financial and
accounting capacities. Previously, Ms. Howard was employed by Ernst & Young LLP
as a certified public accountant.
NED T. LIBROCK was elected a Vice President in November 1995. Until his
resignation in May 2006, Mr. Librock had been employed by us since 1990 in
various sales management capacities. Prior to his employment with us, Mr.
Librock was employed by Dynabrade Inc., a manufacturer of power tools, as
director of Sales and Marketing.
JOSEPH J. OWEN was appointed Vice President in August 1999. From April 1997
to August 1999, Mr. Owen was employed by us as Corporate Director - Materials
Management. Prior to joining us, Mr. Owen was employed by Ernst & Young LLP in
various management consulting capacities.
ROBERT H. MYERS, JR. retired in March 2006. He had been employed by us
since 1959. In October of 2001, Mr. Myers was appointed Vice President - Human
Resources. Prior to October 2001, Mr. Myers served for eight years as Corporate
Manager of Environmental Systems. Prior to that, Mr. Myers served as Human
Resources Director of our CM Hoist Division.
TIMOTHY R. HARVEY has been with us since 1996, initially serving as Manager
- Legal Affairs until his appointment as Secretary in October 2003. He also
serves as our General Counsel. Prior to 1996, Mr. Harvey was engaged in the
private practice of law in Buffalo, New York.
RICHARD A. STEINBERG has been employed by us since August 2005, initially
as Director - Human Resources and, since November 2005, as Vice President -
Human Resources. Prior to joining us, Mr. Steinberg was employed by Praxair Inc.
for ten years in various human resources capacities, most recently as a Region
Leader and Human Resource Manager. Prior to joining Praxair in 1995, he held the
positions of Human Resources Manager at Computer Task Group Inc. located in
Buffalo and Organizational Development Leader at The Goodyear Tire and Rubber
Company located in Akron, Ohio.
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COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the cash compensation as well as certain
other compensation paid during the fiscal years ended March 31, 2004, 2005 and
2006 for our Chief Executive Officer and our other four most highly compensated
executive officers. The amounts shown include compensation for services in all
compensation capacities.
SUMMARY COMPENSATION TABLE
--------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------- -----------------------------
SECURITIES
RESTRICTED UNDERLYING
FISCAL OTHER ANNUAL STOCK OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS(1) SARS(2) COMPENSATION(3)
--------------------------- ---- ------ ----- ------------ --------- ------- ---------------
Timothy T. Tevens, 2006 $522,981 $819,000 $ 74,121(4) $ -- -- $7,714
President and Chief 2005 472,500 631,851 $13,254(5) -- 125,000 2,047
Executive Officer 2004 472,500 -- -- -- -- 5,645
Ned T. Librock, 2006 247,758 232,128 816,671(4) -- -- 8,670
Vice President - Sales 2005 235,019 189,154 7,384(6) -- 40,000 3,261
2004 230,577 -- 279(7) -- -- 3,326
Karen L. Howard, 2006 239,334 222,612 74,780(4) -- -- 8,828
Vice President - Finance, 2005 196,500 157,662 30,959(8) -- 20,000 3,441
Treasurer and Chief 2004 196,500 -- -- -- -- 2,989
Financial Officer
Derwin R. Gilbreath (9) 2006 300,000 280,800 80,985(10) -- -- 5,555
Vice President and 2005 28,846 -- 1,641(10) -- 45,000 9
Chief Operating Officer 2004 -- -- -- -- -- --
Joseph J. Owen, 2006 203,625 190,944 219,446(4) -- -- 8,838
Vice President and Hoist 2005 194,250 155,857 5,412(11) -- 30,000 3,403
Group Leader 2004 194,250 -- -- -- -- 2,956
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(1) Mr. Tevens was granted 2,488 shares of restricted common stock on June 10,
1999, which had a value on such date of $61,900. The restrictions on 2,488
of Mr. Tevens' restricted shares of common stock lapsed on June 9, 2004, on
which date such shares had a value of $13,062. As of March 31, 2006, Mr.
Tevens no longer owned any shares of restricted common stock. Mr. Librock
was granted 1,386 shares of restricted common stock on June 10, 1999, on
which date had a value of $34,500. The restrictions on 1,386 shares of Mr.
Librock's restricted common stock lapsed on June 9, 2004, on which date
such shares had a value of $7,276.50. As of March 31, 2006, Mr. Librock no
longer owned any shares of restricted common stock. Ms. Howard was granted
1,031 shares of restricted common stock on June 10, 1999, which had a value
on such date of $25,650, and 8,500 shares of restricted common stock on
August 17, 1998, which had a value on such date of $196,563. The
restrictions on 1,031 shares of Ms. Howard's restricted common stock lapsed
on June 9, 2004, on which date such shares had a value of $5,412.75. The
restrictions on 8,500 shares of Ms. Howard's restricted common stock lapsed
on August 16, 2003, on which date such shares had a value of $32,215. As of
March 31, 2006, Ms. Howard no longer owned any shares of restricted common
stock. Mr. Owen was granted 1,016 shares of restricted common stock on June
10, 1999, which had a value on such date of $25,300. The restrictions on
1,016 shares of Mr. Owen's restricted common stock lapsed on June 9, 2004,
on which date such shares had a value of $5,334. As of March 31, 2006, Mr.
Owen no longer owned any shares of restricted common stock. We do not pay
dividends on our outstanding shares of restricted common stock. In the
event we declare any dividends on our common stock in the future, we would
provide additional compensation to holders of our restricted common stock
in lieu of such dividends.
(2) Consists of options granted in fiscal 2005 to Messrs. Tevens and Librock,
Ms. Howard and Messrs. Gilbreath and Owen pursuant to our Incentive Stock
Option Plan in the amounts of 125,000, 40,000, 20,000, 45,000 and 30,000,
respectively.
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(3) Consists of: (i) the value of shares of common stock allocated in fiscal
2006 under our Employee Stock Ownership Plan, or ESOP, to accounts for
Messrs. Tevens and Librock, Ms. Howard and Messrs. Gilbreath and Owen in
the amount of $3,202, $3,202, $3,202, $0 and $3,202, respectively, (ii)
premiums for group term life insurance policies insuring the lives of
Messrs. Tevens and Librock, Ms. Howard and Messrs. Gilbreath and Owen in
the amount of $120 each and (iii) our matching contributions under our
401(k) plan for Messrs. Tevens and Librock, Ms. Howard and Messrs.
Gilbreath and Owen in the amount of $4,392, $5,348, $5,506, $5,435 and
$5,516 respectively.
(4) Represents the fair market value of common stock acquired during fiscal
2006 upon the exercise of non-qualified stock options or incentive stock
options treated as non-qualified stock options previously issued pursuant
to our Non-Qualified Stock Option Plan and Incentive Stock Option Plan.
(5) Represents tax payments we made on behalf of Mr. Tevens in fiscal 2005 for
the income tax effects of the expiration of the restrictions on 2,488
shares of restricted common stock granted to him in fiscal 2000 and
released in fiscal 2005. See footnote (1) above.
(6) Represents tax payments we made on behalf of Mr. Librock in fiscal 2005 for
the income tax effects of the expiration of the restrictions on 1,386
shares of restricted common stock granted to him in fiscal 2000 and
released in fiscal 2005. See footnote (1) above.
(7) Represents tax reimbursement payments we made to Mr. Librock in fiscal 2004
to offset the income tax effects of the expiration of the restrictions on
shares released in a previous year.
(8) Represents $5,492 of tax payments we made on behalf of Ms. Howard in fiscal
2005 for the income tax effects of the expiration of the restrictions on
1,031 shares of restricted common stock granted to her in fiscal 2000 and
released in fiscal 2005. Also represents $25,467 of tax reimbursement
payments we made to Ms. Howard in fiscal 2005 to offset the income tax
effects of the expiration of the restrictions on 8,500 shares of restricted
common stock granted to her in fiscal 1999 and released in fiscal 2004. See
footnote (1) above.
(9) Mr. Gilbreath was not employed by us in fiscal 2004.
(10) Represents relocation expense reimbursements made to Mr. Gilbreath.
(11) Represents tax payments we made on behalf of Mr. Owen in fiscal 2005 for
the income tax effects of the expiration of the restrictions on 1,016
shares of restricted stock granted to him in fiscal 2000 and released in
fiscal 2005. See footnote (1) above.
EMPLOYEE PLANS
EMPLOYEE STOCK OWNERSHIP PLAN. We maintain our ESOP for the benefit of
substantially all of our domestic non-union employees. The ESOP is intended to
be an employee stock ownership plan within the meaning of Section 4975(e)(7) of
the Internal Revenue Code of 1986, as amended and an eligible individual account
plan within the meaning of Section 407(d)(3) of the Internal Revenue Code. From
1988 through 1998, the ESOP has purchased from us 1,373,549 shares of common
stock for the aggregate sum of approximately $10.5 million. The proceeds of
certain institutional loans were used to fund such purchases. The ESOP's loans
are secured by our common stock which is held by the ESOP and such loans are
guaranteed by us. The ESOP acquired 479,900 shares of our common stock in
October 1998 for the aggregate sum of approximately $7.7 million. The proceeds
of a loan we made to the ESOP were used to fund the purchase.
On a quarterly basis, we make a contribution to the ESOP in an amount
determined by our Board of Directors. In fiscal 2006, our cash contribution was
10
approximately $0.9 million. The ESOP's trustees use the entire contribution to
make payments of principal and interest on the ESOP's loans.
Common stock not allocated to ESOP participants is recorded in an ESOP
suspense account and is held as collateral for repayment of the ESOP's loans. As
payments of principal and interest are received by the lenders, these shares are
released from the ESOP suspense account annually and are then allocated to the
ESOP participants in the same proportion as a participant's compensation for
such year bears to the total compensation of all participants.
An ESOP participant becomes fully vested in all amounts allocated to him or
her after five years of service. The shares of our common stock held by the
participants in the ESOP are voted by the participants in the same manner as any
other share of our common stock.
In general, common stock allocated to a participant's account is
distributed upon his or her termination of employment, normal retirement at age
65 or death. The distribution is made in whole shares of common stock with a
cash payment in lieu of any fractional shares.
Messrs. Steinberg and Harvey and Ms. Howard serve as trustees of the ESOP.
As of March 31, 2006, the ESOP owned 1,080,485 shares of our common stock.
Common stock allocated pursuant to the ESOP to Messrs. Tevens and Librock, Ms.
Howard and Messrs. Gilbreath and Owen as of March 31, 2006 is 119 shares, 119
shares, 119 shares, 0 shares and 119 shares, respectively.
PENSION PLAN. We have a non-contributory, defined benefit Pension Plan
which provides certain of our employees with retirement benefits. As defined in
the Pension Plan, a participant's annual pension benefit at age 65 is equal to
the product of (i) 1% of the participant's final average earnings, as calculated
by the terms of the Pension Plan, plus 0.5% of that part, if any, of final
average earnings in excess of such participant's "social security covered
compensation," as such term is defined in the Pension Plan, multiplied by (ii)
such participant's years of credited service, limited to 35 years. Plan benefits
are not subject to reduction for social security benefits.
The following table illustrates the estimated annual benefits upon
retirement under our Pension Plan if the plan remains in effect and assuming
that an eligible employee retires at age 65. However, because of changes in tax
laws or future adjustments to the provisions of our Pension Plan, actual pension
benefits could differ significantly from the amounts set forth in the table.
Years of Service
------------------------------------------------------
FINAL AVERAGE 15 20 25 30 35
-------------- -- -- -- -- --
EARNINGS
--------
125,000 22,162 29,549 36,936 44,323 51,710
150,000 27,787 37,049 46,311 55,573 64,835
175,000 33,412 44,549 55,686 66,823 77,960
200,000 39,037 52,049 65,061 78,073 91,085
250,000 43,537 58,049 72,561 87,073 101,585
300,000 43,537 58,049 72,561 87,073 101,585
350,000 43,537 58,049 72,561 87,073 101,585
400,000 43,537 58,049 72,561 87,073 101,585
450,000 43,537 58,049 72,561 87,073 101,585
500,000 43,537 58,049 72,561 87,073 101,585
11
A portion of the annual benefit for plan participants is determined by
their final average earnings in excess of "social security covered
compensation," as such term is defined in our Pension Plan. Since this amount
can vary depending on the eligible employee's year of birth, all pension amounts
shown above have been calculated using Mr. Tevens' year of birth and his social
security covered compensation of $79,512. Our Pension Plan excludes final
average earnings in excess of $220,000.
If Messrs. Tevens and Librock, Ms. Howard and Messrs. Gilbreath and Owen
remain our employees until they reach age 65, the years of credited service
under the Pension Plan for each of them would be 29, 27, 31, 6 and 27,
respectively.
NON-QUALIFIED STOCK OPTION PLAN. In October 1995, we adopted our
Non-Qualified Stock Option Plan and reserved, subject to certain adjustments, an
aggregate of 250,000 shares of our common stock for issuance thereunder. Under
the terms of our Non-Qualified Plan, options may be granted by our Compensation
and Succession Committee to our officers and other key employees as well as to
non-employee directors and advisors. In fiscal 2006, we did not grant any
options to purchase shares of our common stock under our Non-Qualified Plan.
INCENTIVE STOCK OPTION PLAN. Our Incentive Stock Option Plan which was
adopted in October 1995 and amended in 2002, authorizes our Compensation and
Succession Committee to grant to our officers and other key employees stock
options that are intended to qualify as "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code. Our Incentive Plan
reserved, subject to certain adjustments, an aggregate of 1,750,000 shares of
common stock to be issued thereunder. Options granted under the Incentive Plan
become exercisable over a four-year period at the rate of 25% per year
commencing one year from the date of grant at an exercise price of not less than
100% of the fair market value of our common stock on the date of grant. Any
option granted thereunder may be exercised not earlier than one year and not
later than ten years from the date the option is granted. In the event of
certain extraordinary transactions, including a change in control, the vesting
of such options would automatically accelerate. In fiscal 2006, we granted
options to purchase 45,000 shares of our common stock under the Incentive Plan.
RESTRICTED STOCK PLAN. Our Restricted Stock Plan which was adopted in
October 1995 and amended in 2002, reserves, subject to certain adjustments, an
aggregate of 150,000 shares of our common stock to be issued upon the grant of
restricted stock awards thereunder. Under the terms of the Restricted Stock
Plan, our Compensation and Succession Committee may grant to our employees
restricted stock awards to purchase shares of common stock at a purchase price
of not less than $.01 per share. Shares of common stock issued under the
Restricted Stock Plan are subject to certain transfer restrictions and, subject
to certain exceptions, must be forfeited if the grantee's employment with us is
terminated at any time prior to the date the transfer restrictions have lapsed.
Grantees who remain continuously employed with us become vested in their shares
five years after the date of the grant, or earlier upon death, disability,
retirement or other special circumstances. The restrictions on any such stock
awards automatically lapse in the event of certain extraordinary transactions,
including a change in our control.
VARIABLE COMPENSATION PLAN. Effective April 1, 2004, we adopted our
Variable Compensation Plan to replace our previous corporate incentive plan. Our
executive officers and certain of our managers are eligible to participate in
the Variable Compensation Plan. Under the Variable Compensation Plan, for each
fiscal year, each executive officer is assigned a participation percentage by
12
our Board of Directors. The actual bonus to be paid to a participant will be
equal to his participation percentage times his base compensation, multiplied by
a factor, which is the annual budgeted target percentage determined by the Board
of Directors based on the achievement of pre-designated target criteria. The
bonus is computed and paid annually. For fiscal 2006, bonuses in the amount of
$819,000, $232,128, $222,612, $280,800 and $190,944 were awarded to Messrs.
Tevens and Librock, Ms. Howard and Messrs. Gilbreath and Owen, respectively,
under this plan.
401(K) PLAN. We maintain a 401(k) retirement savings plan which covers all
of our non-union employees in the U.S., including our executive officers, who
have completed at least 90 days of service. Eligible participants may contribute
up to 30% of their annual compensation (7% for highly compensated employees),
subject to an annual limitation as adjusted by the provisions of the Internal
Revenue Code. Employee contributions are matched by us in an amount equal to 50%
of the employee's salary reduction contributions, as such term is defined in the
401(k) Plan. Our matching contributions are limited to 3.0% of the employee's
base pay and vest at the rate of 20% per year.
CHANGE IN CONTROL AGREEMENTS
We have entered into change in control agreements with Messrs. Tevens and
Librock, Ms. Howard, Messrs. Gilbreath and Owen and certain other of our
officers and employees. The change in control agreements provide for an initial
term of one year, which, absent delivery of notice of termination, is
automatically renewed annually for an additional one year term. Generally, each
of the named officers is entitled to receive, upon termination of employment
within 36 months of a change in control of our Company (unless such termination
is because of death, disability, for cause or by an officer or employee other
than for "good reason," as defined in the change in control agreements), (i) a
lump sum severance payment equal to three times the sum of (A) his or her annual
salary and (B) the greater of (1) the annual target bonus under the Incentive
Plan in effect on the date of termination and (2) the annual target bonus under
the Incentive Plan in effect immediately prior to the change in control of our
Company, (ii) continued coverage for 36 months under our medical and life
insurance plans, (iii) a lump sum payment equal to the actuarial equivalent of
the pension payment which he or she would have accrued under our tax-qualified
retirement plans had he or she continued to be employed by us for three
additional years and (iv) certain other specified payments. Aggregate "payments
in the nature of compensation" (within the meaning of Section 280G of the
Internal Revenue Code) payable to any executive or employee under the change in
control agreements is limited to the amount that is fully deductible by us under
Section 280G of the Internal Revenue Code less one dollar. The events that
trigger a change in control under the change in control agreements include (i)
the acquisition of 20% or more of our outstanding common stock by certain
persons, (ii) certain changes in the membership of our Board of Directors, (iii)
certain mergers or consolidations, (iv) certain sales or transfers of
substantially all of our assets and (v) the approval by our shareholders of a
plan of dissolution or liquidation.
OPTIONS GRANTED IN LAST FISCAL YEAR
In fiscal 2006 we did not grant any options to our executives named in the
Summary Compensation Table.
13
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to our executives
named in the Summary Compensation Table concerning the exercise of options
during fiscal 2006 and unexercised options held at the end of fiscal 2006.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END (1)
-------------------------- ----------------------
SHARES
NAME AND ACQUIRED VALUE
PRINCIPAL POSITION ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------ ----------- -------- ----------- ------------- ----------- -------------
Timothy T. Tevens, 10,853 $132,993 184,397 93,750 $2,476,008 $2,012,813
President and Chief
Executive Officer
Ned T. Librock, 141,000 1,527,402 -- 30,000 -- 644,100
Vice President - Sales
Karen L. Howard,
Vice President - Finance, 11,167 136,840 124,833 15,000 1,540,941 322,050
Treasurer and Chief
Financial Officer
Derwin R. Gilbreath,
Vice President and -- -- 11,250 33,750 146,475 439,425
Chief Operating Officer
Joseph J. Owen,
Vice President and Hoist 22,500 295,950 49,000 22,500 621,840 483,075
Group Leader
-----------------------
(1) Represents the difference between $26.93, the closing market value of our
common stock as of March 31, 2006 and the exercise prices of such options
which are exercisable at an exercise price less than $26.93.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about our common stock that may be
issued upon the exercise of options, warrants and rights under all of our
existing equity compensation plans as of March 31, 2006, including the
Non-Qualified Plan and the Incentive Plan.
NUMBER OF SECURITIES
REMAINING FOR FUTURE
NUMBER OF SECURITIES TO BE WEIGHTED AVERAGE ISSUANCE UNDER EQUITY
ISSUED UPON EXERCISE OF EXERCISE PRICE OF COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN FIRST COLUMN)
------------- ------------------- ------------------- ------------------------
Equity compensation plans 1,132,118 $11.28 172,100
approved by security holders
Equity compensation plans not -- -- --
approved by security holders
Total 1,132,118 $11.28 172,100
14
COMPENSATION AND SUCCESSION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation for our executive officers is administered by the Compensation
and Succession Committee, which currently consists of four independent
(non-employee) Directors. Our Board of Directors has delegated to the
Compensation and Succession Committee responsibility for establishing,
administrating and approving the compensation arrangements of the Chief
Executive Officer, Chief Financial Officer and other executive officers.
The following objectives, established by our Compensation and Succession
Committee, are the basis for the Company's executive compensation program:
o providing a comprehensive program with components including base salary,
performance incentives, and benefits that support and align with our goal of
providing superior value to customers and shareholders;
o ensuring that we are competitive and can attract and retain qualified and
experienced executive officers and other key personnel; and
o appropriately motivating our executive officers and other key personnel
to seek to attain short, intermediate and long-term corporate and divisional
performance goals and to manage our Company to achieve sustained long term
growth.
The Compensation and Succession Committee reviews compensation policy and
specific levels of compensation paid to our Chief Executive Officer, Chief
Financial Officer and other executive officers and makes recommendations to our
Board of Directors regarding executive compensation, policies and programs.
The Compensation and Succession Committee is assisted in these efforts,
when required, by independent outside consultants and by our internal staff, who
provide the Compensation and Succession Committee with relevant information and
recommendations regarding compensation policies and specific compensation
matters.
ANNUAL COMPENSATION PROGRAMS
Our executives' base salaries are compared to manufacturing companies
included in a periodic management survey completed by outside compensation
consultants and all data have been regressed to revenues equivalent to our
revenues. This survey is used because it reflects companies with similar revenue
and in the same industry sectors as us. The Compensation and Succession
Committee believes salaries should be targeted toward the median of the surveyed
salaries reported, depending upon the relative experience and individual
performance of the executive.
Salary adjustments are determined by four factors: (i) an assessment of the
individual executive officer's performance and merit, (ii) our goal of achieving
market parity with salaries of comparable executives in the competitive market,
(iii) the occurrence of any promotion or other increases in responsibility of
the executive and (iv) the general economic environment in which we are
operating. In assessing market parity, we target groups of companies surveyed
and referred to above.
15
Each executive officer's corporate position is assigned a title
classification reflecting evaluation of the position's overall contribution to
our corporate goals and the value the labor market places on the associated job
skills. A range of appropriate salaries is then assigned to that title
classification. Each April, the salary ranges may be adjusted to reflect market
conditions, including changes in comparison companies, inflation, and supply and
demand in the market. The midpoint of the salary range corresponds to a "market
rate" salary which the Compensation and Succession Committee believes is
appropriate for an experienced executive who is performing satisfactorily, with
salaries in excess of the salary range midpoint appropriate for executives whose
performance is superior or outstanding.
The Compensation and Succession Committee has recommended that any
progression or regression within the salary range for an executive officer will
depend upon a formal annual review of job performance, accomplishments and
progress toward individual and/or overall goals and objectives for each of our
segments that such executive officer oversees as well as his or her
contributions to our overall direction. The long-term growth in shareholder
value is an important factor. The results of executive officers' performance
evaluations will form a part of the basis of the Compensation and Succession
Committee's decision to approve, at its discretion, future adjustments in base
salaries of our executive officers.
CHIEF EXECUTIVE OFFICER COMPENSATION
Compensation decisions affecting our Chief Executive Officer were based on
quantitative and qualitative factors. These factors were accumulated by an
external compensation consulting firm and included comparisons of our fiscal
2006 financial statistics to peer companies, strategic achievements such as
acquisitions and their integration, comparisons of the base salary level to the
median for comparable companies in published compensation surveys and
assessments prepared internally by other members of our executive management.
For fiscal 2006, the Compensation and Succession Committee established Mr.
Tevens' base salary at $525,000. For fiscal 2007, the Compensation and
Succession Committee established Mr. Tevens' base salary at $550,000.
SECTION 162(M) OF INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation in excess of $1.0 million paid to
a company's chief executive officer and any one of the four other most highly
paid executive officers during its taxable year. Qualifying performance-based
compensation is not subject to the deduction limit if certain requirements are
met. Based upon the compensation paid to the Company's executive officers in
fiscal 2006, it does not appear that the Section 162(m) limitation will have a
significant impact on us in the near term. However, the Compensation and
Succession Committee plans to review this matter periodically.
Carlos Pascual, Chairman
Richard H. Fleming
Herbert P. Ladds, Jr.
Stephen Rabinowitz
16
RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee retained Ernst & Young LLP to audit our consolidated
financial statements for fiscal 2006. All services provided on our behalf by
Ernst & Young LLP during fiscal 2005 and 2006 were approved in advance by our
Audit Committee. The aggregate fees billed to us by Ernst & Young LLP for fiscal
2005 and 2006 are as follows:
FISCAL YEAR
2006 2005
---- ----
($ in thousands)
Audit Fees.............................. $1,007 $1,235
Audit Related Fees...................... 89 73
Tax Fees................................ 130 160
All Other Fees.......................... 2 4
-- --
Total.......................... $1,228 $1,472
====== ======
Our Audit Committee has selected Ernst & Young LLP, independent certified
public accountants, to act as our independent auditors for 2007. We expect that
a representative of Ernst & Young LLP will attend the Annual Meeting, and the
representative will have an opportunity to make a statement if he or she so
desires. The representative will also be available to respond to appropriate
questions from shareholders.
REPORT OF THE AUDIT COMMITTEE
REVIEW OF OUR AUDITED FINANCIAL STATEMENTS
Our Audit Committee is comprised of the Directors named below, each of whom
is independent as defined under Section 10A(m)(3) of the Exchange Act and under
the NASDAQ Stock Market, Inc. listing standards currently in effect. In
addition, pursuant to the requirements of Section 407 of the Sarbanes-Oxley Act
of 2002, our Board of Directors has determined that each of Messrs. Fleming,
Creek and Rabinowitz qualifies as an "audit committee financial expert."
The Audit Committee operates under a written charter which includes
provisions requiring Audit Committee advance approval of all audit and non-audit
services to be provided by independent public accountants. However, as a matter
of course, we will not engage any outside accountants to perform any audit or
non-audit services without the prior approval of the Audit Committee.
The Audit Committee has reviewed and discussed our audited financial
statements for the year ended March 31, 2006 with our management. The Audit
Committee has also discussed with Ernst & Young LLP, our independent auditors,
the matters required to be discussed by Statement on Auditing Standards No. 61,
"Communication with Audit Committees."
17
The Audit Committee has also received and reviewed the written disclosures
and the letter from Ernst & Young LLP required by Independence Standards Board
Standard No. 1, "Independence Discussion with Audit Committees," and has
discussed the independence of Ernst & Young LLP with that firm.
Based on the review and the discussions noted above, the Audit Committee
recommended to our Board of Directors that our audited financial statements be
included in our Annual Report on Form 10-K for the year ended March 31, 2006 for
filing with the Securities and Exchange Commission.
Richard H. Fleming, Chairman
Ernest R. Verebelyi
Wallace W. Creek
Stephen Rabinowitz
Linda A. Goodspeed
18
PERFORMANCE GRAPH
The Performance Graph shown below compares the cumulative total shareholder
return on our common stock based on its market price, with the total return of
the S&P MidCap 400 Index and the Dow Jones Industrial - Diversified Index. The
comparison of total return assumes that a fixed investment of $100 was invested
on March 31, 2001 in our common stock and in each of the foregoing indices and
further assumes the reinvestment of dividends. The stock price performance shown
on the graph is not necessarily indicative of future price performance.
[ILLUSTRATION OF PERFORMANCE GRAPH]
2001 2002 2003 2004 2005 2006
---- ---- ---- ---- ---- ----
Columbus McKinnon Corporation.............. 100 166 21 100 177 350
S&P Midcap 400 Index....................... 100 119 91 136 150 182
Dow Jones US Industrial - Diversified Index 100 94 66 90 108 107
19
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Succession Committee is composed of Carlos Pascual,
Richard H. Fleming, Herbert P. Ladds, Jr. and Stephen Rabinowitz, each an
independent Director. No interlocking relationship exists between any member of
our Compensation and Succession Committee or any of our executive officers and
any member of any other company's board of directors or compensation committee
(or equivalent), nor has any such relationship existed in the past. No member of
our Compensation and Succession Committee was, during fiscal 2006 or prior
thereto, an officer or employee of our Company or any of our subsidiaries,
except for Mr. Ladds who was an employee and officer of our Company until his
retirement in 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our Directors and executive
officers, and persons who own more than 10% of a registered class of our equity
securities, to file with the Securities and Exchange Commission and NASDAQ
initial reports of ownership and reports of changes in ownership of our common
stock and other equity securities. Our executive officers, Directors and greater
than 10% shareholders are required to furnish us with copies of all Section
16(a) forms they file.
To our knowledge, based solely on our review of the copies of such reports
furnished to us and written representations that no other reports were required,
during the fiscal year ended March 31, 2006 all Section 16(a) filing
requirements applicable to our executive officers, Directors and greater than
10% beneficial owners were complied with, except (i) Mr. Ladds was late in
filing one Form 4 in connection with a single transaction to sell shares of
common stock as part of our public offering of common stock in November 2005,
(ii) Mr. Librock was late in filing one Form 4 in connection with one exercise
of an option to purchase shares of our common stock and (iii) Mr. Rabinowitz was
late in filing one Form 4 in connection with one open market purchase of shares
of our common stock.
20
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of April 30, 2006
regarding the beneficial ownership of our common stock by (i) each person who is
known by us to own beneficially more than 5% of our common stock; (ii) by each
Director; (iii) by each of our executive officers named in the Summary
Compensation Table and (iv) by all of our executive officers and Directors as a
group.
NUMBER OF PERCENTAGE
DIRECTORS, OFFICERS AND 5% SHAREHOLDERS SHARES (1) OF CLASS
--------------------------------------- ---------- --------
Ernest R. Verebelyi (2) 1,000 *
Timothy T. Tevens (2)(3) 231,915 1.24
Herbert P. Ladds, Jr. (2)(4) 564,610 3.02
Carlos Pascual (2) 10,000 *
Richard H. Fleming (2) 1,504 *
Wallace W. Creek (2) 8,500 *
Stephen Rabinowitz (2) 1,500 *
Linda A. Goodspeed (2) 1,550 *
Derwin R. Gilbreath (2)(5) 11,250 *
Joseph J. Owen (2)(6) 61,377 *
Ned T. Librock (2)(7) 33,662 *
Karen L. Howard (2)(8) 131,230 *
All Directors and Executive Officers as a
Group (14 persons) (9) 1,065,374 5.71
Columbus McKinnon Corporation Employee Stock
Ownership Plan (2) 1,080,498 5.79
Jeffrey L. Gendell (10) 1,378,530 7.38
Bear Stearns Asset Management, Inc. (11) 1,270,872 6.81
-------
* Less than 1%.
(1) Rounded to the nearest whole share. Unless otherwise indicated in the
footnotes, each of the shareholders named in this table has sole voting and
investment power with respect to the shares shown as beneficially owned by
such shareholder, except to the extent that authority is shared by spouses
under applicable law.
(2) The business address of each of the executive officers and directors is 140
John James Audubon Parkway, Amherst, New York 14228-1197.
(3) Includes (i) 43,326 shares of common stock owned directly, (ii) 7,000
shares of common stock owned directly by Mr. Tevens' spouse, (iii) 50
shares of common stock owned by Mr. Tevens' son, (iv) 5,039 shares of
common stock allocated to Mr. Tevens' ESOP account, (v) 124,930 shares of
common stock issuable under options granted to Mr. Tevens under the
Incentive Plan which are exercisable within 60 days and (vi) 51,570 shares
of common stock issuable under options granted to Mr. Tevens under the
Non-Qualified Plan which are exercisable within 60 days. Excludes 62,500
shares of common stock issuable under options granted to Mr. Tevens under
the Incentive Plan which are not exercisable within 60 days.
(4) Includes (i) 381,355 shares of common stock owned directly, (ii) 163,705
shares of common stock owned directly by Mr. Ladds' spouse, and (iii)
19,550 shares of common stock held by Mr. Ladds' spouse as trustee for the
grandchildren of Mr. Ladds. Mr. Ladds has announced that he plans to retire
as a Director effective as of the date of the Annual Meeting and is not
seeking re-election as a Director.
21
(5) Includes 11,250 shares of common stock issuable under options granted to
Mr. Gilbreath under the Incentive Plan which are exercisable within 60
days. Excludes 33,750 shares of common stock issuable under options granted
to Mr. Gilbreath under the Non-Qualified Plan which are not exercisable
within 60 days.
(6) Includes (i) 9,644 shares of common stock owned directly, (ii) 1,327 shares
of common stock owned by Mr. Owen's spouse, (iii) 1,406 shares of common
stock allocated to Mr. Owen's ESOP account and (iv) 49,000 shares of common
stock issuable under options granted to Mr. Owen under the Incentive Plan
which are exercisable within 60 days. Excludes 15,000 shares of common
stock issuable under options granted to Mr. Owen under the Incentive Plan
which are not exercisable within 60 days.
(7) Includes (i) 18,387 shares of common stock owned directly, (ii) 152 shares
of common stock owned by Mr. Librock's son, (iii) 5,123 shares of common
stock allocated to Mr. Librock's ESOP account and (iv) 10,000 shares of
common stock issuable under options granted to Mr. Librock under the
Incentive Plan which are exercisable within 60 days. Excludes 20,000 shares
of common stock issuable under options granted to Mr. Librock under the
Incentive Plan which are not exercisable within 60 days.
(8) Includes (i) 38,168 shares of common stock owned directly, (ii) 2,062
shares allocated to Ms. Howard's ESOP account, (iii) 72,845 shares of
common stock issuable under options granted to Ms. Howard under the
Incentive Plan which are exercisable within 60 days and (iv) 18,155 shares
of common stock issuable under options granted to Ms. Howard under the
Non-Qualified Plan which are exercisable within 60 days. Excludes (i)
1,080,379 additional shares of common stock owned by the ESOP for which Ms.
Howard serves as one of three trustees and for which she disclaims any
beneficial ownership and (ii) 10,000 shares of common stock issuable under
options granted to Ms. Howard under the Incentive Plan which are not
exercisable within 60 days.
(9) Includes (i) options to purchase an aggregate of 344,000 shares of common
stock issuable to certain executive officers under the Incentive Plan and
Non-Qualified Plan which are exercisable within 60 days. Excludes the
shares of common stock owned by the ESOP as to which Ms. Howard, Mr. Harvey
and Mr. Steinberg serve as trustees, except for an aggregate of 14,656
shares allocated to the respective ESOP accounts of our executive officers
and (ii) options to purchase an aggregate of 147,500 shares of common stock
issued to certain executive officers under the Incentive Plan and
Non-Qualified Plan which are not exercisable within 60 days.
(10) Information with respect to Jeffrey L. Gendell is based on a Schedule 13F
filed with the Securities and Exchange Commission on March 31, 2006 by a
group consisting of Tontine Management, L.L.C., Tontine Partners, L.P.,
Tontine Capital Management, L.L.C., Tontine Associates, L.L.C. and Jeffrey
L. Gendell (individually and as managing member of Tontine Management,
L.L.C., Tontine Capital Management, L.L.C. and Tontine Associates, L.L.C.).
Based solely upon information in this Schedule 13F, Jeffrey L. Gendell and
these affiliated entities share voting power and dispositive power with
respect to all of such shares of common stock. The stated business address
for Jeffrey L. Gendell is 55 Railroad Avenue, 3rd Floor, Greenwich,
Connecticut 06830.
(11) Information with respect to Bear Stearns Asset Management, Inc. is based on
a Schedule 13F filed with the Securities and Exchange Commission on March
31, 2006. The stated business address for Bear Stearns Asset Management,
Inc. is 383 Madison Avenue, New York, New York 10179.
22
PROPOSAL 2
ADOPTION OF COLUMBUS MCKINNON CORPORATION
2006 LONG TERM INCENTIVE PLAN
Our Board of Directors, following the recommendation of the Compensation
and Succession Committee, has adopted the Columbus McKinnon Corporation 2006
Long Term Incentive Plan (the "2006 Plan") on May 4, 2006 and is recommending
that shareholders approve the 2006 Plan at the 2006 Annual Meeting. The 2006
Plan is integral to our compensation strategies and programs. The 2006 Plan will
maintain the flexibility that we need to keep pace with our competitors and
effectively recruit, motivate and retain the caliber of employees essential to
our success while allowing them to acquire a meaningful, significant and growing
proprietary interest in the Company (although the 2006 Plan does not necessarily
require them to hold for investment the shares received under the 2006 Plan).
o The total number of our shares of common stock with respect to which
awards may be granted under the 2006 Plan is 850,000 shares, or
approximately 4.5% of our shares of common stock outstanding. We
expect that, under our equity compensation strategy, the 2006 Plan
will enable us to meet our equity compensation needs for the next
three to five years.
o The total number of shares reserved for issuance under the 2006 Plan,
plus outstanding awards and available shares under our other incentive
compensation plans is 2,198,218 shares as of March 31, 2006, or
approximately 12% of our shares of common stock outstanding.
BACKGROUND INFORMATION
We undertook a comprehensive review of our business plan and our needs to
retain and recruit talented employees and non-employee directors. Working with
our executive compensation consultant, we developed an equity compensation
strategy focusing on performance-based equity awards and methods to better align
key employees with our business strategies and with our shareholders' interests.
While all of our employees are eligible under the literal terms of the 2006
Plan to receive awards under the plan, it is presently contemplated that awards
would be made to our officers, executive team members, operating group and
business unit leaders, sales directors and other directors of operations, and to
our non-employee Directors.
In designing the 2006 Plan and our equity compensation strategy, we worked
with our executive compensation consultant and our investor relations consultant
to review and incorporate the perspectives of our institutional investors on
sound corporate governance and have drafted the 2006 Plan to reflect those
concerns. Several of these provisions are highlighted below. Further, we have
reviewed the guidelines of Institutional Shareholder Services, one of the
leading advisors to institutional investors, and we believe the 2006 plan
complies with their requirements. For example, we analyzed the 2006 Plan using
Institutional Shareholder Services' shareholder value transfer model and
determined that it is within the allowable cap for the Capital Goods GICS
industry classification into which we fall.
23
We presently contemplate under this equity compensation strategy that our
annual share usage under the 2006 Plan, based on a three-year average, would be
less than 1.5% of our shares of common stock outstanding. This is lower than the
current 25th percentile of our peer group. The potential total dilution under
the 2006 Plan and our existing incentive compensation plans will be
approximately 12% of our shares of common stock outstanding, which approximates
the median of our peer group.
We anticipate that 70% of the value of awards granted to officers,
executive team members, operating group and business unit leaders, sales
directors and other directors of operations would be provided in the form of
stock options and performance based restricted stock or restricted stock units.
The remainder of the value would be provided in the form of time-based
restricted stock or restricted stock units. For operating group and business
unit leaders, we anticipate that the value of the awards would be an equal mix
of stock options and time based restricted stock or restricted stock units.
We anticipate that stock options would be granted with an exercise price of
fair market value on date of grant, that they would become exercisable in a
pro-rata method over a four-your period, and that the option term would not
exceed ten years. Further, we anticipate that time based restricted stock and
restricted stock units would have a three to five year vesting schedule.
With respect to performance based restricted stock or restricted stock
units, while a variety of performance goals are permitted under the 2006 Plan,
we presently contemplate establishing goals based on specific after-tax earnings
targets to be achieved over a two-year period. Further, these awards would not
vest unless a certain target level had been met at the end of the two-year
period and full vesting would require achievement of a level beyond the
designated target level. We also expect to impose a one-year retention
requirement after the awards have vested.
The 2006 Plan includes a number of features that are intended to protect
the interests of shareholders:
o The number of shares requested, 850,000, represents only an
additional 4.5% of shares of common stock outstanding.
o The 2006 Plan has a ten-year term with a fixed number of shares
authorized for issuance. It is not an "evergreen" plan.
o It does not contain provisions which have been labeled as "liberal
share counting" by some institutional investors. Only awards that are
cancelled, forfeited or which are paid in cash become available to be
issued.
o It prohibits the use of discounted stock options or SARs.
o It prohibits the use of reload options.
o It prohibits the repricing of options or SARs without stockholder
approval.
o It does not permit for options or other benefits to be transferred
to third parties for consideration.
24
o It contains, with certain exceptions, a minimum three-year pro-rata
vesting schedule for time-based awards of restricted stock and
restricted stock units.
o It contains, with certain exceptions, a minimum one-year period for
exercisability for time based options and SARs.
o Acceleration of exercisability and vesting on a change in control
occurs only if the individual's employment is terminated.
o Shareholder approval of the 2006 Plan will permit the
performance-based awards discussed below to qualify for deductibility
under Section 162(m) of the Code.
A summary of the principal features of the 2006 Plan is provided
below, but is qualified in its entirety by reference to the full text of the
2006 Plan that is attached as Appendix A to this proxy statement.
Plan Term Effective May 4, 2006. No new awards may be granted
after May 3, 2016, or earlier if terminated by the
Board of Directors.
Persons Eligible for Grants
Employees of and
non-employee
directors of
Columbus McKinnon
Corporation and its
subsidiaries.
Shares Authorized 850,000 shares of our common stock.
A maximum of
600,000 shares may be
awarded as
Restricted Stock,
Restricted Stock
Units or Stock
bonuses.
Types of Awards Available o Non-Qualified Stock Options.
o Incentive Stock Options.
o Stock Appreciation Rights.
o Restricted Stock.
o Restricted Stock Units.
o Stock Bonuses.
In the description below, awards and grants under the 2006 Plan are
referred to as "Benefits." Those eligible for Benefits under the 2006 Plan are
referred to as "Participants." Participants include all employees and
non-employee directors of Columbus McKinnon Corporation and its subsidiaries.
SHARES AVAILABLE FOR ISSUANCE
As of March 31, 2006, approximately 172,000 shares were available for new
grants under our Incentive Stock Option Plan, Non-Qualified Stock Option Plan
and Restricted Stock Option Plan (the "Existing Plans") and there were
approximately 1,176,000 shares subject to outstanding benefits under these
25
plans. Accordingly, assuming that the 2006 Plan is approved by our shareholders,
the maximum number of shares of common stock reserved for issuance under all of
our plans will be 2,198,000, consisting of: (i) the 850,000 shares reserved for
issuance under this 2006 Plan, (ii) 1,348,000 shares reserved for issuance under
our Existing Plans, plus (iii) any shares that become available for issuance
pursuant to the re-usage provisions of our Existing Plans.
ADMINISTRATION AND ELIGIBILITY
The 2006 Plan will be administered by the Compensation and Succession
Committee of the Board of Directors or such other committee as our Board of
Directors shall appoint from time to time (the "Committee"), provided that at
all times the Committee shall consist of two or more directors, each of whom
will satisfy the requirements: (i) established for administrators acting under
plans intended to qualify for exemption under Rule 16b-3 under the Exchange Act
and (ii) for outside directors acting under plans intended to qualify for
exemption under Section 162(m) of the Code. The Committee will approve the
aggregate Benefits and the individual Benefits for the most senior elected
officers and non-employee directors. The Committee may delegate some of its
authority under the 2006 Plan in accordance with the terms of the 2006 Plan.
The total number of shares of common stock eligible to be awarded under the
2006 Plan as incentive stock options, non-qualified stock options or stock
appreciation rights shall not exceed 850,000 shares. The total number of shares
of common stock eligible to be awarded under the 2006 Plan as restricted stock,
restricted stock units or as stock bonuses shall, in the aggregate, not exceed
600,000 shares.
The total number of shares of common stock subject to options and SARs
awarded to any one employee during any of our fiscal years, shall not exceed
50,000 shares.
BENEFITS
STOCK OPTIONS
GRANTS OF OPTIONS. The Committee is authorized to grant stock options
to Participants ("Optionees"), which may be either Incentive Stock Options
("ISOs") or Non-Qualified Stock Options ("NSOs"). NSOs and ISOs are collectively
referred to as "Stock Options." The exercise price of any Stock Option must be
at least equal to the fair market value of the shares on the date of the grant.
For purposes of the 2006 Plan, "fair market value" means, for any
particular date, (i) for any period during which our common stock shall be
listed for trading on a national securities exchange or the National Association
of Securities Dealers Automated Quotation System ("NASDAQ"), the average of the
opening and closing price per share of our common stock on such exchange or the
NASDAQ official open and close price as of such trading day, or (ii) the market
price per share of our common stock as determined in good faith by our Board of
Directors in the event (i) above shall not be applicable. The 2006 Plan
prohibits repricing of Stock Options without shareholder approval.
At the time of the grant, the Committee in its sole discretion will
determine when Options are exercisable and when they expire, provided the term
of an ISO cannot exceed 10 years. For Stock Options intended to become
exercisable solely on the basis of the passage of time, the Stock Options will
not become exercisable before the first anniversary of the award. However, Stock
26
Options may become exercisable more quickly in the event of (a) death,
disability or retirement, (b) job loss due to workforce reduction, job
elimination or divestiture or (c) under the "change in control" provisions of
the 2006 Plan. Also, Stock Options necessary in the recruitment of new employees
will not be subject to a minimum time-based exercisability requirement.
PAYMENT OF OPTION PRICE. Payment for shares purchased upon exercise
of a Stock Option must be made in full at the time of purchase. Payment may be
made: (a) in cash, (b) subject to the approval of the Committee, by the transfer
to us of shares owned by the Participant for at least six months having a fair
market value on the date of exercise equal to the option exercise price (or
certification of ownership of such shares), (c) to the extent permitted by
applicable law, by delivery of a properly executed exercise notice, together
with irrevocable instructions to a broker to promptly deliver to us the amount
of sale proceeds from the option shares or loan proceeds to pay the exercise
price and any withholding taxes due to us, or (d) in such other manner as may be
authorized by the Committee.
SARS. The Committee has the authority to grant SARs to Participants and to
determine the number of shares subject to each SAR, the term of the SAR, the
time or times at which the SAR may be exercised, and all other terms and
conditions of the SAR. A SAR is a right, denominated in shares, to receive, upon
exercise of the right, in whole or in part, without payment to us, an amount,
payable in shares, cash or any combination of shares and cash, that is equal to:
(i) the fair market value of our common stock on the date of exercise of the
right minus (ii) the fair market value of our common stock on the date of grant
of the right, multiplied by the number of shares for which the right is
exercised. The form of payment upon the exercise of SARs will be determined by
the Committee either at the time of grant of the SARs or at the time of exercise
of the SARs. The exercise price of any SAR must be at least equal to the fair
market value of the shares on the date of the grant. For SARs intended to become
exercisable solely on the basis of the passage of time, the SAR will not become
exercisable before the first anniversary of the award. However, SARs may become
exercisable more quickly in the event of (a) death, disability or retirement,
(b) job loss due to workforce reduction, job elimination or divestiture or (c)
under the "change in control" provisions of the 2006 Plan. Also, SARs necessary
in the recruitment of new employees will not be subject to a minimum time-based
exercisability requirement. The 2006 Plan prohibits repricing of SARs without
shareholder approval.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS. Restricted Stock consists of
shares which are transferred or sold by us to a Participant, but are subject to
substantial risk or forfeiture and to restrictions on their sale or other
transfer by the Participant. Restricted Stock Units are the right to receive
shares at a future date after vesting upon the attainment of certain conditions
and restrictions. The Committee determines the eligible Participants to whom,
and the time or times at which, grants of Restricted Stock or Restricted Stock
Units will be made, the number of shares or units to be granted, the price to be
paid, if any, the time or times within which the shares covered by such grants
will be subject to forfeiture, the time or times at which the restrictions will
terminate, and all other terms and conditions of the grants. Restrictions or
conditions could include, but not be limited to, the attainment of performance
goals (as described below), continuous service with us, the passage of time or
other restrictions or conditions. For Restricted Stock or Restricted Stock Units
intended to vest solely on the basis of the passage of time, the Restricted
Stock or Restricted Stock Unit will not vest more quickly than ratably over a
three-year period beginning on the first anniversary of the award. However,
Restricted Stock or Restricted Stock Units may vest more quickly in the event of
(a) death, disability or retirement, (b) job loss due to workforce reduction,
job elimination or divestiture or (c) under the "change in control" provisions
27
of the 2006 Plan. Also, Restricted Stock and Restricted Stock Units necessary in
the recruitment of new employees will not be subject to a minimum time-based
vesting requirement. Awards of Restricted Stock may require that dividends paid
on shares of Restricted Stock be held in escrow until all restrictions on such
shares have lapsed. At the discretion of the Committee, dividend equivalents may
be granted with respect to Restricted Stock Units, subject to such limitations
as may be determined by the Committee.
STOCK BONUSES. A Participant who is granted a stock bonus has the right to
receive shares of our common stock in accordance with the terms of such grant.
PERFORMANCE GOALS. Awards other than Stock Options and SARs under the 2006
Plan may be made subject to the attainment of performance goals relating to one
or more business criteria within the meaning of Section 162(m) of the Code, but
limited to: net earnings (either before or after interest, taxes, depreciation
or amortization), economic value-added (as determined by the Committee), sales
or revenue, net income (either before or after taxes), operating earnings or
income, cash flow (including, but not limited to, operating cash flow and free
cash flow), cash flow return on capital, return on investment, return on
stockholders' equity, return on assets or net assets, return on capital, debt
reduction, stockholder returns, return on sales, gross or net profit margin,
productivity, expense, margins, operating efficiency, cost reduction or savings,
customer or employee satisfaction, safety, working capital, earnings or diluted
earnings per share, price per share of Company Stock, and market share, any of
which may be measured either in absolute terms or as compared to any incremental
increase or as compared to results of a peer group ("Performance Criteria"). For
Awards not intended to constitute performance based compensation under Section
162(m) of the Code, performance goals may include other financial or other
measurements established by the Committee.
AMENDMENT OF THE 2006 PLAN
The Committee and our Board of Directors have the right and power to amend
the 2006 Plan, provided, however that we shall obtain stockholder approval of
any amendment of the 2006 Plan to the extent necessary to comply with applicable
laws, regulations or stock exchange rules.
TERMINATION OF THE 2006 PLAN
The Board may suspend or terminate the 2006 Plan at any time. The Plan is
scheduled to terminate on May 3, 2016. Termination will not in any manner impair
or adversely affect any Benefit outstanding at the time of termination.
CHANGE IN CONTROL
Unless otherwise provided in the agreement providing for the Award or
unless otherwise determined by the Committee, upon the termination of a
Participant's employment within 36 months following the occurrence of a Change
in Control (as defined below) and if such termination is not (i) due to the
Participant's death or disability, (ii) a termination by the Company for Cause
and (iii) a voluntary termination by the Participant absent good reason, all
outstanding Stock Options and SARs shall become vested and exercisable and all
Restricted Stock and Restricted Stock Units shall become vested. In addition, in
the event of a potential Change in Control, the Committee may in its discretion,
cancel any outstanding Stock Options, SARS, Restricted Stock and Restricted
Stock Units and pay to the holders thereof, in cash or stock, or any combination
thereof, the value thereof based upon the price per share of our common stock to
28
be received by our other shareholders in the Change in Control less, in the case
of Stock Options and SARs, the exercise price thereof.
For purposes of the 2006 Plan, a "Change in Control" occurs if: (i) there
shall be consummated: (A) any consolidation or merger in which we are not the
continuing or surviving corporation or pursuant to which shares of our common
stock would be converted into cash, securities or other property, other than a
merger in which the holders of our common stock immediately prior to the merger
have the same proportionate ownership of common stock of the surviving
corporation immediately after the merger; or (B) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of our assets; (ii) our shareholders approve any plan or
proposal for our liquidation or dissolution; (iii) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Exchange Act, but excluding us and
each of our officers and directors, whether individually or collectively), shall
become the beneficial owner (within the meaning of 13d-3 under the Exchange Act)
of 20% or more of our outstanding common stock; or (iv) during any period of two
(2) consecutive years, individuals who at the beginning of such period
constitute the entire Board of Directors shall cease for any reason to
constitute a majority thereof unless the election, or the nomination for
election by our shareholders, of each new Director was approved by a vote of a
least two-thirds of the Directors then still in office who were Directors at the
beginning of the period.
ADJUSTMENTS
If there is any change in the number, class, market price or terms of our
common stock by reason of any stock dividend or distribution, stock split-up,
recapitalization, combination or exchange of shares, or by reason of any merger,
consolidation, spin-off or other corporate reorganization in which we are the
surviving corporation, the number of shares available for issuance both in the
aggregate and with respect to each outstanding Benefit, the exercise price, and
the limitations on grants shall be proportionately adjusted by the Committee,
whose determination shall be final and binding.
REUSAGE
To the extent that a Benefit awarded under the 2006 Plan terminates,
expires, is cancelled, forfeited, or lapses for any reason, or if a Benefit is
settled by payment of cash, any shares of our common stock subject to the
Benefit shall again be available for the grant of a Benefit pursuant to the 2006
Plan. Shares which are used to pay the exercise price of a Stock Option and
shares withheld to satisfy tax withholding obligations will not be available for
further grants of Benefits pursuant to the 2006 Plan. All shares of our common
stock covered by a SAR, to the extent it is exercised and settled in shares of
our common stock, will be considered issued or transferred pursuant to the Plan.
To the extent permitted by applicable law or any exchange rule, shares of our
common stock issued in assumption of, or in substitution for, any outstanding
awards of any entity acquired in any form of combination by us or any of our
subsidiaries shall not be counted against shares of our common stock available
for grant pursuant to the 2006 Plan. Dividend equivalents payable in cash shall
not be counted against the shares available for issuance under the 2006 Plan.
U.S. FEDERAL INCOME TAX CONSEQUENCES
We have been advised by counsel that the federal income tax consequences as
they relate to Benefits are as follows:
29
ISOS. An Optionee does not generally recognize taxable income upon the
grant or upon the exercise of an ISO. Upon the sale of ISO shares, the Optionee
recognizes income in an amount equal to the difference, if any, between the
exercise price of the ISO shares and the fair market value of those share on the
date of sale. The income is taxed at long-term capital gains rates if the
Optionee has not disposed of the stock within two years after the date of the
grant of the ISO and has held the shares for at least one year after the date of
exercise and we are not entitled to a federal income tax deduction. The holding
period requirements are waived when an Optionee dies.
The exercise of an ISO may for some Optionees trigger liability for the
alternative minimum tax.
If an Optionee sells ISO shares before having held them for at least one
year after the date of exercise and two years after the date of grant (a
"disqualifying disposition"), the Optionee recognizes ordinary income to the
extent of the lesser of: (i) the gain realized upon the sale; or (ii) the
difference between the exercise price and the fair market value of the shares on
the date of exercise. Any additional gain is treated as long-term or short-term
capital gain depending upon how long the Optionee has held the ISO shares prior
to disposition. In a year of a disqualifying disposition, we receive a federal
income tax deduction in an amount equal to the ordinary income that the Optionee
recognizes as a result of the disposition.
NSOS. An Optionee does not recognize taxable income upon the grant of an
NSO. Upon the exercise of such a Stock Option, the Optionee recognizes ordinary
income to the extent the fair market value of the shares received upon exercise
of the NSO on the date of exercise exceeds the exercise price. We receive an
income tax deduction in an amount equal to the ordinary income that the Optionee
recognizes upon the exercise of the Stock Option.
RESTRICTED STOCK. A Participant who receives an award of Restricted Stock
does not generally recognize taxable income at the time of the award. Instead,
the Participant recognizes ordinary income in the first taxable year in which
his or her interest in the shares becomes either: (i) freely transferable; or
(ii) no longer subject to substantial risk of forfeiture. The amount of taxable
income is equal to the fair market value of the shares less the cash, if any,
paid for the shares. Any dividends paid to a Participant while the Restricted
Stock remained subject to the restrictions would be treated as compensation for
federal income tax purposes.
A Participant may elect to recognize income at the time he or she receives
Restricted Stock in an amount equal to the fair market value of the Restricted
Stock (less any cash paid for the shares) on the date of the award.
We receive a compensation expense deduction in an amount equal to the
ordinary income recognized by the Participant in the taxable year in which
restrictions lapse (or in the taxable year of the award if, at that time, the
Participant had filed a timely election to accelerate recognition of income).
OTHER BENEFITS. In the case of an exercise of an SAR or an award of
Restricted Stock Units, the Participant will generally recognize ordinary income
in an amount equal to any cash received and the fair market value of any shares
received on the date of payment or delivery. In that taxable year, we will
receive a federal income tax deduction in an amount equal to the ordinary income
which the Participant has recognized. Any dividend equivalents paid to a
30
Participant related to Restricted Stock Units would be treated as compensation
for federal income tax purposes.
MILLION DOLLAR DEDUCTION LIMIT
Under Section 162(m) of the Code, we may not deduct compensation of more
than $1,000,000 that is paid to an individual who, on the last day of the
taxable year, is either our chief executive officer or is among one of the four
other most highly compensated officers for that taxable year as reported in our
proxy statement. The limitation on deductions does not apply to certain types of
compensation, including qualified performance-based compensation. We believe
that Benefits in the form of Stock Options, SARs and performance-based
Restricted Stock and Restricted Stock Units which are awarded subject to the
Performance Criteria would constitute qualified performance-based compensation
and, as such, will be exempt from the $1,000,000 limitation on deductible
compensation.
SECTION 409A
Section 409A of the Code has been enacted generally effective January 1,
2005. To date, the IRS has issued only limited guidance on the interpretation of
this new law. Section 409A of the Code covers most programs that defer the
receipt of compensation to a succeeding taxable year and provides strict rules
for elections to defer (if any) and for timing of payouts. There are significant
penalties placed on the individual employee for failure to comply with Section
409A of the Code. However, it does not impact our ability to deduct deferred
compensation. Section 409A does not apply to (i) incentive stock options,
non-qualified stock options and stock appreciation rights that are not granted
at less than fair market value and (ii) restricted stock, provided there is no
deferral of income beyond the vesting date. Section 409A of the Code may apply
to Restricted Stock Units.
APPROVAL BY SHAREHOLDERS
In order to be adopted, the 2006 Plan must be approved by the affirmative
vote of a majority of the outstanding shares represented at the meeting and
entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS UNANIMOUSLY A VOTE "FOR" ADOPTION OF THE
COLUMBUS MCKINNON CORPORATION 2006 LONG TERM INCENTIVE PLAN.
31
PROPOSAL 3
ADOPTION OF COLUMBUS MCKINNON CORPORATION
EXECUTIVE MANAGEMENT VARIABLE COMPENSATION PLAN
Under Section 162(m) of the Code, we may not deduct compensation of more
than $1,000,000 that is paid to an individual who, on the last day of the
taxable year, is either our chief executive officer or is among one of the four
other most high-compensated officers for that taxable year as reported in our
proxy statement. The limitation on deductions does not apply to certain types of
compensation, including qualified performance-based compensation.
Performance-based compensation is excluded from this $1 million limitation if
paid pursuant to a plan that has received shareholder approval.
PURPOSE
The primary purpose of the Executive Management Variable Compensation Plan
(the "Bonus Plan") is to pay covered employees appropriate bonuses for their
performance and to obtain, for federal income tax purposes, the deductibility of
bonus awards made under the Bonus Plan. Accordingly, the amounts payable under
the Plan are intended to constitute "qualified performance-based compensation"
under Section 162(m) of the Code.
ADMINISTRATION
The Compensation and Succession Committee (the "Committee") of the Board of
Directors is responsible for administering the Bonus Plan. Each member of the
Committee is an "outside director" as defined for purposes of Section 162(m).
ELIGIBILITY AND PARTICIPATION
The CEO and others who are officers for purposes of Section 16 of the
Exchange Act are eligible to participate in the Bonus Plan. Participants will be
the Chief Executive Officer and other officers who the Committee determines are
"covered employees" within the meaning of Section 162(m) for the fiscal year.
PERFORMANCE-BASED COMPENSATION UNDER SECTION 162(M)
The objective performance goal(s) for each Participant is set by the
Committee within first 90 days of fiscal year. The performance goals will relate
to one or more business criteria within the meaning of Section 162(m) of the
Code, but limited to: net earnings (either before or after interest, taxes,
depreciation or amortization), economic value-added (as determined by the
Committee), sales or revenue, net income (either before or after taxes),
operating earnings or income, cash flow (including, but not limited to,
operating cash flow and free cash flow), cash flow return on capital, return on
investment, return on shareholders' equity, return on assets or net assets,
return on capital, debt reduction, stockholder returns, return on sales, gross
or net profit margin, productivity, expense, margins, operating efficiency, cost
reduction or savings, customer or employee satisfaction, safety, working
capital, earnings or diluted earnings per share, price per share of our common
stock, and market share, any of which may be measured either in absolute terms
or as compared to any incremental increase or as compared to results of a peer
32
group. After the end of each fiscal year, the Committee will determine and
certify in writing the amount of bonus to be awarded to each Participant in
accordance with the limitations established by the Bonus Plan.
The maximum bonus award that a covered employee may be paid under the Bonus
Plan for the fiscal year is set at 300% of base salary.
The Committee may determine it is appropriate to pay less than the maximum
bonus award amount to a Participant, but not more.
Subject to the maximum bonus award described above, actual award amounts
will be based on Company and individual performance and competitive pay levels
as determined by the Committee.
PAYMENT OF BONUS AWARDS
All bonus awards will be paid in cash. Participants will be permitted to
defer payment of all or a portion of their bonus awards in accordance with the
terms of any deferred compensation plan that we may adopt.
APPROVAL BY SHAREHOLDERS
In order to be adopted, the Bonus Plan must be approved by the affirmative
vote of a majority of the outstanding shares represented at the meeting and
entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS UNANIMOUSLY A VOTE "FOR" ADOPTION OF THE
COLUMBUS MCKINNON CORPORATION EXECUTIVE MANAGEMENT VARIABLE COMPENSATION PLAN.
33
SOLICITATION OF PROXIES
The cost of solicitation of proxies will be borne by us, including expenses
in connection with preparing and mailing this Proxy Statement. In addition to
the use of the mail, proxies may be solicited by personal interviews or by
telephone, telecommunications or other electronic means by our Directors,
officers and employees at no additional compensation. Arrangements will be made
with brokerage houses, banks and other custodians, nominees and fiduciaries for
the forwarding of solicitation material to the beneficial owners of our common
stock, and we will reimburse them for reasonable out-of-pocket expenses incurred
by them in connection therewith.
OTHER MATTERS
Our management does not presently know of any matters to be presented for
consideration at the Annual Meeting other than the matters described in the
Notice of Annual Meeting. However, if other matters are presented, the
accompanying proxy confers upon the person or persons entitled to vote the
shares represented by the proxy, discretionary authority to vote such shares in
respect of any such other matter in accordance with their best judgment.
SHAREHOLDERS' PROPOSALS
Proposals of shareholders intended to be presented at the 2007 Annual
Meeting must be received by us by February 20, 2007 to be considered for
inclusion in our Proxy Statement and form of proxy relating to that meeting. In
addition, our by-laws require that notice of shareholder proposals and
nominations for director be delivered to our principal executive offices not
less than 60 days nor more than 90 days prior to the first anniversary of the
Annual Meeting for the preceding year; provided, however, if the Annual Meeting
is not scheduled to be held within a period commencing 30 days before such
anniversary date and ending 30 days after such anniversary date, such
shareholder notice shall be delivered by the later of (i) 60 days prior to the
date of the Annual Meeting or (ii) the tenth day following the date such Annual
Meeting date is first publicly announced or disclosed. The date of the 2007
Annual Meeting has not yet been established. Nothing in this paragraph shall be
deemed to require us to include in our Proxy Statement and proxy relating to the
2007 Annual Meeting any shareholder proposal that does not meet all of the
requirements for inclusion established by the Exchange Act, and the rules and
regulations promulgated thereunder.
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OTHER INFORMATION
WE WILL PROVIDE WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS SOLICITED, ON
THE WRITTEN REQUEST OF SUCH PERSON, A COPY OF OUR ANNUAL REPORT ON FORM 10-K,
FOR THE FISCAL YEAR ENDED MARCH 31, 2006, FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES THERETO. Such
written request should be directed to Columbus McKinnon Corporation, 140 John
James Audubon Parkway, Amherst, New York 14228-1197, Attention: Secretary. Each
such request must set forth a good faith representation that, as of June 9,
2006, the person making the request was a beneficial owner of securities
entitled to vote at the Annual Meeting.
The accompanying Notice and this Proxy Statement are sent by order of our
Board of Directors.
TIMOTHY R. HARVEY
Secretary
Dated: June 20, 2006
35
APPENDIX A
COLUMBUS MCKINNON CORPORATION
2006 LONG TERM INCENTIVE PLAN
1 PREAMBLE
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This Columbus McKinnon Corporation 2006 Long Term Incentive Plan, as it may
be amended from time to time (the "Plan"), is intended to promote the interests
of Columbus McKinnon Corporation., a New York corporation ("CM" and, together
with its Subsidiaries, the "Company"), and its stockholders by providing
officers and other employees and non-employee directors of the Company with
appropriate incentives and rewards to encourage them to enter into and continue
in service to the Company and to acquire a meaningful, significant and growing
proprietary interest in CM, while aligning the interests of key employees and
management with those of the stockholders.
This Plan is intended to provide a flexible framework that will permit the
development and implementation of a variety of stock-based programs based on
changing needs of the Company, its competitive market and the regulatory
climate.
2 DEFINITIONS
-----------
As used in the Plan, the following definitions apply to the terms indicated
below:
(a) "Award Agreement" shall mean the written agreement between the Company
and a Participant or other document approved by the Committee evidencing an
Incentive Award. The Committee need not require the execution of any such
agreement by a Participant in which case the acceptance of the Award by the
Participant will constitute agreement to the terms of the Award.
(b) "Board of Directors" shall mean the Board of Directors of CM.
(c) "Cause," shall mean, termination of employment of a Participant for
cause under the Company's generally applicable policies and procedures or, in
the case of a non-employee director of the Company, for circumstances which
would constitute cause if such policies and procedures were applicable.
(d) "Change in Control", unless otherwise defined in an Award Agreement,
occurs if:
(1) there shall be consummated: (i) any consolidation or merger of CM
in which CM is not the continuing or surviving corporation or pursuant to which
shares of Company Stock would be converted into cash, securities or other
property, other than a merger of CM in which the holders of the Company Stock
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the merger; or (ii) any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of CM; or
(2) the stockholders of CM approve any plan or proposal for the
liquidation or dissolution of CM; or
(3) any person (as such term is used in Sections 13(d) and 14(d)(2) of
the Exchange Act but excluding CM and each of CM's officers and directors,
whether individually or collectively), shall become the beneficial owner (within
the meaning of 13d-3 under the Exchange Act) of 20% or more of the outstanding
Company Stock; or
(4) during any period of two (2) consecutive years, individuals who at
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the beginning of such period constitute the entire Board of Directors shall
cease for any reason to constitute a majority thereof unless the election, or
the nomination for election by CM's stockholders, of each new director was
approved by a vote of a least two-thirds of the directors then still in office
who were directors at the beginning of the period.
For purposes hereof, ownership of voting securities shall take into account
and shall include ownership as determined by applying the provisions of Rule
13d-3(d)(1)(i) (as in effect on the date hereof) pursuant to the Exchange Act.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Committee" shall mean the Compensation and Succession Committee of
the Board of Directors or such other committee as the Board of Directors shall
appoint from time to time to administer the Plan; provided, that the Committee
shall at all times consist of two or more persons, each of whom shall be a
member of the Board of Directors. To the extent required for transactions under
the Plan to qualify for the exemptions available under Rule 16b-3 (as defined
herein), members of the Committee (or any subcommittee thereof) shall be
"non-employee directors" within the meaning of Rule 16b-3. To the extent
required for compensation realized from Incentive Awards (as defined herein)
under the Plan to be deductible by the Company pursuant to Section 162(m) of the
Code, members of the Committee (or any subcommittee thereof) shall be "outside
directors" within the meaning of such section.
(g) "Company Stock" shall mean the common stock, par value $.01 per share,
of CM.
(h) "Covered Employee" means a Participant who is, or could be, a "covered
employee" within the meaning of Section 162(m) of the Code.
(i) "Disability," unless otherwise provided in an Award Agreement, shall
mean
(1) with respect to a Participant who is a party to a written
employment agreement with the Company, which agreement contains a definition of
"disability" or "permanent disability" (or words of like import) for purposes of
termination of employment thereunder by the Company, "disability" or "permanent
disability" as defined in the most recent of such agreements, or
(2) in all other cases, means such Participant's inability to perform
substantially his or her duties to the Company by reason of physical or mental
illness, injury, infirmity or condition: (A) for a continuous period for 180
days or one or more periods aggregating 180 days in any twelve-month period; (B)
at such time as such Participant is eligible to receive disability income
payments under any long-term disability insurance plan maintained by the
Company; or (C) at such earlier time as such Participant or the Company submits
medical evidence, in the form of a physician's certification, that such
Participant has a physical or mental illness, injury, infirmity or condition
that will likely prevent such Participant from substantially performing his
duties for 180 days or longer.
(j) "Dividend Equivalents" means a right granted to a Participant pursuant
to Section 10 to receive the equivalent value (in cash or Stock) of dividends
paid on Stock.
(k) "Effective Date" shall mean May 4, 2006, the date the Plan was adopted
by the Board of Directors, subject to approval by CM's stockholders. The Plan
will be deemed to be approved by the stockholders if it receives the affirmative
vote of the holders of a majority of the shares of stock of CM present or
represented and entitled to vote at a meeting at which a quorum representing a
majority of all outstanding voting stock is, either in person or by proxy,
present and voting and duly held in accordance with the applicable provisions of
CM's Bylaws. Incentive Awards may be granted under the Plan at any time prior to
the receipt of stockholder approval; provided, however, that each such grant
shall automatically terminate in the event such approval is not obtained.
Without limiting the foregoing, no Option or SAR may be exercised prior to the
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receipt of such approval, and no share certificate will be issued pursuant to a
grant of Restricted Stock or Stock Bonus prior to the receipt of such approval.
(l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, for any particular date, (i) for any period
during which the Company Stock shall be listed for trading on a national
securities exchange or the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), the average of the opening and closing price per
share of Company Stock on such exchange or the NASDAQ official open and close
price as of such trading day, or (ii) the market price per share of Company
Stock as determined in good faith by the Board of Directors in the event (i)
above shall not be applicable. If the Fair Market Value is to be determined as
of a day when the securities markets are not open, the Fair Market Value on that
day shall be the Fair Market Value on the next preceding day when the markets
were open.
(n) "Good Reason" shall mean (i) the reduction by the Company of a
Participant's annual base salary as in effect from time to time; or (b) the
Company's requiring a Participant to be based (other than for required travel on
the Company's business) at a Company office more than 50 miles from the
Company's office at which the Participant is principally employed immediately
prior to the date of a Change in Control.
(o) "Incentive Award" shall mean an Option, SAR, share of Restricted
Stock, Restricted Stock Unit or Stock Bonus (each as defined herein) granted
pursuant to the terms of the Plan.
(p) "Incentive Stock Option" shall mean an Option that is an "incentive
stock option" within the meaning of Section 422 of the Code.
(q) "Issue Date" shall mean the date established by the Committee on which
Certificates representing shares of Restricted Stock shall be issued by the
Company pursuant to the terms of Section 9(e).
(r) "Non-Qualified Stock Option" shall mean an Option that is not an
Incentive Stock Option.
(s) "Option" shall mean an option to purchase shares of Company Stock
granted pursuant to Section 7.
(t) "Participant" shall mean an employee of the Company or a non-employee
director of the Company to whom an Incentive Award is granted pursuant to the
Plan and, upon his or her death, his or her successors, heirs, executors and
administrators, as the case may be.
(u) "Performance-Based Award" means an Award granted to selected Covered
Employees pursuant to Sections 9 and 10, but which is subject to the terms and
conditions set forth in Section 12. All Performance-Based Awards are intended to
qualify as Qualified Performance-Based Compensation.
(v) "Performance Criteria" means the criteria that the Committee selects
for purposes of establishing the Performance Goal or Performance Goals for a
Participant for a Performance Period. The Performance Criteria may differ as to
type of Award and from one Performance Period to another. The Performance
Criteria that will be used to establish Performance Goals are limited to the
following: net earnings (either before or after interest, taxes, depreciation or
amortization), economic value-added (as determined by the Committee), sales or
revenue, net income (either before or after taxes), operating earnings or
income, cash flow (including, but not limited to, operating cash flow and free
cash flow), cash flow return on capital, return on investment, return on
stockholders' equity, return on assets or net assets, return on capital, debt
reduction, stockholder returns, return on sales, gross or net profit margin,
productivity, expense, margins, operating efficiency, cost reduction or savings,
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customer or employee satisfaction, safety, working capital, earnings or diluted
earnings per share, price per share of Company Stock, and market share, any of
which may be measured either in absolute terms or as compared to any incremental
increase or as compared to results of a peer group. The Committee shall, within
the time prescribed by Section 162(m) of the Code, define in an objective
fashion the manner of calculating the Performance Criteria it selects to use for
such Performance Period for such Participant.
(w) "Performance Goals" means, for a Performance Period, the goals
established in writing by the Committee for the Performance Period based upon
the Performance Criteria. Depending on the Performance Criteria used to
establish such Performance Goals, the Performance Goals may be expressed in
terms of overall Company performance or the performance of a division, business
unit, or an individual. The Committee, in its discretion, may, within the time
prescribed by Section 162(m) of the Code, adjust or modify the calculation of
Performance Goals 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, or (b) in recognition of, or in anticipation of, any
other unusual or nonrecurring events affecting the Company (determined
consistent with U.S. Generally Accepted Accounting Principles), 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. The
Committee may, in its discretion, classify Participants into as many groups as
it determines, and as to any Participant relate the Participant's Performance
Goals partially, or entirely, to the measured performance, either absolutely or
relatively, of an identified Subsidiary, operating company or division or test
strategy or new venture of the Company.
(x) "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-Based
Award.
(y) "Qualified Performance-Based Compensation" means any compensation that
is intended to qualify as "qualified performance-based compensation" as
described in Section 162(m)(4)(C) of the Code.
(z) A share of "Restricted Stock" shall mean a share of Company Stock that
is granted pursuant to the terms of Section 9 hereof and that is subject to the
restrictions set forth in Section 9(c).
(aa) "Restricted Stock Unit" means the right to receive a share of Company
Stock that is granted pursuant to the terms of Section 10.
(bb) "Retirement" means a termination of employment at a time at which the
Participant (i) is eligible for and could immediately commence receipt of either
early or normal retirement benefits under the Company's defined benefit plan or
(ii) if the participant had been a participant in the Company's defined benefit
plan, would have been eligible and could have immediately commenced receipt of
either early or normal retirement benefits under the Company's defined benefit
plan.
(cc) "Rule 16b-3" shall mean the rule thus designated as promulgated under
the Exchange Act.
(dd) "SAR" shall mean a stock appreciation right granted pursuant to
Section 8.
(ee) "Stock Bonus" shall mean a bonus payable in shares of Company Stock or
a payment made in shares of Company Stock pursuant to a deferred compensation
plan of the Company.
(ff) "Subsidiary" shall mean any corporation or other entity in which, at
the time of reference, the Company owns, directly or indirectly, stock or
similar interests comprising more than 50 percent of the combined voting power
of all outstanding securities of such entity.
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(gg) "Vesting Date" shall mean the date established by the Committee on
which a share of Restricted Stock or Restricted Stock Unit may vest.
3 STOCK SUBJECT TO THE PLAN
-------------------------
(a) Shares Available for Awards
The total number of shares of Company Stock with respect to which Incentive
Awards may be granted shall not exceed 850,000 shares. Such shares may be
authorized but unissued Company Stock or authorized and issued Company Stock
held in the Company's treasury or acquired by the Company for the purposes of
the Plan. The Committee may direct that any stock certificate evidencing shares
issued pursuant to the Plan shall bear a legend setting forth such restrictions
on transferability as may apply to such shares pursuant to the Plan.
(b) Total Grants by Award Type
The total number of shares of Company Stock to be awarded under the Plan as
Incentive Stock Options, Non-Qualified Stock Options, or SARs shall not exceed
850,000 shares. The total number of shares of Company Stock to be awarded under
the Plan as Restricted Stock, Restricted Stock Units, Performance Based Awards,
or as Stock Bonuses shall, in the aggregate, not exceed 600,000 shares.
(c) Individual Limitation
The total number of shares of Company Stock subject to Options and SARs
awarded to any one employee during any fiscal year of the Company, shall not
exceed 50,000 shares. Determinations under the preceding sentence shall be made
in a manner that is consistent with Section 162(m) of the Code and regulations
promulgated thereunder. The provisions of this Section 3(c) shall not apply in
any circumstance with respect to which the Committee determines that compliance
with Section 162(m) of the Code is not necessary.
(d) Adjustment for Change in Capitalization
If there is any change in the outstanding shares of Company Stock by reason
of a stock dividend or distribution, stock split-up, recapitalization,
combination or exchange of shares, or by reason of any merger, consolidation,
spinoff or other corporate reorganization in which the Company is the surviving
corporation, the number of shares available for issuance both in the aggregate
and with respect to each outstanding Incentive Award, the price per share under
each outstanding Incentive Award, and the limitations set forth in Section 3(b)
and (c), shall be proportionately adjusted by the Committee, whose determination
shall be final and binding. After any adjustment made pursuant to this Section
3(d), the number of shares subject to each outstanding Incentive Award shall be
rounded to the nearest whole number.
(e) Other Adjustments
In the event of any transaction or event described in Section 3(d) or any
unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the Company or any
affiliate (including without limitation any Change in Control), or of changes in
applicable laws, regulations or accounting principles, and whenever the
Committee determines that action is appropriate in order to prevent the dilution
or enlargement of the benefits or potential benefits intended to be made
available under the Plan or with respect to any Incentive Award under the Plan,
to facilitate such transactions or events or to give effect to such changes in
laws, regulations or principles, the Committee, in its sole discretion and on
such terms and conditions as it deems appropriate, including, if the Committee
deems appropriate, the principles of Treasury Regulation Section 1.424-1(a)(5)
except to the extent necessary to ensure that the action does not violate
Section 409A of the Code, either by amendment of the terms of any outstanding
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Incentive Awards or by action taken prior to the occurrence of such transaction
or event and either automatically or upon the Participant's request, is hereby
authorized to take any one or more of the following actions:
(i) To provide for either (A) termination of any such Incentive
Award in exchange for an amount of cash and/or other property, if any, equal to
the amount that would have been attained upon the exercise of such Incentive
Award or realization of the Participant's rights (and, for the avoidance of
doubt, if as of the date of the occurrence of the transaction or event described
in this Section 3(e) the Committee determines in good faith that no amount would
have been attained upon the exercise of such Incentive Award or realization of
the Participant's rights, then such Incentive Award may be terminated by the
Company without payment) or (B) the replacement of such Incentive Award with
other rights or property selected by the Committee in its sole discretion;
(ii) To provide that such Incentive Award be assumed by the successor
or survivor corporation, or a parent or subsidiary thereof, or shall be
substituted for by similar options, rights or awards covering the stock of the
successor or survivor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices; and
(iii) To make adjustments in the number and type of shares of Company
Stock (or other securities or property) subject to outstanding Incentive Awards,
and in the number and kind of outstanding Restricted Stock and/or in the terms
and conditions of (including the grant or exercise price), and the criteria
included in, outstanding options, rights and awards and options, rights and
awards which may be granted in the future;
(iv) To provide that such Incentive Award shall be exercisable or
payable or fully vested with respect to all shares covered thereby,
notwithstanding anything to the contrary in the Plan or the applicable Award
Agreement; and
(v) To provide that the Incentive Award cannot vest, be exercised or
become payable after such event.
(f) Re-use of Shares
To the extent that an Incentive Award terminates, expires, is cancelled,
forfeited, or lapses for any reason, or if an Incentive Award is settled by
payment of cash, any shares of Company Stock subject to the Incentive Award
shall again be available for the grant of an Incentive Award pursuant to the
Plan. Shares which are used to pay the exercise price of an Option and shares
withheld to satisfy tax withholding obligations will not be available for
further grants of Incentive Awards pursuant to the Plan. To the extent permitted
by applicable law or any exchange rule, shares of Company Stock issued in
assumption of, or in substitution for, any outstanding awards of any entity
acquired in any form of combination by the Company or any Subsidiary shall not
be counted against shares of Company Stock available for grant pursuant to this
Plan. Dividend Equivalents payable in cash shall not be counted against the
shares available for issuance under the Plan. All shares of Company Stock
covered by a SAR, to the extent it is exercised and settled in shares of Company
Stock, will be considered issued or transferred pursuant to the Plan.
(g) No Repricing
Absent stockholder approval, neither the Committee nor the Board of
Directors shall have any authority, with or without the consent of the affected
holders of Incentive Awards, to "reprice" an Incentive Award in the event of a
decline in the price of Company Stock after the date of its initial grant either
by reducing the exercise price from the original exercise price or through
cancellation of outstanding Incentive Awards in connection with regranting of
Incentive Awards at a lower price to the same individual. This paragraph may not
be amended, altered or repealed by the Board of Directors or the Committee
without approval of the stockholders of the Company.
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(h) No Reloading
No Option or SAR shall provide for the automatic grant of replacement or
reload Options or SARs upon the Participant exercising the Option or SAR and
paying the Exercise Price by tendering shares of Company Stock, net exercise or
otherwise. This paragraph may not be amended, altered or repealed by the Board
of Directors or the Committee without approval of the stockholders of the
Company.
4 ADMINISTRATION OF THE PLAN
--------------------------
The Plan shall be administered by the Committee. The Committee shall from
time to time designate the persons who shall be granted Incentive Awards and the
amount, type and other features of each Incentive Award.
The Committee shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan and the terms of
any Incentive Award issued under it and to adopt such rules and regulations for
administering the Plan as it may deem necessary or appropriate. The Committee
shall determine whether an authorized leave of absence or absence due to
military or government service shall constitute termination of employment.
Decisions of the Committee shall be final and binding on all parties.
Determinations made by the Committee under the Plan need not be uniform but may
be made on a Participant-by-Participant basis. Notwithstanding anything to the
contrary contained herein, the Board of Directors may, in its sole discretion,
at any time and from time to time, resolve to administer the Plan, in which case
the term "Committee" as used herein shall be deemed to mean the Board of
Directors.
The Committee may, in its absolute discretion, without amendment to the
Plan, (i) accelerate the date on which any Option or SAR granted under the Plan
becomes exercisable, (ii) waive or amend the operation of Plan provisions
respecting exercise after termination of service or otherwise adjust any of the
terms of such Option or SAR and (iii) accelerate the Vesting Date or Issue Date,
or waive any condition imposed hereunder, with respect to any share of
Restricted Stock or Restricted Stock Unit or otherwise adjust any of the terms
applicable to such share.
No member of the Committee shall be liable for any action, omission or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Committee) arising out of any action, omission or
determination relating to the Plan, unless, in either case, such action,
omission or determination was taken or made by such member, director or employee
in bad faith and without reasonable belief that it was in the best interests of
the Company.
5 ELIGIBILITY
-----------
The persons who shall be eligible to receive Incentive Awards pursuant to
the Plan shall be such employees of the Company (including employees who are
also directors and prospective employees conditioned on their becoming
employees) and non-employee directors of the Company as the Committee shall
designate from time to time.
6 AWARDS UNDER THE PLAN; AWARD AGREEMENTS
---------------------------------------
The Committee may grant Options, SARs, shares of Restricted Stock,
Restricted Stock Units and Stock Bonuses, in such amounts and with such terms
and conditions as the Committee shall determine, subject to the provisions of
the Plan.
Each Incentive Award granted under the Plan (except an unconditional Stock
Bonus) shall be evidenced by an Award Agreement which shall contain such
provisions as the Committee may in its sole discretion deem necessary or
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desirable. By accepting an Incentive Award, a Participant thereby agrees that
the Incentive Award shall be subject to all of the terms and provisions of the
Plan and the applicable Award Agreement.
7 OPTIONS
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(a) Identification of Options
Each Option shall be clearly identified in the applicable Award Agreement
as either an Incentive Stock Option or a Non-Qualified Stock Option. In the
absence of such identification, an Option will be deemed to be a Non-Qualified
Stock Option.
(b) Exercise Price
Each Award Agreement with respect to an Option shall set forth the amount (the
"exercise price") payable by the holder to the Company upon exercise of the
Option. The exercise price per share shall be determined by the Committee but
shall in no event be less than the Fair Market Value of a share of Company Stock
on the date the Option is granted.
(c) Term and Exercise of Options
(1) The applicable Award Agreement will provide the date or dates on
which an Option shall become exercisable. The Committee shall determine the
expiration date of each Option; provided, however, that no Incentive Stock
Option shall be exercisable more than ten years after the date of grant. Options
that become exercisable solely on the basis of the passage of time (e.g., not on
the basis of any performance standards) will not become exercisable earlier than
the first anniversary of the date of grant, except that Options may be
exercisable sooner under any of the following circumstances as more specifically
set forth in the applicable Award Agreement: (i) the Participant's death; (ii)
the Participant's Disability; (iii) the Participant's "retirement" as defined in
the Award Agreement consistent with the Company's retirement policies and
programs; (iv) a Participant's termination of employment with the Company due to
workforce reduction, job elimination or divestiture as determined by the
Committee; (v) a Change in Control consistent with the provisions of Section
7(f); or (vi) in connection with establishing the terms and conditions of
employment of an individual necessary for the recruitment of the individual or
as the result of a business combination or acquisition by the Company.
(2) An Option may be exercised for all or any portion of the shares
as to which it is exercisable; provided, that no partial exercise of an Option
shall be for an aggregate exercise price of less than $2,500. The partial
exercise of an Option shall not cause the expiration, termination or
cancellation of the remaining portion thereof.
(3) Unless the Committee determines otherwise, an Option shall be
exercised by delivering notice to the Company's principal office, to the
attention of its Secretary (or the Secretary's designee), no less than one nor
more than ten business days in advance of the effective date of the proposed
exercise. Such notice shall specify the number of shares of Company Stock with
respect to which the Option is being exercised and the effective date of the
proposed exercise and shall be signed by the Participant or other person then
having the right to exercise the Option. Payment for shares of Company Stock
purchased upon the exercise of an Option shall be made on the effective date of
such exercise by one or a combination of the following means: (i) in cash, by
certified check, bank cashier's check or wire transfer; (ii) subject to the
approval of the Committee, by the Participant tendering (either actually or by
attestation) owned and unencumbered shares of Company Stock which have been held
by the Participant for at least six months prior to the date of exercise and
valued at their Fair Market Value on the effective date of such exercise; or
(iii) by means of a broker assisted cashless exercise procedure complying with
applicable law, and (iv) by such other provision as the Committee may from time
to time authorize. Any payment in shares of Company Stock shall be effected by
the delivery of such shares to the Secretary (or the Secretary's designee) of
the Company, duly endorsed in blank or accompanied by stock powers duly executed
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in blank, together with any other documents and evidences as the Secretary (or
the Secretary's designee) of the Company shall require.
(4) Certificates for shares of Company Stock purchased upon the
exercise of an Option shall be issued in the name of the Participant or other
person entitled to receive such shares, and delivered to the Participant or such
other person as soon as practicable following the effective date on which the
Option is exercised.
(d) Limitations on Incentive Stock Options
(1) Incentive Stock Options may be granted only to employees of the
Company or any "subsidiary corporation" thereof (within the meaning of Section
424(f) of the Code and the applicable regulations thereunder).
(2) To the extent that the aggregate Fair Market Value of shares of
Company Stock with respect to which Incentive Stock Options are exercisable for
the first time by a Participant during any calendar year under the Plan and any
other stock option plan of the Company (or any "subsidiary corporation" of the
Company within the meaning of Section 424 of the Code) shall exceed $100,000, or
such higher value as may be permitted under Section 422 of the Code, such
Options shall be treated as Non-Qualified Stock Options. Such Fair Market Value
shall be determined as of the date on which each such Incentive Stock Option is
granted.
(3) No Incentive Stock Option may be granted to an individual if, at
the time of the proposed grant, such individual owns stock possessing more than
10% of the total combined voting power of all classes of stock of the Company
(or any "subsidiary corporation" of the Company within the meaning of Section
424 of the Code), unless (i) the exercise price of such Incentive Stock Option
is at least 110% of the Fair Market Value of a share of Company Stock at the
time such Incentive Stock Option is granted and (ii) such Incentive Stock Option
is not exercisable after the expiration of five years from the date such
Incentive Stock Option is granted.
(e) Effect of Termination of Employment
(1) Unless the applicable Award Agreement provides or the Committee
shall determine otherwise, in the event that the employment of a Participant
with the Company shall terminate for any reason other than Cause, Retirement,
Disability or death : (i) Options granted to such Participant, to the extent
that they were exercisable at the time of such termination, shall expire at the
close of business on the 30th day following the later of (A) the date of such
termination or (B) the date on which any period, as determined by the Committee
in a reasonable manner, which prohibits the Participant from trading in
securities of the Company due to the Participant's knowledge of material
non-public information ends; and (ii) Options granted to such Participant, to
the extent that they were not exercisable at the time of such termination, shall
expire at the close of business on the date of such termination. Notwithstanding
the foregoing, no Option shall be exercisable after the expiration of its term.
(2) Unless the applicable Award Agreement provides or the Committee
shall determine otherwise, in the event that the employment of a Participant
with the Company shall terminate on account of the Disability or death of the
Participant: (i) Options granted to such Participant, to the extent that they
were exercisable at the time of such termination, shall remain exercisable until
the first anniversary of such termination, on which date they shall expire; and
(ii) Options granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire at the close of
business on the date of such termination. Notwithstanding the foregoing, no
Option shall be exercisable after the expiration of its original term.
(3) In the event of the termination of a Participant's employment
for Cause, all outstanding Options granted to such Participant shall expire at
the commencement of business on the date of such termination.
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(4) In the event of the termination of a Participant's employment at
a time of Retirement and other than for Cause, (i) all Options granted to the
Participant, to the extent they have not otherwise expired, will become
exercisable and (ii) all Options shall remain exercisable for a period of six
months, on which date they shall expire. Notwithstanding the foregoing, no
Option shall be exercisable after the expiration of its original term.
(5) Upon a non-employee director's cessation of service, the
exercisability of Options will be as set out in the applicable Award Agreement
or as the Committee shall determine.
(f) Effect of Change in Control
Unless the Award Agreement provides or the Committee determines otherwise,
upon the termination of a Participant's employment within 36 months following
the occurrence of a Change in Control and if such termination is not (i) due to
the Participant's death or Disability, (ii) a termination by the Company for
Cause and (iii) a voluntary termination by the Participant absent Good Reason,
each Option granted under the Plan and outstanding at such time shall become
fully and immediately exercisable and shall remain exercisable remain
exercisable for a period of six months, on which date they shall expire. In
addition, in the event of a potential Change in Control, the Committee may in
its discretion, cancel any outstanding Options and pay to the holders thereof,
in cash or stock, or any combination thereof, the value of such Options based
upon the price per share of Company Stock to be received by other stockholders
of the Company in the Change in Control less the exercise price of each Option.
Notwithstanding the foregoing, no Option shall be exercisable after the
expiration of its original term.
(g) Transferability
During the lifetime of a Participant each Option granted to a Participant
shall be exercisable only by the Participant and no Option shall be assignable
or transferable otherwise than by will or by the laws of descent and
distribution. The Committee may in its sole discretion on a case by case basis,
in any applicable agreement evidencing an Option (other than, to the extent
inconsistent with the requirements of Section 422 of the Code applicable to
Incentive Stock Options), permit a Participant to transfer all or some of the
Options to (i) the Participant's Immediate Family Members, or (ii) a trust or
trusts for the exclusive benefit of such Immediate Family Members. Following any
such transfer, any transferred Options shall continue to be subject to the same
terms and conditions as were applicable immediately prior to the transfer.
"Immediate Family Members" shall mean a Participant's spouse, child(ren) and
grandchild(ren). In no event may an Option be transferred for consideration.
Notwithstanding the foregoing, Non-Qualified Stock Options may be transferred to
a Participant's former spouse pursuant to a property settlement made part of an
agreement or court order incident to the divorce.
8 STOCK APPRECIATION RIGHTS
-------------------------
(a) Exercise Price
The exercise price per share of a SAR shall be determined by the Committee
at the time of grant, but shall in no event be less than the Fair Market Value
of a share of Company Stock on the date of grant.
(b) Benefit Upon Exercise
The exercise of SARs with respect to any number of shares of Company Stock
shall entitle the Participant to receive unrestricted, fully transferable shares
of Company Stock, cash or any combination of Company Stock and cash, payable
within 2 1/2 months of the date on which the SARs are exercised, equal in value
to the number of SARs exercised multiplied by (i) the Fair Market Value of a
share of Company Stock on the exercise date minus (ii) the exercise price of the
SAR. Fractional share amounts shall be settled in cash. The form of payment upon
the exercise of SARs will be determined by the Committee either at the time of
grant of the SARs or at the time of exercise of the SARs.
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(c) Term and Exercise of SARS
(1) The applicable Award Agreement will provide the dates or dates
on which a SAR shall become exercisable. The Committee shall determine the
expiration date of each SAR. SARs that become exercisable solely on the basis of
the passage of time (e.g., not on the basis of any performance standards) will
not become exercisable earlier than the first anniversary of the date of grant,
except that SARs may be exercisable sooner under any of the following
circumstances as more specifically set forth in the applicable Award Agreement:
(i) the Participant's death; (ii) the Participant's Disability; (iii) the
Participant's "retirement" as defined in the Award Agreement consistent with the
Company's retirement policies and programs; (iv) a Participant's termination of
employment with the Company due to workforce reduction, job elimination or
divestiture as determined by the Committee; (v) a Change in Control consistent
with the provisions of Section 8(e); or (vi) in connection with establishing the
terms and conditions of employment of an individual necessary for the
recruitment of the individual or as the result of a business combination or
acquisition by the Company.
(2) A SAR may be exercised for all or any portion of the shares as
to which it is exercisable; provided, that no partial exercise of a SAR shall be
for an aggregate exercise price of less than $2,500. The partial exercise of a
SAR shall not cause the expiration, termination or cancellation of the remaining
portion thereof.
(3) Unless the Committee determines otherwise, a SAR shall be
exercised by delivering notice to the Company's principal office, to the
attention of its Secretary (or the Secretary's designee), no less than one nor
more than ten business days in advance of the effective date of the proposed
exercise. Such notice shall specify the number of shares of Company Stock with
respect to which the SAR is being exercised, and the effective date of the
proposed exercise, and shall be signed by the Participant.
(d) Effect of Termination of Employment
The provisions set forth in Section 7(e) with respect to the exercise of
Options following termination of employment shall apply as well to such exercise
of SARs.
(e) Effect of Change in Control
Unless the Award Agreement provides or the Committee determines otherwise,
upon the termination of a Participant's employment within 36 months following
the occurrence of a Change in Control and if such termination is not (i) due to
the Participant's death or Disability, (ii) a termination by the Company for
Cause and (iii) a voluntary termination by the Participant absent Good Reason,
each SAR granted under the Plan and outstanding at such time shall become fully
and immediately exercisable and shall remain exercisable for a period of six
months, on which date they shall expire. In addition, in the event of a
potential Change in Control, the Committee may in its discretion, cancel any
outstanding SARs and pay to the holders thereof, in stock, the value of such
SARs based upon the price per share of Company Stock to be received by other
stockholders of the Company in the Change in Control less the exercise price of
each SAR. Notwithstanding the foregoing, no SAR shall be exercisable after the
expiration of its original term.
(f) Transferability
During the lifetime of a Participant each SAR granted to a Participant
shall be exercisable only by the Participant and no SAR shall be assignable or
transferable otherwise than by will or by the laws of descent and distribution.
In no event may a SAR be transferred for consideration. Notwithstanding the
foregoing, SARs may be transferred to a Participant's former spouse pursuant to
a property settlement made part of an agreement or court order incident to the
divorce.
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9 RESTRICTED STOCK
----------------
(a) Issue Date and Vesting Date
At the time of the grant of shares of Restricted Stock, the Committee shall
establish an Issue Date or Issue Dates and a Vesting Date or Vesting Dates with
respect to such shares. The Committee may divide such shares into classes and
assign a different Issue Date and/or Vesting Date for each class. If the grantee
is employed by the Company on an Issue Date (which may be the date of grant),
the specified number of shares of Restricted Stock shall be issued in accordance
with the provisions of Section 9(e). Provided that all conditions to the vesting
of a share of Restricted Stock imposed pursuant to Section 9(b) are satisfied,
and except as provided in Section 9(g), upon the occurrence of the Vesting Date
with respect to a share of Restricted Stock, such share shall vest and the
restrictions of Section 9(c) shall cease to apply to such share.
(b) Conditions to Vesting
At the time of the grant of shares of Restricted Stock, the Committee may
impose such restrictions or conditions to the vesting of such shares as it, in
its absolute discretion, deems appropriate. By way of example and not by way of
limitation, the Committee may require, as a condition to the vesting of any
class or classes of shares of Restricted Stock, that the Participant or the
Company achieves such performance goals as the Committee may specify under
Section 12. Any shares of Restricted Stock that vest solely on the basis of the
passage of time (e.g., not on the basis of any performance standards) shall not
vest more quickly than ratably over the three (3) year period beginning on the
first anniversary of the date of grant, except that the shares of Restricted
Stock may vest sooner under any of the following circumstances as more
specifically set forth in the applicable Award Agreement: (i) the Participant's
death; (ii) the Participant's Disability; (iii) the Participant's "retirement"
as defined in the Award Agreement consistent with the Company's retirement
policies and programs; (iv) a Participant's termination of employment with the
Company due to workforce reduction, job elimination or divestiture as determined
by the Committee; (v) a Change in Control consistent with the provisions of
Section 9(h); or (vi) in connection with establishing the terms and conditions
of employment of an individual necessary for the recruitment of the individual
or as the result of a business combination or acquisition by the Company.
(c) Restrictions on Transfer Prior to Vesting
Prior to the vesting of a share of Restricted Stock, no transfer of a
Participant's rights with respect to such share, whether voluntary or
involuntary, by operation of law or otherwise, shall be permitted. Immediately
upon any attempt to transfer such rights, such share, and all of the rights
related thereto, shall be forfeited by the Participant.
(d) Dividends on Restricted Stock
The Committee in its discretion may require that any dividends paid on
shares of Restricted Stock shall be held in escrow until all restrictions on
such shares have lapsed.
(e) Issuance of Certificates
(1) Reasonably promptly after the Issue Date with respect to shares
of Restricted Stock, the Company shall cause to be issued a stock certificate,
registered in the name of the Participant to whom such shares were granted,
evidencing such shares; provided, that the Company shall not cause such a stock
certificate to be issued unless it has received a stock power duly endorsed in
blank with respect to such shares. Each such stock certificate shall bear any
such legend as the Company may determine.
Such legend shall not be removed until such shares vest pursuant to the terms
hereof.
(2) Each certificate issued pursuant to this Section 9(e), together
A-12
with the stock powers relating to the shares of Restricted Stock evidenced by
such certificate, shall be held by the Company in such manner as the Company may
determine unless the Committee determines otherwise.
(f) Consequences of Vesting
Upon the vesting of a share of Restricted Stock pursuant to the terms of
the Plan and the applicable Award Agreement, the restrictions of Section 9(c)
shall cease to apply to such share. Reasonably promptly after a share of
Restricted Stock vests, the Company shall cause to be delivered to the
Participant to whom such shares were granted, a certificate evidencing such
share, free of the legend set forth in Section 9(e). Notwithstanding the
foregoing, such share still may be subject to restrictions on transfer as a
result of applicable securities laws or pursuant to Section 15.
(g) Effect of Termination of Employment
(1) Unless the applicable Award Agreement or the Committee
determines otherwise, in the event of the termination of a Participant's service
to the Company for any reason other than Cause, all shares of Restricted Stock
granted to such Participant which have not vested as of the date of such
termination shall immediately be forfeited and returned to the Company. The
Company also shall have the right to require the return of all dividends paid on
such shares, whether by termination of any escrow arrangement under which such
dividends are held or otherwise.
(2) In the event of the termination of a Participant's employment
for Cause, all shares of Restricted Stock granted to such Participant which have
not vested prior to the date of such termination shall immediately be forfeited
and returned to the Company, together with any dividends credited on such shares
by termination of any escrow arrangement under which such dividends are held or
otherwise.
(h) Effect of Change in Control
Unless the Award Agreement provides or the Committee determines otherwise,
upon the termination of a Participant's employment within 36 months following
the occurrence of a Change in Control and if such termination is not (i) due to
the Participant's death or Disability, (ii) a termination by the Company for
Cause and (iii) a voluntary termination by the Participant absent Good Reason,
all outstanding shares of Restricted Stock which have not previously vested
shall immediately vest. In addition, in the event of a potential Change in
Control, the Committee may in its discretion, cancel any outstanding shares of
Restricted Stock and pay to the holders thereof, in cash or stock, or any
combination thereof, the value of such shares of Restricted Stock based upon the
price per share of Company Stock to be received by other stockholders of the
Company in the Change in Control.
10 RESTRICTED STOCK UNITS
----------------------
(a) Vesting Date
At the time of the grant of Restricted Stock Units, the Committee shall
establish a Vesting Date or Vesting Dates with respect to such shares. The
Committee may divide such shares into classes and assign a different Vesting
Date for each class. Provided that all conditions to the vesting of a Restricted
Stock Unit imposed pursuant to Section 10(d) are satisfied, and except as
provided in Section 10(e), upon the occurrence of the Vesting Date with respect
to a Restricted Stock Unit, such Restricted Stock Unit shall vest and shares of
Stock will be delivered pursuant to Section 10(c).
(b) Dividend Equivalents
Any Participant selected by the Committee may be granted Dividend Equivalents
based on the dividends declared on the shares of Company Stock that are subject
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to any award of Restricted Stock Units, to be credited as of dividend payment
dates, during the period between the date the award is granted and the date the
award is exercised, vests or expires, as determined by the Committee. Such
Dividend Equivalents shall be converted to cash or additional Restricted Stock
Units by such formula and at such time and subject to such limitations as may be
determined by the Committee.
(c) Benefit Upon Vesting
Upon the vesting of a Restricted Stock Unit, the Participant shall be
entitled to receive one unrestricted, fully transferable share of Stock for each
Restricted Stock Unit scheduled to be paid out on such date and not previously
forfeited, or, in the sole discretion of the Committee, an amount, payable
within 2 1/2 months of the date on which such Restricted Stock Units vests,
equal to the Fair Market Value of a share of Company Stock on the date on which
such Restricted Stock Unit vests. Notwithstanding the foregoing, shares of
Company Stock issued may be subject to restrictions on transfer as a result of
applicable securities laws or pursuant to Section 15.
(d) Conditions to Vesting
At the time of the grant of Restricted Stock Units, the Committee may
impose such restrictions or conditions to the vesting of such Restricted Stock
Units as it, in its absolute discretion, deems appropriate. By way of example
and not by way of limitation, the Committee may require, as a condition to the
vesting of any class or classes of Restricted Stock Units, that the Participant
or the Company achieves such performance goals as the Committee may specify
under Section 12. Any Restricted Stock Units that vest solely on the basis of
the passage of time (e.g., not on the basis of any performance standards) shall
not vest more quickly than ratably over the three (3) year period beginning on
the first anniversary of the date of grant, except that Restricted Stock Units
may vest sooner under any of the following circumstances as more specifically
set forth in the applicable Award Agreement: (i) the Participant's death; (ii)
the Participant's Disability; (iii) the Participant's "retirement" as defined in
the Award Agreement consistent with the Company's retirement policies and
programs; (iv) a Participant's termination of employment with the Company due to
workforce reduction, job elimination or divestiture as determined by the
Committee; (v) a Change in Control consistent with the provisions of Section
10(f); or (vi) in connection with establishing the terms and conditions of
employment of an individual necessary for the recruitment of the individual or
as the result of a business combination or acquisition by the Company.
(e) Effect of Termination of Employment
(1) Unless the applicable Award Agreement or the Committee
determines otherwise, Restricted Stock Units that have not vested, together with
any dividends credited on such Restricted Stock Units, shall be forfeited upon
the Participant's termination of employment for any reason other than Cause.
(2) In the event of the termination of a Participant's employment
for Cause, all Restricted Stock Units granted to such Participant which have not
vested as of the date of such termination shall immediately be forfeited,
together with any dividends credited on such shares.
(f) Effect of Change in Control
Unless the Award Agreement provides or the Committee determines otherwise,
upon the termination of a Participant's employment within 36 months following
the occurrence of a Change in Control and if such termination is not (i) due to
the Participant's death or Disability, (ii) a termination by the Company for
Cause and (iii) a voluntary termination by the Participant absent Good Reason,
all outstanding Restricted Stock Units which have not theretofore vested shall
immediately vest. In addition, in the event of a potential Change in Control,
the Committee may in its discretion, cancel any outstanding Restricted Stock
Units and pay to the holders thereof, in cash or stock, or any combination
thereof, the value of such Restricted Stock Units based upon the price per share
of Company Stock to be received by other stockholders of the Company in the
Change in Control.
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11 STOCK BONUSES
-------------
In the event that the Committee grants a Stock Bonus, a certificate for the
shares of Company Stock comprising such Stock Bonus shall be issued in the name
of the Participant to whom such grant was made and delivered to such Participant
as soon as practicable after the date on which such Stock Bonus is payable.
12 PERFORMANCE-BASED AWARDS
------------------------
(a) Purpose.
The purpose of this Section 12 is to provide the Committee the ability to
qualify Incentive Awards other than Options and SARs that are granted pursuant
to Sections 9 and 10 as Qualified Performance-Based Compensation. If the
Committee, in its discretion, decides to grant a Performance-Based Award to a
Covered Employee, the provisions of this Section 12 shall control over any
contrary provision contained in Sections 9 and 10; provided, however, that the
Committee may in its discretion grant Incentive Awards to Covered Employees and
to other Participants that are based on performance criteria or performance
goals which do not satisfy the requirements of this Section 12 and which may be
other than Performance Criteria or Performance Goals.
(b) Applicability.
This Section 12 shall apply only to those Covered Employees selected by the
Committee to receive Performance-Based Awards. The designation of a Covered
Employee as a Participant for a Performance Period shall not in any manner
entitle the Participant to receive an Incentive Award for the period. 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 Employees as a
Participant in such period or in any other period.
(c) Procedures with Respect to Performance-Based Awards.
To the extent necessary to comply with the Qualified Performance-Based
Compensation requirements of Section 162(m)(4)(C) of the Code, with respect to
any Incentive Award granted under Sections 9 and 10 which may be granted to one
or more Covered Employees, no later than ninety (90) days following the
commencement of any fiscal year in question or any other designated fiscal
period or period of service (or such other time as may be required or permitted
by Section 162(m) of the Code), the Committee shall, in writing, (a) designate
one or more Covered Employees, (b) select the Performance Criteria applicable to
the Performance Period, (c) establish the Performance Goals, and amounts of such
Awards, as applicable, which may be earned for such Performance Period, and (d)
specify the relationship between Performance Criteria and the Performance Goals
and the amounts of such Awards, as applicable, to be earned by each Covered
Employee for such Performance Period. Following the completion of each
Performance Period, the Committee shall certify in writing whether the
applicable Performance Goals have been achieved for such Performance Period. In
determining the amount earned by a Covered Employee, the Committee shall have
the right to reduce or eliminate (but not to increase) the amount payable at a
given level of performance to take into account additional factors that the
Committee may deem relevant to the assessment of individual or corporate
performance for the Performance Period.
(d) Payment of Performance-Based Awards.
Unless otherwise provided in the applicable Award Agreement, a Participant
must be employed by the Company or a Subsidiary on the day a Performance-Based
Award for such Performance Period is paid to the Participant. Furthermore, a
Participant shall be eligible to receive payment pursuant to a Performance-Based
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Award for a Performance Period only if, and to the extent, the Performance Goals
for such period are achieved.
(e) Additional Limitations.
Notwithstanding any other provision of the Plan, any Incentive Award which
is granted to a Covered Employee and is intended to constitute Qualified
Performance-Based Compensation shall be subject to any additional limitations
set forth in Section 162(m) of the Code (including any amendment to Section
162(m) of the Code) or any regulations or rulings issued thereunder that are
requirements for qualification as qualified performance-based compensation as
described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed
amended to the extent necessary to conform to such requirements.
13 RIGHTS AS A STOCKHOLDER
-----------------------
No person shall have any rights as a stockholder with respect to any shares
of Company Stock covered by or relating to any Incentive Award until the date of
issuance of a stock certificate with respect to such shares. Except as otherwise
expressly provided in Section 3(d), no adjustment to any Incentive Award shall
be made for dividends or other rights for which the record date occurs prior to
the date such stock certificate is issued.
14 DEFERRAL OF AWARDS
------------------
The Committee may permit or require the deferral of payment or settlement
of any Restricted Stock Unit or Stock Bonus subject to such rules and procedures
as it may establish. Payment or settlement of Options or SARs may not be
deferred unless such deferral would not cause the provisions of Section 409A of
the Code to be violated.
15 RESTRICTION ON TRANSFER OF SHARES
---------------------------------
The Committee may impose, either in the Award Agreement or at the time
shares of Company Stock are issued in settlement of an Incentive Award,
restrictions on the ability of the Participant to sell or transfer such shares
of Company Stock.
16 NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO INCENTIVE AWARD
---------------------------------------------------------
Nothing contained in the Plan or any Award Agreement shall confer upon any
Participant any right with respect to the continuation of employment by the
Company or interfere in any way with the right of the Company, subject to the
terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Participant.
No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant any other Incentive Award
to such Participant or other person at any time nor preclude the Committee from
making subsequent grants to such Participant or any other person.
17 SECURITIES MATTERS
------------------
(a) The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of 1933 of any interests in the Plan or any
shares of Company Stock to be issued hereunder or to effect similar compliance
under any state laws. Notwithstanding anything herein to the contrary, the
Company shall not be obligated to cause to be issued or delivered any
certificates evidencing shares of Company Stock pursuant to the Plan unless and
until the Company is advised by its counsel that the issuance and delivery of
such certificates is in compliance with all applicable laws, regulations of
governmental authority and the requirements of the securities exchange or
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automated quotation system on which shares of Company Stock are listed.
Certificates evidencing shares of Company Stock issued pursuant to the terms
hereof, may bear such legends, as the Committee or the Company, in its sole
discretion, deems necessary or desirable to insure compliance with applicable
securities laws.
(b) The transfer of any shares of Company Stock hereunder shall be
effective only at such time as counsel to the Company shall have determined that
the issuance and delivery of such shares is in compliance with all applicable
laws, regulations of governmental authority and the requirements of the
securities exchange or automated quotation system on which shares of Company
Stock are listed. The Committee may, in its sole discretion, defer the
effectiveness of any transfer of shares of Company stock hereunder in order to
allow the issuance of such shares to be made pursuant to registration or an
exemption from registration or other methods for compliance available under
federal or state securities laws. The Company shall inform the Participant in
writing of the Committee's decision to defer the effectiveness of a transfer.
During the period of such a deferral in connection with the exercise of an
Option, the Participant may, by written notice, withdraw such exercise and
obtain the refund of any amount paid with respect thereto.
(c) It is intended that the Plan be applied and administered in compliance
with Rule 16b-3. If any provision of the Plan would be in violation of Rule
16b-3 if applied as written, such provision shall not have effect as written and
shall be given effect so as to comply with Rule 16b-3, as determined by the
Committee. The Committee is authorized to amend the Plan and to make any such
modifications to Award Agreements to comply with Rule 16b-3, as it may be
amended from time to time, and to make any other such amendments or
modifications deemed necessary or appropriate to better accomplish the purposes
of the Plan in light of any amendments made to Rule 16b-3.
18 WITHHOLDING TAXES
-----------------
Whenever cash is to be paid pursuant to an Incentive Award, the Company
shall have the right to deduct therefrom an amount sufficient to satisfy any
federal, state and local withholding tax requirements related thereto.
Whenever shares of Company Stock are to be delivered pursuant to an
Incentive Award, the Company shall have the right to require the Participant to
remit to the Company in cash an amount sufficient to satisfy any federal, state
and local withholding tax requirements related thereto. With the approval of the
Committee, which it shall have sole discretion to grant and which approval may
be evidenced by the presence in the Award Agreement of an appropriate reference
to such right, a Participant may satisfy the foregoing requirement by electing
to have the Company withhold from delivery shares of Company Stock having a
value equal to the minimum amount of tax required to be withheld. Such shares
shall be valued at their Fair Market Value on the date as of which the amount of
tax to be withheld is determined. Fractional share amounts shall be settled in
cash. Such a withholding election may be made with respect to all or any portion
of the shares to be delivered pursuant to an Incentive Award. Any tax
withholding above the minimum amount of tax required to be withheld must be
deducted from other amounts payable to the Participant or must be paid in cash
by the Participant.
19 NOTIFICATION OF ELECTION UNDER SECTION 83(B) OF THE CODE
--------------------------------------------------------
If any Participant shall, in connection with the acquisition of shares of
Company Stock under the Plan, make the election permitted under Section 83(b) of
the Code (i.e., an election to include in gross income in the year of transfer
the amounts specified in Section 83(b)) and permitted under the terms of the
Award Agreement, such Participant shall notify the Company of such election
within ten days of filing notice of the election with the Internal Revenue
Service, in addition to any filing and notification required pursuant to
regulations issued under the authority of Code Section 83(b).
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20 NOTIFICATION UPON DISQUALIFYING DISPOSITION UNDER SECTION 421(B) OF THE
-----------------------------------------------------------------------
CODE
----
Each Award Agreement with respect to an Incentive Stock Option shall
require the Participant to notify the Company of any disposition of shares of
Company Stock issued pursuant to the exercise of such Option under the
circumstances described in Section 421(b) of the Code (relating to certain
disqualifying dispositions) within ten days of such disposition.
21 AMENDMENT OR TERMINATION OF THE PLAN
------------------------------------
Stockholder approval of any amendment to the Plan shall be required if and
to the extent required by Rule 16b-3 or by any comparable or successor exemption
under which the Board of Directors believes it is appropriate for the Plan to
qualify, or if and to the extent the Board of Directors determines that such
approval is appropriate for purposes of satisfying Section 162(m), Section 422
or Section 409A of the Code, any applicable rule or listing standard of any
stock exchange, automated quotation system or similar organization, or the New
York Business Corporation Law. Except as otherwise provide in the Plan, the
Board of Directors may, at any time, suspend or terminate the Plan or revise or
amend it in any respect whatsoever. Nothing herein shall restrict the
Committee's ability to exercise its discretionary authority pursuant to Section
4, which discretion may be exercised without amendment to the Plan. No action
hereunder may, without the consent of a Participant, reduce the Participant's
rights under any outstanding Incentive Award.
22 NO OBLIGATION TO EXERCISE
-------------------------
The grant to a Participant of an Option or SAR shall impose no obligation
upon such Participant to exercise such Option or SAR.
23 TRANSFERS UPON DEATH; NONASSIGNABILITY
--------------------------------------
Upon the death of a Participant outstanding Incentive Awards granted to
such Participant may be exercised only by the executor or administrator of the
Participant's estate or by a person who shall have acquired the right to such
exercise by will or by the laws of descent and distribution. No transfer of an
Incentive Award by will or the laws of descent and distribution shall be
effective to bind the Company unless the Company shall have been furnished with
(a) written notice thereof and with a copy of the Will and/or such evidence as
the Committee may deem necessary to establish the validity of the transfer and
(b) an agreement by the transferee to comply with all the terms and conditions
of the Incentive Award that are or would have been applicable to the Participant
and to be bound by the acknowledgments made by the Participant in connection
with the grant of the Incentive Award.
Except as otherwise provided, no Incentive Award or interest in it may be
transferred, assigned, pledged or hypothecated by the Participant, whether by
operation of law or otherwise, or be made subject to execution, attachment or
similar process.
24 EXPENSES AND RECEIPTS
---------------------
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be used for
general corporate purposes.
25 FAILURE TO COMPLY
-----------------
In addition to the remedies of the Company elsewhere provided for herein,
failure by a Participant (or beneficiary) to comply with any of the terms and
conditions of the Plan or the applicable Award Agreement, unless such failure is
remedied by such Participant (or beneficiary) within ten days after notice of
such failure by the Committee, shall be grounds for the cancellation and
forfeiture of such Incentive Award, in whole or in part, as the Committee, in
its sole discretion, may determine.
A-18
26 EFFECTIVE DATE AND TERM OF PLAN
-------------------------------
The Plan shall be effective as of the Effective Date. Unless earlier
terminated by the Board of Directors, the right to grant Incentive Awards under
the Plan will terminate on the tenth anniversary of the Effective Date.
Incentive Awards outstanding at Plan termination will remain in effect according
to their terms and the provisions of the Plan.
27 APPLICABLE LAW
--------------
Except to the extent preempted by any applicable federal law, the Plan will
be construed and administered in accordance with the laws of the State of New
York, without reference to the principles of conflicts of laws thereunder.
A-19
APPENDIX B
COLUMBUS MCKINNON CORPORATION
EXECUTIVE MANAGEMENT VARIABLE COMPENSATION PLAN
PURPOSE
This Executive Variable Compensation Plan (the "Plan") is intended to
enable Columbus McKinnon Corporation to attract, motivate and retain highly
qualified executives on a competitive basis and to provide financial incentives
to those executives in order to promote the success of the Company. The Plan is
for the benefit of Participants. The Plan is designed to ensure that the bonuses
paid hereunder to Participants are deductible without limit under Section 162(m)
of the Internal Revenue Code of 1986, as amended, and the regulations and
interpretations promulgated thereunder.
SECTION 1. DEFINITIONS.
The following terms have the meanings indicated unless a different
meaning is clearly required by the context:
(a) "Base Salary" means the Participant's annualized salary on the
last day of the fiscal year. Base Salary shall be before both (i) deductions for
taxes or benefits; and (ii) deferrals of compensation pursuant to
Company-sponsored plans.
(b) "Board of Directors" means the Board of Directors of the Company.
(c) "Chief Executive Officer" has the meaning set forth in Rule 3b-7
promulgated under the Securities Exchange Act of 1934, as amended.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Compensation and Succession Committee of the
Board of Directors or a subcommittee thereof. The Committee at all times shall
be composed of at least two directors of Columbus McKinnon Corporation each of
whom shall be "outside directors" within the meaning of Section 162(m) of the
Code.
(f) "Company" means Columbus McKinnon Corporation and its affiliated
group of corporations as defined in Section 1504 of the Code (determined without
regard to Section 1504(b) of the Code).
(g) "Participant" means an individual who participates in the Plan
pursuant to Section 2.
SECTION 2. ELIGIBLE EXECUTIVES AND PARTICIPANTS
"Eligible Executives" for a fiscal year are defined as (i) the Chief
Executive Officer of the Company on the first day of such year or a person who
becomes the Chief Executive Officer during such year by virtue of being hired or
promoted and (ii) any other officer of the Company designated by the Committee.
Within the first ninety (90) days of each fiscal year (or such other period as
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may be permitted by Section 162(m) of the Code), the Committee will designate
those Eligible Executives who are to be "Participants" in the Plan for that
fiscal year.
SECTION 3. ADMINISTRATION
The Committee shall have the sole discretion and authority to
administer the Plan, interpret the terms and provisions of the Plan and to
establish, adjust, pay or decline to pay bonuses under the Plan.
SECTION 4. PERFORMANCE GOALS
Within the first ninety (90) days of each fiscal year of the Company,
the Committee shall set one or more objective performance goals for each
Participant for such year. Such goals shall be expressed in terms of: net
earnings (either before or after interest, taxes, depreciation or amortization),
economic value-added (as determined by the Committee), sales or revenue, net
income (either before or after taxes), operating earnings or income, cash flow
(including, but not limited to, operating cash flow and free cash flow), cash
flow return on capital, return on investment, return on stockholders' equity,
return on assets or net assets, return on capital, debt reduction, stockholder
returns, return on sales, gross or net profit margin, productivity, expense,
margins, operating efficiency, cost reduction or savings, customer or employee
satisfaction, safety, working capital, earnings or diluted earnings per share,
price per share of Company stock, and market share, any of which may be measured
either in absolute terms or as compared to any incremental increase or as
compared to results of a peer group.
SECTION 5. BONUS DETERMINATIONS
(a) Within the first ninety (90) days of each fiscal year of the
Company, the Committee will specify the objective terms and conditions for the
determination and payment of a bonus for each Participant. At the time that
annual performance goals are set for Participants, the Committee shall establish
a maximum award opportunity for each Participant for the year. The maximum award
opportunity shall be related to the Participant's Base Salary at the start of
the year by a formula that takes account of the degree of achievement of the
goals set for the Participant; provided, however, that the Committee shall have
absolute discretion to reduce the actual bonus payment that would otherwise be
payable to any Participant on the basis of achievement of performance goals. The
maximum award paid to a Participant in respect of a particular fiscal year shall
in no event exceed an amount equal to 300% of a Participant's Base Salary. In
the event of a change in the Company's fiscal year, the Plan shall apply, with
appropriate pro-rata adjustments, to any fiscal period not consisting of twelve
months.
(b) No bonuses shall be paid to a Participant unless and until the
Committee makes a certification in writing with respect to the attainment of the
performance goals as required by Section 162(m) of the Code. Although the
Committee may in its sole discretion reduce a bonus payable to a Participant
based on such objective and/or subjective factors as it may determine, the
Committee shall have no discretion to increase the amount of a Participant's
bonus as determined under the applicable objective terms and conditions
established for such bonus amount.
(c) Following the Committee's determination and certification of the
amount of any bonus payable, such amount will be paid in cash (subject to any
B-2
election made by a Participant with respect to the deferral of all or a portion
of his or her bonus or the payment of all or a portion of his or her bonus in
some form other than cash). Payment of the bonus amount will be made as soon as
feasible after the Committee's certification of the amount payable but not after
two and one-half months following the end of the fiscal year to which the bonus
relates.
(d) In the event of the death of a Participant after the end of a
fiscal year and prior to any payment otherwise required pursuant to Section 5.3,
such payment shall be made to the representative of the Participant's estate.
(e) In the event of the death, disability, retirement or other
termination of employment of a Participant during a fiscal year, the Committee
shall, in its discretion, have the power to award to such Participant (or the
representative of the Participant's estate) an equitably prorated portion of the
bonus which otherwise would have been earned by such Participant.
(f) The right of a Participant or of any other person to any payment
under the Plan shall not be assigned, transferred, pledged or encumbered in any
manner and any attempted assignment, transfer, pledge or encumbrance shall be
null and void and of no force or effect.
SECTION 6. AMENDMENT AND TERMINATION
The Board of Directors may at any time amend the Plan in any fashion
or terminate or suspend the Plan; provided that no amendment shall be made which
would cause bonuses payable under the Plan to fail to qualify for the exemption
from the limitations of Section 162(m) of the Code provided in Section
162(m)(4)(C) of the Code. Upon any such termination, all rights of a Participant
with respect to any fiscal year that has not ended on or prior to the effective
date of such termination shall become null and void. Any amendments to the Plan
shall require shareholder approval only to the extent required by Section 162(m)
of the Code.
SECTION 7. SHAREHOLDER APPROVAL
No bonuses shall be paid under the Plan unless and until the Company's
shareholders shall have approved the Plan and the performance goals as required
by Section 162(m) of the Code. If the Plan is amended in any way that changes
the material terms of the Plan's performance goals, including by materially
modifying the performance goals, increasing the maximum bonus payable under the
Plan or changing the Plan's eligibility requirements, the Plan shall be
resubmitted to the Company's shareholders for approval as required by Section
162(m) of the Code.
SECTION 8. MISCELLANEOUS
(a) The Plan shall be governed by and construed in accordance with the
internal laws of the State of New York applicable to contracts made, and to be
wholly performed, within such State, without regard to principles of choice of
laws.
(b) All amounts required to be paid under the Plan shall be subject to
any required Federal, state, local and other applicable withholdings or
deductions.
(c) Nothing contained in the Plan shall confer upon any Participant or
any other person any right with respect to the continuation of employment by the
B-3
Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation payable to
the Participant from the rate in effect at the commencement of a fiscal year or
to otherwise modify the terms of such Participant's employment. No person shall
have any claim or right to participate in or receive any award under the Plan
for any particular fiscal year.
B-4
COLUMBUS MCKINNON CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 31, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints TIMOTHY T. TEVENS and KAREN L. HOWARD and
each or any of them, attorneys and proxies, with full power of substitution, to
vote at the Annual Meeting of Shareholders of COLUMBUS McKINNON CORPORATION (the
"Company") to be held at the Ramada Hotel and Conference Center at 2402 North
Forest Road, Amherst, New York, on July 31, 2006 at 10:00 a.m., local time, and
any adjournment(s) thereof revoking all previous proxies, with all powers the
undersigned would possess if present, to act upon the following matters and upon
such other business as may properly come before the meeting or any
adjournment(s) thereof.
(Continued and to be signed on the reverse side)
ANNUAL MEETING OF SHAREHOLDERS OF
COLUMBUS MCKINNON CORPORATION
July 31, 2006
PROXY VOTING INSTRUCTIONS
MAIL - DATE, SIGN AND MAIL YOUR PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS
----
POSSIBLE.
- OR -
TELEPHONE - CALL TOLL-FREE 1-800-PROXIES (1 800-776-9437) FROM ANY TOUCH TONE
---------
TELEPHONE AND FOLLOW THE INSTRUCTIONS. HAVE YOUR CONTROL NUMBER AND THE PROXY
CARD AVAILABLE WHEN YOU CALL.
- OR -
INTERNET - ACCESS WWW.VOTEPROXY.COM AND FOLLOW THE ON-SCREEN INSTRUCTIONS. HAVE
--------
YOUR CONTROL NUMBER AVAILABLE WHEN YOU ACCESS THE WEB PAGE.
COMPANY NUMBER IS ___________________
ACCOUNT NUMBER IS ___________________
You may enter your voting instructions at 1 -800-PROXIES or www.voteproxy.com up
until 11:59 PM Eastern Time the day before the cut-off or meeting date.
Please detach along the perforated line and mail in the envelope provided
IF you are not voting via telephone or the internet.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS
AND "FOR" PROPOSALS 2 AND 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE /X/
1. ELECTION OF DIRECTORS:
NOMINEES:
o TIMOTHY T. TEVENS
|_| FOR ALL NOMINEES
o CARLOS PASCUAL
|_| WITHHOLD AUTHORITY
FOR ALL NOMINEES o RICHARD H. FLEMING
|_| FOR ALL EXCEPT o ERNEST R. VEREBELYI
(see instructions below)
o WALLACE W. CREEK
o STEPHEN RABINOWITZ
o LINDA A. GOODSPEED
INSTRUCTION: To withhold authority to vote for any individual nominee(s) mark
-----------
"FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to
withhold
2. ADOPTION OF THE COLUMBUS McKINNON CORPORATION 2006 LONG TERM INCENTIVE PLAN
|_| FOR |_| AGAINST |_| ABSTAIN
C-2
3. ADOPTION OF THE COLUMBUS McKINNON CORPORATION EXECUTIVE MANAGEMENT VARIABLE
COMPENSATION PLAN
|_| FOR |_| AGAINST |_| ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSAL NOS. 1, 2 AND
3.
To change the address on your account, please check the box at right |_|
and indicate your new address in the address space above. Please
note that changes to the registered name(s) on the account may not
be submitted via this method.
Signature of Shareholder _____________________ Date:___________________
Signature of Shareholder _____________________ Date:___________________
Note: Please sign exactly as name appears on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If the signer is
a corporation, please sign in full corporate name by duly authorized officer,
giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
C-3
COLUMBUS MCKINNON CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
VOTING INSTRUCTION CARD FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 31, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The Trustees of the Columbus McKinnon Corporation Employee Stock Ownership
Plan (the "ESOP") are hereby authorized to represent and to vote at the Annual
Meeting of Shareholders of COLUMBUS McKINNON CORPORATION (the "Company") to be
held at the Ramada Hotel and Conference Center at 2402 North Forest Road,
Amherst, New York, on July 31, 2006 at 10:00 a.m., local time, and any
adjournment(s) thereof revoking all previous proxies, with all powers the
undersigned would possess if present, to act upon the following matters and upon
such other business as may properly come before the meeting or any
adjournment(s) thereof.
(Continued and to be signed on the reverse side)
B-1
ANNUAL MEETING OF SHAREHOLDERS OF
COLUMBUS MCKINNON CORPORATION
July 31, 2006
ESOP
PROXY VOTING INSTRUCTIONS
MAIL - DATE, SIGN AND MAIL YOUR PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS
----
POSSIBLE.
- OR -
TELEPHONE - CALL TOLL-FREE 1-800-PROXIES (1 800-776-9437) FROM ANY TOUCH TONE
---------
TELEPHONE AND FOLLOW THE INSTRUCTIONS. HAVE YOUR CONTROL NUMBER AND THE PROXY
CARD AVAILABLE WHEN YOU CALL.
- OR -
INTERNET - ACCESS WWW.VOTEPROXY.COM AND FOLLOW THE ON-SCREEN INSTRUCTIONS. HAVE
--------
YOUR CONTROL NUMBER AVAILABLE WHEN YOU ACCESS THE WEB PAGE.
COMPANY NUMBER IS ___________________
ACCOUNT NUMBER IS ___________________
You may enter your voting instructions at 1 -800-PROXIES or www.voteproxy.com up
until 11:59 PM Eastern Time the day before the cut-off or meeting date.
Please detach along the perforated line and mail in the envelope provided
IF you are not voting via telephone or the internet.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS
AND "FOR" PROPOSALS 2 AND 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE /X/
THE TRUSTEES MAKE NO RECOMMENDATION WITH RESPECT TO VOTING YOUR ESOP SHARES
ON ANY PROPOSALS.
1. ELECTION OF DIRECTORS:
NOMINEES:
o TIMOTHY T. TEVENS
|_| FOR ALL NOMINEES
o CARLOS PASCUAL
|_| WITHHOLD AUTHORITY
FOR ALL NOMINEES o RICHARD H. FLEMING
|_| FOR ALL EXCEPT o ERNEST R. VEREBELYI
(see instructions below)
o WALLACE W. CREEK
o STEPHEN RABINOWITZ
o LINDA A. GOODSPEED
INSTRUCTION: To withhold authority to vote for any individual nominee(s) mark
------------
"FOR ALL EXCEPT" and fill in the circle next to eachnominee you wish to withhold
B-2
2. ADOPTION OF THE COLUMBUS McKINNON CORPORATION 2006 LONG TERM INCENTIVE PLAN
|_| FOR |_| AGAINST |_| ABSTAIN
3. ADOPTION OF THE COLUMBUS McKINNON CORPORATION EXECUTIVE MANAGEMENT VARIABLE
COMPENSATION PLAN
|_| FOR |_| AGAINST |_| ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
WHEN PROPERLY EXECUTED, THIS VOTING INSTRUCTION WILL BE VOTED IN THE MANNER
DIRECTED HEREIN. IF NO DIRECTION IS MADE, THE TRUSTEES WILL VOTE ANY ALLOCATED
ESOP SHARES "FOR" PROPOSAL NOS. 1, 2 AND 3.
To change the address on your account, please check the box at right |_|
and indicate your new address in the address space above. Please
note that changes to the registered name(s) on the account may not
be submitted via this method.
Signature of Shareholder _____________________ Date:___________________
Signature of Shareholder _____________________ Date:___________________
Note: Please sign exactly as name appears on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If the signer is
a corporation, please sign in full corporate name by duly authorized officer,
giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
B-3
BROKER CARD
COLUMBUS MCKINNON CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 31, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints TIMOTHY T. TEVENS and KAREN L. HOWARD and
each or any of them, attorneys and proxies, with full power of substitution, to
vote at the Annual Meeting of Shareholders of COLUMBUS McKINNON CORPORATION (the
"Company") to be held at the Ramada Hotel and Conference Center at 2402 North
Forest Road, Amherst, New York, on July 31, 2006 at 10:00 a.m., local time, and
any adjournment(s) thereof revoking all previous proxies, with all powers the
undersigned would possess if present, to act upon the following matters and upon
such other business as may properly come before the meeting or any
adjournment(s) thereof.
(Continued and to be signed on the reverse side)
ANNUAL MEETING OF SHAREHOLDERS OF
COLUMBUS MCKINNON CORPORATION
July 31, 2006
PROXY VOTING INSTRUCTIONS
PLEASE DATE, SIGN AND MAIL
YOUR PROXY CARD IN THE
ENVELOPE PROVIDED AS SOON
AS POSSIBLE
Please detach along the perforated line and mail in the envelope provided IF you
are not voting via telephone or the internet.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS
AND "FOR" PROPOSALS 2 AND 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE /X/
1. ELECTION OF DIRECTORS:
NOMINEES:
o TIMOTHY T. TEVENS
|_| FOR ALL NOMINEES
o CARLOS PASCUAL
|_| WITHHOLD AUTHORITY
FOR ALL NOMINEES o RICHARD H. FLEMING
|_| FOR ALL EXCEPT o ERNEST R. VEREBELYI
(see instructions below)
o WALLACE W. CREEK
o STEPHEN RABINOWITZ
o LINDA A. GOODSPEED
INSTRUCTION: To withhold authority to vote for any individual nominee(s) mark
-----------
"FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to
withhold
2. ADOPTION OF THE COLUMBUS McKINNON CORPORATION 2006 LONG TERM INCENTIVE PLAN
|_| FOR |_| AGAINST |_| ABSTAIN
3. ADOPTION OF THE COLUMBUS McKINNON CORPORATION EXECUTIVE MANAGEMENT VARIABLE
COMPENSATION PLAN
|_| FOR |_| AGAINST |_| ABSTAIN
C-2
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSAL NOS. 1, 2 AND
3.
To change the address on your account, please check the box at right |_|
and indicate your new address in the address space above. Please
note that changes to the registered name(s) on the account may not
be submitted via this method.
Signature of Shareholder _____________________ Date:___________________
Signature of Shareholder _____________________ Date:___________________
Note: Please sign exactly as name appears on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If the signer is
a corporation, please sign in full corporate name by duly authorized officer,
giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
C-3