SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. ___)
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ARMOR HOLDINGS, INC.
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(Name of Registrant as Specified In Its Charter)
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ARMOR HOLDINGS, INC.
1400 MARSH LANDING PARKWAY, SUITE 112
JACKSONVILLE, FLORIDA 32250
April 29, 2002
To Our Stockholders:
On behalf of the Board of Directors of Armor Holdings, Inc., I cordially
invite you to attend the Annual Meeting of Stockholders to be held on June 18,
2002, at 10:00 A.M., New York City time, at The Metropolitan Club, One East 60th
Street, New York, New York 10022.
The accompanying Notice of Meeting and Proxy Statement cover the details of
the matters to be presented.
A copy of the 2001 Annual Report is included in this mailing.
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING, I URGE THAT
YOU PARTICIPATE BY COMPLETING AND RETURNING YOUR PROXY AS SOON AS POSSIBLE. YOUR
VOTE IS IMPORTANT AND WILL BE GREATLY APPRECIATED. RETURNING YOUR PROXY CARD
WILL ENSURE THAT YOUR VOTE IS COUNTED IF YOU LATER DECIDE NOT TO ATTEND THE
ANNUAL MEETING.
Cordially,
ARMOR HOLDINGS, INC.
Jonathan M. Spiller
President and
Chief Executive Officer
ARMOR HOLDINGS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 18, 2002
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of the Stockholders,
and any adjournments or postponements thereof, of Armor Holdings, Inc., which
will be held on June 18, 2002 at 10:00 A.M., New York City time, at The
Metropolitan Club, One East 60th Street, New York, New York 10022, for the
following purposes:
1. To elect seven members to serve on the Board of Directors until the
next annual meeting of stockholders and until their successors are duly
elected and qualified (Proposal 1);
2. To consider and vote upon a proposal to ratify and approve the
Armor Holdings, Inc. 2002 Stock Incentive Plan (Proposal 2);
3. To ratify the appointment of PricewaterhouseCoopers LLP as Armor
Holdings, Inc.'s independent auditors for the fiscal year ending December
31, 2002 (Proposal 3); and
4. To transact such other business as may properly be brought before
the meeting.
Stockholders of record at the close of business on April 29, 2002 are
entitled to notice of and to vote at the meeting.
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND
RETURN IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE, WHETHER OR NOT YOU EXPECT TO
ATTEND THE MEETING. RETURNING YOUR PROXY CARD WILL ENSURE THAT YOUR VOTE IS
COUNTED IF YOU LATER DECIDE NOT TO ATTEND THE ANNUAL MEETING.
By order of the Board of Directors
Robert R. Schiller
Secretary
April 29, 2002
ARMOR HOLDINGS, INC.
1400 MARSH LANDING PARKWAY
SUITE 112
JACKSONVILLE, FLORIDA 32250
--------------------
PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
JUNE 18, 2002
INTRODUCTION
PROXY SOLICITATION AND GENERAL INFORMATION
This Proxy Statement and the enclosed form of proxy are being furnished to
the holders of common stock, par value $.01 per share, of Armor Holdings, Inc.,
a Delaware corporation (which is sometimes referred to in this Proxy as "Armor
Holdings," "we," or "us"), in connection with the solicitation of proxies by our
Board of Directors for use at the Annual Meeting of Stockholders to be held on
Tuesday, June 18, 2002 at The Metropolitan Club, One East 60th Street, New York,
New York 10022, at 10:00 A.M., New York City time, and at any adjournments or
postponements thereof. This Proxy Statement and the Proxy Card are first being
sent to stockholders on or about April 30, 2002.
At the meeting, stockholders will be asked:
1. To elect seven members to serve on the Board of Directors until the next
annual meeting of stockholders and until their successors are duly elected and
qualified (Proposal 1);
2. To consider and vote upon a proposal to ratify and approve the Armor
Holdings, Inc. 2002 Stock Incentive Plan (Proposal 2);
3. To ratify the appointment of PricewaterhouseCoopers LLP as Armor
Holdings, Inc.'s independent auditors for the fiscal year ending December 31,
2002 (Proposal 3); and
4. To transact such other business as may properly be brought before the
meeting.
The Board of Directors has fixed the close of business on April 29, 2002 as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting. Each such Stockholder will be entitled to one vote for
each share of common stock held on all matters to come before the meeting and
may vote in person or by proxy authorized in writing.
Stockholders are requested to complete, sign, date and promptly return the
enclosed proxy card in the enclosed envelope. Proxies which are not revoked will
be voted at the meeting in accordance with instructions contained therein. If
the proxy card is signed and returned without instructions, the shares will be
voted FOR the election of each nominee for director named in this proxy
statement (Proposal 1), FOR the ratification and approval of the Armor Holdings,
Inc. 2002 Stock Incentive Plan (Proposal 2) and FOR the ratification of the
appointment of PricewaterhouseCoopers LLP as our independent auditors (Proposal
3). A stockholder who so desires may revoke his proxy at any time before it is
voted at the meeting by: (i) delivering written notice to us (attention:
Corporate Secretary); (ii) duly executing and delivering a proxy bearing a later
date; or (iii) casting a ballot at the meeting. Attendance at the meeting will
not in and of itself constitute a revocation of a proxy.
The Board of Directors knows of no other matters that are to be brought
before the meeting other than as set forth in the Notice of Meeting. If any
other matters properly come before the meeting, the persons named in the
enclosed form of proxy or their substitutes will vote in accordance with their
best judgment on such matters.
RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE
Only stockholders as of the close of business on April 29, 2002 (the
"Record Date") are entitled to notice of and to vote at the meeting. As of the
Record Date, there were 31,225,894 shares of our common stock outstanding and
entitled to vote, with each share entitled to one vote. See "Security Ownership
of Certain Beneficial Owners and Management."
REQUIRED VOTES
The affirmative vote of a plurality of the votes cast in person or by proxy
is necessary for the election of directors (Proposal 1). The affirmative vote of
a majority of the votes cast in person or by proxy is necessary for the approval
and the ratification of the 2002 Stock Incentive Plan (Proposal 2) and the
approval and the ratification of the appointment of independent auditors
(Proposal 3).
An independent inspector of elections appointed by our transfer agent or us
will tabulate votes at the meeting. Since the affirmative vote of a plurality of
votes cast is required for the election of directors (Proposal 1), abstentions
and "broker non-votes" will have no effect on the outcome of such election.
Since the affirmative vote of a majority of the votes cast is necessary for the
approval of the ratification and approval of the 2002 Stock Incentive Plan
(Proposal 2) and the ratification and approval of the appointment of independent
auditors (Proposal 3), an abstention will have the same effect as a negative
vote, but "broker non-votes" will have no effect on the outcome of the vote.
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Brokers holding shares for beneficial owners must vote those shares
according to the specific instructions they receive from beneficial owners. If
specific instructions are not received, brokers may be precluded from exercising
their discretion, depending on the type of proposal involved. Shares as to which
brokers have not exercised discretionary authority or received instructions from
beneficial owners are considered "broker non-votes," and will be counted for
purposes of determining whether there is a quorum.
PROXY SOLICITATION
Armor Holdings will bear the costs of the solicitation of proxies for the
meeting. Our directors, officers and employees may solicit proxies from
stockholders by mail, telephone, telegram, e-mail, personal interview or
otherwise. Such directors, officers and employees will not receive additional
compensation but may be reimbursed for out-of-pocket expenses in connection with
such solicitation. Brokers, nominees, fiduciaries and other custodians have been
requested to forward soliciting material to the beneficial owners of our common
stock held of record by them and such custodians will be reimbursed for their
reasonable expenses.
IT IS DESIRABLE THAT AS LARGE A PROPORTION AS POSSIBLE OF THE STOCKHOLDERS'
INTERESTS BE REPRESENTED AT THE MEETING. THEREFORE, EVEN IF YOU INTEND TO BE
PRESENT AT THE MEETING, PLEASE SIGN AND RETURN THE ENCLOSED PROXY TO ENSURE THAT
YOUR STOCK WILL BE REPRESENTED. IF YOU ARE PRESENT AT THE MEETING AND DESIRE TO
DO SO, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON BY GIVING WRITTEN NOTICE
TO THE SECRETARY OF ARMOR HOLDINGS, INC. PLEASE RETURN YOUR EXECUTED PROXY
PROMPTLY.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 29, 2002 certain information
regarding the beneficial ownership of the common stock outstanding by (i) each
person known to us to own 5% or more of the common stock, (ii) each or our
directors, (iii) our executive officers and (iv) our executive officers and
directors as a group. Unless otherwise indicated, each of the stockholders shown
in the table below has sole voting and investment power with respect to the
shares beneficially owned. Unless otherwise indicated, the address of each
person named in the table below is c/o Armor Holdings, Inc., 1400 Marsh Landing
Parkway, Suite 112, Jacksonville, Florida 32250.
Amount and Nature of Beneficial
Ownership (1)
-------------------------------
Name Number Percentage
---- ------ ----------
Warren B. Kanders and Kanders Florida Holdings, Inc. (2) 2,324,855 7.4%
Lord Abbett & Co. (3) 1,757,442 5.6%
T. Price Rowe Associates, Inc. (4) 1,797,400 5.8%
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Amount and Nature of Beneficial
Ownership (1)
-------------------------------
Name Number Percentage
---- ------ ----------
Capital Group International, Inc. and Capital Guardian Trust Company (5) 2,135,500 6.8%
Wellington Management Company, LLP (6) 2,023,720 6.5%
Jonathan M. Spiller (7) 883,087 2.8%
Burtt R. Ehrlich (8) 212,500 *
Nicholas Sokolow (9) 177,500 *
Thomas W. Strauss (10) 120,000 *
Robert R. Schiller (11) 177,233 *
Alair A. Townsend (12) 92,516 *
Stephen B. Salzman (13) 32,784 *
Stephen J. Loffler (14) 101,181 *
Stephen E. Croskrey (15) 152,233 *
All executive officers and directors as a group (10 persons)(16) 4,273,889 13.7%
* Less than 1%.
(1) As used in this table, a beneficial owner of a security includes any person
who, directly or indirectly, through contract, arrangement, understanding,
relationship or otherwise has or shares (a) the power to vote, or direct
the voting of, such security or (b) investment power which includes the
power to dispose, or to direct the disposition of, such security. In
addition, a person is deemed to be the beneficial owner of a security if
that person has the right to acquire beneficial ownership of such security
within 60 days.
(2) Of such shares, Kanders Florida Holdings, Inc., of which Mr. Kanders is the
sole stockholder and sole director, owns 2,112,355 shares. Includes options
held by Mr. Kanders to purchase 212,500 shares of common stock.
(3) This information has been obtained from the Schedule 13G filed by Lord
Abbett & Co. on January 28, 2002. The address of Lord, Abbett & Co. is 90
Hudson Street, Jersey City, New Jersey 07302.
(4) This information has been obtained from the Schedule 13G filed by T. Rowe
Price Associates, Inc. on February 12, 2002. The address of T. Rowe Price
Associates, Inc. is 100 E. Pratt Street, Baltimore, Maryland 21202.
(5) This information has been obtained from the Schedule 13G filed by Capital
Group International and Capital Guardian Trust Company on February 11,
2002. The address of Capital Group International, Inc. and Capital Guardian
Trust Company is 11100 Santa Monica Blvd., Los Angeles, California 90025.
(6) This information has been obtained from Schedule 13G filed by Wellington
Management Company, LLP on February 12, 2002. The amount reported consists
of shares of common stock owned by clients of Wellington Management. The
address of Wellington Management is 75 State Street, Boston, MA 02109.
(7) Includes options to purchase 564,191 shares of common stock. Also includes
20,000 shares owned by Mr. Spiller's children, of which Mr. Spiller
disclaims beneficial ownership.
(8) Includes options to purchase 107,500 shares of common stock. Also includes
10,000 shares owned by Mr. Ehrlich's children and 23,000 in trust for the
benefit of his children, of which Mr. Ehrlich's spouse is trustee, of which
he disclaims beneficial ownership. Also includes 400 shares owned by Mr.
Ehrlich's spouse's individual retirement account of which Mr. Ehrlich
disclaims beneficial ownership.
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(9) Includes options to purchase 107,500 shares of common stock. Also includes
60,000 shares owned by S.T. Investors Fund, LLC, a limited liability
company of which Mr. Sokolow is a member, and 10,000 shares owned by Mr.
Sokolow's profit sharing plan.
(10) Includes options to purchase 107,500 shares of common stock.
(11) Includes options to purchase 175,000 shares of common stock.
(12) Includes options to purchase 87,500 shares of common stock.
(13) Includes options to purchase 32,500 shares of common stock.
(14) Includes options to purchase 100,000 shares of common stock.
(15) Includes options to purchase 150,000 shares of common stock.
(16) See footnotes (2) and (7-15).
We are not aware of any material proceedings to which any of our directors,
executive officers or affiliates or any security holder, including any owner of
record or beneficially of more than 5% of any class of our voting securities, is
a party adverse to us or has a material interest adverse to us.
PROPOSAL 1
ELECTION OF DIRECTORS
Our Certificate of Incorporation and Bylaws provide that we shall have
between three and fifteen directors, with such number to be fixed by the Board
of Directors. Effective at the time and for the purposes of the meeting, the
number of directors of Armor Holdings, as fixed by the Board of Directors, is
seven.
Our directors are elected annually at the annual meeting of stockholders.
Their respective terms of office continue until the next annual meeting of
stockholders and until their successors have been elected and qualified in
accordance with our By-laws. There are no family relationships among any of our
directors or executive officers.
Unless otherwise specified, each proxy received will be voted for the
election as directors of the seven nominees named below to serve until the next
annual meeting of stockholders and until their successors shall have been duly
elected and qualified. Each of the nominees has consented to be named a nominee
in this proxy statement and to serve as a director if elected. Should any
nominee become unable or unwilling to accept a nomination or election, the
persons named in the enclosed proxy will vote for the election of a nominee
designated by the Board of Directors or will vote for such lesser number of
directors as may be prescribed by the Board of Directors in accordance with our
By-laws.
The following persons have been nominated as directors:
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WARREN B. KANDERS, 44, has served as the Chairman of our board since
January 1996. From October 1992 to May 1996, Mr. Kanders served as Vice Chairman
of the board of Benson Eyecare Corporation. From June 1992 to March 1993, Mr.
Kanders served as the President and a director of Pembridge Holdings, Inc.
JONATHAN M. SPILLER, 50, has served as our President and as a director
since July 1991 and as Chief Executive Officer since September 1993. From June
1991 to September 1993, Mr. Spiller served as our Chief Operating Officer. From
1989 to 1991, Mr. Spiller served as a partner with Deloitte & Touche LLP, an
international accounting firm, where he worked for 18 years. Mr. Spiller is a
chartered accountant in England and Wales, a certified public accountant, and
holds a Bachelor's Degree from the University of Wales.
BURTT R. EHRLICH, 62, has served as one of our directors since January
1996. Mr. Ehrlich served as Chairman and Chief Operating Officer of Ehrlich
Bober Financial Corp. (the predecessor of Benson Eyecare Corporation) from
December 1986 until October 1992, and as a director of Benson Eyecare
Corporation from October 1992 until November 1995.
NICHOLAS SOKOLOW, 52, has served as one of our directors since January
1996. Mr. Sokolow has been a partner in the law firm of Sokolow, Dunaud,
Mercadier & Carreras since 1994. From June 1973 until October 1994, Mr. Sokolow
was an associate and partner in the law firm of Coudert Brothers.
THOMAS W. STRAUSS, 60, has served as one of our directors since May 1996.
Since 1995, Mr. Strauss has been a principal with Ramius Capital Group, a
privately held investment management firm. From June 1993 until July 1995, Mr.
Strauss was co-chairman of Granite Capital International Group, an investment
banking firm. From 1963 to 1991, Mr. Strauss served in various capacities with
Salomon Brothers Inc, an investment banking and brokerage firm, including
President and Vice-Chairman.
ALAIR A. TOWNSEND, 60, has served as one of our directors since December
1996. Since February 1989, Ms. Townsend has been publisher of Crain's New York
Business, a business periodical. Ms. Townsend was a former governor of the
American Stock Exchange. Ms. Townsend served as New York City's Deputy Mayor for
Finance and Economic Development from February 1985 to January 1989.
STEPHEN B. SALZMAN, 36, has served as one of our directors since June 1999.
Mr. Salzman has been a principal of Priderock Management since its inception in
August 2001. Prior to forming Priderock, Mr. Salzman was a principal of FS
Partners, LLC from its inception in 1994 until 2001. Priderock and its
affiliates invest in public and private companies through the purchase of equity
and related securities.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THE ABOVE-NAMED
DIRECTOR NOMINEES.
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INFORMATION CONCERNING MEETINGS OF THE BOARD OF DIRECTORS AND
BOARD COMMITTEES AND DIRECTOR COMPENSATION
During fiscal 2001, the Board of Directors held ten meetings. The Board of
Directors has standing Audit, Compensation, Nominating and Option Committees.
During fiscal 2001, all of the directors then in office attended at least 75% of
the total number of meetings of the Board of Directors and the Committees of the
Board of Directors on which they served. The Compensation, Nominating and Option
Committees do not meet on a regular basis, but only as circumstances require.
AUDIT COMMITTEE
The functions of the Audit Committee are to recommend to the Board of
Directors the appointment of independent auditors and to analyze the reports and
recommendations of such auditors. The committee also monitors the adequacy and
effectiveness of our financial controls and reporting procedures. During fiscal
2001, the Audit Committee consisted of Ms. Townsend (Chairwoman), and Messrs.
Sokolow and Strauss. The Audit Committee met six times during fiscal 2001.
COMPENSATION COMMITTEE
The purpose of the Compensation Committee is to recommend to the Board of
Directors the compensation and benefits of our executive officers and other key
managerial personnel. During fiscal 2001, the Compensation Committee consisted
of Messrs. Sokolow (Chairman), Kanders and Ehrlich.
Although members of the Compensation Committee held numerous informal
discussions during fiscal 2001, the Compensation Committee did not formally meet
during fiscal 2001, and the functions of the Compensation Committee were
considered at and acted upon by the entire Board of Directors during its
meetings in fiscal 2001.
NOMINATING COMMITTEE
The purpose of the Nominating Committee is to identify, evaluate and
nominate candidates for election to the Board of Directors. The Nominating
Committee will consider nominees recommended by stockholders. The names of such
nominees should be forwarded to Robert R. Schiller, Secretary, Armor Holdings,
Inc., 1400 Marsh Landing Parkway Suite 112, Jacksonville, Florida 32250, who
will submit them to the committee for its consideration. During fiscal 2001, the
Nominating Committee consisted of Messrs. Kanders (Chairman) and Sokolow. The
Nominating Committee did not meet during fiscal 2001.
The functions of the Nominating Committee were considered at and acted upon
by the entire Board of Directors during its meetings in fiscal 2001.
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OPTION COMMITTEE
The purpose of the Option Committee is to administer our stock option
plans, and to recommend to the Board of Directors awards of options to purchase
Armor Holdings common stock thereunder. During fiscal 2001, the Option Committee
consisted of Mr. Ehrlich (Chairman). The Option Committee did not meet during
fiscal 2001.
The functions of the Option Committee were considered at and acted upon by
the entire Board of Directors during its meetings in fiscal 2001.
COMPENSATION OF DIRECTORS
In 2001, our directors, other than Mr. Spiller who is compensated pursuant
to his employment agreement, were each granted options to purchase 12,500 shares
of our common stock for their services as directors. Directors who are not
employees of Armor Holdings ("Non-Employee Directors") are compensated for their
services as directors through their participation in the 1999 Stock Incentive
Plan. The 1999 Stock Incentive Plan is a formula plan pursuant to which
qualified options to acquire 10,000 shares of our common stock are automatically
granted to each Non-Employee Director on the date of his or her initial election
or appointment to the Board of Directors in consideration for service as a
director. The exercise price for all 10,000 options granted to each Non-Employee
Director under the 1999 Stock Incentive Plan is the closing price of our common
stock on the date of the grant as quoted on the composite tape of the New York
Stock Exchange, or on such exchange as our common stock may then be trading.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
No director, executive officer, or person nominated to become a director or
executive officer has, within the last five years: (i) had a bankruptcy petition
filed by or against, or a receiver, fiscal agent or similar officer appointed by
a court for, any business of such person or entity with respect to which such
person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time; (ii) been convicted in a
criminal proceeding or is currently subject to a pending criminal proceeding
(excluding traffic violations or similar misdemeanors); (iii) been subject to
any order, judgment or decree, not subsequently reversed, suspended or vacated,
of any court of competent jurisdiction, permanently or temporarily enjoining,
barring, suspending or otherwise limiting his involvement in any type of
business, securities or banking activities or practice; (iv) been found by a
court of competent jurisdiction (in a civil action), the Securities and Exchange
Commission (the "Commission") or the Commodity Futures Trading Commission to
have violated a federal or state securities or commodities law, and the judgment
has not been reversed, suspended or vacated.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Board of Directors has appointed an Audit Committee consisting of three
directors. Each of the members of the Audit Committee is "independent" as
defined under the New York Stock
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Exchange's listing standards and is financially literate as that qualification
is interpreted by the Board of Directors. The Board of Directors has adopted a
written charter with respect to the Audit Committee's roles and
responsibilities.
1. The Audit Committee has reviewed and discussed the audited financial
statements with management.
2. The Audit Committee has discussed with PricewaterhouseCoopers LLP, our
independent auditors, the matters required to be discussed by SAS 61
(Communications with Audit Committees).
3. The Audit Committee has received the written disclosures and the letter
from PricewaterhouseCoopers LLP required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and has
discussed with PricewaterhouseCoopers LLP their independence.
4. Based on the reviews and discussions referred to in paragraphs (1) through
(3) above, the Audit Committee recommended to the Board of Directors that
the audited financial statements be included in our Annual Report on Form
10-K for the fiscal year ended December 31, 2001, for filing with the
Securities and Exchange Commission.
Alair A. Townsend (Chair)
Nicholas Sokolow
Thomas W. Strauss
AUDIT FEES
The aggregate fees billed by PricewaterhouseCoopers LLP, our principal
accountants, for professional services rendered for the audit of our annual
financial statements for the fiscal year ended December 31, 2001 and for the
review of the financial statements included in our quarterly reports on Form
10-Q for such fiscal year were approximately $546,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
We were not billed by PricewaterhouseCoopers LLP for professional services
rendered for information technology services relating to financial information
systems design and implementation for the fiscal year ended December 31, 2001.
ALL OTHER FEES
The aggregate fees billed by PricewaterhouseCoopers LLP for professional
services rendered for the fiscal year ended December 31, 2001, other than for
services described above under "Audit Fees" and under "Financial Information
Systems Design and Implementation Fees," were $2.7 million.
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The Audit Committee has considered whether the provision of non-audit
services by PricewaterhouseCoopers LLP is compatible with maintaining their
independence.
EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each of our
executive officers and significant employees as of April 29, 2001. Our executive
officers are appointed by and serve at the discretion of the Board of Directors
of Armor Holdings.
NAME AGE POSITION
---- --- --------
Warren B. Kanders 44 Chairman of the Board of Directors
Jonathan M. Spiller 50 President, Chief Executive Officer and Director
Robert R. Schiller 39 Executive Vice President, Chief Financial Officer, Secretary and Treasurer
Stephen E. Croskrey 42 President and Chief Executive Officer--Armor Holdings Products Division
Stephen J. Loffler 48 President and Chief Executive Officer--ArmorGroup Services Division
See the table of nominees for election as directors for biographical data
with respect to Messrs. Kanders and Spiller.
Robert R. Schiller, 39, has served as our Executive Vice President, Chief
Financial Officer, Secretary and Treasurer since November 2000, as Executive
Vice President and Director of Corporate Development from January 1999 to
October 2000, and as Vice President of Corporate Development from July 1996 to
December 1998. Mr. Schiller graduated with a B.A. in Economics from Emory
University in 1985 and received an M.B.A. from Harvard Business School in 1991.
Stephen E. Croskrey, 42, has served as President and Chief Executive
Officer--Armor Holdings Products Division since February 1999. From 1998 to
February 1999, Mr. Croskrey served as Director of Sales for Allied Signal,
Inc.'s global fibers business. From 1988 to 1998, Mr. Croskrey served in various
positions for Mobil Oil, most recently as its Central Regional Manager for its
Industrial Lubricant division. Mr. Croskrey graduated with a B.S. in Engineering
from USMA at West Point and received a MM from Kellogg School of Management at
Northwestern University in 1998.
Stephen J. Loffler, 48, has served as President and Chief Executive
Officer--ArmorGroup Services Division since April 1999. From April 1998 to March
1999, Mr. Loffler served as Vice President and General Manager Europe at Office
Depot, an office products retailer, where he was responsible for European
operations. From August 1991 to March 1998, Mr. Loffler served as Deputy
Chairman of Acco Europe, an office products manufacturer, where he led the
integration of Ofrex Group Holdings, an international distributor and
manufacturer of office products. Mr. Loffler graduated with a B.A. in Business
Studies from Brighton Polytechnic in 1975.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth information concerning
the annual and long-term compensation earned by our chief executive officer and
each of our other executive officers whose annual salary and bonus during fiscal
2001 exceeded $100,000 (collectively, the "Named Executive Officers").
LONG-TERM COMPENSATION
---------------------------------------------
FISCAL ANNUAL COMPENSATION SECURITIES
------------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS BONUSES OPTIONS COMPENSATION
------------------------------------ -------- ------------ ----------- ---------- ------------- ----------------
Warren B. Kanders 2001 $ - $ - $ - 12,500 $ - (1)
Chairman of the Board 2000 - - - - -
1999 - - - 200,000 -
Jonathan M. Spiller 2001 398,000 500,000 - - -
President, CEO and Director 2000 365,700 - 250,000 (3) - -
1999 350,000 - - 300,000 -
Robert R. Schiller 2001 300,000 375,000 - 250,000 -
Executive Vice President and 2000 208,935 - 175,000 (3) - -
Chief Financial Officer 1999 200,000 50,000 - 125,000 -
Stephen E. Croskrey 2001 265,000 150,000 - - -
President and CEO of Armor 2000 229,000 - 175,000 (3) - -
Holdings Products Division 1999 220,000 - - 200,000 103,674 (2)
Stephen J. Loffler 2001 267,000 - - - -
President and CEO of 2000 251,000 - 100,000 (3) - -
ArmorGroup Services Division 1999 264,000 - - 150,000 -
(1) See "Certain Relationships and Related Transactions" for a description of
consideration paid to an entity controlled by Mr. Kanders.
(2) Mr. Croskrey received reimbursement for moving expenses as part of his
employment agreement.
(3) Represents the value of stock bonuses granted on April 27, 2001 pursuant to
the 1999 Stock Incentive Plan, for services rendered in fiscal year 2000.
The number of shares issued pursuant to these bonuses is calculated using
the closing price on April 27, 2001 of $16.96 as quoted on the New York
Stock Exchange. These are restricted shares and will fully vest over a
period ending December 31, 2003.
11
OPTIONS GRANTED IN FISCAL 2001
We granted the following options to our Named Executive Officers during
fiscal 2001.
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATE OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------------------------------------------------------- -----------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTION IN FISCAL OF EXPIRATION
NAME GRANTS (#) YEAR BASE PRICE DATE 5%($) 10%($)
----------------------- -------------- -------------- ----------- ------------- ------------- --------------
Warren B. Kanders 12,500 1.4% $14.44 6/19/11 $306, 436 $468,171
Jonathan M. Spiller - - - - - -
Robert R. Schiller 250,000 28.0% $15.05 9/6/11 $6,128,716 $9,758,956
Stephen E. Croskrey - - - - - -
Stephen J. Loffler - - - - - -
AGGREGATE OPTION EXERCISES IN FISCAL 2001 AND FISCAL YEAR END OPTION VALUES
The following table contains certain information regarding stock options
exercised during fiscal 2001 and options to purchase our common stock held as of
December 31, 2001, by each of the Named Executive Officers. The stock options
listed below were granted without tandem stock appreciation rights. We have no
freestanding stock appreciation rights outstanding.
NUMBER OF SECURITIES VALUE OF UNDERLYING
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE OPTIONS AT 12/31/01 (#) 12/31/01 (1)
ON EXERCISE REALIZED ------------------------------ -------------------------------
NAME (#) (2)($) EXERCISABLE NON-EXERCISABLE EXERCISABLE NON-EXERCISABLE
------------------------ --------------- ------------- -------------- --------------- -------------- ---------------
Warren B. Kanders - $ - 212,500 - $ 5,735,375 $ -
Jonathan M. Spiller - - 659,429 - 17,797,989 -
Robert R. Schiller 150,000 1,753,125 175,000 200,000 4,723,250 5,398,000
Stephen E. Croskrey 50,000 440,625 150,000 - 2,699,000 -
Stephen J. Loffler 50,000 465,625 100,000 - 4,048,500 -
(1) Calculated on the basis of $26.99 per share, the closing sales price of the
common stock on the New York Stock Exchange on December 31, 2001, less the
exercise price payable for such shares.
(2) Calculated on the basis of the closing share price of the common stock on
the New York Stock Exchange on the date of exercise, less the exercise
price payable for such shares.
12
REPORT ON EXECUTIVE COMPENSATION BY THE BOARD OF DIRECTORS
AND THE COMPENSATION COMMITTEE
COMPENSATION POLICY
The Compensation Committee of the Board of Directors is responsible for
setting and administering the policies which govern annual executive salaries,
raises and bonuses and certain awards of stock options (in the case of options
granted under our 1999 Stock Incentive Plan and 1996 Stock Option Plan, such
responsibility is generally limited to the actions taken by the Option Committee
of the Board of Directors, although at times the full Board will grant options
without having first received recommendations from the Option Committee). During
2001, the Compensation Committee was composed of Messrs. Sokolow, Kanders and
Ehrlich, each of whom, except for Mr. Kanders, was a Non-Employee Director.
Our executive compensation program emphasizes company performance,
individual performance and an increase in stockholder value over time in
determining executive pay levels. Our executive compensation program consists of
three key elements; (i) low annual base salaries; (ii) a performance-based
annual bonus; and (iii) periodic grants of stock options. The Compensation
Committee believes that this three-part approach best serves our and our
stockholders' interests by motivating executive officers to improve our
financial position, holding executives accountable for the performance of the
organizations for which they are responsible and by attracting key executives
into our service. Under our compensation program, annual compensation for
executive officers are composed of a significant portion of pay that is "at
risk" -- specifically, the annual bonus and stock options. Annual performance
bonuses also permit executive officers to be recognized on an annual basis. Such
bonuses are based largely on an evaluation of the contribution made by the
executive officer to our overall performance. Stock options, which are generally
awarded under our 1999 Stock Incentive Plan, relate a significant portion of
long-term remuneration directly to stock price appreciation realized by all our
stockholders.
COMPENSATION OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
As President and Chief Executive Officer, Mr. Spiller was compensated
during fiscal 2001 pursuant to an employment agreement entered into in January
1999. During 2001, Mr. Spiller received an annual base salary of $398,000. In
addition, Mr. Spiller is entitled, at the discretion of the Option Committee of
the Board of Directors, to yearly bonuses based upon our net income and to
participate in the 1999 Stock Incentive Plan and other bonus plans adopted by us
based on his performance and Armor Holdings' performance.
MEMBERS OF THE COMPENSATION COMMITTEE
Nicholas Sokolow (Chairman)
Warren B. Kanders
Burtt R. Ehrlich
13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Kanders, who was Chairman of the Board of Armor Holdings in fiscal
2001, served on the Compensation Committee in fiscal 2001. During fiscal 2001,
none of the members of our Compensation Committee, other than Mr. Kanders, (i)
served as an officer or employee of Armor Holdings or its subsidiaries, (ii) was
formerly an officer of Armor Holdings or its subsidiaries or (iii) entered into
any transactions with Armor Holdings or its subsidiaries. During fiscal 2001,
none of our executive officers (i) served as a member of the compensation
committee (or other board committee performing similar functions or, in the
absence of any such committee, the board of directors) of another entity, one of
whose executive officers served on our Compensation Committee, (ii) served as
director of another entity, one of whose executive officers served on our
Compensation Committee, or (iii) served as member of the compensation committee
(or other board committee performing similar functions or, in the absence of any
such committee, the board of directors) of another entity, one of whose
executive officers served as a director of Armor Holdings. See "Certain
Relationships and Related Transactions" below for a description of certain
arrangements between Kanders & Company, Inc., a corporation controlled by Mr.
Kanders, and us.
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return (stock
price appreciation plus reinvested dividends) of our common stock with the
cumulative return (including reinvested dividends) of the Standard & Poor's 600
SmallCap Index, the Russell 3000 Index and certain companies selected in good
faith by management. In management's view, such companies constitute a
representative line-of-business comparison (the "Peer Group"). Several of the
companies comprising the Peer Group were not publicly traded during the entire
mandated comparison period. Returns for these companies were therefore included
in the presentation of the performance graph for only those calendar years that
such data was publicly available. Our returns for the period since May 1999 are
as quoted on the New York Stock Exchange and for the period prior to May 1999
are as quoted on the American Stock Exchange.
The companies comprising the Peer Group are Moog, Inc., InVision
Technologies, Inc., Kroll, Inc., Heico Corp., and L 3 Communication Holdings,
Inc.
14
---------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
1996 1997 1998 1999 2000 2001
---------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
ARMOR 100.00 135.71 145.27 166.67 221.43 342.73
---------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
PEER GROUP 100.00 111.42 159.52 101.77 153.54 229.29
---------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
RUSSELL 3000 INDEX 100.00 129.47 158.37 189.14 173.03 151.19
---------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
S&P 600 SMALLCAP INDEX 100.00 124.53 121.91 135.96 150.94 159.60
---------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
EMPLOYMENT AGREEMENTS
As of January 1, 2002,we entered into an employment agreement with Jonathan
M. Spiller which provides that he will serve as our President and Chief
Executive Officer for a three year term that will expire December 31, 2004,
subject to early termination as described below. The agreement provides for a
base salary of $525,000. Mr. Spiller also received options to purchase 425,000
shares of common stock, of which options to purchase 128,000 shares of common
stock were issued to him at an exercise price per share equal to $23.93, with
the remaining 297,000 options to be issued to him after stockholder approval has
been obtained for the adoption of the 2002 Stock Incentive Plan, at an exercise
price per share which will be equal to the closing price of our common stock on
the date of issuance of these options. These options vest as follows, 100,000
options vest on each of December 31, 2002 and December 31, 2003 and 225,000
options vest on December 31, 2004. Mr. Spiller will also receive a restricted
stock grant of 100,000 shares upon stockholder approval of the 2002 Stock
Incentive Plan which will vest on December 31, 2016, subject to acceleration
under certain circumstances which include, among other things, our achievement
of certain target levels for our earnings before interest, taxes, depreciation
and amortization ("EBITDA"). Pursuant to his employment agreement, Mr. Spiller
may be entitled, at the discretion of the Compensation Committee of the board,
to participate in the other option plans and other bonus plans we have adopted
based on his performance and our overall performance. A "change in control" of
Armor Holdings will allow Mr. Spiller to terminate his employment agreement and
to receive, in one lump sum within five business days, payment equal to his base
salary until the end of the term of his employment or his base salary for two
years, whichever is greater, as well as the vesting of all 425,000 options and
100,000 restricted stock grants granted to him under the employment agreement.
Mr. Spiller will also be entitled to such payment, in one lump sum within five
business days, and the acceleration of such vesting on the options and
restricted stock grants upon the termination of his employment agreement by us
without cause. Mr. Spiller has also agreed to certain confidentiality and
non-competition provisions and, subject to certain exceptions and limitations,
to not sell, transfer or dispose of the shares of common stock or options for
15
the purchase of common stock of Armor Holdings granted to him under his
employment agreement until December 31, 2004.
As of January 1, 2002,we entered into an employment agreement with Robert
R. Schiller which provides that he will serve as our Executive Vice President,
Chief Financial Officer and Secretary for a three year term that will expire
December 31, 2004, subject to early termination as described below. The
agreement provides for a base salary of $320,000. Mr. Schiller also received
options to purchase 250,000 shares of common stock at an exercise price per
share equal to $15.05. These options were granted during September of 2001,
50,000 options vested on December 31, 2001 and 50,000 options will vest on each
of December 31, 2002, December 31, 2003, December 31, 2004 and December 31,
2005. Mr. Schiller also received options to purchase 50,000 shares at an
exercise price per share equal to $23.93, which will vest on December 31, 2004.
Mr. Schiller also received a restricted stock grant of 100,000 shares which vest
on December 31, 2016, subject to acceleration under certain circumstances which
include, among other things, our achievement of certain EBITDA targets. Pursuant
to his employment agreement, Mr. Schiller may be entitled, at the discretion of
the Compensation Committee of the board, to participate in the other option
plans and other bonus plans we have adopted based on his performance and our
overall performance. A "change in control" of Armor Holdings will allow Mr.
Schiller to terminate his employment agreement and to receive, in one lump sum
within five business days, payment equal to his base salary until the end of the
term of his employment or his base salary for two years, whichever is greater,
as well as the vesting of all 300,000 options and 100,000 restricted stock
grants granted to him under the employment agreement. Mr. Schiller will also be
entitled to such payment, in one lump sum within five business days, and the
acceleration of such vesting on the options and restricted stock grants upon the
termination of his employment agreement by us without cause. Mr. Schiller has
also agreed to certain confidentiality and non-competition provisions and,
subject to certain exceptions and limitations, to not sell, transfer or dispose
of the shares of common stock or options for the purchase of common stock of
Armor Holdings granted to him under his employment agreement until December 31,
2004.
As of January 1, 2002, we entered into an employment agreement with Warren
B. Kanders which provides that he will serve as the Chairman of our Board of
Directors for a five year term expiring December 31, 2006, for which Mr. Kanders
will receive options to purchase 550,000 shares of common stock, of which
options to purchase 75,000 shares of common stock were issued to him at an
exercise price per share equal to $23.93, with the remaining 475,000 options to
be issued to him after stockholder approval has been obtained for the adoption
of the 2002 Stock Incentive Plan, at an exercise price per share which will be
equal to the closing price of our common stock on the date of issuance of such
options. These options vest as follows, 100,000 options vest on each of December
31, 2002, December 31, 2003 and December 31, 2004 and 250,000 options vest on
December 31, 2006. Mr. Kanders will also receive a restricted stock grant of
100,000 shares upon stockholder approval of the 2002 Stock Incentive Plan which
will vest on December 31, 2016, subject to acceleration under certain
circumstances which include, among other things, our achievement of certain
EBITDA targets. Pursuant to his employment agreement, Mr. Kanders may be
entitled, at the discretion of the Compensation Committee of the board, to
participate in the other option plans and other bonus plans we have adopted
based on his performance and our overall performance. A "change in control" of
16
Armor Holdings will allow Mr. Kanders to terminate his employment agreement and
Mr. Kanders will be entitled to the vesting of all 550,000 options and 100,000
restricted stock grants granted to him under the employment agreement. Mr.
Kanders will also be entitled to such acceleration of such vesting on the
options and restricted stock grants upon the termination of his employment
agreement by us without cause. Mr. Kanders has also agreed to certain
confidentiality and non-competition provisions. See "Certain Relationships and
Related Transactions" for a description of compensation paid to an entity
controlled by Mr. Kanders.
As of January 1, 2002,we entered into an employment agreement with Stephen
E. Croskrey which provides that he will serve as the President and Chief
Executive Officer of our Armor Holdings Products Division for a three year term
that will expire December 31, 2004, subject to early termination as described
below. The agreement provides for a base salary of $300,000. Mr. Croskrey also
received options to purchase 200,000 shares of common stock at an exercise price
per share equal to $23.93. These options vest as follows, 50,000 options vest on
each of December 31, 2002 and December 31, 2003 and 100,000 options vest on
December 31, 2004. A "change in control" of Armor Holdings will allow Mr.
Croskrey to terminate his employment agreement and to receive, in one lump sum
within five business days, payment equal to his base salary until the end of the
term of his employment or his base salary for two years, whichever is greater,
as well as the vesting of all 200,000 options granted to him under the
employment agreement. Mr. Croskrey will also be entitled to such payment, in one
lump sum within five business days, and the acceleration of such vesting on his
options upon the termination of his employment agreement by us without cause.
Mr. Croskrey has also agreed to certain confidentiality and non-competition
provisions and, subject to certain exceptions and limitations, to not sell,
transfer or dispose of the shares of common stock or options for the purchase of
common stock of Armor Holdings granted to him under his employment agreement
until December 31, 2004.
As of April 12, 1999, we entered into an Employment Agreement with Stephen
J. Loffler, which provides that he will serve as Chief Executive Officer of our
ArmorGroup Services Division. Mr. Loffler's employment will continue until
terminated by us on not less than 12 months' written notice or by Mr. Loffler on
not less than six months' written notice. Mr. Loffler will receive a base salary
of (pounds sterling) 160,000 per year. In addition to his base salary, Mr.
Loffler may, at the discretion of the Compensation Committee of the Board of
Directors, receive an annual bonus payment not exceeding 40% of his base salary.
The termination provisions allow us to terminate Mr. Loffler's employment at any
time by paying to him within 14 days salary in lieu of his notice period or any
unexpired part thereof (subject to tax and National Insurance), including any
accrued holiday entitlement. Mr. Loffler has agreed to certain confidentiality,
protection of intellectual property and non-competition provisions. The
restricted area for non-competition covers the United Kingdom, Russia and the
former Soviet Union and the American Continent, with the restricted period being
six months from the termination date.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective as of January 1, 2002, Kanders & Company, Inc. ("Kanders & Co."),
a corporation controlled by Warren B. Kanders, the Chairman of our Board,
entered into an agreement with us to
17
provide certain investment banking, financial advisory and related service for a
five year term that will expire December 31, 2006. Kanders & Co. will receive a
mutually agreed upon fee on a transaction by transaction basis during the term
of this agreement. The aggregate fees under this agreement will not exceed
$1,575,000 during any calendar year. We also agreed to reimburse Kanders & Co.
for reasonable out-of-pocket expenses including Kanders & Co.'s expenses for
office space, an executive assistant, furniture and equipment, travel and
entertainment, reasonable fees and disbursements of counsel, and consultants
retained by Kanders & Co.
During the fiscal year ended December 31, 2001 we paid Kanders & Co.
$750,000 for services provided in connection with our acquisition of the O'Gara
Hess & Eisenhardt companies. We also reimbursed Kanders & Co. for out-of-pocket
expenses in the aggregate amount of $187,260 during the fiscal year ended
December 31, 2001. We also granted Kanders & Co. (i) options to purchase 35,000
shares of our common stock at an exercise price per share equal to $23.93, and
(ii) a restricted stock grant of 10,447 shares of common stock, subject to
stockholder approval of the 2002 Stock Incentive Plan. These grants were made
during fiscal 2002 in consideration of consulting services provided by Kanders &
Co. in connection with certain transactions during fiscal 2001.
Nicholas Sokolow is a member of Sokolow, Dunaud, Mercadier & Carreras. We
have retained Sokolow, Dunaud, Mercadier & Carreras during the fiscal year ended
December 31, 2001 and will retain Sokolow, Dunaud, Mercadier & Carreras during
the current fiscal year. During the fiscal year ended December 31, 2001, we paid
Sokolow, Dunaud, Mercadier & Carreras $155,727 for legal services.
PROPOSAL 2
ADOPTION OF THE 2002 STOCK INCENTIVE PLAN
The 2002 Stock Incentive Plan (the "2002 Plan") was adopted by the Board of
Directors on March 13, 2002 and will become effective on June 18, 2002, subject
to approval by the stockholders at the annual meeting. The purpose of the 2002
Plan is to attract and retain the best available personnel for positions of
substantial responsibility and to provide additional incentives to employees,
officers, directors, consultants, independent contractors and advisors to
promote the growth and success of our business. Plans such as the 2002 Plan have
become particularly important for us to be able to continue to retain and
attract key management and directors because of the competitive nature of the
market in which we operate.
There are no shares remaining under the 1999 Stock Incentive Plan available
for grant. As a result, the Board of Directors has adopted resolutions
authorizing the establishment of the 2002 Plan. The 2002 Plan will serve as the
successor to the 1999 Stock Incentive Plan. Options granted under prior plans
remain outstanding according to their terms, but no further options will be
granted under the prior stockholder approved plans after the effective date of
the 2002 Plan.
18
The following summary of the 2002 Plan is qualified in its entirety by
reference to the text of the 2002 Plan, which is included as Appendix A to this
proxy.
SUMMARY OF THE 2002 STOCK INCENTIVE PLAN
Administration and Eligibility. The 2002 Plan authorizes the issuance of up
to 2,700,000 shares of our common stock upon the exercise of stock options or in
connection with the issuance of restricted stock and stock bonuses. The 2002
Plan authorizes the granting of stock options, restricted stock and stock
bonuses to employees, officers, directors and consultants, independent
contractors and advisors of Armor Holdings and its subsidiaries. The 2002 Plan
provides for its administration by either a committee of two or more outside
directors or the Board of Directors (the "Administrator"). In general, the
Administrator, in its sole discretion, determines which eligible employees,
officers, directors, consultants, independent contractors and advisors of Armor
Holdings and its subsidiaries may participate in the 2002 Plan and the type,
extent and terms of the equity-based awards to be granted to them.
The 2002 Plan provides for the grant of both incentive stock options
("ISOs") that qualify under Section 422 of the Code, and non-qualified stock
options ("NQSOs"). ISOs may be granted only to our employees or employees of our
subsidiaries. NQSOs (and all other awards other than ISOs) may be granted to our
and our subsidiaries' employees, officers, directors and consultants,
independent contractors and advisors. The exercise price of ISOs must be at
least equal to the fair market value of our common stock on the date of grant.
The exercise price of ISOs granted to 10% stockholders must be at least equal to
110% of that value. The exercise price of NQSOs may be greater than, less than
or equal to the fair market value of our common stock on the date of grant. The
maximum term of options granted under the 2002 Plan is ten years. Awards granted
under the 2002 Plan may not be transferred in any manner other than by will or
by the laws of descent and distribution and may be exercised during the lifetime
of the optionee only by the optionee (unless otherwise determined by the
Administrator and set forth in the award agreement with respect to awards that
are NQSOs). Options granted under the 2002 Plan generally expire three months
after the termination of the optionee's service to Armor Holdings or a parent or
subsidiary of Armor Holdings, except in the case of death or disability, in
which case the options generally may be exercised up to 12 months following the
date of death or termination of service. Options will generally terminate
immediately upon termination for cause. In the event of our dissolution or
liquidation or a "change in control" transaction, outstanding awards may be
assumed or substituted by the successor corporation (if any). In the discretion
of the Administrator, the vesting of such awards may accelerate prior to the
consummation of such a transaction and if not exercised prior to the transaction
may terminate at such time as the Administrator may determine.
Restricted Stock. The Administrator may make grants of restricted stock for
cash or other consideration, as the Administrator determines. The number of
shares of common stock granted to each grantee will be determined by the
Administrator. Grants of restricted stock will be made subject to such
restrictions and conditions as the Administrator may determine in its sole
discretion, including periods of restriction on transferability during which
time the grant may be required to be deposited with an escrow agent, if the
Administrator so determines.
19
Stock Bonuses. A stock bonus is an award of Shares (which may consist of
Restricted Stock) for services rendered to Armor Holdings or any of its
subsidiaries for past or future services. Stock bonuses and the criteria they
are based upon will be determined by the Administrator.
Amendment. The Board has the right to amend, suspend or terminate the 2002
Plan at any time, provided, however, that no amendment or change in the 2002
Plan that pursuant to applicable rules requires stockholder approval will be
effective without such approval.
U.K. Employees. The 2002 Plan incorporates a schedule (the "(No. 1)
Schedule") which set forth certain alterations to the 2002 Plan and conditions
for the grant of certain options to our employees of United Kingdom subsidiaries
("U.K. Employees") in compliance with U.K. Inland Revenue rules and regulations
which treat such options, for U.K. tax purposes, in a manner similar to
incentive stock options granted to U.S. employees under the 2002 Plan. The (No.
1) Schedule provides for certain differences in the terms and conditions of the
2002 Plan applicable to the U.K. Employees principally including, but not
limited to, the following: (a) the (No. 1) Schedule to the 2002 Plan must be
approved by the U.K. Inland Revenue; (b) there can be no contractual agreement,
condition or restriction on the resale of shares purchased upon the exercise of
an option except as required to comply with applicable laws, including U.S.
securities laws; (c) no options can be granted to a U.K. director unless the
director regularly works at least twenty-five (25) hours per week for Armor
Holdings or its subsidiaries; (d) the maximum value of all options held by an
individual under the (No. 1) Schedule cannot exceed (pounds sterling)30,000 on
the date of grant;(e) the price of the options cannot be less than the fair
market value of the common stock on the date of grant and must be payable in
cash in full upon exercise of the option; (f) the date upon which the options
may be exercised must be fixed at the date of grant and may not be subsequently
changed by the Option Committee or the Board of Directors but must be exercised
within ten (10) years of the grant; (g) options may not be granted in tandem
with stock appreciation rights or other rights; and (h) amendments to the terms
of the (No. 1) Schedule do not take effect until the approval of the U.K. Inland
Revenue has been received. The Board of Directors reserves the right to make
such other changes to the (No. 1) Schedule as may be necessary or desirable to
obtain and maintain U.K. Inland Revenue approval. A second schedule to the 2002
Plan (the "(No. 2) Schedule") provides for the grant of options (above the
(pounds sterling)30,000 U.K. Inland Revenue approved limit) on similar terms to
the (No. 1) Schedule, but without the need to comply with certain U.K. Inland
Revenue restrictions applicable to the approved scheme. The Board of Directors
may from time to time make changes to the (No. 1) Schedule.
The following discussion concerning certain tax consequences of the 2002
Plan does not address any tax effects on the U.K. employees or the employees of
any other foreign affiliate of Armor Holdings or the effect of any changes to
applicable laws and regulations which may occur after the date of this proxy
statement. The following discussion is only a summary, it is not intended to be
all inclusive or to constitute tax advice, and, among other things, does not
cover possible state or local or other federal tax consequences. This
description may differ from the actual tax consequences of participation in the
2002 Plan.
20
Certain Tax Consequences. No taxable income is realized by an optionee upon
the grant or exercise of an ISO. If common stock is issued to an optionee
pursuant to the exercise of an ISO, and if no disqualifying disposition of such
shares is made by such optionee within two years after the date of grant or
within one year after the transfer of such shares to such optionee, then (i)
upon sale of such shares, any amount realized in excess of the option price will
be taxed to such optionee as a long-term capital gain and any loss sustained
will be a long-term capital loss, and (ii) no deduction will be allowed to the
optionee's employer for Federal income tax purposes. If common stock acquired
upon the exercise of an ISO is disposed of prior to the expiration of either
holding period described above, generally (i) the optionee will realize ordinary
income in the year of disposition in an amount equal to the excess (if any) of
the fair market value of such shares at exercise (or, if less, the amount
realized on the disposition of such shares) over the option price paid for such
shares, and (ii) the optionee's employer will be entitled to deduct such amount
for Federal income tax purposes if the amount represents an ordinary and
necessary business expense. Any further gain (or loss) realized by the optionee
upon the sale of the common stock will be taxed as short-term or long-term
capital gain (or loss), depending on how long the shares have been held, and
will not result in any deduction by the employer. Subject to certain exceptions
for disability or death, if an ISO is exercised more than three months following
termination of employment, the exercise of the option will generally be taxed as
the exercise of a non-ISO. For purposes of determining whether an optionee is
subject to any alternative minimum tax liability, an optionee who exercises an
ISO generally would be required to increase his or her alternative minimum
taxable income, and compute the tax basis in the stock so acquired, in the same
manner as if the optionee had exercised a non-ISO. Each optionee is potentially
subject to the alternative minimum tax. In substance, a taxpayer is required to
pay the higher of his/her alternative minimum tax liability or his/her "regular"
income tax liability. As a result, a taxpayer has to determine his/her potential
liability under the alternative minimum tax.
With respect to non-ISOs (i) no income is realized by the optionee at the
time the option is granted; (ii) generally, at exercise, ordinary income is
realized by the optionee in an amount equal to the difference between the option
price paid for the shares and the fair market value of the shares, if
unrestricted, on the date of exercise, and the optionee's employer is generally
entitled to a tax deduction in the same amount subject to applicable tax
withholding requirements; and (iii) at sale, appreciation (or depreciation)
after the date of exercise is treated as either short-term or long-term capital
gain (or loss) depending on how long the shares have been held. Individuals
subject to Section 16(b) of the Exchange Act will recognize ordinary income at
the time of exercise of a non-ISO as noted above, provided at least six months
have elapsed from the date of grant to the date of exercise. In the event that
less than six months have elapsed, such individual will recognize ordinary
income at the time such six month period elapses in an amount equal to the
excess of the fair market value of the shares on such date over the exercise
price.
The granting of an award of restricted stock does not result in taxable
income to the recipient unless the recipient elects to report the award as
taxable income under Section 83(b) of the Internal Revenue Code. Absent such an
election, the value of the award is considered taxable income once it is vested
and distributed. Dividends are paid concurrent with, and in an amount equal to,
ordinary dividends and are taxable as paid. If a Section 83(b) election is made,
the recipient recognizes ordinary
21
income in the amount of the total value on the date of grant and we receive a
corresponding tax deduction. Any gain or loss subsequently experienced will be a
capital gain or loss to the recipient and we do not receive an additional tax
deduction.
Optionees are strongly advised to consult with their individual tax
advisers to determine their personal tax consequences resulting from the grant
and/or exercise of options or the issuance and sale of restricted stock under
the 2002 Option Plan.
New Plan Benefits. The grant of options under the 2002 Plan is within the
discretion of the Administrator. We cannot forecast the extent of option grants
that will be made in the future except with respect to the grants and award
described below. Information with respect to compensation paid and other
benefits, including options, granted during the 2001 fiscal year to the Chief
Executive Officer and the other Named Executive Officers is set forth above.
During 2001 fiscal year, there were no options awarded to our Chief Executive
Officer and 262,500 options to our other Named Executive Officers.
BENEFITS TO BE AWARDED TO CERTAIN INDIVIDUALS
The following table identifies all known benefits or amounts which are
presently determinable which will be allocated to each of the persons indicated
under the 2002 Stock Incentive Plan.
Stock Option Grants
NAME AND POSITION DOLLAR VALUE ($) NUMBER OF UNITS
Warren B. Kanders (1) 475,000
Chairman of the Board
Jonathan M. Spiller (1) 297,000
President and Chief Executive Officer
(1) The options identified in this table will be granted with an exercise price
equal to the closing price of our common stock on the date of issuance
which may be subsequent to day the 2002 Stock Incentive Plan is approved by
stockholders.
Restricted Stock Awards
NAME AND POSITION DOLLAR VALUE ($) NUMBER OF UNITS
Warren B. Kanders (1) 110,447(2)
Chairman of the Board
Jonathan M. Spiller (1) 110,447
President and Chief Executive Officer
Robert R. Schiller (1) 5,223
Executive Vice President, Chief
Financial Officer and Secretary
Stephen E. Croskrey (1) 2,089
President and Chief Executive Officer-
Armor Holdings Products Division
(1) The dollar value of these grants will depend on the market price of our
common stock on the date the 2002 Stock Incentive Plan is approved by
stockholders. The dollar value of these awards on the
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date awarded by the Board of Directors was $250,000, $250,000, $125,000 and
$50,000 to Messrs. Kanders, Spiller, Schiller and Croskrey respectively.
(2) 10,447 shares of such restricted stock award represents a restricted stock
award granted to Kanders & Co., a corporation controlled by Mr. Kanders.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth certain information regarding our equity
plans as at December 31, 2001.
PLAN CATEGORY (A) (B) (C)
NUMBER OF SECURITIES REMAINING AVAILABLE FOR
TO BE ISSUED UPON WEIGHTED AVERAGE EXERCISE FUTURE ISSUANCE UNDER EQUITY
EXERCISE OF PRICE OF OUTSTANDING COMPENSATION PLANS
OUTSTANDING OPTIONS, OPTIONS, WARRANTS AND (EXCLUDING SECURITIES
WARRANTS AND RIGHTS RIGHTS RIGHTS REFLECTED IN COLUMN (A))
Equity compensation plans
approved by security holders 2,341,368 $11.6827 313,000
Equity compensation plans not
approved by security holders 641,667 $11.3149 0
------- -
Total 2,984,035 0
We have two non-qualified equity plans that have not been approved by
stockholders. The 2002 Executive Stock Plan provides for the grant of a total of
470,000 stock options and stock awards to our key employees. The Board of
Directors, or a committee designated by the Board consisting of two or more
independent directors, is authorized to set the price and terms and conditions
of the options and awards granted under the 2002 Executive Stock Plan. Options
under the 2002 Executive Stock Plan must be exercised within ten years of the
date of grant. The terms and provisions of the 2002 Executive Stock Plan are
substantially the same as the 2002 Stock Incentive Plan, which is described more
fully in this proxy, except that we may only grant non-qualified stock options
under the 2002 Executive Stock Plan. The 2002 Executive Stock Plan was adopted
on March 13, 2002 and all shares available for grant under the 2002 Executive
Stock Plan were granted to our executive officers on March 13, 2002.
The 1998 Stock Option Plan provides for the grant of a total of 725,000
stock options to our key employees. The Board of Directors, or a committee
designated by the Board consisting of two or more independent directors, is
authorized to set the terms and conditions of the options granted under the 1998
Stock Option Plan. The exercise price of all option granted under the 1998 Stock
Option Plan is equal to the fair market value of our common stock on the date of
grant. As of the end of our last fiscal year, there were no shares available for
options to be granted under the 1998 Stock Option Plan.
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THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION AND
APPROVAL OF THE ADOPTION OF THE 2002 STOCK INCENTIVE PLAN.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP has audited our financial statements
for the fiscal year ended December 31, 2001. The Board of Directors desires to
continue the services of PricewaterhouseCoopers LLP for the current fiscal year
ending December 31, 2002. Accordingly, the Board of Directors will recommend to
the meeting that the stockholders ratify the appointment by the Board of
Directors of the firm of PricewaterhouseCoopers LLP to audit our financial
statements for the current fiscal year. Representatives of that firm are
expected to be present at the meeting, shall have the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions. In the event the stockholders do not ratify the
appointment of PricewaterhouseCoopers LLP, the appointment will be reconsidered
by the Audit Committee and the Board of Directors.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to present any other matter for action at the meeting other than as set
forth in the Notice of Annual Meeting and this Proxy Statement. If any other
matters properly come before the meeting, it is intended that the shares
represented by the proxies will be voted, in the absence of contrary
instructions, in the discretion of the persons named in the proxy.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires our directors and executive officers and any persons
who own more than 10% of our capital stock to file with the Commission (and, if
such security is listed on a national securities exchange, with such exchange),
various reports as to ownership of such capital stock. Such persons are required
by Commission regulations to furnish us with copies of all Section 16(a) forms
they file.
Based solely upon reports and representations submitted by the directors,
executive officers and holders of more than 10% of our capital stock, except as
indicated below, all Forms 3, 4 and 5 showing ownership of and changes of
ownership in our capital stock during the 2001 fiscal year were timely filed
with the Commission and the New York Stock Exchange. Jonathan M. Spiller
inadvertently did not file the required Form 4 to report the exercise of certain
options by the required time. Stephen J. Loffler inadvertently did not file
24
the required Form 4 to report the sale of certain shares of common stock by the
required time. The required forms have since been filed.
FORM 10-K
We will provide, without charge, to each Stockholder as of the Record Date,
on the written request of the Stockholder, a copy of our Annual Report on Form
10-K for the year ended December 31, 2001, including the financial statements
and schedules, as filed with the Commission. Stockholders should direct the
written request to our Corporate Secretary at c/o Armor Holdings, Inc., 1400
Marsh Landing Parkway, Suite 112, Jacksonville, Florida 32250.
PROPOSALS BY STOCKHOLDERS
Any proposal of a Stockholder intended to be presented at the annual
meeting of stockholders to be held in 2003 must be received by us no later than
February 17, 2003 to be considered for inclusion in the Proxy Statement and form
of proxy for the 2003 annual meeting. Proposals must comply with Rule 14a-8
promulgated by the Commission pursuant to the Exchange Act.
FOR THE BOARD OF DIRECTORS
ROBERT R. SCHILLER
SECRETARY
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APPENDIX A
ARMOR HOLDINGS, INC.
2002 STOCK INCENTIVE PLAN
1. PURPOSE. The purpose of Armor Holdings, Inc. 2002 Stock Incentive Plan
(the "Plan") is to provide a means through which the Company and its
Subsidiaries and Affiliates may attract able persons to enter and remain in the
employ of the Company and its Subsidiaries and Affiliates and to provide a means
whereby eligible persons can acquire and maintain Common Stock ownership, or be
paid incentive compensation measured by reference to the value of Common Stock,
thereby strengthening their commitment to the welfare of the Company and its
Subsidiaries and Affiliates and promoting an identity of interest between
stockholders and these eligible persons.
So that the appropriate incentive can be provided, the Plan provides for
granting Incentive Stock Options, Nonqualified Stock Options, Restricted Stock
Awards and Stock Bonuses, or any combination of the foregoing. Capitalized terms
not defined in the text are defined in Section 24.
2. SHARES SUBJECT TO THE PLAN. Subject to Section 18, the total number of
Shares reserved and available for grant and issuance pursuant to this Plan will
be 2,700,000 Shares. Shares that have been (a) reserved for issuance under
Options which have expired or otherwise terminated without issuance of the
underlying Shares, (b) reserved for issuance or issued under an Award granted
hereunder but are forfeited or are repurchased by the Company at the original
issue price, or (c) reserved for issuance or issued under an Award that
otherwise terminates without Shares being issued, shall be available for
issuance. At all times the Company shall reserve and keep available a sufficient
number of Shares as shall be required to satisfy the requirements of all
outstanding Options granted under this Plan and all other outstanding but
unvested Awards granted under this Plan.
3. ELIGIBILITY. ISO's (as defined in Section 5 below) may be granted only
to employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors, consultants, independent contractors
and advisors of the Company or any Parent, Affiliate or Subsidiary of the
Company.
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be administered by the Committee or
by the Board. Any power, authority or discretion granted to the Committee may
also be taken by the Board. Subject to the general purposes, terms and
conditions of this Plan, and to the direction of the Board, the Committee will
have full power to implement and carry out this Plan. Without limitation, the
Committee will have the authority to:
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(a) select persons to receive Awards;
(b) determine the nature, extent, form and terms of Awards and the number
of Shares or other consideration subject to Awards;
(c) determine the vesting, exerciseability and payment of Awards;
(d) correct any defect, supply any omission or reconcile any inconsistency
in this Plan, any Award or any Award Agreement;
(e) determine whether Awards will be granted singly, in combination with,
in tandem with, in replacement of, or as alternatives to, other Awards
under this Plan or any other incentive or compensation plan of the
Company or any Parent or Subsidiary of the Company;
(f) prescribe, amend and rescind rules and regulations relating to this
Plan or any Award;
(g) construe and interpret this Plan, any Award Agreement and any other
agreement or document executed pursuant to this Plan;
(h) grant waivers of Plan or Award conditions;
(i) determine whether an Award has been earned;
(j) accelerate the vesting of any Award; and
(k) make all other determinations necessary or advisable for the
administration of this Plan.
The Committee shall have the authority, subject to the provisions of the
Plan, to establish, adopt, or revise such rules and regulations and to make all
such determinations relating to the Plan as it may deem necessary or advisable
for the administration of the Plan. The Committee's interpretation of the Plan
or any documents evidencing Awards granted pursuant thereto and all decisions
and determinations by the Committee with respect to the Plan shall be final,
binding, and conclusive on all parties unless otherwise determined by the Board.
4.2 Committee Discretion. Any determination made by the Committee with
respect to any Award will be made in its sole discretion at the time of grant of
the Award or, unless in contravention of any express term of this Plan or Award,
at any later time, and such determination will be final and binding on the
Company and on all persons having an interest in any Award under this Plan.
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5. STOCK OPTIONS. The Committee may grant Options to eligible persons and
will determine whether such Options will be intended to be "Incentive Stock
Options" within the meaning of Section 422 of the Code or any successor section
thereof ("ISO's") or nonqualified stock options (options not intended to qualify
as incentive stock options)("NQSO's"), the number of Shares subject to the
Option, the Exercise Price of the Option, the period during which the Option may
be exercised, and all other terms and conditions of the Option, subject to the
following:
5.1 Form of Option Grant. Each Option granted under this Plan will be
evidenced by an Award Agreement ("Stock Option Agreement"), which will expressly
identify the Option as an ISO or NQSO, and will be in such form and contain such
provisions (which need not be the same for each Participant) as the Committee
may from time to time approve, and which will comply with and be subject to the
terms and conditions of this Plan.
5.2 Exercise Period. Options may be exercisable to the extent vested within
the times or upon the events determined by the Committee as set forth in the
Stock Option Agreement governing such Option; provided, however, that no Option
will be exercisable after the expiration of ten (10) years from the date the
Option is granted; and provided further that no ISO granted to a person who
directly or by attribution owns more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any Parent or
Subsidiary of the Company ("Ten Percent Stockholder") will be exercisable after
the expiration of five (5) years from the date the ISO is granted. The Committee
also may provide for Options to become exercisable at one time or from time to
time, periodically or otherwise, in such number of Shares or percentage of
Shares as the Committee determines.
5.3 Exercise Price. The Exercise Price of an Option will be determined by
the Committee when the Option is granted and may be greater, less than, or equal
to the Fair Market Value of the Shares on the date of grant; provided that: (i)
the Exercise Price of an ISO will be not less than 100% of the Fair Market Value
of the Shares on the date of grant; and (ii) the Exercise Price of any ISO
granted to a Ten Percent Stockholder will not be less than 110% of the Fair
Market Value of the Shares on the date of grant.
5.4 Date of Grant. The date of grant of an Option will be the date on which
the Committee makes the determination to grant such Option, unless otherwise
specified by the Committee. The Stock Option Agreement and a copy of this Plan
will be delivered to the Participant within a reasonable time after the granting
of the Option.
5.5 Method of Exercise. Options may be exercised only by delivery to the
Company of a written stock option exercise agreement (the "Exercise Agreement")
in a form approved from time to time by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price
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for the number of Shares being purchased. Payment for the Shares purchased may
be made in accordance with Section 8 of this Plan.
5.6 Termination. Unless otherwise expressly provided in an Award Agreement
or otherwise determined by the Committee, exercise of an Option will always be
subject to the following:
a. If the Participant is Terminated for any reason (including
voluntary Termination) other than death or Disability, then the Participant
may exercise such Participant's Options only to the extent that such
Options would have been exercisable upon the Termination Date no later than
three (3) months after the Termination Date (or such shorter or longer time
period not exceeding five (5) years as may be determined by the Committee,
with any exercise beyond three (3) months after the Termination Date deemed
to be a NQSO), but in any event, no later than the expiration date of the
Options.
b. If the Participant is Terminated because of Participant's death or
Disability (or the Participant dies within three (3) months after a
Termination other than for Cause or because of Participant's Disability),
then Participant's Options may be exercised only to the extent that such
Options would have been exercisable by Participant on the Termination Date
and must be exercised by Participant (or Participant's legal representative
or authorized assignee) no later than twelve (12) months after the
Termination Date (or such shorter or longer time period not exceeding five
(5) years as may be determined by the Committee, with any such exercise
beyond twelve (12) months after the Termination Date when the Termination
is for Participant's death or Disability, deemed to be a NQSO), but in any
event no later than the expiration date of the Options.
c. Notwithstanding the provisions in paragraph 5.6(a) above, if a
Participant is terminated for Cause, neither the Participant, the
Participant's estate nor such other person who may then hold the Option
shall be entitled to exercise any Option with respect to any Shares
whatsoever, after termination of service, whether or not after termination
of service the Participant may receive payment from the Company or
Subsidiary for vacation pay, for services rendered prior to termination,
for services rendered for the day on which termination occurs, for salary
in lieu of notice, or for any other benefits. In making such determination,
the Committee shall give the Participant an opportunity to present to the
Committee evidence on his behalf. For the purpose of this paragraph,
termination of service shall be deemed to occur on the date when the
Company dispatches notice or advice to the Participant that his or her
service is terminated.
d. If the Participant is not an employee or a director, the Award
Agreement shall specify treatment of the Award upon Termination.
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5.7 Limitations on ISO. The aggregate Fair Market Value (determined as of
the date of grant) of Shares with respect to which ISO's are exercisable for the
first time by a Participant during any calendar year (under this Plan or under
any other incentive stock option plan of the Company, Parent or Subsidiary of
the Company) will not exceed $100,000 or such other amount as may be required by
the Code. If the Fair Market Value of Shares on the date of grant with respect
to which ISO's are exercisable for the first time by a Participant during any
calendar year exceeds $100,000, then the Options for the first $100,000 worth of
Shares to become exercisable in such calendar year will be ISO's and the Options
for the amount in excess of $100,000 that become exercisable in that calendar
year will be NQSO's. In the event that the Code or the regulations promulgated
thereunder are amended after the Effective Date of this Plan to provide for a
different limit on the Fair Market Value of Shares permitted to be subject to
ISO's, such different limit will be automatically incorporated herein and will
apply to any Options granted after the effective date of such amendment.
5.8 Modification, Extension or Renewal. The Committee may modify, extend or
renew outstanding Options and authorize the grant of new Options in substitution
therefor, provided that, except as expressly provided for in the Plan or an
Award Agreement, any such action may not, without the written consent of a
Participant, impair any of such Participant's rights under any Option previously
granted. Any outstanding ISO that is modified, extended, renewed or otherwise
altered will be treated in accordance with Section 424(h) of the Code. The
Committee may, by a written notice to the affected Participants, reduce the
Exercise Price of outstanding Options without the consent of such Participants;
provided, however, that the Exercise Price may not be reduced below the minimum
Exercise Price that would be permitted under Section 5.3 of this Plan for
Options granted on the date the action is taken to reduce the Exercise Price.
5.9 Limitations on Exercise. The Committee may specify a reasonable minimum
number of Shares that may be purchased on any exercise of an Option, provided
that such minimum number will not prevent Participant from exercising the Option
for the full number of Shares for which it is then exercisable.
5.10 No Disqualification. Notwithstanding any other provision in this Plan,
no term of this Plan relating to ISO's will be interpreted, amended or altered,
nor will any discretion or authority granted under this Plan be exercised, so as
to disqualify this Plan under Section 422 of the Code or, without the consent of
the Participant affected, to disqualify any ISO under Section 422 of the Code.
5.11 Lapsed Grants. Notwithstanding anything in the Plan to the contrary,
the Company may, in its sole discretion, allow the exercise of a lapsed grant if
the Company determines that: (i) the lapse was the result of the Company's
inability to timely execute the exercise of an option award and (ii) the
Participant made valid and reasonable efforts to exercise the Award. In the
event the Company makes such a determination, the Company shall allow the
exercise to occur as promptly as possible following its receipt of exercise
instructions subsequent to such determination.
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6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company to
sell to an eligible person Shares that are subject to restrictions. The
Committee will determine to whom an offer will be made, the number of Shares the
person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a Restricted Stock
Award made pursuant to this Plan will be evidenced by an Award Agreement
("Restricted Stock Purchase Agreement") that will be in such form (which need
not be the same for each Participant) as the Committee will from time to time
approve, and shall comply with and be subject to the terms and conditions of
this Plan. The offer of Restricted Stock shall will be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company not later than thirty (30) days
after the date the Restricted Stock Purchase Agreement is delivered to the
person. If such person does not execute and deliver the Restricted Stock
Purchase Agreement along with full payment for the Shares to the Company within
thirty (30) days, then the offer shall terminate, unless otherwise determined by
the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a
Restricted Stock Award will be determined by the Committee on the date the
Restricted Stock Award is granted. Payment of the Purchase Price shall be made
in accordance with Section 8 of this Plan.
6.3 Terms of Restricted Stock Awards. Restricted Stock Awards shall be
subject to such restrictions as the Committee may impose. These restrictions may
be based upon completion of a specified number of years of service with the
Company or upon completion of the performance goals as set out in advance in the
Participant's individual Restricted Stock Purchase Agreement. Restricted Stock
Awards may vary from Participant to Participant and between groups of
Participants. Prior to the grant of a Restricted Stock Award, the Committee
shall: (a) determine the nature, length and starting date of any Performance
Period for the Restricted Stock Award; (b) select from among the Performance
Factors to be used to measure performance goals, if any; and (c) determine the
number of Shares that may be awarded to the Participant. Prior to the payment of
any Restricted Stock Award, the Committee shall determine the extent to which
such Restricted Stock Award has been earned and such determination shall be
conclusive. Performance Periods may overlap and Participants may participate
simultaneously with respect to Restricted Stock Awards that are subject to
different Performance Periods and having different performance goals and other
criteria.
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6.4 Stock Restrictions. Each certificate representing Restricted Stock
awarded under the Plan shall bear the following legend until the lapse of all
restrictions with respect to such Stock:
"TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS
RESTRICTED PURSUANT TO THE TERMS OF A RESTRICTED STOCK AGREEMENT,
DATED AS OF _______, BETWEEN ARMOR HOLDINGS, INC., AND ____________. A
COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES
OF ARMOR HOLDINGS, INC."
Stop transfer orders shall be entered with the Company's transfer agent and
registrar against the transfer of legended securities.
6.5 Termination During Performance Period. If a Participant is Terminated
during a Performance Period for any reason, then such Participant will be
entitled to payment (whether in Shares, cash or otherwise) with respect to the
Restricted Stock Award only to the extent earned as of the date of Termination
in accordance with the Restricted Stock Purchase Agreement, unless the Committee
will determine otherwise.
7. STOCK BONUSES.
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares (which may
consist of Restricted Stock) for services rendered to the Company or any Parent
or Subsidiary of the Company. A Stock Bonus may be awarded for past services
already rendered to the Company, or any Parent or Subsidiary of the Company
pursuant to an Award Agreement (the "Stock Bonus Agreement") that will be in
such form (which need not be the same for each Participant) as the Committee
will from time to time approve, and will comply with and be subject to the terms
and conditions of this Plan. A Stock Bonus may be awarded upon satisfaction of
such performance goals as are set out in advance in the Participant's individual
Award Agreement (the "Performance Stock Bonus Agreement") that will be in such
form (which need not be the same for each Participant) as the Committee will
from time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. Stock Bonuses may vary from Participant to Participant
and between groups of Participants, and may be based upon the achievement of the
Company, Parent or Subsidiary and/or individual Performance Factors or upon such
other criteria as the Committee may determine.
7.2 Terms of Stock Bonuses. The Committee will determine the number of
Shares to be awarded to the Participant. If the Stock Bonus is being earned upon
the satisfaction of performance goals pursuant to a Performance Stock Bonus
Agreement, then the Committee will: (a) determine the nature, length and
starting date of any Performance Period for each Stock Bonus; (b) select from
among the Performance Factors to be used to measure the performance, if any; and
(c) determine the number of Shares that may be awarded to the Participant. Prior
to the payment of any Stock Bonus, the Committee shall determine the extent to
which such Stock Bonuses have been earned. Performance Periods may overlap and
Participants may participate simultaneously with respect to Stock Bonuses that
are subject to different Performance Periods and different performance goals and
other
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criteria. The number of Shares may be fixed or may vary in accordance with such
performance goals and criteria as may be determined by the Committee. The
Committee may adjust the performance goals applicable to the Stock Bonuses to
take into account changes in law and accounting or tax rules and to make such
adjustments as the Committee deems necessary or appropriate to reflect the
impact of extraordinary or unusual items, events or circumstances to avoid
windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may be paid
currently or on a deferred basis with such interest or dividend equivalent, if
any, as the Committee may determine. Payment may be made in the form of cash or
whole Shares or a combination thereof, either in a lump sum payment or in
installments, all as the Committee will determine.
8. PAYMENT FOR SHARE PURCHASES.
8.1 Payment. Payment for Shares purchased pursuant to this Plan may be made
in cash (by check) or, where expressly approved for the Participant by the
Committee or where expressly indicated in the Participants Award Agreement and
where permitted by law:
a. by cancellation of indebtedness of the Company to the Participant;
b. by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid for within the
meaning of SEC Rule 144 (and, if such shares were purchased from the
Company by use of a promissory note, such note has been fully paid with
respect to such shares); or (2) were obtained by Participant in the public
market;
c. by tender of a promissory note having such terms as may be approved
by the Committee and bearing interest at a rate sufficient to avoid
imputation of income under Sections 483 and 1274 of the Code;
d. by waiver of compensation due or accrued to the Participant for
services rendered;
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e. with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from the Participant and a
broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD Dealer") whereby the Participant
irrevocably elects to exercise the Option and to sell a portion
of the Shares so purchased to pay for the Exercise Price, and
whereby the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the Company; or
(2) through a "margin" commitment from the Participant and a NASD
Dealer whereby the Participant irrevocably elects to exercise the
Option and to pledge the Shares so purchased to the NASD Dealer
in a margin account as security for a loan from the NASD Dealer
in the amount of the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; or
f. by any combination of the foregoing or other method authorized by
the Committee.
At its discretion, the Committee may modify or suspend any method for the
exercise of stock options, including any of the methods specified in the
previous sentence. Delivery of shares for exercising an Option shall be made
either through the physical delivery of shares or through an appropriate
certification or attestation of valid ownership.
8.2 Loan Guarantees. The Committee may help the Participant pay for Shares
purchased under this Plan by authorizing a guarantee by the Company of a
third-party loan to the Participant.
9. WITHHOLDING TAXES.
9.1 Withholding Generally. Whenever Shares are to be issued in satisfaction
of Awards granted under this Plan, the Company may require the Participant to
remit to the Company an amount sufficient to satisfy federal, state and local
withholding tax requirements prior to the delivery of any certificate or
certificates for such Shares. Whenever, under this Plan, payments in
satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.
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9.2 Stock Withholding. When, under applicable tax laws, a Participant
incurs tax liability in connection with the exercise or vesting of any Award
that is subject to tax withholding and the Participant is obligated to pay the
Company the amount required to be withheld, the Committee may in its sole
discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee.
10. PRIVILEGES OF STOCK OWNERSHIP. No Participant will have any of the
rights of a stockholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a stockholder and have all the rights of a stockholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's Purchase Price or Exercise Price pursuant
to Section 12.
11. TRANSFERABILITY.
11.1 Non-Transferability of Options. No Option granted under the Plan shall
be transferable by the Participant otherwise than by will or by the laws of
descent and distribution, and such Option right shall be exercisable, during the
Participant's lifetime, only by the Participant. Notwithstanding the foregoing,
the Committee may set forth in an Award Agreement at the time of grant or
thereafter, that the Options (other than Incentive Stock Options) may be
transferred to members of the Participant's immediate family, to trusts solely
for the benefit of such immediate family members and to partnerships or limited
liability companies in which such family members and/or trusts are the only
partners or members, as the case may be. For this purpose, immediate family
means the Participant's spouse, parents, children, stepchildren, grandchildren
and legal dependants. Any transfer of Options made under this provision will not
be effective until notice of such transfer is delivered to the Company.
11.2 Rights of Transferee. Notwithstanding anything to the contrary herein,
if an Option has been transferred in accordance with Section 11.1 above, the
Option shall be exercisable solely by the transferee. The Option shall remain
subject to the provisions of the Plan, including that it will be exercisable
only to the extent that the Participant or Participant's estate would have been
entitled to exercise it if the Participant had not transferred the Option. In
the event of the death of the Participant prior to the expiration of the right
to exercise the transferred Option, the period during which the Option shall be
exercisable will terminate on the date 12 months following the date of the
Participant's death. In no event will the Option be exercisable after the
expiration of the exercise period
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set forth in the Award Agreement. The Option shall be subject to such other
rules relating to transferees as the Committee shall determine.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the Company
may reserve to itself and/or its assignee(s) in the Award Agreement a right to
repurchase a portion of or all Unvested Shares held by a Participant following
such Participant's Termination at any time within three (3) months after the
later of Participant's Termination Date and the date Participant purchases
Shares under this Plan, for cash and/or cancellation of purchase money
indebtedness, at the Participant's Exercise Price or Purchase Price, as the case
may be.
13. CERTIFICATES. All certificates for Shares or other securities delivered
under this Plan will be subject to such stock transfer orders, legends and other
restrictions, consistent with the terms of the Awards, as the Committee may deem
necessary or advisable, including restrictions under any applicable federal,
state or foreign securities law, or any rules, regulations and other
requirements of the SEC or any stock exchange or automated quotation system upon
which the Shares may be listed or quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. In the
discretion of the Committee, the pledge agreement may provide that the Shares
purchased with the promissory note may be released from the pledge on a pro rata
basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from
time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules
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and regulations of any governmental body, and the requirements of any stock
exchange or automated quotation system upon which the Shares may then be listed
or quoted, as they are in effect on the date of grant of the Award and also on
the date of exercise or other issuance. However, in the event that an Award is
not effective as discussed in the preceding sentence, the Company will use
reasonable efforts to modify, revise or renew such Award in a manner so as to
make the Award effective. Notwithstanding any other provision in this Plan, the
Company will have no obligation to issue or deliver certificates for Shares
under this Plan prior to: (a) obtaining any approvals from governmental agencies
that the Company determines are necessary or advisable; and/or (b) completion of
any registration or other qualification of such Shares under any state or
federal law or ruling of any governmental body that the Company determines to be
necessary or advisable. The Company will be under no obligation to register the
Shares with the SEC or to effect compliance with the registration, qualification
or listing requirements of any state securities laws, stock exchange or
automated quotation system, and the Company will have no liability for any
inability or failure to do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
18. CORPORATE TRANSACTIONS.
18.1 Assumption or Replacement of Awards by Successor. If a
Change-of-Control Event occurs:
(i) the successor company in any Change-of-Control Event may, if
approved in writing by the Committee prior to any
Change-of-Control Event:
(1) substitute equivalent Options or Awards or provide
substantially similar consideration to Participants as was
provided to stockholders (after taking into account the
existing provisions of the Awards), or
(2) issue, in place of outstanding Shares of the Company held by
the Participant, substantially similar shares or
substantially similar other securities or substantially
similar other property subject to repurchase restrictions no
less favorable to the Participant.
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(ii) Notwithstanding anything in this Plan to the contrary, the
Committee may, in its sole discretion, provide that the vesting
of any or all Options and Awards granted pursuant to this Plan
will accelerate immediately prior to the consummation of a
Change-of-Control Event. If the Committee exercises such
discretion with respect to Options, such Options will become
exercisable in full prior to the consummation of such event at
such time and on such conditions as the Committee determines, and
if such Options are not exercised prior to the consummation of
such event, they shall terminate at such time as determined by
the Committee.
18.2 Other Treatment of Awards. Subject to any rights and limitations set
forth in Section 18.1, if a Change-of-Control Event occurs or has occurred, any
outstanding Awards will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, or sale of assets
constituting the Change-of-Control Event.
18.3 Assumption of Awards by the Company. The Company, from time to time,
also may substitute or assume outstanding awards granted by another company,
whether in connection with an acquisition of such other company or otherwise, by
either (a) granting an Award under this Plan in substitution of such other
company's award, or (b) assuming such award as if it had been granted under this
Plan if the terms of such assumed award could be applied to an Award granted
under this Plan. Such substitution or assumption will be permissible if the
holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. If the Company assumes an award granted by another
company, the terms and conditions of such award will remain unchanged (except
that the exercise price and the number and nature of Shares issuable upon
exercise of any such option will be adjusted appropriately pursuant to Section
424(a) of the Code). If the Company elects to grant a new Option rather than
assuming an existing option, such new Option may be granted with a similarly
adjusted Exercise Price.
18.4 Adjustment of Shares. In the event that the number of outstanding
shares is changed by a stock dividend, recapitalization, stock split, reverse
stock split, subdivision, combination, reclassification or similar change in the
capital structure of the Company without consideration, then (a) the number of
Shares reserved for issuance under this Plan, (b) the Exercise Prices of and
number of Shares subject to outstanding Options, and (c) the number of Shares
subject to other outstanding Awards will be proportionately adjusted, subject to
any required action by the Board or the stockholders of the Company and
compliance with applicable securities laws; provided, however, that fractions of
a Share will not be issued but will either be replaced by a cash payment equal
to the Fair Market Value of such fraction of a Share or will be rounded up to
the nearest whole Share, as determined by the Committee.
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19. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective on
the date that this Plan is approved by the stockholders of the Company,
consistent with applicable laws (the "Effective Date").
20. TERM OF PLAN. Unless earlier terminated as provided herein, this Plan
will terminate ten (10) years from the date this Plan is adopted by the Board.
The expiration of the Plan, however, shall not affect the rights of Participants
under Options theretofore granted to them, and all unexpired Options and Awards
shall continue in force and operation after termination of the Plan, except as
they may lapse or be terminated by their own terms and conditions.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate
or amend this Plan in any respect, including without limitation amendment of any
form of Award Agreement or instrument to be executed pursuant to this Plan;
provided, however, that the Board will not, (i) without the approval of the
stockholders of the Company, amend this Plan in any manner that applicable law
or regulation requires such stockholder approval, or (ii) without the written
consent of the Participant substantially alter or impair any Option or Award
previously granted under the Plan. Notwithstanding the foregoing, if an Option
has been transferred in accordance with the terms of this Plan, written consent
of the transferee (and not the Participant) shall be necessary to substantially
alter or impair any Option or Award previously granted under the Plan.
22. EFFECT OF SECTION 162(M) OF THE CODE. The Plan, and all Awards issued
thereunder, are intended to be exempt from the application of Section 162(m) of
the Code, which restricts under certain circumstances the Federal income tax
deduction for compensation paid by a public company to named executives in
excess of $1 million per year. The exemption is based on Treasury Regulation
Section 1.162-27(f) as in effect on the effective date of the Plan, with the
understanding that such regulation generally exempts from the application of
Section 162(m) of the Code compensation paid pursuant to a plan that existed
before a company becomes publicly held. The Committee may, without stockholder
approval (unless otherwise required to comply with Rule 16b-3 under the Exchange
Act), amend the Plan retroactively and/or prospectively to the extent it
determines necessary in order to comply with any subsequent clarification of
Section 162(m) of the Code required to preserve the Company's Federal income tax
deduction for compensation paid pursuant to the Plan. To the extent that the
Committee determines as of the Date of Grant of an Award that (i) the Award is
intended to comply with Section 162(m) of the Code and (ii) the exemption
described above is no longer available with respect to such Award, such Award
shall not be effective until any stockholder approval required under Section
162(m) of the Code has been obtained.
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23. GENERAL.
23.1 Additional Provisions of an Award. Awards under the Plan also may be
subject to such other provisions (whether or not applicable to the benefit
awarded to any other Participant) as the Committee determines appropriate
including, without limitation, provisions to assist the Participant in financing
the purchase of Stock upon the exercise of Options, provisions for the
forfeiture of or restrictions on resale or other disposition of shares of Stock
acquired under any Award, provisions giving the Company the right to repurchase
shares of Stock acquired under any Award in the event the Participant elects to
dispose of such shares, provisions which restrict a Participant's ability to
sell Shares for a period of time under certain circumstances, and provisions to
comply with Federal and state securities laws and Federal and state tax
withholding requirements. Any such provisions shall be reflected in the
applicable Award Agreement. In addition, the Committee may, in its discretion,
provide in an Award Agreement that, in the event that the Participant engages,
within a specified period after termination of employment, in certain activity
specified by the Committee that is deemed detrimental to the interests of the
Company (including, but not limited to, the breach of any non-solicitation
and/or non-compete agreements with the Company), the Participant will forfeit
all rights under any Options that remain outstanding as of the time of such act
and will return to the Company an amount of shares with a Fair Market Value
(determined as of the date such shares are returned) equal to the amount of any
gain realized upon the exercise of any Option that occurred within a specified
time period.
23.2. Claim to Awards and Employment Rights. Unless otherwise expressly
agreed in writing by the Company, no employee or other person shall have any
claim or right to be granted an Award under the Plan or, having been selected
for the grant of an Award, to be selected for a grant of any other Award.
Neither the Plan nor any action taken hereunder shall be construed as giving any
Participant any right to be retained in the employ or service of the Company, a
Subsidiary or an Affiliate.
23.3. Designation and Change of Beneficiary. Each Participant shall file
with the Committee a written designation of one or more persons as the
beneficiary who shall be entitled to receive the amounts payable with respect to
an Award of Restricted Stock, if any, due under the Plan upon his death. A
Participant may, from time to time, revoke or change his beneficiary designation
without the consent of any prior beneficiary by filing a new designation with
the Committee. The last such designation received by the Committee shall be
controlling; provided, however, that no designation, or change or revocation
thereof, shall be effective unless received by the Committee prior to the
Participant's death, and in no event shall it be effective as of a date prior to
such receipt. If no beneficiary designation is filed by the Participant, the
beneficiary shall be deemed to be his or her spouse or, if the Participant is
unmarried at the time of death, his or her estate.
23.4. Payments to Persons Other Than Participants. If the Committee shall
find that any person to whom any amount is payable under the Plan is unable to
care for his or her affairs because of illness or accident, or is a minor, or is
otherwise legally incompetent or incapacitated or has died, then any payment due
to such person or such person's estate (unless a prior claim therefor has been
made by a duly appointed legal representative) may, if the Committee so directs
the Company,
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be paid to such person's spouse, child, relative, an institution maintaining or
having custody of such person, or any other person deemed by the Committee, in
its absolute discretion, to be a proper recipient on behalf of such person
otherwise entitled to payment. Any such payment shall be a complete discharge of
the liability of the Committee and the Company therefor.
23.5. No Liability of Committee Members. No member of the Committee shall
be personally liable by reason of any contract or other instrument executed by
such Committee member or on his or her behalf in his or her capacity as a member
of the Committee nor for any mistake of judgment made in good faith, and the
Company shall indemnify and hold harmless each member of the Committee and each
other employee, officer or director of the Company to whom any duty or power
relating to the administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim) arising out of any act or
omission to act in connection with the Plan unless arising out of such person's
own fraud or willful bad faith; provided, however, that approval of the Board
shall be required for the payment of any amount in settlement of a claim against
any such person. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company's Articles of Incorporation or By-Laws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
23.6. Governing law. The Plan and all agreements hereunder shall be
governed by and construed in accordance with the internal laws of the State of
Delaware without regard to the principles of conflicts of law thereof.
23.7. Funding. No provision of the Plan shall require the Company, for the
purpose of satisfying any obligations under the Plan, to purchase assets or
place any assets in a trust or other entity to which contributions are made or
otherwise to segregate any assets, nor shall the Company maintain separate bank
accounts, books, records or other evidence of the existence of a segregated or
separately maintained or administered fund for such purposes. Participants shall
have no rights under the Plan other than as general unsecured creditors of the
Company, except that insofar as they may have become entitled to payment of
additional compensation by performance of services, they shall have the same
rights as other employees under general law.
23.8. Reliance on Reports. Each member of the Committee and each member of
the Board shall be fully justified in relying, acting or failing or refusing to
act, and shall not be liable for having so relied, acted or failed or refused to
act in good faith, upon any report made by the independent public accountant of
the Company and its Subsidiaries and Affiliates and upon any other information
furnished in connection with the Plan by any person or persons other than
himself.
23.9. Relationship to Other Benefits. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
profit sharing, group insurance or other benefit plan of the Company or any
Subsidiary except as otherwise specifically provided in such other plan.
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23.10. Expenses. The expenses of administering the Plan shall be borne by
the Company and its Subsidiaries and Affiliates.
23.11. Pronouns. Masculine pronouns and other words of masculine gender
shall refer to both men and women.
23.12. Titles and Headings. The titles and headings of the sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings shall control.
23.13. Termination of Employment. For all purposes herein, a person who
transfers from employment or service with the Company to employment or service
with a Subsidiary or Affiliate or vice versa shall not be deemed to have
terminated employment or service with the Company, a Subsidiary or Affiliate.
23.14 Nonexclusivity of the Plan. Neither the adoption of this Plan by the
Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such incentive arrangements as it
may deem desirable, including, without limitation, the granting of stock options
and bonuses otherwise than under this Plan, and such arrangements may be either
generally applicable or applicable only in specific cases.
23.15 Employees Based Outside of the United States. Notwithstanding any
provision of the Plan to the contrary, in order to foster and promote
achievement of the purposes of the Plan or to comply with provisions of laws in
other countries in which the Company, its Affiliates, and its Subsidiaries
operate or have employees, the Committee, in its sole discretion, shall have the
power and authority to (i) determine which employees employed outside the United
States are eligible to participate in the Plan, (ii) modify the terms and
conditions of Awards granted to employees who are employed outside the United
States, and (iii) establish subplans (through the addition of schedules to the
Plan or otherwise), modify option exercise procedures and other terms and
procedures to the extent such actions may be necessary or advisable.
24. DEFINITIONS. As used in this Plan, the following terms will have the
following meanings:
"Affiliate" means any entity in which the Company has an ownership interest
of at least 20%.
"Award" means any award under this Plan, including any Option, Restricted
Stock or Stock Bonus.
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"Award Agreement" means, with respect to each Award, the signed written
agreement between the Company and the Participant setting forth the terms
and conditions of the Award.
"Board" means the Board of Directors of the Company.
"Cause" means the Company, a Subsidiary or Affiliate having cause to
terminate a Participant's employment or service under any existing
employment, consulting or any other agreement between the Participant and
the Company or a Subsidiary or Affiliate or, in the absence of such an
employment, consulting or other agreement, upon (i) the determination by
the Committee that the Participant has ceased to perform his duties to the
Company, a Subsidiary or Affiliate (other than as a result of his
incapacity due to physical or mental illness or injury), which failure
amounts to an intentional and extended neglect of his duties to such party,
(ii) the Committee's determination that the Participant has engaged or is
about to engage in conduct materially injurious to the Company, a
Subsidiary or Affiliate or (iii) the Participant having been convicted of a
felony or a misdemeanor carrying a jail sentence of six months or more.
"CHANGE-OF-CONTROL EVENT" MEANS THE OCCURRENCE OF ANY ONE OR MORE OF THE
FOLLOWING EVENTS: (I) THERE SHALL HAVE BEEN A CHANGE IN A MAJORITY OF THE BOARD
OF DIRECTORS OF THE COMPANY WITHIN A TWO (2) YEAR PERIOD, UNLESS THE APPOINTMENT
OF A DIRECTOR OR THE NOMINATION FOR ELECTION BY THE COMPANY'S STOCKHOLDERS OF
EACH NEW DIRECTOR WAS APPROVED BY THE VOTE OF A MAJORITY OF THE DIRECTORS THEN
STILL IN OFFICE WHO WERE IN OFFICE AT THE BEGINNING OF SUCH TWO (2) YEAR PERIOD,
OR (II) THE COMPANY SHALL HAVE BEEN SOLD BY EITHER (A) A SALE OF ALL OR
SUBSTANTIALLY ALL ITS ASSETS, OR (B) A MERGER OR CONSOLIDATION, OTHER THAN ANY
MERGER OR CONSOLIDATION PURSUANT TO WHICH THE COMPANY ACQUIRES ANOTHER ENTITY,
OR (C) A TENDER OFFER, WHETHER SOLICITED OR UNSOLICITED.
"Code" means the Internal Revenue Code of 1986, as amended. Reference in
the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations
under such section.
"Common Stock" means the outstanding common stock, par value $0.01 per
share, of the Company, or any other class of securities into which
substantially all the Common Stock is converted or for which substantially
all the Common Stock is exchanged.
"Committee" means the Compensation Committee, the Stock Option Committee or
such other committee appointed by the Board consisting solely of two or
more Outside Directors or the Board.
"Company" means Armor Holdings, Inc., a Delaware corporation, or any
successor corporation.
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"Disability" or "Disabled" means a disability, whether temporary or
permanent, partial or total, as determined in good faith by the Committee.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Price" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of a share of the
Company's Common Stock determined as follows:
a. if such Common Stock is publicly traded and is then listed on a
national securities exchange (i.e. The New York Stock Exchange),
its closing price on the date of determination on the principal
national securities exchange on which the Common Stock is listed
or admitted to trading, and if there were no trades on such date,
on the day on which a trade occurred next preceding such date;
b. if such Common Stock is publicly traded and is then quoted on the
NASDAQ National Market, its closing price on the NASDAQ National
Market on the date of determination as reported in The Wall
Street Journal, and if there were no trades on such date, on the
day on which a trade occurred next preceding such date;
c. if such Common Stock is publicly traded but is not quoted on the
NASDAQ National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and
asked prices on the date of determination as reported in The Wall
Street Journal or, if not reported in The Wall Street Journal, as
reported by any reputable publisher or quotation service, as
determined by the Committee in good faith, and if there were no
trades on such date, on the day on which a trade occurred next
preceding such date;
d. if none of the foregoing is applicable, by the Committee in good
faith based upon factors available at the time of the
determination, including, but not limited to, capital raising
activities of the Company.
"Insider" means an officer or director of the Company or any other person
whose transactions in the Company's Common Stock are subject to Section 16
of the Exchange Act.
"NASD Dealer" has the meaning set forth in Section 8(e).
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"NQSO's" has the meaning set forth in Section 5.
"Option" means an award of an option to purchase Shares pursuant to Section
5.
"Outside Director" means a person who is both (i) a "nonemployee director"
within the meaning of Rule 16b-3 under the Exchange Act, or any successor
rule or regulation and (ii) an "outside director" within the meaning of
Section 162(m) of the Code.
"Parent" means any corporation or other legal entity (other than the
Company) in an unbroken chain of corporations and/or other legal entities
ending with the Company if each of such corporations and other legal
entities other than the Company owns stock, other equity securities or
other equity interests possessing 50% or more of the total combined voting
power of all classes of stock, equity securities or other equity interests
in one of the other corporations or other entities in such chain.
"Participant" means a person who receives an Award under this Plan.
"Performance Factors" means the factors selected by the Committee from time
to time, including, but not limited to, the following measures to determine
whether the performance goals established by the Committee and applicable
to Awards have been satisfied:
a. Net revenue and/or net revenue growth;
b. Earnings before income taxes and amortization and/or earnings
before income taxes and amortization growth;
c. Operating income and/or operating income growth;
d. Net income and/or net income growth;
e. Earnings per share and/or earnings per share growth;
f. Total stockholder return and/or total stockholder return growth;
g. Return on equity;
h. Operating cash flow;
i. Adjusted operating cash flow return on income;
j. Economic value added;
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k. Successful capital raises;
l. Individual confidential business objectives
m. Other factors deemed reasonable and appropriate by the Committee.
"Performance Period" means the period of service determined by the
Committee, not to exceed five years, during which years of service or
performance is to be measured for Restricted Stock Awards or Stock Bonuses.
"Plan" means Armor Holdings, Inc. 2002 Stock Incentive Plan, as amended
from time to time.
"Restricted Stock Award" means an award of Shares pursuant to Section 6.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Company's Common Stock reserved for issuance
under this Plan, as adjusted pursuant to Section 18, and any successor
security.
"Stock Bonus" means an award of Shares, or cash in lieu of Shares, pursuant
to Section 7.
"Subsidiary" means any corporation or other legal entity (other than the
Company) in an unbroken chain of corporations and/or other legal entities
beginning with the Company if each of the corporations and entities other
than the last corporation or entity in the unbroken chain owns stock, other
equity securities or other equity interests possessing 50% or more of the
total combined voting power of all classes of stock, other equity
securities or other equity interests in one of the other corporations or
entities in such chain.
"Ten Percent Stockholder" has the meaning set forth in Section 5.2.
"Termination" or "Terminated" means, for purposes of this Plan with respect
to a Participant, that the Participant has for any reason ceased to provide
services as an employee, officer, director, consultant, independent
contractor, or advisor to the Company or a Parent or Subsidiary of the
Company. An employee will not be deemed to have ceased to provide services
in the case of (i) sick leave, (ii) military leave, or (iii) any other
leave of absence approved by the Committee, provided, that such leave is
for a period of not more than 90 days, unless re-employment upon the
expiration of such leave is guaranteed by contract or statute or unless
provided otherwise pursuant to
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formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing. In the case of any employee on an
approved leave of absence, the Committee may make such provisions
respecting suspension of vesting of the Award while on leave from the
employ of the Company or a Subsidiary as it may deem appropriate, except
that in no event may an Option be exercised after the expiration of the
term set forth in the Option agreement. The Committee will have sole
discretion to determine whether a Participant has ceased to provide
services and the effective date on which the Participant ceased to provide
services (the "Termination Date").
"Unvested Shares" means "Unvested Shares" as defined in the Award
Agreement.
"Vested Shares" means "Vested Shares" as defined in the Award Agreement.
A-22
(NO. 1) SCHEDULE (INLAND REVENUE APPROVED)
TO
ARMOR HOLDINGS, INC. 2002 STOCK INCENTIVE PLAN
INLAND REVENUE REFERENCE: [______]
APPROVED BY THE INLAND REVENUE ON [_________]
ALTERATIONS AND AMENDMENTS TO THE PLAN IN RESPECT OF ITS OPERATION IN RELATION
TO UNITED KINGDOM EMPLOYEES
1. In this Schedule, "Plan" refers to the Armor Holdings, Inc. 2002 Stock
Incentive Plan and words and expressions defined therein shall have the
same meaning when used in this Schedule. The provisions of the Plan
relating to Non-Qualified Stock Options shall apply to the provisions of
this Schedule except where expressly varied herein. References to Sections
in this Schedule are to Sections of the Plan.
2. It is intended that Non-Qualified Stock Options ("Options") granted by the
Company pursuant to this Schedule to persons ("UK Participants") employed
by the Company and/or its subsidiary corporations in the UK who are subject
to UK Income Tax in respect of such employment will be granted pursuant to
an approved share option scheme within the provisions of Section 185 of and
Schedule 9 to the United Kingdom Income and Corporation Taxes Act 1988
("ICTA 1988").
3. Only Options may be granted pursuant to this Schedule and not any other
form of incentive. An Option granted under this Schedule shall not be
granted to an individual in conjunction with any other form of Award under
the Plan.
4. Section 24 (DEFINITIONS) shall be amended in relation to Options granted
pursuant to this Schedule so that:-
(i) "Share" means "shares of the Company's Common Stock which comply with
the conditions of paragraphs 10-14 Schedule 9 ICTA 1988"; (ii) "Subsidiary"
means "any company of which the Company has control"; and (iii) "Parent"
means "any company which has control of the Company", in each case control
shall have the meaning set out in Section 840 of ICTA 1988.
5. Options may only be granted pursuant to this Schedule to employees of the
Company or Subsidiary of the Company who are not excluded by paragraph 8 of
Schedule 9 ICTA 1988. No employee who is a director shall be eligible to
participate in the Plan pursuant to this Schedule, unless required in that
capacity to work for the Company and/or any Subsidiary for at least 25
hours per week excluding meal breaks.
A-23
6. The conditions attaching to an Option granted under this Schedule
(including any shorter or later time for exercising Options following the
termination of a Participant's employment provided that where a
Participant's employment terminates by reason of his death his Options may
be exercised by his personal representatives no later than twelve months
after the date of his death) shall be determined at the time of grant and
may not be determined following the grant of an Option. Any performance
condition which is imposed on any Option granted under this Schedule must
be objective in nature. Such a condition may only be varied if events occur
which cause the Committee to reasonably believe that the original condition
is no longer a fair measure of performance. In such circumstances the
Committee may waive the performance condition or may impose a different
objective performance condition which, in the fair and reasonable opinion
of the Committee, is no more difficult to meet than the original condition
was considered to be when it was first set.
7. No Option may be granted pursuant to this Schedule to any UK Participant
which would result in the aggregate Exercise Price of Shares comprised in
outstanding Options granted to him or her under this Schedule together with
the aggregate Exercise Price of shares in subsisting options granted to him
or her under any share option scheme, (not being a savings-related share
option scheme), approved under Schedule 9 ICTA 1988 and established by the
Company or any associated company (within the meaning of Section 416 ICTA
1988) exceeding 30,000 UK pounds sterling (converting, for this purpose,
the Exercise Price into pounds sterling using the exchange rate applicable
on the date of grant of such options) or such other amount as is from time
to time specified in paragraph 28(1) of Schedule 9 ICTA 1988.
8. The Exercise Price for each Share under Option granted under this Schedule
shall be determined by the Board of Directors or the Committee and be
denominated in dollars, but shall not be less than the greater of:-
(i) 100% of the Fair Market Value of a Share on the day preceding the date
of grant as agreed in advance with the Inland Revenue Shares Valuation
Division; and
(ii) the par value of the Share.
9. The price for each Share which may be acquired under an Option granted
pursuant to this Schedule shall be payable in cash (and no other form) in
full on the exercise of the Option and the provisions of Section 8.1 which
allow for payment in forms other than cash shall not apply to this
Schedule.
10. Section 5.2 (EXERCISE PERIOD) shall not apply in relation to Options
granted pursuant to this Schedule and the following provisions shall apply
instead:-
"An Option shall be exercisable at such times, in such amounts and during
such periods as the Board of Directors or the Committee, as the case may
be, shall determine at the date of the
A-24
grant of such Option but shall not be exercisable in any event on or after
the tenth anniversary of the date of grant."
11. No restriction may be imposed pursuant to section 5.5 on the Shares
acquired under an Exercise Agreement other than such restrictions as may be
required by the Company to comply with applicable securities laws.
12. Section 5.8 (MODIFICATION, EXTENSION OR RENEWAL) shall not apply to Options
granted under this Schedule.
13. No Option granted under this Schedule may be exercised by any UK
Participant at any time when he or she is precluded by paragraph 8 of
Schedule 9 ICTA 1988 from participating in the Plan pursuant to this
Schedule.
14. In Section 11 (TRANSFERABILITY) the words "except as determined by the
Committee" and "unless otherwise determined by the Committee and set forth
in the Award Agreement with respect to Awards that are not ISOs" will not
apply to this Schedule.
15. Section 12 (RESTRICTIONS ON SHARES) will not apply to this Schedule.
16. Section 15 (EXCHANGE AND BUYOUT OF AWARDS) will not apply to this Schedule.
17. In Section 18.1 (ASSUMPTION OR REPLACEMENT OF AWARDS BY SUCCESSOR) the
words "If a Change-of-Control Event occurs" and subsection (i) will be
replaced in this Schedule by:
"18.1.1 If any company (hereafter "the Acquiring Company")
(i) obtains control of the Company (as defined in Section 840 of ICTA
1988) as a result of making:-
(a) a general offer to acquire the whole of the issued ordinary
share capital of the Company which is made on a condition
such that if it is satisfied the Acquiring Company will have
control of the Company; or
(b) a general offer to acquire all the shares of the same class
as the shares over which Options have been or may be
granted; or
(ii) obtains control of the Company in pursuance of a compromise or
arrangement sanctioned by the court under section 425 of the UK Companies
Act 1985 or (where relevant) legislation that the Inland Revenue agrees is
the overseas equivalent thereof; orbecomes bound or entitled to acquire
Shares under section 428 to 430 of that Act or (where relevant) legislation
that the Inland Revenue agrees is the overseas equivalent thereof
A-25
(iii) the Participant may by agreement with the Acquiring Company
within the periods specified in paragraph 15(2) of Schedule 9 ICTA 1988
release (the "Release") his Options (the "Old Options") in consideration of
the grant to him of equivalent rights over shares in the Acquiring Company
or in another company within paragraph 10(b) or (c) of Schedule 9 ICTA 1988
("New Options").
18.1.2 The grant of New Options may only take place on the following
conditions:-
(i) the shares over which the New Options are granted (the "New
Scheme Shares") comply with the provisions relating to scheme
shares contained in paragraphs 10 to 14 inclusive of Schedule 9
ICTA 1988;
(ii) the total market value, immediately before the Release, of the
shares which were subject to the Old Options is equal to the
total market value, immediately after the Release, of the New
Scheme Shares in respect of which the New Options are granted to
the Participant;
(iii) the total amount payable by the Participant for the acquisition
of New Scheme Shares on complete exercise of the New Options is
equal to the total amount that would have been payable for the
acquisition of shares on complete exercise of the Old Options;
and
(iv) the New Options are otherwise identical in terms to the Old
Options.
18.1.3 The New Options shall, for all the other purposes of this Scheme, be
treated as having been acquired at the same time as the Old Options
were or were treated as acquired and "Date of Grant" shall be
construed accordingly.
18.1.4 Where the Participant releases his Options under 18.1.1 above the
New Options granted to him on that Release shall not lapse, nor
shall the Participant be entitled to exercise the New Options
early solely by virtue of the circumstances which entitled the
Participant to effect the Release.
18.1.5 Where any New Options are granted pursuant to 18.1.1 above,
references to the Company shall, where applicable, be construed
in relation to the New Options as references to the Acquiring
Company or, as the case may be, to the other company to whose
shares the New Options relate.
18. Section 18.4 (ADJUSTMENT OF SHARES) shall, in the case of any Option
granted pursuant to this Schedule, be amended so that any adjustment made
under that Article may only be made to take account of a variation in the
share capital of which the shares form part and shall be subject to:
A-26
(i) confirmation from the auditors of the Company that such adjustment is
fair and reasonable;
(ii) the prior approval of the Inland Revenue;
(iii) the Shares continuing to satisfy the conditions specified in
paragraphs 10 to 14 inclusive of Schedule 9 ICTA 1988.
19. Section 21 (AMENDMENT OR TERMINATION OF PLAN) shall apply with the
additional requirement that no amendment shall have effect until approved
by the Inland Revenue.
20. Section 23.1 (ADDITIONAL PROVISIONS OF AN AWARD) shall not apply to this
Schedule except to the extent that it allows Award Agreements to contain
provisions to comply with Federal and state securities laws and Federal and
state tax withholding requirements.
A-27
(NO. 2) SCHEDULE (UNAPPROVED)
TO
ARMOR HOLDINGS, INC. 2002 STOCK INCENTIVE PLAN
ALTERATIONS AND AMENDMENTS TO THE PLAN IN RESPECT OF ITS OPERATION IN RELATION
TO UNITED KINGDOM EMPLOYEES
1. In this (No. 2) Schedule, "Plan" refers to the Armor Holdings, Inc. 2002
Stock Incentive Plan together with the (No. 1) Schedule and words and
expressions defined therein shall have the same meaning when used in this
(No. 2 ) Schedule. The provisions of the Plan relating to Options shall
apply to the provisions of this (No.2) Schedule except where expressly
varied herein.
2. It is intended that this (No. 2) Schedule will not be approved by the
Inland Revenue pursuant to Schedule 9 ICTA 1988.
3. Clause 4(i) of the (No. 1) Schedule will not apply to Options granted under
this (No. 2) Schedule.
4. The words "who are not excluded by paragraph 8 of Schedule 9 ICTA 1988" in
clause 5 and the second sentence of clause 5 to the (No. 1) Schedule shall
not apply to this (No. 2) Schedule.
5. The limit set out in clause 7 of the (No. 1) Schedule shall not apply to
this (No. 2) Schedule.
6. Clause 11 of the (No. 1) Schedule shall not apply to this (No.2) Schedule.
7. Clause 12 of the (No. 1) Schedule shall not apply to this (No. 2) Schedule.
8. Clause 13 of the (No. 1) Schedule shall not apply to this (No. 2) Schedule.
9. Clause 15 of the (No. 1) Schedule shall not apply to this (No. 2) Schedule.
10. All requirements in the (No. 1) Schedule for the approval, consent or
agreement of the Inland Revenue shall not apply to this (No. 2) Schedule.
A-28