performance period prior to the change in control. The outstanding options would have become immediately exercisable and the restricted stock award and performance awards would have become immediately vested regardless of whether the named executive officer was terminated or voluntarily terminated employment following the change of control. The value of the stock options and restricted stock awards is based on the Company’s closing market price of $46.48$34.83 per share on December 31, 2007,2009, the last trading day before year-end.
amended and as adopted by the Public Company Accounting Oversight Board (the “PCAOB”), (b) received the written disclosures and letter from the independent auditors required by Independence Standards Board Standard No. 1 (Independence Discussionsthe applicable requirements of the PCAOB regarding the independent auditors’ communications with the Audit Committees)Committee concerning independence and (c) discussed with the independent auditors their independence.
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Based on the Audit Committee’s review of the audited financial statements for the year ended December 31, 20072009 and the Audit Committee’s discussions with management and the independent auditors, the Audit Committee recommended to the Board of Directors of the Company that the audited financial statements be included in the Company’s Annual Report onForm 10-K for the year ended December 31, 2007,2009, which has been filed with the Securities and Exchange Commission.
AUDIT COMMITTEE
Bob G. Gower,Chairman
C. Sean Day
David L. Lemmon
George A. Peterkin, Jr.
AMENDMENTREAPPROVAL OF THE MATERIAL TERMS OF THE PERFORMANCE OBJECTIVES UNDER THE 2005 STOCK AND INCENTIVE PLAN (ITEM 2)
On March 6, 2008,The Company is asking stockholders to reapprove the Board approved amendments tomaterial terms of the performance objectives that may be established for performance awards granted under the Company’s 2005 Stock and Incentive Plan, as amended to date (the “2005 Plan”). The approval is necessary to (1) increasepreserve the number of sharesCompany’s federal income tax deduction for performance-based compensation paid to certain executive officers under section 162(m) (“Section 162(m)”) of the Company’s Common Stock that may be issued under the 2005 Plan from 2,000,000 to 3,000,000 shares and (2) increase the maximum amountInternal Revenue Code of cash that may be paid to any participant pursuant to any performance award under the 2005 Plan during any calendar year from $2,000,000 to $3,000,000. The amendments are subject to stockholder approval.1986, as amended (the “Code”).
The Board of Directors of the Company unanimously recommends that you vote “FOR” the proposed amendments toreapproval of the material terms of the performance objectives under the 2005 Plan.
IfBackground
Section 162(m) imposes an annual deduction limit of $1 million on the proposedamount of compensation paid to each of the Chief Executive Officer and the three other most highly compensated officers of the Company other than the Chief Financial Officer. The deduction limit does not apply to performance-based compensation that satisfies the requirements of Section 162(m). The 2005 Plan was adopted by the Board of Directors and originally approved by stockholders in 2005. One of the requirements of Section 162(m) for performance-based compensation is that the material terms of the performance objectives under the 2005 Plan be reapproved by the Company’s stockholders every five years. The material terms include (1) the employees eligible to receive compensation under the 2005 Plan, (2) the business criteria on which the performance objectives may be based and (3) the maximum amount of cash that may be paid to any participant in the 2005 Plan pursuant to a performance award in any calendar year. Employees of the Company or its subsidiaries are eligible to receive awards under the 2005 Plan. Performance awards granted under the 2005 Plan may be payable in cash, stock or a combination and are subject to the achievement of one or more performance objectives established by the Compensation Committee of the Board of Directors of the Company. The performance objectives must be based on earnings, cash flow, economic value added, total stockholder return, return on equity, return on capital, return on assets, revenues, operating profit, EBITDA, net profit, earnings per share, stock price, cost reduction goals, debt to capital ratio, financial return ratios, profit or operating margins, working capital or other comparable objective tests selected by the Compensation Committee, or any combination of those measures, for the Company as a whole or for one or more of its subsidiaries or other business units. The 2005 Plan provides that the maximum amount of cash that may be paid to any participant in the Plan pursuant to any performance award during any calendar year is $3,000,000.
The material terms of the performance objectives that stockholders are being asked to approve are unchanged from those previously approved by stockholders. There are no amendments to the 2005 Plan are not approved byproposed for this Annual Meeting.
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The following table shows the Company’s stockholders,target values of annual incentive compensation awards for 2010 and cash performance awards covering three-year performance periods ending in 2010 or later made to the 2005 Plan will remain in effect in its current form, subject to amendment from time to time by the Board in respects that do not constitute material amendments that require stockholder approval.
Discussion of the Proposed Amendments
The 2005 Plan was originally approved by the stockholders of the Company on April 26, 2005. In the period from December 31, 2004 through December 31, 2007, the revenues of the Company have grown from approximately $675 million to $1.173 billion (a 74% increase), earnings per share have grown from $.98 to $2.29 (a 134% increase)named executive officers and the market capitalization of the Company has grown from approximately $1.1 billion to approximately $2.5 billion (a 127% increase).
The Company’s long-term performance has been due in large part to a highly qualified and loyal employee base. The Company’s future growth and performance will also depend to a significant extent on its ability to attract, retain and reward employees who contribute to the Company’s success. The Company believes that equity awards are an important component of its compensation program that are needed in order for the Company to be able to continue to attract and retain employees with the skills and experience required for the Company to continue to grow and build on its past success.
No grants of any equity compensation awards have been made from the 1,000,000 incremental shares proposed to be added toidentified groups under the 2005 Plan. The actual payments under the awards cannot be determined until the end of 2010 or the end of the three-year performance periods, as the case may be, when the Company’s achievement of the performance objectives for the awards can be measured and each officer’s eligibility for a payment under the terms of the annual incentive plan and the 2005 Plan can be determined.
| | | | | | | | | | | | | | | | |
| | Annual
| | | | | | | | | | |
| | Incentive
| | | | | | | | | | |
| | Compensation
| | | Three-Year Performance Awards | |
Name | | 2010 | | | 2008-10 | | | 2009-11 | | | 2010-12 | |
|
Joseph H. Pyne | | $ | 612,000 | | | $ | 1,200,000 | | | $ | 1,200,000 | | | $ | 1,200,000 | |
Norman W. Nolen | | | 245,000 | | | | 264,000 | | | | 264,000 | | | | — | |
C. Berdon Lawrence | | | 445,500 | | | | — | | | | — | | | | — | |
Gregory R. Binion | | | 237,000 | | | | — | | | | 300,000 | | | | 326,000 | |
Dorman L. Strahan | | | 178,500 | | | | 122,000 | | | | 122,000 | | | | 126,000 | |
All current executive officers as a group | | | 2,389,856 | | | | 1,586,000 | | | | 1,886,000 | | | | 1,902,000 | |
All employees (other than executive officers) as a group | | | 9,535,748 | | | | — | | | | — | | | | — | |
Non-officer directors as a group | | | — | | | | — | | | | — | | | | — | |
A total of 3,000,000 shares of common stock may be issued under the 2005 Plan, of which a total of 1,309,151 remain available for future awards. The terms of options and restricted stock granted under the 2005 Plan are described in the “Compensation Discussion and Analysis” above. The following table shows the number of shares of common stock subject to option and restricted stock grants that have been awarded to the named executive officers and the identified groups under the 2005 Plan since its inception.
| | | | | | | | |
| | Shares
| | | Shares of
| |
Name | | Subject to Options | | | Restricted Stock | |
|
Joseph H. Pyne | | | 286,096 | | | | 180,033 | |
Norman W. Nolen | | | 54,613 | | | | 31,417 | |
C. Berdon Lawrence | | | 202,583 | | | | 62,368 | |
Gregory R. Binion | | | 57,537 | | | | 38,254 | |
Dorman L. Strahan | | | 23,954 | | | | 16,703 | |
Steven P. Valerius | | | 33,388 | | | | 33,875 | |
All current executive officers as a group | | | 682,143 | | | | 422,522 | |
All employees (other than executive officers) as a group | | | 148,988 | | | | 437,196 | |
Non-officer directors as a group | | | — | | | | — | |
The amounts of future cash or equity awards that may be made to officers or directors of the Company under the 2005 Plan are not determinable at this time, since any such awards are made in the discretion of the Compensation Committee. Nonemployee directors are not eligible for awards under the 2005 Plan.
As of March 7, 2008, 1,077,207 shares of common stock were available for future awards under the 2005 Plan. The total number of shares subject to awards made under the 2005 Plan was 253,726 in 2006, 347,140 in 2007 and 321,927 in 2008 to date. The Company’s burn rate under all of its stock plans, defined as the number of shares subject to grants made in a given year as a percentage of the weighted average shares outstanding during the year, was 1.45% for 2007, 1.56% for 2006 and 1.79% for 2005. In calculating the burn rate, the number of shares of restricted stock granted (so-called “full value” awards) is multiplied by 3 in 2007, 2.5 in 2006 and 3 in 2005 as a method of attempting to equate the dilutive effect of full value awards to that of option shares. The Company’s equity overhang, defined as (a) the number of shares subject to outstanding unexercised options plus the number of shares remaining available for awards under the Company’s equity compensation plans as a percentage of
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(b) outstanding shares plus the number of shares subject to outstanding unexercised options plus the number of shares remaining available for awards under the Company’s equity compensation plans, was 5.1% at the end of 2007, 6.1% at the end of 2006 and 8.2% at the end of 2005.
The following table shows the number of shares of common stock subject to option and restricted stock grants that have been awarded to the named executive officers and the identified groups under the 2005 Plan since its inception.
| | | | | | | | |
| | Shares
| | | Shares of
| |
Name | | Subject to Options | | | Restricted Stock | |
|
Joseph H. Pyne | | | 174,516 | | | | 99,012 | |
Norman W. Nolen | | | 40,225 | | | | 21,700 | |
C. Berdon Lawrence | | | 148,364 | | | | 43,232 | |
Steven P. Valerius | | | 45,783 | | | | 24,158 | |
Dorman L. Strahan | | | 12,981 | | | | 8,342 | |
All current executive officers as a group | | | 455,069 | | | | 226,724 | |
All employees (other than executive officers) as a group | | | 54,600 | | | | 186,400 | |
Non-officer directors as a group | | | 0 | | | | 0 | |
Section 162(m) of the Internal Revenue Code denies a tax deduction to public companies for compensation over $1,000,000 paid to a company’s most highly paid executive officers, subject to exemption from that limit for certain performance-based compensation. There are limitations in the 2005 Plan designed to qualify awards for the exemption, including a $2 million limitation on the maximum amount of cash that may be paid to any participant in the 2005 Plan pursuant to any performance award during any calendar year. The target values of outstanding cash performance awards that have been made to date under the 2005 Plan, all of which have been made to named executive officers, range from $62,400 to $1,209,245. No payments for performance awards have been made to date under the 2005 Plan. The highest payment made to date to any participant in one year under a prior plan was a payment of $1,320,170 to Mr. Pyne based on the Company’s performance during the period2005-2007. However, in light of the sustained growth and performance of the Company described above, the Board decided to increase the limit under the 2005 Plan to $3,000,000 to enhance the ability of the Company to qualify future performance award payments as deductible performance-based compensation, subject to stockholder approval of the increase.
Summary of the 2005 Plan
The material features of the 2005 Plan (as proposed to be amended) are discussed below. The discussion is subject to, and is qualified in its entirety by, the full text of the 2005 Plan, (as proposed to be amended), which is attached asExhibit BA to this Proxy Statement.
General
Purpose
The purpose of the 2005 Plan is to advance the interests of the Company by providing an additional incentive to attract and retain qualified and competent employees for the Company and its subsidiaries, upon whose efforts and
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judgment the success of the Company is largely dependent, through the award of options to purchase shares of common stock, shares of restricted stock and performance awards.
Eligibility
Employees of the Company and its subsidiaries are eligible to participate in the 2005 Plan.
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Types of Awards
The 2005 Plan authorizes the granting of incentive stock options (“Incentive Options”) and nonincentive stock options (“Nonincentive Options”) to purchase common stock of the Company to employees of the Company. Unless the context otherwise requires, the term “Options” includes both Incentive Options and Nonincentive Options.
The 2005 Plan also authorizes awards of restricted stock (“Restricted Stock”). The vesting and number of shares of a Restricted Stock award may be conditioned upon one or a combination of:
| | |
| • | the completion of a specified period of service with the Company; |
|
| • | the attainment of goals related to the performance of the Company or a division, department or unit of the Company; |
|
| • | the performance of the Company’s common stock; or |
|
| • | the performance of the recipient of the Restricted Stock award. |
The Compensation Committee of the Board determines whether a recipient of Restricted Stock will have the right to vote or receive dividends before the Restricted Stock has vested.
The 2005 Plan also authorizes awards intended to be “performance-based compensation” which are payable in stock, cash or a combination of stock and cash (“Performance Awards”). Any Performance Awards granted will vest upon the achievement of performance objectives. The Compensation Committee establishes the performance objectives, the length of the performance period and the form and time of payment of the award.
Administration
The 2005 Plan is administered by the Compensation Committee. The Compensation Committee has the authority to interpret and adopt rules and regulations for carrying out the 2005 Plan. All decisions and acts of the Compensation Committee are final and binding on all participants under the 2005 Plan. If there is no Compensation Committee, the Board will administer the 2005 Plan.
Shares of Common Stock Subject to the 2005 Plan
A total of 3,000,000 shares of common stock (subject to adjustment as discussed below) may be issued under the 2005 Plan.
Exercise Price of Options
The exercise price of Options granted under the 2005 Plan shall be any price determined by the Compensation Committee, but may not be less than the fair market value of the common stock on the date of grant. The exercise price of Incentive Options shall not be less than 110% of the fair market value on the date of grant if the optionee owns, directly or indirectly, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company.
Price of Restricted Stock
The price, if any, to be paid by a recipient for Restricted Stock awarded under the 2005 Plan shall be determined by the Compensation Committee.
Payment of Exercise Price
Unless further limited by the Compensation Committee, the exercise price of an Option shall be paid solely in cash, by certified or cashier’s check, by money order, by personal check or by delivery of shares of common stock owned by the optionee for at least six months, or by a combination of the foregoing. If the exercise price is paid in whole or in part with shares of common stock, the value of the shares surrendered shall be their fair market value on the date received by the Company.
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Restrictions on Transfer of Awards
No award granted under the 2005 Plan is transferable otherwise than by will or by the laws of descent and distribution. During the lifetime of a participant, each award will be exercisable only by the participant or the guardian or legal representative of the participant.
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Restrictions on Transfer of Restricted Stock
A participant may not sell, transfer, assign or pledge shares of Restricted Stock until the shares have vested.
Exercisability of Options
In granting Options, the Compensation Committee, in its sole discretion, may determine the terms and conditions under which the Options shall be exercisable.
The Compensation Committee also has the right, exercisable in its sole discretion, to accelerate the date on which all or any portion of an Option may be exercised or otherwise waive or amend any conditions in respect of all or a portion of the Options held by an optionee.
In the event of a Change in Control (as defined in the 2005 Plan), all Options outstanding at the time of the Change in Control will become immediately exercisable unless otherwise provided in the option agreement. In the event of a merger, consolidation or other reorganization of the Company in which the Company is not the surviving entity, the Compensation Committee may provide for payment of cash or securities of the Company in satisfaction of the Options.
Vesting of Restricted Stock
In granting Restricted Stock awards, the Compensation Committee, in its sole discretion, may determine the terms and conditions under which the Restricted Stock awards shall vest.
The Compensation Committee also has the right, exercisable in its sole discretion, to accelerate the date on which Restricted Stock may vest or otherwise waive or amend any conditions in respect of a grant of Restricted Stock.
In the event of a Change in Control, all shares of Restricted Stock will vest unless the restricted stock agreement with the recipient specifies otherwise.
Terms of Performance Awards
In granting performance awards, the Compensation Committee may determine the target and maximum value of the performance award and the date or dates when performance awards are earned. However, for performance awards granted to the chief executive officer or the fourthree most highly compensated officers of the Company other than the chief executive officer and the chief financial officer, the Compensation Committee may not grant performance awards after the earlier of:
| | |
| • | 90 days after the beginning of the performance period; |
|
| • | the date on which 25% of the performance period has elapsed; or |
|
| • | the date on which the satisfaction of the performance objectives becomes substantially certain. |
Expiration of Options
The expiration date of an Option is determined by the Compensation Committee at the time of the grant.
If an optionee’s employment is terminated for cause, any Options held by the optionee terminate automatically and without notice. The 2005 Plan further provides that in most instances an Option must be exercised by the optionee within 30 days after the termination of an optionee’s employment with the Company (for any reason other than termination for cause, mental or physical disability or death), if and to the extent such Option was exercisable on the date of such termination.
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Generally, if an optionee’s termination of employment is due to mental or physical disability, the optionee will have the right to exercise an Option (to the extent otherwise exercisable on the date of termination) for a period of one year from the date on which the optionee suffers the mental or physical disability. If an optionee dies while actively employed by the Company, an Option may be exercised (to the extent otherwise exercisable on the date of death) within one year of the date of the optionee’s death by the optionee’s legal representative or legatee. If the optionee dies following termination of employment, but within either the30-day period described in the preceding paragraph, or during the one year period following termination due to disability, the employee’s beneficiary will have six months to exercise the option.
The Compensation Committee may extend the termination date of a Nonincentive Option to a date not later than the tenth anniversary of the date of the grant of the Option.
Expiration of Restricted Stock Awards
The requirements for vesting of Restricted Stock are determined by the Compensation Committee at the time of the grant.
If an employee’s employment is terminated before all of the Restricted Stock held by the employee has vested, the shares of Restricted Stock that have not vested shall be forfeited and any purchase price paid by the
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employee for the forfeited shares shall be returned to the employee. If other conditions to the vesting of Restricted Stock have not been satisfied prior to any deadline for the satisfaction of the conditions established by the Compensation Committee, the shares of Restricted Stock shall be forfeited and any purchase price paid by the employee shall be returned to the employee.
Expiration of Performance Awards
The performance periods are determined by the Compensation Committee at the time of grant. If a participant’s employment is terminated due to death, disability or retirement before the end of a performance period, a proportional portion of the performance award, to the extent earned as a result of the full or partial achievement of the performance objectives during the performance period, will be paid after the end of the performance period. If a participant’s employment is terminated for any other reason, the participant shall not be entitled to any part of the performance award.
Term of the 2005 Plan
The 2005 Plan is of unlimited duration. However, no Incentive Options shall be granted on or after the tenth anniversary of the effective date of the 2005 Plan.
Adjustments
The 2005 Plan gives the Compensation Committee authority to make appropriate adjustments to the number of shares with respect to which Options may be granted, to the number of shares subject to outstanding Options and to the exercise price of outstanding Options in the event of a change in the capitalization of the Company, a distribution to stockholders other than regular cash dividends, a recapitalization resulting in asplit-up or consolidation of shares or a share repurchase at a price in excess of the market price of the shares at the time the repurchase is announced.
Amendments
The Board may amend or modify the 2005 Plan at any time, subject to stockholder approval if required by applicable law or regulation or by applicable stock exchange rules; provided that the action may not impair the rights of a participant with respect to an outstanding award without the written consent of such participant.
Federal Income Tax Consequences
The following discussion summarizes certain federal income tax consequences of the issuance and receipt of options and awards pursuant to the 2005 Plan under the law as in effect on the date of this Proxy Statement. The rules governing the tax treatment of such options and awards are quite technical, so the following discussion of tax
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consequences is necessarily general in nature and is not complete. In addition, statutory provisions are subject to change, as are their interpretations, and their application may vary in individual circumstances. This summary does not purport to cover all federal employment tax or other federal tax consequences associated with the 2005 Plan, nor does it address state, local ornon-U.S. taxes.
Grants of Options
Under current tax laws, the grant of an Option will not be a taxable event to the optionee and the Company will not be entitled to a deduction with respect to the grant.
Exercise of Nonincentive Options and Subsequent Sale of Stock
Upon the exercise of a Nonincentive Option, an optionee will recognize ordinary income in the year of exercise equal to the excess of the then fair market value of the shares of common stock on the exercise date over the exercise price. The taxable income recognized upon exercise of a Nonincentive Option will be treated as compensation income subject to withholding and, subject to Section 162(m) of the Internal Revenue Code and the requirement of reasonableness, the Company will be entitled to deduct as a compensation expense an amount equal to the ordinary income an optionee recognizes with respect to such exercise. When common stock received upon the exercise of a Nonincentive Option subsequently
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The general rule for Incentive Options is sold or exchanged in a taxable transaction, the holder thereof generally will recognize capital gain (or loss) equal to the difference between the total amount realized and the adjusted tax basis in the shares (the exercise price plus the amount of ordinary income recognized in the year of exercise). The character of thethat gain or loss as long-termfrom the sale or short-term capital gain or loss will depend upon the holding periodexchange of the shares following exercise. Special tax rules apply when all or a portion of the exercise price of a Nonincentive Option is paid by the delivery of already owned shares.
Exercise of Incentive Options and Subsequent Sale of Stock
The exercise of an Incentive Option generally will not be a taxable event to the optionee and the Company will not be entitled to any deduction with respect to such exercise if the optionee does not dispose of the shares of common stock acquired uponon the exercise of an Incentive Option until after the later of two years following the date of grantwill be treated as capital gain or one year following the date of exercise. A disposition within such period would be a “disqualifying disposition.” The surrender ofloss. However, if shares of common stock acquired uponon the exercise of an Incentive Option in paymentare disposed of within two years from the date of grant or within one year after exercise price of an Option or to satisfy any withholding requirements within the required holding period for incentive stock options under the Internal Revenue Code will be a disqualifying disposition of the surrendered shares. Upon any subsequent taxable non-disqualifying disposition of shares of common stock received upon exercise of an Incentive Option, the optionee generally will recognize long-term or short-term capital gain (or loss) equal to the difference between the total amount realized and the exercise price of the Incentive Option.
In the case of a disqualifying disposition,(a “disqualifying disposition”), the optionee will recognize ordinary income in the year of the disqualifying disposition equal to the lower of (i) the excess of the amount realized over the exercise price or (ii) excess of the fair market value of the common stock at the time of the exercise over the exercise price and the Company generally will be entitled to a deduction for the amount of ordinary income recognized by the optionee. In addition, the optionee will recognize on the disqualifying disposition, as long-term or short-term capital gain depending on the length of time the stock was held after the Option was exercised, the amount, if any, by which the amount realized in the disqualifying disposition exceeds the fair market value of the common stock at the time of the exercise. If, however, the sales price is less than the fair market value at the date of exercise, then the ordinary income recognized by the optionee is generally limited to the excess of the sales price over the option price. In both situations, the Company’s tax deduction is limited to the amount of ordinary income recognized by the optionee. Different consequences apply for an optionee subject to the alternative minimum tax, and special tax rules apply when all or a portion of the exercise price of an Incentive Option is paid by delivery of already owned shares.
Restricted Common Stock
Unless a recipient who receives Restricted Stock makes an election under Section 83(b) of the Internal Revenue Code, the recipient generally is not required to recognize ordinary income on the award of the Restricted
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Stock. Instead, on the date the shares vest (i.e.(i.e., become transferable and no longer subject to forfeiture), the recipient will be required to recognize ordinary income in an amount equal to the excess, if any, of the fair market value of the shares on such date over the amount, if any, paid for such shares. If a recipient makes a Section 83(b) election, the recipient will recognize ordinary income on the date the shares are awarded. The amount of ordinary income required to be recognized is an amount equal to the excess, if any, of the fair market value of the shares on the date of award over the amount, if any, paid for such shares. In such case, the recipient will not be required to recognize additional ordinary income when the shares vest.
Any gain or loss recognized upon a subsequent disposition of the shares will be capital gain or loss. If, after making a Section 83(b) election, an employee forfeits any shares of Restricted Stock, the employee will realize a loss equal to the amount paid for the Restricted Stock, not the amount elected to be included as income at the time of grant. If, after making the election, an employee sells Restricted Stock, the employee will have a gain or loss equal to the difference between the total amount realized and the adjusted tax basis in the shares (the consideration paid for the shares, if any, plus the amount of ordinary income recognized as a result of the election).
Performance SharesAwards
AUpon payment of a Performance Award in cash, the recipient is not taxed uponrequired to recognize ordinary income in the grant of performance shares. Upon receiptamount of the underlyingpayment. Upon payment of a performance award in shares of common stock, the recipient will be taxed at ordinary income tax rates on the current fair market value of the stock received, andreceived. In both cases, the Company will generally be entitled to a corresponding tax deduction. The recipient’s basis in any shares acquired pursuant to the settlement of performance shares will be equal to the amount of ordinary income on which the recipient was taxed and, upon subsequent disposition, any gain or loss will be capital gain or loss.
Section 162(m) Effect on Deductibility
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to publicly held companies for compensation exceeding $1 million paid to certain of the company’s most highly paid executives, subject to an exception that would allow the deduction of certain performance-based compensation. The Options and Performance Awards granted under the 2005 Plan are intended to qualify as performance-based compensation that will not be subject to the $1 million limitation.
Withholding
The Company has the right to reduce the number of shares of common stock deliverable pursuant to the 2005 Plan by an amount having a fair market value equal to the minimum statutory amount necessary to satisfy all federal and state tax withholding requirements or to deduct a corresponding amount from any cash payment to be made pursuant to the 2005 Plan. The Compensation Committee may permit participants to satisfy all or a portion of the minimum statutory withholding requirement by having shares withheld from the award.
Parachute PaymentsExercise of Options
UnderUpon the so-called “golden parachute” provisionsexercise of a Nonincentive Option, an optionee will recognize ordinary income in the year of exercise equal to the excess of the Internal Revenue Code,then fair market value of the accelerated vestingshares of Options, Restricted Stock, Performance Awards and benefits paid under any other awards in connection with a change of controlcommon stock on the exercise date over the exercise price. The taxable income recognized upon exercise of a corporation mayNonincentive Option will be requiredtreated as compensation income subject to withholding and, subject to Section 162(m) and the requirement of reasonableness, the Company will be valued and taken into account in determining whether participants have received compensatory payments, contingent on the change of control, in excess of certain limits. If those limits are exceeded,entitled to deduct as a portion of the amounts payablecompensation expense an amount equal to the participant may be subjectordinary income an optionee recognizes with respect to an additional 20% federal tax and may be nondeductible to the Company.
AMENDMENT OF THE 2000 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN (ITEM 3)
On March 6, 2008, the Board approved an amendment to the Company’s 2000 Nonemployee Director Stock Option Plan (the “2000 Plan”) to increase the number of shares that may be issued under the 2000 Plan from 600,000 to 1,000,000 shares, subject to stockholder approval.
The Board of Directors of the Company unanimously recommends that you vote ’FOR” the proposed amendment to the 2000 Plan.such exercise.
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IfThe general rule for Incentive Options is that gain or loss from the proposed amendment tosale or exchange of shares acquired on the 2000 Plan is not approved byexercise of an Incentive Option will be treated as capital gain or loss. However, if shares acquired on the Company’s stockholders, the 2000 Plan will remain in effect in its current form, subject to amendmentexercise of an Incentive Option are disposed of within two years from time to time by the Board in respects that do not constitute material amendments that require stockholder approval.
Discussion of the Proposed Amendment
The 2000 Plan currently provides for automatic grants to nonemployee directors of the company of (1) a stock option for 10,000 shares of the Company’s common stock on the date of a director’s first election as a director, (2) a stock option for 6,000 shares immediatelygrant or within one year after each annual meeting of stockholdersexercise (a “disqualifying disposition”), the optionee will recognize ordinary income in the year of the Company and (3) 1,000 sharesdisqualifying disposition equal to the lower of restricted stock immediately after each Annual Meeting of Stockholders(i) the excess of the Company. The 2000 Plan also permits nonemployee directors to elect to receive optionsamount realized over the exercise price or restricted stock in lieu(ii) excess of all or part of the $24,000 annual director fee otherwise payable in cash.
The purpose of the 2000 Plan is to compensate nonemployee directors fairly for the time and effort they devote to the Company’s business and thereby enable the Company to attract and retain qualified directors. Only nonemployee directors of the Company are eligible to participate in the 2000 Plan. There are currently 7 nonemployee directors and will be 8 if the nominees identified in this Proxy Statement are elected by the stockholders.
No grants of any equity compensation awards have been made from the 400,000 incremental shares proposed to be added to the 2000 Plan. Since the inception of the 2000 Plan, options covering 440,724 shares of common stock and 37,714 shares of restricted stock have been granted to nonemployee directors. The amounts of future awards that may be made to nonemployee directors under the 2000 Plan will include the automatic grants described above and an undeterminable number of options or shares of restricted stock that will depend on the elections they make with respect to the $24,000 annual director fee.
As of March 7, 2008, 121,562 shares of common stock were available for future awards under the 2000 Plan. The total number of shares subject to awards made under the 2000 Plan was 75,496 in 2006 and 52,128 in 2007, and awards covering an estimated 80,000 shares will be made immediately after the 2008 Annual Meeting. Giving effect to those awards, there will be a total of approximately 40,000 shares of common stock available for future awards under the 2000 Plan, an amount that is insufficient to allow the automatic awards under the 2000 Plan in future years.
Summary of the 2000 Plan
The material features of the 2000 Plan (as proposed to be amended) are discussed below. The discussion is subject to, and is qualified in its entirety by, the full text of the 2000 Plan (as proposed to be amended), which is attached asExhibit Cto this Proxy Statement.
General
Purpose
The purpose of the 2000 Plan is to advance the interests of the Company by providing an incentive to attract and retain qualified directors for the Company through the encouragement of stock ownership in the Company through the granting of stock options or restricted stock.
Eligibility
Directors of the Company who are not employees of the Company or its subsidiaries are eligible to participate in the 2000 Plan.
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Types of Awards
The 2000 Plan authorizes the granting to nonemployee directors of the Company of nonincentive stock options (“Options”) to purchase common stock of the Company and shares of restricted stock (“Restricted Stock”), which is common stock of the Company that is subject to forfeiture until it becomes vested.
Administration
The 2000 Plan is administered by the Compensation Committee. The Compensation Committee has the authority to interpret and adopt rules and regulations for carrying out the 2000 Plan. All decisions and acts of the Compensation Committee are final and binding on all participants under the 2000 Plan. If there is no Compensation Committee, the Board of Directors will administer the 2000 Plan.
Shares of Common Stock Subject to the 2000 Plan
A total of 1,000,000 shares of common stock (subject to adjustment as discussed below) may be issued under the 2000 Plan.
Granting of Options
Under the 2000 Plan, nonemployee directors automatically receive:
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| • | an Option for 10,000 shares of the Company’s common stock on the date of the director’s first election as a director, and |
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| • | an Option for 6,000 shares of the Company’s common stock immediately after each annual meeting of stockholders of the Company. |
The Compensation Plan permits nonemployee directors to elect to receive Options in lieu of all or part of the $24,000 annual director fee otherwise payable in cash. Each eligible director who makes such an election shall automatically be granted an Option for a number of shares of the Company’s common stock equal to:
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| • | the amount of the fee the eligible director elects to receive in the form of an Option, divided by |
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| • | the fair market value of a share of the Company’s common stock on the date of grant, multiplied by |
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| • | 3, with the result rounded to the nearest whole share of common stock. |
Option Price
The option price per share of Options granted under the 2000 Plan is the fair market value of the common stock on the date of grant.
Payment of Exercise Price
Unless further limited by the Compensation Committee, the option price of an Option shall be paid solely in cash, by certified or cashier’s check, by money order, by personal check or by delivery of shares of common stock owned by the optionee for at least six months, or by a combination of the foregoing. If the exercise price is paid in whole or in part with shares of common stock, the value of the shares surrendered shall be their fair market value on the date received by the Company.
Restrictions on Transfer of Options
No Option granted under the 2000 Plan is transferable other than by will or by the laws of descent and distribution. During the lifetime of an eligible director, each Option will be exercisable only by the director or the guardian or legal representative of the director.
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Exercisability of Options
Options granted to an eligible director automatically upon the director’s first election as a director are exercisable on or after the date of grant. Options granted to an eligible director after an annual meeting of stockholders are exercisable six months after the date of grant.
Options granted to an eligible director in lieu of director fees otherwise payable in cash become exercisable on the last day of each calendar quarter after the date of grant (each, a “Payment Date”) in the number of shares equal to (a) the total number of shares subject to the Option divided by (b) the number of Payment Dates occurring after the date of grant and before the first anniversary of the most recent annual meeting of stockholders.
In the event of a Change in Control (as defined in the 2000 Plan), all Options outstanding at the time of the Changeexercise over the exercise price and the Company generally will be entitled to a deduction for the amount of ordinary income recognized by the optionee. In addition, the optionee will recognize on the disqualifying disposition, as long-term or short-term capital gain depending on the length of time the stock was held after the Option was exercised, the amount, if any, by which the amount realized in Control will become immediately exercisable. In the event of a merger, consolidation or other reorganizationdisqualifying disposition exceeds the fair market value of the Company in whichcommon stock at the Company is not the surviving entity, the Board of Directors or the Compensation Committee may provide for any or alltime of the following:exercise. If, however, the sales price is less than the fair market value at the date of exercise, then the ordinary income recognized by the optionee is generally limited to the excess of the sales price over the option price. In both situations, the Company’s tax deduction is limited to the amount of ordinary income recognized by the optionee. Different consequences apply for an optionee subject to the alternative minimum tax, and special tax rules apply when all or a portion of the exercise price of an Incentive Option is paid by delivery of already owned shares.
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| • | for Options to become immediately exercisable; |
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| • | for exercisable Options to be cancelled immediately prior to the transaction; |
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| • | for the assumption by the surviving entity of the 2000 Plan and the Options; or |
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| • | for payment in cash or stock in lieu of and in complete satisfaction of Options. |
Granting of Restricted Stock
Under the 2000 Plan, nonemployee directors automatically receive 1,000 shares ofUnless a recipient who receives Restricted Stock immediately after each annual meeting of stockholdersmakes an election under Section 83(b) of the Company.
The Compensation Plan permits nonemployee directorsCode, the recipient generally is not required to receive Restricted Stock in lieu of all or partrecognize ordinary income on the award of the $24,000 annual director fee otherwise payableRestricted Stock. Instead, on the date the shares vest (i.e., become transferable and no longer subject to forfeiture), the recipient will be required to recognize ordinary income in cash. Each eligible director who has madean amount equal to the excess, if any, of the fair market value of the shares on such date over the amount, if any, paid for such shares. If a recipient makes a Section 83(b) election, the recipient will recognize ordinary income on the date the shares are awarded. The amount of ordinary income required to be recognized is an election shall automaticallyamount equal to the excess, if any, of the fair market value of the shares on the date of award over the amount, if any, paid for such shares. In such case, the recipient will not be granted a number ofrequired to recognize additional ordinary income when the shares of Restricted Stock equal to:vest.
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| • | the amount of the fee the eligible director elects to receive in the form of Restricted Stock, divided by |
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| • | the fair market value of a share of the Company’s common stock on the date of grant, multiplied by |
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| • | 1.2, with the result rounded to the nearest whole share of common stock. |
Restrictions on Transfer of Restricted StockPerformance Awards
A participant may not sell, transfer, assign or pledgeUpon payment of a Performance Award in cash, the recipient is required to recognize ordinary income in the amount of the payment. Upon payment of a performance award in shares of Restricted Stock untilcommon stock, the shares have vested. Stock certificates representingrecipient will be taxed at ordinary income tax rates on the Restricted Stock shall either be held byfair market value of the stock received. In both cases, the Company or deliveredwill generally be entitled to the participant bearing a legend to restrict transfer of the certificate until the Restricted Stock has vested. At the time the Restricted Stock vests, a certificate for the vested shares will be delivered to the participant free of transfer restrictions.corresponding tax deduction.
Vesting of Restricted StockSection 162(m) Effect on Deductibility
Restricted Stock grantedSection 162(m) generally disallows a tax deduction to publicly held companies for compensation exceeding $1 million paid to certain of the company’s most highly paid executives, subject to an eligible director after an annual meetingexception that would allow the deduction of stockholders vests six months aftercertain performance-based compensation. The Options and Performance Awards granted under the date of grant.2005 Plan are intended to qualify as performance-based compensation that will not be subject to the $1 million limitation.
The number of shares of Restricted Stock granted to an eligible director in lieu of director fees otherwise payable in cash that vest on each Payment Date is equal to (a) the number of shares granted divided by (b) the number of Payment Dates occurring after the date of grant and before the first anniversary of the most recent annual meeting of stockholders.
In the event of a Change in Control (as defined in the 2000 Plan), all shares of Restricted Stock will immediately vest. The Compensation Committee may in its discretion at any time accelerate vesting of Restricted Stock or otherwise waive or amend any conditions of a grant of Restricted Stock under the 2000 Plan.
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Term of the 2000 PlanWithholding
The 2000 Plan is of unlimited duration.
Adjustments
InCompany has the event of an increase or decrease inright to reduce the number of outstanding shares of common stock deliverable pursuant to the 2005 Plan by an amount having a fair market value equal to the minimum statutory amount necessary to satisfy all federal and state tax withholding requirements or to deduct a corresponding amount from any cash payment to be made pursuant to the 2005 Plan. The Compensation Committee may permit participants to satisfy all or a portion of the Company as a result of a stock dividend, recapitalization or stock split, combination or exchange ofminimum statutory withholding requirement by having shares withheld from the Compensation Committee shall make appropriate adjustments in the number and kind of shares subject to being granted under the 2000 Plan so that the same proportion of the Company’s issued and outstanding shares shall continue to be subject to issuance under the 2000 Plan upon the exercise of Options or as Restricted Stock.award.
Amendments
The Board of Directors may amend or modify the 2000 Plan in any respect at any time, subject to stockholder approval if required by applicable law or regulation or by applicable stock exchange rules.
Federal Income Tax Consequences
The following discussion summarizes certain federal income tax consequences of the issuance and receipt of options and awards pursuant to the 2000 Plan under the law as in effect on the date of this Proxy Statement. The rules governing the tax treatment of such options and awards are quite technical, so the following discussion of tax consequences is necessarily general in nature and is not complete. In addition, statutory provisions are subject to change, as are their interpretations, and their application may vary in individual circumstances. This summary does not purport to cover all federal employment tax or other federal tax consequences associated with the 2000 Plan, nor does it address state, local ornon-U.S. taxes.
Grants of Options and Restricted Stock
Under current tax laws, neither the grant of an Option nor the grant of Restricted Stock is a taxable event to the recipient and the Company is not entitled to a deduction.
Exercise of Options
Upon the exercise of ana Nonincentive Option, an optionee will recognize ordinary income atin the timeyear of exercise equal to the excess of the then fair market value of the shares of common stock receivedon the exercise date over the exercise price. The taxable income recognized upon exercise of a Nonincentive Option will be treated as compensation income subject to withholding and, subject to Section 162(m) and the requirement of reasonableness, the Company will be entitled to deduct as a compensation expense an amount equal to the ordinary income an optionee recognizes with respect to such exercise.
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The general rule for Incentive Options is that gain or loss from the sale or exchange of shares acquired on the exercise of an Incentive Option will be treated as capital gain or loss. However, if shares acquired on the exercise of an Incentive Option are disposed of within two years from the date of grant or within one year after exercise (a “disqualifying disposition”), the optionee will recognize ordinary income in the year of the disqualifying disposition equal to the lower of (i) the excess of the amount realized over the exercise price or (ii) excess of the fair market value of the common stock at the time of the exercise over the exercise price and the Company generally will be entitled to a deduction for the amount of ordinary income recognized by the optionee. In addition, the optionee will recognize on the disqualifying disposition, as long-term or short-term capital gain depending on the length of time the stock was held after the Option was exercised, the amount, if any, by which the amount realized in the disqualifying disposition exceeds the fair market value of the common stock at the time of the exercise. If, however, the sales price is less than the fair market value at the date of exercise, then the ordinary income recognized by the optionee is generally limited to the excess of the sales price over the option price. In both situations, the Company’s tax deduction is limited to the amount of ordinary income recognized by the optionee. Different consequences apply for an optionee subject to the alternative minimum tax, and special tax rules apply when all or a portion of the exercise price of an Incentive Option is paid by delivery of already owned shares.
Restricted Stock
Unless a directorrecipient who receives Restricted Stock makes an election under Section 83(b) of the Internal Revenue Code, the directorrecipient generally is not required to recognize ordinary income on the award of the Restricted Stock. Instead, on the date the shares of Restricted Stock vest (i.e.(i.e., become transferable and no longer subject to forfeiture), the directorrecipient will be required to recognize ordinary income in an amount equal to the excess, if any, of the fair market value of the shares on such date over the amount, if any, paid for such shares. If a directorrecipient makes a proper election under Section 83(b) ofelection, the Internal Revenue Code, the directorrecipient will recognize ordinary income on the date the shares are awarded. The amount of grant inordinary income required to be recognized is an amount equal to the excess, if any, of the fair market value of the shares (determined without regard to the vesting) on the date of grant.award over the amount, if any, paid for such shares. In such case, the directorrecipient will not be required to recognize additional ordinary income when the shares vest.
CharacterPerformance Awards
Upon payment of a Performance Award in cash, the recipient is required to recognize ordinary income in the amount of the Ordinary Incomepayment. Upon payment of a performance award in shares of common stock, the recipient will be taxed at ordinary income tax rates on the fair market value of the stock received. In both cases, the Company will generally be entitled to a corresponding tax deduction.
Section 162(m) Effect on Deductibility
Section 162(m) generally disallows a tax deduction to publicly held companies for compensation exceeding $1 million paid to certain of the company’s most highly paid executives, subject to an exception that would allow the deduction of certain performance-based compensation. The Options and Performance Awards granted under the Company’s Deduction2005 Plan are intended to qualify as performance-based compensation that will not be subject to the $1 million limitation.
Withholding
The ordinary income recognizedCompany has the right to reduce the number of shares of common stock deliverable pursuant to the 2005 Plan by an eligible director as described above is compensation paidamount having a fair market value equal to the minimum statutory amount necessary to satisfy all federal and state tax withholding requirements or to deduct a corresponding amount from any cash payment to be made pursuant to the 2005 Plan. The Compensation Committee may permit participants to satisfy all or a portion of the minimum statutory withholding requirement by having shares withheld from the Company to an independent contractor and thus is not subject to withholding or employment taxes. The Company will be entitled to a business expense (compensation) deduction in the same amount as the ordinary income recognized by an eligible director.award.
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Sale of Stock Acquired Though the Exercise of an Option or Vesting of Restricted StockParachute Payments
WhenUnder the common stock received uponso-called “golden parachute” provisions of the exercise of an Option orCode, the accelerated vesting of Options, Restricted Stock, subsequently is sold or exchangedPerformance Awards and benefits paid under any other awards in connection with a taxable transaction,change of control of a corporation may be required to be valued and taken into account in determining whether participants have received
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compensatory payments, contingent on the holder generally will recognize capital gain (or loss) equalchange of control, in excess of certain limits. If those limits are exceeded, a portion of the amounts payable to the difference between (x) the sum of (i) the exercise price (in the case ofparticipant may be subject to an Option) of the shares sold plus (ii) the ordinary income recognized with respectadditional 20% federal tax and may be nondeductible to the shares sold, over (y) the sale price of the shares sold. Such gain (or loss) will be a capital gain (or loss) and will be long-term or short-term depending on how long the shares have been held after the date the Option was exercised or the Restricted Shares vested. If a director sells Restricted Stock after making a Section 83(b) election, the director will have a gain or loss equal to the difference between the total amount realized and the adjusted tax basis in the shares (the consideration paid for the shares, if any, plus the amount of ordinary income recognized as a result of the election). Special tax rules will apply if the option price for shares acquired by exercise of an Option is paid with previously owned shares.
RATIFICATION OF THE AUDIT COMMITTEE’S SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM (ITEM 4)3)
The Audit Committee has selected KPMG LLP (“KPMG”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2007.2010. KPMG served as the Company’s independent accounting firm for 2007.2009. Although the Audit Committee has the sole authority and responsibility to select and evaluate the performance of the independent accounting firm for the Company, the Board is requesting, as a matter of good corporate governance, that the Company’s stockholders ratify the selection of KPMG for 2008.2010.
The Board of Directors of the Company unanimously recommends that you vote “FOR” the ratification of the selection of KPMG LLP as the Company’s independent registered public accounting firm for 2010.
Ratification of the selection of KPMG requires the affirmative vote of a majority of the shares represented at the meeting in person or by proxy. If the stockholders do not ratify the selection of KPMG, the Audit Committee will reconsider the selection. However, because of the difficulty and expense of changing independent auditors at this point in the year, the selection of KPMG will probably be continued for 20082010 in the absence of extraordinary reasons for making an immediate change. If the stockholders do ratify the selection of KPMG, the Audit Committee will retain the authority to make a change if warranted in its judgment.
Representatives of KPMG are expected to be present at the 20082010 Annual Meeting of Stockholders, with the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.
Fees Paid to the Independent Registered Public Accounting Firm
The following table sets forth the fees billed by KPMG, the Company’s independent registered public accounting firm, during the last two fiscal years:
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| | 2007 | | 2006 | | | 2009 | | 2008 | |
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Audit Fees | | $ | 898,500 | | | $ | 827,500 | | | $ | 900,000 | | | $ | 900,000 | |
Audit-Related Fees | | | 85,500 | | | | 80,000 | | | | 110,000 | | | | 108,936 | |
Tax Fees | | | 30,500 | | | | 33,000 | | | | 25,000 | | | | 25,000 | |
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TOTAL | | $ | 1,014,500 | | | $ | 940,500 | | | $ | 1,035,000 | | | $ | 1,033,936 | |
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Audit Feesare fees for professional services rendered by KPMG for the audit of the Company’s annual financial statements, audit of internal control over financial reporting, review of the Company’s quarterly financial statements or services normally provided in connection with statutory or regulatory filings.
Audit-Related Feesare fees for assurance and related services reasonably related to the performance of the audit or review of the Company’s financial statements. Services performed by KPMG in this category consisted of the audit of the Company’s benefit plans.
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Tax Feesare fees for professional services rendered by KPMG for tax compliance, tax advice and tax planning. Services performed by KPMG in this category for 20072009 included the review of the Company’s 20062008 federal income tax return.
Each engagement of the independent registered public accounting firm to perform audit or non-audit services must be approved in advance by the Company’s Audit Committee or by its Chairman pursuant to delegated authority.
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The Board of Directors of the Company unanimously recommends that you vote “FOR” the ratification of the selection of KPMG LLP as the Company’s independent registered public accounting firm for 2008.
OTHER BUSINESS (ITEM 5)4)
The Board knows of no other business to be brought before the Annual Meeting. However, if any other matters are properly presented, it is the intention of the persons named in the accompanying proxy to take such action as in their judgment is in the best interest of the Company and its stockholders.
STOCKHOLDER PROPOSALS FOR 20092011 ANNUAL MEETING
Stockholder proposals must be received by the Company at its principal executive offices no later than November 7, 200810, 2010 to be considered for inclusion in the Company’s proxy statement and form of proxy for the 20092011 Annual Meeting of Stockholders.
Under the Company’s Bylaws, written notice (containing the information required by the Bylaws) of any stockholder proposal for action at an annual meeting of stockholders (whether or not proposed for inclusion in the Company’s proxy materials) must be received by the Company at its principal executive offices not less than 90 nor more than 120 days prior to the anniversary date of the prior year’s annual meeting of stockholders and must be a proper subject for stockholder action.
BY ORDER OF THE BOARD OF DIRECTORS
Thomas G. Adler
Secretary
March 7, 200810, 2010
Houston, Texas
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EXHIBITExhibit A
KIRBY CORPORATION
CRITERIA FOR THE SELECTION OF DIRECTORS
Criteria Applicable to the Board of Directors and Committees:
1. The Board and its Committees must satisfy the independence requirements of applicable law and the New York Stock Exchange.
2. The Board should have diverse experience at management or policy-making levels in areas relevant to Kirby’s business.
3. A sufficient number of directors must have the requisite expertise to enable the Audit Committee as a whole to satisfy the requirements of applicable securities laws, rules and regulations and New York Stock Exchange standards.
Criteria to be Considered in Evaluating the Qualifications of Individual Director Candidates:
1.��Reputation for character and integrity.
2. Business or professional experience.
3. Understanding of the marine transportation business, the chemical and refining business, the diesel engine services business and corporate strategy and finance, particularly for public companies.
4. Understanding of the responsibilities of directors of public companies.
5. Willingness to commit sufficient time to Kirby’s business.
6. The number of other boards and board committees on which a person serves.
7. Independence of any particular constituency and the ability to represent the interests of all stockholders of Kirby rather than a particular interest group.
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EXHIBIT B
KIRBY CORPORATION
2005 STOCK AND INCENTIVE PLANStock and Incentive Plan
ARTICLE I
GENERAL
Section 1.1. Purpose. The purpose of this Plan is to advance the interests of Kirby Corporation, a Nevada corporation (the “Company”), by providing an additional incentive to attract and retain qualified and competent employees for the Company and its subsidiaries, upon whose efforts and judgment the success of the Company is largely dependent, through the award of (i) Options to purchase shares of Common Stock (which Options may be Incentive Stock Options or Nonincentive Stock Options); (ii) shares of Restricted Stock; and (iii) Performance Awards.
Section 1.2. Definitions. As used herein, the following terms shall have the meaning indicated:
(a) “Award”“Award” means a grant under this Plan in the form of Options, Restricted Stock, Performance Awards or any combination of the foregoing.
(b) “Board”“Board” means the Board of Directors of the Company.
(c) “Change“Change in Control” means the occurrence of any of the following events:
(i) Any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) becomes the beneficial owner, directly or indirectly, of voting securities representing thirty percent (30%) or more of the combined voting power of the Company’s then outstanding voting securities;
(ii) The Board ceases to consist of a majority of Continuing Directors, with the term “Continuing Director” meaning a Director who (A) is a Director on the effective date of the Plan or (B) is nominated or appointed to serve as a Director by a majority of the then Continuing Directors;
(iii) The stockholders of the Company approve (A) anyAny consolidation or merger of the Company or any Subsidiary that results in the holders of the Company’s voting securities immediately prior to the consolidation or merger having (directly or indirectly) less than a majority ownership interest in the outstanding voting securities of the surviving entity immediately after the consolidation or merger, (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company or (C) any plan or proposal for the liquidation or dissolution of the Company;
(iv) The stockholders of the Company accept a share exchange, with the result that stockholders of the Company immediately before such share exchange do not own, immediately following such share exchange, at least a majority of the voting securities of the entity resulting from such share exchange in substantially the same proportion as their ownership of the voting securities outstanding immediately before such share exchange; or
(v) Any tender or exchange offer is made to acquire thirty percent (30%) or more of the voting securities of the Company, other than an offer made by the Company, and shares are acquired pursuant to that offer.
For purposes of this definition, the term “voting securities” means equity securities, or securities that are convertible or exchangeable into equity securities, that have the right to vote generally in the election of Directors.
(d) “Code”“Code” means the Internal Revenue Code of 1986, as amended.
(e) “Committee”“Committee” means the Compensation Committee, if any, appointed by the Board.
(f) “Date“Date of Grant” means the date on which the Committee takes formal action to grant an Award to an Eligible Person or such later date as may be specified by the Committee when approving the Award.
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(g) “Director”“Director” means a member of the Board.
(h) “Disability”“Disability” means mental or physical disability as determined by a medical doctor satisfactory to the Committee.
(i) “Eligible“Eligible Person” means an employee of the Company or a Subsidiary.
(j) “Existing“Existing Plan” means the 2005 Stock and Incentive Plan as approved by the stockholders of the Company on April 26, 2005, and as amended by the Board on January 22, 2007.2007 and as amended by the Board on March 6, 2008 and approved by the stockholders of the Company on April 22, 2008.
(k) “Fair“Fair Market Value” of a Share means the closing price on the New York Stock Exchange on the day of reference. If the Shares are not listed for trading on the New York Stock Exchange, the Fair Market Value on the date of reference shall be determined by any fair and reasonable means prescribed by the Committee.
(l) “Incentive“Incentive Stock Option” means an option that is an incentive stock option as defined in Section 422 of the Code.
(m) “Nonincentive“Nonincentive Stock Option” means an option that is not an Incentive Stock Option.
(n) “Option”“Option” means any option granted under this Plan.
(o) “Optionee”“Optionee” means a person to whom a stock option is granted under this Plan or any successor to the rights of such person under this Plan by reason of the death of such person.
(p) “Participant”“Participant” means a person to whom an Award is granted under the Plan.
(q) “Performance“Performance Award” means an Award granted pursuant to Article IV.
(r) “Performance“Performance Objectives” means the objectives established by the Committee pursuant to Section 4.1(b).
(s) “Performance“Performance Period” means the period over which the performance of a holder of a Performance Award is measured.
(t) “Plan”“Plan” means this Kirby Corporation 2005 Stock and Incentive Plan.
(u) “Restricted“Restricted Stock” means Shares granted under this Plan that are subject to restrictions imposed by the Committee pursuant to Article III.
(v) “Restricted“Restricted Stock Award” means an award of Restricted Stock under this Plan.
(w) “Section“Section 162(m) Participant” means each Participant who would be a “covered employee” under Section 162(m) of the Code.
(x) “Share”“Share” means a share of the common stock, par value ten cents ($0.10) per share, of the Company.
(y) “Subsidiary”“Subsidiary” means any corporation (other than the Company) in any unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.
Section 1.3. Total Shares and LimitationsLimitations..
(a) The maximum number of Shares that may be issued under the Plan shall be Three Million (3,000,000) Shares, which may be from Shares held in the Company’s treasury or from authorized and unissued Shares. If any Award granted under the Plan shall terminate, expire or be cancelled or surrendered as to any Shares, or the Award is paid in cash in lieu of Shares, the Shares that were subject to such Award shall not count against the above limit and shall again be available for grants under the Plan. Shares equal in number to the Shares surrendered in payment of the option price of an Option and Shares that are withheld in order to satisfy federal, state or local tax liability, shall not count against the above limit and shall be available for grants under the Plan. All Share numbers in the Plan reflect the2-for-1 split of the common stock of the Company effected on May 31, 2006.
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(b) The maximum aggregate number of Shares that may be issued under the Plan pursuant to the exercise of Incentive Stock Options shall be 1,000,000.
(c) The maximum number of Shares that may be issued to any Participant pursuant to the exercise of Options during any calendar year shall be 500,000.
(d) The maximum number of Shares that may be issued to any Participant pursuant to any Performance Award during the term of the Plan shall be 400,000.
(e) The maximum amount of cash that may be paid to any Participant pursuant to any Performance Award during any calendar year shall be $3,000,000.
Section 1.4. Awards Under the Plan.
(a) Only Eligible Persons may receive awards under the Plan. Awards to Eligible Persons may be in the form of (i) Options; (ii) shares of Restricted Stock; (iii) Performance Awards; or (iv) any combination of the foregoing. No Award shall confer on any person any right to continue as an employee of the Company or any Subsidiary.
(b) Each Award shall be evidenced by an agreement containing any terms deemed necessary or desirable by the Committee that are not inconsistent with the Plan or applicable law.
ARTICLE II
STOCK OPTIONS
Section2.1. Grant of Options. The Committee may from time to time grant Options to Eligible Persons. Options may be Incentive Stock Options or Nonincentive Stock Options as designated by the Committee on or before the Date of Grant. If no such designation is made by the Committee for an Option, the Option shall be a Nonincentive Stock Option. The aggregate Fair Market Value (determined as of the Date of Grant) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by an Optionee during any calendar year under the Plan and all such plans of the Company and any parent or subsidiary of the Company (as defined in Section 424 of the Code) shall not exceed $100,000.
Section2.2. Exercise Price. The exercise price per Share for any Option shall be determined by the Committee, but shall not be less than the Fair Market Value on the Date of Grant and shall not be less than 110% of the Fair Market Value on the Date of Grant for any Incentive Stock Option if the Optionee is a person who owns directly or indirectly (within the meaning of Section 422(b)(6) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company.
Section2.3. Term of Option. The term of an Option shall be determined by the Committee, provided that, in the case of an Incentive Stock Option, if the grant is to a person who owns directly or indirectly (within the meaning of Section 422(b)(6) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, the term of the Option shall not exceed five years from the Date of Grant. Notwithstanding any other provision of this Plan, no Option shall be exercised after the expiration of its term.
Section2.4. Vesting. Options shall be exercisable at such times and subject to such terms and conditions as the Committee shall specify in the option agreement. Unless the option agreement specifies otherwise, the Committee shall have discretion at any time to accelerate such times and otherwise waive or amend any conditions in respect of all or any portion of any Options. Notwithstanding the other provisions of this Section 2.4 and unless otherwise provided in the option agreement, upon the occurrence of a Change in Control, all Options outstanding at the time of the Change in Control shall become immediately exercisable.
Section2.5. Termination of OptionsOptions..
(a) Except as otherwise provided in the option agreement, the portion of an Option that is exercisable shall automatically and without notice terminate upon the earliest to occur of the following:
(i) thirty (30) days after the date on which the Optionee ceases to be an Employee for any reason other than (x) death, (y) Disability or (z) termination for cause;
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(ii) one (1) year after the date on which the Optionee ceases to be an Employee as a result of a Disability;
(iii) either (y) one (1) year after the death of the Optionee or (z) six (6) months after the death of the Optionee if the Optionee dies during the30-day period described in Section 2.5(a)(i) or the one-year period described in Section 2.5(a)(ii);
(iv) the date on which the Optionee ceases to be an Employee as a result of a termination for cause; and
(v) the tenth anniversary of the Date of Grant of the Option.
(b) The portion of an Option that is not exercisable shall automatically and without notice terminate on the date on which the Optionee ceases to be an Employee for any reason.
(c) The Committee shall have discretion at any time to extend the term of any Nonincentive Stock Option to any date that is not later than the date described in Section 2.5(a)(v).
Section2.6. Exercise of Options. An Option may be exercised in whole or in part to the extent exercisable in accordance with Section 2.4 and the option agreement. An Option shall be deemed exercised when (i) the Company has received written notice of such exercise in accordance with the terms of the Option and (ii) full payment of the aggregate exercise price of the Shares as to which the Option is exercised has been made. Unless further limited by the Committee for any Option, the exercise price of any Shares purchased shall be paid solely in cash, by certified or cashier’s check, by money order, by personal check or with Shares owned by the Optionee for at least six months, or by a combination of the foregoing. If the exercise price is paid in whole or in part with Shares, the value of the Shares surrendered shall be their Fair Market Value on the date received by the Company.
Section2.7. Corporate TransactionsTransactions..
(a) In the event of a merger, consolidation or other reorganization of the Company in which the Company is not the surviving entity, the Board or the Committee may provide for payment in cash or in securities of the Company or the surviving entity in lieu of and in complete satisfaction of Options.
(b) Except as otherwise expressly provided herein, the issuance by the Company of shares of its capital stock of any class, or securities convertible into shares of capital stock of any class, either in connection with direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of or exercise price of Shares then subject to outstanding Options granted under the Plan.
(c) Without limiting the generality of the foregoing, the existence of outstanding Options granted under the Plan shall not affect in any manner the right or power of the Company to make, authorize or consummate (i) any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business; (ii) any merger or consolidation of the Company; (iii) any issue by the Company of debt securities, or preferred or preference stock that would rank above the Shares subject to outstanding Options; (iv) the dissolution or liquidation of the Company; (v) any sale, transfer or assignment of all or any part of the assets or business of the Company; or (vi) any other corporate act or proceeding, whether of a similar character or otherwise.
Section2.8. Issuance of Shares. No person shall be, or have any of the rights or privileges of, a stockholder of the Company with respect to any of the Shares subject to any Option unless and until such Shares (whether represented by certificates or in book-entry or other electronic form) shall have been issued and delivered to such person.
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ARTICLE III
RESTRICTED STOCK
Section3.1. Grant of Restricted Stock Awards. The Committee may from time to time grant Restricted Stock Awards to Eligible Persons.
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Section3.2. Terms and Conditions of Restricted Stock Awards. Each Restricted Stock Award shall specify the number of shares of Restricted Stock awarded, the price, if any, to be paid by the Participant receiving the Restricted Stock Award, the date or dates on which the Restricted Stock will vest and any other terms and conditions that the Committee may determine. The vesting and number of shares of Restricted Stock may be conditioned upon the completion of a specified period of service with the Company or its Subsidiaries or upon the attainment of any performance goals established by the Committee, including without limitation goals related to the performance of the Company or any Subsidiary, division, department or other unit of the Company, the performance of the Company’s common stock or other securities, the performance of the recipient of the Restricted Stock Award or any combination of the foregoing.
Section 3.3. Restrictions on Transfer. Unless otherwise provided in the grant relating to a Restricted Stock Award, the Restricted Stock granted to a Participant (whether represented by certificates or in book-entry or other electronic form) shall be registered in the Participant’s name or, at the option of the Committee, not issued until such time as the Restricted Stock shall become vested or as otherwise determined by the Committee. If certificates are issued prior to the shares of Restricted Stock becoming vested, such certificates shall either be held by the Company on behalf of the Participant, or delivered to the Participant bearing a legend to restrict transfer of the certificate until the Restricted Stock has vested, as determined by the Committee. The Committee shall determine whether the Participant shall have the right to voteand/or receive dividends on the Restricted Stock before it has vested. Except as may otherwise be expressly permitted by the Committee, no share of Restricted Stock may be sold, transferred, assigned or pledged by the Participant until such share has vested in accordance with the terms of the Restricted Stock Award. Unless the grant of a Restricted Stock Award specifies otherwise, in the event that a Participant ceases to be an Employee before all the Participant’s Restricted Stock has vested, or in the event other conditions to the vesting of Restricted Stock have not been satisfied prior to any deadline for the satisfaction of such conditions set forth in the award agreement, the shares of Restricted Stock that have not vested shall be forfeited and any purchase price paid by the Participant for the forfeited Shares shall be returned to the Participant. At the time Restricted Stock vests (and, if the Participant has been issued legended certificates for Restricted Stock, upon the return of such certificates to the Company), such vested shares shall be issued to the Participant (or the beneficiary designated by the Participant in the event of death), in certificated or book entry or other electronic form, free of all restrictions.
Section 3.4. AcceleratedAccelerated Vesting.Notwithstanding the vesting conditions set forth in a Restricted Stock Award, unless the Restricted Stock Award grant or other agreement with the Participant specifies otherwise:
(a) the Committee may in its discretion at any time accelerate the vesting of Restricted Stock or otherwise waive or amend any conditions of a grant of a Restricted Stock Award, and
(b) all shares of Restricted Stock shall vest upon a Change in Control of the Company.
Section3.5. Section 83(b) Election. If a Participant receives Restricted Stock that is subject to a “substantial risk of forfeiture,” such Participant may elect under Section 83(b) of the Code to include in his or her gross income, for the taxable year in which the Restricted Stock is received, the excess of the Fair Market Value of such Restricted Stock on the Date of Grant (determined without regard to any restriction other than one which by its terms will never lapse), over the amount paid for the Restricted Stock. If the Participant makes the Section 83(b) election, the Participant shall (a) make such election in a manner that is satisfactory to the Committee, (b) provide the Company with a copy of such election, (c) agree to notify the Company promptly if any Internal Revenue Service or state tax agent, on audit or otherwise, questions the validity or correctness of such election or of the amount of income reportable on account of such election and (d) agree to such federal and state income tax withholding as the Committee may reasonably require in its sole discretion.
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ARTICLE IV
PERFORMANCE AWARDS
Section 4.1. Terms and Conditions of Performance Awards. The Committee may from time to time grant Awards that are intended to be “performance-based compensation,” which are payable in stock, cash or a combination thereof, at the discretion of the Committee.
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(a) Performance Period. The Committee shall establish a Performance Period for each Performance Award at the time such Performance Award is granted. A Performance Period may overlap with Performance Periods relating to other Performance Awards granted hereunder to the same Participant. The Committee shall not grant Performance Awards to Section 162(m) Participants after the earliest to occur of (i) the 90th90th day after the start of the Performance Period, (ii) the date on which 25% of the Performance Period has elapsed or (iii) the date on which the satisfaction of the Performance Objectives becomes substantially certain.
(b) Performance Objectives. The Committee shall establish written performance objectives for the Participant at the time of the grant of each Performance Award. Each Performance Award shall be contingent upon the achievement of the Performance Objectives established by the Committee. Performance Objectives shall be based on earnings, cash flow, economic value added, total stockholder return, return on equity, return on capital, return on assets, revenues, operating profit, EBITDA, net profit, earnings per share, stock price, cost reduction goals, debt to capital ratio, financial return ratios, profit or operating margins, working capital or other comparable objective tests selected by the Committee, or any combination of the foregoing, for the Company on a consolidated basis or, if applicable, for one or more Subsidiaries, divisions, departments or other units of the Company or one or more of its Subsidiaries.
(c) Amount; Frequency. The Committee shall determine at the time of grant of Performance Awards the target and maximum values of Performance Awards and the date or dates when Performance Awards are earned.
(d) Payment. Following the end of each Performance Period, the holder of each Performance Award will be entitled to receive payment of an amount, not exceeding the maximum value of the Performance Award, based on the achievement of the Performance Objectives for such Performance Period, as determined in writing by the Committee. Unless otherwise provided in the Performance Award, if the Participant exceeds the specified minimum level of acceptable achievement but does not attain the Performance Objectives, the Participant shall be deemed to have partly earned the Performance Award, and shall become entitled to receive a portion of the total award, as determined by the Committee. Unless otherwise provided in the Performance Award, if a Performance Award is granted after the start of a Performance Period, the Performance Award shall be reduced to reflect the portion of the Performance Period during which the Performance Award was in effect.
(e) Termination of Employment. Unless otherwise provided in the Performance Award, a Participant who receives a Performance Award and who ceases to be an Employee as a result of death, Disability or retirement before the end of the applicable Performance Period shall be entitled to receive, to the extent earned as a result of the full or partial achievement of the Performance Objectives during the Performance Period, a portion of the Performance Award that is proportional to the portion of the Performance Period during which the Participant was employed, with payment to be made following the end of the Performance Period. Unless otherwise provided in the Performance Award, a Participant who receives a Performance Award who ceases to be an Employee for any reason other than death, Disability or retirement shall not be entitled to any part of the Performance Award unless the Committee determines otherwise.
(f) Accelerated Vesting. Notwithstanding the vesting conditions set forth in a Performance Award, unless the Performance Award specifies otherwise (i) the Committee may in its discretion at any time accelerate the time at which the Performance Award is considered to have been earned or otherwise waive or amend any conditions (including but not limited to Performance Objectives) in respect of a Performance Award, and (ii) all Performance Awards shall be considered earned upon a Change in Control of the Company. In addition, upon a Change in Control of the Company, unless a Performance Award specifies otherwise, each Participant shall receive the target Performance Award such Participant could have earned for the proportionate part of the Performance Period prior to the Change in Control, and shall retain the right to earn any additional portion of his or her Performance Award if such Participant remains in the Company’s employ through the end of the Performance Period.
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(g) Stockholder Rights. The holder of a Performance Award shall, as such, have none of the rights of a stockholder of the Company.
(h) Annual Incentive Plan. Cash awards based on the attainment of the performance objectives established under the Company’s Annual Incentive Plan may, in the Committee’s discretion, be considered Performance Awards granted under the Plan, provided that such awards are subject to the terms and conditions of this Article IV.
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ARTICLE V
ADDITIONAL PROVISIONS
Section5.1. Administration of the Plan. The Plan shall be administered by the Committee. The Committee shall have the authority to interpret the provisions of the Plan, to adopt such rules and regulations for carrying out the Plan as it may deem advisable, to decide conclusively all questions arising with respect to the Plan, to establish performance criteria in respect of Awards under the Plan, to determine whether Plan requirements have been met for any Participant in the Plan and to make all other determinations and take all other actions necessary or desirable for the administration of the Plan. All decisions and acts of the Committee shall be final and binding upon all affected Participants. If there is no Committee, the Board shall administer the Plan and in such case all references to the Committee shall be deemed to be references to the Board.
Section 5.2. Adjustments for Changes in Capitalization. In the event of any (a) stock dividends, stock splits, recapitalizations, combinations, exchanges of shares, mergers, consolidations, liquidations,split-ups, split-offs, spin-offs or other similar changes in capitalization, (b) distributions to stockholders, including a rights offering, other than regular cash dividends, (c) changes in the outstanding stock of the Company by reason of any increase or decrease in the number of issued Shares resulting from asplit-up or consolidation of Shares or any similar capital adjustment or the payment of any stock dividend, (d) Share repurchase at a price in excess of the market price of the Shares at the time such repurchase is announced or (e) other similar increase or decrease in the number of the Shares, the Committee, in its sole discretion, shall make appropriate adjustment in the number and kind of shares authorized by the Plan (including the numbers of Shares specified in Section 1.3(b) and (c)), in the number, price or kind of shares covered by the Awards and in any outstanding Awards under the Plan. In addition, upon the occurrence of any event described in this Section 5.2, the Committee, in its sole discretion, shall make appropriate adjustment in the limits specified in Section 1.3(b), (c) and (d) so that the effect of such limits is, as nearly as practicable, equivalent to the effect of such limits prior to the event in question, provided that any such adjustment complies with applicable laws and does not cause an award that is intended to satisfy the performance-based compensation exception under Section 162(m) of the Code to fail to satisfy the exception. In the event of any adjustment in the number of Shares covered by any Award, any fractional Shares resulting from such adjustment shall be disregarded and each such Award shall cover only the number of full Shares resulting from such adjustment.
Section 5.3. Amendment.
(a) The Board may amend or modify the Plan in any respect at any time, subject to stockholder approval if required by applicable law or regulation or by applicable stock exchange rules. Such action shall not impair any of the rights of any Participant with respect to any Award outstanding on the date of the amendment or modification without the Participant’s written consent.
(b) The Committee shall have the authority to amend any Award to include any provision which, at the time of such amendment, is authorized under the terms of the Plan; however, no outstanding Award may be revoked or altered in a manner unfavorable to the Participant without the written consent of the Participant.
Section 5.4. Transferability of Awards. An Award shall not be transferable by the Participant otherwise than by will or the laws of descent and distribution. So long as a Participant lives, only such Participant or his or her guardian or legal representative shall have the right to exercise such Award.
Section5.5. Beneficiary. A Participant may file with the Company a written designation of beneficiary, on such form as may be prescribed by the Committee, to receive any Shares, Awards or payments that become deliverable to the Participant pursuant to the Plan after the Participant’s death. A Participant may, from time to time, amend or revoke a designation of beneficiary. If no designated beneficiary survives the Participant, the executor or administrator of the Participant’s estate shall be deemed to be the Participant’s beneficiary.
Section5.6. Non-uniform Determinations. Determinations by the Committee under the Plan (including, without limitation, determinations of the Eligible Persons to receive Awards, the form, amount and timing of Awards, the terms and provisions of Awards and the agreements evidencing Awards and provisions with respect to termination of employment) need not be uniform and may be made by the Committee selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated.
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Section 5.7. Duration and Termination. The Plan shall be of unlimited duration, provided that no Incentive Stock Option shall be granted under the Plan on or after the tenth anniversary of the effective date of the Plan. The Board may suspend, discontinue or terminate the Plan at any time. Such action shall not impair any of the rights of any holder of any Award outstanding on the date of the Plan’s suspension, discontinuance or termination without the holder’s written consent.
Section5.8. Withholding. Prior to the issuance of any Shares under the Plan, arrangements satisfactory to the Committee in its sole discretion shall have been made for the Participant’s payment to the Company of the amount, if any, that the Committee determines to be necessary for the Company or Subsidiary employing the Participant to withhold in accordance with applicable federal or state income tax withholding requirements. If the Committee allows Shares to be withheld from an Award to satisfy such withholding requirements, the amount withheld in Shares shall not exceed the minimum amount required to be withheld, determined on the date that the amount of tax to be withheld is to be determined. When payments under the Plan are made in cash, such payments shall be net of an amount sufficient to satisfy such withholding requirements.
Section5.9. Agreements and Undertakings. As a condition of any issuance or transfer of Shares, the Committee may obtain such agreements or undertakings, if any, as it may deem necessary or advisable to assure compliance with any provision of the Plan, any agreement or any law or regulation including, but not limited to, the following:
(a) a representation, warranty or agreement by the Participant to the Company that the Participant is acquiring the Shares for investment and not with a view to, or for sale in connection with, the distribution of any such Shares; and
(b) a representation, warranty or agreement to be bound by any restrictions that are, in the opinion of the Committee, necessary or appropriate to comply with the provisions of any securities law deemed by the Committee to be applicable to the issuance of the Shares.
Section 5.10. Uncertificated Shares. In lieu of issuing stock certificates for Shares acquired pursuant to the Plan, the Company may issue such Shares in book-entry or other electronic or uncertificated form, unless prohibited by applicable law or regulation or by applicable stock exchange rules.
Section5.11. Governing Law. The Plan shall be governed by the laws of the State of Texas except to the extent that federal law or Nevada corporate law is controlling.
Section5.12. Effective Date. The effective date of the Existing Plan was April 26, 2005. The Plan amends and restates the Existing Plan in its entirety. Such amendment and restatement was effective upon approval by the stockholders of the Company on April 22, 2008.
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EXHIBIT C
KIRBY CORPORATION
2000 NONEMPLOYEE DIRECTOR STOCK PLAN
ARTICLE I
GENERAL
Section 1.1. Purpose. The purpose of this Plan is to advance the interests of Kirby Corporation, a Nevada corporation (the “Company”), by providing an additional incentive to attract and retain qualified and competent directors, upon whose efforts and judgment the success of the Company is largely dependent, through the encouragement of stock ownership in the Company by such persons.
Section 1.2. Definitions. As used herein, the following terms shall have the meaning indicated:
(a) “Award” means a grant under this Plan in the form of an Option or Restricted Stock.
(b) “Board” means the Board of Directors of the Company.
(c) “Change in Control” means the occurrence of any of the following events:
(i) Any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) becomes the beneficial owner, directly or indirectly, of voting securities representing thirty percent (30%) or more of the combined voting power of the Company’s then outstanding voting securities or, if a person is the beneficial owner, directly or indirectly, of voting securities representing thirty percent (30%) or more of the combined voting power of the Company’s outstanding voting securities as of the date a particular Award is granted, such person becomes the beneficial owner, directly or indirectly, of additional voting securities representing ten percent (10%) or more of the combined voting power of the Company’s then outstanding voting securities;
(ii) During any period of twelve (12) months, individuals who at the beginning of such period constitute the Board cease for any reason to constitute a majority of the Directors unless the election, or the nomination for election by the Company’s stockholders, of each new Director was approved by a vote of at least a majority of the Directors then still in office who were Directors at the beginning of the period;
(iii) The stockholders of the Company approve (A) any consolidation or merger of the Company or any Subsidiary that results in the holders of the Company’s voting securities immediately prior to the consolidation or merger having (directly or indirectly) less than a majority ownership interest in the outstanding voting securities of the surviving entity immediately after the consolidation or merger, (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company or (C) any plan or proposal for the liquidation or dissolution of the Company;
(iv) The stockholders of the Company accept a share exchange, with the result that stockholders of the Company immediately before such share exchange do not own, immediately following such share exchange, at least a majority of the voting securities of the entity resulting from such share exchange in substantially the same proportion as their ownership of the voting securities outstanding immediately before such share exchange; or
(v) Any tender or exchange offer is made to acquire thirty percent (30%) or more of the voting securities of the Company, other than an offer made by the Company, and shares are acquired pursuant to that offer.
For purposes of this definition, the term “voting securities” means equity securities, or securities that are convertible or exchangeable into equity securities, that have the right to vote generally in the election of Directors.
(d) “Code” means the Internal Revenue Code of 1986, as amended.
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(e) “Committee” means the Compensation Committee, if any, appointed by the Board.
(f) “Compensation Plan” means the written plan or program in effect from time to time, as approved by the Board, which sets forth the compensation to be paid to Eligible Directors.
(g) “Date of Grant” means the date on which an Option or Restricted Stock is granted to an Eligible Director.
(h) “Director” means a member of the Board.
(i) “Eligible Director” means a Director who is not an employee of the Company or a Subsidiary.
(j) “Existing Plan” means the 2000 Nonemployee Director Stock Option Plan, as amended by the Board on January 27, 2004 and approved by the stockholders of the Company on April 27, 2004, and as further amended by the Board effective April 26, 2005 and January 22, 2007.
(k) “Fair Market Value” of a Share means the closing price on the New York Stock Exchange on the day of reference. If the Shares are not listed for trading on the New York Stock Exchange, the Fair Market Value on the date of reference shall be determined by any fair and reasonable means prescribed by the Committee.
(l) “Nonincentive Stock Option” means an option that is not an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended.
(m) “Option” means any option granted under this Plan.
(n) “Optionee” means a person to whom a stock option is granted under this Plan or any successor to the rights of such person under this Plan by reason of the death of such person.
(o) “Payment Date” means the last day of a calendar quarter.
(p) “Plan” means this 2000 Nonemployee Director Stock Plan for Kirby Corporation, as amended from time to time.
(q) “Restricted Stock” means Shares granted under this Plan that are subject to restrictions described in Article III and the Compensation Plan.
(r) “Share” means a share of the common stock, par value ten cents ($0.10) per share, of the Company.
(s) “Subsidiary” means any corporation (other than the Company) in any unbroken chain of corporations beginning with the Company if, at the time of the granting of the Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
Section 1.3. Total Shares. The maximum number of Shares that may be issued under this Plan shall be One Million (1,000,000) Shares, which may be from Shares held in the Company’s treasury or from authorized and unissued Shares. If any Award granted under the Plan shall terminate, expire or be cancelled or surrendered as to any Shares, new Options may thereafter be granted covering such Shares or such Shares may thereafter be issued as Restricted Stock. All Share numbers in the Plan reflect the2-for-1 split of the common stock of the Company effected on May 31, 2006.
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ARTICLE II
STOCK OPTIONS
Section 2.1. Automatic Grant of Options. Options shall automatically be granted to Eligible Directors as provided in Sections 2.2, 2.3 and 2.4. All Options shall be Nonincentive Stock Options. Each Option shall be evidenced by an option agreement containing such terms deemed necessary or desirable by the Committee that are not inconsistent with the Plan or any applicable law. Neither the Plan nor any Option shall confer upon any person any right to continue to serve as a Director.
Section 2.2. Automatic One-Time Grant. Each Eligible Director shall automatically be granted an Option for TEN THOUSAND (10,000) Shares on the date of such Eligible Director’s first election as a Director.
Section 2.3. Automatic Annual Grants. Immediately after each annual meeting of stockholders of the Company, each Eligible Director shall automatically be granted an Option for SIX THOUSAND (6,000) Shares.
Section 2.4. Election to Receive Options. If the Compensation Plan permits Eligible Directors to elect to receive an Option in lieu of all or part of Director fees otherwise payable in cash, each Eligible Director who has properly and timely made such election as provided in the Compensation Plan shall automatically be granted an Option for a number of Shares equal to (i) the amount of the fee such Eligible Director elects to receive in the form of an Option divided by (ii) the Fair Market Value of a Share on the Date of Grant multiplied by (iii) 3, with the result rounded to the nearest whole Share.
Section 2.5. Option Price. The option price per Share for any Option shall be the Fair Market Value on the Date of Grant.
Section 2.6. Date of Grant.
(a) The Date of Grant of an Option granted under Section 2.2 shall be the date of the Eligible Director’s first election as a Director.
(b) The Date of Grant of an Option granted under Section 2.3 shall be the date of the annual meeting of stockholders of the Company to which the grant relates.
(c) The Date of Grant of an Option granted under Section 2.4 shall be the date of the next annual meeting of stockholders after the election by the Eligible Director pursuant to the Compensation Plan to receive the Option in lieu of cash fees, except that, for an Eligible Director elected between annual stockholder meetings, the Date of Grant shall be the date of his or her election as a Director.
Section 2.7. Vesting.
(a) An Option granted under Section 2.2 shall be exercisable on or after the Date of Grant.
(b) An Option granted under Section 2.3 shall become exercisable six months after the Date of Grant.
(c) An Option granted under Section 2.4 shall become exercisable on the Payment Date(s) following the Date of Grant as provided in this Section 2.7(c). The number of Shares as to which an Option granted under Section 2.4 will become exercisable on each Payment Date after the Date of Grant shall equal the number of Shares subject to the Option divided by the number of Payment Dates occurring after the Date of Grant and before the first anniversary of the most recent annual meeting of stockholders of the Company.
(d) Notwithstanding the other provisions of this Section 2.7, (i) an Option shall only become exercisable as provided in this Section 2.7 if the Optionee is a Director at the time the Option would otherwise become exercisable and (ii) upon the occurrence of a Change in Control, all Options outstanding at the time of the Change in Control shall become immediately exercisable.
Section 2.8. Term of Options. The portion of an Option that is exercisable shall automatically and without notice terminate upon the earlier of (a) one (1) year after the Optionee ceases to be a Director for any reason or (b) ten (10) years after the Date of Grant of the Option. The portion of an Option that is not exercisable shall automatically and without notice terminate at the time the Optionee ceases to be a Director for any reason.
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Section 2.9. Exercise of Options. Any Option may be exercised in whole or in part to the extent exercisable in accordance with Section 2.7. An Option shall be deemed exercised when (i) the Company has received written notice of such exercise in accordance with the terms of the Option and (ii) full payment of the aggregate option price of the Shares as to which the Option is exercised has been made. Unless further limited by the Committee in any Option, the option price of any Shares purchased shall be paid solely in cash, by certified or cashier’s check, by money order, by personal check or with Shares owned by the Optionee for at least six months, or by a combination of the foregoing. If the option price is paid in whole or in part with Shares, the value of the Shares surrendered shall be their Fair Market Value on the date received by the Company.
Section 2.10. Adjustment of Shares.
(a) If at any time while the Plan is in effect or unexercised Options are outstanding, there shall be any increase or decrease in the number of issued and outstanding Shares through the declaration of a stock dividend or through any recapitalization resulting in a stock split, combination or exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the maximum number of Shares then subject to being optioned under the Plan, and the numbers of Options to be granted under Sections 2.2, 2.3 and 2.4, so that the same proportion of the Company’s issued and outstanding Shares shall continue to be subject to being so optioned, and
(ii) appropriate adjustment shall be made in the number of Shares and the exercise price per Share thereof then subject to any outstanding Option, so that the same proportion of the Company’s issued and outstanding Shares shall remain subject to purchase at the same aggregate exercise price.
(b) In the event of a merger, consolidation or other reorganization of the Company in which the Company is not the surviving entity, the Board or the Committee may provide for any or all of the following alternatives: (i) for Options to become immediately exercisable, (ii) for exercisable Options to be cancelled immediately prior to such transaction, (iii) for the assumption by the surviving entity of the Plan and the Options, with appropriate adjustments in the number and kind of shares and exercise prices or (iv) for payment in cash or stock in lieu of and in complete satisfaction of Options.
(c) Any fractional shares resulting from any adjustment under this Section 2.10 shall be disregarded and each Option shall cover only the number of full shares resulting from such adjustment.
(d) Except as otherwise expressly provided herein, the issuance by the Company of shares of its capital stock of any class, or securities convertible into shares of capital stock of any class, either in connection with direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of or exercise price of Shares then subject to outstanding Options granted under the Plan.
(e) Without limiting the generality of the foregoing, the existence of outstanding Options granted under the Plan shall not affect in any manner the right or power of the Company to make, authorize or consummate (i) any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business; (ii) any merger or consolidation of the Company; (iii) any issue by the Company of debt securities, or preferred or preference stock that would rank above the Shares subject to outstanding Options; (iv) the dissolution or liquidation of the Company; (v) any sale, transfer or assignment of all or any part of the assets or business of the Company; or (vi) any other corporate act or proceeding, whether of a similar character or otherwise.
Section 2.11. Transferability of Options. Each Option shall provide that such Option shall not be transferable by the Optionee otherwise than by will or the laws of descent and distribution and that so long as an Optionee lives, only such Optionee or his guardian or legal representative shall have the right to exercise such Option.
Section 2.12. Issuance of Shares. No person shall be, or have any of the rights or privileges of, a stockholder of the Company with respect to any of the Shares subject to any Option unless and until such Shares (whether in certificated or in book entry or other electronic form) shall have been issued and delivered to such person. As a condition of any transfer of Shares, the Committee may obtain such agreements or undertakings, if any,
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as it may deem necessary or advisable to assure compliance with any provision of the Plan, any agreement or any law or regulation including, but not limited to, the following:
(a) a representation, warranty or agreement by the Optionee to the Company, at the time any Option is exercised, that the Optionee is acquiring the Shares for investment and not with a view to, or for sale in connection with, the distribution of any such Shares; and
(b) a representation, warranty or agreement to be bound by any restrictions that are, in the opinion of the Committee, necessary or appropriate to comply with the provisions of any securities law deemed by the Committee to be applicable to the issuance of the Shares.
ARTICLE III
RESTRICTED STOCK
Section 3.1. Automatic Grants of Restricted Stock. Restricted Stock shall automatically be granted to Eligible Directors as provided in Sections 3.2 and 3.3. Each Restricted Stock grant shall be evidenced by an agreement containing such terms deemed necessary or desirable by the Committee that are not inconsistent with the Plan or any applicable law. No grant of Restricted Stock shall confer upon any person any right to continue to serve as a Director.
Section 3.2. Automatic Annual Grants. Immediately after each annual meeting of stockholders of the Company, each Eligible Director shall automatically be granted ONE THOUSAND (1,000) shares of Restricted Stock.
Section 3.3. Election to Receive Restricted Stock. If the Compensation Plan permits Eligible Directors to elect to receive Restricted Stock in lieu of all or part of Director fees otherwise payable in cash, each Eligible Director who has properly and timely made such election as provided in the Compensation Plan shall automatically be granted a number of Shares of Restricted Stock equal to (i) the amount of the fee such Eligible Director elects to receive in the form of Restricted Stock divided by (ii) the Fair Market Value of a Share on the Date of Grant multiplied by (iii) 1.2, with the result rounded to the nearest whole Share.
Section 3.4. Date of Grant.
(a) The Date of Grant of Restricted Stock granted under Section 3.2 shall be the date of the annual meeting of stockholders of the Company to which the grant relates.
(b) The Date of Grant of Restricted Stock granted under Section 3.3 shall be the date of the next annual meeting of stockholders after the election by the Eligible Director pursuant to the Compensation Plan to receive the Restricted Stock in lieu of cash fees, except that, for an Eligible Director elected between annual stockholder meetings, the Date of Grant shall be the date of his or her election as a Director.
Section 3.5. Vesting.
(a) Restricted Stock granted under Section 3.2 shall vest six months after the Date of Grant.
(b) Restricted Stock granted under Section 3.3 shall vest on the Payment Date(s) following the Date of Grant as provided in this Section 3.5(a). The number of Shares of Restricted Stock granted under Section 3.3 that will vest on each Payment Date after the Date of Grant shall equal the number of Shares of Restricted Stock granted divided by the number of Payment Dates occurring after the Date of Grant and before the first anniversary of the most recent annual meeting of stockholders of the Company.
(c) Notwithstanding the other provisions of this Section 3.5, (i) Restricted Stock shall only vest as provided in this Section 3.5 if the holder is a Director at the time the Restricted Stock would otherwise vest and (ii) upon the occurrence of a Change in Control, all Restricted Stock issued under the Plan that is outstanding at the time of the Change in Control shall immediately vest.
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(d) Notwithstanding the vesting conditions set forth in the Plan or the Compensation Plan, the Committee may in its discretion at any time accelerate the vesting of Restricted Stock or otherwise waive or amend any conditions of a grant of Restricted Stock under the Plan.
Section 3.6. Restrictions on Transfer. Restricted Stock granted to an Eligible Director under the Plan (whether represented by stock certificates or in book entry or other electronic form) shall be registered in the Director’s name or, at the option of the Committee, not issued until such time as the Restricted Stock shall become vested or as otherwise determined by the Committee. If certificates are issued prior to the Shares of Restricted Stock becoming vested, such certificates shall either be held by the Company on behalf of the Director, or delivered to the Director bearing a legend to restrict transfer of the certificate until the Restricted Stock has vested, as determined by the Committee. The Director shall have the right to vote and receive dividends on the Restricted Stock before it has vested. Except as may otherwise be expressly permitted by the Committee, no Share of Restricted Stock may be sold, transferred, assigned or pledged by the Director until such Share has vested. In the event that a Director ceases to be a Director before all the Director’s Restricted Stock has vested, the Shares of Restricted Stock that have not vested shall be forfeited. At the time Restricted Stock vests (and, if the Director has been issued legended certificates for Restricted Stock, upon the return of such certificates to the Company), such vested Shares shall be issued to the Director, in certificated or book entry or other electronic form, free of all restrictions.
Section 3.7. Issuance of Shares. As a condition of the issuance of any Shares of Restricted Stock, the Committee may obtain such agreements or undertakings, if any, as it may deem necessary or advisable to assure compliance with any provision of the Plan, any agreement or any law or regulation including, but not limited to, the following:
(a) a representation, warranty or agreement by the Eligible Director to the Company that the Eligible Director is acquiring the Shares for investment and not with a view to, or for sale in connection with, the distribution of any such Shares; and
(b) a representation, warranty or agreement to be bound by any restrictions that are, in the opinion of the Committee, necessary or appropriate to comply with the provisions of any securities law deemed by the Committee to be applicable to the issuance of the Shares.
Section 3.8. Section 83(b) Election. If a Director receives Restricted Stock that is subject to a “substantial risk of forfeiture,” the Director may elect under Section 83(b) of the Code to include in his or her gross income, for the taxable year in which the Restricted Stock is received, the Fair Market Value of such Restricted Stock on the Date of Grant. If the Director makes the Section 83(b) election, the Director shall (a) make such election in a manner that is satisfactory to the Committee, (b) provide the Company with a copy of such election and (c) agree to promptly notify the Company if any Internal Revenue Service or state tax agent, on audit or otherwise, questions the validity or correctness of such election or of the amount of income reportable on account of such election.
ARTICLE IV
ADDITIONAL PROVISIONS
Section 4.1. Administration of the Plan. The Plan shall be administered by the Committee. The Committee shall have the authority to interpret the provisions of the Plan, to adopt such rules and regulations for carrying out the Plan as it may deem advisable, to decide conclusively all questions arising with respect to the Plan and to make all other determinations and take all other actions necessary or desirable for the administration of the Plan. All decisions and acts of the Committee shall be final and binding upon all affected Optionees and holders of Restricted Stock. If there is no Committee, the Board shall administer the Plan and in such case all references to the Committee shall be deemed to be references to the Board.
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Section 4.2. Adjustment of Shares. If at any time while the Plan is in effect, there shall be any increase or decrease in the number of issued and outstanding Shares through the declaration of a stock dividend or through any recapitalization resulting in a stock split, combination or exchange of Shares, the Committee shall make an appropriate adjustment in the number and kind of Shares then subject to being issued under the Plan, so that the same proportion of the Company’s issued and outstanding Shares shall continue to be subject to issuance under the Plan upon the exercise of Options or as Restricted Stock.
Section 4.3. Amendment. The Board may amend or modify the Plan in any respect at any time, subject to stockholder approval if required by applicable law or regulation or by applicable stock exchange rules.
Section 4.4. Duration and Termination. The Plan shall be of unlimited duration. The Board may suspend, discontinue or terminate the Plan at any time. Such action shall not impair any of the rights of any holder of any Option or Restricted Stock outstanding on the date of the Plan’s suspension, discontinuance or termination without the holder’s written consent.
Section 4.5.5.12. Effective Date. The Plan amends and restates the Existing Plan in its entirety. Such amendment and restatement wasentirety, effective upon approval by the stockholders of the CompanyBoard on AprilJuly 22, 2008.
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| | ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 MMMMMMMMM ADD 6 Using ablack ink pen, mark your votes with an X as shown in X this example. Please do not write outside the designated areas. | | x | | |
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6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
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3 PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. 3 A | | Proposals — The Board of Directors recommends a vote FOR all the nominees listed and FOR Proposals 2 - 4. |
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and 3. 1. | | Election of Directors: | | For | | Against | | Abstain | | | | For | | Against | | Abstain | | | | For | | Against | | Abstain | | + |
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| | 01 - James R. Clark | | o | | o | | o | | — C. Sean Day 02 - David L. Lemmon | | o | | o | | o | | — William M. Lamont, Jr. 03 - George A. Peterkin, Jr. | | o | | o | | o | |
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| | 04 - Richard R. Stewart | | o | | o | | o | | | | | | | | | | | | | | | | | | |
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| | | | For | | Against | | Abstain | | | | | | | | For | | Against | | Abstain |
2. | | To approve amendments to the Kirby Corporation 2005 Stock and Incentive Plan. | | o | | o | | o | | | 3. | | | To approve an amendment to the Kirby Corporation 2000 Nonemployee Director Stock Option Plan. | | o | | o | | o |
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4. | | To ratify the selection of KPMG LLP as Kirby Corporation’s independent registered public accounting firm for 2008. | | o | | o | | o | | | 5. | | | In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. | | | | | | |
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— C. Berdon Lawrence For Against Abstain For Against Abstain 2. Reapproval of the material terms of the performance 3. Ratification of the selection of KPMG LLP as Kirby’s objectives under Kirby’s 2005 Stock and Incentive Plan. independent registered public accounting firm for 2010. 4. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. B | | Non-Voting Items |
Change of Address— Please print new address below. |
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C | | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
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Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. | | | Signature 1 — Please keep signature within the box. | | | Signature 2 — Please keep signature within the box. | |
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