UNITED
STATES
Securities
and Exchange Commission
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. __)
Filed
by
the registrant x
Filed
by
a party other than the registrant ¨
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Check
the appropriate box:
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Preliminary
proxy statement
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¨
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Confidential-For
Use of the
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Commission
Only (as permitted by Rule 14a-6(e) (2))
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x
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Definitive
proxy statement
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¨
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Definitive
additional materials
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¨
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Soliciting
material pursuant to Section 240.
14a-12
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Hudson
Technologies, Inc.
(Name
of
Registrant as Specified in Its Charter)
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of filing fee (Check the appropriate box):
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i) (1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is
calculated and state how it was determined).
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
Fee Paid:
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Fee
paid previously with preliminary materials.
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¨
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a) (2)
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(1)
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Amount
previously paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
party:
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(4)
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HUDSON
TECHNOLOGIES, INC.
PO
Box
1541, One Blue Hill Plaza
Pearl
River, New York 10965
July
25,
2008
Dear
Fellow Shareholders:
You
are
cordially invited to attend the Annual Meeting of Shareholders which will
be
held on Wednesday, August 27, 2008 at 10:00 A.M., local time at the Pearl
River
Hilton, 500 Veterans Memorial Highway, Pearl River, New York 10965. The Notice
of Annual Meeting and Proxy Statement which follow describe the business
to be
conducted at the meeting.
Whether
or not you plan to attend the Annual Meeting in person, it is important that
your shares be represented and voted. After reading the enclosed Notice of
Annual Meeting and Proxy Statement, I urge you to complete, sign, date and
return your proxy card in the envelope provided. If the address on the
accompanying material is incorrect, please inform our Transfer Agent,
Continental Stock Transfer & Trust Company, at 17 Battery Place, New York,
New York 10004, in writing, of the correct address.
Your
vote
is very important, and we will appreciate a prompt return of your signed
proxy
card. We hope to see you at the meeting.
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Cordially,
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 |
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Kevin
J. Zugibe, P.E.
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Chairman
of the Board and
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Chief
Executive Officer
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HUDSON
TECHNOLOGIES, INC.
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON AUGUST 27, 2008
To
the
Shareholders of HUDSON TECHNOLOGIES, INC.:
NOTICE
IS
HEREBY GIVEN that the Annual Meeting of Shareholders of Hudson Technologies,
Inc. (the “Company”) will be held on Wednesday, August 27, 2008 at 10:00 A.M.,
local time at the Pearl River Hilton, 500 Veterans Memorial Highway, Pearl
River, New York 10965 for the following purposes:
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1.
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To
elect a class of two directors who shall serve until the Annual
Meeting of
Shareholders to be held in 2010 or until their successors have
been
elected and qualified;
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2.
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To
approve the Company’s 2008 Stock Incentive Plan; and
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3.
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To
transact such other business as may properly come before the
meeting or
any adjournment or adjournments
thereof.
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Only
shareholders of record at the close of business on July 9, 2008 are entitled
to
notice of and to vote at the Annual Meeting or any adjournments
thereof.
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By
Order of the Board of Directors
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Stephen
P. Mandracchia
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Secretary
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July
25,
2008
IF
YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING:
PLEASE
FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED
FOR THAT PURPOSE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
THE
PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE PRESENT
AT
THE MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND EXERCISE
THE RIGHT TO VOTE YOUR SHARES PERSONALLY.
PROXY
STATEMENT
HUDSON
TECHNOLOGIES, INC.
ANNUAL
MEETING OF SHAREHOLDERS
TO
BE HELD ON AUGUST 27, 2008
This
proxy statement is furnished in connection with the solicitation of proxies
by
the Board of Directors of Hudson Technologies, Inc. (the "Company", “Hudson”,
“we” or “our”) for use at the Annual Meeting of Shareholders (the "Annual
Meeting") to be held on Wednesday, August 27, 2008, and including any
adjournment or adjournments thereof, for the purposes set forth in the
accompanying Notice of Meeting.
Management
intends to mail this proxy statement and the accompanying form of proxy to
shareholders on or about July 28, 2008.
Proxies
in the accompanying form, duly executed, returned to the management of the
Company and not revoked, will be voted at the Annual Meeting. Any proxy given
pursuant to such solicitation may be revoked by the shareholder at any time
prior to the voting of the proxy by a subsequently dated proxy, by written
notification to the Secretary of the Company, or by personally withdrawing
the
proxy at the Annual Meeting and voting in person.
The
address and telephone number of the principal executive offices of the Company
is:
PO
Box
1541, One Blue Hill Plaza
Pearl
River, New York 10965
Telephone
No.: (845) 735-6000
OUTSTANDING
STOCK AND VOTING RIGHTS
Only
shareholders of record at the close of business on July 9, 2008 (the "Record
Date") are entitled to notice of and to vote at the Annual Meeting. As of
the
Record Date, there were issued and outstanding 19,406,548 shares of the
Company's common stock, par value $.01 per share ("Common Stock"), the only
class of voting securities of the Company. Each share of Common Stock entitles
the holder thereof to one vote on each matter submitted to a vote at the
Annual
Meeting.
VOTING
PROCEDURES
Directors
will be elected by a plurality of the votes cast by the holders of Common
Stock
in person or represented by proxy at the Annual Meeting, provided a quorum
is
present at the meeting. Therefore, the two nominees receiving the greatest
number of votes cast at the meeting will be elected as directors of the Company.
All other matters to be acted upon at the meeting will be decided by the
majority of the votes cast by the holders of the shares of Common Stock present
in person or represented by proxy at the Annual Meeting, provided a quorum
is
present. A
quorum
will be present at the Annual Meeting if the holders of a majority of the
outstanding shares of Common Stock as of the Record Date are present in person
or represented by proxy. Votes will be counted and certified by one or more
Inspectors of Election who are expected to be employees of Continental Stock
Transfer & Trust Company, the Company's transfer
agent.
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In
accordance with applicable law, abstentions and "broker non-votes" (i.e.,
proxies from brokers or nominees indicating that such persons have not received
instructions from the beneficial owners or other persons entitled to vote
shares
as to a matter with respect to which the brokers or nominees do not have
discretionary power to vote) will be treated as present for purposes of
determining the presence of a quorum. Based upon the Company's understanding
of
the requirements of the law of the State of New York and the Certificate
of
Incorporation and By-laws, as amended (the "By-laws"), of the Company, "votes
cast" at a meeting of shareholders by the holders of shares entitled to vote
are
determinative of the outcome of the matter to be voted on. Failures to vote,
broker non-votes and abstentions will not be considered "votes
cast."
Proxies
will be voted in accordance with the instructions thereon. Unless otherwise
stated, all shares represented by such proxy will be voted as instructed.
Proxies may be revoked as noted above.
PROPOSAL
1
ELECTION
OF DIRECTORS
The
Company's By-laws provide that the Board of Directors (the "Board") is divided
into two classes. Each class is to have a term of two years (the term of
each
class expiring in alternating years) and is to consist, as nearly as possible,
of one-half of the number of directors constituting the entire Board. The
By-laws provide that the number of directors shall be fixed by the Board
of
Directors but in any event, shall be no less than five (5) (subject to decrease
by a resolution adopted by the shareholders).
At
the
Annual Meeting, a class of two directors will be elected for a two-year term
expiring at the Annual Meeting of Shareholders to be held in 2010. Messrs.
Dominic J. Monetta and Kevin J. Zugibe are the nominees for election to this
class. Vincent P. Abbatecola, Brian F. Coleman and Otto C. Morch will not
stand
for election at the Annual Meeting because their respective terms expire
at the
Annual Meeting of Shareholders to be held in 2009.
Proxies
will be voted for the nominees named below, unless authority is withheld.
Should
any nominee not be available for election, proxies will be voted for such
substitute nominee as may be designated by the Board of Directors. Each of
the
nominees has indicated to the Board that he will be available and is willing
to
serve.
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The
following is information with respect to the nominees for election as directors
at the Annual Meeting:
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Name
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Age
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Position(s)
with the Company
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Dominic
J. Monetta
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67
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Director
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Kevin
J. Zugibe
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44
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Director,
Chairman, Chief Executive Officer
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Dominic
J. Monetta, DPA, has
been
a Director of the Company since 1996. Since August 1993, Dr. Monetta has
been
the President of Resource Alternatives, Inc., a corporate development firm
concentrating on solving management and technological issues facing chief
executive officers and their senior executives. From 1991 to 1993, Dr. Monetta
served as the Director of Defense Research and Engineering for Research and
Advanced Technology, United States Department of Defense. From 1989 to 1991,
Dr.
Monetta served as the Director of the Office of New Production Reactors,
United
States Department of Energy.
Kevin
J. Zugibe, P.E., a
founder
of the Company, has been Chairman of the Board and Chief Executive Officer
of
the Company since its inception in 1991. From 1987 to 1994, Mr. Zugibe was
employed as a power engineer with Orange and Rockland Utilities, Inc., a
major
public utility, where he was responsible for all HVAC applications. Mr. Zugibe
is a licensed professional engineer, and from 1990 to 1994, he was also a
member
of Kevin J. Zugibe & Associates, a professional engineering firm. Mr. Zugibe
is the brother-in-law of Stephen P. Mandracchia.
The
following is information with respect to the directors whose terms of office
expire at the Annual Meeting of Shareholders to be held in the year 2009:
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Name
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Age
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Position
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||||
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Vincent
P. Abbatecola
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62
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Director
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Brian
F. Coleman
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46
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President
and Chief Operating Officer
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Otto
C. Morch
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75
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Director
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Vincent
P. Abbatecola
has been
a Director of the Company since 1994. Mr. Abbatecola is Vice President of
Abbey
Ice & Spring Water, Spring Valley, New York, where he has been employed
since 1971. Mr. Abbatecola is a former Trustee of Nyack Hospital. He also
serves
on the Rockland County Board of Governors and St. Thomas Aquinas College
President’s Council.
Brian
F. Coleman,
has
been President and Chief Operating Officer of the Company since August, 2001
and
served as Chief Financial Officer of the Company from 1997 until December
2002.
From 1987 to 1997, Mr. Coleman was employed by, and from 1995, was a partner
with BDO Seidman, LLP, the Company's independent auditors.
Otto
C. Morch
has been
a Director of the Company since 1996. Mr. Morch was a Senior Vice President
of
Commercial Banking at Provident Savings Bank, F.A. for more than five years
until his retirement in 1997.
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The
Board
of Directors has determined that each of Messrs. Abbatecola, Monetta and
Morch
is an “independent director” within the meaning of NASDAQ Marketplace Rule
4200.
Board
Meetings
A
total
of twelve meetings of the Board of Directors were held during the fiscal
year
ended December 31, 2007 (“Fiscal 2007”). During the Fiscal 2007 no director
attended fewer than 75 percent of the aggregate of (1) the Board meetings
that
were held, and (2) the meetings held by the committees of the Board on which
he
served.
Committees
of the Board of Directors
The
Board
of Directors has established a Compensation and Stock Option Committee, which
is
responsible for recommending to the independent directors the compensation
of
the Company's executive officers and for the administration of the Company's
employee benefit plans. The Compensation and Stock Option Committee is also
responsible for recommending to the directors the compensation of the Company’s
directors. Determination of the compensation of the executive officers is
made
by vote of the independent directors, and the determination of the compensation
of directors is made by vote of all directors. The executive officers do
not
determine executive or director compensation, but provide information and
recommendations to the Compensation and Stock Option Committee upon its request.
The Company has not engaged compensation consultants in connection with the
determination or recommendation of executive or director compensation. The
members of the Compensation and Stock Option Committee are Messrs. Abbatecola,
Coleman and Morch. The Compensation and Stock Option Committee held two meetings
during Fiscal 2007. The Compensation and Stock Option Committee does not
have a
charter.
The
Board
also has an Audit Committee which supervises the audit and financial procedures
of the Company and is responsible for the selection of the Company’s independent
registered public accountants. The members of the Audit Committee are Messrs.
Abbatecola, Morch and Monetta. The Board of Directors has determined that
each
member of the Audit Committee is an “independent director” within the meaning of
NASDAQ Marketplace Rule 4200 and applicable Securities and Exchange Commission
(“SEC”) rules under the Securities Exchange Act of 1934 (the “Exchange Act”).
The Audit Committee does not have a member that qualifies as a “financial
expert” under the federal securities laws. The members of the Audit Committee
have each been active in the business community and have broad and diverse
backgrounds, and financial experience. Two of the current members have served
on
the Company’s Audit Committee and have overseen the financial review by the
Company’s independent auditors for nine (9) years. The Company believes that the
current members of the Audit Committee are able to fully and faithfully perform
the functions of the Audit Committee and that the Company does not need to
install a “financial expert” on the Audit Committee. The Audit Committee held
seven meetings during Fiscal 2007. The Audit Committee has adopted a written
charter, a copy of which was previously filed as Appendix A to the Company’s
Definitive Proxy Statement Pursuant to Section 14(a) of the Exchange Act,
filed
November 13, 2007. The charter is not available on the Company’s website.
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The
Board
also has an Executive Committee which is authorized to exercise the powers
of
the Board of Directors in the general supervision and control of the business
affairs of the Company during the intervals between meetings of the Board.
The
members of the Executive Committee are Messrs. Abbatecola, Morch and Zugibe.
The
Board
also has an Occupational, Safety and Environmental Protection Committee,
which
is responsible for satisfying the Board that the Company's Environmental,
Health
and Safety policies, plans and procedures are adequate. The members of the
Occupational, Safety and Environmental Protection Committee are Messrs. Monetta
and Zugibe.
In
September 2007, the Board established a Nominating Committee whose members
consist of Messrs. Abbatecola, Monetta and Zugibe, and which was responsible
for
recommending to the independent directors nominees for election to the Board
at
the annual meeting of the shareholders to be held in 2008. In accordance
with
NASDAQ Marketplace Rule 4350(c)(4), the nominees for director at the Annual
Meeting named above were recommended by the Nominating Committee and selected
as
nominees to the Board by vote of a majority of the independent directors.
Shareholder nominations for directors of the Company will be considered by
the
Nominating Committee, or if no such committee exists at the time, by the
independent directors, subject to the shareholder complying with the procedures
described below. The Nominating Committee does not have a charter.
Audit
Committee Report
The
Audit
Committee held seven meetings during Fiscal 2007. In December 2007, the Audit
Committee met with management to review and discuss the audit and the procedures
and timing of the audit. In March 2008, the Audit Committee met with management
to review and discuss the audited financial statements. The Audit Committee
also
discussed with the Company’s independent auditors, BDO Seidman, LLP, the matters
required to be discussed by the Statement on Auditing Standards No. 61. As
required by Independence Standards Board Standard No. 1, “Independence
Discussion with Audit Committees,” the Audit Committee has received the required
written disclosures and confirming letter from BDO Seidman, LLP regarding
its
independence and has discussed with BDO Seidman, LLP its independence. Based
upon the review and discussions referred to above, the Audit Committee ratified
its prior recommendation to the Board of Directors that the audited financial
statements be included in the Company’s Annual Report on Form 10-KSB for the
year ended December 31, 2007.
The
Audit
Committee-
Vincent
Abbatecola, Otto Morch and Dominic Monetta.
Code
of Conduct and Ethics
The
Company has adopted a written code of conduct and ethics that applies to
all
directors, and employees, including the Company's principal executive officer,
principal financial officer, principal accounting officer or controller and
any persons performing similar functions. The Company will provide a
copy of its code of conduct and ethics to any person without charge upon
written
request addressed to Hudson Technologies, Inc., PO Box 1541, One Blue Hill
Plaza, Pearl River, New York 10965, Attention: Stephen P.
Mandracchia.
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Executive
officers
In
addition to Kevin J. Zugibe and Brian Coleman, Messrs. James R. Buscemi,
Charles
F. Harkins, Jr. and Stephen P. Mandracchia serve as executive officers of
the
Company. Executive officers are elected annually and serve at the pleasure
of
the Board. The following is information with respect to such executive
officers:
James
R. Buscemi, age
55,
has been
Chief Financial Officer of the Company since December 2002 and prior to that
time served as Corporate Controller since joining the Company in 1998. Prior
to
joining the Company, Mr. Buscemi held various financial positions within
Avnet,
Inc, including Chief Financial Officer of Avnet's electric motors and component
part subsidiary, Brownell Electro, Inc.
Charles
F. Harkins, Jr., age
46, has
been
Vice President of Sales of the Company since December 2003. Mr. Harkins has
served in a variety of capacities since joining the Company in 1992. Prior
to
joining the Company, Mr. Harkins served in the U.S. Army for 13 years attaining
the rank of Staff Sergeant; he is a graduate of the U.S. Army Engineering
School
and the U.S. Army Chemical School.
Stephen
P. Mandracchia,
age 48,
a founder of the Company, has been Vice President Legal and Regulatory of
the
Company since August 2003 and has been Secretary of the Company since 1995.
Mr.
Mandracchia has served in a variety of capacities with the Company since
1993.
Mr. Mandracchia was a member of the law firm of Martin, Vandewalle, Donohue,
Mandracchia & McGahan in Great Neck, New York until 1995 (having been
associated with such firm since 1983). Mr. Mandracchia is the brother in-law
of
Mr. Zugibe.
COMMUNICATIONS
WITH THE BOARD
The
Board
of Directors has established a process for shareholders to send communications
to the Board of Directors. Shareholders may communicate with the Board of
Directors individually or as a group by writing to: The Board of Directors
of
Hudson Technologies, Inc. c/o Corporate Secretary, PO Box 1541, One Blue
Hill
Plaza, Pearl River, NY 10965. Shareholders should identify their communication
as being from a shareholder of the Company. The Corporate Secretary may require
reasonable evidence that the communication or other submission is made by
a
shareholder of the Company before transmitting the communication to the Board
of
Directors.
BOARD
ATTENDANCE AT ANNUAL SHAREHOLDER MEETINGS
We
have a
policy that strongly encourages directors to attend our Annual Meeting of
Shareholders. Last year’s Annual Meeting of Shareholders was attended by all
five of our directors.
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CONSIDERATION
OF DIRECTOR NOMINEES RECOMMENDED BY SHAREHOLDERS
Shareholders
of Hudson wishing to recommend director candidates to the Board must submit
their recommendations in writing to the Nominating Committee of the Board,
c/o
Corporate Secretary, Hudson Technologies, Inc., PO Box 1541, One Blue Hill
Plaza, Pearl River, NY 10965.
The
Nominating Committee of the Board or, if no such committee exists at the
time,
the independent directors, will consider nominees recommended by Hudson’s
shareholders provided that the recommendation contains sufficient information
for the independent directors to assess the suitability of the candidate,
including the candidate’s qualifications. Candidates recommended by shareholders
that comply with these procedures will be considered either by the Nominating
Committee of the Board that is comprised solely of the Hudson’s independent
directors, or, in its absence, solely by the independent directors. The
recommendations must also state the name of the shareholder who is submitting
the recommendation. In addition, it must include information regarding the
recommended candidate relevant to a determination of whether the recommended
candidate would be barred from being considered independent under NASDAQ
Marketplace Rule 4200, or, alternatively, a statement that the recommended
candidate would not be so barred. Each nomination is also required to set
forth:
(i) a representation that the shareholder making the nomination is a holder
of
record of capital stock of Hudson entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to vote for the person or
persons
nominated; (ii) a description of all arrangements and understandings between
the
shareholder and each nominee and any other person or persons (naming such
person
or persons) pursuant to which the nomination was made by the shareholder;
(iii)
such other information regarding each nominee proposed by such shareholder
as
would be required to be included in a proxy statement filed pursuant to the
proxy rules of the SEC had the nominee been nominated by the Board of Directors;
(iv) and the consent of each nominee to serve as a director of Hudson if
so
elected. A nomination which does not comply with the above requirements or
that
is not received by the deadline referred to below will not be
considered.
The
qualities and skills sought in prospective members of the Board are determined
by the Board. The Board generally requires that director candidates be qualified
individuals who, if added to the Board, would provide the mix of director
characteristics, experience, perspectives and skills appropriate for Hudson.
Criteria for selection of candidates will include, but not be limited to:
(i)
business and financial acumen, as determined by the Board in its discretion,
(ii) qualities reflecting a proven record of accomplishment and ability to
work
with others, (iii) knowledge of Hudson’s industry, (iv) relevant experience and
knowledge of corporate governance practices, and (v) expertise in an area
relevant to Hudson. Such persons should not have commitments that would conflict
with the time commitments of a Director of Hudson.
DEADLINE
AND PROCEDURES FOR SUBMITTING BOARD NOMINATIONS
A
shareholder wishing to nominate a candidate for election to the Board at
the
Annual Meeting of Shareholders to be held in 2009, which we currently anticipate
will be held in or about June 2009, is required to give written notice
containing the required information specified above addressed to the Nominating
Committee of the Board, c/o Secretary of the Company, Hudson Technologies,
Inc.,
PO Box 1541, One Blue Hill Plaza, Pearl River, NY 10965 of his or her intention
to make such a nomination. The notice of nomination and other required
information must be received by Hudson’s Company’s Secretary no later than
January 31, 2009.
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Section
16(a) Compliance
Section
16(a) of the Exchange Act requires the Company's officers and directors and
persons who own more than 10% of a registered class of the Company's equity
securities (collectively, the "Reporting Persons") to file reports of ownership
and changes in ownership with the SEC. Reporting Persons are required by
SEC
regulations to furnish the Company with copies of all Section 16(a) forms
they
file.
Based
solely on the Company's review of the copies of such forms received by the
Company, the Company believes that during and for the year ended December
31,
2007 all filing requirements applicable to the Reporting Persons were complied
with.
PROPOSAL
2
APPROVAL
OF 2008 STOCK INCENTIVE PLAN
Subject
to the approval of the Company’s shareholders, the Board approved the Hudson
Technologies, Inc. 2008 Stock Incentive Plan (the “Stock Incentive Plan”) on
June 19, 2008.
General
Description of the Stock Incentive Plan
The
Stock
Incentive Plan may be administered by the Board or the Compensation and Stock
Option Committee of the Board or another committee appointed by the Board
from
among its members as provided in the Stock Incentive Plan. Presently, however,
it is anticipated that the Stock Incentive Plan, except as otherwise required
in
the Plan, will be administered by a committee consisting of non-employee
directors. As used throughout this section, the term “Administrator” refers to
either the Board, the Compensation and Stock Option Committee, or other Board
Committee in its role as administrator of the Stock Incentive Plan, if
applicable.
Under
the
Stock Incentive Plan, the Administrator is authorized to grant awards to
non-employee directors, executive officers and other employees of, and
consultants and advisors to, the Company or any of its subsidiaries and to
determine the number and types of such awards and the terms, conditions,
vesting
and other limitations applicable to each such award. In addition, the
Administrator has the power to interpret the Stock Incentive Plan and to
adopt
such rules and regulations as it considers necessary or appropriate for purposes
of administering the Stock Incentive Plan.
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The
following types of awards or any combination of them may be granted under
the
Stock Incentive Plan: (i) incentive stock options, (ii) non-qualified
stock options, (iii) stock grants, and (iv) performance awards. The
maximum number of shares of Common Stock with respect to which awards may
be
granted to any individual participant under the Stock Incentive Plan during
each
of the Company’s fiscal years will not exceed 750,000 shares, subject to certain
adjustments.
The
aggregate number of shares of Common Stock reserved for awards under the
Stock
Incentive Plan is 3,000,000 shares, subject to adjustments for stock splits,
recapitalizations and other specified events. Such shares may be treasury
shares
or authorized but unissued shares. If any outstanding award is cancelled,
forfeited, or surrendered to the Company, shares of Common Stock allocable
to
such award may again be available for awards under the Stock Incentive Plan.
Incentive stock options may be granted only to participants who are executive
officers or to other employees of the Company or any of its subsidiaries
on the
date of the grant, and non-qualified stock options may be granted to any
participant in the Stock Incentive Plan. No stock option granted under the
Stock
Incentive Plan will be exercisable later than ten years after the date it
is
granted
Set
forth
below is a summary of the principal features of the Stock Incentive Plan.
The
summary of the Stock Incentive Plan is not intended to be complete and is
qualified in its entirety by reference to the full text of the Stock Incentive
Plan attached to this proxy statement as Appendix I.
Summary
of the Stock Incentive Plan
Purpose
of the Stock Incentive Plan
The
purpose of the Stock Incentive Plan is to provide incentives to attract,
retain,
motivate and reward highly competent persons as non-employee directors,
executive officers and other employees of, or consultants or advisors to,
Hudson
or any of its subsidiary corporations, limited liability companies or other
forms of business entities now
existing or hereafter formed or acquired
(“Subsidiaries”) by providing them with opportunities to acquire shares of
Common Stock or to receive other awards under the Stock Incentive plan, as
applicable. Furthermore, the Stock Incentive Plan is intended to assist in
further aligning the interests of participants in the Stock Incentive Plan
with
those of the shareholders of Hudson.
Consideration
to be Received by Hudson for the Granting of Awards
The
Board
believes that Hudson and its Subsidiaries will significantly benefit from
having
Hudson’s non-employee directors, executive officers, other employees,
consultants or advisors, receive options to purchase Common Stock and other
awards under the Stock Incentive Plan, as applicable. Providing an opportunity
to the foregoing participants in the Stock Incentive Plan to acquire Common
Stock or benefit from the appreciation of Common Stock is valuable in attracting
and retaining highly qualified outside directors, employees, consultants
and
advisors and in providing additional motivation to such persons to use their
best efforts on behalf of Hudson and its shareholders.
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Awards
As
a
single award, or in any combination, the following types of awards may be
granted under the Stock Incentive Plan: (i) “Stock Options” (both “Incentive
Stock Options” and “Non-Qualified Stock Options”) to acquire shares of common
stock; (ii) “Stock Grants” which entitle the grantee to acquire shares of Common
Stock which may be subject to certain restrictions such as restrictions on
transferability; and (iii) “Performance Awards,” which entitle the grantee to
receive, without payment, shares of Common Stock or the value of such shares
following the attainment of performance goals. Awards are evidenced by award
agreements in such forms as the Administrator approves from time to time.
Each
award is subject to such terms and conditions consistent with the Stock
Incentive Plan, as determined by the Administrator and as set forth in the
award
agreement. The Administrator shall have the authority to retract any award
granted under the Stock Incentive Plan in case of a material restatement
of the
financial statements of Hudson or if it is otherwise determined by the
Administrator that the previously granted award was not earned by the
participant.
Administration
of the Stock Incentive Plan
The
Stock
Incentive Plan may be administered by the Administrator, which may be the
Board
or the Compensation and Stock Option Committee or, if the Board so determines,
by other applicable Board Committee. Under the Stock Incentive Plan, the
Administrator is authorized to grant awards to non-employee directors, executive
officers, and other employees of and consultants and advisors to, Hudson
or any
of its Subsidiaries and to determine the number and types of such awards
and the
terms, conditions, vesting and other limitations applicable to each such
award.
In addition, the Administrator has the power to interpret the Stock Incentive
Plan and to adopt such rules and regulations as it considers necessary or
appropriate for purposes of administering the Stock Incentive Plan.
The
Board has the authority to establish stock grant levels and stock ownership
guidelines for non-employee directors.
Eligibility
and Participation
All
non-employee directors, executive officers and other employees of, and
consultants and advisors to, Hudson or any of its Subsidiaries, who are
significantly responsible for the success and future growth and profitability
of
Hudson, as determined by the Administrator, are eligible to be participants
in
the Stock Incentive Plan. As of the date of this proxy statement, five
directors, three non-director executive officers and approximately 70 employees
were eligible to be participants under the Stock Incentive Plan. We are
presently unable to determine the number of consultants or advisors who may
be
eligible to receive awards under the Stock Incentive Plan. The number of
persons
covered by the Stock Incentive Plan may increase if we employ additional
employees, elect additional directors or retain additional consultants and
advisors. A participant’s right, if any, to continue to serve Hudson as a
director, executive officer or other employee, or otherwise will not be enlarged
or otherwise affected by his or her designation as a participant under the
Stock
Incentive Plan. Participants may receive one or more awards under the Stock
Incentive Plan. To date, no awards have been granted under the Stock Incentive
Plan.
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Shares
Subject to Awards
The
aggregate number of shares of Common Stock that are currently reserved for
awards, including shares underlying stock options, that may be granted under
the
Stock Incentive Plan is 3,000,000 shares, subject to adjustments for stock
splits, recapitalizations and other specified events. The maximum number
of
shares of Common Stock with respect to which awards may be granted or measured
to any individual participant under the Stock Incentive Plan during any fiscal
year of Hudson may not exceed 750,000 shares, subject to certain adjustments.
Such shares may be treasury shares or authorized but unissued shares. If
any
outstanding award is canceled, forfeited, or surrendered to Hudson, the
underlying shares of Common Stock allocable to such award may again be available
for awards under the Stock Incentive Plan.
Stock
Options
Stock
Options granted under the Stock Incentive Plan may be either Incentive Stock
Options (within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”)) or Non-Qualified Stock Options that do not
qualify as Incentive Stock Options. See “U.S. Federal Income Tax Consequences.”
The
Administrator determines the exercise price at which shares underlying a
Stock
Option may be purchased, whether an Incentive Stock Option or a Non-Qualified
Stock Option. However, the exercise price of a Stock Option may not be less
than
the fair market value of the shares of Common Stock on the date the Stock
Option
is granted. No Stock Option will be exercisable later than ten years after
the
date it is granted. Stock Options granted under the Stock Incentive Plan
are
exercisable at such times as specified in the Stock Incentive Plan and the
award
agreement relating to the Stock Option. A participant in the Stock Incentive
Plan must pay the option exercise price in cash, unless the Administrator
prescribes another method consistent with applicable law and the
Plan.
Incentive
Stock Options may be granted only to executive officers and other employees
of
Hudson or any of its Subsidiaries on the date of grant. The aggregate market
value (determined as of the date of grant) of Common Stock with respect to
which
Incentive Stock Options are exercisable for the first time by a participant
during any calendar year may not exceed $100,000. Furthermore, Incentive
Stock
Options may not be granted to any participant who, at the time of grant,
owns
stock possessing more than 10% of the total combined voting power of all
outstanding classes of stock of Hudson or any of its Subsidiaries, unless
the
exercise price is fixed at not less than 110% of the fair market value of
the
Common Stock on the date of grant, and such an Incentive Stock Option cannot
be
exercised more than five years after the date of grant.
Stock
Grants
Stock
Grants may be granted to non-employee directors, executive officers and other
employees of, or consultants or advisors to, Hudson or any of its Subsidiaries.
A Stock Grant may include restrictions on the sale or other disposition of
the
shares covered by the award, and Hudson may have the right to reacquire such
shares for no consideration upon termination of the participant’s employment
within specified periods. The award agreement will specify whether the
participant will have, with respect to the shares of Common Stock subject
to a
Stock Grant, all of the rights of a holder of shares of Common Stock, including
the right to receive dividends, if any, and to vote the shares.
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Performance
Awards
Performance
Awards may be granted to executive officers and other employees of Hudson
or any
of its Subsidiaries. The Administrator will set performance targets at its
discretion which, depending on the extent to which they are met, will determine
the number and/or value of Performance Awards that will be paid out to the
participants and may attach to such Performance Awards one or more restrictions.
Performance targets may be based upon Company-wide, divisional and/or individual
performance.
Payment
of earned Performance Awards may be made in shares of Common Stock or in
cash
and will be made in accordance with the terms and conditions prescribed or
authorized by the Administrator. The participant may elect to defer, or the
Administrator may require or permit the deferral of, the receipt of Performance
Awards upon such terms as the Administrator deems appropriate.
Performance-Based
Awards
Certain
awards made under the Stock Incentive Plan may be granted so that they qualify
as “performance-based compensation” (as this term is used in Section 162(m) of
the Code and the regulations thereunder) and are exempt from the deduction
limitation imposed by Section 162(m) of the Code (“Performance-Based Awards”).
All Stock Options granted under the Stock Incentive Plan and certain Stock
Grants and Performance Awards granted under the Stock Incentive Plan, and
the
compensation attributable to such awards, are intended (but not required)
to
(i) qualify as Performance-Based Awards or (ii) be otherwise exempt
from the deduction limitation imposed by Section 162(m) of the Code. Among
other
criteria, awards qualify as Performance-Based Awards if at the time of grant
the
Administrator is comprised solely of two or more “outside directors” (as this
term is used in Section 162(m) of the Code and the regulations thereunder).
In
making
Performance-Based awards, the Administrator must establish and apply objective
performance goals and may use the
following performance measures (either individually or in any combination)
to
set performance targets with respect to Awards intended to qualify as
Performance-Based Awards: net sales; pretax income before allocation of
corporate overhead and bonus; budget; earnings per share; net income; division,
group or corporate financial goals; return on stockholders' equity; return
on
assets; attainment of strategic and operational initiatives; appreciation
in
and/or maintenance of the price of Common Stock or any other publicly-traded
securities of the Company; market share; gross profits; earnings before interest
and taxes; earnings before interest, taxes, depreciation and amortization;
economic value-added models; comparisons with various stock market indices;
and/or reductions in costs. No
Performance-Based Awards may be granted after the first meeting of the
shareholders of the Company held five (5) or more years after the date of
approval of the Stock Incentive Plan by the shareholders of the Company until
the performance measures listed in the Stock Incentive Plan (as originally
approved or as subsequently amended) have been resubmitted to and reapproved
by
the shareholders of the Company in accordance with the requirements of
Section 162(m) of the Code, unless such grant is made contingent upon such
approval.
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Effect
of Change in Control
The
Stock
Incentive Plan provides for the acceleration of certain benefits in the event
of
a “Change in Control” of Hudson. The meaning of a “Change in Control” is either
defined in the participant’s employment agreement or change-in-control
agreement, if one exists, or by the Stock Incentive Plan. The Stock Incentive
Plan definition includes, among other things, such events as the sale of
all or
substantially all of the assets of Hudson, any person becoming the beneficial
owner of more than 50% of Hudson voting stock, and a merger of Hudson where
Hudson stockholders own less than 51% of the voting stock of the surviving
entity.
All
unvested awards granted under the Stock Incentive Plan will become fully
vested
immediately upon the occurrence of the Change in Control and such vested
awards
will be paid out or settled, as applicable, within 60 days upon the
occurrence of the Change in Control, subject to requirements of applicable
laws
and regulations. The Administrator may determine that upon the occurrence
of a
Change in Control, each Stock Option outstanding will terminate and the holder
will receive, within 60 days upon the occurrence of the Change in Control,
an amount equal to the excess of the fair market value of the shares underlying
the award immediately prior to the occurrence of such Change in Control over
the
exercise price per share of such award. This cashout amount is payable in
cash,
in one or more kinds of property (including the property, if any, payable
in the
transaction) or in a combination thereof, as the Administrator, in its
discretion, shall determine.
Adjustments
to Awards Due to Changes in Hudson’s Capital Structure
In
the
event of any change in the shares of Common Stock by reason of a merger,
consolidation, reorganization, recapitalization, stock split, reverse stock
split, stock dividend, exchange of shares, or other similar change in the
corporate structure or distribution to stockholders, each outstanding Stock
Option will be adjusted. The adjustments will make each award exercisable
thereafter for the securities, cash and/or other property as would have been
received in respect of the Common Stock subject to such award had the Stock
Option been exercised in full immediately prior to the change or distribution.
Furthermore, in the event of any such change or distribution, in order to
prevent dilution or enlargement of participants’ rights under the Stock
Incentive Plan, the Administrator shall make equitable adjustments to, among
other things, the number and kind of shares subject to outstanding awards
and
exercise price of outstanding awards.
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Termination
of Employment
Except
as
otherwise expressly provided, if a participant’s employment is terminated due to
death or disability, then the participant’s unvested Stock Grants and
unexercisable Stock Options shall become vested or exercisable, as applicable,
immediately as of the date of the termination of the participant’s employment.
All Stock Options that were or became exercisable as of the date of the
participant’s death or such termination of employment, will remain exercisable
until the earlier of (i) the end of the one-year period following the date
of the participant’s death or following the date of the termination of his or
her employment, as the case may be, or (ii) the date the Stock Option would
otherwise expire. All unearned or unvested Performance Awards held by the
participant (with a minimum of one year into the performance period) on the
date
of the participant’s death or the date of such termination of his or her
employment, as the case may be, will immediately become earned or vested
as of
such date and will be paid out or settled based on the participant’s performance
immediately prior to the date of the participant’s death or the date of such
termination of his or her employment on a pro-rated basis.
Except
as
otherwise expressly provided, a participant whose employment is voluntarily
terminated by the participant, or whose employment is terminated for cause,
as
defined in the Stock Incentive Plan, forfeits all awards, whether or not
vested,
exercisable or earned, granted to the participant.
Unless
otherwise provided by the Administrator, a participant whose employment is
terminated for any reason, other than for cause, death or disability, including,
without limitation, retirement, forfeits all unvested, unexercisable and
unearned awards granted to the participant. All exercisable Stock Options
held
by the participant on the date of the termination of his or her employment
for
any reason other than for voluntary termination, cause, death or disability
will
remain exercisable until the earlier of (i) the end of the 90-day period
following the date of the termination of the participant’s employment, or
(ii) the date the Stock Option would otherwise expire. The Stock Incentive
Plan’s provisions relating to termination of employment may be modified in the
discretion of the Administrator.
Transferability
Each
award granted under the Stock Incentive Plan which is subject to restrictions
on
transferability and/or exercisability is not transferable otherwise than
by will
or the laws of descent and distribution, and/or is exercisable, during the
participant’s lifetime, only by the participant. The Administrator may allow a
Stock Option to be exercisable during a period after the death of the
participant by the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased participant’s rights
under the Stock Option will pass by will or the laws of descent and
distribution. The Administrator also may permit an award (other than an
Incentive Stock Option) to be transferred by a participant solely to members
of
the participant’s immediate family or trusts or family partnerships for the
benefit of such persons, subject to any restriction included in the award
agreement.
Amendment
of Awards
The
terms
and conditions applicable to any award may be amended or modified by mutual
agreement between Hudson and the participant or any other persons as may
then
have an interest in the award. Also, by mutual agreement between Hudson and
a
participant under the Stock Incentive Plan or under any other present or
future
plan of Hudson, awards may be granted to a participant in substitution and
exchange for, and in cancellation of, any awards previously granted to a
participant under the Stock Incentive Plan or any other present or future
plan
of Hudson.
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Term
and Amendment of the Stock Incentive Plan
If
the
Stock Incentive Plan is approved at the Annual Meeting it will terminate
on June
19, 2018, unless terminated sooner by the Board or the Administrator. Subject
to
the provisions of the Stock Incentive Plan, the Board or the Administrator,
if
other than the Board, may amend the Stock Incentive Plan from time to time,
and
suspend or terminate the Stock Incentive Plan at any time. Without stockholder
approval, no amendment may (i) increase the total number of shares which
may be issued under the Stock Incentive Plan or the maximum number of shares
with respect to which Stock Options and other awards that may be granted
to any
individual under the Stock Incentive Plan; (ii) modify the requirements as
to eligibility for awards under the Stock Incentive Plan; (iii) disqualify
any Incentive Stock Options granted under the Stock Incentive Plan; or
(iv) effect the repricing of Stock Options.
U.S.
Federal Income Tax Consequences
The
following information summarizes the material U.S. federal income tax
consequences upon participants and the Company with respect to the grant
and
exercise of stock options under the Stock Incentive Plan. It does not purport
to
be complete, and does not discuss the tax consequences of a participant’s death
or the provisions of the income tax laws of any municipality, state or foreign
country in which the participant may reside. This summary is qualified in
its
entirety by reference to the applicable provisions of the Code and the
regulations adopted under the Code, each as in effect on the date hereof.
Participants
are encouraged to consult their own tax advisors regarding the municipal,
state,
U.S. federal and foreign income tax consequences in their particular
circumstances and with respect to their particular awards. The provisions
of the
Code described in this section include current U.S. federal income tax law
only
and do not reflect any proposals to revise current tax law. The U.S. federal
income tax consequences applicable to officers, directors, and other persons
who
are subject to potential liability under Section 16(b) of the Exchange Act
may
be different than the U.S. federal income tax consequences applicable to
persons
who are not subject to Section 16(b).
To
ensure
compliance with IRS Circular 230, stockholders are hereby notified that:
(a) any discussion of federal tax issues contained or referred to herein is
not intended or written to be used, and cannot be used by a stockholder,
for the
purpose of avoiding penalties that may be imposed on the stockholder under
the
Internal Revenue Code, (b) such discussion is written in connection with
this proxy statement and the matters addressed herein, and (c) a
stockholder should seek advice based on his, her or its particular circumstances
from an independent tax advisor.
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Incentive
Stock Options
Generally,
under the Code, an optionee will not realize taxable income by reason of
the
grant or exercise of an Incentive Stock Option granted pursuant to the Stock
Incentive Plan (see, however, discussion of alternative minimum tax below).
If
an optionee exercises an Incentive Stock Option and does not dispose of the
shares until the later of: (i) two years from the date the option was
granted and (ii) one year from the date of exercise, the entire gain, if
any, realized upon disposition of such shares will be taxable to the optionee
as
long-term capital gain, and Hudson will not be entitled to any income tax
deduction. If an optionee disposes of the shares within the period of two
years
from the date of grant or one year from the date of exercise (a “disqualifying
disposition”), the optionee generally will realize ordinary income in the year
of disposition and Hudson will receive a corresponding income tax deduction
in
an amount equal to the excess of (i) the lesser of (a) the amount, if
any, realized on the disposition and (b) the fair market value of the
shares on the date the option was exercised over (ii) the option price. Any
additional gain realized on the disposition will be short- term or long-term
capital gain and any loss will be long-term or short-term capital loss, as
applicable. The optionee will be considered to have disposed of a share if
he or
she sells, exchanges, makes a gift of or transfers legal title to the share
(except transfers, among others, by pledge, on death or to a spouse). If
the
disposition is by sale or exchange, the optionee’s tax basis will equal the
amount paid for the shares plus any ordinary income realized as a result
of the
disqualifying disposition.
The
exercise of an Incentive Stock Option may subject the optionee to the so-called
“alternative minimum tax” (“AMT”). The amount by which the fair market value of
the shares purchased at the time of the exercise exceeds the option exercise
price is an adjustment for purposes of computing the AMT. In the event of
a
disqualifying disposition of the shares in the same taxable year as exercise
of
the Incentive Stock Option, no adjustment is then required for purposes of
the
AMT, but regular income tax, as described above, may result from such
disqualifying disposition.
An
optionee who surrenders shares as payment of the exercise price of his or
her
Incentive Stock Option generally will not recognize gain or loss on his or
her
surrender of such shares. The surrender of shares previously acquired upon
exercise of an Incentive Stock Option in payment of the exercise price of
another Incentive Stock Option, is, however, a “disposition” of such stock. If
the Incentive Stock Option holding period requirements described above have
not
been satisfied with respect to such stock, such disposition will be a
disqualifying disposition that may cause the optionee to recognize ordinary
income as discussed above.
Under
the
Code, all of the shares received by an optionee upon exercise of an Incentive
Stock Option by surrendering shares will be subject to the Incentive Stock
Option holding period requirements. Of those shares, a number of shares (the
“Exchange Shares”) equal to the number of shares surrendered by the optionee
will have the same tax basis for capital gains purposes (increased by any
ordinary income recognized as a result of a disqualifying disposition of
the
surrendered shares if they were Incentive Stock Option shares) and the same
capital gains holding period as the shares surrendered.
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For
purposes of determining ordinary income upon a subsequent disqualifying
disposition of the Exchange Shares, the amount paid for such shares will
be
deemed to be the fair market value of the shares surrendered. The balance
of the
shares received by the optionee will have a tax basis (and a deemed purchase
price) of zero and a capital gains holding period beginning on the date of
exercise. The Incentive Stock Option holding period for all shares will be
the
same as if the option had been exercised for cash.
Non-Qualified
Stock Options
Generally,
there will be no U.S. federal income tax consequences to either the optionee
or
Hudson on the grant of Non-Qualified Stock Options pursuant to the Stock
Incentive Plan. On the exercise of a Non-Qualified Stock Option, the optionee
has taxable ordinary income equal to the excess of the fair market value
of the
shares acquired on the exercise date over the option price of the shares.
Hudson
will generally be entitled to a U.S. federal income tax deduction (subject
to
the limitations contained in Code Section 162(m)) in an amount equal to
such excess, provided that Hudson complies with applicable reporting rules.
Upon
the
sale of stock acquired by exercise of a Non-Qualified Stock Option, optionees
will realize long-term or short-term capital gain or loss depending upon
their
holding period for such stock. For individuals, capital losses are deductible
only to the extent of capital gains for the year plus $3,000. An optionee
who
surrenders shares in payment of the exercise price of a Non-Qualified Stock
Option will not recognize gain or loss with respect to the shares so delivered
unless such shares were acquired pursuant to the exercise of an Incentive
Stock
Option and the delivery of such shares is a disqualifying disposition. See
“Incentive Stock Options.” The optionee will recognize ordinary income on the
exercise of the Non-Qualified Stock Option as described above. Of the shares
received in such an exchange, that number of shares equal to the number of
shares surrendered have the same tax basis and capital gains holding period
as
the shares surrendered. The balance of shares received will have a tax basis
equal to their fair market value on the date of exercise and the capital
gains
holding period will begin on the date of exercise.
Stock
Grants
The
taxability of a Stock Grant to a participant is dependent upon the extent
to
which the award is restricted on the date of grant. If a Stock Grant is either
“transferable” or not “subject to a substantial risk of forfeiture” (both as
determined for Federal income tax purposes), a participant will recognize
taxable ordinary income on the date of grant. If a Stock Grant is both
non-transferable and subject to a substantial risk of forfeiture on the date
of
grant, then unless an election is made as described below, a participant
will
not recognize taxable ordinary income on the date of grant, but will at such
time or times as the Stock Grant becomes either transferable or not subject
to a
substantial risk of forfeiture in an amount equal to the fair market value
of
such shares at that time. Within thirty days of receipt of a Stock Grant
that is
not transferable and subject to a substantial risk of forfeiture, a participant
may file an election with the Internal Revenue Service to include as taxable
ordinary income in the year of receipt an amount equal to the fair market
value
of the shares subject to the award at the time of receipt. In such event,
any
subsequent appreciation in the value of such shares will not be taxable as
compensation to a participant upon the vesting of shares subject to the award.
However, if shares subject to the award are forfeited subsequent to such
election, a participant will not be entitled to a tax deduction. For purposes
of
determining the amount of taxable gain or loss upon a subsequent disposition
of
shares issued pursuant to such an award, the amount recognized as ordinary
income to a participant will be treated as the cost basis for such shares.
Shares which are held for more than one year after vesting (or in the event
of
an election as described above, the date of receipt) generally will qualify
for
long-term capital gain treatment.
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Performance
Awards
The
tax
consequences of a performance award depend upon the nature of the underlying
award and if and when the performance goals are achieved. If a performance
award
consists of a promise to deliver common stock at a future date based upon
the
satisfaction of certain targets, such awards will be subject to U.S. federal
income taxation as ordinary income based upon the fair market value of the
common stock on the date such performance awards are earned by a participant
by
satisfying the performance targets, provided such awards are not then subject
to
a substantial risk of forfeiture.
Application
of Code Section 409A to Deferred Compensation
Arrangements
The
Stock
Incentive Plan provides that, under certain circumstances, the receipt of
a
benefit resulting from an award under the Stock Incentive Plan may be electively
deferred by the participant (or the Administrator, as applicable) to a time
that
is later than the year in which such benefit becomes vested. To the extent
that
a participant makes such a deferral election, Section 409A of the Code,
which was recently enacted as part of the American Jobs Creation Act of 2004
(the “Jobs Act”), subjects the deferral arrangement to certain substantive
requirements including (among other items) deferral election and payment
timing
requirements. In the event that a deferral arrangement fails to comply with
Code
Section 409A in form or operation, a participant may become subject to:
(i) the imposition of U.S. federal income tax (and potentially state and
local income tax) on all amounts deferred in the tax year in which the amounts
are deferred (or, if later, in the tax year when the receipt of the benefits
are
no longer subject to a substantial risk of forfeiture); (ii) a penalty tax
of 20 percent of the includable amount (in addition to the regular income
tax at ordinary income rates); and (iii) interest at the underpayment rate
plus 1 percent from the time the amount was first deferred (or, if later,
the tax year when the benefits are no longer subject to a substantial risk
of
forfeiture) until the time the amount is included in income. Code
Section 409A may require significant changes to existing nonqualified
deferred compensation plans no later than December 31, 2008. The Stock
Incentive Plan specifically provides that any awards in connection therewith
shall be structured in a manner (as determined by the Board) that is intended
to
comply with the requirements of Section 409A, and that any deferrals of
payments under the Plan (whether requested by the participant or otherwise
required by the Compensation Committee) with respect to Awards under this
Plan
shall not be allowed except to the extent that such deferrals would not (in
the
judgment of the Board) cause the payments to fail to satisfy the requirements
for nonqualified deferred compensation plans described in Section 409A of
the Code. Generally speaking, Section 409A of the Code does not apply to
incentive stock options and nonqualified stock options granted at fair market
value if no deferral is provided beyond exercise, or to restricted stock.
Although Hudson will institute a review of the Stock Incentive Plan with
respect
to the requirements of Code Section 409A, because the tax consequences to
any participant in the Stock Incentive Plan may depend upon such person’s
situation, as well as the uncertain application of Code Section 409A, each
participant in the Stock Incentive Plan should consult his or her tax advisor
as
to the federal, state and local and other tax consequences with respect to
the
grant or exercise of an option or any other award granted under the Stock
Incentive Plan.
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Withholdings
of Tax; Company Deduction
Generally,
whenever a participant realizes ordinary income under the Stock Incentive
Plan,
a corresponding deduction is available to Hudson provided Hudson complies
with
certain reporting requirements. Under Code Section 162(m), however, Hudson
will be denied a deduction for certain compensation if it exceeds $1,000,000
paid, excluding (among other things) certain performance-based compensation.
Hudson
is
entitled to withhold, or secure payment from a participant in lieu of
withholding, the amount of any tax required by law to be withheld or paid
by
Hudson with respect to any amount payable or shares issuable under a
participant’s award.
The
following table provides certain information with respect to all of Hudson’s
equity compensation plans as of December 31, 2007.
|
Number of securities to be
issued upon exercise of
outstanding options, warrants
and rights
|
Weighted-average exercise
price of outstanding options,
warrants and rights
|
Number of securities remaining
available for future issuance under
equity compensation plans (excluding
securities reflected in column (a))
|
||||||||
|
Plan Category
|
(a)
|
(b)
|
(c)
|
|||||||
|
Equity compensation
plans approved by security holders:
|
3,173,000
|
$
|
1.14
|
580,000
|
||||||
|
Equity
compensation plans not approved by security holders:
|
—
|
N/A
|
—
|
|||||||
|
Total
|
3,173,000
|
$
|
1.14
|
580,000
|
||||||
As
of the
Record Date, the Company had 400,000 shares available for future issuance
of
grants under all available equity compensation plans of the
Company.
On
July
24, 2008, the closing stock price of the Common Stock as reported on Nasdaq
was
$2.71.
EXECUTIVE
COMPENSATION
The
following table discloses, for the years indicated, the compensation for
our
Chief Executive Officer and for our two most highly compensated executive
officers, other than the Chief Executive Officer, who were serving as executive
officers at the end of the year ended December 31, 2007 and whose total
compensation during the year ended December 31, 2007 exceeded $100,000 (the
“Named Executives”).
-
19
-
SUMMARY
COMPENSATION TABLE
|
Name and Principal Position
|
Year
|
Salary ($)
|
|
Bonus ($)
|
Stock
Awards
($)
|
Option
Awards (1)
($)
|
Non-Equity
Incentive Plan
Compensation
($)
|
Non-qualified
Deferred
Compensation
Earnings
|
All Other
Compensation
($)
|
Total
($)
|
||||||||||||||||||
|
Kevin
J. Zugibe,
|
2007
|
|
182,391
|
|
—
|
|
—
|
|
83,850
|
|
90,000
|
(2)
|
|
—
|
—
|
|
356,241
|
|||||||||||
|
Chairman,
Chief Executive Officer (4)
|
2006
|
|
178,073
|
|
—
|
|
—
|
|
39,383
|
|
80,500
|
(3)
|
|
—
|
5,600
|
|
303,556
|
|||||||||||
|
Brian
F. Coleman,
|
2007
|
|
161,506
|
|
—
|
|
—
|
|
77,400
|
|
80,000
|
(2)
|
|
—
|
|
—
|
|
318,906
|
||||||||||
|
President,
Chief Operating officer (4)
|
2006
|
|
157,681
|
|
—
|
|
—
|
|
36,176
|
|
65,500
|
(3)
|
|
—
|
|
5,100
|
|
264,457
|
||||||||||
|
Charles
F. Harkins, Jr.,
|
2007
|
|
150,834
|
|
—
|
|
—
|
|
64,500
|
|
79,000
|
(2)
|
|
—
|
|
—
|
|
294,334
|
||||||||||
|
Vice
President Sales
|
2006
|
|
147,485
|
|
—
|
|
—
|
|
27,312
|
|
74,000
|
(3)
|
|
—
|
|
4,600
|
|
253,397
|
||||||||||
(1)
We
utilize the Black-Sholes method for valuing stock option awards (see Note
10 to
the Notes to the Consolidated Financial Statements).
(2)
Non-Equity Incentive Plan Compensation was earned in 2007 and was paid during
the first quarter of 2008.
(3)
Non-Equity Incentive Plan Compensation was earned in 2006 and was paid during
the first quarter of 2007.
(4)
Mr.
Zugibe and Mr. Coleman did not receive any compensation for services as a
director during the year ended December 31, 2007.
Narrative
Disclosure to Summary Compensation Table
For
the
fiscal year 2007, each of the Named Executives received Non-Equity Incentive
Plan Compensation that was paid out of a bonus pool established by our Board
of
Directors on December 29, 2006. The amount of the bonus pool was not initially
established, but was based upon our benchmark for the fiscal year 2007 in
excess
of a pre-determined level for fiscal year 2007, with a maximum bonus pool
of
$350,000. On January 7, 2008, our Board of Directors increased the fiscal
year
2007 cash bonus pool and approved the payment of Non-Equity Incentive Plan
Compensation to the Named Executives. The amount of the Non-Equity Incentive
Plan Compensation awarded to each Named Executive was determined in the
discretion of our Board of Directors based upon our overall 2007 financial
results as well as on the personal performance of the Named Executive during
2007.
-
20
-
For
the
fiscal year 2006, each of the Named Executives received Non-Equity Incentive
Plan Compensation that was paid out of a bonus pool established by our Board
of
Directors on December 29, 2005. The amount of the bonus pool was not initially
established, but was based upon our achieving earnings for the fiscal year
2006
in excess of a pre-determined level for fiscal year 2006, with a maximum
bonus
pool of $325,000. On December 29, 2006, our Board of Directors increased
the
fiscal year 2006 cash bonus pool and approved the payment of Non-Equity
Incentive Plan Compensation to the Named Executives. The amount of the
Non-Equity Incentive Plan Compensation awarded to each Named Executive was
determined in the discretion of our Board of Directors based upon our overall
2006 financial results as well as on the personal performance of the Named
Executives during 2006.
Employment
and other Agreements
Kevin
J. Zugibe. On
October 10, 2006, we entered into an Amended and Restated Employment Agreement
with Kevin J. Zugibe, pursuant to which Mr. Zugibe is receiving an annual
base
salary of $187,096 with such increases and bonuses as our board of directors
may
determine. The agreement provides, in the event of Mr. Zugibe's disability,
for
the continuation of at least 75% of Mr. Zugibe's salary for up to one hundred
twenty days after the commencement of his disability. Mr. Zugibe is also
entitled to take up to four weeks of vacation, excluding paid
holidays.
As
part
of the agreement, Mr. Zugibe has agreed to certain covenants and restrictions,
which include an agreement that Mr. Zugibe will not compete with us in specified
geographic areas for a period of twenty-four months after his termination
for
any reason. In addition, as part of the agreement, Mr. Zugibe received a
cash
payment of $5,000 and received stock options to purchase
9,300
shares of our common stock at an exercise price of $1.02 per share. These
options became exercisable and vested immediately upon issuance and remain
exercisable after termination of Mr. Zugibe’s employment. The
agreement also contains a number of termination provisions that are described
in
“Termination and Change of Control Arrangements” in this item. We are the
beneficiary of a “key-man” term life insurance policy on the life of Mr. Zugibe
in the amount of $1,000,000.
Brian
F. Coleman. On
October 10, 2006, we entered into an agreement with Brian F. Coleman, pursuant
to which, Mr. Coleman has agreed to certain covenants and restrictions, which
include an agreement that Mr. Coleman will not compete with us in specified
geographic areas for a period of eighteen months after his termination for
any
reason. In addition, as part of the agreement, Mr. Coleman received a cash
payment of $4,500 and received stock options to purchase
8,100
shares of our common stock at an exercise price of $1.02 per share. These
options became exercisable and vested immediately upon issuance and remain
exercisable after termination of Mr. Coleman’s employment. The
agreement also provides, in the event of his disability, for the continuation
of
at least 75% of his salary for up to one hundred twenty days after the
commencement of his disability. The agreement also contains a number of
termination provisions that are described in “Termination and Change of Control
Arrangements” in this item.
-
21
-
Charles
F. Harkins.
On
October 10, 2006, we entered into an agreement with Charles F. Harkins, pursuant
to which, Mr. Harkins has agreed to certain covenants and restrictions, which
include an agreement that Mr. Harkins will not compete with us in specified
geographic areas for a period of eighteen months after his termination for
any
reason. In addition, as part of the agreement, Mr. Harkins received a cash
payment of $4,100 and received stock options to purchase 7,900 shares of our
common stock at an exercise price of $1.02 per share. These options became
exercisable and vested immediately upon issuance and remain exercisable after
termination of Mr. Harkins’ employment. The agreement also provides, in the
event of his disability, for the continuation of at least 75% of his salary
for
up to one hundred twenty days after the commencement of his disability. The
agreement also contains a number of termination provisions that are described
in
“Termination and Change of Control Arrangements” in this item.
Summary
of Stock Options Granted to the Named Executives
Kevin
J. Zugibe. On
November 20, 2007, pursuant to our 2004 Stock Incentive Plan, Mr. Zugibe was
granted options to purchase 195,000 shares of common stock at an exercise price
of $0.85 per share. These options expire on November 20, 2017 and became
exercisable and vested immediately upon issuance.
Brian
F. Coleman. On
November 20, 2007, pursuant to our 2004 Stock Incentive Plan, Mr. Coleman was
granted options to purchase 180,000 shares of common stock at an exercise price
of $0.85 per share. These options expire on November 20, 2017 and became
exercisable and vested immediately upon issuance.
Charles
F. Harkins. On
November 20, 2007, pursuant to our 2004 Stock Incentive Plan, Mr. Harkins was
granted options to purchase 150,000 shares of common stock at an exercise price
of $0.85 per share. These options expire on November 20, 2017 and became
exercisable and vested immediately upon issuance.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The
following table discloses the outstanding option awards held by the Named
Executives as of December 31, 2007. No options were exercised by the Named
Executives during the fiscal year ended December 31, 2007. No stock awards
have
been issued to the Named Executives.
-
22
-
|
Name
|
Number of Securities
underlying exercised
Options (#) Exercisable
|
Number of Securities
Underlying
Unexercised Options
(#) Unexercisable
|
Equity Incentive Plan
Awards: Number of
Securities Underlying
Unexercised Unearned
Options (#)
|
Option Exercise
Price ($)
|
Option Expiration
Date
|
|||||||||||
|
Kevin
J. Zugibe, Chairman, Chief Executive Officer
|
25,000
|
$
|
1.14
|
4/27/08 | ||||||||||||
|
87,500
|
$
|
1.13
|
3/5/2014 | |||||||||||||
|
193,750
|
$
|
1.15
|
3/31/2014 | |||||||||||||
|
18,750
|
$
|
0.83
|
9/17/2014 | |||||||||||||
|
18,750
|
$
|
0.95
|
10/1/2014 | |||||||||||||
|
93,750
|
$
|
1.02
|
1/3/2015 | |||||||||||||
|
18,750
|
$
|
0.87
|
4/1/2015 | |||||||||||||
|
18,750
|
$
|
0.83
|
7/8/2015 | |||||||||||||
|
18,750
|
$
|
2.15
|
9/30/2015 | |||||||||||||
|
123,750
|
$
|
1.76
|
12/29/2015 | |||||||||||||
|
35,000
|
$
|
1.40
|
3/31/2016 | |||||||||||||
|
9,300
|
$
|
1.02
|
10/10/2016 | |||||||||||||
|
195,000
|
$
|
0.85
|
11/20/2017 | |||||||||||||
|
Brian
F. Coleman, President, Chief Operating officer
|
25,300
|
$
|
1.14
|
4/27/2008 | ||||||||||||
|
75,000
|
$
|
1.13
|
3/5/2014 | |||||||||||||
|
18,750
|
$
|
1.15
|
3/31/2014 | |||||||||||||
|
12,500
|
$
|
0.83
|
9/17/2014 | |||||||||||||
|
12,500
|
$
|
0.95
|
10/1/2014 | |||||||||||||
|
62,500
|
$
|
1.02
|
1/3/2015 | |||||||||||||
|
12,500
|
$
|
0.87
|
4/1/2015 | |||||||||||||
|
12,500
|
$
|
0.83
|
7/8/2015 | |||||||||||||
|
12,500
|
$
|
2.15
|
9/30/2015 | |||||||||||||
|
82,500
|
$
|
1.76
|
12/29/2015 | |||||||||||||
|
32,500
|
$
|
1.40
|
3/31/2016 | |||||||||||||
|
8,100
|
$
|
1.02
|
10/10/2016 | |||||||||||||
|
180,000
|
$
|
0.85
|
11/20/2017 | |||||||||||||
|
Charles
F. Harkins, Jr., Vice President Sales
|
13,114
|
$
|
1.13
|
3/5/2014 | ||||||||||||
|
14,063
|
$
|
1.15
|
3/31/2014 | |||||||||||||
|
9,375
|
$
|
0.83
|
9/17/2014 | |||||||||||||
|
9,375
|
$
|
0.95
|
10/1/2014 | |||||||||||||
|
46,875
|
$
|
1.02
|
1/3/2015 | |||||||||||||
|
7,032
|
$
|
0.87
|
4/1/2015 | |||||||||||||
|
8,204
|
$
|
0.83
|
7/8/2015 | |||||||||||||
|
9,375
|
$
|
2.15
|
9/30/2015 | |||||||||||||
|
61,875
|
$
|
1.76
|
12/29/2015 | |||||||||||||
|
23,125
|
$
|
1.40
|
3/31/2016 | |||||||||||||
|
7,900
|
$
|
1.02
|
10/10/2016 | |||||||||||||
|
150,000
|
$
|
0.85
|
11/20/2017 | |||||||||||||
Termination
and Change of Control Arrangements
Kevin
J. Zugibe. On
October 10, 2006, we entered into an Amended and Restated Employment Agreement
with Kevin J. Zugibe, pursuant to which, in the event of his involuntary
separation from Hudson without cause, or in the event of his voluntary
separation for a good reason as enumerated in the agreement, Mr. Zugibe will
receive severance payments, in the form of the continuation of his annual base
salary and benefits for a period of twenty-four months, and a lump sum payment
equivalent to the highest bonus paid to Mr. Zugibe in the three years prior
to
his termination, pro-rated to the date of his termination.
-
23
-
Brian
F. Coleman. On
October 10, 2006, we entered into an agreement with Brian F. Coleman, pursuant
to which, in the event of his involuntary separation without cause, or in the
event of his voluntary separation for a good reason as enumerated in the
agreement, Mr. Coleman will receive severance payments, in the form of the
continuation of his annual base salary and benefits for a period of eighteen
months, and a lump sum payment equivalent to the highest bonus paid to him
in
the three years prior to his termination, pro-rated to the date of his
termination.
Charles
F. Harkins. On
October 10, 2006, we entered into an agreement with Charles F. Harkins, pursuant
to which, in the event of his involuntary separation without cause, or in the
event of his voluntary separation for a good reason as enumerated in the
agreement, Mr. Harkins will receive severance payments, in the form of the
continuation of his annual base salary and benefits for a period of eighteen
months, and a lump sum payment equivalent to the highest bonus paid to him
in
the three years prior to his termination, pro-rated to the date of his
termination.
Stock
Option Plans
We
adopted an Employee Stock Option Plan (the “1994 Plan”), a 1997 Stock Option
Plan (the “1997 Plan”), and a 2004 Stock Incentive Plan (the “2004 Plan”)
pursuant to which an aggregate of 2,829,482 shares of common stock are currently
reserved for issuance upon the exercise of options designated as either (i)
options intended to qualify as incentive stock options (“ISOs”) under the
Internal Revenue Code of 1986, as amended, (ii) nonqualified options or (iii),
in the case of the 2004 Plan, for issuance upon the granting of restricted
stock, deferred stock or other stock-based awards. The ability to grant options
under the 1994 Plan expired December 31, 2004, and the ability to grant options
under the 1997 Plan expired on September 11, 2007. Unless sooner terminated,
the
2004 Plan will expire on September 10, 2014.
ISOs
may
be granted under 2004 Plan to our employees and officers. Non-qualified options
may be granted to consultants, directors (whether or not they are employees),
employees or officers of Hudson. Stock appreciation rights may also be issued
in
tandem with stock options.
The
2004
Plan is, and each of the 1997 Plan and the 1994 Plan were, intended to qualify
under Rule 16b-3 under the Exchange Act and the 2004 Plan is currently
administered by a committee consisting of non-employee directors of the Board
of
Directors. The Compensation/Stock Option Committee, within the limitations
of
the 2004 Plan, determines the persons to whom options will be granted, the
number of shares to be covered by each option, whether the options granted
are
intended to be ISOs, the duration and rate of exercise of each option, the
exercise price per share and the manner of exercise and the time, manner and
form of payment upon exercise of an option.
-
24
-
ISOs
granted under 2004 Plan may not be granted at a price less than the fair market
value of the common stock on the date of grant (or 110% of fair market value
in
the case of persons holding 10% or more of our voting stock). The aggregate
fair
market value of shares for which ISOs granted to any employee are exercisable
for the first time by such employee during any calendar year (under all of
our
stock option plans) may not exceed $100,000. Non-qualified options granted
under
the 2004 Plan may not be granted at a price less than the fair market value
of
the common stock on the date of grant. Options granted under the 1994 Plan,
1997
Plan and the 2004 Plan will expire not more than ten years from the date of
grant (five years in the case of ISOs granted to persons holding 10% or more
of
our voting stock). Except as otherwise provided by the committee with respect
to
non-qualified options, all options granted under the 1994 Plan, the 1997 Plan
and the 2004 Plan are not transferable during an optionee's lifetime but are
transferable at death by will or by the laws of descent and distribution. In
general, upon termination of employment of an optionee, all options granted
to
such person which are not exercisable on the date of such termination
immediately terminate, and any options that are exercisable terminate 90 days
following termination of employment.
As
of
December 31, 2007, we had options outstanding to purchase 59,364 shares of
Common Stock under the 1994 Plan; 1,033,010 shares of Common Stock under the
1997 Plan; and 1,917,269 shares of Common Stock under the 2004 Plan.
Compensation
of Directors
Non-employee
directors receive an annual fee of $7,000 and receive reimbursement for
out-of-pocket expenses incurred for attendance at meetings of the Board of
Directors and Board committee meetings. The chairman of the Audit Committee
of
our Board receives additional compensation of $2,000 per year, and each
independent member of our Audit Committee (excluding the Chairman) receives
additional compensation of $1,000 per year. The following table discloses the
compensation of the non-employee directors who served as our directors during
the year ended December 31, 2007. We reimburse each of our non-employee
directors for their reasonable expenses incurred in connection with attending
meetings of our board of directors and related committees.
DIRECTOR
COMPENSATION
|
Name
|
Fees earned or
paid in cash(4)
|
Stock
Awards
|
Option
Awards (1)
|
Non-Equity
Incentive Plan
Compensation
|
Nonqualified
Deferred
Compensation
Earnings
|
All Other
Compensation
|
Total
|
|||||||||||||||
|
Vincent
P. Abbatecola (2)
|
9,000
|
—
|
17,000
|
—
|
—
|
—
|
26,000
|
|||||||||||||||
|
Robert
L. Burr (3)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
|
Dominic
J. Monetta (2)
|
8,000
|
—
|
17,000
|
—
|
—
|
—
|
25,000
|
|||||||||||||||
|
Otto
C. Morch (2)
|
8,000
|
—
|
17,000
|
—
|
—
|
—
|
25,000
|
|||||||||||||||
-
25
-
| (1) |
We
utilize the Black-Sholes method for valuing stock option awards (see
Note
10 to the Notes to the Consolidated Financial Statements included
in our
Form 10-KSB for the year ended December 31,
2007).
|
| (2) |
As
of December 31, 2007, Mr. Abbatecola, Mr. Monetta and Mr. Morch each
have
options to purchase 67,500 shares of common stock outstanding.
|
| (3) |
Mr.
Robert L. Burr served as director of our company until our annual
meeting
of stockholders held in December 2007. Mr. Burr did not receive
compensation from us for serving as a member of our Board during
2007.
|
| (4) |
Excludes
compensation for Board and committees participation earned in 2006
and
paid in 2007.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information as of the Record Date based on
information obtained from the persons named below, with respect to the
beneficial ownership of our Common Stock by (i) each person known by us to
be
the beneficial owner of more than 5% of our outstanding Common Stock, (ii)
the
Named Executives, (iii) each or our directors, and (iv) all of our directors
and
executive officers as a group:
BENEFICIAL
OWNERSHIP TABLE
|
Title of Class
|
Name of Beneficial Owner
|
Amount and Nature of
Beneficial Ownership (1)
|
Percent of Class
|
|||||||
|
Common
Stock
|
Kevin J. Zugibe |
7,017,750
|
(2)
|
34.68
|
%
|
|||||
|
Common
Stock
|
Brian F. Coleman |
872,176
|
(3)
|
4.38
|
%
|
|||||
|
Common
Stock
|
Charles F. Harkins |
279,452
|
(4)
|
1.42
|
%
|
|||||
|
Common
Stock
|
Vincent P. Abbatecola |
74,500
|
(5)
|
|
*
|
|||||
|
Common
Stock
|
Dominic J. Monetta |
117,600
|
|
*
|
||||||
|
Common
Stock
|
Otto C. Morch |
52,509
|
(6)
|
|
*
|
|||||
|
Common
Stock
|
All directors and executive
officers
as a group (Eight Persons)
|
|
11,287,452
|
(7)
|
52.05
|
%
|
||||
*
Less
than 1%
-
26
-
(1)
A
person is deemed to be the beneficial owner of securities that can be acquired
by such person within 60 days from the Record Date. Each beneficial owner's
percentage ownership is determined by assuming that options and warrants that
are held by such person (but not held by any other person) and which are
exercisable within 60 days from the Record Date have been exercised. Unless
otherwise noted, Hudson believes that all persons named in the table have sole
voting and investment power with respect to all shares of our common stock
beneficially owned by them. The address for each beneficial owner, unless
otherwise noted, is c/o Hudson Technologies, Inc. at PO Box 1541, One Blue
Hill
Plaza, Pearl River, New York 10965.
(2)
Includes (i) 25,000 shares which may be purchased at $1.14 per share; (ii)
87,500 shares which may be purchased at $1.13 per share; (iii) 193,750 shares
which may be purchased at $1.15 per share; (iv) 37,500 shares which may be
purchased at $.83 per share; (v) 18,750 shares which may be purchased at $.95
per share; (vi) 93,750 shares which may be purchased at $1.02 per share; (vii)
18,750 shares which may be purchased at $.87 per share; (viii) 18,750 shares
which may be purchased at $2.15 per share; (ix) 123,750 shares which may be
purchased at $1.76 per share; (x) 35,000 shares which may be purchased at $1.40
per share; (xi) 9,300 shares which may be purchased at $1.02 per share and
(xii)
195,000 shares that may be purchased at $0.85 per share under immediately
exercisable options.
(3)
Includes (i) 25,300 shares which may be purchased at $1.14 per share; (ii)
75,000 shares which may be purchased at $1.13 per share; (iii) 18,750 shares
which may be purchased at $1.15 per share; (iv) 25,000 shares which may be
purchased at $.83 per share; (v) 12,500 shares which may be purchased at $.95
per share; (vi) 62,500 shares which may be purchased at $1.02 per share; (vii)
12,500 shares which may be purchased at $.87 per share; (viii) 12,500 shares
which may be purchased at $2.15 per share; (ix) 82,500 shares which may be
purchased at $1.76 per share; (x) 32,500 shares which may be purchased at $1.40
per share; (xi) 8,100 shares which may be purchased at $1.02 per share: and
(xii) 180,000 shares which may be purchased at $.85 per share under immediately
exercisable options. Also includes 1,926 common stock purchase warrants with
an
exercise price of $.87 per share.
(4)
Includes (i) 13,114 shares which may be purchased at $1.13 per share; (ii)
14,063 shares which may be purchased at $1.15 per share; (iii) 9,375 shares
which may be purchased at $2.15 per share; (iv) 61,875 shares which may be
purchased at $1.76 per share; (v) 23,125 shares which may be purchased at $1.40
per share; (vi) 7,900 shares which may be purchased at $1.02; and (vii) 150,000
which may be purchased at $.85 per share under immediately exercisable
options.
(5)
Includes 40,000 which may be purchased at $.85 per share under immediately
exercisable options.
(6)
Includes (i) 5,000 shares, which may be purchased at $1.13 per share; (ii)
10,000 shares, which may be purchased at $0.95 per share; (iii) 10,000 shares,
which may be purchased at $.94 per share; (iv) 2,500 shares, which may be
purchased at $1.12 per share; and (v) 20,000 which may be purchased at $.85
per
share under immediately exercisable options.
(7)
Includes exercisable options to purchase 2,275,347 shares of common stock,
and
common stock purchase warrants to purchase 1,926 shares of Common Stock, owned
by the directors and officers as a group.
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
On
June
28, 2007, we purchased and retired approximately 5,700,000 shares of our Common
Stock from the US Discovery Fund III, L.P. and the Fleming US Discovery Offshore
Fund III, L.P. (“Fleming Funds”) at
a
purchase price of $0.65 per share, for total consideration of approximately
$3,700,000. Additionally, certain members of our management, in separate private
transactions, purchased approximately 9,200,000 shares of our Common Stock
from
the Fleming Funds at a purchase price of $0.65 per share, for a total
consideration of approximately $6,000,000. Of the total shares purchased by
our
management, Kevin J. Zugibe purchased 6,461,500, shares, Stephen P Mandracchia
purchased 2,000,000 shares, Brian F. Coleman purchased 323,100 shares and James
R. Buscemi purchased 292,300 shares. The shares purchased by management are
unregistered shares and management did not receive registration rights in
connection with their purchase of their shares.
On
June
29, 2007, we commenced a tender offer to all of our common shareholders to
purchase and retire up to approximately 1,200,000 shares of our Common Stock
at
a purchase price of $1.12 per share. Upon completion of the tender offer, a
total of approximately 55,000 shares of our Common Stock, at an aggregate
purchase price of approximately $62,000, were tendered to and accepted for
purchase by us, all of which were retired. On September 25, 2007, we utilized
the unused tender offer funds to purchase and retire approximately 1,100,000
shares of our Common Stock from the Fleming Funds at a price of $1.12 per share,
for a total consideration of approximately $1,200,000.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS
BDO
Seidman, LLP has audited and reported upon the consolidated financial statements
of the Company for Fiscal 2007 and has been selected by the Audit Committee
of
the Board of Directors to examine and report upon the financial statements
of
the Company for the fiscal year ending December 31, 2008. A representative
of
BDO Seidman, LLP is expected to be present at the Annual Meeting, will have
the
opportunity to make a statement if he or she desires to do so and is expected
to
be available to respond to appropriate questions.
In
addition to retaining BDO Seidman, LLP to audit the Company’s financial
statements, the Company has engaged BDO Seidman, LLP from time to time to
perform other services. The following sets forth the aggregate fees billed
by
BDO Seidman, LLP to the Companying connection with services rendered during
the
years ended December 31, 2007 and December 31, 2006.
Audit
Fees.
The
aggregate fees billed by BDO Seidman, LLP for professional services rendered
for
the audit of the Company's annual financial statements for the years ended
December 31, 2007 and 2006, the review of the financial statements included
in
the Company's Forms 10-KSB for 2007 and 2006 totaled $143,000 and $130,000,
respectively.
Audit-Related
Fees.
In 2007,
the aggregate fees billed by BDO Seidman, LLP for assurance and related services
that are reasonably related to the performance of the audit or review of the
Company's financial statements was $14,000. In 2006, the aggregate fees billed
by BDO Seidman, LLP for professional services rendered for assurance and related
services that are reasonable related to the performance of the audit or review
of the Company’s financial statements totaled $13,000.
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Tax
Fees.
In 2007,
and 2006 the aggregate fees billed by BDO Seidman, LLP for professional services
rendered for tax advice totaled $11,000 and $8,000, respectively.
All
Other Fees:
In 2007,
the aggregate fees billed by BDO Seidman, LLP for products and services, other
than the services described in the paragraphs caption “Audit Fees”, “Audit
Related Fees” and “Tax Fees” was $11,000. In 2006, the Company did not utilize
BDO Seidman, LLP for products and services, other than the services described
in
the paragraphs caption “Audit Fees”, “Audit Related Fees” and “Tax
Fees.”
The
Audit
Committee has established its pre-approval policies and procedures, pursuant
to
which the Audit Committee approved the foregoing audit services provided by
BDO
Seidman, LLP in 2007. Consistent with the Audit Committee's responsibility
for
engaging the Company’s independent auditors, all audit and permitted non-audit
services require pre-approval by the Audit Committee. The full Audit Committee
approves proposed services and fee estimates for these services. The Audit
Committee chairperson or their designee has been designated by the Audit
Committee to approve any services arising during the year that were not
pre-approved by the Audit Committee. Services approved by the Audit Committee
chairperson are communicated to the full Audit Committee at its next regular
meeting and the Audit Committee reviews services and fees for the fiscal year
at
each such meeting. Pursuant to these procedures, the Audit Committee approved
the foregoing audit services provided by BDO Seidman, LLP
SHAREHOLDER
PROPOSALS
Shareholders
who wish to present proposals appropriate for consideration at the 2009 Annual
Meeting of Shareholders, which the Company currently anticipates will be held
in
or about June 2008, must submit the proposal in proper form, and in satisfaction
of the conditions established by the Securities and Exchange Commission, to
the
Company at its address set forth on the first page of this proxy statement
not
later than January 31, 2009 to be considered for inclusion in the Company's
proxy statement and form of proxy relating to such annual meeting. Any such
proposals, as well as any questions related thereto, should be directed to
the
Secretary of the Company.
After
the
January 31, 2009 deadline, a shareholder may present a proposal at the Company’s
2009 Annual Meeting if it is submitted to the Company’s Secretary at the address
set forth above no later than March 16, 2009. If timely submitted, the
shareholder may present the proposal at the next Annual Meeting, but the Company
is not obligated to include the proposal in its proxy statement.
OTHER
INFORMATION
Proxies
for the Annual Meeting will be solicited by mail and through brokerage
institutions and all expenses involved, including printing and postage, will
be
paid by the Company.
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A
COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31,
2007
IS BEING FURNISHED HEREWITH TO EACH SHAREHOLDER OF RECORD AS OF THE CLOSE OF
BUSINESS ON THE RECORD DATE.
COPIES
OF
EXHIBITS TO SUCH ANNUAL REPORT ON FORM 10-KSB WILL BE PROVIDED FOR A NOMINAL
CHARGE TO SHAREHOLDERS WHO MAKE A WRITTEN REQUEST TO THE COMPANYAT THE FOLLOWING
ADDRESS:
HUDSON
TECHNOLOGIES, INC.
PO
Box
1541, One Blue Hill Plaza
PEARL
RIVER, NEW YORK 10965
ATTENTION:
Stephen P. Mandracchia, Secretary
The
Board
is not aware of any other matters, except for those incident to the conduct
of
the Annual Meeting, that are to be presented to shareholders for formal action
at the Annual Meeting. If, however, any other matters properly come before
the
Annual Meeting or any adjournments thereof, it is the intention of the persons
named in the proxy included herewith to vote such proxy in accordance with
their
judgment.
|
of
Directors
|
|
|
|
Kevin
J. Zugibe, P.E.
|
July
25,
2008
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APPENDIX
I
HUDSON
TECHNOLOGIES, INC.
2008
STOCK INCENTIVE PLAN
1. Purpose
The
2008
Hudson Technologies, Inc. Stock Incentive Plan (the "Plan") is intended to
provide incentives which will attract, retain, motivate and reward highly
competent persons as non-employee directors, executive officers and other
employees of, or consultants and advisors to, Hudson Technologies, Inc. (the
"Company") or any of its subsidiary corporations, limited liability companies
or
other forms of business entities now existing or hereafter formed or acquired
("Subsidiaries"), by providing them opportunities to acquire shares of common
stock, par value $.01 per share, of the Company ("Common Stock") or to receive
other Awards (as defined in Section 4 below) described herein. Furthermore,
the
Plan is intended to assist in further aligning the interests of such
non-employee directors, executive officers and other employees, consultants
and
advisors, with those of the stockholders of the Company.
2.
Administration
a.
The
Plan generally shall be administered by a committee (the "Committee") which
shall be the Compensation and Stock Option Committee of the Board of Directors
of the Company (the "Board") or another committee appointed by the Board from
among its members. In the absence of such committee, the Board shall administer
the Plan. Unless the Board determines otherwise, the Committee shall be
comprised solely of not less than two members who each shall qualify as a (i)
"Non-Employee Director" within the meaning of Rule 16b-3(b)(3) (or any successor
rule) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and (ii) an "outside director" within the meaning of Section 162(m)
of
the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder. The Committee is authorized, subject to the provisions of the Plan,
to establish such rules and regulations as it deems necessary for the proper
administration of the Plan and to make such determinations and interpretations
and to take such action in connection with the Plan and any Awards granted
hereunder as it deems necessary or advisable. All determinations and
interpretations made by the Committee shall be binding and conclusive on all
persons and entities, including participants and their legal representatives.
However, the Board shall have the authority: (i) to establish the level of
stock
options or stock awards granted under the Plan, as well as stock grant levels
and stock ownership guidelines, for the non-employee directors; and (ii)
establish the level of stock options or stock awards granted under the Plan
to
executive officers of the Company.
b.
No
member of the Board, no member of the Committee and no agent of the Committee
who is an employee of the Company shall be liable for any act or failure to
act
hereunder, except in circumstances involving his or her bad faith, gross
negligence or willful misconduct, or for any act or failure to act hereunder
by
any other member or employee or by any agent to whom duties in connection with
the administration of this Plan have been delegated. The Company shall indemnify
members of the Board, members of the Committee and any agent of the Committee
who is an employee of the Company against any and all liabilities or expenses
to
which they may be subjected by reason of any act or failure to act with respect
to their duties on behalf of the Plan, except in circumstances involving such
person's bad faith, gross negligence or willful misconduct.
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c.
The
Committee shall have the authority to grant Awards to non-employee directors,
executive officers and other employees of, or consultants and advisors to,
the
Company or any of its Subsidiaries. The Committee may delegate to one or more
of
its members, or to one or more agents, such administrative duties as it may
deem
advisable, and the Committee, or any person to whom it has delegated duties
as
aforesaid, may employ one or more persons to render advice with respect to
any
responsibility the Committee or such person may have under the Plan. The
Committee may employ such legal or other counsel, consultants and agents as
it
may deem desirable for the administration of the Plan and may rely upon any
opinion or computation received from any such counsel, consultant or agent.
Expenses incurred by the Committee in the engagement of such counsel, consultant
or agent shall be paid by the Company or any of its Subsidiaries whose employees
have benefited from the Plan, as determined by the Committee.
3.
Participants
Participants
shall consist of such non-employee directors, executive officers and other
employees of, or consultants and advisors to, the Company or any of its
Subsidiaries and outside contractors who the Committee in its sole discretion
determines to be significantly responsible for the success and future growth
and
profitability of the Company and who the Committee may designate from time
to
time to receive Awards under the Plan. Designation as a participant in any
year
shall not require the Committee to designate such person to receive an Award
in
any other year or, once designated, to receive the same type or amount of Award
as granted to the participant in any other year. The Committee shall consider
such factors as it deems pertinent in selecting participants and in determining
the type, amount and other terms of Awards.
4.
Types
of
Awards and Vesting Restrictions
Awards
under the Plan may be granted in any one or a combination of (1) Stock Options,
(2) Stock Grants, and (3) Performance Awards (individually an "Award," and
collectively, "Awards"). Stock Grants and Performance Awards may, as determined
by the Committee, in its discretion, constitute Performance-Based Awards, as
described in Section 9 below. Awards shall be evidenced by Award agreements
(which need not be identical) in such forms as the Committee may from time
to
time approve; provided, however, that in the event of any conflict between
the
provisions of the Plan and any such agreements, the provisions of the Plan
shall
prevail.
5. Common
Stock Available Under the Plan
a.
Shares
Available. The aggregate number of shares of Common Stock that may be subject
to
Awards, including shares of Common Stock underlying Stock Options, granted
under
this Plan shall be 3,000,000 shares of Common Stock, which may be authorized
and
unissued or treasury shares, subject to any adjustments made in accordance
with
Section 10 below.
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b.
Maximum Limits. The maximum number of shares of Common Stock with respect to
which Awards may be granted or measured to any participant during any fiscal
year of the Company shall not exceed 750,000 shares, subject to adjustment
in
accordance with Section 10 below.
c.
Shares
Underlying Awards That Again Become Available. Any shares of Common Stock
subject to a Stock Option, Stock Grant or Performance Award, which for any
reason are cancelled, forfeited, or surrendered to the Company, shall again
be
available for Awards under the Plan. The preceding sentence shall apply only
for
purposes of determining the aggregate number of shares of Common Stock subject
to Awards pursuant to Section 5.a above but shall not apply for purposes of
determining the maximum number of shares of Common Stock subject to Awards
that
any individual participant may receive pursuant to Section 5.b
above.
6. Stock
Options
a.
In
General. The Committee is authorized to grant Stock Options to non-employee
directors, executive officers and other employees of, or consultants or advisors
to, the Company or any of its Subsidiaries and shall, in its sole discretion,
determine which of such individuals shall receive Stock Options and the number
of shares of Common Stock underlying each Stock Option. Stock Options may be
(i)
incentive stock options ("Incentive Stock Options") within the meaning of
Section 422 of the Code, or (ii) Stock Options which do not qualify as Incentive
Stock Options ("Non-Qualified Stock Options"). The Committee may grant to a
participant in the Plan one or more Incentive Stock Options, Non-Qualified
Stock
Options, or both types of Stock Options. Each Stock Option shall be subject
to
such terms and conditions consistent with the Plan as shall be determined by
the
Committee and as set forth in the Award agreement. In addition, each Stock
Option shall be subject to the following limitations set forth in this Section
6.
b.
Exercise Price. Each Stock Option granted hereunder shall have such per-share
exercise price as the Committee may determine on the date of grant; provided,
however, subject to Section 6(e) below, that the per-share exercise price shall
not be less than 100 percent of the Fair Market Value (as defined in Section
15
below) of Common Stock on the date the Stock Option is granted.
c.
Payment of Exercise Price. Unless otherwise provided by the Committee, the
Stock
Option exercise price must be paid in cash. In the discretion of the Committee,
a payment may also be made by delivering a properly executed exercise notice
to
the Company together with a copy of irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds to pay
the
exercise price with the requirement of the broker same day reconciliation or
as
otherwise determined by the Company. To facilitate the foregoing, the Company
may enter into agreements for coordinated procedures with one or more brokerage
firms. The Committee may prescribe any other method of paying the exercise
price
that it determines to be consistent with applicable law and the purpose of
the
Plan.
d.
Exercise Period. Stock Options granted under the Plan shall be exercisable
at
such time or times as specified in the Plan and the Award agreement; provided,
however, that no Stock Option shall be exercisable later than ten years after
the date it is granted.
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33
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e.
Limitations on Incentive Stock Options. Incentive Stock Options may be granted
only to participants who are executive officers or other employees of the
Company or any of its Subsidiaries on the date of grant. The aggregate market
value (determined as of the time the Stock Option is granted) of Common Stock
with respect to which Incentive Stock Options (under all option plans of the
Company) are exercisable for the first time by a participant during any calendar
year shall not exceed $100,000. For purposes of the preceding sentence, (i)
Incentive Stock Options shall be taken into account in the order in which they
are granted and (ii) Incentive Stock Options granted before 1995 shall not
be
taken into account. Incentive Stock Options may not be granted to any
participant who, at the time of grant, owns stock possessing (after the
application of the attribution rules of Section 424(d) of the Code) more than
10
percent of the total combined voting power of all outstanding classes of stock
of the Company or any of its Subsidiaries, unless the exercise price is fixed
at
not less than 110 percent of the Fair Market Value of Common Stock on the date
of grant and the exercise of such option is prohibited by its terms after the
expiration of five years from the date of grant of such option. In addition,
no
Incentive Stock Option shall be issued to a participant in tandem with a
Non-Qualified Stock Option.
f.
Alternative
Settlement of Option.
If
provided in an Award agreement, or upon the receipt of written notice of
exercise, or as otherwise provided for by the Board or Committee, as the case
may be, either at or after the time of grant of the Stock Option, the Board
or
the Committee, as the case may be, may elect to settle all or part of any Stock
Option by paying to the optionee an amount, in cash or Stock (valued at Fair
Market Value on the date of exercise), equal to the product of the excess of
the
Fair Market Value of one share of Stock, on the date of exercise over the Stock
Option exercise price, multiplied by the number of shares of Stock with respect
to which the optionee proposes to exercise the Option. Any such settlements
which relate to Options which are held by optionee who are subject to Section
16(b) of the Exchange Act shall comply with any "window period" provisions
of
Rule 16b-3, to the extent applicable, and with such other conditions as the
Board or Committee, as the case may be, may impose.
7. Stock
Grants
The
Committee is authorized to grant Stock Grants to non-employee directors,
executive officers and other employees of, or consultants or advisors to, the
Company or any of its Subsidiaries and shall, in its sole discretion, determine
which of such individuals shall receive Stock Grants and the number of shares
of
Common Stock underlying each Stock Grant. Each Stock Grant shall be subject
to
such terms and conditions consistent with the Plan as shall be determined by
the
Committee and as set forth in the Award agreement, including, without
limitation, restrictions on the sale or other disposition of such shares, and
the right of the Company to reacquire such shares for no consideration upon
termination of the participant's employment with, or services performed for,
the
Company or any of its Subsidiaries within specified periods. The Committee
may
require the participant to deliver a duly signed stock power, endorsed in blank,
relating to Common Stock covered by such Stock Grant and/or that the stock
certificates evidencing such shares be held in custody or bear restrictive
legends until the restrictions thereon shall have lapsed. The Award agreement
shall specify whether the participant shall have, with respect to the shares
of
Common Stock subject to a Stock Grant, all of the rights of a holder of shares
of Common Stock, including the right to receive dividends, if any, and to vote
the shares.
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8. Performance
Awards
a.
In
General. The Committee is authorized to grant Performance Awards to executive
officers and other employees of the Company or any of its Subsidiaries and
shall, in its sole discretion, determine such executive officers and other
employees who will receive Performance Awards and the number of shares of Common
Stock that may be subject to each Performance Award. Each Performance Award
shall be subject to such terms and conditions consistent with the Plan as shall
be determined by the Committee and as set forth in the Award agreement. The
Committee shall set performance targets at its discretion which, depending
on
the extent to which they are met, will determine the number and/or value of
Performance Awards that will be paid out to the participants, and may attach
to
such Performance Awards one or more restrictions. Performance targets may be
based upon, without limitation, Company-wide, divisional and/or individual
performance.
b.
Payout. Payment of earned Performance Awards may be made in shares of Common
Stock or in cash and shall be made in accordance with the terms and conditions
prescribed or authorized by the Committee. Subject to Section 21 below, if
permitted by the Committee, the participant may elect to defer, or the Committee
may require or permit the deferral of, the receipt of Performance Awards upon
such terms as the Committee deems appropriate.
9. Performance-Based
Awards
a.
In
General. All Stock Options granted under the Plan, certain Stock Grants and
Performance Awards granted under the Plan, and the compensation attributable
to
such Awards, are intended (but not required) to (i) qualify as Performance-Based
Awards (as defined in the next sentence) or (ii) be otherwise exempt from the
deduction limitation imposed by Section 162(m) of the Code. Certain Awards
granted under the Plan may be granted in a manner such that Awards qualify
as
"qualified performance-based compensation" (as such term is used in Section
162(m) of the Code and the regulations thereunder) and thus be exempt from
the
deduction limitation imposed by Section 162(m) of the Code ("Performance-Based
Awards"). Awards shall only qualify as Performance-Based Awards if at the time
of grant the Committee is comprised solely of two or more "outside directors"
(as such term is used in Section 162(m) of the Code and the regulations
thereunder). No
Performance-Based Awards may be granted after the first meeting of the
stockholders of the Company held five (5) or more years after the date of
approval of this Plan by the stockholders of the Company until the listed
performance measures set forth in 9 d. below (as originally approved or as
subsequently amended) have been resubmitted to and reapproved by the
stockholders of the Company in accordance with the requirements of
Section 162(m) of the Code, unless such grant is made contingent upon such
approval.
b.
Stock
Options. Stock Options granted under the Plan with an exercise price at or
above
the Fair Market Value of Common Stock on the date of grant are intended to
qualify as Performance-Based Awards.
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35
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c.
Other
Awards. Stock Awards and Performance Awards granted under the Plan are intended
to qualify as Performance-Based Awards if, as determined by the Committee,
in
its discretion, either the granting or vesting of such Award is subject to
the
achievement of a performance target or targets based on one or more of the
performance measures specified in Section 9(d) below. With respect to such
Awards intended to qualify as Performance-Based Awards:
(1)
the
Committee shall establish in writing (x) the objective performance-based goals
applicable to a given period and (y) the individual employees or class of
employees to which such performance-based goals apply no later than 90 days
after the commencement of such period (but in no event after 25 percent of
such
period has elapsed);
(2)
no
Performance-Based Awards shall be payable to or vest with respect to, as the
case may be, any participant for a given period until the Committee certifies
in
writing that the objective performance goals (and any other material terms)
applicable to such period have been satisfied; and
(3)
except as permitted under Section 10, after the establishment of a performance
goal, the Committee shall not revise such performance goal or increase the
amount of compensation payable thereunder (as determined in accordance with
Section 162(m) of the Code) upon the attainment of such performance
goal.
d.
Performance Measures. The Committee may use the following performance measures
(either individually or in any combination) to set performance targets with
respect to Awards intended to qualify as Performance-Based Awards: net sales;
pretax income before allocation of corporate overhead and bonus; budget;
earnings per share; net income; division, group or corporate financial goals;
return on stockholders' equity; return on assets; attainment of strategic and
operational initiatives; appreciation in and/or maintenance of the price of
Common Stock or any other publicly-traded securities of the Company; market
share; gross profits; earnings before interest and taxes; earnings before
interest, taxes, depreciation and amortization; economic value-added models;
comparisons with various stock market indices; and/or reductions in
costs.
10. Adjustment
Provisions
If
there
shall be any change in Common Stock of the Company, through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
reverse stock split, split up, spinoff, combination of shares, exchange of
shares, dividend in kind or other like change in capital structure or
distribution (other than normal cash dividends) to stockholders of the Company,
an adjustment shall be made to each outstanding Stock Option such that each
such
Stock Option shall thereafter be exercisable for such securities, cash and/or
other property as would have been received in respect of Common Stock subject
to
such Stock Option had such Stock Option been exercised in full immediately
prior
to such change or distribution, and such an adjustment shall be made
successively each time any such change shall occur. In addition, in the event
of
any such change or distribution, in order to prevent dilution or enlargement
of
participants' rights under the Plan, the Committee shall adjust, in an equitable
manner, the number and kind of shares that may be issued under the Plan, the
number and kind of shares subject to outstanding Awards, the exercise price
applicable to outstanding Awards, and the Fair Market Value of Common Stock
and
other value determinations applicable to outstanding Awards. To
the
extent consistent with the requirements for satisfying the requirements of
Section 162(m) of the Code, if applicable, appropriate
adjustments may also be made by the Committee in the terms of any Awards under
the Plan to reflect such changes or distributions and to modify any other terms
of outstanding Awards on an equitable basis, including modifications of
performance targets and changes in the length of performance periods. In
addition, other than with respect to Stock Options and other Awards intended
to
constitute Performance-Based Awards, the Committee is authorized to make
adjustments to the terms and conditions of, and the criteria included in, Awards
in recognition of unusual or nonrecurring events affecting the Company or any
of
its Subsidiaries or the financial statements of the Company, or in response
to
changes in applicable laws, regulations, or accounting principles.
Notwithstanding the foregoing, (i) any adjustment with respect to an Incentive
Stock Option shall comply with the rules of Section 424(a) of the Code, and
(ii)
in no event shall any adjustment be made which would render any Incentive Stock
Option granted hereunder other than an incentive stock option for purposes
of
Section 422 of the Code.
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36
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11. Change
in
Control
a.
Accelerated Vesting. Notwithstanding any other provision of this Plan, if there
is a Change in Control of the Company (as defined in Section 11(b) below),
all
unvested Awards granted under the Plan shall become fully vested immediately
upon the occurrence of the Change of Control and such vested Awards shall be
paid out or settled, as applicable, within 60 days upon the occurrence of the
Change of Control, subject to requirements of applicable laws and
regulations.
b.
Definition. For purposes of this Section 11, (i) if there is an employment
agreement or a change-in-control agreement between the participant and the
Company or any of its Subsidiaries in effect, "Change in Control" shall have
the
same definition as the definition of "change in control" contained in such
employment agreement or change-in-control agreement, or (ii) if "Change in
Control" is not defined in such employment agreement or change-in-control
agreement, or if there is no employment agreement or change-in-control agreement
between the participant and the Company or any of its Subsidiaries in effect,
a
"Change in Control" of the Company shall be deemed to have occurred upon any
of
the following events:
(1)
any
person or other entity (other than any of the Company's Subsidiaries or any
employee benefit plan sponsored by the Company or any of its Subsidiaries)
including any person as defined in Section 13(d)(3) of the Exchange Act, becomes
the beneficial owner, as defined in Rule 13d-3 under the Exchange Act, directly
or indirectly, of more than 50 percent of the total combined voting power of
all
classes of capital stock of the Company normally entitled to vote for the
election of directors of the Company (the "Voting Stock");
(2)
the
stockholders of the Company approve the sale of all or substantially all of
the
property or assets of the Company and such sale occurs;
(3)
the
Company's Common Stock shall cease to be publicly traded;
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(4)
the
stockholders of the Company approve a consolidation or merger of the Company
with another corporation (other than with any of the Company's Subsidiaries),
the consummation of which would result in the stockholders of the Company
immediately before the occurrence of the consolidation or merger owning, in
the
aggregate, less than 51 percent of the Voting Stock of the surviving entity,
and
such consolidation or merger occurs; or
(5)
a
change in the Company's Board occurs with the result that the members of the
Board on the Effective Date (as defined in Section 24(a) below) of the Plan
(the
"Incumbent Directors") no longer constitute a majority of such Board, provided
that any person becoming a director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest or the settlement thereof, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
election or nomination for election was supported by two-thirds (2/3) of the
then Incumbent Directors shall be considered an Incumbent Director for purposes
hereof.
c.
Cashout. The Committee, in its discretion, may determine that, upon the
occurrence of a Change in Control of the Company, each Stock Option outstanding
hereunder shall terminate and such holder shall receive, within 60 days upon
the
occurrence of the Change of Control, with respect to each share of Common Stock
subject to such Stock Option, an amount equal to the excess of the Fair Market
Value of such shares of Common Stock immediately prior to the occurrence of
such
Change in Control over the exercise price per share of such Stock Option; such
amount to be payable in cash, in one or more kinds of property (including the
property, if any, payable in the transaction) or in a combination thereof,
as
the Committee, in its discretion, shall determine.
12. Termination
of Employment
a.
Subject to any written agreement between the participant and the Company or
any
of its Subsidiaries, if a participant's employment is terminated due to death
or
disability:
(1)
all
unvested Stock Grants held by the participant on the date of the participant's
death or the date of the termination of his or her employment as the case may
be, shall immediately become vested as of such date;
(2)
all
unexercisable Stock Options held by the participant on the date of the
participant's death or the date of the termination of his or her employment,
as
the case may be, shall immediately become exercisable as of such date and shall
remain exercisable until the earlier of (i) the end of the one-year period
following the date of the participant's death or the date of the termination
of
his or her employment, as the case may be, or (ii) the date the Stock Option
would otherwise expire;
(3)
all
exercisable Stock Options held by the participant on the date of the
participant's death or the date of the termination of his or her employment,
as
the case may be, shall remain exercisable until the earlier of (i) the end
of
the one-year period following the date of the participant's death or the date
of
the termination of his or her employment, as the case may be, or (ii) the date
the Stock Option would otherwise expire; and
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(4)
all
unearned and/or unvested Performance Awards held by the participant on the
date
of the participant's death or the date of the termination of his or her
employment, as the case may be, with regard to which a minimum of one year
of
the performance period (as defined by the Committee) has elapsed, shall
immediately become earned or vested as of such date and shall be paid out and/or
settled based on the participant's performance immediately prior to the date
of
the participant's death or the date of the termination of his or her employment
on a pro-rated basis.
b.
Subject to any written agreement between the participant and the Company or
any
of its Subsidiaries, if a participant's employment is terminated by the Company
for Cause (as defined in Section 12(f) below), or if a participant voluntarily
terminates the participant’s employment, all Awards, whether or not vested,
earned or exercisable, held by the participant on the date of the termination
of
his or her employment for Cause, or on the date of the participant’s voluntary
termination of employment, shall immediately be forfeited by such participant
as
of such date.
c.
Subject to any written agreement between the participant and the Company or
any
of its Subsidiaries, if a participant's employment is terminated for any reason,
including, without limitation, retirement, other than for Cause or other than
due to death or disability:
(1)
all
unvested, unearned or unexercisable Awards held by the participant on the date
of the termination of his or her employment shall immediately be forfeited
by
such participant as of such date; and
(2)
all
exercisable Stock Options held by the participant on the date of the termination
of his or her employment shall remain exercisable until the earlier of (i)
the
end of the 90-day period following the date of the termination of the
participant's employment, or (ii) the date the Stock Option would otherwise
expire.
d.
Notwithstanding anything contained in the Plan to the contrary, the Committee
may, in its discretion, provide that:
(1)
any
or all unvested Stock Grants held by the participant on the date of the
termination of the participant's employment shall immediately become vested
as
of such date;
(2)
any
or all unexercisable Stock Options held by the participant on the date of the
participant's death and/or the date of the termination of his or her employment
shall immediately become exercisable as of such date and shall remain
exercisable until a date that occurs on or prior to the date the Stock Option
is
scheduled to expire, provided, however, that Incentive Stock Options shall
remain exercisable not longer than the end of the 90-day period following the
date of the termination of the participant's employment;
(3)
any
or all exercisable Stock Options held by the participant on the date of the
participant's death and/or the date of the termination of his or her employment
shall remain exercisable until a date that occurs on or prior to the date the
Stock Option is scheduled to expire, provided, however, that Incentive Stock
Options shall remain exercisable not longer than the end of the 90-day period
following the date of the termination of the participant's employment;
and/or
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(4)
a
participant shall immediately become vested in all or a portion of any earned
Performance Awards held by such participant on the date of the termination
of
the participant's employment, and such vested Performance Awards (or portion
thereof) and/or any unearned Performance Awards (or portion thereof) held by
such participant on the date of the termination of his or her employment shall
immediately become payable to such participant as if all performance goals
had
been met as of the date of the termination of his or her employment, provided,
however, that no portion of a payment shall be made if such portion would not
be
deductible under Section 162 of the Code.
e.
Notwithstanding anything contained in the Plan to the contrary, (i) the
provisions contained in this Section 12 shall be applied to an Incentive Stock
Option only if the application of such provision maintains the treatment of
such
Incentive Stock Option as an Incentive Stock Option and (ii) the exercise period
of an Incentive Stock Option in the event of a termination due to disability
provided in Section 12(a)(3) above shall only apply if the participant's
disability satisfies the requirement of "permanent and total disability" as
defined in Section 22(e)(3) of the Code.
f.
For
purposes of this Section 12, (i) if there is an employment agreement between
the
participant and the Company or any of its Subsidiaries in effect, "Cause" shall
have the same definition as the definition of "cause" contained in such
employment agreement; or (ii) if "Cause" is not defined in such employment
agreement or if there is no employment agreement between the participant and
the
Company or any of its Subsidiaries in effect, "Cause" shall include, but is
not
limited to:
(1)
any
willful and continuous neglect of or refusal to perform the employee's duties
or
responsibilities with respect to the Company or any of its Subsidiaries,
insubordination, dishonesty, gross neglect or willful malfeasance by the
participant in the performance of such duties and responsibilities, or the
willful taking of actions which materially impair the participant's ability
to
perform such duties and responsibilities, or any serious violation of the rules
or regulations of the Company;
(2)
the
violation of any local, state or federal criminal statute, including, without
limitation, an act of dishonesty such as embezzlement, theft or
larceny;
(3)
intentional provision of services in competition with the Company or any of
its
Subsidiaries, or intentional disclosure to a competitor of the Company or any
of
its Subsidiaries of any confidential or proprietary information of the Company
or any of its Subsidiaries; or
(4)
any
similar conduct, including, without limitation, disparagement of the Company
or
any of its Subsidiaries, by the participant with respect to which the Company
determines in its discretion that the participant has terminated employment
under circumstances such that the payment of any compensation attributable
to
any Award granted under the Plan would not be in the best interest of the
Company or any of its Subsidiaries.
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For
purposes of this Section 12, the Committee shall have the authority to determine
whether the "Cause" exists and whether subsequent actions on the part of the
participant have cured the "Cause."
13. Transferability
Each
Award granted under the Plan to a participant who is subject to restrictions
on
transferability and/or exercisability shall not be transferable otherwise than
by will or the laws of descent and distribution and/or shall be exercisable,
during the participant's lifetime, only by the participant. In the event of
the
death of a participant, each Stock Option theretofore granted to him or her
shall be exercisable in accordance with Section 12 above and then only by the
executor or administrator of the estate of the deceased participant or the
person or persons to whom the deceased participant's rights under the Stock
Option shall pass by will or the laws of descent and distribution.
Notwithstanding the foregoing, at the discretion of the Committee, an Award
(other than an Incentive Stock Option) may permit the transferability of such
Award by a participant solely to members of the participant's immediate family
or trusts or family partnerships for the benefit of such persons, subject to
any
restriction included in the Award agreement.
14.
Other
Provisions
Awards
granted under the Plan may also be subject to such other provisions (whether
or
not applicable to the Award granted to any other participant) as the Committee
determines on the date of grant to be appropriate, including, without
limitation, for the installment purchase of Common Stock under Stock Options
to
assist the participant, excluding an executive officer or a director, in
financing the acquisition of Common Stock, for the forfeiture of, or
restrictions on resale or other disposition of, Common Stock acquired under
any
form of the Award, for the acceleration of exercisability or vesting of Awards
in the event of the Change in Control of the Company, or to comply with federal
and state securities laws, or understandings or conditions as to the
participant's employment, in addition to those specifically provided for under
the Plan. In addition, except as otherwise provided herein (including, without
limitation Section 21 hereof), a participant may defer receipt or payment of
any
Award granted under this Plan, in accord with the terms of any deferred
compensation plan or arrangement of the Company. The Committee shall have the
authority to retract any Award granted under the Plan in case of a material
restatement of the financial statements of the Company or if it is otherwise
determined by the Committee that the previously granted Award was not earned
by
the participant.
15. Fair
Market Value
For
purposes of this Plan and any Awards granted hereunder, Fair Market Value shall
be (i) the closing price of Common Stock on the date of grant in the case of
a
Stock Option or date of reference for any other Award (or on the last preceding
trading date if Common Stock was not traded on such date) if Common Stock is
readily tradable on a national securities exchange or other market system or
(ii) if Common Stock is not readily tradable, the amount determined in good
faith by the Committee as the fair market value of Common
Stock.
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16. Withholding
All
payments or distributions of Awards made pursuant to the Plan shall be net
of
any amounts required to be withheld pursuant to applicable federal, state and
local or foreign tax withholding requirements. If the Company proposes or is
required to distribute Common Stock pursuant to the Plan or a participant,
it
may require the participant receiving such Common Stock to remit to it or to
the
Subsidiary that employs such participant an amount sufficient to satisfy such
tax withholding requirements prior to the delivery of any certificates for
such
Common Stock. In lieu thereof, the Company or the Subsidiary employing the
participant shall have the right to withhold the amount of such taxes from
any
other sums due or to become due from the Company or the Subsidiary, as the
case
may be, to the participant receiving Common Stock, as the Committee shall
prescribe. The Committee may, in its discretion, and subject to such rules
as
the Committee may adopt (including any as may be required to satisfy applicable
tax and/or non-tax regulatory requirements), permit a participant to pay all
or
a portion of the federal, state and local or foreign withholding taxes arising
in connection with any Award consisting of shares of Common Stock, including
Common Stock that is part of the Award that gives rise to the withholding
requirement, by electing to have the Company withhold shares of Common Stock
having a Fair Market Value equal to the amount of tax to be withheld, such
tax
calculated at rates required by statute or regulation.
17. Tenure
A
participant's right, if any, to continue to serve the Company or any of its
Subsidiaries as a non-employee director, executive officer, other employee,
consultant or advisor or otherwise shall not be enlarged or otherwise affected
by his or her designation as a participant under the Plan.
18. Unfunded
Plan
Participants
shall have no right, title, or interest whatsoever in or to any investments
which the Company may make to aid it in meeting its obligations under the Plan.
Nothing contained in the Plan, and no action taken pursuant to its provisions,
shall create or be construed to create a trust of any kind, or a fiduciary
relationship between the Company and any participant, beneficiary, legal
representative or any other person. To the extent that any person acquires
a
right to receive payments from the Company under the Plan, such right shall
be
no greater than the right of an unsecured general creditor of the Company.
All
payments to be made hereunder shall be paid from the general funds of the
Company and no special or separate fund shall be established and no segregation
of assets shall be made to assure payment of such amounts except as expressly
set forth in the Plan. The Plan is not intended to be subject to the Employee
Retirement Income Security Act of 1974, as amended.
19. No
Fractional Shares
No
fractional shares of Common Stock shall be issued or delivered pursuant to
the
Plan or any Award. The Committee shall determine whether cash, or Awards, or
other property shall be issued or paid in lieu of fractional shares or whether
such fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.
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20. Duration,
Amendment and Termination
No
Award
shall be granted more than ten years after the Effective Date; provided,
however, that the terms and conditions applicable to any Award granted prior
to
such date may thereafter be amended or modified by mutual agreement between
the
Company and the participant or such other persons as may then have an interest
therein. Also, by mutual agreement between the Company and a participant under
this Plan or under any other present or future plan of the Company, Awards
may
be granted to such participant in substitution and exchange for, and in
cancellation of, any Awards previously granted to such participant under this
Plan, or any other present or future plan of the Company. The Board or the
Committee may amend the Plan from time to time or suspend or terminate the
Plan
at any time. However, no action authorized by this Section 20 shall reduce
the
amount of any existing Award or change the terms and conditions thereof without
the participant's consent. No amendment of the Plan shall, without approval
of
the stockholders of the Company, (i) increase the total number of shares which
may be issued under the Plan or the maximum number of shares with respect to
Stock Options and other Awards that may be granted to any individual under
the
Plan; (ii) modify the requirements as to eligibility for Awards under the Plan;
or (iii) effect the repricing of Stock Options; provided, however, that no
amendment may be made without approval of the stockholders of the Company if
the
amendment will disqualify any Incentive Stock Options granted
hereunder.
21. Compliance
with Section 409A of the Code
Notwithstanding
anything to the contrary set forth herein, any Award granted under this Plan
that is not exempt from the requirements of Section 409A of the Code shall
contain such provisions so that such Award shall comply with the requirements
of
Section 409A if the Code. Such restrictions, if any, shall be determined by
the
Board. For example, any deferrals of payments to any participant (whether
requested by the participant of otherwise required by the Committee) with
respect to Awards under this Plan shall not be allowed except to the extent
that
such deferrals would not cause the payments to fail to satisfy the requirements
for nonqualified deferred compensation plans described in Section 409A of the
Code.
22. Governing
Law
This
Plan, Awards granted hereunder and actions taken in connection herewith shall
be
governed and construed in accordance with the laws of the State of New York
(regardless of the law that might otherwise govern under applicable New York
principles of conflict of laws).
23.
Severability
In
case
any provision of this Plan shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not
in
any way be affected or impaired thereby.
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24. Effective
Date
a.
The
Plan shall be effective as of the date on which the Plan is approved by the
stockholders of the Company at an annual meeting or any special meeting of
stockholders of the Company (the "Effective Date") and such approval of
stockholders shall be a condition to the right of each participant to receive
Awards hereunder.
b.
This
Plan shall terminate on the 10th anniversary of the Effective Date (unless
sooner terminated by the Board).
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