UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
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[X] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
ARMOR HOLDINGS, INC.
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(Name of Registrant as Specified in Its Charter)
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ARMOR HOLDINGS, INC.
1400 MARSH LANDING PARKWAY, SUITE 112
JACKSONVILLE, FLORIDA 32250
APRIL 29, 2004
To Our Stockholders:
On behalf of the Board of Directors of Armor Holdings, Inc., I cordially
invite you to attend the Annual Meeting of Stockholders to be held on Tuesday,
June 22, 2004, at 10:00 A.M., New York City time, at The Metropolitan Club, One
East 60th Street, New York, New York 10022.
The accompanying Notice of Meeting and Proxy Statement cover the details of
the matters to be presented.
A copy of the 2003 Annual Report is included in this mailing.
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING, I URGE THAT YOU
PARTICIPATE BY COMPLETING AND RETURNING YOUR PROXY AS SOON AS POSSIBLE. YOUR
VOTE IS IMPORTANT AND WILL BE GREATLY APPRECIATED. RETURNING YOUR PROXY CARD
WILL ENSURE THAT YOUR VOTE IS COUNTED IF YOU LATER DECIDE NOT TO ATTEND THE
ANNUAL MEETING.
Cordially,
ARMOR HOLDINGS, INC.
Warren B. Kanders
Chief Executive Officer
ARMOR HOLDINGS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 22, 2004
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of the Stockholders,
and any adjournments or postponements thereof, of Armor Holdings, Inc., which
will be held on Tuesday, June 22, 2004, at 10:00 A.M., New York City time, at
The Metropolitan Club, One East 60th Street, New York, New York 10022, for the
following purposes:
1. To elect six members to serve on the Board of Directors until the next
annual meeting of stockholders and until their successors are duly
elected and qualified (Proposal 1);
2. To consider and vote upon a proposal to increase the number of shares
of authorized capital stock of Armor Holdings, Inc. to 80,000,000
shares, 75,000,000 shares of which will be common stock and 5,000,000
shares of which will be preferred stock (Proposal 2);
3. To consider and vote upon a proposal to amend Armor Holdings, Inc.'s
2002 Stock Incentive Plan, as amended, to increase, by 4,000,000
shares, the total number of shares of common stock that may be awarded
under such plan (Proposal 3); and
4. To transact such other business as may properly be brought before the
meeting, including proposals to adjourn or postpone the meeting.
Stockholders of record at the close of business on April 28, 2004 are
entitled to notice of and to vote at the meeting.
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN
IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND
THE ANNUAL MEETING. RETURNING YOUR PROXY CARD WILL ENSURE THAT YOUR VOTE IS
COUNTED IF YOU LATER DECIDE NOT TO ATTEND THE ANNUAL MEETING.
By order of the Board of Directors
Phil Baratelli
Secretary
April 29, 2004
ARMOR HOLDINGS, INC.
1400 MARSH LANDING PARKWAY, SUITE 112
JACKSONVILLE, FLORIDA 32250
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
JUNE 22, 2004
INTRODUCTION
PROXY SOLICITATION AND GENERAL INFORMATION
This Proxy Statement and the enclosed Proxy Card are being furnished to the
holders of common stock, par value $.01 per share, of Armor Holdings, Inc., a
Delaware corporation (which is sometimes referred to in this Proxy Statement as
"Armor Holdings," "we," or "us"), in connection with the solicitation of proxies
by our Board of Directors for use at the Annual Meeting of Stockholders to be
held on Tuesday, June 22, 2004 at The Metropolitan Club, One East 60th Street,
New York, New York 10022, at 10:00 A.M., New York City time, and at any
adjournments or postponements thereof. This Proxy Statement and the Proxy Card
are first being sent to stockholders on or about April 29, 2004. Our principal
executive offices are located at 1400 Marsh Landing Parkway, Suite 112,
Jacksonville, Florida 32250.
At the meeting, stockholders will be asked:
1. To elect six members to serve on the Board of Directors until the next
annual meeting of stockholders and until their successors are duly
elected and qualified (Proposal 1);
2. To consider and vote upon a proposal to increase the number of shares
of authorized capital stock of Armor Holdings to 80,000,000 shares,
75,000,000 shares of which will be common stock and 5,000,000 shares
of which will be preferred stock (Proposal 2);
3. To consider and vote upon a proposal to amend Armor Holdings' 2002
Stock Incentive Plan, as amended (the "2002 Stock Incentive Plan"), to
increase, by 4,000,000 shares, the total number of shares of common
stock that may be awarded under such plan (Proposal 3); and
4. To transact such other business as may properly be brought before the
meeting, including proposals to adjourn or postpone the meeting.
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The Board of Directors has fixed the close of business on April 28, 2004 as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting. Each such stockholder will be entitled to one vote for
each share of common stock held on all matters to come before the meeting and
may vote in person or by proxy authorized in writing.
Stockholders are requested to complete, sign, date and promptly return the
enclosed Proxy Card in the enclosed envelope. Proxies which are not revoked will
be voted at the meeting in accordance with instructions contained therein. If
the Proxy Card is signed and returned without instructions, the shares will be
voted FOR the election of each nominee for director named in this Proxy
Statement (Proposal 1), FOR increasing the number of shares of Armor Holdings'
authorized capital stock to 80,000,000 shares, 75,000,000 shares of which will
be common stock and 5,000,000 shares of which will be preferred stock (Proposal
2), and FOR increasing, by 4,000,000 shares, the total number of shares of our
common stock that may be awarded under our 2002 Stock Incentive Plan (Proposal
3). A stockholder who so desires may revoke his proxy at any time before it is
voted at the meeting by: (i) delivering written notice to us (attention:
Secretary); (ii) duly executing and delivering a proxy bearing a later date; or
(iii) casting a ballot at the meeting. Attendance at the meeting will not in and
of itself constitute a revocation of a proxy.
The Board of Directors knows of no other matters that are to be brought
before the meeting other than as set forth in the Notice of Meeting. If any
other matters properly come before the meeting, the persons named in the
enclosed Proxy Card or their substitutes will vote in accordance with their best
judgment on such matters.
RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE
Only stockholders as of the close of business on April 28, 2004 (the
"Record Date") are entitled to notice of and to vote at the meeting. As of the
Record Date, there were ________ shares of our common stock outstanding and
entitled to vote, with each share entitled to one vote. See "Security Ownership
of Certain Beneficial Owners and Management" for information regarding the
beneficial ownership of our common stock by our directors, executive officers
and stockholders known to us to own 5% or more of our common stock.
Our common stock is traded on the New York Stock Exchange under the symbol
"AH". On ___________, 2004, the last full trading date prior to the printing and
mailing of this Proxy Statement, the reported closing price for the common stock
on the New York Stock Exchange was _____. Stockholders are urged to obtain the
current market quotation for the shares of our common stock.
REQUIRED VOTES
The presence at the Annual Meeting, in person or by duly authorized proxy,
of the holders of a majority of the outstanding shares of stock entitled to vote
constitutes a quorum for the transaction of business. Each share of Armor
Holdings common stock entitles the holder to one vote on each matter presented
for stockholder action. The affirmative vote of a plurality of the votes cast in
person or by proxy is necessary for the election of directors (Proposal 1). The
affirmative vote of a majority of the votes cast in person or by proxy is
necessary for the approval of (i) the amendment to our Certificate of
Incorporation to increase the number of
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shares of our authorized capital stock to 80,000,000 shares, 75,000,000 shares
of which will be common stock and 5,000,000 shares of which will be preferred
stock (Proposal 2); and (ii) the increase, by 4,000,000 shares, of the total
number of shares of our common stock that may be awarded under our 2002 Stock
Incentive Plan (Proposal 3).
An independent inspector of elections appointed by our transfer agent or us
will tabulate votes at the meeting. Since the affirmative vote of a plurality of
votes cast is required for the election of directors (Proposal 1), abstentions
and "broker non-votes" will have no effect on the outcome of such election.
Since the affirmative vote of a majority of the votes cast is necessary for
approval of the increase in the number of shares of Armor Holdings' authorized
capital stock to 80,000,000 shares, 75,000,000 shares of which will be common
stock and 5,000,000 shares of which will be preferred stock (Proposal 2) and the
increase, by 4,000,000 shares, of the total number of shares of our common stock
that may be awarded under our 2002 Stock Incentive Plan (Proposal 3), an
abstention will have the same effect as a negative vote, but "broker non-votes"
will have no effect on the outcome of the voting for Proposals 2 and 3.
Brokers holding shares for beneficial owners must vote those shares
according to the specific instructions they receive from beneficial owners. If
specific instructions are not received, brokers may be precluded from exercising
their discretion, depending on the type of proposal involved. Shares as to which
brokers have not exercised discretionary authority or received instructions from
beneficial owners are considered "broker non-votes," and will be counted for
purposes of determining whether there is a quorum.
PROXY SOLICITATION
Armor Holdings will bear the costs of the solicitation of proxies for the
meeting. Our directors, officers and employees may solicit proxies from
stockholders by mail, telephone, telegram, e-mail, personal interview or
otherwise. Such directors, officers and employees will not receive additional
compensation but may be reimbursed for out-of-pocket expenses in connection with
such solicitation. Brokers, nominees, fiduciaries and other custodians have been
requested to forward soliciting material to the beneficial owners of our common
stock held of record by them and such parties will be reimbursed for their
reasonable expenses.
IT IS DESIRABLE THAT AS LARGE A PROPORTION AS POSSIBLE OF THE STOCKHOLDERS'
INTERESTS BE REPRESENTED AT THE MEETING. THEREFORE, EVEN IF YOU INTEND TO BE
PRESENT AT THE MEETING, PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD TO ENSURE
THAT YOUR STOCK WILL BE REPRESENTED. IF YOU ARE PRESENT AT THE MEETING AND
DESIRE TO DO SO, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON BY GIVING
WRITTEN NOTICE TO THE SECRETARY OF ARMOR HOLDINGS. PLEASE RETURN YOUR EXECUTED
PROXY CARD PROMPTLY.
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BENEFICIAL OWNERSHIP OF COMPANY COMMON STOCK BY
DIRECTORS, OFFICERS AND PRINCIPAL SHAREHOLDERS
The following table sets forth as of April 1, 2004 the number of shares and
percentage of our common stock owned by (i) each person known to us to
beneficially own five percent or more of our common stock, (ii) each of our
directors and nominees for director, (iii) each of our executive officers, and
(iv) our executive officers, directors and nominees for director as a group.
Unless otherwise indicated, each of the stockholders shown in the table below
has sole voting and investment power with respect to the shares beneficially
owned. Unless otherwise indicated, the address of each person named in the table
below is c/o Armor Holdings, Inc., 1400 Marsh Landing Parkway, Suite 112,
Jacksonville, Florida 32250.
Amount and
nature of
beneficial
Name ownership (1) Percentage (17)
---- ------------- ----------
Westfield Capital Management Co. LLC (2) 2,956,000 10.3%
T. Rowe Price Associates, Inc. (3) 2,901,100 10.2%
Warren B. Kanders and Kanders Florida Holdings, Inc. (4) 2,515,655 8.7%
FleetBoston Financial Corporation (5) 2,065,005 7.2%
Wellington Management Company, LLP (6) 1,496,250 5.2%
Robert R. Schiller (7) 283,005 1.0%
Stephen E. Croskrey (8) 258,005 *
Nicholas Sokolow (9) 212,450 *
Burtt R. Ehrlich (10) 150,025 *
Thomas W. Strauss (11) 141,500 *
Alair A. Townsend (12) 112,716 *
Glenn J. Heiar (13) 51,500 *
Deborah Zoullas (14) 19,000 *
Robert F. Mecredy (15) 17,878 *
All directors, nominees for directors and executive officers as a group 3,761,734 12.5%
(10 persons) (16)
* Less than 1%.
(1) As used in this table, a beneficial owner of a security includes any
person who, directly or indirectly, through contract,
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arrangement, understanding, relationship or otherwise has or shares
(a) the power to vote, or direct the voting of, such security or (b)
investment power which includes the power to dispose, or to direct the
disposition of, such security. In addition, a person is deemed to be
the beneficial owner of a security if that person has the right to
acquire beneficial ownership of such security within 60 days.
(2) This information has been obtained from the Schedule 13G filed by
Westfield Capital Management Co. LLC on December 5, 2002. The address
of Westfield Capital Management Co. LLC is One Financial Center,
Boston, MA 02111.
(3) This information has been provided to us by T. Rowe Price Associates,
Inc. in a letter dated March 19, 2004. We have assumed that, as of
April 1, 2004, there has been no change in the number of shares of our
common stock held by T. Rowe Price Associates, Inc. The address of T.
Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore,
Maryland 21202.
(4) Of such shares, Kanders Florida Holdings, Inc., of which Mr. Kanders
is the sole stockholder and sole director, owns 2,098,395 shares.
Includes options to purchase 412,500 shares of common stock. Excludes
unvested restricted stock awards of 124,288 shares and vested deferred
restricted stock awards of 200,000 shares granted to Mr. Kanders over
which Mr. Kanders does not have voting or dispositive power and
unvested options to purchase 935,000 shares of common stock. Also
includes 4,760 shares held for the benefit of Mr. Kanders' children.
(5) This information has been obtained from the Schedule 13G filed by
FleetBoston Financial Corporation on February 13, 2004. The address of
FleetBoston Financial Corporation is 100 Federal Street, Boston, MA
02110.
(6) This information has been obtained from Schedule 13G/A filed by
Wellington Management Company, LLP on February 12, 2004. The amount
reported consists of shares of common stock owned by clients of
Wellington Management. The address of Wellington Management is 75
State Street, Boston, MA 02109.
(7) Includes options to purchase 275,000 shares of common stock. Excludes
vested deferred performance stock awards of 150,000 shares and
unvested restricted stock awards of 112,144 shares granted to Mr.
Schiller over which Mr. Schiller does not have voting or dispositive
power. Excludes unvested options to purchase 350,000 shares of common
stock.
(8) Includes options to purchase 220,000 shares of common stock. Excludes
unvested options to purchase 100,000 shares of common stock and
unvested restricted stock awards of 4,940 shares granted to Mr.
Croskrey over which Mr. Croskrey does not have voting or dispositive
power.
(9) Includes options to purchase 131,250 shares of common stock. Excludes
unvested options to purchase 3,750 shares of common stock. Also
includes 60,000 shares owned by S.T. Investors Fund, LLC, a limited
liability company of which Mr. Sokolow is a member, 10,000 shares
owned by Mr. Sokolow's profit sharing plan and 11,200 shares held for
the benefit of Mr. Sokolow's children and of which Mr. Sokolow
disclaims beneficial ownership.
(10) Includes options to purchase 55,125 shares of common stock. Excludes
unvested options to purchase 3,375 shares of common stock. Also
includes 5,000 shares owned by Mr. Ehrlich's children and 6,500 shares
in trust for the benefit of his children, of which Mr. Ehrlich's
spouse is trustee, of which he disclaims beneficial ownership. Also
includes 400 shares owned by Mr. Ehrlich's spouse's individual
retirement account of which Mr. Ehrlich disclaims beneficial
ownership.
(11) Includes options to purchase 129,000 shares of common stock. Excludes
unvested options to purchase 3,000 shares of common stock.
(12) Includes options to purchase 109,000 shares of common stock. Excludes
unvested options to purchase 3,000 shares of common stock.
(13) Includes options to purchase 40,000 shares of common stock. Excludes
unvested options to purchase 150,000 shares of common stock and
unvested restricted stock awards of 5,020 over which Mr. Heiar does
not have voting or dispositive power.
(14) Includes options to purchase 19,000 shares of common stock. Excludes
unvested options to purchase 23,000 shares of common stock.
(15) Includes options to purchase 16,666 shares of common stock. Excludes
unvested restricted stock awards of 6,100
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shares over which Mr. Mecredy does not have voting or dispositive
power. Excludes unvested options to acquire 108,334 shares of common
stock.
(16) See footnotes (4) and (7) through (15).
(17) Percent is based on 28,572,595 shares of common stock outstanding as
of April 1, 2004.
We are not aware of any material proceedings to which any of our directors,
nominees for director, executive officers, affiliates of the foregoing persons
or any security holder, including any owner of record or beneficial owner of
more than 5% of any class of our voting securities, is a party adverse to us or
has a material interest adverse to us.
STOCK OPTION PLANS
The table below shows the number of options and range of exercise prices we
granted to various employees and directors during our fiscal year ended December
31, 2003 under our 2002 Stock Incentive Plan.
PLAN NAME NUMBER OF GRANTS GRANT PRICE RANGES
------------------------------ ------------------- -----------------------
2002 Stock Incentive Plan 898,346 $13.68 - $25.07
The options granted to non-employee directors vest in one year, and options
granted to employees typically vest equally over a period of three years from
the date of the grant. The vesting of the options may be accelerated in the
event of the occurrence of certain events.
The following table sets forth certain information regarding our equity plans as
at December 31, 2003.
Plan Category (A) (B) (C)
Number of Weighted-average Number of securities remaining
securities to be exercise price of available for future issuance
issued upon outstanding under equity compensation plans
exercise of options, warrants (excluding securities reflected in
outstanding and rights column (a))
options, warrants
and rights
----------------------------- -------------------- ------------------- ------------------------------------
Equity compensation plans
approved by security holders 3,205,921 $ 16.80 417,120
Equity compensation plans not
approved by security holders 685,000 $ 17.94 --
--------------------
Total 3,890,921
====================
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We have two non-qualified equity plans, the 2002 Executive Stock Plan and
the 1998 Stock Option Plan, that have not been approved by stockholders. The
2002 Executive Stock Plan provides for the grant of a total of 470,000 stock
options and stock awards to our key employees. The Board of Directors, or a
committee designated by the Board consisting of two or more independent
directors, is authorized to set the price and terms and conditions of the
options and awards granted under the 2002 Executive Stock Plan. Options under
the 2002 Executive Stock Plan are substantially the same as the 2002 Stock
Incentive Plan except that we may only grant non-qualified stock options under
the 2002 Executive Stock Plan. The 2002 Executive Stock Plan was adopted on
March 13, 2002 and all shares available for grant under the 2002 Executive Stock
Plan were granted to our executive officers on March 13, 2002.
The 1998 Stock Option Plan provides for the grant of a total of 725,000
stock options to our key employees. The Board of Directors, or a committee
designated by the Board consisting of two or more independent directors, is
authorized to set the terms and conditions of the options granted under the 1998
Stock Option Plan. The exercise price of all options granted under the 1998
Stock Option Plan is equal to the fair market value of our common stock on the
date of grant. As of the end of our last fiscal year, there were no shares
available for options to be granted under the 1998 Stock Option Plan.
PROPOSAL 1
ELECTION OF DIRECTORS
Our Certificate of Incorporation and Bylaws provide that we may have
between three and fifteen directors, with such number to be fixed by the Board
of Directors. Effective at this time and for the purposes of the meeting, the
number of directors of Armor Holdings, as fixed by the Board of Directors, is
six.
Our directors are elected annually at the annual meeting of stockholders.
Their respective terms of office continue until the next annual meeting of
stockholders and until their successors have been elected and qualified in
accordance with our Bylaws. There are no family relationships among any of our
directors or executive officers.
Unless otherwise specified, each proxy received will be voted for the
election of directors of the six nominees named below to serve until the next
annual meeting of stockholders and until their successors shall have been duly
elected and qualified. Each of the nominees has consented to be named a nominee
in this Proxy Statement and to serve as a director if elected. Should any
nominee become unable or unwilling to accept a nomination or election, the
persons named in the enclosed Proxy Card will vote for the election of a nominee
designated by the Board of Directors or will vote for such lesser number of
directors as may be prescribed by the Board of Directors in accordance with our
Bylaws.
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The following persons have been nominated as directors:
WARREN B. KANDERS, 46, has served as the Chairman of our Board since
January 1996 and as our Chief Executive Officer since April 9, 2003. Mr. Kanders
has served as a member of the Board of Directors of Clarus Corporation since
June 2002 and as the Executive Chairman of Clarus Corporation's Board of
Directors since December 2002. From October 1992 to May 1996, Mr. Kanders served
as Vice Chairman of the board of Benson Eyecare Corporation. From June 1992 to
March 1993, Mr. Kanders served as the President and a director of Pembridge
Holdings, Inc. Mr. Kanders received a B.A. degree in Economics from Brown
University in 1979.
BURTT R. EHRLICH, 64, has served as one of our directors since January
1996. Mr. Ehrlich has served as a member of the Board of Directors of Clarus
Corporation since June 2002 and as Chairman of the Board of Directors of Langer,
Inc. since February 2001. Mr. Ehrlich served as Chairman and Chief Operating
Officer of Ehrlich Bober Financial Corp. (the predecessor of Benson Eyecare
Corporation) from December 1986 until October 1992, and as a director of Benson
Eyecare Corporation from October 1992 until November 1995.
NICHOLAS SOKOLOW, 54, has served as one of our directors since January
1996. Mr. Sokolow has served as a member of the Board of Directors of Clarus
Corporation since June 2002. Mr. Sokolow has been a partner in the law firm of
Sokolow, Dunaud, Mercadier & Carreras since 1994. From June 1973 until October
1994, Mr. Sokolow was an associate and partner in the law firm of Coudert
Brothers.
THOMAS W. STRAUSS, 61, has served as one of our directors since May 1996.
Mr. Strauss has served as a member of the Board of Directors of Langer, Inc.
since June 2002. Since 1995, Mr. Strauss has been a principal with Ramius
Capital Group, a privately held investment management firm. From June 1993 until
July 1995, Mr. Strauss was co-chairman of Granite Capital International Group,
an investment banking firm. From 1963 to 1991, Mr. Strauss served in various
capacities with Salomon Brothers Inc, an investment banking and brokerage firm,
including President and Vice-Chairman.
ALAIR A. TOWNSEND, 62, has served as one of our directors since December
1996. Since February 1989, Ms. Townsend has been publisher of Crain's New York
Business, a business periodical. Ms. Townsend was a former governor of the
American Stock Exchange. Ms. Townsend served as New York City's Deputy Mayor for
Finance and Economic Development from February 1985 to January 1989.
DEBORAH ZOULLAS, 51, has served as one of our directors since July 2002.
Ms. Zoullas is a private investor. From December 1998 until December 2000, Ms.
Zoullas served as the Executive Vice President of Sotheby's Holdings, Inc. and
during 2000 served on its Board of Directors. From 1974 until 1996, Ms. Zoullas
worked in various capacities within the Investment Banking Division of Morgan
Stanley & Co. Incorporated. Ms. Zoullas is an Advisory Director of Morgan
Stanley, a member of the Advisory Board of The Stanford Business School, a
Director of the Helena Rubinstein Foundation and a member of the Executive
Committee of The Projects Committee of Memorial Sloan Kettering.
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The affirmative vote of a plurality of the votes cast in person or by proxy
at the annual meeting of stockholders is necessary for the election of directors
(assuming a quorum of a majority of the outstanding shares of common stock is
present).
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THE ABOVE-NAMED
DIRECTOR NOMINEES.
GOVERNANCE OF THE COMPANY
CORPORATE GOVERNANCE
Our Board of Directors has a long-standing commitment to sound and
effective corporate governance practices. Recently, the Company's management and
our Board of Directors reviewed our corporate governance practices in light of
the Sarbanes-Oxley Act of 2002 and the revised listing requirements of the New
York Stock Exchange. Based on that review, and to the extent necessary, the
Board of Directors has adopted codes of ethics and conduct, corporate governance
guidelines, committee charters, complaint procedures for accounting and auditing
matters and an Audit Committee pre-approval policy.
CORPORATE GOVERNANCE GUIDELINES AND DOCUMENTS
The Code of Ethics for Senior Executive and Financial Officers, the Code of
Business Conduct and Ethics for Directors, Officers and Employees, the Complaint
Procedures for Accounting and Auditing Matters, the Corporate Governance
Guidelines, the Audit Committee Pre-Approval Policy, and the Charters of our
Audit, Compensation and Nominating/Corporate Governance Committees were adopted
by Armor Holdings for the purpose of promoting honest and ethical conduct,
promoting full, fair, accurate, timely and understandable disclosure in periodic
reports required to be filed by Armor Holdings, and promoting compliance with
all applicable rules and regulations that apply to Armor Holdings and its
officers and directors. The foregoing materials may be accessed at
www.armorholdings.com, our Internet website, at the tab "Investor Relations." In
addition, you may request, without charge, a copy of our codes of ethics and
conduct, corporate governance guidelines, committee charters, complaint
procedures for accounting and auditing matters and the Audit Committee
pre-approval policy by submitting a written request for any of such materials
to: Armor Holdings, Inc., c/o the Secretary at 1400 Marsh Landing Parkway, Suite
112, Jacksonville, Florida 32250.
BOARD OF DIRECTORS
Our Board of Directors is currently comprised of the following six members:
Warren B. Kanders, Burtt R. Ehrlich, Nicholas Sokolow, Thomas W. Strauss, Alair
A. Townsend and Deborah A. Zoullas. During fiscal 2003, the Board of Directors
held 17 meetings. The Board of Directors has standing Audit, Compensation and
Nominating/Corporate Governance Committees. During fiscal 2003, all of the
directors then in office attended at least 75% of the total number of meetings
of the Board of Directors and the Committees of the Board of Directors on which
they served. All members of our Board of Directors attended last year's annual
stockholders meeting which was held on June 24, 2003.
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In connection with the New York Stock Exchange listing requirement that
non-management directors meet at regularly scheduled executive sessions without
management, the Board appointed Nicholas Sokolow as the Presiding Director for
such meetings until Armor Holdings' 2005 annual meeting of stockholders. The
primary responsibilities of the Presiding Director include presiding over
periodic executive sessions of the non-management members of the Board and
performing other duties that the Board may from time to time delegate to assist
in the fulfillment of its responsibilities.
DIRECTOR INDEPENDENCE
In response to the revised listing requirements of the New York Stock
Exchange, the Board of Directors has evaluated each of its directors'
independence from Armor Holdings based on the definition of "independence"
established by the New York Stock Exchange. In its review of each director's
independence from Armor Holdings, the Board of Directors reviewed whether any
transactions or relationships exist currently or, during the past year existed,
between each director and Armor Holdings and its subsidiaries, affiliates,
equity investors or independent auditors. The Board of Directors also examined
whether there were any transactions or relationships between each director and
members of the senior management of Armor Holdings or their affiliates. Based on
the Board's review and the New York Stock Exchange's definition of
"independence", the Board has determined that the Board is comprised of a
majority of independent directors. The Board has also determined that each of
the members of our Audit Committee is "independent" for purposes of Section
10A(m)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
STOCKHOLDER COMMUNICATIONS WITH DIRECTORS
Stockholders may send communications to the Board of Directors or any
committee thereof by writing to the Board or any such committee at Armor
Holdings, Inc., c/o the Secretary at 1400 Marsh Landing Parkway, Suite 112,
Jacksonville, Florida 32250. The Secretary will distribute all stockholder
communications to the intended recipients and/or distribute to the entire Board,
as appropriate.
In addition, stockholders may also contact the Presiding Director or any
other non-management director by writing to the Presiding Director at Armor
Holdings, Inc., c/o the Secretary at 1400 Marsh Landing Parkway, Suite 112,
Jacksonville, Florida 32250. The Presiding Director will review and distribute
all stockholder communications to the intended recipients and/or distribute to
the entire Board, as appropriate.
COMPLAINT PROCEDURES
Complaints and concerns about accounting, internal accounting controls or
auditing or related matters pertaining to the Company may be submitted by
writing to the Chairman of the Audit Committee as follows: Armor Holdings, Inc.,
c/o Chairman of the Audit Committee 1400 Marsh Landing Parkway, Suite 112,
Jacksonville, Florida 32250. Complaints may be submitted on a confidential and
anonymous basis by sending them in a sealed envelope marked "Confidential."
11
AUDIT COMMITTEE
The functions of the Audit Committee are to recommend to the Board of
Directors the appointment of independent auditors and to analyze the reports and
recommendations of such auditors. The committee also monitors the adequacy and
effectiveness of our financial controls and reporting procedures and the
performance of our internal audit staff and independent auditors. During fiscal
2003, the Audit Committee consisted of Ms. Townsend (Chairwoman), Mr. Sokolow,
Mr. Strauss and Ms. Zoullas, all of whom were determined by the Board to be
independent of Armor Holdings based on the New York Stock Exchange's definition
of "independence". Effective December 31, 2003, Mr. Sokolow resigned from his
position on the Audit Committee. The Board of Directors has determined that it
currently does not have an "audit committee financial expert" (as such term is
defined under the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated thereunder) serving on its Audit Committee as it has not yet
identified a suitable candidate. The Audit Committee met 10 times during fiscal
2003. The Board of Directors has adopted a written Charter for the Audit
Committee, a copy of which is attached hereto as Appendix A.
COMPENSATION COMMITTEE
The purpose of the Compensation Committee is to recommend to the Board of
Directors the compensation and benefits of our executive officers and other key
managerial personnel. During fiscal 2003, the Compensation Committee consisted
of Messrs. Sokolow (Chairman) and Ehrlich, all of whom were determined by the
Board to be independent of Armor Holdings. The Compensation Committee met 2
times during fiscal 2003, and also held numerous informal discussions during
fiscal 2003.
NOMINATING/CORPORATE GOVERNANCE COMMITTEE
The purpose of the Nominating/Corporate Governance Committee is to
identify, evaluate and nominate candidates for election to the Board of
Directors as well as review Armor Holdings' corporate governance guidelines and
other related documents for compliance with applicable laws and regulations such
as the Sarbanes-Oxley Act of 2002 and the New York Stock Exchange's listing
requirements. The Nominating/Corporate Governance Committee will consider
nominees recommended by stockholders. The names of such nominees should be
forwarded to Armor Holdings, Inc., c/o the Secretary at 1400 Marsh Landing
Parkway, Suite 112, Jacksonville, Florida 32250, who will submit them to the
committee for its consideration. During fiscal 2003, the Nominating/Corporate
Governance Committee consisted of Messrs. Kanders (Chairman) and Sokolow.
The Nominating/Corporate Governance was established at the end of December
2003 and replaces the Nominating Committee. The Nominating Committee did not
meet during fiscal 2003. The functions of the Nominating/Corporate Governance
Committee were considered at and acted upon by the entire Board of Directors
during its meetings in fiscal 2003. In order to comply with the New York Stock
Exchange's listing requirement that all members of our Nominating/Corporate
Governance Committee be independent from Armor Holdings, in December 2003, Mr.
Kanders resigned from his position on the Nominating/Corporate Governance
Committee and Mr. Ehrlich and Ms. Zoullas were appointed by the Board to the
12
Nominating/Corporate Governance Committee. Mr. Sokolow will act as Chairman of
the Nominating/Corporate Governance Committee. As Messrs. Sokolow and Ehrlich
and Ms. Zoullas were determined by the Board to be independent from Armor
Holdings, the Nominating/Corporate Governance Committee will only be comprised
of independent directors. A copy of the Nominating/Corporate Governance
Committee's Charter is available on our Internet website at the tab "Investor
Relations".
Candidates for the Board of Directors should possess fundamental qualities
of intelligence, honesty, perceptiveness, good judgment, maturity, high ethics
and standards, integrity, fairness and responsibility; have a genuine interest
in Armor Holdings; have no conflict of interest or legal impediment which would
interfere with the duty of loyalty owed to Armor Holdings and its stockholders;
and have the ability and willingness to spend the time required to function
effectively as a director of Armor Holdings. The Nominating/Corporate Governance
Committee may engage third-party search firms from time to time to assist it in
identifying and evaluating nominees for director. The Nominating/Corporate
Governance Committee evaluates nominees recommended by stockholders, by other
individuals and by the search firms in the same manner, as follows. The
Nominating/Corporate Governance Committee reviews biographical information
furnished by or about the potential nominees to determine whether they have the
experience and qualities discussed above. When a Board vacancy occurs or is
anticipated, the Nominating/Corporate Governance Committee determines which of
the qualified candidates to interview, based on the current needs of the Board
and Armor Holdings, and members of the Nominating/Corporate Governance Committee
meet with these individuals. If, after such meetings, the Nominating/Corporate
Governance Committee determines to recommend any candidate to the Board for
consideration, that individual is invited to meet with the entire Board. The
Board then determines whether to select the individual as a director-nominee.
COMPENSATION OF DIRECTORS
Our directors, other than Mr. Kanders who was compensated pursuant to his
employment agreement, receive stock options for 12,000 shares of our common
stock and cash in the amount of $15,000, each of which vests and is payable
quarterly during the course of the year. In addition, each member of the Audit
Committee, due to the additional work required by the members of such committee,
will receive an additional $8,000 in cash and the Chair of the Audit Committee
will receive an additional $4,000 in cash, each of which is payable quarterly
during the course of the year. The members of the Compensation Committee and the
Nominating/Corporate Governance Committee will receive stock options for 1,500
shares of our common stock, which vests quarterly during the course of the year.
Non-attendance by a member of the Board at any Board meeting or a member of the
Audit Committee at an Audit Committee meeting will result in a reduction of
$1,500 in compensation for each missed meeting. The members of the Board are
reimbursed by us for their travel and other expenses incurred by them in
connection with company business.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
No director, executive officer, or person nominated to become a director or
executive officer has, within the last five years: (i) had a bankruptcy petition
filed by or against, or a
13
receiver, fiscal agent or similar officer appointed by a court for, any property
or any business of such person or entity with respect to which such person was a
general partner or executive officer either at the time of the bankruptcy or
within two years prior to that time; (ii) been convicted in a criminal
proceeding or is currently subject to a pending criminal proceeding (excluding
traffic violations and other minor offenses); (iii) been subject to any order,
judgment or decree, not subsequently reversed, suspended or vacated, of any
court of competent jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of business,
securities or banking activities or practice; (iv) been found by a court of
competent jurisdiction (in a civil action), the Securities and Exchange
Commission (the "Commission") or the Commodity Futures Trading Commission to
have violated a federal or state securities or commodities law, and the judgment
has not been subsequently reversed, suspended or vacated.
14
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Board of Directors has appointed an Audit Committee consisting of three
directors. Each of the members of the Audit Committee is independent from Armor
Holdings and is financially literate as that qualification is interpreted by the
Board of Directors. The Board of Directors has adopted a written charter with
respect to the Audit Committee's roles and responsibilities.
Management is responsible for Armor Holdings' internal controls and the
financial reporting process. The external auditor is responsible for performing
an independent audit of Armor Holdings' consolidated financial statements in
accordance with generally accepted auditing standards and to issue a report
thereon. The Audit Committee's responsibility is to monitor and oversee these
processes.
1. The Audit Committee has reviewed and discussed the audited financial
statements with management and with PricewaterhouseCoopers LLP, our
independent auditors.
2. The Audit Committee has discussed with PricewaterhouseCoopers LLP the
matters required to be discussed by SAS 61 (Codification of Statements
on Auditing Standards).
3. The Audit Committee has received the written disclosures from
PricewaterhouseCoopers LLP required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and
has discussed with PricewaterhouseCoopers LLP its independence from
Armor Holdings.
4. Based on the reviews and discussions referred to in paragraphs (1)
through (3) above, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2003
for filing with the Commission.
AUDIT COMMITTEE
Alair A. Townsend (Chair)
Thomas W. Strauss
Deborah Zoullas
15
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Aggregate fees for professional services rendered for Armor Holdings by
PricewaterhouseCoopers LLP for the fiscal years ended December 31, 2003 and 2002
were:
2003 2002
---- ----
Audit Fees $2,011,781 $896,847
Audit Related Fees 268,697 683,895
Tax Fees 690,014 328,102
All Other Fees -- 37,409
--------------- ---------------
Total $2,970,492 $1,946,244
AUDIT FEES
The Audit Fees for the years ended December 31, 2003 and 2002,
respectively, were for professional services rendered for the audit of our
consolidated financial statements for the fiscal years ended December 31, 2003
and 2002, as applicable, and for the review of our consolidated financial
statements included in our quarterly reports on Form 10-Q for fiscal 2003 and
2002, as applicable. In addition, the Audit Fees also includes fees for services
rendered to us by PricewaterhouseCoopers LLP for statutory and subsidiary
audits, issuance of comfort letters, consents, income tax provision procedures
and assistance with review of documents filed with the Commission.
AUDIT RELATED FEES
The Audit Related Fees as of the fiscal years ended December 31, 2003 and
2002, respectively, were for assurance and related services related to employee
benefit plan audits, due diligence related to mergers and acquisitions and
accounting consultations in connection with acquisitions.
TAX FEES
Tax Fees as of the fiscal years ended December 31, 2003 and 2002,
respectively, were for services related to tax compliance, including the
preparation of tax returns and claims for refund, tax planning and advice,
including assistance with and representation in tax audits and appeals, advice
related to mergers and acquisitions, tax services for employee benefit plans,
and requests for rulings or technical advice from tax authorities.
16
ALL OTHER FEES
There were no fees incurred for All Other Fees for the fiscal year ended
December 31, 2003. All Other Fees as of the fiscal year ended December 31, 2002,
were for services rendered for risk management advisory services.
AUDITOR INDEPENDENCE
The Audit Committee has considered the non-audit services provided by
PricewaterhouseCoopers LLP and determined that the provision of such services
had no effect on PricewaterhouseCoopers LLP's independence from Armor Holdings.
AUDIT COMMITTEE PRE-APPROVAL POLICY AND PROCEDURES
The Audit Committee must review and pre-approve all audit and non-audit
services provided by PricewaterhouseCoopers LLP, our independent auditors, and
has adopted a Pre-approval Policy. In conducting reviews of audit and non-audit
services, the Audit Committee will determine whether the provision of such
services would impair the auditor's independence. The term of any pre-approval
is 12 months from the date of pre-approval, unless the Audit Committee
specifically provides for a different period. Any proposed services exceeding
pre-approved fee ranges or limits must be specifically pre-approved by the Audit
Committee.
Requests or applications to provide services that require pre-approval by
the Audit Committee must be accompanied by a statement of the independent
auditors as to whether, in the auditor's view, the request or application is
consistent with the Commission's rules on auditor independence. Each
pre-approval request or application must also be accompanied by detailed
documentation regarding the specific services to be provided.
Since the adoption of the Pre-approval Policy by the Audit Committee on
March 11, 2004, the Audit Committee has not waived the pre-approval requirement
for any services rendered by PricewaterhouseCoopers LLP to Armor Holdings. The
full text of the Audit Committee's Pre-Approval Policy may be accessed at
www.armorholdings.com, our Internet website, at the tab "Investor Relations."
17
EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each of our
executive officers and significant employees as of April 1, 2004. Our executive
officers are appointed by and serve at the discretion of the Board of Directors
of Armor Holdings.
NAME AGE POSITION
Warren B. Kanders 46 Chairman of the Board of Directors and
Chief Executive Officer
Robert R. Schiller 41 President and Chief Operating Officer
Glenn J. Heiar 44 Chief Financial Officer
Stephen E. Croskrey 44 President and Chief Executive Officer --
Armor Holdings Products Division
Robert F. Mecredy 57 President - Aerospace and Defense Group
See the table of nominees for election as directors for biographical data
with respect to Mr. Kanders.
ROBERT R. SCHILLER, 41, has served as our President since January 1, 2004
and Chief Operating Officer since April 2003. Mr. Schiller has also held other
positions at Armor Holdings and has served as an Executive Vice President from
November 2000 to April 2003, Chief Financial Officer and Secretary from November
2000 to March 2004, as Executive Vice President and Director of Corporate
Development from January 1999 to October 2000, and as Vice President of
Corporate Development from July 1996 to December 1998. Mr. Schiller graduated
with a B.A. in Economics from Emory University in 1985 and received a M.B.A.
from Harvard Business School in 1991.
GLENN J. HEIAR, 44, has served as our Chief Financial Officer since March
2004, Chief Accounting Officer since March 2003 and Chief Financial Officer of
our Mobile Security Division since February 2002. From 1996 until 2001, Mr.
Heiar was a Vice President and the Chief Financial Officer of Pirelli Cables and
Systems, North America. From 1987 to 1996, Mr. Heiar worked for Alcatel Alsthom
as a Financial Vice President and in various other financial positions. Mr.
Heiar graduated with a B.B.A. in Accounting from the University of Wisconsin in
1982 and received a M.B.A. from the University of North Carolina in 1992. Mr.
Heiar is a certified public accountant and a certified management accountant.
STEPHEN E. CROSKREY, 44, has served as President and Chief Executive
Officer--Armor Holdings Products Division since February 1999. From 1998 to
February 1999, Mr. Croskrey served as Director of Sales for Allied Signal,
Inc.'s global fibers business. From 1988 to 1998, Mr. Croskrey served in various
positions for Mobil Oil, most recently as its Central Regional Manager for its
Industrial Lubricant division. Mr. Croskrey graduated with a B.S. in Engineering
from the United States Military Academy at West Point and received an M.M. from
Kellogg School of Management at Northwestern University in 1998.
ROBERT F. MECREDY, 57, has served as President of our Aerospace & Defense
Group since December 2003 and Corporate Vice President for Government Affairs
since October 2001.
18
From 1991 to 2001, Mr. Mecredy worked at Firearms Training Systems,
Incorporated, holding positions ranging from Director of U.S. Military Marketing
and Sales through Chief Executive Officer, President and Director. From 1988 to
1990, Mr. Mecredy served as the Director of Army and Marine Corps programs for
Raytheon's Washington, D.C. Office. Mr. Mecredy graduated Summa Cum Laude from
Park University with a B.S. in Economics in 1974 and received a M.B.A. from
Webster University in 1980.
19
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth information concerning
the annual and long-term compensation earned for the periods presented below by
our chief executive officer and each of our other executive officers whose
annual salary and bonus during fiscal 2003 exceeded $100,000 (collectively, the
"Named Executive Officers").
LONG-TERM COMPENSATION
AWARDS
-----------------------------
RESTRICTED SECURITIES
FISCAL ANNUAL COMPENSATION STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL YEAR SALARY BONUS AWARDS(1) OPTIONS COMPENSATION
POSITION
Warren B. Kanders 2003 382,000 400,000 $4,552,005 (2) 300,000 $143,000 (3)
Chairman of the Board 2002 - - 1,661,123 (4) 585,000 (5) 525,000 (3)
and CEO 2001 - - - 12,500 750,000 (3)
Jonathan M. Spiller (6) 2003 166,000 - - - 359,000 (7)
Former President, CEO and 2002 525,000 - 1,661,123 (8) 425,000 -
Director 2001 398,000 500,000 - - -
Robert R. Schiller 2003 432,638 400,000 3,314,017 (9) 200,000
Chief Operating Officer 2002 320,000 - 2,471,554 (10) 50,000 -
and Chief Financial Officer 2001 300,000 375,000 - 250,000 -
Stephen E. Croskrey 2003 300,000 225,000 82,536 (11) -
President and CEO of 2002 300,000 - 31,419 (12) 200,000 -
Armor Holdings Products Division 2001 265,000 150,000 - - -
Robert F. Mecredy 2003 200,000 190,000 114,225 (13) 100,000 -
President of Aerospace and 2002 200,000 - - 25,000 -
Defense Group 2001 38,610 - - - -
Glenn J. Heiar 2003 220,000 100,000 93,278 (14) - -
Chief Accounting Officer 2002 198,423 - - 100,000 -
2001 - - - - -
(1) Each Named Executive Officer received the following number of shares
of restricted common stock in fiscal 2003: Mr. Kanders, 213,841, Mr.
Schiller, 156,921, Mr. Croskrey, 2,851, Mr. Mecredy, 7,900, and Mr.
Heiar, 6,520. The value of the restricted common stock awarded to each
Named Executive Officer as of the date of grant are shown in the table
above. The value of the restricted common stock awarded to each Named
Executive Officer as of December 31, 2003 was as follows: Mr. Kanders,
$5,626,157, Mr. Schiller, $4,128,592, Mr. Croskrey, $75,010, Mr.
Mecredy, $207,849, and Mr. Heiar, $171,541, and were calculated using
the closing price of our common stock on December 31, 2003 which was
$26.31. No dividends, to the
20
extent declared and paid on our unrestricted common stock, will be
paid on our unvested restricted common stock.
(2) Represents the value of stock bonuses granted on July 26, 2003 and
February 10, 2004 (2003 bonus compensation which has been included as
compensation in fiscal 2003) pursuant to the 2002 Stock Incentive
Plan. The number of shares issued pursuant to the February 10, 2004
stock bonus was calculated using the closing price on February 10,
2004 which was $28.90, as quoted on the New York Stock Exchange.
200,000 shares of restricted common stock were granted to Mr. Kanders
on July 26, 2003; such shares vested on November 11, 2003 and have
been deferred until November 11, 2008, subject to acceleration under
certain circumstances. We calculated the value of the July 26, 2003
stock bonus using the closing price of our common stock, as quoted on
the New York Stock Exchange, on Novemer 11, 2003, the date on which
such stock bonus vested. The closing price of our common stock on the
New York Stock Exchange on November 11, 2003 was $20.76. 13,841 shares
of restricted common stock were granted to Mr. Kanders on February 10,
2004 of which 4,613 shares vest on February 9, 2005 and 4,614 shares
vest on each of February 9, 2006 and February 9, 2007.
(3) See "Certain Relationships and Related Transactions" for a description
of Armor Holdings' agreements with Kanders & Company, Inc. ("Kanders &
Co."), a corporation controlled by Mr. Kanders. Represents the
compensation paid to Kanders & Co. for investment banking services
provided to Armor Holdings.
(4) Represents the value of stock bonuses granted on August 12, 2002
pursuant to the 2002 Stock Incentive Plan. The number of shares issued
pursuant to these bonuses was calculated using the closing price on
August 12, 2002 of $15.04 as quoted on the New York Stock Exchange.
100,000 shares of restricted common stock were granted to Mr. Kanders
on August 12, 2002 which vest on December 31, 2016, subject to
acceleration under certain circumstances, including, among other
things, the vesting of 75% of such shares upon us achieving $100
million of earnings before interest, taxes, depreciation and
amortization ("EBITDA") during any rolling four-quarter period and the
vesting of the remaining 25% of such shares upon us achieving $125
million of EBITDA during any rolling four-quarter period. 10,447
shares of restricted common stock were granted to Kanders & Co. on
August 12, 2002 which vest on December 31, 2004.
(5) The securities underlying options granted to Mr. Kanders during 2002
include 35,000 shares of common stock underlying an option granted to
Kanders & Co.
(6) Mr. Spiller's employment was terminated and he resigned from his
position as a director on April 9, 2003.
(7) Represents a payment paid to Mr. Spiller pursuant to a separation
agreement and general release executed by us and Mr. Spiller.
(8) Represents the value of stock bonuses granted on August 12, 2002
pursuant to the 2002 Stock Incentive Plan. The number of shares issued
pursuant to these bonuses was calculated using the closing price on
August 12, 2002 of $15.04 as quoted on the New York Stock Exchange.
100,000 shares of restricted common stock were granted to Mr. Spiller
on August 12, 2002 which vest on May 22, 2006. 10,447 shares of
restricted common stock were granted to Mr. Spiller on August 12, 2002
and such shares vested on May 22, 2003.
(9) Represents the value of stock bonuses granted on November 4, 2003 and
February 10, 2004 (2003 bonus compensation which has been included as
compensation in fiscal 2003) pursuant to the 2002 Stock Incentive
Plan. The number of shares issued pursuant to the February 10, 2004
stock bonus was calculated using the closing price on February 10,
2004 which was $28.90, as quoted on the New York Stock Exchange.
150,000 shares of restricted common stock were granted to Mr. Schiller
on November 4, 2003; such shares vested on November 11, 2003 and have
been deferred until November 11, 2008, subject to acceleration under
certain circumstances. We calculated the value of the November 4, 2003
stock bonus using the closing price of our common stock, as quoted on
the New York Stock Exchange, on November 11, 2003, the date on which
such stock bonus vested. The closing price of our common stock on the
New York Stock Exchange on November 11, 2003 was $20.76. 6,921 shares
of restricted common stock were granted to Mr. Schiller on February
10, 2004 and such shares vest on February 9, 2007.
21
(10) Represents the value of stock bonuses granted on March 13, 2002 and
August 12, 2002 pursuant to the 2002 Executive Stock Plan and the 2002
Stock Incentive Plan. The number of shares issued pursuant to these
bonuses was calculated using the closing price on March 13, 2002 and
August 12, 2002 which was $23.93 and $15.04, respectively, as quoted
on the New York Stock Exchange. 100,000 shares of restricted common
stock were granted to Mr. Schiller pursuant to the 2002 Executive
Stock Plan on March 13, 2002 which vest on December 31, 2016, subject
to acceleration under certain circumstances, including, among other
things, the vesting of 75% of such shares upon us achieving $100
million of EBITDA during any rolling four-quarter period and the
vesting of the remaining 25% of such shares upon us achieving $125
million of EBITDA during any rolling four-quarter period. 5,223 shares
of restricted common stock were granted to Mr. Schiller pursuant to
the 2002 Stock Incentive Plan on August 12, 2002 and such shares vest
on December 31, 2004.
(11) Represents the value of stock bonuses granted on March 15, 2004 (2003
bonus compensation which has been included as compensation in fiscal
2003) pursuant to the 2002 Stock Incentive Plan. The number of shares
issued pursuant to these bonuses was calculated using the closing
price on March 12, 2004 which was $28.95 as quoted on the New York
Stock Exchange. Pursuant to such calculations, 2,851 shares of
restricted common stock were granted to Mr. Croskrey and such shares
vest on December 31, 2006.
(12) Represents the value of stock bonuses granted on August 12, 2002
pursuant to the 2002 Stock Incentive Plan. The number of shares issued
pursuant to these bonuses was calculated using the closing price on
August 12, 2002 which was $15.04 as quoted on the New York Stock
Exchange. Pursuant to such calculations, 2,089 shares of restricted
common stock were granted to Mr. Croskrey and such shares vest on
December 31, 2004.
(13) Represents the value of stock bonuses granted on March 21, 2003 and
March 15, 2004 (2003 bonus compensation which has been included as
compensation in fiscal 2003) pursuant to the 2002 Stock Incentive
Plan. The number of shares issued pursuant to these bonuses was
calculated using the closing price on March 21, 2003 and March 12,
2004 which was $9.87 and $28.95, respectively, as quoted on the New
York Stock Exchange. 6,000 shares of restricted common stock were
granted to Mr. Mecredy on March 21, 2003 of which 1,800 shares have
vested, 1,800 shares vest on December 31, 2004 and 2,400 shares vest
on December 31, 2005. 1,900 shares of restricted common stock were
granted to Mr. Mecredy on March 15, 2004 which shares vest on December
31, 2006.
(14) Represents the value of stock bonuses granted on March 21, 2003 and
March 15, 2004 (2003 bonus compensation which has been included as
compensation in fiscal 2003) pursuant to the 2002 Stock Incentive
Plan. The number of shares issued pursuant to these bonuses was
calculated using the closing price on March 21, 2003 and March 12,
2004 which was $9.87 and $28.95, respectively, as quoted on the New
York Stock Exchange. 5,000 shares of restricted common stock were
granted to Mr. Heiar on March 21, 2003 of which 1,500 shares have
vested, 1,500 shares vest on December 31, 2004 and 2,000 shares vest
on December 31, 2005. 1,520 shares of restricted common stock were
granted to Mr. Heiar on March 15, 2004 which shares vest on December
31, 2006.
22
OPTIONS GRANTED IN FISCAL 2003
We granted the following options to our Named Executive Officers during
fiscal 2003.
INDIVIDUAL GRANTS
-------------------------------------------------------------------------------------
PERCENT
OF TOTAL POTENTIAL REALIZABLE VALUE
OPTIONS AT ASSUMED ANNUAL RATES OF
NUMBER OF GRANTED EXERCISE STOCK PRICE APPRECIATION
SECURITIES TO OR FOR OPTION TERM
UNDERLYING EMPLOYEES BASE -----------------------------
OPTIONS IN FISCAL PRICE EXPIRATION 5% ($) 10% ($)
NAME GRANTED (#) YEAR ($/SH) DATE
----------------------- -------------- ----------- ----------- ------------- ------------- --------------
Warren B. Kanders 300,000 (1) 33.4% 14.32 7/25/13 2,701,731 6,846,718
Jonathan M. Spiller - - - - - -
Robert R. Schiller 200,000 (2) 22.3% 17.12 10/8/13 2,153,335 5,456,974
Stephen E. Croskrey - - - - - -
Robert F. Mecredy 100,000 (3) 11.1% 17.12 10/8/13 1,076,668 2,728,487
Glenn J. Heiar - - - - - -
(1) Options to purchase 100,000 shares of common stock become exercisable
on each of July 25, 2004, July 25, 2005 and July 25, 2006.
(2) Options to purchase 66,666 shares of common stock become exercisable
on October 8, 2004 and options to purchase 66,667 shares of common
stock become exercisable on each of October 8, 2005 and October 8,
2006.
(3) Options to purchase 33,333 shares of common stock become exercisable
on each of October 8, 2004 and October 8, 2005 and options to purchase
33,334 shares of common stock become exercisable on October 8, 2006.
AGGREGATE OPTION EXERCISES IN FISCAL 2003 AND FISCAL YEAR END OPTION VALUES
The following table contains certain information regarding stock options
exercised during fiscal 2003 and options to purchase our common stock held as of
December 31, 2003, by each of the Named Executive Officers. The stock options
listed below were granted without tandem stock appreciation rights. We have no
freestanding stock appreciation rights outstanding.
23
NUMBER OF SECURITIES VALUE OF UNDERLYING
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT 12/31/03 (#) 12/31/03 (1)
ACQUIRED VALUE ------------------------------ ------------------------------
ON EXERCISE REALIZED NON- NON-
NAME (#) (2)($) EXERCISABLE EXERCISABLE EXERCISABLE EXERCISABLE
------------------------ --------------- ------------- -------------- -------------- -------------- --------------
Warren B. Kanders - - 412,500 685,000 $3,606,375 $4,464,300
Jonathan M. Spiller 275,000 1,142,207 - - - -
Robert R. Schiller - - 275,000 350,000 3,563,688 3,083,000
Stephen E. Croskrey - - 200,000 150,000 2,087,375 357,000
Robert F. Mecredy - - 8,333 116,667 26,832 972,668
Glenn J. Heiar - - 25,000 75,000 114,000 342,000
(1) Calculated on the basis of $26.31 per share, the closing sales price
of the common stock on the New York Stock Exchange on December 31,
2003, less the exercise price payable for such shares.
(2) Calculated on the basis of the closing share price of the common stock
on the New York Stock Exchange on the date of exercise, less the
exercise price paid for such shares.
REPORT ON EXECUTIVE COMPENSATION BY
THE COMPENSATION COMMITTEE
COMPENSATION POLICY
The Compensation Committee of the Board of Directors is responsible for
setting and administering the policies which govern annual executive salaries,
raises and bonuses and certain awards of stock options and common stock, and
such responsibility is generally limited to the actions taken by the
Compensation Committee of the Board of Directors, although at times the full
Board has determined annual executive salaries, raises and bonuses as well as
grants of stock options and common stock without having first received
recommendations from the Compensation Committee. During 2003, the Compensation
Committee was composed of Messrs. Sokolow and Ehrlich, both of whom were
Non-Employee Directors. The general philosophy of our executive compensation
program is to attract and retain talented management while ensuring that our
executive officers are compensated in a way that advances the interests of our
stockholders. In pursuing this objective, the Compensation Committee believes
that it is critical that a substantial portion of each executive officer's
compensation be contingent upon our overall performance. It is the Compensation
Committee's responsibility to make recommendations to the Board with respect to
non-CEO compensation and, effective March 11, 2004, either alone or with the
other independent members of our Board, to determine and approve our Chief
Executive Officer's compensation. In addition, the Compensation Committee
periodically reviews our incentive compensation and other stock-based
compensation programs and recommends changes in such plans to the Board as
needed.
COMPENSATION PROGRAM COMPONENTS
Our executive compensation program emphasizes company performance,
individual performance and an increase in stockholder value over time in
determining executive pay levels. Our executive compensation program consists of
three key elements: (i) annual base salaries; (ii) a performance-based annual
bonus; and (iii) periodic grants of stock options and restricted stock. The
Compensation Committee believes that this three-part approach best serves our
and
24
our stockholders' interests by motivating executive officers to improve our
financial position, holding executives accountable for the performance of the
organizations for which they are responsible and by attracting key executives
into our service. Under our compensation program, annual compensation for
executive officers are composed of a significant portion of pay that is "at
risk" -- specifically, the annual bonus, stock options and restricted stock.
Base Salary. In reviewing and approving the base salaries of our executive
officers, the Compensation Committee considers the terms of any employment
contract with the executive; the recommendation of the Chief Executive Officer
(except in the case of his own compensation); a determination of what other
companies might pay the executive for his or her services; the executive's
experience; and a subjective assessment of the nature of the executive's
performance and contribution to the Company.
Performance-Based Annual Bonus. In reviewing and approving the annual
performance-based annual bonus for our executive officers, the Compensation
Committee considers an executive's contribution to the overall performance of
the Company.
Stock Options and Restricted Stock. Executive officers of the Company and
other key employees who contribute to the growth, development and financial
success of the Company are eligible to be awarded stock options to purchase our
common stock, shares of restricted common stock, and bonuses of shares of common
stock under our 2002 Stock Incentive Plan. Awards under our 2002 Stock Incentive
Plan help relate a significant portion of an employee's long-term remuneration
directly to stock price appreciation realized by all our stockholders and aligns
an employee's interests with that of our stockholders.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
As our President and Chief Executive Officer through April 9, 2003, Mr.
Spiller was compensated pursuant to an employment agreement entered into as of
January 1, 2002. For fiscal 2003, Mr. Spiller received a base salary of
$525,000. In addition, Mr. Spiller was entitled, at the discretion of the
Compensation Committee, to yearly bonuses based upon our net income and to
participate in the 2002 Stock Incentive Plan and other bonus plans adopted by us
based on his performance and our performance. Mr. Spiller's employment was
terminated and he resigned from his position as a director on April 10, 2003.
On April 9, 2003 Mr. Kanders was appointed our Chief Executive Officer.
From April 9, 2003 through the end of fiscal 2003, Mr. Kanders was compensated
pursuant to an employment agreement entered into as of January 1, 2002 and
amended on July 26, 2003 and November 4, 2003. The employment agreement states
that Mr. Kanders shall receive a base salary of $525,000 per year. In addition,
Mr. Kanders is entitled, at the discretion of the Compensation Committee, to
incentive compensation which may, among other things, be based upon our
performance and Mr. Kanders' performance, all as determined in the sole and
absolute discretion of the Compensation Committee. For more information
regarding Mr. Kanders' compensation, see the section labeled "Employment
Agreements" set forth below. Based on Mr. Kanders' being appointed our Chief
Executive Officer and assuming the additional duties and responsibilities
related to such appointment and the performance of our stock price since Mr.
Kanders became our Chief Executive Officer, the Board of Directors determined
that Mr. Kanders was entitled to,
25
and awarded him, a cash bonus in the amount of $400,000 and a restricted stock
award of 13,841 shares of our common stock valued at $28.90 per share, which
shall vest equally over three years, with 4,613 shares vesting on February 9,
2005 and 4,614 shares vesting on each of February 9, 2006 and February 9, 2007.
In addition, pursuant to his employment agreement with us, we provided Mr.
Kanders with a non-accountable supplemental benefit allowance equal to 7.5% of
his base salary. In determining the compensation of our Chief Executive Officer,
the Board of Directors has applied our Compensation Policy set forth above.
Effective March 11, 2004, the Compensation Committee, either alone or with the
other independent members of our Board, has the authority to determine and
approve Mr. Kanders' compensation.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public corporations for compensation over $1,000,000 paid for any
fiscal year to an individual who, on the last day of the taxable year, was (i)
the Chief Executive Officer or (ii) among the four other highest compensated
executive officers whose compensation is required to be reported in the Summary
Compensation Table. The statute exempts qualifying performance-based
compensation from the deduction limit if certain conditions are met. The
Compensation Committee believes that it is generally in our best interest to
comply with Section 162(m). However, the Compensation Committee also believes
that it must reserve the right to award compensation which it deems to be in our
best interest and our stockholders but which may not qualify as
performance-based compensation under Section 162(m). One of the conditions
required to preserve the deductibility is that the performance-based goals of
any compensation plan are determined by a compensation committee comprised of
two or more outside directors. The 2002 Stock Incentive Plan is administered by
the Compensation Committee which is comprised solely of directors who are
"outside directors" pursuant to the requirements of Section 162(m). Another
condition is that our stockholders approve certain material terms under which
the compensation is to be paid and our stockholders have approved the 2002 Stock
Incentive Plan.
MEMBERS OF THE COMPENSATION COMMITTEE
Nicholas Sokolow (Chairman)
Burtt R. Ehrlich
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2003, none of the members of our Compensation Committee, (i)
served as an officer or employee of Armor Holdings or its subsidiaries, (ii) was
formerly an officer of Armor Holdings or its subsidiaries or (iii) entered into
any transactions with Armor Holdings or its subsidiaries. During fiscal 2003,
none of our executive officers (i) served as a member of the compensation
committee (or other board committee performing similar functions or, in the
absence of any such committee, the board of directors) of another entity, one of
whose executive officers served on our Compensation Committee, (ii) served as
director of another entity, one of whose executive officers served on our
Compensation Committee, or (iii) served as member of the compensation committee
(or other board committee performing similar functions or, in the
26
absence of any such committee, the board of directors) of another entity, one of
whose executive officers served as a director of Armor Holdings.
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return (stock
price appreciation plus reinvested dividends) of our common stock with the
cumulative return (including reinvested dividends) of the Standard & Poor's 600
SmallCap Index, the Russell 3000 Index and certain companies selected in good
faith by management which, in management's view, constitute a representative
line-of-business comparison (the "Peer Group"). Our returns for the period since
May 1999 are as quoted on the New York Stock Exchange and for the period prior
to May 1999 are as quoted on the American Stock Exchange.
The companies comprising the Peer Group are L-3 Communications Holdings,
Inc., Moog Inc., EDO Corporation, DRS Technologies, Inc., Goodrich Corporation
and Engineered Support Systems, Inc.
[GRAPHIC OMITTED]
1998 1999 2000 2001 2002 2003
Armor Holdings 100.00 114.73 152.43 235.93 120.37 229.98
Peer Group 100.00 89.24 132.51 158.94 174.19 246.06
Russell 3000 100.00 119.43 109.26 95.47 73.69 94.86
S&P 600 Small Cap Index 100.00 111.52 123.81 130.91 110.86 152.47
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and executive
officers and any persons who own more than 10% of our capital stock to file with
the Commission (and, if such security is listed on a national securities
exchange, with such exchange), various reports as to ownership of such capital
stock. Such persons are required by Commission regulations to furnish us with
copies of all Section 16(a) forms they file.
Except as indicated below, based solely upon reports and representations
submitted by the directors, executive officers and holders of more than 10% of
our capital stock, all Forms 3, 4 and 5 showing ownership of and changes of
ownership in our capital stock during the 2003 fiscal
27
year were timely filed with the Commission and the New York Stock Exchange. Each
of Messrs. Schiller and Croskrey inadvertently did not timely file the required
Form 4 to report the payment of a tax liability. In addition, Mr. Croskrey
inadvertently did not timely file the required Form 4 to report the exercise of
certain stock options.
EMPLOYMENT AGREEMENTS
As of January 1, 2002, we entered into an employment agreement with
Jonathan M. Spiller which provides that he will serve as our President and Chief
Executive Officer for a three year term that will expire on December 31, 2004,
subject to early termination as described below. The agreement provides for a
base salary of $525,000. Mr. Spiller also received options to purchase 425,000
shares of common stock, of which options to purchase 128,000 shares of common
stock were issued to him at an exercise price per share equal to $23.93, and
options to purchase 297,000 were issued to him at an exercise price per share
equal to $24.07. These options vest as follows: 100,000 options vest on each of
December 31, 2002 and December 31, 2003 and 225,000 options vest on December 31,
2004. Mr. Spiller also received a restricted stock grant of 100,000 shares
pursuant to the 2002 Stock Incentive Plan which will vest on December 31, 2016,
subject to acceleration under certain circumstances which include, among other
things, our achievement of certain target levels for our earnings before
interest, taxes, depreciation and amortization ("EBITDA"). Pursuant to his
employment agreement, Mr. Spiller may be entitled, at the discretion of the
Compensation Committee of the board, to participate in the other option plans
and other bonus plans we have adopted based on his performance and our overall
performance. Mr. Spiller's employment was terminated and he resigned from his
position as a director on April 10, 2003. Armor Holdings and Mr. Spiller entered
into a Separation Agreement and General Release, dated May 22, 2003, pursuant to
which in exchange for certain consideration paid to Mr. Spiller and a release by
Mr. Spiller in favor of Armor Holdings and certain other parties of certain
claims, if any existed, Mr. Spiller's employment agreement with Armor Holdings
was terminated, except that certain provisions of the employment agreement,
including confidentiality and non-competition provisions, survived termination
of the employment agreement and were expressly incorporated into the Separation
Agreement and General Release. Pursuant to the terms of the Separation Agreement
and General Release, we agreed to make a severance payment to Mr. Spiller
payable over a period of two years in equal amounts in accordance with our
payroll practices. The amount of the severance payment was not material to us.
In addition, the Separation Agreement and General Release also established
certain vesting periods for restricted stock grants previously made to Mr.
Spiller and extended the termination date for the exercise of certain options
granted to Mr. Spiller. The Separation Agreement and General Release also
contains other provisions that are customary for agreements of this type.
As of January 1, 2002, we entered into an employment agreement with Warren
B. Kanders which provides that he will serve as the Executive Chairman of our
Board of Directors for a five year term expiring December 31, 2006, for which
Mr. Kanders received options to purchase 550,000 shares of common stock, of
which 75,000 shares can be acquired at an exercise price of $23.93 and the
remaining 475,000 shares can be acquired at an exercise price of $24.07. These
options vest as follows: 100,000 options vested on December 31, 2002 and
December 31, 2003, 100,000 option vest on December 31, 2004 and 250,000 options
vest on December 31, 2006. Mr. Kanders also received a restricted stock grant of
100,000 shares which will vest on
28
December 31, 2016, subject to acceleration under certain circumstances which
include, among other things, our achievement of certain EBITDA targets. Pursuant
to his employment agreement, Mr. Kanders may be entitled, at the discretion of
the Compensation Committee of the board, to participate in the other option
plans and other bonus plans we have adopted based on his performance and our
overall performance. A "change in control" of Armor Holdings will allow Mr.
Kanders to terminate his employment agreement and Mr. Kanders will be entitled
to the vesting of all 550,000 options and 100,000 restricted stock grants
granted to him under the employment agreement. Mr. Kanders will also be entitled
to acceleration of such vesting on the options and restricted stock grants upon
the termination of his employment agreement by us without cause. Furthermore, in
the event the employment agreement is terminated by Mr. Kanders due to the
occurrence of a change in control or terminated by Armor Holdings without cause,
Mr. Kanders shall be entitled to receive, in one lump sum, within 5 business
days of the occurrence of the change in control or his termination by Armor
Holdings without cause, the greater of his base compensation throughout the term
of the employment agreement or twice his annual base compensation. A termination
for cause will result in the termination of any unvested options and restricted
stock grants. In the event Mr. Kanders terminates the employment agreement,
other than due to a change in control, all vested options and restricted stock
grants granted to Mr. Kanders shall remain subject to the terms of the agreement
by which such options and restricted stock grants were issued, and the unvested
portion of such options and restricted stock grants shall terminate. A
termination of the employment agreement due to Mr. Kander's death or disability
will result in the termination of the unvested portion of the restricted stock
and option grants awarded pursuant to Mr. Kander's employment agreement. Mr.
Kanders has also agreed to certain confidentiality and non-competition
provisions. Mr. Kanders' employment agreement also contains other provisions
that are customary for agreements of this type.
Effective April 9, 2003, Mr. Kanders was also appointed to serve as our
Chief Executive Officer. Pursuant to his employment with Armor Holdings, Mr.
Kanders' shall receive a base salary in the amount of $525,000. On July 26,
2003, Mr. Kanders received from us 200,000 shares of restricted stock pursuant
to our 2002 Stock Incentive Plan which vested on November 12, 2003; provided,
that the payment of such restricted stock bonus award is deferred until November
11, 2008, subject to certain acceleration provisions. Mr. Kanders also received
from us on July 26, 2003 300,000 stock options to purchase our common stock from
us at an exercise price of $14.32 per share pursuant to our 2002 Stock Incentive
Plan, which vests in three annual installments of 100,000 shares commencing on
July 26, 2004. For information regarding Mr. Kanders' compensation after being
appointed our Chief Executive Officer, see "Compensation of the Chief Executive
Officer" included elsewhere in this Proxy Statement. See "Certain Relationships
and Related Transactions" for a description of compensation paid to an entity
controlled by Mr. Kanders.
As of January 1, 2002, we entered into an employment agreement with Robert
R. Schiller which provides that he will serve as our Executive Vice President,
Chief Financial Officer and Secretary for a three year term that will expire
December 31, 2004, subject to early termination as described below. The
employment agreement was subsequently amended on November 4, 2003 in connection
with Mr. Schiller's being appointed Chief Operating Officer of Armor Holdings.
The agreement provides for a base salary of $500,000 effective as of April 9,
2003. Mr. Schiller also received options to purchase 250,000 shares of common
stock at an exercise price per share equal to $15.05. These options were granted
during September of 2001, 50,000
29
options vested on each of December 31, 2001, December 31, 2002 and December 31,
2003 and 50,000 options will vest on each of December 31, 2004 and December 31,
2005; provided, that, if Mr. Kanders is not Chairman of Armor Holdings on
December 31, 2004, the remaining 50,000 shares that have not vested will vest on
December 31, 2004. Mr. Schiller also received options to purchase 50,000 shares
at an exercise price per share equal to $23.93, which will vest on December 31,
2004. Mr. Schiller also received a restricted stock grant of 100,000 shares of
common stock, valued at $23.93 per share, which will vest on December 31, 2016,
subject to acceleration under certain circumstances which include, among other
things, our achievement of certain EBITDA targets. On November 4, 2003, Mr.
Schiller received from us 150,000 shares of restricted stock pursuant to our
2002 Stock Incentive Plan which vested on November 12, 2003; provided, that the
payment of such restricted stock bonus award will be deferred until November 11,
2008, subject to certain acceleration provisions. Pursuant to his employment
agreement, Mr. Schiller may be entitled, at the discretion of the Compensation
Committee of the Board, to incentive compensation which may, among other things,
be based upon our performance and his performance, all as determined in the sole
and absolute discretion of the Compensation Committee of the Board. Pursuant to
the terms of the employment agreement, based upon his performance, we paid
$400,000 to Mr. Schiller and granted to him a restricted stock award of 6,921
shares of our common stock valued at $28.90 per share, which will vest on
February 9, 2007. Furthermore, pursuant to the terms of the employment
agreement, we have assigned to Mr. Schiller all of our rights as a beneficiary
of the life insurance policy obtained on the life of Mr. Kanders; provided that
upon the vesting of the 100,000 share restricted stock grant set forth in the
employment agreement, Mr. Schiller shall no longer be the beneficiary of such
life insurance policy, and we will be reinstated as the beneficiary thereof. Mr.
Schiller pays the premiums on such policy for so long as he is the beneficiary
thereof.
A "change in control" of Armor Holdings will allow Mr. Schiller to
terminate his employment agreement and to receive, in one lump sum within five
business days, payment equal to his base salary until the end of the term of his
employment or his base salary for two years, whichever is greater, as well as
the vesting of all 300,000 options and 100,000 restricted stock grants granted
to him under the employment agreement. Mr. Schiller will also be entitled to
such payment, in one lump sum within five business days, and the acceleration of
such vesting on the options and restricted stock grants upon the termination of
his employment agreement by us without cause. In addition, in the event the
employment agreement is terminated upon the occurrence of a "change in control"
or termination of the employment agreement by us without cause, the transfer
restrictions relating to our capital stock shall not be applicable. A
termination for cause will result in the termination of any unvested options and
restricted stock grants. A termination of the employment agreement due to Mr.
Schiller's death or disability will result in the termination of the unvested
portion of the restricted stock grant for 100,000 shares granted to Mr. Schiller
pursuant to his employment agreement. In addition, in the event the employment
agreement is terminated due to Mr. Schiller's death or disability, other than as
set forth in the immediately preceding sentence, Mr. Schiller's stock options or
stock grants, whether or not vested as of such termination date, will become
fully vested. If Mr. Schiller terminates his employment agreement for any reason
other than upon a change in control or due to Mr. Kanders not being the Chairman
of the Board, all of Mr. Schiller's vested options and restricted stock grants
granted pursuant to the employment agreement will remain subject to the transfer
restrictions contained in the employment agreement, the unvested portion of such
options and restricted stock grants will terminate, and Mr. Schiller's other
shares of common stock or vested
30
options other than the options referenced earlier on in this sentence shall not
be subject to the transfer restrictions contained in the employment agreement.
Mr. Schiller's employment agreement also provides him with a non-accountable
supplemental benefit allowance of 7.5% of his base salary.
Mr. Schiller has also agreed to certain confidentiality and non-competition
provisions and, subject to certain exceptions and limitations, to not sell,
transfer or dispose of the shares of common stock or options for the purchase of
common stock of Armor Holdings granted to him under his employment agreement
until December 31, 2004. Mr. Schiller's employment agreement also contains other
provisions that are customary for agreements of this type. In April 2003, Mr.
Schiller was also appointed to serve as our Chief Operating Officer, and in
January 2004, he was appointed as our President.
As of January 1, 2002,we entered into an employment agreement with Stephen
E. Croskrey which provides that he will serve as the President and Chief
Executive Officer of our Armor Holdings Products Division for a three year term
that will expire on December 31, 2004, subject to early termination as described
below. The agreement provides for a base salary of $300,000. Mr. Croskrey also
received options to purchase 200,000 shares of common stock at an exercise price
per share equal to $23.93. These options vest as follows: 50,000 options vested
on each of December 31, 2002 and December 31, 2003 and 100,000 options vest on
December 31, 2004. A "change in control" of Armor Holdings will allow Mr.
Croskrey to terminate his employment agreement and to receive, in one lump sum
within five business days, payment equal to his base salary until the end of the
term of his employment or his base salary for two years, whichever is greater,
as well as the vesting of all 200,000 options granted to him under the
employment agreement. Mr. Croskrey will also be entitled to such payment, in one
lump sum within five business days, and the acceleration of such vesting on his
options upon the termination of his employment agreement by us without cause. A
termination for cause will result in the termination of any unvested options and
restricted stock grants. Mr. Croskrey has also agreed to certain confidentiality
and non-competition provisions and, subject to certain exceptions and
limitations, to not sell, transfer or dispose of the shares of common stock or
options for the purchase of common stock of Armor Holdings granted to him under
his employment agreement until December 31, 2004. Mr. Croskrey's employment
agreement also contains other provisions that are customary for agreements of
this type.
As of March 11, 2004, we entered into an employment agreement with Glenn J.
Heiar, which provides that he will serve as our Chief Financial Officer for a
three year term that will expire on March 10, 2007, subject to early termination
as described below. The agreement provides for a base salary of $300,000. Mr.
Heiar also received options to purchase 100,000 shares of common stock at an
exercise price per share equal to $28.46. These options vest on March 10 of each
year from 2005 through 2009 at the rate of 20,000 options per year. A "change in
control" of Armor Holdings will allow Mr. Heiar to terminate his employment
agreement and to receive, in one lump sum within five business days, payment
equal to his base salary for one year and will accelerate the vesting of all
options and awards of restricted common stock granted to him. A termination for
cause or without cause by Armor Holdings, or termination by Mr. Heiar for any
reason other than a "change in control," will result in the termination of any
unvested options and awards of restricted common stock granted to Mr. Heiar. Mr.
Heiar has also agreed to certain confidentiality and non-competition provisions
and, subject to certain
31
exceptions and limitations, to not sell, transfer or dispose of the shares of
common stock or options for the purchase of common stock of Armor Holdings
granted to him until March 10, 2007. Mr. Heiar's employment agreement also
provides him with a non-accountable supplemental benefit allowance of $15,000
per year. Mr. Heiar's employment agreement also contains other provisions that
are customary for agreements of this type.
As of December 9, 2003,we entered into an employment agreement with Robert
F. Mecredy which provides that he will serve as the President of Armor Holdings
Aerospace and Defense Group for a three year term that will expire on December
8, 2006, subject to early termination as described below. The agreement provides
for a base salary of $300,000. A "change in control" of Armor Holdings will
allow Mr. Mecredy to terminate his employment agreement and to receive, in one
lump sum within five business days, payment equal to his base salary for one
year and will accelerate the vesting of all options and awards of restricted
common stock granted to him. A termination for cause or without cause by Armor
Holdings, or termination by Mr. Mecredy for any reason other than a "change in
control," will result in the termination of any unvested options and awards of
restricted common stock granted to Mr. Mecredy. Mr. Mecredy has also agreed to
certain confidentiality and non-competition provisions and, subject to certain
exceptions and limitations, to not sell, transfer or dispose of the shares of
common stock or options for the purchase of common stock of Armor Holdings
granted to him until December 8, 2006. Mr. Mecredy's employment agreement also
provides him with a non-accountable supplemental benefit allowance of $15,000
per year and reimbursement for reasonable relocation expenses. Mr. Mecredy's
employment agreement also contains other provisions that are customary for
agreements of this type.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective as of January 1, 2002, Kanders & Company, Inc. ("Kanders & Co."),
a corporation controlled by Warren B. Kanders, the Executive Chairman of our
Board and our Chief Executive Officer, entered into an agreement with us to
provide certain investment banking, financial advisory and related services for
a five year term that expires on December 31, 2006. Kanders & Co. will receive a
mutually agreed upon fee on a transaction by transaction basis during the term
of this agreement. The aggregate fees under this agreement will not exceed
$1,575,000 during any calendar year. We also agreed to reimburse Kanders & Co.
for reasonable out-of-pocket expenses including Kanders & Co.'s expenses for
office space, an executive assistant, furniture and equipment, travel and
entertainment, reasonable fees and disbursements of counsel, and consultants
retained by Kanders & Co.
In April 2003, in connection with Mr. Kanders being appointed Chief
Executive Officer of Armor Holdings, Armor Holdings and Kanders & Co. agreed to
terminate the agreement pursuant to which Kanders & Co. provided certain
services to Armor Holdings. We paid Kanders & Co. $143,000 for investment
banking services during fiscal 2003 (through and including April 2003 only). We
also reimbursed Kanders & Co. for out-of-pocket expenses in the aggregate amount
of $61,000 during the fiscal year ended December 31, 2003 (through and including
April 2003 only).
Effective as of January 1, 2003, we entered into a Transportation Services
Agreement with Kanders Aviation, LLC, an entity controlled by Mr. Kanders.
Pursuant to the terms of the
32
Transportation Services Agreement and upon our request, Kanders Aviation may, in
its sole discretion, provide us with air transportation services via certain
aircraft. The Transportation Services Agreement will remain in effect
indefinitely until terminated by written notice by either party thereto to the
other party thereto. During the term of the Transportation Services Agreement,
we will reimburse Kanders Aviation in an amount equal to the fair market value
of the air transportation services provided by Kanders Aviation to us and any
additional expenses incurred by Kanders Aviation in connection with such air
transportation services.
Nicholas Sokolow, one of our directors, is a member of the law firm
Sokolow, Dunaud, Mercadier & Carreras located in Paris, France. We have retained
Sokolow, Dunaud, Mercadier & Carreras during the fiscal year ended December 31,
2003 and may retain Sokolow, Dunaud, Mercadier & Carreras during the fiscal year
ending December 31, 2004. During the fiscal year ended December 31, 2003, we
paid Sokolow, Dunaud, Mercadier & Carreras $124,000 for legal services in
connection with our French operations.
PROPOSAL 2
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
On March 11, 2004, the Board of Directors unanimously approved and
recommended that Armor Holdings' stockholders consider and approve an amendment
to Article IV of Armor Holdings' Certificate of Incorporation that would
increase the number of shares of authorized capital stock to 80,000,000 shares,
75,000,000 shares of which will be common stock, par value $.01 per share, and
5,000,000 shares of which will be preferred stock, par value $.01 per share.
The proposed increase in the authorized common stock has been recommended
by the Board of Directors to assure that an adequate supply of authorized,
unissued shares is available for general corporate needs and to provide the
Board of Directors with the necessary flexibility to issue stock in connection
with acquisitions, merger transactions or financings without the expense and
delay incidental to obtaining stockholder approval of an amendment to the
Certificate of Incorporation at the time of such action, except as may be
required for a particular issuance by applicable law or by the rules of any
stock exchange on which our securities may then be listed. The additional
authorized shares of common stock may be used for such purposes as raising
additional capital, the financing of an acquisition or business combination,
stock splits and stock dividends, and employee, executive and director benefits
plans. Such shares would, however, be available for issuance without further
action by the stockholders, unless required by applicable law. We have no
present plans, arrangements, commitments or understanding with respect to the
issuance of any of the additional shares of common stock that would be
authorized by adoption of the amendment.
The additional shares of common stock for which authorization is sought
would be identical to the shares of the common stock of Armor Holdings now
authorized. Holders of our common stock do not have preemptive rights to
subscribe for additional securities which may be issued by us. The issuance of
additional shares of our common stock may, among other things, have a dilutive
effect on the earnings per share and on the equity and voting power of existing
holders of our common stock and may adversely affect the market price of our
common stock.
33
Although the Board of Directors has no present intention of issuing
additional shares for such purposes, the proposed increase in the number of
authorized shares of common stock could enable the Board of Directors to render
more difficult or discourage an attempt by another person or entity to obtain
control of Armor Holdings. Such additional shares could be issued by the Board
of Directors in a public or private sale, merger or similar transaction,
increasing the number of outstanding shares and thereby diluting the equity
interest and voting power of a party attempting to obtain control of Armor
Holdings. The increase in the authorized shares of common stock has not,
however, been proposed for an anti-takeover-related purpose and we have no
knowledge of any current efforts to obtain control of Armor Holdings or to
effect large accumulations of our common stock. Certain provisions of the Bylaws
of Armor Holdings relating to the calling of special stockholders meetings could
also have the effect of deterring takeover attempts because of the procedural
provisions contained therein.
This Proposal 2 is not part of any plan by Armor Holdings to adopt a series
of amendments to its Certificate of Incorporation or Bylaws so as to render the
takeover of Armor Holdings more difficult. Moreover, we are not submitting this
Proposal to enable us to frustrate any efforts by another party to acquire a
controlling interest or to seek representation on the Board of Directors.
Pursuant to the Certificate of Incorporation, our stockholders have no
preemptive rights with respect to the additional shares of common stock being
authorized. The Certificate of Incorporation does not require further approval
of stockholders prior to the issuance of any additional shares of common stock.
In some circumstances (generally relating to the number of shares to be issued,
the manner of offering and the identity of the recipients), the rules of the New
York Stock Exchange, may require specific authorization in connection with the
issuance of additional shares. We do not anticipate that we will seek
authorization from stockholders for issuance of additional shares of common
stock unless required by applicable laws or the New York Stock Exchange.
The Board of Directors believes that the proposed amendment to Article IV
of the Certificate of Incorporation will provide several long-term advantages to
Armor Holdings and its stockholders. The passage of this Proposal might enable
us to pursue acquisitions or enter into transactions which the Board of
Directors believes provide the potential for growth and profit. If additional
authorized shares are available, transactions dependent upon the issuance of
additional shares will be less likely to be undermined by delays and
uncertainties occasioned by the need to obtain stockholder authorization to
provide for the shares necessary to consummate such transactions. The ability to
issue shares, as the Board of Directors determines from time to time to be in
Armor Holdings' best interests, will also permit Armor Holdings to avoid the
extra expenses which would be incurred in holding special stockholders meetings
solely to approve an increase in the number of shares which Armor Holdings has
the authority to issue.
If this Proposal is adopted, the Certificate of Incorporation will be
amended soon after the approval to delete Article IV in its entirety and replace
the same with the following:
"ARTICLE IV.
34
The total number of shares of capital stock which the
corporation shall have authority to issue is Eighty Million
(80,000,000) shares of the par value of one cent ($.01) each,
divided into (a) Seventy-Five Million (75,000,000) shares of
common stock (the "Common Stock") and (b) Five Million
(5,000,000) shares of preferred stock (the "Preferred Stock").
There is hereby expressly vested in the Board of Directors the
authority to fix in the resolution or resolutions providing for
the issue of each series of Preferred Stock, the voting power and
the designations, preferences and relative, participating,
optional or other rights of each such series, and the
qualification, limitations or restrictions thereof. Shares of
Preferred Stock may be issued from time to time in one or more
series as may from time to time be determined by the Board of
Directors, each such series to be distinctly designated."
Approval of the amendment to our Certificate of Incorporation requires the
affirmative vote of a majority of the votes cast in person or by proxy at the
annual meeting of stockholders (assuming a quorum of a majority of the
outstanding shares of common stock is present).
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE INCREASE IN THE NUMBER
OF SHARES OF ARMOR HOLDINGS' AUTHORIZED CAPITAL STOCK TO 80,000,000 SHARES,
75,000,000 SHARES OF WHICH WILL BE COMMON STOCK AND 5,000,000 SHARES OF WHICH
WILL BE PREFERRED STOCK.
35
PROPOSAL 3
AMENDMENT TO THE 2002 STOCK INCENTIVE PLAN TO
INCREASE NUMBER OF SHARES OF COMMON STOCK
ISSUABLE UNDER 2002 STOCK INCENTIVE PLAN
At the annual meeting of our stockholders, the stockholders will be asked
to consider and vote upon a proposal to amend our 2002 Stock Incentive Plan to
increase, by 4,000,000 shares, the total number of shares of our common stock
that may be awarded under the 2002 Stock Incentive Plan, for a total of
6,700,000 shares available thereunder. A copy of the 2002 Stock Incentive Plan,
as currently in effect, is attached hereto as Appendix B.
The 2002 Stock Incentive Plan was adopted by the Board of Directors on
March 13, 2002 and became effective on June 18, 2002. Since adoption of the 2002
Stock Incentive Plan, awards for an aggregate of 2,665,863 shares, net of
forfeited options, have been granted to our employees, officers, directors,
consultants, independent contractors and advisors of Armor Holdings or any
parent, affiliate or subsidiary of Armor Holdings (collectively, the
"Participants") or reserved for future issuance in accordance with the terms of
outstanding awards. Only 34,137 shares remain available for issuance under the
2002 Stock Incentive Plan. The Board of Directors believes that this number of
shares is inadequate to permit us to appropriately compensate the Participants
in the near future.
The Board of Directors believes that availability of common stock under
equity plans is necessary in order to attract and retain high caliber directors,
officers, and employees in key positions. The Board of Directors believes that
our equity plans are an important component to employee compensation as such
plans allow our employees to participate in our growth and prosperity as
reflected in our stock price. Our equity plans also provide incentive to our
employees to perform at the highest level since their efforts will help us
achieve our goals and grow our business which normally have a positive influence
on our stock price. As a result, our equity plans not only incentivize our
employees but also align their interests with our stockholders. We are an
acquisition oriented company and have grown our business through various
acquisitions since 1996, and in connection therewith, increased the number of
our employees. In addition, we continue to consider other acquisitions that will
complement our business. If we acquire other businesses and further increase the
number of our employees, we will need more shares of common stock available for
issuance under the 2002 Stock Incentive Plan in order to attract, retain and
incentivize any new employees we hire, whether through acquisitions or
otherwise. Therefore, the Board of Directors believes that the authorization of
additional shares for issuance under the 2002 Stock Incentive Plan is necessary
in order to permit our continued growth and profitability.
We have historically maintained a target of 15% - 20% of the number of our
outstanding shares of common stock for incentive awards. Since 2002, we have
repurchased 3,834,337 shares of common stock in the open market. As a result of
such purchases of our common stock, our incentive awards comprise a higher
percentage of our outstanding common stock. As of April 1, 2004, our incentive
awards comprised 16.6% of our common stock outstanding on such date. If we had
not repurchased our common stock in the open market as mentioned above, our
incentive awards, as of April 1, 2004, would have comprised 13.7% of our common
stock outstanding on such date.
36
On March 11, 2004, the Board of Directors approved the amendment increasing
the number of shares issuable under the 2002 Stock Incentive Plan by 4,000,000
shares of common stock and directed that such amendment be submitted for the
approval of the stockholders at our annual meeting of stockholders. The 2002
Stock Incentive Plan, which was approved by our stockholders on June 18, 2002 at
the annual meeting of stockholders held in 2002, originally reserved and made
available for grant and issuance of 2,700,000 shares of our common stock to the
Participants. If the amendment is approved, the number of shares of common stock
available for issuance under the 2002 Stock Incentive Plan will be increased by
4,000,000 shares of our common stock. Should the amendment not be approved by
our stockholders, the 2002 Stock Incentive Plan will remain in force without
taking into effect the proposed amendment.
The purpose of the 2002 Stock Incentive Plan, which is unchanged by the
proposed amendment, is to advance the interests of Armor Holdings by encouraging
and enabling the acquisition of a financial interest in Armor Holdings by its
directors, officers, employees and consultants. The 2002 Stock Incentive Plan is
intended to aid Armor Holdings in attracting and retaining competent
individuals, to stimulate the efforts of such individuals and to strengthen
their desire to remain with Armor Holdings. In order that the 2002 Stock
Incentive Plan may continue to serve its intended purposes, the proposed
amendment would increase the number of shares of common stock available for
issuance under the 2002 Stock Incentive Plan.
SUMMARY OF THE 2002 STOCK INCENTIVE PLAN
Administration and Eligibility. The 2002 Stock Incentive Plan authorizes
the issuance of up to 2,700,000 shares of our common stock (or 6,700,000 shares
of our common stock if the amendment proposed herein is approved) upon the
exercise of stock options or in connection with the issuance of restricted stock
and stock bonuses. The 2002 Stock Incentive Plan authorizes the granting of
stock options, restricted stock and stock bonuses to employees, officers,
directors and consultants, independent contractors and advisors of Armor
Holdings and its subsidiaries. The 2002 Plan provides for its administration by
either a committee of two or more outside directors or the Board of Directors
(the "Administrator"). In general, the Administrator, in its sole discretion,
determines which eligible employees, officers, directors, consultants,
independent contractors and advisors of Armor Holdings and its subsidiaries may
participate in the 2002 Stock Incentive Plan and the type, extent and terms of
the equity-based awards to be granted to them.
Stock Options. The 2002 Stock Incentive Plan provides for the grant of both
incentive stock options ("ISOs") that qualify under Stock Incentive Section 422
of the Internal Revenue Code, as amended, and non-qualified stock options
("NQSOs"). ISOs may be granted only to our employees or employees of our
subsidiaries. NQSOs (and all other awards other than ISOs) may be granted to our
and our subsidiaries' employees, officers, directors and consultants,
independent contractors and advisors. The exercise price of ISOs must be at
least equal to the fair market value of our common stock on the date of grant.
The exercise price of ISOs granted to 10% stockholders must be at least equal to
110% of that value. The exercise price of NQSOs may be greater than, less than
or equal to the fair market value of our common stock on the date of grant. The
maximum term of options granted under the 2002 Stock Incentive Plan is ten
years. Awards granted under the 2002 Stock Incentive Plan may not be transferred
in any manner other than by will or by the laws of descent and distribution and
may be exercised during the lifetime
37
of the optionee only by the optionee (unless otherwise determined by the
Administrator and set forth in the award agreement with respect to awards that
are NQSOs). Options granted under the 2002 Stock Incentive Plan generally expire
three months after the termination of the optionee's service to Armor Holdings
or a parent or subsidiary of Armor Holdings, except in the case of death or
disability, in which case the options generally may be exercised up to 12 months
following the date of death or termination of service. Options will generally
terminate immediately upon termination for cause. In the event of our
dissolution or liquidation or a "change in control" transaction, outstanding
awards may be assumed or substituted by the successor corporation, if any. In
the discretion of the Administrator, the vesting of such awards may accelerate
prior to the consummation of such a transaction, and if not exercised prior to
the transaction, may terminate at such time as the Administrator may determine.
Restricted Stock. The Administrator may make grants of restricted stock for
cash or other consideration, as the Administrator determines. The number of
shares of common stock granted to each grantee will be determined by the
Administrator. Grants of restricted stock will be made subject to such
restrictions and conditions as the Administrator may determine in its sole
discretion, including periods of restriction on transferability during which
time the grant may be required to be deposited with an escrow agent, if the
Administrator so determines.
Stock Bonuses. A stock bonus is an award of Shares (which may consist of
Restricted Stock) for services rendered to Armor Holdings or any of its
subsidiaries for past or future services. Stock bonuses and the criteria they
are based upon will be determined by the Administrator.
Amendment. The Board has the right to amend, suspend or terminate the 2002
Stock Incentive Plan at any time, provided, however, that no amendment or change
in the 2002 Stock Incentive Plan that pursuant to applicable rules requires
stockholder approval will be effective without such approval.
U.K. Employees. The 2002 Stock Incentive Plan incorporates a schedule (the
"(No. 1) Schedule") which set forth certain alterations to the 2002 Stock
Incentive Plan and conditions for the grant of certain options to our employees
of United Kingdom subsidiaries ("U.K. Employees") in compliance with U.K. Inland
Revenue rules and regulations which treat such options, for U.K. tax purposes,
in a manner similar to incentive stock options granted to U.S. employees under
the 2002 Stock Incentive Plan. The (No. 1) Schedule provides for certain
differences in the terms and conditions of the 2002 Stock Incentive Plan
applicable to the U.K. Employees principally including, but not limited to, the
following: (a) the (No. 1) Schedule to the 2002 Stock Incentive Plan must be
approved by the U.K. Inland Revenue; (b) there can be no contractual agreement,
condition or restriction on the resale of shares purchased upon the exercise of
an option except as required to comply with applicable laws, including U.S.
securities laws; (c) no options can be granted to a U.K. director unless the
director regularly works at least twenty-five (25) hours per week for Armor
Holdings or its subsidiaries; (d) the maximum value of all options held by an
individual under the (No. 1) Schedule cannot exceed (pounds sterling)30,000 on
the date of grant;(e) the price of the options cannot be less than the fair
market value of the common stock on the date of grant and must be payable in
cash in full upon exercise of the option; (f) the date upon which the options
may be exercised must be fixed at the date of grant and may not be subsequently
changed by the Compensation Committee or the Board of
38
Directors but must be exercised within ten (10) years of the grant; (g) options
may not be granted in tandem with stock appreciation rights or other rights; and
(h) amendments to the terms of the (No. 1) Schedule do not take effect until the
approval of the U.K. Inland Revenue has been received. The Board of Directors
reserves the right to make such other changes to the (No. 1) Schedule as may be
necessary or desirable to obtain and maintain U.K. Inland Revenue approval. A
second schedule to the 2002 Stock Incentive Plan (the "(No. 2) Schedule")
provides for the grant of options (above the (pounds sterling)30,000 U.K. Inland
Revenue approved limit) on similar terms to the (No. 1) Schedule, but without
the need to comply with certain U.K. Inland Revenue restrictions applicable to
the approved scheme. The Board of Directors may from time to time make changes
to the (No. 1) Schedule.
The following discussion concerning certain tax consequences of the 2002
Stock Incentive Plan does not address any tax effects on the U.K. employees or
the employees of any other foreign affiliate of Armor Holdings or the effect of
any changes to applicable laws and regulations which may occur after the date of
this Proxy Statement. The following discussion is only a summary, it is not
intended to be all inclusive or to constitute tax advice, and, among other
things, does not cover possible state or local or other federal tax
consequences. This description may differ from the actual tax consequences of
participation in the 2002 Stock Incentive Plan.
Certain Tax Consequences. No taxable income is realized by an optionee upon
the grant or exercise of an ISO. If common stock is issued to an optionee
pursuant to the exercise of an ISO, and if no disqualifying disposition of such
shares is made by such optionee within two years after the date of grant or
within one year after the transfer of such shares to such optionee, then (i)
upon sale of such shares, any amount realized in excess of the option price will
be taxed to such optionee as a long-term capital gain and any loss sustained
will be a long-term capital loss, and (ii) no deduction will be allowed to the
optionee's employer for Federal income tax purposes. If common stock acquired
upon the exercise of an ISO is disposed of prior to the expiration of either
holding period described above, generally (i) the optionee will realize ordinary
income in the year of disposition in an amount equal to the excess (if any) of
the fair market value of such shares at exercise (or, if less, the amount
realized on the disposition of such shares) over the option price paid for such
shares, and (ii) the optionee's employer will be entitled to deduct such amount
for Federal income tax purposes if the amount represents an ordinary and
necessary business expense. Any further gain (or loss) realized by the optionee
upon the sale of the common stock will be taxed as short-term or long-term
capital gain (or loss), depending on how long the shares have been held, and
will not result in any deduction by the employer. Subject to certain exceptions
for disability or death, if an ISO is exercised more than three months following
termination of employment, the exercise of the option will generally be taxed as
the exercise of a non-ISO. For purposes of determining whether an optionee is
subject to any alternative minimum tax liability, an optionee who exercises an
ISO generally would be required to increase his or her alternative minimum
taxable income, and compute the tax basis in the stock so acquired, in the same
manner as if the optionee had exercised a non-ISO. Each optionee is potentially
subject to the alternative minimum tax. In substance, a taxpayer is required to
pay the higher of his/her alternative minimum tax liability or his/her "regular"
income tax liability. As a result, a taxpayer has to determine his/her potential
liability under the alternative minimum tax.
39
With respect to non-ISOs (i) no income is realized by the optionee at the
time the option is granted; (ii) generally, at exercise, ordinary income is
realized by the optionee in an amount equal to the difference between the option
price paid for the shares and the fair market value of the shares, if
unrestricted, on the date of exercise, and the optionee's employer is generally
entitled to a tax deduction in the same amount subject to applicable tax
withholding requirements; and (iii) at sale, appreciation (or depreciation)
after the date of exercise is treated as either short-term or long-term capital
gain (or loss) depending on how long the shares have been held. Individuals
subject to Section 16(b) of the Exchange Act will recognize ordinary income at
the time of exercise of a non-ISO as noted above, provided at least six months
have elapsed from the date of grant to the date of exercise. In the event that
less than six months have elapsed, such individual will recognize ordinary
income at the time such six month period elapses in an amount equal to the
excess of the fair market value of the shares on such date over the exercise
price.
The granting of an award of restricted stock does not result in taxable
income to the recipient unless the recipient elects to report the award as
taxable income under Section 83(b) of the Internal Revenue Code. Absent such an
election, the value of the award is considered taxable income once it is vested
and distributed. Dividends are paid concurrent with, and in an amount equal to,
ordinary dividends and are taxable as paid. If a Section 83(b) election is made,
the recipient recognizes ordinary income in the amount of the total value on the
date of grant and we receive a corresponding tax deduction. Any gain or loss
subsequently experienced will be a capital gain or loss to the recipient and we
do not receive an additional tax deduction.
Optionees are strongly advised to consult with their individual tax
advisers to determine their personal tax consequences resulting from the grant
and/or exercise of options or the issuance and sale of restricted stock under
the 2002 Stock Incentive Option Plan.
New Plan Benefits. The grant of options under the 2002 Stock Incentive Plan
is within the discretion of the Administrator. We cannot forecast the extent of
option grants that will be made in the future.
Approval of the amendment to the 2002 Stock Incentive Plan requires the
affirmative vote of a majority of the votes cast in person or by proxy at the
annual meeting of stockholders (assuming a quorum of a majority of the
outstanding shares of common stock is present).
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE INCREASE, BY 4,000,000
SHARES, OF THE TOTAL NUMBER OF SHARES OF OUR COMMON STOCK THAT MAY BE AWARDED
UNDER THE 2002 STOCK INCENTIVE PLAN, FOR A TOTAL OF 6,700,000 SHARES AVAILABLE
THEREUNDER.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to present any other matter for action at the meeting other than as set
forth in the Notice of Annual Meeting and this Proxy Statement. If any other
matters properly come before the meeting, it is intended that the shares
represented by the proxies will be voted, in the absence of contrary
instructions, in the discretion of the persons named in the proxy.
40
FORM 10-K
We will provide, without charge, to each stockholder as of the Record Date,
upon our receipt of a written request of the stockholder, a copy of our Annual
Report on Form 10-K for the year ended December 31, 2003, including the
financial statements and schedules, as filed with the Commission. Stockholders
should direct the written request to Armor Holdings, Inc., c/o the Secretary at
1400 Marsh Landing Parkway, Suite 112, Jacksonville, Florida 32250.
REQUIREMENTS FOR SUBMISSION OF
STOCKHOLDER PROPOSALS, NOMINATION OF DIRECTORS AND
OTHER BUSINESS OF STOCKHOLDERS
Under the rules of the Commission, if a stockholder wants us to include a
proposal in our Proxy Statement and Proxy Card for presentation at our 2005
Annual Meeting, the proposal must be received by us at our principal executive
offices at 1400 Marsh Landing Parkway, Suite 112, Jacksonville, Florida 32250 by
December 31, 2004 (or, if the 2005 Annual Meeting is called for a date not
within 30 calendar days before or after June 22, 2005, within a reasonable time
before we begin to print and mail our proxy materials for the meeting). The
proposal should be sent to the attention of the Secretary of Armor Holdings,
Inc. and must include the information and representations that are set out in
Exchange Act Rule 14a-8.
Under our Bylaws, and as permitted by the rules of the Commission, certain
procedures are provided that a stockholder must follow to nominate persons for
election as Directors or to introduce an item of business at a meeting of our
stockholders. These procedures provide that nominations for Director nominees
and/or an item of business to be introduced at a meeting of our stockholders
must be submitted in writing to the Secretary of the Company at our principal
executive offices. Any written submission by a stockholder including a Director
nomination and/or item of business to be presented at a meeting of our
stockholders must comply with the procedures and such other requirements as may
be imposed by our Amended and Restated Bylaws, Delaware law, the New York Stock
Exchange, the Exchange Act, the rules and regulations of the Commission and must
include the information necessary for the Board to determine whether the
candidate qualifies as independent under the New York Stock Exchange's rules.
We must receive notice of the intention to introduce a Director nomination
or to present an item of business at our 2005 Annual Meeting (a) not less than
sixty (60) days nor more than ninety (90) days prior to June 22, 2005 if our
2005 Annual Meeting is held within thirty (30) days before or after June 22,
2005; or (b) not later than the close of business on the tenth (10th) day
following the day on which the notice of meeting was mailed or public disclosure
of the date of the meeting was made, whichever occurs first, in the event our
2005 Annual Meeting is not held within thirty (30) days before or after June 22,
2005. In the event we call a special meeting of our stockholders, we must
receive your intention to introduce a Director nomination or to present an item
of business at the special meeting of stockholders not later than the close of
business on the tenth (10th) day following the day on which the notice of such
special meeting of stockholders was mailed or public disclosure of the date of
the meeting was made, whichever occurs first.
41
Assuming that our 2005 Annual Meeting is held on schedule, we must receive
notice of your intention to introduce a Director nomination or other item of
business at that meeting not less than sixty (60) days nor more than ninety (90)
days prior to June 22, 2005. If we do not receive notice within the prescribed
dates, or if we meet other requirements of the Commission rules, the persons
named as proxies in the proxy materials relating to that meeting will use their
discretion in voting the proxies when these matters are raised at the meeting.
In addition, nominations or proposals not made in accordance herewith may be
disregarded by the chairman of the meeting in his discretion, and upon his
instructions all votes cast for each such nominee or for such proposals may
be disregarded.
FOR THE BOARD OF DIRECTORS
PHIL BARATELLI
SECRETARY
42
APPENDIX A
AUDIT COMMITTEE CHARTER
CHARTER OF THE AUDIT COMMITTEE
OF
THE BOARD OF DIRECTORS
OF
ARMOR HOLDINGS, INC.
PURPOSE
The Audit Committee is appointed by the Board of Directors (the "Board") of
Armor Holdings, Inc. (the "Company") to assist the Board in overseeing (1) the
integrity of the Company's financial statements, (2) the Company's compliance
with legal and regulatory requirements, (3) the independent auditor's
qualifications and independence, and (4) the performance of the Company's
internal audit function and independent auditors.
The Audit Committee shall prepare the report required by the rules of the
Securities and Exchange Commission (the "Commission") to be included in the
Company's annual proxy statement, or, if the Company does not file a proxy
statement, in the Company's Annual Report on Form 10-K.
COMMITTEE MEMBERSHIP
The Audit Committee shall consist of no fewer than three members. The
members of the Audit Committee shall meet the independence and experience
requirements of the New York Stock Exchange, Section 10A(m)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act") and the rules and regulations of the
Commission. Each member of the Audit Committee must be financially literate, as
such qualification is interpreted by the Company's Board in its business
judgment, or must become financially literate within a reasonable period of time
after his or her appointment to the Audit Committee. In addition, at least one
member of the Audit Committee must have accounting or related financial
management expertise, as the Company's Board interprets such qualification in
its business judgment.
Audit Committee members shall not simultaneously serve on the audit
committees of more than two other public companies unless the Board determines
that such simultaneous service would not impair the ability of such member to
effectively serve on the Audit Committee, in which case the Company shall
disclose such determination in its annual proxy statement or, if the Company
does not file an annual proxy statement, in the Company's annual report on Form
10-K. The members of the Audit Committee shall be appointed by the Board. Audit
Committee members may be replaced by the Board.
MEETINGS
The Audit Committee shall meet as often as it determines, but not less
frequently than quarterly. The Audit Committee shall meet separately on a
periodic basis with management, the internal auditor and the independent
auditor. The Audit Committee may request any officer or employee of the Company
or the Company's outside counsel or independent auditor to attend a meeting of
the Committee or to meet with any members of, or consultants to, the Committee.
COMMITTEE AUTHORITY AND RESPONSIBILITIES
The Audit Committee shall be directly responsible for the appointment,
compensation, retention, and oversight of the work of any registered public
accounting firm engaged for the purpose of preparing or issuing an audit report
or performing other audit, review or attest services for the Company. The Audit
Committee shall the sole authority to approve all audit engagement fees and
terms, as well as non-audit engagements with the independent auditors. The Audit
Committee shall be directly responsible for the oversight of the work of the
independent auditor, including resolution of disagreements between management
and the independent auditor. The registered public accounting firm shall report
directly to the Audit Committee.
The Audit Committee shall preapprove all auditing services and permitted
non-audit services to be performed for the Company by its independent auditor,
subject to the de minimis exceptions for non-audit services described in Section
10A(i)(1)(B) of the Exchange Act which are approved by the Audit Committee prior
to the completion of the audit. The Audit Committee may delegate to one or more
designated members of the Audit Committee authority to grant preapprovals of
audit and permitted non-audit services, provided that decisions of such
subcommittee to grant preapprovals shall be presented to the full Audit
Committee at its next scheduled meeting.
The Audit Committee shall have the authority, to the extent it deems
necessary or appropriate to carry out its duties, to engage independent counsel
or other advisors. The Company shall provide for appropriate funding, as
determined by the Audit Committee, (i) for payment of compensation to any
registered public accounting firm engaged for the purpose of preparing or
issuing an audit report or performing other audit, review or attest services for
the Company, (ii) for payment of compensation to any advisors employed by the
Audit Committee, and (iii) for payment of ordinary administrative expenses of
the Audit Committee.
The Audit Committee shall make regular reports to the Board. The Audit
Committee shall review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval. The Audit Committee
shall annually review the Audit Committee's own performance.
The Audit Committee shall establish procedures for the receipt, retention
and treatment of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters, and the confidential,
anonymous submission by employees of concerns regarding questionable accounting
or auditing matters.
The Audit Committee, to the extent it deems necessary or appropriate,
shall:
Financial Statement and Disclosure Matters
1. Review and discuss with management and the independent auditor the annual
audited financial statements and quarterly financial statements, including
disclosures made under "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
A-2
2. Recommend to the Board whether the annual audited financial statements
should be included in the Company's Annual Report on Form 10-K and whether
the quarterly financial statements should be included in the Company's
Quarterly Report on Form 10-Q.
3. Discuss and review with management and the independent auditor significant
financial reporting issues and judgments made in connection with the
preparation of the Company's financial statements, including any
significant changes in the Company's selection or application of accounting
principles, any major issues as to the adequacy of the Company's internal
controls and any actions taken in light of material control deficiencies.
4. Review reports from the independent auditor regarding:
(a) All critical accounting practices to be used.
(b) All alternative treatments of financial information within generally
accepted accounting principles that have been discussed with
management, ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the independent
auditor.
(c) Other material written communications between the independent auditor
and management, such as any management letter or schedule of
unadjusted differences.
5. Discuss with, the independent auditors and/or management:
(a) All critical accounting policies and practices to be used and
significant financial reporting issues.
(b) All alternative treatments of financial information within generally
accepted accounting principles including the ramifications of the use
of such alternative disclosures and treatments, and the treatment
preferred by the independent auditor.
(c) The effect of regulatory and accounting initiatives as well as
off-balance sheet structures on the Company's financial statements.
(d) The type and presentation of information to be included in earnings
press releases, including the use of "pro forma" or "adjusted"
non-GAAP information, as well as financial information and earnings
guidance provided to analysts and rating agencies.
6. Discuss with management the Company's major financial risk exposures and
the steps management has taken to monitor and control such exposures,
including the Company's risk assessment and risk management policies.
7. Discuss with the independent auditor any difficulties encountered by the
auditor in the course of the audit work, including any restrictions on the
scope of activities or access to requested information, any significant
disagreements with management, accounting adjustments that were noted or
proposed by the auditor but were passed, any communications between the
audit team and the audit firm's national office respecting auditing or
accounting issues presented by the engaged, any "management" or "internal
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control" letter issued, or proposed to be issued, by the audit firm to the
Company, and the responsibilities, budget and staffing of the Company's
internal audit function.
9. Review disclosures made to the Audit Committee by the Company's CEO and CFO
during their certification process for the Annual Report on Form 10-K and
Quarterly Report on Form 10-Q about any significant deficiencies in the
design or operation of internal controls or material weaknesses therein and
any fraud involving management or other employees who have a significant
role in the Company's internal controls.
Oversight of the Company's Relationship with the Independent Auditor
10. Obtain and review a report from the independent auditor at least annually
regarding (a) the independent auditor's internal quality-control
procedures, (b) any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities within the
preceding five years respecting one or more independent audits carried out
by the firm, and any steps taken to deal with any such issues, and (c) all
relationships between the independent auditor and the Company.
11. Evaluate the qualifications, performance and independence of the
independent auditor, including a review and evaluation of the lead partner
of the independent auditor. The Audit Committee shall present its
conclusions with respect to the independent auditor to the Board.
12. Ensure the rotation of the audit partners as required by law. Consider
whether, in order to assure continuing auditor independence, it is
appropriate to adopt a policy of rotating the independent auditing firm on
a regular basis.
13. Set clear hiring policies for the Company's hiring of employees or former
employees of the independent auditor taking into account the pressures that
may exist for auditors consciously or subconsciously seeking a job with the
Company.
Oversight of the Company's Internal Audit Function
14. Review the appointment and replacement of the senior internal auditing
executive.
15. Review the significant reports to management prepared by the internal
auditing department and management's responses.
16. Review with the full board any issues that arise with respect to the
performance of the internal audit function.
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Compliance Oversight Responsibilities
17. Discuss with the independent auditor whether, in the course of conducting
their audit, it detected or otherwise became of aware of information
indicating that an illegal act (whether or not perceived to have a material
effect on the Company's financial statements) has or may have occurred, and
if so, the actions taken by the independent auditors in accordance with
Section 10A(b) of the Exchange Act.
18. Obtain reports from management, the Company's senior internal auditing
executive and the independent auditor that the Company and its
subsidiary/foreign affiliated entities are in conformity with applicable
legal requirements and the Company's Code of Business Conduct and Ethics.
Review reports and disclosures of insider and affiliated party
transactions.
19. Discuss with management and the independent auditor any correspondence with
regulators or governmental agencies and any published reports which raise
material issues regarding the Company's financial statements or accounting
policies.
20. Discuss with the Company's legal counsel matters that may have a material
impact on the financial statements or the Company's compliance policies.
LIMITATION OF AUDIT COMMITTEE'S ROLE
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements and disclosures
are complete and accurate and are in accordance with generally accepted
accounting principles and applicable rules and regulations. These are the
responsibilities of management and the independent auditor.
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APPENDIX B
2002 STOCK INCENTIVE PLAN
ARMOR HOLDINGS, INC.
2002 STOCK INCENTIVE PLAN
1. PURPOSE. The purpose of Armor Holdings, Inc. 2002 Stock Incentive Plan
(the "Plan") is to provide a means through which the Company and its
Subsidiaries and Affiliates may attract able persons to enter and remain in the
employ of the Company and its Subsidiaries and Affiliates and to provide a means
whereby eligible persons can acquire and maintain Common Stock ownership, or be
paid incentive compensation measured by reference to the value of Common Stock,
thereby strengthening their commitment to the welfare of the Company and its
Subsidiaries and Affiliates and promoting an identity of interest between
stockholders and these eligible persons.
So that the appropriate incentive can be provided, the Plan provides for
granting Incentive Stock Options, Nonqualified Stock Options, Restricted Stock
Awards and Stock Bonuses, or any combination of the foregoing. Capitalized terms
not defined in the text are defined in Section 24.
2. SHARES SUBJECT TO THE PLAN. Subject to Section 18, the total number of
Shares reserved and available for grant and issuance pursuant to this Plan will
be 2,700,000 Shares. Shares that have been (a) reserved for issuance under
Options which have expired or otherwise terminated without issuance of the
underlying Shares, (b) reserved for issuance or issued under an Award granted
hereunder but are forfeited or are repurchased by the Company at the original
issue price, or (c) reserved for issuance or issued under an Award that
otherwise terminates without Shares being issued, shall be available for
issuance. At all times the Company shall reserve and keep available a sufficient
number of Shares as shall be required to satisfy the requirements of all
outstanding Options granted under this Plan and all other outstanding but
unvested Awards granted under this Plan.
3. ELIGIBILITY. ISO's (as defined in Section 5 below) may be granted only
to employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors, consultants, independent contractors
and advisors of the Company or any Parent, Affiliate or Subsidiary of the
Company.
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be administered by the
Committee or by the Board. Any power, authority or discretion granted to the
Committee may also be taken by the Board. Subject to the general purposes, terms
and conditions of this Plan, and to the direction of the Board, the Committee
will have full power to implement and carry out this Plan. Without limitation,
the Committee will have the authority to:
(a) select persons to receive Awards;
(b) determine the nature, extent, form and terms of Awards and the
number of Shares or other consideration subject to
(c) Awards;determine the vesting, exerciseability and payment of
Awards;
(d) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award Agreement;
(e) determine whether Awards will be granted singly, in combination
with, in tandem with, in replacement of, or as alternatives to,
other Awards under this Plan or any other incentive or
compensation plan of the Company or any Parent or Subsidiary of
the Company;
(f) prescribe, amend and rescind rules and regulations relating to
this Plan or any Award;
(g) construe and interpret this Plan, any Award Agreement and any
other agreement or document executed pursuant to this Plan;
(h) grant waivers of Plan or Award conditions;
(i) determine whether an Award has been earned;
(j) accelerate the vesting of any Award; and
(k) make all other determinations necessary or advisable for the
administration of this Plan.
The Committee shall have the authority, subject to the provisions of the
Plan, to establish, adopt, or revise such rules and regulations and to make all
such determinations relating to the Plan as it may deem necessary or advisable
for the administration of the Plan. The Committee's interpretation of the Plan
or any documents evidencing Awards granted pursuant thereto and all decisions
and determinations by the Committee with respect to the Plan shall be final,
binding, and conclusive on all parties unless otherwise determined by the Board.
4.2 Committee Discretion. Any determination made by the Committee with
respect to any Award will be made in its sole discretion at the time of grant of
the Award or, unless in contravention of any express term of this Plan or Award,
at any later time, and such determination will be final and binding on the
Company and on all persons having an interest in any Award under this Plan.
5. STOCK OPTIONS. The Committee may grant Options to eligible persons and
will determine whether such Options will be intended to be "Incentive Stock
Options" within the meaning of Section 422 of the Code or any successor section
thereof ("ISO's") or nonqualified stock options (options not intended to qualify
as incentive stock options)("NQSO's"), the number of Shares subject to the
Option, the Exercise Price of the Option, the period during which the Option may
be exercised, and all other terms and conditions of the Option, subject to the
following:
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5.1 Form of Option Grant. Each Option granted under this Plan will be
evidenced by an Award Agreement ("Stock Option Agreement"), which will expressly
identify the Option as an ISO or NQSO, and will be in such form and contain such
provisions (which need not be the same for each Participant) as the Committee
may from time to time approve, and which will comply with and be subject to the
terms and conditions of this Plan.
5.2 Exercise Period. Options may be exercisable to the extent vested
within the times or upon the events determined by the Committee as set forth in
the Stock Option Agreement governing such Option; provided, however, that no
Option will be exercisable after the expiration of ten (10) years from the date
the Option is granted; and provided further that no ISO granted to a person who
directly or by attribution owns more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any Parent or
Subsidiary of the Company ("Ten Percent Stockholder") will be exercisable after
the expiration of five (5) years from the date the ISO is granted. The Committee
also may provide for Options to become exercisable at one time or from time to
time, periodically or otherwise, in such number of Shares or percentage of
Shares as the Committee determines.
5.3 Exercise Price. The Exercise Price of an Option will be determined
by the Committee when the Option is granted and may be greater, less than, or
equal to the Fair Market Value of the Shares on the date of grant; provided
that: (i) the Exercise Price of an ISO will be not less than 100% of the Fair
Market Value of the Shares on the date of grant; and (ii) the Exercise Price of
any ISO granted to a Ten Percent Stockholder will not be less than 110% of the
Fair Market Value of the Shares on the date of grant.
5.4 Date of Grant. The date of grant of an Option will be the date on
which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.
5.5 Method of Exercise. Options may be exercised only by delivery to
the Company of a written stock option exercise agreement (the "Exercise
Agreement") in a form approved from time to time by the Committee (which need
not be the same for each Participant), stating the number of Shares being
purchased, the restrictions imposed on the Shares purchased under such Exercise
Agreement, if any, and such representations and agreements regarding
Participant's investment intent and access to information and other matters, if
any, as may be required or desirable by the Company to comply with applicable
securities laws, together with payment in full of the Exercise Price for the
number of Shares being purchased. Payment for the Shares purchased may be made
in accordance with Section 8 of this Plan.
5.6 Termination. Unless otherwise expressly provided in an Award
Agreement or otherwise determined by the Committee, exercise of an Option will
always be subject to the following:
a. If the Participant is Terminated for any reason (including
voluntary Termination) other than death or Disability, then the
Participant may exercise such Participant's Options only to the
extent that such Options would have been exercisable upon the
Termination Date no later than three (3) months after the
Termination Date (or such
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shorter or longer time period not exceeding five (5) years as may
be determined by the Committee, with any exercise beyond three (3)
months after the Termination Date deemed to be a NQSO), but in any
event, no later than the expiration date of the Options.
b. If the Participant is Terminated because of Participant's death or
Disability (or the Participant dies within three (3) months after a
Termination other than for Cause or because of Participant's
Disability), then Participant's Options may be exercised only to
the extent that such Options would have been exercisable by
Participant on the Termination Date and must be exercised by
Participant (or Participant's legal representative or authorized
assignee) no later than twelve (12) months after the Termination
Date (or such shorter or longer time period not exceeding five (5)
years as may be determined by the Committee, with any such exercise
beyond twelve (12) months after the Termination Date when the
Termination is for Participant's death or Disability, deemed to be
a NQSO), but in any event no later than the expiration date of the
Options.
c. Notwithstanding the provisions in paragraph 5.6(a) above, if a
Participant is terminated for Cause, neither the Participant, the
Participant's estate nor such other person who may then hold the
Option shall be entitled to exercise any Option with respect to any
Shares whatsoever, after termination of service, whether or not
after termination of service the Participant may receive payment
from the Company or Subsidiary for vacation pay, for services
rendered prior to termination, for services rendered for the day on
which termination occurs, for salary in lieu of notice, or for any
other benefits. In making such determination, the Committee shall
give the Participant an opportunity to present to the Committee
evidence on his behalf. For the purpose of this paragraph,
termination of service shall be deemed to occur on the date when
the Company dispatches notice or advice to the Participant that his
or her service is terminated.
d. If the Participant is not an employee or a director, the Award
Agreement shall specify treatment of the Award upon Termination.
5.7 Limitations on ISO. The aggregate Fair Market Value (determined as
of the date of grant) of Shares with respect to which ISO's are exercisable for
the first time by a Participant during any calendar year (under this Plan or
under any other incentive stock option plan of the Company, Parent or Subsidiary
of the Company) will not exceed $100,000 or such other amount as may be required
by the Code. If the Fair Market Value of Shares on the date of grant with
respect to which ISO's are exercisable for the first time by a Participant
during any calendar year exceeds $100,000, then the Options for the first
$100,000 worth of Shares to become exercisable in such calendar year will be
ISO's and the Options for the amount in excess of $100,000 that become
exercisable in that calendar year will be NQSO's. In the event that the
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Code or the regulations promulgated thereunder are amended after the Effective
Date of this Plan to provide for a different limit on the Fair Market Value of
Shares permitted to be subject to ISO's, such different limit will be
automatically incorporated herein and will apply to any Options granted after
the effective date of such amendment.
5.8 Modification, Extension or Renewal. The Committee may modify,
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that, except as expressly provided for in the
Plan or an Award Agreement, any such action may not, without the written consent
of a Participant, impair any of such Participant's rights under any Option
previously granted and (ii) except as provided for in Section 18 of the Plan,
Options issued hereunder will not be repriced, replaced or regranted through
cancellation or by lowering the Exercise Price of a previously granted Award
without prior approval of the Company's Stockholders. Any outstanding ISO that
is modified, extended, renewed or otherwise altered will be treated in
accordance with Section 424(h) of the Code.
5.9 Limitations on Exercise. The Committee may specify a reasonable
minimum number of Shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent Participant from exercising
the Option for the full number of Shares for which it is then exercisable.
5.10 No Disqualification. Notwithstanding any other provision in this
Plan, no term of this Plan relating to ISO's will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
5.11 Lapsed Grants. Notwithstanding anything in the Plan to the
contrary, the Company may, in its sole discretion, allow the exercise of a
lapsed grant if the Company determines that: (i) the lapse was the result of the
Company's inability to timely execute the exercise of an option award and (ii)
the Participant made valid and reasonable efforts to exercise the Award. In the
event the Company makes such a determination, the Company shall allow the
exercise to occur as promptly as possible following its receipt of exercise
instructions subsequent to such determination.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company
to sell to an eligible person Shares that are subject to restrictions. The
Committee will determine to whom an offer will be made, the number of Shares the
person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a Restricted
Stock Award made pursuant to this Plan will be evidenced by an Award Agreement
("Restricted Stock Purchase Agreement") that will be in such form (which need
not be the same for each Participant) as the Committee will from time to time
approve, and shall comply with and be subject to the terms and conditions of
this Plan. The offer of Restricted Stock shall will be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company not later than thirty (30) days
after the date the Restricted Stock Purchase Agreement is delivered to the
person. If such person does not execute
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and deliver the Restricted Stock Purchase Agreement along with full payment for
the Shares to the Company within thirty (30) days, then the offer shall
terminate, unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a
Restricted Stock Award will be determined by the Committee on the date the
Restricted Stock Award is granted. Payment of the Purchase Price shall be made
in accordance with Section 8 of this Plan.
6.3 Terms of Restricted Stock Awards. Restricted Stock Awards shall be
subject to such restrictions as the Committee may impose. These restrictions may
be based upon completion of a specified number of years of service with the
Company or upon completion of the performance goals as set out in advance in the
Participant's individual Restricted Stock Purchase Agreement. Restricted Stock
Awards may vary from Participant to Participant and between groups of
Participants. Prior to the grant of a Restricted Stock Award, the Committee
shall: (a) determine the nature, length and starting date of any Performance
Period for the Restricted Stock Award; (b) select from among the Performance
Factors to be used to measure performance goals, if any; and (c) determine the
number of Shares that may be awarded to the Participant. Prior to the payment of
any Restricted Stock Award, the Committee shall determine the extent to which
such Restricted Stock Award has been earned and such determination shall be
conclusive. Performance Periods may overlap and Participants may participate
simultaneously with respect to Restricted Stock Awards that are subject to
different Performance Periods and having different performance goals and other
criteria.
6.4 Stock Restrictions. Each certificate representing Restricted Stock
awarded under the Plan shall bear the following legend until the lapse of all
restrictions with respect to such Stock:
"TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS
RESTRICTED PURSUANT TO THE TERMS OF A RESTRICTED STOCK AGREEMENT,
DATED AS OF _______, BETWEEN ARMOR HOLDINGS, INC., AND
____________. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF ARMOR HOLDINGS, INC."
Stop transfer orders shall be entered with the Company's transfer agent and
registrar against the transfer of legended securities.
6.5 Termination During Performance Period. If a Participant is
Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Restricted Stock Award only to the extent earned as of the date of
Termination in accordance with the Restricted Stock Purchase Agreement, unless
the Committee will determine otherwise.
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7. STOCK BONUSES.
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares (which
may consist of Restricted Stock) for services rendered to the Company or any
Parent or Subsidiary of the Company. A Stock Bonus may be awarded for past
services already rendered to the Company, or any Parent or Subsidiary of the
Company pursuant to an Award Agreement (the "Stock Bonus Agreement") that will
be in such form (which need not be the same for each Participant) as the
Committee will from time to time approve, and will comply with and be subject to
the terms and conditions of this Plan. A Stock Bonus may be awarded upon
satisfaction of such performance goals as are set out in advance in the
Participant's individual Award Agreement (the "Performance Stock Bonus
Agreement") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent or Subsidiary and/or
individual Performance Factors or upon such other criteria as the Committee may
determine.
7.2 Terms of Stock Bonuses. The Committee will determine the number of
Shares to be awarded to the Participant. If the Stock Bonus is being earned upon
the satisfaction of performance goals pursuant to a Performance Stock Bonus
Agreement, then the Committee will: (a) determine the nature, length and
starting date of any Performance Period for each Stock Bonus; (b) select from
among the Performance Factors to be used to measure the performance, if any; and
(c) determine the number of Shares that may be awarded to the Participant. Prior
to the payment of any Stock Bonus, the Committee shall determine the extent to
which such Stock Bonuses have been earned. Performance Periods may overlap and
Participants may participate simultaneously with respect to Stock Bonuses that
are subject to different Performance Periods and different performance goals and
other criteria. The number of Shares may be fixed or may vary in accordance with
such performance goals and criteria as may be determined by the Committee. The
Committee may adjust the performance goals applicable to the Stock Bonuses to
take into account changes in law and accounting or tax rules and to make such
adjustments as the Committee deems necessary or appropriate to reflect the
impact of extraordinary or unusual items, events or circumstances to avoid
windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may be paid
currently or on a deferred basis with such interest or dividend equivalent, if
any, as the Committee may determine. Payment may be made in the form of cash or
whole Shares or a combination thereof, either in a lump sum payment or in
installments, all as the Committee will determine.
8. PAYMENT FOR SHARE PURCHASES.
8.1 Payment. Payment for Shares purchased pursuant to this Plan may be
made in cash (by check) or, where expressly approved for the Participant by the
Committee or where expressly indicated in the Participants Award Agreement and
where permitted by law:
a. by cancellation of indebtedness of the Company to the Participant;
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b. by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid for within the
meaning of SEC Rule 144 (and, if such shares were purchased from the Company by
use of a promissory note, such note has been fully paid with respect to such
shares); or (2) were obtained by Participant in the public market;
c. by tender of a promissory note having such terms as may be approved
by the Committee and bearing interest at a rate sufficient to avoid imputation
of income under Sections 483 and 1274 of the Code;
d. by waiver of compensation due or accrued to the Participant for
services rendered;
e. with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from the Participant and a
broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD Dealer") whereby the Participant
irrevocably elects to exercise the Option and to sell a portion of
the Shares so purchased to pay for the Exercise Price, and whereby
the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; or
(2) through a "margin" commitment from the Participant and a NASD
Dealer whereby the Participant irrevocably elects to exercise the
Option and to pledge the Shares so purchased to the NASD Dealer in
a margin account as security for a loan from the NASD Dealer in the
amount of the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; or
f. by any combination of the foregoing or other method authorized by
the Committee.
At its discretion, the Committee may modify or suspend any method for the
exercise of stock options, including any of the methods specified in the
previous sentence. Delivery of shares for exercising an Option shall be made
either through the physical delivery of shares or through an appropriate
certification or attestation of valid ownership.
8.2 Loan Guarantees. The Committee may help the Participant pay for
Shares purchased under this Plan by authorizing a guarantee by the Company of a
third-party loan to the Participant.
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9. WITHHOLDING TAXES.
9.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.
9.2 Stock Withholding. When, under applicable tax laws, a Participant
incurs tax liability in connection with the exercise or vesting of any Award
that is subject to tax withholding and the Participant is obligated to pay the
Company the amount required to be withheld, the Committee may in its sole
discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee.
10. PRIVILEGES OF STOCK OWNERSHIP. No Participant will have any of the
rights of a stockholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a stockholder and have all the rights of a stockholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's Purchase Price or Exercise Price pursuant
to Section 12.
11. TRANSFERABILITY.
11.1 Non-Transferability of Options. No Option granted under the Plan
shall be transferable by the Participant otherwise than by will or by the laws
of descent and distribution, and such Option right shall be exercisable, during
the Participant's lifetime, only by the Participant. Notwithstanding the
foregoing, the Committee may set forth in an Award Agreement at the time of
grant or thereafter, that the Options (other than Incentive Stock Options) may
be transferred to members of the Participant's immediate family, to trusts
solely for the benefit of such immediate family members and to partnerships or
limited liability companies in which such family members and/or trusts are the
only partners or members, as the case may be. For this purpose, immediate family
means the Participant's spouse, parents, children, stepchildren, grandchildren
and legal dependants. Any transfer of Options made under this provision will not
be effective until notice of such transfer is delivered to the Company.
11.2 Rights of Transferee. Notwithstanding anything to the contrary
herein, if an Option has been transferred in accordance with Section 11.1 above,
the Option shall
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be exercisable solely by the transferee. The Option shall remain subject to the
provisions of the Plan, including that it will be exercisable only to the extent
that the Participant or Participant's estate would have been entitled to
exercise it if the Participant had not transferred the Option. In the event of
the death of the Participant prior to the expiration of the right to exercise
the transferred Option, the period during which the Option shall be exercisable
will terminate on the date 12 months following the date of the Participant's
death. In no event will the Option be exercisable after the expiration of the
exercise period set forth in the Award Agreement. The Option shall be subject to
such other rules relating to transferees as the Committee shall determine.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the Company
may reserve to itself and/or its assignee(s) in the Award Agreement a right to
repurchase a portion of or all Unvested Shares held by a Participant following
such Participant's Termination at any time within three (3) months after the
later of Participant's Termination Date and the date Participant purchases
Shares under this Plan, for cash and/or cancellation of purchase money
indebtedness, at the Participant's Exercise Price or Purchase Price, as the case
may be.
13. CERTIFICATES. All certificates for Shares or other securities delivered
under this Plan will be subject to such stock transfer orders, legends and other
restrictions, consistent with the terms of the Awards, as the Committee may deem
necessary or advisable, including restrictions under any applicable federal,
state or foreign securities law, or any rules, regulations and other
requirements of the SEC or any stock exchange or automated quotation system upon
which the Shares may be listed or quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. In the
discretion of the Committee, the pledge agreement may provide that the Shares
purchased with the promissory note may be released from the pledge on a pro rata
basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from
time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted
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with payment in cash, Shares (including Restricted Stock) or other
consideration, based on such terms and conditions as the Committee and the
Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. However, in the
event that an Award is not effective as discussed in the preceding sentence, the
Company will use reasonable efforts to modify, revise or renew such Award in a
manner so as to make the Award effective. Notwithstanding any other provision in
this Plan, the Company will have no obligation to issue or deliver certificates
for Shares under this Plan prior to: (a) obtaining any approvals from
governmental agencies that the Company determines are necessary or advisable;
and/or (b) completion of any registration or other qualification of such Shares
under any state or federal law or ruling of any governmental body that the
Company determines to be necessary or advisable. The Company will be under no
obligation to register the Shares with the SEC or to effect compliance with the
registration, qualification or listing requirements of any state securities
laws, stock exchange or automated quotation system, and the Company will have no
liability for any inability or failure to do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
18. CORPORATE TRANSACTIONS.
18.1 Assumption or Replacement of Awards by Successor. If a
Change-of-Control Event occurs:
(i) the successor company in any Change-of-Control Event may, if
approved in writing by the Committee prior to any
Change-of-Control Event:
(1) substitute equivalent Options or Awards or provide
substantially similar consideration to Participants as
was provided to stockholders (after taking into account
the existing provisions of the Awards), or
(2) issue, in place of outstanding Shares of the Company
held by the Participant, substantially similar shares
or substantially similar other securities or
substantially similar other property subject to
repurchase restrictions no less favorable to the
Participant.
B-11
(ii) Notwithstanding anything in this Plan to the contrary, the
Committee may, in its sole discretion, provide that the
vesting of any or all Options and Awards granted pursuant to
this Plan will accelerate immediately prior to the
consummation of a Change-of-Control Event. If the Committee
exercises such discretion with respect to Options, such
Options will become exercisable in full prior to the
consummation of such event at such time and on such
conditions as the Committee determines, and if such Options
are not exercised prior to the consummation of such event,
they shall terminate at such time as determined by the
Committee.
18.2 Other Treatment of Awards. Subject to any rights and limitations
set forth in Section 18.1, if a Change-of-Control Event occurs or has occurred,
any outstanding Awards will be treated as provided in the applicable agreement
or plan of merger, consolidation, dissolution, liquidation, or sale of assets
constituting the Change-of-Control Event.
18.3 Assumption of Awards by the Company. The Company, from time to
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either (a) granting an Award under this Plan in substitution of
such other company's award, or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. If the Company assumes an award granted by another
company, the terms and conditions of such award will remain unchanged (except
that the exercise price and the number and nature of Shares issuable upon
exercise of any such option will be adjusted appropriately pursuant to Section
424(a) of the Code). If the Company elects to grant a new Option rather than
assuming an existing option, such new Option may be granted with a similarly
adjusted Exercise Price.
18.4 Adjustment of Shares. In the event that the number of outstanding
shares is changed by a stock dividend, recapitalization, stock split, reverse
stock split, subdivision, combination, reclassification or similar change in the
capital structure of the Company without consideration, then (a) the number of
Shares reserved for issuance under this Plan, (b) the Exercise Prices of and
number of Shares subject to outstanding Options, and (c) the number of Shares
subject to other outstanding Awards will be proportionately adjusted, subject to
any required action by the Board or the stockholders of the Company and
compliance with applicable securities laws; provided, however, that fractions of
a Share will not be issued but will either be replaced by a cash payment equal
to the Fair Market Value of such fraction of a Share or will be rounded up to
the nearest whole Share, as determined by the Committee.
19. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective on
the date that this Plan is approved by the stockholders of the Company,
consistent with applicable laws (the "Effective Date").
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20. TERM OF PLAN. Unless earlier terminated as provided herein, this Plan
will terminate ten (10) years from the date this Plan is adopted by the Board.
The expiration of the Plan, however, shall not affect the rights of Participants
under Options theretofore granted to them, and all unexpired Options and Awards
shall continue in force and operation after termination of the Plan, except as
they may lapse or be terminated by their own terms and conditions.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate
or amend this Plan in any respect, including without limitation amendment of any
form of Award Agreement or instrument to be executed pursuant to this Plan;
provided, however, that the Board will not, (i) without the approval of the
stockholders of the Company, amend this Plan in any manner that applicable law
or regulation requires such stockholder approval, or (ii) without the written
consent of the Participant substantially alter or impair any Option or Award
previously granted under the Plan. Notwithstanding the foregoing, if an Option
has been transferred in accordance with the terms of this Plan, written consent
of the transferee (and not the Participant) shall be necessary to substantially
alter or impair any Option or Award previously granted under the Plan.
22. EFFECT OF SECTION 162(m) OF THE CODE. The Plan, and all Awards issued
thereunder, are intended to be exempt from the application of Section 162(m) of
the Code, which restricts under certain circumstances the Federal income tax
deduction for compensation paid by a public company to named executives in
excess of $1 million per year. The exemption is based on Treasury Regulation
Section 1.162-27(f) as in effect on the effective date of the Plan, with the
understanding that such regulation generally exempts from the application of
Section 162(m) of the Code compensation paid pursuant to a plan that existed
before a company becomes publicly held. The Committee may, without stockholder
approval (unless otherwise required to comply with Rule 16b-3 under the Exchange
Act), amend the Plan retroactively and/or prospectively to the extent it
determines necessary in order to comply with any subsequent clarification of
Section 162(m) of the Code required to preserve the Company's Federal income tax
deduction for compensation paid pursuant to the Plan. To the extent that the
Committee determines as of the Date of Grant of an Award that (i) the Award is
intended to comply with Section 162(m) of the Code and (ii) the exemption
described above is no longer available with respect to such Award, such Award
shall not be effective until any stockholder approval required under Section
162(m) of the Code has been obtained.
23. GENERAL.
23.1 Additional Provisions of an Award. Awards under the Plan also may
be subject to such other provisions (whether or not applicable to the benefit
awarded to any other Participant) as the Committee determines appropriate
including, without limitation, provisions to assist the Participant in financing
the purchase of Stock upon the exercise of Options, provisions for the
forfeiture of or restrictions on resale or other disposition of shares of Stock
acquired under any Award, provisions giving the Company the right to repurchase
shares of Stock acquired under any Award in the event the Participant elects to
dispose of such shares, provisions which restrict a Participant's ability to
sell Shares for a period of time under certain circumstances, and provisions to
comply with Federal and state securities laws and Federal and state tax
withholding requirements. Any such provisions shall be reflected in the
applicable Award Agreement. In addition, the Committee may, in its discretion,
provide in an Award
B-13
Agreement that, in the event that the Participant engages, within a specified
period after termination of employment, in certain activity specified by the
Committee that is deemed detrimental to the interests of the Company (including,
but not limited to, the breach of any non-solicitation and/or non-compete
agreements with the Company), the Participant will forfeit all rights under any
Options that remain outstanding as of the time of such act and will return to
the Company an amount of shares with a Fair Market Value (determined as of the
date such shares are returned) equal to the amount of any gain realized upon the
exercise of any Option that occurred within a specified time period.
23.2. Claim to Awards and Employment Rights. Unless otherwise expressly
agreed in writing by the Company, no employee or other person shall have any
claim or right to be granted an Award under the Plan or, having been selected
for the grant of an Award, to be selected for a grant of any other Award.
Neither the Plan nor any action taken hereunder shall be construed as giving any
Participant any right to be retained in the employ or service of the Company, a
Subsidiary or an Affiliate.
23.3. Designation and Change of Beneficiary. Each Participant shall
file with the Committee a written designation of one or more persons as the
beneficiary who shall be entitled to receive the amounts payable with respect to
an Award of Restricted Stock, if any, due under the Plan upon his death. A
Participant may, from time to time, revoke or change his beneficiary designation
without the consent of any prior beneficiary by filing a new designation with
the Committee. The last such designation received by the Committee shall be
controlling; provided, however, that no designation, or change or revocation
thereof, shall be effective unless received by the Committee prior to the
Participant's death, and in no event shall it be effective as of a date prior to
such receipt. If no beneficiary designation is filed by the Participant, the
beneficiary shall be deemed to be his or her spouse or, if the Participant is
unmarried at the time of death, his or her estate.
23.4. Payments to Persons Other Than Participants. If the Committee
shall find that any person to whom any amount is payable under the Plan is
unable to care for his or her affairs because of illness or accident, or is a
minor, or is otherwise legally incompetent or incapacitated or has died, then
any payment due to such person or such person's estate (unless a prior claim
therefor has been made by a duly appointed legal representative) may, if the
Committee so directs the Company, be paid to such person's spouse, child,
relative, an institution maintaining or having custody of such person, or any
other person deemed by the Committee, in its absolute discretion, to be a proper
recipient on behalf of such person otherwise entitled to payment. Any such
payment shall be a complete discharge of the liability of the Committee and the
Company therefor.
23.5. No Liability of Committee Members. No member of the Committee
shall be personally liable by reason of any contract or other instrument
executed by such Committee member or on his or her behalf in his or her capacity
as a member of the Committee nor for any mistake of judgment made in good faith,
and the Company shall indemnify and hold harmless each member of the Committee
and each other employee, officer or director of the Company to whom any duty or
power relating to the administration or interpretation of the Plan may be
allocated or delegated, against any cost or expense (including counsel fees) or
liability (including any sum paid in settlement of a claim) arising out of any
act or omission to act in connection with the Plan unless arising out of such
person's own fraud or
B-14
willful bad faith; provided, however, that approval of the Board shall be
required for the payment of any amount in settlement of a claim against any such
person. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under the
Company's Articles of Incorporation or By-Laws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
23.6. Governing law. The Plan and all agreements hereunder shall be
governed by and construed in accordance with the internal laws of the State of
Delaware without regard to the principles of conflicts of law thereof.
23.7. Funding. No provision of the Plan shall require the Company, for
the purpose of satisfying any obligations under the Plan, to purchase assets or
place any assets in a trust or other entity to which contributions are made or
otherwise to segregate any assets, nor shall the Company maintain separate bank
accounts, books, records or other evidence of the existence of a segregated or
separately maintained or administered fund for such purposes. Participants shall
have no rights under the Plan other than as general unsecured creditors of the
Company, except that insofar as they may have become entitled to payment of
additional compensation by performance of services, they shall have the same
rights as other employees under general law.
23.8. Reliance on Reports. Each member of the Committee and each member
of the Board shall be fully justified in relying, acting or failing or refusing
to act, and shall not be liable for having so relied, acted or failed or refused
to act in good faith, upon any report made by the independent public accountant
of the Company and its Subsidiaries and Affiliates and upon any other
information furnished in connection with the Plan by any person or persons other
than himself.
23.9. Relationship to Other Benefits. No payment under the Plan shall
be taken into account in determining any benefits under any pension, retirement,
profit sharing, group insurance or other benefit plan of the Company or any
Subsidiary except as otherwise specifically provided in such other plan.
23.10. Expenses. The expenses of administering the Plan shall be borne
by the Company and its Subsidiaries and Affiliates.
23.11. Pronouns. Masculine pronouns and other words of masculine gender
shall refer to both men and women.
23.12. Titles and Headings. The titles and headings of the sections in
the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings shall
control.
23.13. Termination of Employment. For all purposes herein, a person who
transfers from employment or service with the Company to employment or service
with a Subsidiary or Affiliate or vice versa shall not be deemed to have
terminated employment or service with the Company, a Subsidiary or Affiliate.
B-15
23.14 Nonexclusivity of the Plan. Neither the adoption of this Plan by
the Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such incentive arrangements as it
may deem desirable, including, without limitation, the granting of stock options
and bonuses otherwise than under this Plan, and such arrangements may be either
generally applicable or applicable only in specific cases.
23.15 Employees Based Outside of the United States. Notwithstanding any
provision of the Plan to the contrary, in order to foster and promote
achievement of the purposes of the Plan or to comply with provisions of laws in
other countries in which the Company, its Affiliates, and its Subsidiaries
operate or have employees, the Committee, in its sole discretion, shall have the
power and authority to (i) determine which employees employed outside the United
States are eligible to participate in the Plan, (ii) modify the terms and
conditions of Awards granted to employees who are employed outside the United
States, and (iii) establish subplans (through the addition of schedules to the
Plan or otherwise), modify option exercise procedures and other terms and
procedures to the extent such actions may be necessary or advisable.
24. DEFINITIONS. As used in this Plan, the following terms will have the
following meanings:
"Affiliate" means any entity in which the Company has an ownership interest
of at least 20%.
"Award" means any award under this Plan, including any Option, Restricted
Stock or Stock Bonus.
"Award Agreement" means, with respect to each Award, the signed written
agreement between the Company and the Participant setting forth the terms
and conditions of the Award.
"Board" means the Board of Directors of the Company.
"Cause" means the Company, a Subsidiary or Affiliate having cause to
terminate a Participant's employment or service under any existing
employment, consulting or any other agreement between the Participant and
the Company or a Subsidiary or Affiliate or, in the absence of such an
employment, consulting or other agreement, upon (i) the determination by
the Committee that the Participant has ceased to perform his duties to the
Company, a Subsidiary or Affiliate (other than as a result of his
incapacity due to physical or mental illness or injury), which failure
amounts to an intentional and extended neglect of his duties to such party,
(ii) the Committee's determination that the Participant has engaged or is
about to engage in conduct materially injurious to the Company, a
Subsidiary or Affiliate or (iii) the Participant having been convicted of a
felony or a misdemeanor carrying a jail sentence of six months or more.
"Change-of-Control Event" means the occurrence of any one or more of the
following events: (i) there shall have been a change in a majority of the Board
of Directors of the
B-16
Company within a two (2) year period, unless the appointment of a director or
the nomination for election by the Company's stockholders of each new director
was approved by the vote of a majority of the directors then still in office who
were in office at the beginning of such two (2) year period, or (ii) the Company
shall have been sold by either (A) a sale of all or substantially all its
assets, or (B) a merger or consolidation, other than any merger or consolidation
pursuant to which the Company acquires another entity, or (C) a tender offer,
whether solicited or unsolicited.
"Code" means the Internal Revenue Code of 1986, as amended. Reference in
the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations
under such section.
"Common Stock" means the outstanding common stock, par value $0.01 per
share, of the Company, or any other class of securities into which
substantially all the Common Stock is converted or for which substantially
all the Common Stock is exchanged.
"Committee" means the Compensation Committee, the Stock Option Committee or
such other committee appointed by the Board consisting solely of two or
more Outside Directors or the Board.
"Company" means Armor Holdings, Inc., a Delaware corporation, or any
successor corporation.
"Disability" or "Disabled" means a disability, whether temporary or
permanent, partial or total, as determined in good faith by the Committee.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Price" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of a share of the
Company's Common Stock determined as follows:
a. if such Common Stock is publicly traded and is then listed on a national
securities exchange (i.e. The New York Stock Exchange), its closing price on the
date of determination on the principal national securities exchange on which the
Common Stock is listed or admitted to trading, and if there were no trades on
such date, on the day on which a trade occurred next preceding such date;
b. if such Common Stock is publicly traded and is then quoted
on the NASDAQ National Market, its closing price on the
NASDAQ National Market on the date of determination as
reported in The Wall Street Journal, and if there were no
trades on such date, on the day on which a trade occurred
next preceding such date;
B-17
c. if such Common Stock is publicly traded but is not quoted on
the NASDAQ National Market nor listed or admitted to trading
on a national securities exchange, the average of the
closing bid and asked prices on the date of determination as
reported in The Wall Street Journal or, if not reported in
The Wall Street Journal, as reported by any reputable
publisher or quotation service, as determined by the
Committee in good faith, and if there were no trades on such
date, on the day on which a trade occurred next preceding
such date;
d. if none of the foregoing is applicable, by the Committee in
good faith based upon factors available at the time of the
determination, including, but not limited to, capital
raising activities of the Company.
"Insider" means an officer or director of the Company or any other person
whose transactions in the Company's Common Stock are subject to Section 16
of the Exchange Act.
"NASD Dealer" has the meaning set forth in Section 8(e).
"NQSO's" has the meaning set forth in Section 5.
"Option" means an award of an option to purchase Shares pursuant to
Section 5.
"Outside Director" means a person who is both (i) a "nonemployee director"
within the meaning of Rule 16b-3 under the Exchange Act, or any successor
rule or regulation and (ii) an "outside director" within the meaning of
Section 162(m) of the Code.
"Parent" means any corporation or other legal entity (other than the
Company) in an unbroken chain of corporations and/or other legal entities
ending with the Company if each of such corporations and other legal
entities other than the Company owns stock, other equity securities or
other equity interests possessing 50% or more of the total combined voting
power of all classes of stock, equity securities or other equity interests
in one of the other corporations or other entities in such chain.
"Participant" means a person who receives an Award under this Plan.
"Performance Factors" means the factors selected by the Committee from time
to time, including, but not limited to, the following measures to determine
whether the performance goals established by the Committee and applicable
to Awards have been satisfied:
a. Net revenue and/or net revenue growth;
B-18
b. Earnings before income taxes and amortization and/or
earnings before income taxes and amortization growth;
c. Operating income and/or operating income growth;
d. Net income and/or net income growth;
e. Earnings per share and/or earnings per share growth;
f. Total stockholder return and/or total stockholder return
growth;
g. Return on equity;
h. Operating cash flow;
i. Adjusted operating cash flow return on income;
j. Economic value added;
k. Successful capital raises;
l. Individual confidential business objectives
m. Other factors deemed reasonable and appropriate by the
Committee.
"Performance Period" means the period of service determined by the
Committee, not to exceed five years, during which years of service or
performance is to be measured for Restricted Stock Awards or Stock Bonuses.
"Plan" means Armor Holdings, Inc. 2002 Stock Incentive Plan, as amended
from time to time.
"Restricted Stock Award" means an award of Shares pursuant to Section 6.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Company's Common Stock reserved for issuance
under this Plan, as adjusted pursuant to Section 18, and any successor
security.
"Stock Bonus" means an award of Shares, or cash in lieu of Shares, pursuant
to Section 7.
"Subsidiary" means any corporation or other legal entity (other than the
Company) in an unbroken chain of corporations and/or other legal entities
beginning with the Company if each of the corporations and entities other
than the
B-19
last corporation or entity in the unbroken chain owns stock, other equity
securities or other equity interests possessing 50% or more of the total
combined voting power of all classes of stock, other equity securities or
other equity interests in one of the other corporations or entities in such
chain.
"Ten Percent Stockholder" has the meaning set forth in Section 5.2.
"Termination" or "Terminated" means, for purposes of this Plan with respect
to a Participant, that the Participant has for any reason ceased to provide
services as an employee, officer, director, consultant, independent
contractor, or advisor to the Company or a Parent or Subsidiary of the
Company. An employee will not be deemed to have ceased to provide services
in the case of (i) sick leave, (ii) military leave, or (iii) any other
leave of absence approved by the Committee, provided, that such leave is
for a period of not more than 90 days, unless re-employment upon the
expiration of such leave is guaranteed by contract or statute or unless
provided otherwise pursuant to formal policy adopted from time to time by
the Company and issued and promulgated to employees in writing. In the case
of any employee on an approved leave of absence, the Committee may make
such provisions respecting suspension of vesting of the Award while on
leave from the employ of the Company or a Subsidiary as it may deem
appropriate, except that in no event may an Option be exercised after the
expiration of the term set forth in the Option agreement. The Committee
will have sole discretion to determine whether a Participant has ceased to
provide services and the effective date on which the Participant ceased to
provide services (the "Termination Date").
"Unvested Shares" means "Unvested Shares" as defined in the Award
Agreement.
"Vested Shares" means "Vested Shares" as defined in the Award Agreement.
CERTIFICATION
The undersigned, being the Secretary of Armor Holdings, Inc., a Delaware
corporation, hereby certifies that the foregoing is a true and complete copy of
Armor Holdings, Inc. 2002 Stock Incentive Plan, as duly adopted by the Board of
Directors of the Company on March 13, 2002, and that said plan is in full force
and effect on the date hereof, without amendment or modification.
/s/ Robert R. Schiller
ANNUAL MEETING OF STOCKHOLDERS OF
ARMOR HOLDINGS, INC.
JUNE 22, 2004
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach along perforated line and mail in the envelope provided.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND "FOR" PROPOSALS 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
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1. ELECTION OF DIRECTORS 2. APPROVAL OF AMENDMENT TO FOR AGAINST ABSTAIN
NOMINEES CERTIFICATE OF INCORPORATION [ ] [ ] [ ]
[ ] FOR ALL NOMINEES
( ) Warren B. Kanders
[ ] WITHHOLD AUTHORITY ( ) Burtt R. Ehrlich 3. APPROVAL OF AMENDMENT TO FOR AGAINST ABSTAIN
FOR ALL NOMINEES ( ) Nicholas Sokolow 2002 STOCK INCENTIVE PLAN [ ] [ ] [ ]
( ) Thomas W. Strauss
[ ] FOR ALL EXCEPT ( ) Alair A. Townsend PLEASE DATE, SIGN AND RETURN THIS PROXY.
(See instructions below) ( ) Deborah Zoullas
THANK YOU.
INSTRUCTION: To withhold authority to vote for any individual
nominee(s), mark "FOR ALL EXCEPT" and fill in the
circle next to each nominee you wish to withhold,
as shown here (x)
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To change the address on your account, please check the
box at right and indicate your new address in the
address space above. Please note that changes to the [ ]
registered name(s) on the account may not be submitted
via this method.
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Signature of Stockholder Date: Signature of Stockholder Date:
------------------------- -------- ------------------------- --------
NOTE: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When
signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation,
please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
ARMOR HOLDINGS, INC.
ANNUAL MEETING
JUNE 22, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Warren B. Kanders and Burtt R. Ehrlich, or either of them, as proxies to represent the
undersigned, with full power of substitution, and hereby authorizes them to vote all shares of common stock of Armor Holdings, Inc.
which the undersigned is entitled to vote at the Annual Meeting of Stockholders of Armor Holdings, Inc., to be held on June 22,
2004 at 10:00 A.M., New York City time, at The Metropolitan Club, One East 60th Street, New York, New York 10022 and any
adjournments and postponements thereof:
THIS BALLOT, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. UNLESS OTHERWISE
SPECIFIED, THE SHARES WILL BE VOTED "FOR" EACH PROPOSAL.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE PROPOSALS.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)