SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
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|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
ASTA FUNDING, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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or the Form or Schedule and the date of its filing.
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ASTA FUNDING, INC.
210 SYLVAN AVENUE
ENGLEWOOD CLIFFS, NEW JERSEY 07632
Dear Stockholder:
On behalf of the Board of Directors, you are cordially invited to
attend the Annual Meeting of Stockholders (the "Meeting") of Asta Funding, Inc.
(the "Company") to be held at the Crowne Plaza Englewood, 401 South Van Brunt
Street, Englewood, New Jersey, on March 1, 2006 at 11:00 a.m.
The enclosed Notice of Meeting and the accompanying Proxy Statement
describe the business to be conducted at the Meeting. I am also pleased to
enclose a copy of the Company's 2005 Annual Report on Form 10-K/A, which
contains certain information regarding the Company and its financial results for
the fiscal year ended September 30, 2005.
It is important that your shares of Common Stock be represented and
voted at the Meeting. Accordingly, regardless of whether you plan to attend the
Meeting in person, please complete, date, sign and return the enclosed proxy
card in the envelope provided, which requires no postage if mailed in the United
States. Even if you return a signed proxy card, you may still attend the Meeting
and vote your shares in person. Every stockholder's vote is important, whether
you own a few shares or many.
I look forward to seeing you at the Meeting.
Sincerely,
Gary Stern
President and Chief Executive Officer
Dated: January 27, 2006
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ASTA FUNDING, INC
210 SYLVAN AVENUE
ENGLEWOOD CLIFFS, NEW JERSEY 07632
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MARCH 1, 2006
The Annual Meeting of Stockholders (the "Meeting") of Asta Funding,
Inc. (the "Company") will be held at the Crowne Plaza Englewood, 401 South Van
Brunt Street, Englewood, New Jersey, on March 1, 2006 at 11:00 a.m. to consider
and act upon the following:
1. The election of eight directors.
2. Adoption of the Asta Funding, Inc. Equity Compensation Plan.
3. The transaction of such other business as may properly come before
the Meeting or any adjournments or postponements thereof.
Only holders of record of the Company's Common Stock, par value $.01
per share, at the close of business on January 20, 2006 will be entitled to vote
at the Meeting. A complete list of those stockholders will be open to
examination by any stockholder, for any purpose germane to the Meeting, during
ordinary business hours at the Company's executive offices at 210 Sylvan Avenue,
Englewood Cliffs, New Jersey 07632 for a period of ten days prior to the
Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Mitchell Cohen
-----------------------------------
Mitchell Cohen, Chief Financial Officer
and Secretary
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, MANAGEMENT URGES YOU TO COMPLETE,
DATE, SIGN AND MAIL THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED ENVELOPE. YOU MAY REVOKE THE PROXY AT ANY TIME PRIOR TO ITS EXERCISE.
Dated: January 27, 2006
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ASTA FUNDING, INC
210 SYLVAN AVENUE
ENGLEWOOD CLIFFS, NEW JERSEY 07632
ANNUAL MEETING OF STOCKHOLDERS
MARCH 1, 2006
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Asta
Funding, Inc. (the "Company") for use at the Annual Meeting of Stockholders to
be held at the Crowne Plaza Englewood, 401 South Van Brunt Street, Englewood,
New Jersey on March 1, 2006 at 11:00 a.m., and at any adjournments or
postponements thereof (the "Meeting") for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. A stockholder giving a
proxy has the right to revoke it by giving written notice of such revocation to
the Secretary of the Company at any time before it is voted, by submitting to
the Company a duly-executed, later-dated proxy or by voting the shares subject
to such proxy by written ballot at the Meeting. The presence at the Meeting of a
stockholder who has given a proxy does not revoke such proxy unless such
stockholder files the aforementioned notice of revocation or votes by written
ballot.
This Proxy Statement and the enclosed form of proxy are first being
mailed to stockholders on or about January 27, 2006. All shares represented by
valid proxies pursuant to this solicitation (and not revoked before they are
exercised) will be voted as specified in the proxy. The Board of Directors
recommends a vote "FOR" all proposals listed. If no directions are given by the
person(s) executing this Proxy, the shares will be voted in favor of all listed
proposals and for the election of management's nominees to the Board of
Directors. This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder, and unless otherwise specified,
the shares will be voted for all proposals.
The solicitation of proxies may be made by directors, officers and
regular employees of the Company or any of its subsidiaries by mail, telephone,
facsimile or telegraph or in person without additional compensation payable with
respect thereto. Arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries to forward proxy-soliciting material to the
beneficial owners of stock held of record by such persons, and the Company will
reimburse them for reasonable out-of-pocket expenses incurred by them in so
doing. All costs relating to the solicitation of proxies will be borne by the
Company.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only holders of shares of the Company's Common Stock, par value $.01
per share ("Common Stock"), of record on the close of business on January 20,
2006 (the "Record Date"), are entitled to vote at the Meeting. On the Record
Date, the Company had outstanding 13,602,824 shares of Common Stock. Each holder
of Common Stock will have the right to one vote for each share standing in such
holder's name on the books of the Company as of the close of business on the
Record Date with respect to each of the matters considered at the Meeting. There
are no cumulative voting rights with respect to the election of Directors.
Holders of the Common Stock will not have any dissenters' rights of appraisal in
connection with any of the matters to be voted on at the Meeting.
The presence in person or by proxy of the holders of shares entitled to
cast a majority of the votes of all shares entitled to vote will constitute a
quorum for purposes of conducting business at the Meeting. Assuming that a
quorum is present, directors will be elected by a plurality vote and approval of
the adoption of the Asta Funding Equity Compensation Plan will require the
affirmative vote of a majority of the shares present and entitled to vote with
respect to that proposal. Pursuant to Delaware corporate law, abstentions and
broker non-votes will be counted for the purpose of determining whether a quorum
is present and do not have an effect on the election of directors. Abstentions,
but not broker non-votes, are treated as shares present and entitled to vote,
and will be counted as a "no" vote. Broker non-votes are treated as not entitled
to vote, and so reduce the absolute number, but not the percentage, of votes
needed for approval of a matter.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of December 31, 2005 with
respect to beneficial ownership of the Company's Common Stock by (i) each
director and executive officer acting in the capacity as such on September 30,
2005, (ii) each person known by the Company to own beneficially more than five
percent of the Company's outstanding Common Stock, and (iii) all directors and
executive officers as a group. Unless otherwise indicated, the address of each
such person is c/o Asta Funding, Inc., 210 Sylvan Avenue, Englewood Cliffs, New
Jersey 07632. All persons listed have sole voting and investment power with
respect to their shares unless otherwise indicated.
Name and Address of Beneficial Owner Amount and
Nature
Of Beneficial
Ownership Percentage (1)
-------------- --------------
Arthur Stern.......................................... 789,232(2) 5.7%
Gary Stern............................................ 1,525,902(3) 10.6%
Mitchell Cohen........................................ 30,000(4) *
Herman Badillo
120 Broadway
New York, NY 10271................................... 73,000(5) *
Edward Celano
2115 Scotch Gamble Road
Scotch Plains, NJ .................................... 55,002(6) *
Harvey Leibowitz
159 West 53rd Street, Apt 229
New York, NY 10019................................... 80,000(7) *
David Slackman
28 Markwood Lane
East Northport, NY 11731............................. 43,834(8) *
Alan Rivera........................................... 42,000(9) *
Louis A. Piccolo
211 East 53rd Street
New York, NY 10022................................... 23,769(10) *
Asta Group, Incorporated.............................. 842,000(11) 6.2%
Barbara Marburger
9 Locust Hollow Road
Monsey, NY 10952..................................... 440,440(12) 3.2%
Judith R. Feder
928 East 10th Street
Brooklyn, NY 11230................................... 1,865,000(13) 13.7%
Stern Family Investors LLC............................ 692,000(14) 5.1%
GMS Family Investors LLC.............................. 1,162,000(15) 8.5%
All executive officers and directors
as a group (9 persons)................................ 2,662,739(16) 17.6%
* Less than 1%
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(1) Any shares of common stock that any person named above has the
right to acquire within 60 days of December 31, 2005, are deemed to be
outstanding for purposes of calculating the ownership percentage of
such person, but are not deemed to be outstanding for purposes of
calculating the beneficial ownership percentage of any other person not
named in the table above.
(2) Includes 346,000 shares of common stock issuable upon exercise of
options that are exercisable within 60 days of December 31, 2005, and
214,599 shares of common stock owned by Asta Group, Incorporated which
shares are attributable to Arthur Stern based on his percentage
ownership of Asta Group. Excludes 349,460 shares owned by Stern Family
Investors LLC which shares are attributable to Arthur Stern based on
his percentage ownership of such LLC and 1,278 shares owned by GMS
Family Investors LLC which shares are attributable to Arthur Stern
based on his percentage ownership of such LLC. Arthur Stern does not
have voting or investment power with respect to any of the shares held
by either LLC and disclaims beneficial ownership of the shares owned by
the LLCs.
(3) Includes 846,000 shares of common stock issuable upon exercise of
options that are exercisable within 60 days of December 31, 2005, and
196,656 shares of common stock owned by Gary Stern as custodian for his
minor children and 285,607 shares of common stock owned by Asta Group,
which shares are attributable to Gary Stern based on his percentage
ownership of Asta Group. Excludes 923,325 shares owned by GMS Family
Investors LLC which shares are attributable to Gary Stern based on his
percentage ownership of such LLC. Gary Stern does not have voting or
investment power with respect to any of the shares held by the LLC and
disclaims beneficial ownership of the shares owned by the LLC. Also
excludes 196,656 shares of common stock held by one of his children who
is no longer a minor and for which he disclaims beneficial ownership.
(4) Represents 30,000 shares of common stock issuable upon exercise of
options that are exercisable within 60 days of December 31, 2005.
(5) Represents 73,000 shares of common stock issuable upon exercise of
options that are exercisable within 60 days of December 31, 2005.
(6) Represents 55,002 shares of common stock issuable upon exercise of
options that are exercisable within 60 days of December 31, 2005.
(7) Represents 80,000 shares of common stock issuable upon exercise of
options that are exercisable within 60 days of December 31, 2005.
(8) Includes 43,334 shares of common stock issuable upon exercise of
options that are exercisable within 60 days of December 31, 2005.
(9) Represents 42,000 shares of common stock issuable upon exercise of
options that are exercisable within 60 days of December 31, 2005.
(10) Represents 23,769 shares of common stock issuable upon exercise of
options that are exercisable within 60 days of December 31, 2005.
(11) Asta Group, Incorporated is owned by Arthur Stern, our Chairman of
the Board and an Executive Vice President, Gary Stern, our President
and Chief Executive Officer, and other members of the Stern family,
including Barbara Marburger.
(12) Includes 90,676 shares of common stock owned by Barbara Marburger
as custodian for her minor child and 70,907 shares of common stock
owned by Asta Group, which shares are attributable to Barbara Marburger
based on her percentage ownership of Asta Group. Excludes shares of
common stock held by her children who are no longer minors and for
which she disclaims beneficial ownership. Barbara Marburger is the
daughter of Arthur Stern and the sister of Gary Stern.
(13) Includes 11,000 shares owned directly, 692,000 shares owned by
Stern Family Investors LLC and 1,162,000 shares owned by GMS Family
Investors LLC. Ms. Feder is the manager of each LLC and as such has
sole voting and investment power as to such shares.
-7-
(14) A limited liability company of which Judith R. Feder has sole
voting and investment power. Arthur Stern has a 49.5% beneficial
interest in the LLC, his wife, Alice Stern, has a 1% beneficial
interest, and a trust for the benefit of the descendants of Arthur
Stern, of which Judith R. Feder is trustee, has a 49.5% beneficial
interest in the LLC.
(15) A limited liability company of which Judith R. Feder has sole
voting and investment power. Gary Stern has a 79.46% beneficial
interest in the LLC, trusts for the benefit of the children of Gary
Stern of which Judith R. Feder is the trustee have a combined 20.43%
beneficial interest (10.215% each), and Arthur Stern has a .11%
beneficial interest in the LLC.
(16) Includes 1,539,105 shares of common stock issuable upon exercise
of options that are exercisable within 60 days of December 31, 2005.
Excludes the shares owned in the aggregate by Stern Family Investors
LLC and GMS Family Investors LLC.
PROPOSAL ONE
ELECTION OF DIRECTORS
In accordance with the Company's Certificate of Incorporation and
Bylaws, the number of directors of the Company has been set by the Board of
Directors at eight. At the Meeting, eight directors will be elected by the
stockholders to serve until the next annual meeting of stockholders and until
their successors are duly elected and qualified.
All eight nominees named in this proxy statement are currently
directors who will serve until their successors are duly elected and qualified.
Each person named herein as a nominee for director has consented to serve, and
it is not contemplated that any nominee would be unable to serve, as a director.
However, if a nominee is unable to serve as a director, a substitute will be
selected by the Board of Directors and all proxies eligible to be voted for the
Board of Directors' nominees will be voted for such other person.
The current Board of Directors, based on the recommendation of
our Nominating Committee, nominated the individuals named below for election to
our Board of Directors. Background information on each of the nominees as of
December 31, 2005 is set forth below:
NAME AGE POSITION
---- --- --------
Arthur Stern 85 Chairman of the Board and Executive
Vice President
Gary Stern 53 Director, President and Chief
Executive Officer
Herman Badillo 76 Director
Edward Celano (1)(3) 67 Director
David Slackman (1)(2) 58 Director
Harvey Leibowitz (1)(2) 71 Director
Alan Rivera(2)(3) 43 Director
Louis A. Piccolo(3) 53 Director
(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Member of Nominating Committee
Arthur Stern has been a director and has served as Chairman of the
Board of Directors and Executive Vice President of the Company since the
Company's inception in July 1994. Since 1963, Mr. Stern has been President of
Asta Group, Incorporated, a consumer finance company ("Group"). In such
capacities, he has obtained substantial experience in distressed consumer credit
analysis and receivables collections.
-8-
Gary Stern has been a director and the President and Chief Executive
Officer of the Company since the Company's inception in July 1994. Mr. Stern has
been Vice President, Secretary, Treasurer and a director of the Group since 1980
and held other positions with Group prior thereto. In such capacities, he has
obtained substantial experience in distressed consumer credit analysis and
receivables collections.
Herman Badillo has been a director of the Company since September 1995.
He has been Of Counsel at Sullivan Papain Block McGrath & Cannavo P.C since
2005. Prior to joining his current firm Mr. Badillo was a founding member of
Fischbein, Badillo, Wagner & Harding, a law firm located in New York City, for
more than six years. He has formerly served as Special Counsel to the Mayor of
New York City for Fiscal Oversight of Education and as a member of the Mayor's
Advisory Committee on the Judiciary. Mr. Badillo served as a United States
Congressman from 1971 to 1978 and Deputy Mayor of New York City from 1978 to
1979.
Edward Celano has been a director of the Company since September 1995.
Mr. Celano has served as a consultant to Walters and Samuels, Incorporated since
2003. He was formally a consultant with M.R. Weiser & Co., from 2001 to 2003 and
an Executive Vice President of Atlantic Bank from May 1996 to February 2001.
Prior to May 1996, Mr. Celano was a Senior Vice President of NatWest Bank, now
Bank of America, after having held different positions at the bank for over 20
years.
Harvey Leibowitz has been a director of the Company since March 2000.
Mr. Leibowitz has served as a Senior Vice President of Sterling National Bank
since June 1994. Prior to June 1994, Mr. Leibowitz was employed as a Senior Vice
President and Vice President of several banks and financial institutions since
1963.
David Slackman has been a director of the Company since May 2002. Mr.
Slackman has served as President, Manhattan Market -- New York of Commerce Bank
since June 2001. Prior to June 2001, Mr. Slackman was an Executive Vice
President of Atlantic Bank of New York from 1994 to 2001 and a Senior Vice
President of the Dime Savings Bank from 1986 to 1994.
Alan Rivera has been a director of the Company since February 2004. Mr.
Rivera has served as Chief Financial Officer and General Counsel of Millbrook
Capital Management Inc. since September 1996. Prior to September 1996, Mr.
Rivera was an Executive Vice President of Finance and Administration and General
Counsel of the New York City Economic Development Corporation from 1994 to 1996.
Louis A. Piccolo has been a director of the Company since June 2004.
Mr. Piccolo has served as President of A.L. Piccolo & Co., Inc since 1988. A.L.
Piccolo & Co. is a business consulting firm specializing in management and
financial consulting. Prior to 1988, Mr. Piccolo was an Executive Vice President
and Chief Financial Officer of Alfred Dunhill of London, Inc from 1983 to 1988,
and held the same positions at Debenham's PLC, from 1981 to 1983. From 1977 to
1981, Mr. Piccolo was a senior accountant at KPMG Peat Marwick.
Arthur Stern is the father of Gary Stern. There are no other family
relationships among directors or officers of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES TO THE
BOARD OF DIRECTORS DESCRIBED ABOVE IN PROPOSAL ONE.
PROPOSAL NUMBER TWO
APPROVAL OF THE ASTA FUNDING, INC. EQUITY COMPENSATION PLAN
GENERAL
On December 1, 2005, the Board of Directors adopted the Company's
Equity Compensation Plan (the "Equity Compensation Plan"), subject to the
approval of the stockholders of the Company. The Equity Compensation Plan was
adopted to supplement the Company's existing 2002 Stock Option Plan. In addition
to permitting the grant of stock options as are permitted under the 2002 Stock
Option Plan, the Equity Compensation Plan allows the Company with respect to
equity awards by also providing for grants of stock awards (i.e. restricted or
unrestricted), stock purchase rights and stock appreciation rights.
The general purpose of the Equity Compensation Plan is to provide an
incentive to our employees, directors and consultants, including executive
officers, employees and consultants of any subsidiaries, by enabling them to
share in the future growth of our business. The Board of Directors believes that
the granting of stock options and other equity awards promotes continuity of
management and increases incentive and personal interest in the welfare of the
Company by those who are primarily responsible for shaping and carrying out our
long range plans and securing our growth and financial success.
-9-
The Board believes that the Equity Compensation Plan will advance our
interests by enhancing our ability to (a) attract and retain employees,
directors and consultants who are in a position to make significant
contributions to our success; (b) reward employees, directors and consultants
for these contributions; and (c) encourage employees, directors and consultants
to take into account our long-term interests through ownership of our shares.
DESCRIPTION OF THE EQUITY COMPENSATION PLAN
The following description of the principal terms of the Equity
Compensation Plan is a summary and is qualified in its entirety by the full text
of the Equity Compensation Plan, which is attached as Exhibit A hereto.
Administration. The Equity Compensation Plan provides that it will be
administered by a committee (the "Committee") appointed by the Board of
Directors, consisting of not less than two members of the Board who qualify as
both non-employee directors and outside directors within the meaning of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
The Equity Compensation Plan was adopted by the Board, subject to
stockholder approval, on December 1, 2005 and has a term of ten years measured
from the date of adoption. Accordingly, no grants may be made under the Equity
Compensation Plan after November 30, 2015, but the Equity Compensation Plan will
continue thereafter while previously granted options, rights and awards remain
subject to the Equity Compensation Plan.
Types of Options and other Awards. The Equity Compensation Plan
authorizes the Committee to grant options ("Options") that are Incentive Stock
Options within the meaning of Section 422 of the Code, Nonstatutory Stock
Options or a combination of both. In addition, the Equity Compensation Plan
authorizes the Committee to grant Stock Purchase Rights, Stock Appreciation
Rights ("SARs" and together with Stock Purchase Rights, "Rights"), and
Restricted and Unrestricted Stock Awards ("Awards").
Eligibility. All officers, employees, directors and consultants of the
Company and its subsidiaries are eligible to receive Options, Rights, and Awards
under the Equity Compensation Plan (approximately 140 persons as of January 24,
2006). Grants of Options, Rights, and Awards under the Equity Compensation Plan
are discretionary, and the Company is unable, at the present time, to determine
the identity or number of directors, officers and other employees who may be
granted Options, Rights, and Awards under the Equity Compensation Plan in the
future.
Shares Subject to the Equity Compensation Plan. Subject to adjustments
set forth in the Equity Compensation Plan, the aggregate number of shares of
Common Stock available for issuance in connection with all Options, Rights, and
Awards granted to employees and consultants under the Equity Compensation Plan
will be 1,000,000, in each case subject to customary adjustments for stock
splits, stock dividends or similar transactions.
If any Option, Right or Award granted under the Equity Compensation
Plan terminates without having been exercised in full or if any Award is
forfeited, the number of shares of Common Stock as to which such Option or Right
was not exercised or Award has been forfeited shall be available for future
grants within certain limits under the Equity Compensation Plan. No employee,
director or consultant may receive Options or Stock Appreciation Rights of or
relating to more than 100,000 shares of Common Stock in the aggregate in any
year.
Terms and Conditions of Options. The Committee determines the exercise
price of Options granted under the Equity Compensation Plan. The exercise price
of Incentive Stock Options must be at least equal to the fair market value per
share of Common Stock (or 110% of fair market value in the case of Incentive
Stock Options granted to a ten-percent stockholder) issuable upon exercise of
the option at the time the Incentive Stock Option was granted. If on the date of
grant the Common Stock is listed on a stock exchange or is quoted on the
automated quotation system of NASDAQ, the fair market value shall generally be
the closing sale price for the last trading day before the date of grant. If on
the date of grant the Common Stock is regularly quoted by a recognized
securities dealer but not on a stock exchange or quoted on NASDAQ, the fair
market value shall be the mean between the high and low asked prices on the last
trading day before the date of grant. If no such prices are available, the fair
market value shall be determined in good faith by the Committee. On January 24,
2006, the closing sale price of a share of Common Stock on the NASDAQ National
Market was $29.09.
No option may be exercisable for more than ten years (five years in the
case of an Incentive Stock Option granted to a ten-percent stockholder) from the
date of grant. Options issued under the Equity Compensation Plan will be
exercisable at such time or times as the Committee prescribes at the time of
grant. No employee may receive Incentive Stock Options that first become
exercisable in any calendar year in an amount exceeding $100,000.
-10-
Generally, the option price may be paid (a) in cash or by certified
check, (b) through delivery of shares of Common Stock held for more than six
months and having a fair market value equal to the purchase price, or (c) a
combination of these methods. The Committee is also authorized to establish a
cashless exercise program.
No Option may be transferred other than by will or by the laws of
descent and distribution, and during a recipient's lifetime an Option may be
exercised only by the recipient. Unless otherwise provided by the Committee,
Options that are exercisable at the time of a recipient's termination of service
with the Company will continue to be exercisable for one day less than three
months, unless the optionee terminates employment or service with the Company
due to death in which case the Option will be exercisable for a period of six
months.
Stock Purchase Rights. Stock Purchase Rights may be granted by the
Committee either alone, or in tandem with, other Options or Awards under the
Equity Compensation Plan. A Stock Purchase Right allows a recipient to purchase
a share of Common Stock at a price determined by the Committee. Unless otherwise
determined by the Committee, the Company will have the right to repurchase the
shares of Common Stock acquired upon exercise of the Stock Purchase Right upon
the recipient's termination of service for any reason. Upon exercise of a Stock
Purchase Right, the purchaser will have all of the rights of a shareholder with
respect to the shares of Common Stock acquired thereby.
Stock Purchase Rights may not be transferred other than by will or by
the laws of descent and distribution, and during a recipient's lifetime, a
purchase grant may be exercised only by the recipient. Unless otherwise
determined by the Committee, if a recipient's employment or consulting
relationship terminates for any reason, the Company shall be granted a
repurchase option, which option shall lapse at a rate determined by the
Committee.
Stock Awards. The Committee may also grant a Restricted or Unrestricted
Stock Award to any eligible employee or consultant. Under a Restricted Stock
Award, shares of Common Stock that are the subject of the Award are generally
subject to forfeiture to the extent that the recipient terminates service with
the Company prior to the Award having vested or if the performance goals
established by the Committee as a condition of vesting are not achieved. Shares
of Common Stock subject to a Restricted Stock Award cannot be sold, transferred,
assigned, pledged or otherwise encumbered or disposed of by the recipient of the
Award unless and until the applicable restrictions lapse. Unless otherwise
determined by the Committee, holders of restricted shares will have the right to
vote such shares and to receive any cash dividends with respect thereto during
the restriction period. Any stock dividends will be subject to the same
restrictions as the underlying shares of restricted stock. Unrestricted Stock
Awards are grants of shares of Common Stock that are not subject to forfeiture.
To the extent that the Committee grants Awards that are subject to the
satisfaction of performance goals specified by the Committee ("Performance
Awards"), the Committee shall establish the specified levels of performance
goals. Performance goals may be weighted for different factors and measures. The
Committee will have discretion to make adjustments to a Performance Award in
certain circumstances, such as when a person is promoted into a position of
eligibility for a Performance Award, is transferred between eligible positions
with different performance goals, terminates employment and is subsequently
rehired, takes a leave of absence, or other similar circumstances deemed
appropriate by the Committee. The Committee may also increase or decrease an
Award to any individual, except that, an Award intended to be "qualified
performance-based compensation" for purposes of Section 162(m) of the Code, may
not be increased. The Committee will certify the degree of attainment of
performance goals after the end of each year.
If Awards are intended to satisfy the conditions for deductibility
under Section 162(m) of the Code as "performance-based compensation," the
performance criteria will be selected from among the following, which may be
applied to the Company as a whole, or to an individual recipient, or to a
department, unit, division or function within the Company or an affiliate, and
they may apply on a pre- or post-tax basis, either alone or relative to the
performance of other businesses or individuals (including industry or general
market indices): (a) earnings (either in the aggregate or on a per-share basis,
reflecting dilution of shares as the Committee deems appropriate and, if the
Committee so determines, net of or including dividends) before or after interest
and taxes ("EBIT") or before or after interest, taxes, depreciation, and
amortization ("EBITDA"); (b) gross or net revenue or changes in annual revenues;
(c) cash flow(s) (including either operating or net cash flows); (d) financial
return ratios; (e) total stockholder return, stockholder return based on growth
measures or the attainment by the shares of a specified value for a specified
period of time, share price, or share price appreciation; (f) earnings growth or
growth in earnings per share; (g) return measures, including return or net
return on assets, net assets, equity, capital, investment, or gross sales; (h)
adjusted pre-tax margin; (i) pre-tax profits; (j) operating margins; (k)
operating profits; (l) operating expenses; (m) net income or net operating
income; (n) growth in operating earnings or growth in earnings per share; (o)
expense or cost levels, in each case, where applicable, determined either on a
company-wide basis or in respect of any one or more specified divisions; (p)
reduction of losses, loss ratios or expense ratios; (q) operating cost
management; (r) cost of capital; (s) debt reduction; or (t) satisfaction of
specified business expansion goals or goals relating to acquisitions or
divestitures.
-11-
Stock Appreciation Rights. A SAR may be granted by the Committee either
alone, or in tandem with, other Options, Rights or Awards under the Equity
Compensation Plan. Stock Appreciation Rights may not be transferred other than
by will or by the laws of descent and distribution, and during a recipient's
lifetime, the right may be exercised only by the recipient. A SAR shall relate
to such number of shares of Common Stock as the Committee determines. Each SAR
will have an exercise period determined by the Committee not to exceed ten years
from the date of grant. Upon exercise of a SAR, the holder will receive a number
of shares of Common Stock or cash equal to (i) the number of shares for which
the SAR is exercised times the appreciation in the fair market value of a share
of Common Stock between the date the SAR was granted and it's date of exercise;
divided by (ii) the fair market value of a share of Common Stock on the date
that the SAR is exercised.
Effect of Certain Corporate Transactions. In the event that the Company
merges or consolidates with another corporation, or if the Company liquidates or
sells substantially all of its assets, or if a person or entity or a group of
persons and/or entities acting in concert becomes the beneficial owner of more
than 50% of the Company's outstanding securities, then each holder of an Option
or Right will be entitled, upon exercise of such Option or Right, to receive, in
lieu of shares of Common Stock, the securities or other property to which the
holder would have been entitled if such Option or Right had been exercised
immediately prior to such event. However, the Board may waive any restrictions
applicable to Options or Rights so that they may be exercised prior to such an
event and cancel such Options or Rights. Subject to such terms and conditions as
the Committee may impose, all vesting periods and other conditions applicable to
an Award will be deemed to have been satisfied as a result of such an event.
Amendment, Termination. The Equity Compensation Plan may be amended or
terminated at any time by the Board, except that no amendment may be made
without shareholder approval if such approval is required by Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, or other
applicable law, and no amendment or revision may alter or impair an outstanding
Option, Right or Award without the consent of the holder thereof, or impair the
rights of any participant without the participant's written consent.
FEDERAL INCOME TAX CONSEQUENCES
Following is a summary of the federal income tax consequences of Option
and other grants under the Equity Compensation Plan. Optionees and recipients of
other Rights and Awards granted under the Equity Compensation Plan are advised
to consult their personal tax advisors before exercising an Option, Right or
Award or disposing of any stock received pursuant to the exercise of an Option,
Right or Award. In addition, the following summary is based upon an analysis of
the Code as currently in effect, existing laws, judicial decisions,
administrative rulings, regulations and proposed regulations, all of which are
subject to change and does not address state, local or other tax laws.
TREATMENT OF OPTIONS
The Code treats Incentive Stock Options and Nonstatutory Stock Options
differently. However, as to both types of Options, no income will be recognized
to the optionee at the time of the grant of the options under the Equity
Compensation Plan, nor will the Company be entitled to a tax deduction at that
time.
Generally, upon exercise of a Nonstatutory Stock Option, an optionee
will recognize ordinary income tax on the excess of the fair market value of the
stock on the exercise date over the option price. The Company will be entitled
to a tax deduction in an amount equal to the ordinary income recognized by the
optionee in the fiscal year which includes the end of the optionee's taxable
year. The Company will be required to satisfy applicable withholding
requirements in order to be entitled to a tax deduction. In general, if an
optionee, in exercising a Nonstatutory Stock Option, tenders shares of common
stock of the Company in partial or full payment of the option price, no gain or
loss will be recognized on the tender. However, if the tendered shares were
previously acquired upon the exercise of an Incentive Stock Option and the
tender is within two years from the date of grant or one year after the date of
exercise of the Incentive Stock Option, the tender will be a disqualifying
disposition of the shares acquired upon exercise of the Incentive Stock Option.
-12-
For Incentive Stock Options, there is no taxable income to an optionee
at the time of exercise. However, the excess of the fair market value of the
stock on the date of exercise over the exercise price will be taken into account
in determining whether the "alternative minimum tax" will apply for the year of
exercise. If the shares acquired upon exercise are held until at least two years
form the date of grant and more than one year from the date of exercise, any
gain or loss upon the sale of such shares, if held as capital assets, will be
long-term capital gain or loss (measured by the difference between the sales
price of the stock and the exercise price). Under current federal income tax
law, a long-term capital gain will be taxed at a rate which is less than the
maximum rate of tax on ordinary income. If the two-year and one year holding
period requirements are not met (a "disqualifying disposition"), an optionee
will recognize ordinary income in the year of disposition in an amount equal to
the lesser of (i) the fair market value of the stock on the date of exercise
minus the exercise price or (ii) the amount realized on disposition minus the
exercise price. The remainder of the gain will be treated as long-term capital
gain, depending upon whether the stock has been held for more than a year. If an
optionee makes a disqualifying disposition, the Company will be entitled to a
tax deduction equal to the amount of ordinary income recognized by the optionee.
In general, if an optionee, in exercising an Incentive Stock Option,
tenders shares of common stock in partial or full payment of the option price,
no gain or loss will be recognized on the tender. However, if the tendered
shares were previously acquired upon the exercise of another incentive stock
option and the tender is within two years from the date of grant or one year
after the date of exercise of the other option, the tender will be a
disqualifying disposition of the shares acquired upon exercise of the other
option.
As noted above, the exercise of an Incentive Stock Option could subject
an optionee to the alternative minimum tax. The application of the alternative
minimum tax to any particular optionee depends upon the particular facts and
circumstances which exist with respect to the optionee in the year of exercise.
However, as a general rule, the amount by which the fair market value of the
common stock on the date of exercise of an option exceeds the exercise price of
the option will constitute an item of "adjustment" for purposes of determining
the alternative minimum taxable income on which the alternative tax may be
imposed. As such, this item will enter into the tax base on which the
alternative minimum tax is computed, and may therefore cause the alternative
minimum tax to become applicable in any given year.
TREATMENT OF STOCK AWARDS
Generally, absent an election to be taxed currently under Section 83(b)
of the Code (a "Section 83(b) Election"), there will be no federal income tax
consequences to either the recipient or the Company upon the grant of shares
that are the subject of a Restricted Stock Award ("Restricted Shares") or that
are received, subject to restrictions, upon exercise of a Stock Purchase Right.
At the expiration of the restriction period and the satisfaction of any other
restrictions applicable to the Restricted Shares, the recipient will recognize
ordinary income and the Company generally will be entitled to a corresponding
deduction equal to the fair market value of the Common Stock at that time. If a
Section 83(b) Election is made within 30 days after the date the Restricted
Shares are received, the recipient will recognize an amount of ordinary income
at the time of the receipt of the Restricted Shares, and the Company generally
will be entitled to a corresponding deduction, equal to the fair market value
(determined without regard to applicable restrictions) of the shares at such
time. If a Section 83(b) Election is made, no additional income will be
recognized by the recipient upon the lapse of restrictions on the shares (and
prior to the sale of such shares), but, if the shares are subsequently
forfeited, the recipient may not deduct the income that was recognized pursuant
to the Section 83(b) Election at the time of the receipt of the shares.
The recipient of an Unrestricted Stock Award will recognize ordinary
income, and the Company generally will be entitled to a corresponding deduction,
equal to the fair market value of the Common Stock at the time the Award is
made.
TREATMENT OF STOCK APPRECIATION RIGHTS
Generally, the recipient of a SAR will not recognize any income upon
grant of the SAR, nor will the Company be entitled to a deduction at that time.
Upon exercise of the SAR, the holder will recognize ordinary income, and the
Company generally will be entitled to a corresponding deduction, equal to the
fair market value of the Common Stock at that time.
-13-
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS
Code Section 162(m) denies a deduction to any publicly held corporation
for compensation paid to certain "covered employees" in a taxable year to the
extent that compensation exceeds $1 million for a covered employee. It is
possible that compensation attributable to Options granted in the future under
the Equity Compensation Plan, when combined with all other types of compensation
received by a covered employee from the Company, may cause this limitation to be
exceeded in any particular year. Certain kinds of compensation, including
qualified "performance-based compensation," are disregarded for purposes of the
deduction limitation. In accordance with Treasury regulations issued under Code
Section 162(m), compensation attributable to options will qualify as
performance-based compensation, provided that: (i) the stock award plan contains
a per-employee limitation on the number of shares for which stock options may be
granted during a specified period; (ii) the per-employee limitation is approved
by the stockholders; (iii) the award is granted by a compensation committee
comprised solely of "outside directors"; and (iv) the exercise price of the
award is no less than the fair market value of the stock on the date of grant.
CIRCULAR 230 DISCLAIMER
Nothing contained in this discussion of certain federal income tax
considerations is intended or written to be used, and cannot be used, for the
purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or
(ii) promoting, marketing, or recommending to another party any transactions or
tax-related matters addressed herein.
TAX WITHHOLDING
The Company, as and when appropriate, shall have the right to require
each optionee purchasing shares of Common Stock and each grantee receiving an
Award of shares of Common Stock or cash to pay any federal, state or local taxes
required by law to be withheld.
EQUITY GRANTS
The grant of Options, Rights and Awards under the Equity Compensation
Plan is discretionary, and the Company cannot determine now the number or type
of options, rights or other awards to be granted in the future to any particular
person or group.
VOTE REQUIRED
The affirmative vote of a majority of the shares present and entitled
to vote at the meeting at which a quorum representing a majority of all
outstanding shares of our common stock is present and voting, either in person
or by proxy, is required for approval of Proposal Number 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF THE EQUITY
COMPENSATION PLAN.
The Equity Compensation Plan is attached to this Proxy Statement as Exhibit A.
BOARD ORGANIZATION AND MEETINGS
Composition of the Board of Directors. Since the adoption of the
Sarbanes-Oxley Act in July 2002, there has been a growing public and regulatory
focus on the independence of directors. Additional requirements relating to
independence are imposed by the Sarbanes-Oxley Act with respect to members of
the Audit Committee. The Board has initiated actions consistent with the
Sarbanes-Oxley Act of 2002, the Securities and Exchange Commission and The
NASDAQ Stock Market. The Board of Directors has also determined that the
following members of the Board satisfy the NASDAQ definition of independence:
Edward Celano, Harvey Leibowitz, David Slackman, Alan Rivera and Louis A.
Piccolo.
During the fiscal year ended September 30, 2005, the Board of Directors
held three meetings and acted one time by unanimous consent, the Audit Committee
held four meetings; the Compensation Committee held one meeting and the
Nominating Committee held one meeting. During the 2005 fiscal year, all members
of the Board of Directors attended at least 75% of all the meetings of the Board
of Directors that such Director was eligible to attend, and committees of the
Board of Directors of which such director was a member. There are three standing
committees of the Board of Directors, each of which is described below.
Compensation Committee. During the fiscal year ended September 30,
2005, the Compensation Committee consisted of David Slackman (Chairman), Harvey
Leibowitz and Alan Rivera. The Compensation Committee is empowered by the Board
of Directors to review the executive compensation of the Company's officers and
directors and to recommend any changes in compensation to the full Board of
Directors.
-14-
Nominating Committee. During the fiscal year ended September 30,
2005, the Nominating Committee consisted of Edward Celano (Chairman), Louis
Piccolo and Alan Rivera. The Nominating Committee is empowered by the Board of
Directors to, among other things, recommend to the Board of Directors qualified
individuals to serve on the Company's Board of Directors and to identify the
manner in which the Nominating Committee evaluates nominees recommended for the
Board.
Audit Committee. During the fiscal year ended September 30, 2005, the
Audit Committee consisted of Harvey Leibowitz (the Chairman), David Slackman and
Edward Celano. The Audit Committee is empowered by the Board of Directors to,
among other things: serve as an independent and objective party to monitor the
Company's financial reporting process, internal control system and disclosure
control system; review and appraise the audit efforts of the Company's
independent accountants; assume direct responsibility for the appointment,
compensation, retention and oversight of the work of the outside auditors and
for the resolution of disputes between the outside auditors and the Company's
management regarding financial reporting issues; and provide an open avenue of
communication among the independent accountants, financial and senior
management, and the Board of Directors.
The Audit Committee has selected Eisner LLP to serve as the Company's
independent accountants during the current fiscal year, ending September 30,
2006. Eisner LLP served as the Company's independent registered public
accounting firm during the fiscal year ended September 30, 2005. A
representative of Eisner LLP is expected to be present at the Annual Meeting to
make such statements as Eisner LLP may desire and will be available to answer
appropriate questions from shareholders.
Audit Committee Financial Expert. The Board of Directors has determined
that Harvey Leibowitz is an "audit committee financial expert"; as such term is
defined by the Securities and Exchange Commission ("SEC"). As noted above, Mr.
Leibowitz - as well as the other members of the Audit Committee - has been
determined to be "independent" within the meaning of SEC and NASDAQ regulations.
Audit Committee Charter. The Audit Committee performed its duties
during fiscal 2005 under a written charter approved by the Board of Directors.
The Audit Committee charter was filed as Exhibit A to the Company's Proxy
Statement for 2004 on Form 14A filed as of August 31, 2004.
Independence of Audit Committee Members. The Company's Common Stock is
listed on the NASDAQ National Market and the Company is governed by the listing
standards applicable thereto. All members of the Audit Committee of the Board of
Directors have been determined to be "independent directors" pursuant to the
definition contained in Rule 4200(a)(15) of the National Association of
Securities Dealers' Marketplace Rules and under the SEC's Rule 10A-3.
Audit Committee Report. In connection with the preparation and filing
of the Company's Annual Report on Form 10-K for the fiscal year ended September
30, 2005:
(1) The Audit Committee reviewed and discussed the audited financial
statements with the Company's management.
(2) The Audit Committee discussed with the Company's independent
registered public accounting firm the matters required to be discussed by SAS
61, as may be modified or supplemented.
(3) The Audit Committee received and reviewed the written disclosures
and the letter from the Company's independent registered public accounting firm
required by the Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), as may be modified or supplemented, and
discussed with the Company's independent registered public accounting firm any
relationships that may impact their objectivity and independence and satisfied
itself as to the auditors' independence.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the 2005 Annual Report on Form 10-K.
Audit Committee Members:
Harvey Leibowitz (Chairman)
David Slackman
Edward Celano
-15-
The foregoing report of the Audit Committee is not to be deemed
"soliciting material" or deemed to be filed with the SEC or subject to
Regulation 14A of the Securities Exchange Act of 1934, except to the extent
specifically requested by the Company or incorporated by reference in documents
otherwise filed.
Audit Fees. The Company was billed $564,000 for the audit of the
Company's annual financial statements for the year ended September 30, 2005 and
for the review of the financial statements included in the Company's Quarterly
Reports on Form 10-Q filed during fiscal 2005. Such fees included the audit of
the Company's evaluation of internal controls as required by the Sarbanes- Oxley
Act of 2002. The Company was billed $317,000 for the audit of the Company's
annual financial statements for the year ended September 30, 2004 and for the
review of the financial statements included in the Company's Quarterly Reports
on Form 10-Q filed during fiscal 2004.
Financial Information Systems Design Implementation Fees. The Company
was not billed for and did not receive any professional services described in
Paragraph (c)(4)(ii) of Rule 2-01 of the SEC's Regulation S-X (in general,
information technology services) from the Company's independent registered
public accounting firm during the year ended September 30, 2005.
All Other Fees. There were no other services provided by Eisner LLP,
the Company's independent registered public accounting firm.
The Audit Committee has approved the engagement of Eisner LLP as the
Company's independent registered public accounting firm. The Audit Committee
requires the Company's independent registered public accounting firm to advise
the Audit Committee in advance of the independent registered public accounting
firm's intent to provide any professional services to the Company other than
services provided in connection with an audit or a review of the Company's
financial statements. The Audit Committee shall approve, in advance, any
non-audit services to be provided to the Company by the Company's independent
registered public accounting firm.
Other Matters. No other matters were considered by the Audit Committee
of the Board of Directors.
Of the time expended by the Company's independent registered public
accounting firm to audit the Company's financial statements for the fiscal year
ended September 30, 2005, less than 50% of such time involved work performed by
persons other than the principal accountant's full-time, permanent employees.
Nominating Committee. The Board of Directors has established a
Nominating Committee consisting of Edward Celano (Chairman), Louis Piccolo, and
Alan Rivera. The Nominating Committee is empowered by the Board of Directors to,
among other things, recommend to the Board of Directors qualified individuals to
serve on the Company's Board of Directors and to identify the manner in which
the Nominating Committee evaluates nominees recommended for the Board.
Nominating Committee Charter. The Board of Directors has adopted a
Nominating Committee charter to govern its Nominating Committee. The Nominating
Committee charter was filed as Exhibit B to the Company's Proxy Statement for
2004 on Form 14A filed as of August 31, 2004.
Independence of Nominating Committee Members. All members of the
Nominating Committee of the Board of Directors have been determined to be
"independent directors" pursuant to the definition contained in Rule 4200(a)(15)
of the National Association of Securities Dealers' Marketplace rules.
Procedures for Considering Nominations Made by Shareholders. The
Nominating Committee's charter and guidelines developed by the Nominating
Committee describe procedures for nominations to be submitted by shareholders
and other third-parties, other than candidates who have previously served on the
Board of Directors or who are recommended by the Board of Directors. The
guidelines state that a nomination must be delivered to the Secretary of the
Company at the principal executive offices of the Company not later than the
close of business on the 90th day nor earlier than the close of business on the
120th day prior to the first anniversary of the preceding year's annual meeting;
provided, however, that if the date of the annual meeting is more than 30 days
before or more than 60 days after such anniversary date, notice to be timely
must be so delivered not earlier than the close of business on the 120th day
prior to such annual meeting and not later than the close of business on the
later of the 90th day prior to such annual meeting or the close of business on
the 10th day following the day on which public announcement of the date of such
meeting is first made by the Company. The public announcement of an adjournment
or postponement of an annual meeting will not commence a new time period (or
extend any time period) for the giving of a notice as described above. The
guidelines require a nomination notice to set forth as to each person whom the
proponent proposes to nominate for election as a director: (a) all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such person's written consent to being named
in the proxy statement as a nominee and to serving as a director it elected) and
(b) information that will enable the Nominating Committee to determine whether
the candidate or candidates satisfy the criteria established pursuant to the
charter and the guidelines for director candidates.
-16-
Qualifications. The charter and guidelines developed by the Nominating
Committee describe the minimum qualifications for nominees and the qualities or
skills that are necessary for directors to possess. Each nominee:
o must satisfy any legal requirements applicable to members of
the Board of Directors;
o must have business or professional experience that will enable
such nominee to provide useful input to the Board of Directors
in its deliberations;
o must have a reputation, in one or more of the communities
serviced by Asta and its subsidiaries, for honesty and ethical
conduct;
o must have a working knowledge of the types of responsibilities
expected of members of the board of directors of a public
company; and
o must have experience, either as a member of the board of
directors of another public or private company or in another
capacity, which demonstrates the nominee's capacity to serve
in a fiduciary position.
Identification and Evaluation of Candidates for the Board. Candidates
to serve on the Board of Directors will be identified from all available
sources, including recommendations made by shareholders. The guidelines
developed by the Nominating Committee provide that there will be no differences
in the manner in which the Nominating Committee evaluates nominees recommended
by shareholders and nominees recommended by the Committee or management, except
that no specific process shall be mandated with respect to the nomination of any
individuals who have previously served on the Board of Directors. The evaluation
process for individuals other than existing Board members will include:
o a review of the information provided to the Nominating
Committee by the proponent;
o a review of reference letters from at least two sources
determined to be reputable by the Nominating Committee; and
o a personal interview of the candidate,
together with a review of such other information as the Nominating Committee
shall determine to be relevant.
Third Party Recommendations. In connection with the 2006 Annual
Meeting, the Nominating Committee did not receive any nominations from any
shareholder or group of shareholders which owned more than 5% of the Company's
Common Stock for at least one year.
-17-
PERFORMANCE GRAPH
Notwithstanding anything to the contrary set forth in any of
our filings under the Securities Act of 1933, as amended, or the securities
Exchange Act of 1934, as amended, that might incorporate by reference this Proxy
Statement, in whole or in part, the following Performance Graph shall not be
incorporated by reference into any such filings.
The following graph compares the cumulative total shareholder return on
our Common Stock since September 30, 1999, with the cumulative return for the
NASDAQ Stock Market (US) Index and five stocks comprising our peer group index
over the same period, assuming the investment of $100 on September 30, 2000, and
the reinvestment of all dividends. We declared dividends of $0.025 per share in
fiscal 2003 payable November 1, 2003. During the year ended September 30, 2004,
we declared quarterly cash dividends aggregating $0.12 per share, of which
$0.035 per share was paid November 1, 2004. During the year ended September 30,
2005, we declared quarterly cash dividends aggregating $0.14 per share, of which
$0.035 per share was paid November 1, 2005.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG ASTA FUNDING, INC.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ----
ASTA FUNDING, INC. 100.00 172.28 189.39 452.88 569.11 1072.95
PEER GROUP INDEX 100.00 23.78 18.69 51.43 58.46 92.41
NASDAQ MARKET INDEX 100.00 40.97 32.96 50.52 53.56 60.93
ASSUMES $100 INVESTED ON SEPTEMBER 30, 2000
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING SEPTEMBER 30, 2005
-18-
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive additional
compensation for serving as directors. Each director who is not an employee of
the Company received a fee of $20,000 for fiscal 2005. Each Committee Chair
received a fee $5,000 for fiscal 2005. The Company reimburses each director for
the expenses incurred in connection with attendance at such meetings. Effective
September 30, 2005, the Company accelerated the vesting of all the unvested
stock options previously awarded to employees, officers and directors under the
Company's stock option plans, which resulted in the acceleration of option
vesting of 221,105 options for all non-employee directors.
EXECUTIVE COMPENSATION
The following table summarizes certain information relating to the
compensation paid or accrued by the Company for services rendered during the
fiscal years ended September 30, 2005, 2004 and 2003 with respect to the
Company's Chief Executive Officer and each other executive officer whose total
annual salary and bonus are $100,000 or more:
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Awards (1)
----------
Securities
Annual Compensation Other Underlying
----------------------- Annual Options/ All Other
Name and Salary Bonus Compensation SARs(#) Compensation
Principal Position Year ($) ($) ($) (2) ($)(3)
----------------------------------- ------ -------- -------- ------------- ---------- --------
Gary Stern 2005 $498,641 $100,000 -- -- $ 8,207
President and Chief 2004 $450,000 $ 50,000 -- 150,000 $ 6,331
Executive Officer 2003 $375,000 $250,000 -- 70,000 $ 7,958
Arthur Stern 2005 $324,320 $ 75,000 -- -- --
Chairman of the Board and 2004 $300,000 $ 25,000 -- 80,000 --
Executive Vice President 2003 $275,000 $ 50,000 -- 70,000 --
Mitchell Cohen 2005 $197,115 $ 75,000 -- -- $ 1,269
Chief Financial Officer (4) 2004 $ 7,115 $ 12,500 -- 30,000 --
(1) The Company did not grant any stock appreciation rights, restricted stock
awards or make any long-term incentive plan payouts during the fiscal years
ended September 30, 2005, 2004 or 2003.
(2) Comprised of incentive stock options and non-qualified stock options granted
under the Company's 2002 Stock Option Plan. See "2002 Stock Option Plan." The
Company did not grant any stock options to executive officers for the fiscal
year ended September 30, 2005.
(3) Includes insurance premium amounts paid by the Company and matching
contributions to the Company's 401K Plan.
(4) Mitchell Cohen assumed the role of Chief Financial Officer October 1, 2004.
Salary and Bonus for 2004 was for the period September 9, 2004 through September
30, 2004.
-19-
EMPLOYMENT AGREEMENTS
Arthur Stern entered into an Employment Agreement with the Company on
November 11, 2003 which will continue until November 10, 2006. The Employment
Agreement for Arthur Stern provides for a base annual salary and an annual bonus
determined at the discretion of the Compensation Committee Board of Directors.
Arthur Stern's base salary for fiscal year 2005 was approximately $325,000 with
a bonus of $75,000. Arthur Stern's base salary for fiscal year 2006 is $340,000.
The Company is in the process of finalizing new employment agreements with Gary
Stern and Mitchell Cohen. In the interim, a base salary for Gary Stern for
fiscal year 2006, approved by the Compensation Committee, is $550,000. Gary
Stern's base salary for fiscal year 2005 was approximately $500,000 with a bonus
of $100,000. Prior to contract finalization, the Compensation Committee has
approved a base salary for Mitchell Cohen in the amount of $235,000 for fiscal
year 2006. Mr. Cohen's base salary for fiscal year 2005 was approximately
$200,000 with a bonus of $75,000.
If Arthur Stern's employment with the Company is terminated for
"Disability" or "Without Cause" (as such terms are defined in the Employment
Agreement), or upon death, the Company will pay Arthur Stern or his estate, the
base annual salary and other benefits under the Employment Agreement for the
remainder of the three year term. Arthur Stern's Employment Agreement contains
certain non-competition covenants and confidentiality provisions. During the
term of the Employment Agreement and for a period of 12 months after the date of
termination of the Employment Agreement for cause (as defined in the Employment
Agreement), or for such period as the Company will continue to pay Arthur Stern
his base salary and other benefits under the Employment Agreement, Arthur Stern,
will not, in any geographic area in which the Company does business as of the
date of termination of such Employment Agreement, directly or indirectly,
compete with or be engaged in, or directly or indirectly own, manage, operate,
loan money to or otherwise participate in, the same business as the Company or
its subsidiaries.
STOCK OPTION PLANS
1995 STOCK OPTION PLAN
The 1995 Stock Option Plan was adopted in order to attract and retain
qualified directors, officers and employees of and consultants to the Company.
The following description does not purport to be complete and is qualified in
its entirety by reference to the full text of the 1995 Stock Option Plan, which
is included as an exhibit to the Company's reports filed with the SEC.
The 1995 Stock Option Plan authorizes the granting of incentive stock
options (as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code")) and non-qualified stock options to eligible employees of
the Company, including officers and directors of the Company (whether or not
employees) and consultants of the Company.
The Company has 1,840,000 shares of Common Stock authorized for
issuance under the 1995 Stock Option Plan. All but 96,002 shares were utilized.
As of September 14, 2005, no more options could be issued under this plan. No
option will vest more than ten years from the date of grant.
2002 STOCK OPTION PLAN
On March 5, 2002, the Board of Directors adopted the Asta Funding, Inc.
2002 Stock Option Plan (the "2002 Plan"), which plan was approved by the
Company's stockholders on May 1, 2002. The 2002 Plan was adopted in order to
attract and retain qualified directors, officers and employees of and
consultants to the Company. The following description does not purport to be
complete and is qualified in its entirety by reference to the full text of the
2002 Plan, which is included as an exhibit to the Company's reports filed with
the SEC.
The 2002 Plan authorizes the granting of incentive stock options (as
defined in Section 422 of the Code) and non-qualified stock options to eligible
employees of the Company, including officers and directors of the Company
(whether or not employees) and consultants of the Company.
The Company has 1,000,000 shares of Common Stock authorized for
issuance under the 2002 Plan and 397,167 were available as of December 31, 2005.
As of December 31, 2005, approximately 140 of the Company's employees were
eligible to participate in the 2002 Plan. Future grants under the 2002 Plan have
not yet been determined. No option will vest more than ten years from the date
of grant.
The following tables summarize certain information relating to the
grant of options to purchase Common Stock to the executive officers named in the
Summary Compensation Table.
-20-
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The Company did not grant any stock options or stock appreciation
rights to its executive officers in fiscal 2005. Options granted on October 28,
2004 are attributable to Fiscal Year 2004.
AGGREGATED OPTION/SAR EXERCISE IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES (1)
Value of
Number of Securities Unexercised
Underlying Unexercised In-The-Money
SHARES Options/SARs Options/SARs
Acquired at FY-End (#)(1) at FY-End ($)(2)
on Exercise Value ----------------------------- -----------------------------
Name (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
-------------------- ----------- ------------ ----------- ------------- ----------- -------------
Gary Stern -- -- 846,000 -0- $25,684,560 $0
Arthur Stern -- -- 346,000 -0- $10,504,560 $0
Mitchell Cohen -- -- 30,000 -0- $ 910,800 $0
(1) The Company did not grant any stock options or stock appreciation rights for
fiscal year 2005. Effective September 30, 2005, the Company accelerated the
vesting of all unvested stock options previously awarded to employees, officers
and directors under the Company's stock option plans which resulted in
accelerated option vesting of 110,134 options for Arthur Stern, 193,334 options
for Gary Stern, and 20,000 options for Mitchell Cohen.
(2) In accordance with SEC rules, values are calculated by subtracting the
exercise price from the fair market value of the underlying Common Stock. For
purposes of this table, fair market value is deemed to be $30.36, the fair
market value of a share of Common Stock on September 30, 2005 (which equals the
last reported sale price of the Common Stock as reported on the Nasdaq National
Market on such date).
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about the Company's Common Stock
that may be issued upon the exercise of options, warrants and rights under the
Company's 1995 Stock Option Plan and 2002 Stock Option Plan, as of September 30,
2005. These plans were the Company's only equity compensation plans in existence
as of September 30, 2005.
(a) (b) (c)
Number Of Securities
Remaining Available For
Number Of Securities Future Issuance Under
To Be Issued Upon Weighted-Average Equity Compensation
Exercise Of Exercise Price Of Plans (Excluding
Outstanding Options, Outstanding Options, Securities Reflected In
Plan Category Warrants and Rights Warrants and Rights Column (a))
-------------------- -------------------- -----------------------
Equity Compensation Plans 1,580,605 $9.1082 500,669
Approved by Shareholders
Equity Compensation Plans Not -- -- --
Approved by Shareholders
--------- ------- -------
Total 1,580,605 $9.1082 500,669
========= ======= =======
-21-
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Pursuant to the rules adopted by the Securities and Exchange Commission, the
following report regarding compensation policies as they affect the Company's
executive officers is furnished to the stockholders of the Company. The
Compensation Committee of the Board of Directors, consisting entirely of
non-management directors, approves all policies under which compensation is paid
or awarded to the Company's executive officers. During the fiscal year ended
September 30, 2005, the Compensation Committee consisted of David Slackman (the
Chairman), Alan Rivera and Harvey Leibowitz.
Compensation Philosophy
The Company's executive compensation program is designed to attract and retain
superior executive talent, to provide incentives and rewards to executive
officers who will contribute to the long-term success of the Company and to
closely align the interests of executives with those of the Company's
stockholders. The principal elements of the Company's executive compensation
program consist of: (i) a current compensation program, (ii) a set of standard
benefits and (iii) a long-term benefit program.
The Committee evaluates the level and adequacy of executive compensation through
a process that includes an informal analysis of the compensation practices of
similarly situated entities in the Company's peer group, as well as those of
other receivables management and debt collection companies. The Committee does
not rely on quantitative methods or mathematical formulas in setting
compensation for a particular executive officer. Instead, the members of the
Committee determine appropriate compensation levels after examining a number of
factors, including the compensation practices in the competitive marketplace,
the Company's historical performance and future prospects, the job
responsibilities of each executive, the past and expected contributions of
individual executives and other criteria deemed relevant by the Committee.
Current Compensation Program
The current compensation element focuses upon the executive officer's base
salary and is designed to provide competitive reimbursement for services
rendered. The Company has entered into an employment agreement with Arthur Stern
and is in the process of finalizing new employment agreements with Gary Stern
and Mitchell Cohen. See "Employment Agreements." Under the current employment
agreements base salaries for the executive officers of the Company for 2006
range from $235,000 to $550,000. The Committee believes these base salaries are
market for comparable positions at peer companies. The executive officer's
annual base salary may be increased as determined by the Board of Directors in
its sole discretion.
Standard Benefits
The Company's standard benefit package consists primarily of the matching
portion of the Company's 401(k) plan, health insurance benefits and eligibility
for annual bonuses.
401(k) Plan
-----------
The Company maintains a 401(k) Retirement Plan covering all of its eligible
employees. Matching contributions to the plan are made at the discretion of the
Board of Directors each plan year.
Annual Bonuses
--------------
The Compensation Committee of the Board of Directors of the Company in its sole
discretion, awards bonuses to executive officers and other employees.
Long-Term Benefit Program
The Company's long-term benefit element is reflected in the grants and awards
made pursuant to the Company's stock option plans. Stock options are designed to
align the interests of the Company's executives more closely with those of the
stockholders. The Company typically grants stock options at an exercise price
equal to the fair market value of the Common Stock on the date of grant. These
options generally vest in three equal annual installments (on the first, second
and third anniversaries of the date of grant, provided that the optionee
continues to be employed by the Company on such anniversary date) and are
typically exercisable within ten years from the date of grant. The Committee
believes that the granting of stock options provides powerful incentives for the
creation of long-term value for the Company's stockholders as the full benefit
of the stock options cannot be realized unless stock price appreciation occurs
over a number of years. The Company's stock option plans are administered by the
Compensation Committee, which has authority to determine eligibility, the types
and sizes of options, the price and timing of options, and any vesting
(including acceleration of vesting) of options.
-22-
Compensation of the Chief Executive Officer
The Company is in the process of finalizing a new employment agreement with
Gary Stern. See "Employment Agreements." In the interim, the Compensation
Committee has approved a base salary of $550,000 for fiscal year 2006 for Gary
Stern. During fiscal year 2005, Mr. Stern received a base salary of $500,000 and
a bonus of $100,000.
The Committee considered the overall level of Mr. Stern's cash compensation
appropriate in view of Mr. Stern's leadership of the Company through its
evolution into a leading consumer receivables asset management company, the
Company's balance sheet strength and Mr. Stern's contributions to the building
of the Company's infrastructure and the increased capabilities and expertise of
the senior management team put into place by Mr. Stern. The specific bases for
the Committee's determinations regarding Mr. Stern's compensation in 2006
included his aggressive leadership, which resulted in the significant
strengthening of the Company's balance sheet and the Company's competitive
position, his commitment to the development and implementation of the Company's
strategic plan, his contribution to the building of the Company's infrastructure
and his contributions to the achievement of the Company's performance goals.
Through the first four months of fiscal year 2006, Mr. Stern increased the
Company's line of credit from $80 million to $125 million. Mr. Stern's
leadership resulted in record revenues and earnings for the fiscal year ended
September 30, 2005.
This report is submitted on behalf of the Compensation Committee:
David Slackman (Chairman)
Harvey Leibowitz
Alan Rivera
The foregoing report of the Compensation Committee is not to be deemed
"soliciting material" or deemed to be filed with the SEC or subject to
Regulation 14A of the Securities Exchange Act of 1934, except to the extent
specifically requested by the Company or incorporated by reference in documents
otherwise filed.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons holding more than 10% of a
registered class of the equity securities of the Company to file with the SEC
and to provide the Company with initial reports of ownership, reports of changes
in ownership and annual reports of ownership of Common Stock and other equity
securities of the Company. Based solely upon a review of such reports furnished
to the Company, the Company believes that all such Section 16(a) reporting
requirements were timely fulfilled during the fiscal year ended September 30,
2005.
CERTAIN RELATED PARTY TRANSACTIONS
The Company has an employment agreement with its Chairman and Executive
Vice President, Arthur Stern, and is in the process of finalizing employment
agreements with its President and CEO, Gary Stern and Chief Financial Officer
Mitchell Cohen. See "Executive Compensation -- Employment Agreements".
Transactions with officers, directors and affiliates of the Company are
anticipated to be minimal and will be approved by a majority of the Board of
Directors, including a majority of the disinterested members of the Board of
Directors, and will be made on terms no less favorable to the Company than could
be obtained from unaffiliated third parties.
-23-
STOCKHOLDER PROPOSALS
SEC regulations permit shareholders to submit proposals for
consideration at annual meetings of shareholders. Any such proposals for the
Company's Annual Meeting of Shareholders to be held in 2007 must be submitted to
the Company on or before September 29, 2006, and must comply with applicable
regulations of the SEC in order to be included in proxy materials relating to
that meeting. If a shareholder notifies the Company after December 13, 2006, of
an intent to present a proposal at the Company's Annual Meeting of Shareholders
to be held in 2007, the Company will have the right to exercise its
discretionary voting authority with respect to such proposal, if presented at
the meeting, without including information regarding such proposal in its proxy
materials.
The Board of Directors has established a procedure that enables
shareholders to communicate in writing with members of the Board of Directors.
Any such communication should be addressed to Mitchell Cohen, Chief Financial
Officer and Secretary, Asta Funding, Inc., 210 Sylvan Avenue, Englewood Cliffs,
New Jersey 07632. Any such communication must state, in a conspicuous manner,
that it is intended for distribution to the entire Board of Directors. Under the
procedures established by the Board of Directors, upon the Secretary's receipt
of such a communication, the Company's Secretary will send a copy of such
communication to each member of the Board of Directors, identifying it as a
communication received from a shareholder. Absent unusual circumstances, at the
next regularly scheduled meeting of the Board of Directors held more than two
days after such communication has been distributed, the Board of Directors will
consider the substance of any such communication.
Pursuant to a policy adopted by the Board, Board members are required
to attend the Company's annual meeting of shareholders. Each of the members of
the Board of Directors attended the Company's 2005 annual meeting of
shareholders.
OTHER MATTERS
The Board of Directors does not know of any matters, other than those
referred to in the accompanying Notice of the Annual Meeting, to be presented at
the Meeting for action by the stockholders. However, if any other matters are
properly brought before the Meeting or any adjournments thereof, it is intended
that votes will be cast with respect to such matters, pursuant to the proxies,
in accordance with the best judgment of the person acting under the proxies.
The Company will provide without charge to each person being solicited
by this Proxy Statement, on the written request of any such person, a copy of
the Annual Report of the Company on Form 10-K/A, for the fiscal year ended
September 30, 2005 (as filed with the SEC), including the financial statements
thereto. All such requests should be directed to the Secretary of Asta Funding,
Inc., 210 Sylvan Avenue, Englewood Cliffs, New Jersey 07632.
By Order of the Board of Directors
/s/ Mitchell Cohen
---------------------------------------
Mitchell Cohen, Chief Financial Officer
and Secretary
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K/A, FOR THE FISCAL
YEAR ENDED SEPTEMBER 30, 2005 (EXCLUDING EXHIBITS) ACCOMPANIES THIS PROXY
STATEMENT. THIS REPORT IS NOT TO BE REGARDED AS PROXY SOLICITING MATERIAL OR AS
A COMMUNICATION BY MEANS OF WHICH ANY SOLICITATION IS TO BE MADE.
-24-
EXHIBIT A
ASTA FUNDING, INC.
EQUITY COMPENSATION PLAN
1. PURPOSES OF THE PLAN. This Asta Funding, Inc. Equity Compensation
Plan (the "Plan") is intended to attract and retain the best available personnel
for positions of substantial responsibility, to provide additional incentives to
Employees, Directors and Consultants, and to promote the success of the Company
and any Parent or Subsidiary. Options granted under the Plan may be Incentive
Stock Options or Nonstatutory Stock Options, as determined by the Committee at
the time of grant. Stock Purchase Rights, Stock Awards, Unrestricted Share
Awards and Stock Appreciation Rights may also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
"Applicable Laws" means the requirements relating to the
administration of equity compensation plans under the applicable corporate and
securities laws of any of the states in the United States, U.S. federal
securities laws, the Code, any stock exchange or quotation system on which the
Common Stock is listed or quoted and the applicable laws of any foreign country
or jurisdiction where Awards are, or will be, granted under the Plan.
"Award" means an Option, a Stock Purchase Right, a Stock
Appreciation Right, a Stock Award and/or the grant of Unrestricted Shares.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 of the Plan.
"Common Stock" means the common stock, par value $0.01 per
share, of the Company.
"Company" means Asta Funding, Inc., a Delaware corporation.
"Consultant" means any person, including an advisor, engaged
by the Company or a Parent or Subsidiary to render services to such entity,
other than an Employee or a Director.
"Director" means a member of the Board.
"Employee" means any person, including officers and Directors
(other than Non-Employee Directors), serving as an employee of the Company or
any Parent or Subsidiary. An individual shall not cease to be an Employee in the
case of (i) any leave of absence approved by the Company or (ii) transfers
between locations of the Company or between the Company, its Parent, any
Subsidiary or any successor. For purposes of an Option initially granted as an
Incentive Stock Option, if a leave of absence of more than three months
precludes such Option from being treated as an Incentive Stock Option under the
Code, such Option thereafter shall be treated as a Nonstatutory Stock Option for
purposes of this Plan. Neither service as a Director nor payment of a director's
fee by the Company shall be sufficient to constitute "employment" by the
Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) if the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
NASDAQ National Market or The NASDAQ Small Cap Market of The NASDAQ Stock
Market, the Fair Market Value of a Share of Common Stock shall be the closing
sales price of a Share of Common Stock (or the closing bid, if no such sales
were reported) as quoted on such exchange or system for the last market trading
day prior to the time of determination, as reported in The Wall Street Journal
or such other source as the Committee deems reliable;
-25-
(ii) if the Common Stock is regularly quoted by a
recognized securities dealer but is not listed in the manner contemplated by
clause (i) above, the Fair Market Value of a Share of Common Stock shall be the
mean between the high bid and low asked prices for the Common Stock on the last
market trading day prior to the day of determination, as reported in The Wall
Street Journal or such other source as the Committee deems reliable; or
(iii) if neither clause (i) above nor clause (ii)
above applies, the Fair Market Value shall be determined in good faith by the
Committee.
"Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
"Non-Employee Director" means a Director who is not an
Employee.
"Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
"Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option grant, Stock
Purchase Right grant, Stock Award grant or grant of Unrestricted Shares or Stock
Appreciation Rights. The Notice of Grant applicable to Stock Options shall be
part of the Option Agreement.
"Option" means a stock option granted pursuant to the Plan.
"Option Agreement" means an agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
"Optioned Stock" means the Common Stock subject to an Option
or Stock Purchase Right.
"Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
"Parent" means a "parent corporation" of the Company (or, in
the context of Section 15(c) of the Plan, of a successor corporation), whether
now or hereafter existing, as defined in Section 424(e) of the Code.
"Participant" shall mean any Service Provider who holds an
Option, a Stock Purchase Right, Restricted Stock, a Stock Award, Unrestricted
Shares or Stock Appreciation Rights granted or issued pursuant to the Plan.
"Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
"Restricted Stock Purchase Agreement" means a written
agreement between the Company and an Optionee evidencing the terms and
restrictions applicable to stock purchased under a Stock Purchase Right. Each
Restricted Stock Purchase Agreement shall be subject to the terms and conditions
of the Plan and the applicable Notice of Grant.
"Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to such Rule 16b-3, as such rule is in effect when discretion is being
exercised with respect to the Plan.
"Section 16(b)" means Section 16(b) of the Exchange Act.
"Service Provider" means an Employee, Director or Consultant.
"Share" means a share of the Common Stock, as adjusted in
accordance with Section 15 of the Plan.
"Stock Appreciation Right" means a right awarded pursuant to
Section 14 of the Plan.
"Stock Award" means an Award of Shares pursuant to Section 12
of the Plan.
-26-
"Stock Award Agreement" means an agreement, approved by the
Committee, providing the terms and conditions of a Stock Award.
"Stock Award Shares" means Shares subject to a Stock Award.
"Stock Awardee" means the holder of an outstanding Stock Award
granted under the Plan.
"Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
"Subsidiary" means a "subsidiary corporation" of the Company
(or, in the context of Section 15(c) of the Plan, of a successor corporation),
whether now or hereafter existing, as defined in Section 424(f) of the Code.
"Unrestricted Shares" means a grant of Shares made on an
unrestricted basis pursuant to Section 13 of the Plan.
3. STOCK SUBJECT TO THE PLAN. The maximum aggregate number of Shares
that may be issued under the Plan is 1,000,000 Shares. The total number of
Shares with respect to which Incentive Stock Options may be granted shall be
1,000,000 Shares. The maximum number of Shares subject to Options and Stock
Appreciation Rights which may be issued to any Participant under this Plan
during any calendar year is 100,000 Shares. The class and aggregate number of
Shares referred to in this paragraph shall be subject to adjustment in
accordance with Section 16(a) of the Plan.
The Shares may be authorized but unissued, or reacquired, shares of
Common Stock. If an Option, Stock Purchase Right or Stock Appreciation Right
expires or becomes unexercisable without having been exercised in full or is
canceled or terminated, or if any Shares of Restricted Stock or Shares
underlying a Stock Award are forfeited or reacquired by the Company, the Shares
that were subject thereto shall be added back to the Shares available for
issuance under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) Appointment of Committee. The Plan shall be administered
by a Committee to be appointed by the Board, which Committee shall consist of
not less than two members of the Board and shall be comprised solely of members
of the Board who qualify as both non-employee directors as defined in Rule
16b-3(b)(3) of the Exchange Act and outside directors within the meaning of
Department of Treasury Regulations issued under Section 162(m) of the Code. The
Board shall have the power to add or remove members of the Committee, from time
to time, and to fill vacancies thereon arising; by resignation, death, removal,
or otherwise. Meetings shall be held at such times and places as shall be
determined by the Committee. A majority of the members of the Committee shall
constitute a quorum for the transaction of business, and the vote of a majority
of those members present at any meeting shall decide any question brought before
that meeting.
(b) Powers of the Committee. Subject to the provisions of the
Plan, the Committee shall have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options,
Stock Purchase Rights, Stock Awards, Unrestricted Shares and Stock Appreciation
Rights may be granted hereunder;
(iii) to determine the number of shares of Common
Stock to be covered by each Award granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Award granted hereunder and of
any Restricted Stock Purchase Agreement. Such terms and conditions include, but
are not limited to, the exercise price, the time or times when Options, Stock
Purchase Rights and Stock Appreciation Rights may be exercised (which may be
based on performance criteria), any vesting, acceleration or waiver of
forfeiture provisions, and any restriction or limitation regarding any Option,
Stock Purchase Right, Stock Appreciation Right or Stock Award, or the Shares of
Common Stock relating thereto, based in each case on such factors as the
Committee, in its sole discretion, shall determine;
-27-
(vi) to construe and interpret the terms of the Plan,
Awards granted pursuant to the Plan and agreements entered into pursuant to the
Plan;
(vii) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(viii)to modify or amend each Award (subject to
Section 19 of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options, Stock Appreciation Rights
and/or Stock Purchase Rights longer than is otherwise provided for in the Plan
and to accelerate the time at which any outstanding Option, Stock Purchase Right
or Stock Appreciation Right may be exercised;
(ix) to allow grantees to satisfy withholding tax
obligations by having the Company withhold from the Shares to be issued upon
exercise of an Option, Stock Appreciation Rights or Stock Purchase Rights that
number of Shares having a Fair Market Value equal to the amount required to be
withheld, provided that withholding is calculated at the minimum statutory
withholding level. The Fair Market Value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be
determined. All determinations to have Shares withheld for this purpose shall be
made by the Committee in its discretion;
(x) to authorize any person to execute on behalf of
the Company any agreement entered into pursuant to the Plan and any instrument
required to effect the grant of an Award previously granted by the Committee;
and
(xi) to make all other determinations deemed
necessary or advisable for administering the Plan.
(c) Effect of Committee's Decision. The Committee's decisions,
determinations and interpretations shall be final and binding on all holders of
Awards and Restricted Stock. Neither the Board nor the Committee, nor any member
or delegate thereof, shall be liable for any act, omission, interpretation,
construction or determination made in good faith in connection with the Plan,
and each of the foregoing shall be entitled in all cases to indemnification and
reimbursement by the Company in respect of any claim, loss, damage or expense
(including without limitation reasonable attorneys' fees) arising or resulting
therefrom to the fullest extent permitted by law and/or under any directors' and
officers' liability insurance coverage which may be in effect from time to time.
5. ELIGIBILITY. Nonstatutory Stock Options, Stock Purchase Rights,
Stock Appreciation Rights, Stock Awards and Unrestricted Shares may be granted
to all Service Providers. Incentive Stock Options may be granted only to
Employees. Notwithstanding anything contained herein to the contrary, an Award
may be granted to a person who is not then a Service Provider; provided,
however, that the grant of such Award shall be conditioned upon such person
becoming a Service Provider at or prior to the time of the execution of the
agreement evidencing such Award.
6. LIMITATIONS.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, if a single Employee becomes eligible in any
given year to exercise Incentive Stock Options for Shares having a Fair Market
Value in excess of $100,000; those Options representing the excess shall be
treated as Nonstatutory Stock Options. In the previous sentence, "Incentive
Stock Options" include Incentive Stock Options granted under the Prior Plans and
any other plan of the Company or any Parent or any Subsidiary. For the purpose
of deciding which Options apply to Shares that "exceed" the $100,000 limit,
Incentive Stock Options shall be taken into account in the same order as
granted. The Fair Market Value of the Shares shall be determined as of the time
the Option with respect to such Shares is granted.
(b) None of the Plan, any Award or any agreement entered into
pursuant to the Plan shall confer upon a Participant any right with respect to
continuing the grantee's relationship as a Service Provider with the Company,
nor shall they interfere in any way with the Participant's right or the
Company's right to terminate such relationship at any time, with or without
cause.
-28-
7. TERM OF THE PLAN. Subject to Section 23 of the Plan, the Plan shall
become effective upon its adoption by the Board. Unless terminated earlier under
Section 19 of the Plan, no Awards may be granted under the Plan after November
30, 2015.
8. TERM OF OPTIONS. The term of each Option shall be stated in the
applicable Option Agreement. In the case of an Incentive Stock Option, the term
shall be ten (10) years from the date of grant or such shorter term as may be
provided in the applicable Option Agreement. However, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Incentive
Stock Option is granted, owns, directly or indirectly, stock representing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Incentive
Stock Option shall be five (5) years from the date of grant or such shorter term
as may be provided in the applicable Option Agreement. A Nonstatutory Stock
Option shall not be exercisable after the expiration of ten (10) years from the
date it is granted.
9. OPTION EXERCISE PRICE; EXERCISABILITY.
(a) Exercise Price. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Committee, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time
the Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant, or
(B) granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) The per Share exercise price of a Nonstatutory
Stock Option shall be determined by the Committee.
(b) Exercise Period and Conditions. At the time that an Option
is granted, the Committee shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.
10. EXERCISE OF OPTIONS; CONSIDERATION.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Committee and
set forth in the Option Agreement. An Option shall be deemed exercised when the
Company receives: (i) written or electronic notice of exercise (in accordance
with the Option Agreement) from the person entitled to exercise the Option, and
(ii) full payment for the Shares with respect to which the Option is exercised.
Full payment may consist of any consideration and method of payment authorized
by the Committee and permitted by the Option Agreement and Section 10(c) of the
Plan. Shares issued upon exercise of an Option shall be issued in the name of
the Optionee. Until the Shares are issued (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
Shares promptly after the Option is exercised. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Section 16 of the Plan. Exercising an
Option in any manner shall decrease the number of Shares thereafter available,
both for purposes of the Plan and for sale under the Option, by the number of
Shares as to which the Option is exercised.
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(b) Termination of Relationship as a Service Provider. Except
as may be otherwise expressly provided herein or in the Option agreement,
Options of Participants shall terminate on the earlier of the date of the
expiration of the Option or three months after the date of the severance of the
employment or affiliation relationship between the Company and the Optionee for
any reason, for or without cause, other than death. Whether authorized leave of
absence, or absence on military or government service, shall constitute
severance of the employment or affiliation relationship between the Company and
the Optionee shall be determined by the Committee at the time thereof. Unless
the Optionee's Option agreement specifically addresses the matter and expressly
provides otherwise, after the severance of the employment or affiliation
relationship between the Company and the Optionee, the Optionee shall have the
right, at any time prior to the termination of the Option, to exercise the
Option solely to the extent the Optionee was entitled to exercise it immediately
prior to the date of such severance. In the event of the death of the holder of
an Option while in the employ or affiliation of the Company and before the date
of expiration of such Option, such Option shall terminate on the earlier of such
date of expiration or six months following the date of such death. After the
death of the Optionee, his executors, administrators or any person or persons to
whom his Option may be transferred by will or by the laws of descent and
distribution, shall have the right, at any time prior to such termination, to
exercise the Option, in whole (subject to the provisions of Paragraph 8 hereof,
but without regard to any limitation set forth in or imposed pursuant to
Paragraph 9 hereof) or in part. An employment or affiliation relationship
between the Company and the Optionee shall be deemed to exist during any period
in which the Optionee is employed by or affiliated with the Company, by any
Parent or Subsidiary, by a corporation issuing or assuming a common stock option
in a transaction to which Section 424(a) of the Code, applies, or by a Parent or
Subsidiary corporation of such corporation issuing or assuming a stock option
(and for this purpose, the phrase "corporation issuing or assuming a stock
option" shall be substituted for the word "Company" in the definitions of Parent
and Subsidiary specified in Section 2 of this Plan, and the parent-subsidiary
relationship shall be determined at the time of the corporate action described
in Section 424(a) of the Code).
(b) Form of Consideration. The Committee shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Committee shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) other Shares which (A) have been owned by the
Optionee for more than six months on the date of surrender, and (B) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised;
(iv) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;
(v) any combination of the foregoing methods of
payment; or
(vi) such other consideration and method of payment
for the issuance of Shares to the extent permitted by Applicable Laws.
11. STOCK PURCHASE RIGHTS.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other Awards granted under the
Plan and/or cash awards made outside of the Plan. After the Committee determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant and/or a
Restricted Stock Purchase Agreement in the form determined by the Committee, of
the terms, conditions and restrictions related to the offer, including the
number of Shares that the offeree shall be entitled to purchase and the price to
be paid for such Shares. The offer shall be accepted by execution of a
Restricted Stock Purchase Agreement in the form determined by the Committee.
(b) Repurchase Option. Unless the Committee determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Committee.
(c) Other Provisions. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Committee in its sole discretion.
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(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 16
of the Plan.
12. STOCK AWARDS. The Committee may, in its sole discretion, grant (or
sell at par value or such higher purchase price as it determines) Shares to a
Service Provider subject to such terms and conditions as the Committee sets
forth in a Stock Award Agreement evidencing such grant. The grant of Stock
Awards shall be subject to the following provisions:
(a) At the time a Stock Award is made, the Committee shall
establish a vesting period (the "Restricted Period") applicable to the Stock
Award Shares subject to such Stock Award. The Committee may, in its sole
discretion, at the time a grant is made, prescribe restrictions in addition to
the expiration of the Restricted Period, including the satisfaction of corporate
or individual performance objectives. None of the Stock Award Shares may be
sold, transferred, assigned, pledged or otherwise encumbered or disposed of
during the Restricted Period applicable to such Stock Award Shares or prior to
the satisfaction of any other restrictions prescribed by the Committee with
respect to such Stock Award Shares.
(b) The Company shall issue, in the name of each Service
Provider to whom Stock Award Shares have been granted, stock certificates
representing the total number of Stock Award Shares granted to such person, as
soon as reasonably practicable after the grant. The Company, at the direction of
the Committee, shall hold such certificates, properly endorsed for transfer, for
the Stock Awardee's benefit until such time as the Stock Award Shares are
forfeited to the Company, or the restrictions lapse.
(c) Unless otherwise provided by the Committee, holders of
Stock Award Shares shall have the right to vote such Shares and have the right
to receive any cash dividends with respect to such Shares. All distributions, if
any, received by a Stock Awardee with respect to Stock Award Shares as a result
of any stock split, stock distribution, combination of shares, or other similar
transaction shall be subject to the restrictions of this Section 12.
(d) Unless otherwise provided by the Stock Award Agreement,
any Stock Award Shares granted to a Service Provider pursuant to the Plan shall
be forfeited if the Stock Awardee terminates employment or his consultancy
arrangement with the Company or its subsidiaries for any reason prior to the
expiration or termination of the applicable Restricted Period and the
satisfaction of any other conditions applicable to such Stock Award Shares. Upon
such forfeiture, the Stock Award Shares that are forfeited shall be retained in
the treasury of the Company and be available for subsequent awards under the
Plan.
(e) Upon the expiration or termination of the Restricted
Period and the satisfaction of any other conditions prescribed by the Committee,
the restrictions applicable to the Stock Award Shares shall lapse and, at the
Stock Awardee's request, a stock certificate for the number of Stock Award
Shares with respect to which the restrictions have lapsed shall be delivered,
free of all such restrictions, to the Stock Awardee or his beneficiary or
estate, as the case may be.
13. UNRESTRICTED SHARES. The Committee may grant Unrestricted Shares in
accordance with the following provisions:
(a) The Committee may cause the Company to grant Unrestricted
Shares to Service Providers at such time or times, in such amounts and for such
reasons as the Committee, in its sole discretion, shall determine. No payment
shall be required for Unrestricted Shares.
(b) The Company shall issue, in the name of each Service
Provider to whom Unrestricted Shares have been granted, stock certificates
representing the total number of Unrestricted Shares granted to such individual,
and shall deliver such certificates to such Service Provider as soon as
reasonably practicable after the date of grant or on such later date as the
Committee shall determine at the time of grant.
14. STOCK APPRECIATION RIGHTS. A Stock Appreciation Right may be
granted by the Committee either alone, in addition to, or in tandem with other
Awards granted under the Plan. Each Stock Appreciation Right granted under the
Plan shall be subject to the following terms and conditions:
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(a) Each Stock Appreciation Right shall relate to such number
of Shares as shall be determined by the Committee.
(b) The Award Date (i.e., the date of grant) of a Stock
Appreciation Right shall be the date specified by the Committee, provided that
that date shall not be before the date on which the Stock Appreciation Right is
actually granted. The Award Date of a Stock Appreciation Right shall not be
prior to the date on which the recipient commences providing services as a
Service Provider. The term of each Stock Appreciation Right shall be determined
by the Committee, but shall not exceed ten years from the date of grant. Each
Stock Appreciation Right shall become exercisable at such time or times and in
such amount or amounts during its term as shall be determined by the Committee.
Unless otherwise specified by the Committee, once a Stock Appreciation Right
becomes exercisable, whether in full or in part, it shall remain so exercisable
until its expiration, forfeiture, termination or cancellation.
(c) A Stock Appreciation Right may be exercised, in whole or
in part, by giving written notice to the Committee. As soon as practicable after
receipt of the written notice, the Company shall deliver to the person
exercising the Stock Appreciation Right stock certificates for the Shares to
which that person is entitled under Section 14(d) hereof.
(d) A Stock Appreciation Right shall be exercisable for Shares
only. The number of Shares issuable upon the exercise of the Stock Appreciation
Right shall be determined by dividing:
(A) the number of Shares for which the Stock
Appreciation Right is exercised multiplied by the amount of the appreciation per
Share (for this purpose, the "appreciation per Share" shall be the amount by
which the Fair Market Value of a Share on the exercise date exceeds (x) in the
case of a Stock Appreciation Right granted in tandem with an Option, the
exercise price or (y) in the case of a Stock Appreciation Right granted alone
without reference to an Option, the Fair Market Value of a Share on the Award
Date of the Stock Appreciation Right); by
(B) the Fair Market Value of a Share on the exercise
date.
15. NON-TRANSFERABILITY. Unless determined otherwise by the Committee,
an Option, Stock Purchase Right or Stock Appreciation Right may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Participant, only by the Participant. If the
Committee makes an Option, Stock Purchase Right or Stock Appreciation Right
transferable, such Option, Stock Purchase Right or Stock Appreciation Right
shall contain such additional terms and conditions as the Committee deems
appropriate. Notwithstanding the foregoing, the Committee, in its sole
discretion, may provide in the Option Agreement regarding a given Option that
the Optionee may transfer, without consideration for the transfer, his or her
Nonstatutory Stock Options to members of his or her immediate family, to trusts
for the benefit of such family members, or to partnerships in which such family
members are the only partners, provided that the transferee agrees in writing
with the Company to be bound by all of the terms and conditions of this Plan and
the applicable Option. During the period when Shares of Restricted Stock and
Stock Award Shares are restricted (by virtue of vesting schedules or otherwise),
such Shares may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or
distribution.
16. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.
(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number of Shares of Common Stock covered
by each outstanding Option, Stock Purchase Right, Stock Appreciation Right and
Stock Award, the number of Shares of Restricted Stock outstanding and the number
of Shares of Common Stock which have been authorized for issuance under the Plan
but as to which no Options, Stock Purchase Rights, Stock Appreciation Rights or
Stock Awards have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, Stock Purchase Right, Stock
Appreciation Right, Restricted Stock Purchase Agreement or Stock Award, as well
as the price per share of Common Stock covered by each such outstanding Option,
Stock Purchase Right or Stock Appreciation Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares of Common Stock subject to an Award
hereunder.
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(b) Corporate Transactions. If the Company merges or
consolidates with another corporation, whether or not the Company is a surviving
corporation, or if the Company is liquidated or sells or otherwise disposes of
substantially all its assets, or if any "person" (as that term is used in
Section 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing greater
than 50% of the combined voting power of the Company's then outstanding
securities (each such event a "Corporate Transaction Event") then (i) subject to
the provisions of clause (iii) below, after the effective date of such merger,
consolidation, liquidation, sale or other disposition, or change in beneficial
ownership, as the case may be, each holder of an outstanding Option, Stock
Purchase Right or Stock Appreciation Right shall be entitled, upon exercise of
such Option, Stock Purchase Right or Stock Appreciation Right to receive, in
lieu of Shares of Common Stock, the number and class or classes of shares of
such stock or other securities or property to which such holder would have been
entitled if, immediately prior to such merger, consolidation, liquidation, sale
or other disposition, or change in beneficial ownership, such holder had been
the holder of record of a number of Shares of Common Stock equal to the number
of shares as to which such Option, Stock Purchase Right and Stock Appreciation
Right may be exercised; (ii) the Board may waive any limitations set forth in or
imposed pursuant hereto so that all Options, Stock Purchase Rights and Stock
Appreciation Rights from and after a date prior to the effective date of such
Corporate Transaction Event, as specified by the Board, shall be exercisable in
full; and (iii) all outstanding Options, Stock Purchase Rights and Stock
Appreciation Rights may be canceled by the Board as of the effective date of any
such Corporate Transaction Event.
In the event of a Corporate Transaction Event, then, absent a
provision to the contrary in any particular Restricted Stock Purchase Agreement
or Stock Award (in which case the terms of such Restricted Stock Purchase
Agreement or Stock Award shall supersede each of the provisions of this
paragraph which are inconsistent with such Restricted Stock Purchase Agreement
or Stock Award), each outstanding Restricted Stock Purchase Agreement and Stock
Award shall be assumed or an equivalent agreement or award substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation. In
the event that the Committee determines that the successor corporation or a
Parent or a Subsidiary of the successor corporation has refused to assume or
substitute an equivalent agreement or award for each outstanding Restricted
Stock Purchase Agreement and Stock Award, all vesting periods and conditions
under Restricted Stock Purchase Agreements and Stock Awards shall be deemed to
have been satisfied, so long as at least ten days prior written notice of
cancellation is provided to all Participants and they are provided with an
opportunity to exercise any Awards simultaneously with or prior to the Corporate
Transaction Event.
Except as hereinbefore expressly provided, the issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, for cash or property, or for labor or services either
upon direct sale or upon the exercise of rights or warrants to subscribe
therefore, or upon conversion of shares or obligations of the Company
convertible into sub shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Shares of Common Stock then subject to outstanding Options, Stock Purchase
Rights and Stock Appreciation Rights.
17. SUBSTITUTE OPTIONS. In the event that the Company, directly or
indirectly, acquires another entity, the Board may authorize the issuance of
stock options ("Substitute Options") to the individuals performing services for
the acquired entity in substitution of stock options previously granted to those
individuals in connection with their performance of services for such entity
upon such terms and conditions as the Board shall determine, taking into account
the conditions of Code Section 424(a), as from time to time amended or
superseded, in the case of a Substitute Option that is intended to be an
Incentive Stock Option. Shares of capital stock underlying Substitute Stock
Options shall not constitute Shares issued pursuant to the Plan for any purpose.
18. DATE OF GRANT. The date of grant of an Option, Stock Purchase
Right, Stock Appreciation Right, Stock Award or Unrestricted Share shall be, for
all purposes, the date on which the Committee makes the determination granting
such Option, Stock Purchase Right, Stock Appreciation Right, Stock Award or
Unrestricted Share, or such other later date as is determined by the Committee.
Notice of the determination shall be provided to each grantee within a
reasonable time after the date of such grant.
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19. AMENDMENT AND TERMINATION OF THE PLAN. The Board may modify, revise
or terminate this Plan at any time and from time to time, subject to the
approval of the Company's stockholders to the extent required by Applicable
Laws; provided, however, that no such modification, revision, or termination of
the Plan may impair the rights of any Participant without the Participant's
written consent. All Awards granted under this Plan shall be subject to the
terms and provisions of this Plan and any amendment, modification or revision of
this Plan shall be deemed to amend, modify or revise all Awards outstanding
under this Plan at the time of such amendment, modification or revision.
20. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Legal Compliance. Shares shall not be issued in connection
with the grant of any Stock Award or Unrestricted Share or the exercise of any
Option, Stock Purchase Right or Stock Appreciation Right unless such grant or
the exercise of such Option, Stock Purchase Right or Stock Appreciation Right
and the issuance and delivery of such Shares shall comply with Applicable Laws
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
(b) Investment Representations. As a condition to the grant of
any Stock Award or Unrestricted Share or the exercise of any Option, Stock
Purchase Right or Stock Appreciation Right, the Company may require the person
receiving such Award or exercising such Option, Stock Purchase Right or Stock
Appreciation Right to represent and warrant at the time of any such exercise or
grant that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required.
(c) Additional Conditions. The Committee shall have the
authority to condition the grant of any Award or rights under any Restricted
Stock Purchase Agreement in such other manner that the Committee determines to
be appropriate, provided that such condition is not inconsistent with the terms
of the Plan. Such conditions may include, among other things, obligations of
recipients to execute non-compete, non-solicitation and non-disclosure
covenants.
(d) Trading Policy Restrictions. Option, Stock Purchase Right
and Stock Appreciation Right exercises and other Awards under the Plan shall be
subject to the terms and conditions of any insider trading policy established by
the Company or the Committee.
21. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
22. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
23. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws. Notwithstanding any provision in the Plan
to the contrary, any exercise of an Option, Stock Purchase Right or Stock
Appreciation Right granted before the Company has obtained shareholder approval
of the Plan in accordance with this Section 23 shall be conditioned upon
obtaining such shareholder approval of the Plan in accordance with this Section
23.
24. WITHHOLDING; NOTICE OF SALE. The Company shall be entitled to
withhold from any amounts payable to an Employee any amounts which the Company
determines, in its discretion, are required to be withheld under any Applicable
Law as a result of any action taken by a holder of an Award.
25. ARBITRATION OF DISPUTES. Any controversy arising out of or relating
to this Plan or an Option or other Award Agreement shall be resolved by
arbitration conducted pursuant to the arbitration rules of the American
Arbitration Association. The arbitration shall be final and binding on the
parties.
26. GOVERNING LAW. This Plan shall be governed by the laws of the State
of Delaware, without regard to conflict of law principles.
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ANNUAL MEETING OF STOCKHOLDERS OF
ASTA FUNDING, INC.
March 1, 2006
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.
THE BOAED OF DIRECTORS RECOMMENDS A VOTE "FOR" LISTED NOMINEES. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2. PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS
SHOWN HERE |X|
1. Election of Directors:
NOMINEES:
---------
|_| FOR ALL NOMINEES O Gary Stern
O Arthur Stern
|_| WITHHOLD AUTHORITY O Herman Badillo
FOR ALL NOMINEES O David Slackman
O Edward Celano
|_| FOR ALL EXCEPT
(See instructions below) O Harvey Leibowitz
O Alan Rivera
O Louis A. Piccolo
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: O
2. Approve adoption of the Asta Funding, Inc. Equity For Against Abstain
Compensation Plan |_| |_| |_|
--------------------------------------------------------------------------------
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. ------
In their discretion, the above named proxies are authorized to vote upon such
other business as may properly come before the meeting or any adjournment
thereof and upon matters incident to the conduct of the meeting.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NOT OTHERWISE SPECIFIED, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE DIRECTOR NOMINEES NAMED IN NAMED AT LEFT,
OR IF ANY ONE OR MORE OF THE NOMINEES BECOMES UNAVAILABLE, FOR ANOTHER NOMINEE
OR OTHER NOMINEES TO BE SELECTED BY THE BOARD OF DIRECTORS.
Please sign this proxy and return it promptly whether or not you expect to
attend this Meeting. You may nevertheless vote in person if you attend.
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.
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