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 [ ]
Check the appropriate box:
[ ] 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 [S] 240.14a-12
JACK HENRY & ASSOCIATES, INC.
-----------------------------------------------
(Name of Registrant as Specified in its Charter)
------------------------------------------------------------------------
(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)(1) and 0-11.
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computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
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the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
1) Amount Previously Paid: ________________________________________
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4) Date Filed: _____________________________________________________
JACK HENRY & ASSOCIATES, INC.
663 Highway 60, P.O. Box 807
Monett, Missouri 65708
NOTICE OF 2002 ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF JACK HENRY & ASSOCIATES, INC.:
PLEASE TAKE NOTICE that the 2002 Annual Meeting of Stockholders of Jack
Henry & Associates, Inc., a Delaware corporation, will be held at the Monett
City Park Casino, Monett, Missouri, on Tuesday, October 29, 2002, 11:00
a.m., local time, for the following purposes:
(1) To elect six (6) directors to serve until the 2003 Annual Meeting of
Stockholders;
(2) To amend the 1996 Stock Option Plan to increase the number of shares
available for issuance under the plan by an aggregate of 5,000,000
shares to 18,000,000; and
(3) To transact such other business as may properly come before the Annual
Meeting and any adjournments thereof.
The close of business on September 23, 2002, has been fixed as the record
date for the Annual Meeting. Only stockholders of record as of that date
will be entitled to notice of and to vote at said meeting and any
adjournment or postponement thereof.
The accompanying form of Proxy is solicited by the Board of Directors of the
Company. Reference is made in the attached Proxy Statement for further
information with respect to the business to be transacted at the Annual
Meeting.
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT
YOU EXPECT TO ATTEND, PLEASE DATE AND SIGN THE ENCLOSED PROXY. IF YOU DECIDE
TO ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN
PERSON.
By Order of the Board of Directors
Janet E. Gray
Secretary
Monett, Missouri
September 24, 2002
JACK HENRY & ASSOCIATES, INC.
663 Highway 60, P.O. Box 807
Monett, Missouri 65708
PROXY STATEMENT
FOR THE 2002 ANNUAL MEETING OF STOCKHOLDERS
To Be Held Tuesday, October 29, 2002
This Proxy Statement and the enclosed proxy card (the Proxy) are furnished
to the stockholders of Jack Henry & Associates, Inc., a Delaware corporation
(the Company), in connection with the solicitation of Proxies by the
Company's Board of Directors for use at the 2002 Annual Meeting of
Stockholders, and any adjournment or postponement thereof (the Annual
Meeting), to be held at the Monett City Park Casino, Monett, Missouri, at
11:00 a.m., local time, on Tuesday, October 29, 2002. The mailing of this
Proxy Statement, the Proxy, the Notice of Annual Meeting and the
accompanying 2002 Annual Report to Stockholders is expected to commence on
or about October 1, 2002.
The Board of Directors does not intend to bring any matters before the
Annual Meeting except those indicated in the Notice and does not know of any
matter which anyone else proposes to present for action at the Annual
Meeting. If any other matters properly come before the Annual Meeting,
however, the persons named in the accompanying form of Proxy, or their duly
constituted substitutes, acting at the Annual Meeting, will be deemed
authorized to vote or otherwise to act thereon in accordance with their
judgment on such matters.
If the enclosed Proxy is properly executed and returned prior to voting at
the Annual Meeting, the shares represented thereby will be voted in
accordance with the instructions marked thereon. Each proposal, including
the election of directors, will require the affirmative vote of a majority
of the shares of common stock voting in person or by Proxy at the Annual
Meeting.
Any stockholder executing a Proxy retains the power to revoke it at any time
prior to the voting of the Proxy. It may be revoked by a stockholder
personally appearing at the Annual Meeting and casting a contrary vote, by
filing an instrument of revocation with the Secretary of the Company, or by
the presentation at the Annual Meeting of a duly executed later dated Proxy.
VOTING
At the 2002 Annual Meeting, Stockholders will consider and vote upon:
(1) The election of six (6) directors;
(2) Amendment of the 1996 Stock Option Plan; and
(3) Such other matters as may properly come before the Annual Meeting.
Only stockholders of record at the close of business on September 23, 2002,
the record date for the Annual Meeting, are entitled to notice of and to
vote at such meeting. Stockholders are entitled to one vote for each share
of Common Stock on each matter to be considered at the Annual Meeting.
The Company's authorized capital stock currently consists of 250,000,000
shares of common stock, par value $.01 per share (the Common Stock), and
500,000 shares of preferred stock, par value $1.00 per share (the Preferred
Stock). As of August 19, 2002, there were 87,910,881 shares of Common Stock
outstanding and no shares of Preferred Stock outstanding. At such date, our
executive officers and directors were entitled to vote, or to direct the
voting, of 19,549,746 shares of Common Stock, representing 22% of the shares
entitled to vote at the 2002 Annual Meeting. Unless otherwise specified,
all share numbers and other share data have been adjusted to reflect all
prior stock splits.
All shares represented by Proxy and all Proxies solicited hereunder will be
voted in accordance with the specifications made by the stockholders
executing such Proxies. If a stockholder does not specify how a Proxy is to
be voted, the shares represented thereby will be voted: (1) FOR the election
as directors of the six (6) persons nominated by the Board of Directors; and
(2) FOR amendment of the 1996 Stock Option Plan; and (3) upon other matters
that may properly come before the Annual Meeting, in accordance with the
discretion of the persons to whom the Proxy is granted.
STOCK OWNERSHIP OF CERTAIN STOCKHOLDERS
The following table sets forth information as of August 19, 2002, concerning
the equity ownership of (a) those individuals who are known to be the
beneficial owners, as defined in Rule 13d-3 of the Securities Exchange Act
of 1934, of 5% or more of the Company's Common Stock, (b) the directors, (c)
the executive officers named in the Summary Compensation Table and (d) all
of our directors and executive officers as a group:
Number of Shares Percentage of Shares
Title of Class Beneficial Owner Beneficially Owned (1) Outstanding (1)
-------------- ------------------- ---------------------- ---------------
$.01 par value Michael E. Henry, 10,168,788 11.0%
Common Stock Vicki Jo Henry (2)
and JKHY Partners
663 Highway 60
Monett, MO
Jerry D. Hall 4,870,239 5.3%
663 Highway 60 (3)
Monett, MO
John W. Henry 3,214,300 3.5%
(4)
Tony L. Wormington 779,081 *
(5)
George R. Curry 746,182 *
(6)
James J. Ellis 587,896 *
(6)
Terry W. Thompson 558,536 *
(7)
John F. Prim 396,894 *
(8)
Burton O. George 340,636 *
(9)
Kevin D. Williams 146,869 *
(10)
All directors and 22,084,500 24.0%
executive officers (11)
as a group (11
persons)
* Less than 1%
(1) Information is set forth as of August 19, 2002. The persons named
in the table have sole voting and investment power with respect
to all shares of Common Stock shown as beneficially owned by
them, except as noted below. With respect to shares held in
the Company's 401(k) and Employee Stock Ownership Plans (the
"Retirement Plans"), a participant has the right to direct the
voting and disposition of shares allocated to his account.
(2) Reflects information in filings with the SEC by Michael E. Henry,
his sister Vicki Jo Henry and JHKY Partners, their family
partnership. Michael E. Henry separately may be deemed to
beneficially own 10,168,788 shares, including 148,836 shares held
in the Michael E. Henry Annuity Trust, 65,652 shares allocated
to his Retirement Plan accounts, 1,070,000 shares currently
acquirable by exercise of outstanding stock options, 4,990,200
shares held by the Partnership, 3,291,600 shares held in a living
trust and 600,000 shares held by the Henry Family Limited
Partnership, both established by his mother, Eddina F. Mackey.
Michael E. Henry may be deemed to share beneficial ownership in
the shares held by the JKHY Partners, by the Eddina F. Mackey
Trust and by the Henry Family Limited Partnership because he has
been granted proxies to vote such shares. Vicki Jo Henry does not
beneficially own any shares of common stock in her individual
capacity and her business address is 6851 South Holly Circle,
Suite 270, Englewood, Colorado, 80112. The business address of
Michael E. Henry and JKHY Partners is reflected in the table.
(3) Includes 195,782 shares held in the Retirement Plans for Mr.
Hall's account and 208,038 shares beneficially owned by his wife.
(4) Includes 170,023 shares held in the Retirement Plans for Mr.
Henry's account.
(5) Includes 260,000 shares that are currently acquirable by exercise
of outstanding stock options and 139,641 shares held in the
Retirement Plans for Mr. Wormington's account.
(6) Each includes 210,000 shares that are currently acquirable by
exercise of outstanding stock options.
(7) Includes 80,000 shares that are currently acquirable by exercise
of outstanding stock options and 4,566 shares held in the
Retirement Plans for Mr. Thompson's account.
(8) Includes 365,000 shares that are currently acquirable by exercise
of outstanding stock options and 9,771 shares held in the
Retirement Plans for Mr. Prim's account.
(9) Includes 170,000 shares that are currently acquirable by exercise
of outstanding stock options.
(10) Includes 140,000 shares that are currently acquirable by exercise
of outstanding stock options and 2,821 shares held in the
Retirement Plans for Mr. Williams' account.
(11) Includes 2,562,000 shares that are acquirable under outstanding
stock options, and 656,550 shares held in the Retirement Plans for
the accounts of the executive officers.
PROPOSAL 1
ELECTION OF DIRECTORS
PROCEDURE
At the meeting, the stockholders will elect six (6) directors to hold office
for one-year terms ending at the 2003 Annual Meeting of Stockholders or
until their successors are elected and qualified. The Board of Directors has
nominated the Company's six (6) current directors for reelection at the
Annual Meeting.
The stockholders are entitled to one vote per share on each matter submitted
to vote at any meeting of the Stockholders. Unless contrary instructions are
given, the persons named in the enclosed Proxy or their substitutes will
vote "FOR" the election of the nominees named below.
Each of the nominees has consented to serve as director for a one-year term.
However, if any nominee at the time of election is unable to serve or is
otherwise unavailable for election, and as a result other nominees are
designated by the Board of Directors, the persons named in the enclosed
Proxy or their substitutes intend to vote for the election of such
designated nominees.
NOMINEES FOR ELECTION
The directors and nominees for election as directors of the Company, as well
as certain information about them, are as follows:
Name Position with Company Director Since
---- --------------------- --------------
Michael E. Henry Chairman, Chief Executive Officer and 1986
Director
John W. Henry Vice Chairman, Senior Vice President 1977
and Director
Jerry D. Hall Executive Vice President and Director 1977
James J. Ellis Director 1985
Burton O. George Director 1987
George R. Curry Director 1989
The following information relating to the Company's directors and nominees
for director, all of whom are United States citizens, is with respect to
their principal occupations and positions during the past five years:
Michael E. Henry, age 41, Chairman of the Board, Chief Executive Officer and
Director. Mr. Henry, the son of John W. Henry and a director of the Company
since 1986, has served as Chairman of the Board and Chief Executive Officer
since October, 1994. He previously served as Vice Chairman and Senior Vice
President from 1993 to 1994. He served as Manager of Research and
Development from 1983 to 1993. He joined the Company in 1979.
John W. Henry, age 67, Vice Chairman, Senior Vice President and Director.
Mr. Henry, a co-founder and principal stockholder of the Company, has served
as Vice Chairman since October, 1994. He previously served as Chairman of
the Board from 1977 through 1994. He also has been a director since the
Company's incorporation in 1977. He previously served as Chief Executive
Officer from 1977 through 1988 and as President until 1989.
Jerry D. Hall, age 59, Executive Vice President and Director. Mr. Hall, a
co-founder and principal stockholder of the Company, has served as Executive
Vice President since October, 1994. He previously served as Chief Executive
Officer from 1990 through 1994. He also has been a director since the
Company's incorporation in 1977. He previously served as President from 1989
through 1993 and as Vice President-Operations from 1977 through 1988.
James J. Ellis, age 68, Director. Mr. Ellis, a director of the Company since
1985, has been Managing Partner of Ellis/Rosier Financial Services since
1992. Mr. Ellis served as general manager of MONY Financial Services,
Dallas, Texas, from 1979 until his retirement in 1992. Mr. Ellis also serves
as a director of Merit Medical Systems, Inc.
Burton O. George, age 75, Director. Mr. George, a director of the Company
since 1987, is retired. He previously had been in the banking business since
1958, and most recently served as Chairman of the Board and Chief Executive
Officer of First National Bank of Berryville, Berryville, Arkansas from 1985
through 1989.
George R. Curry, age 77, Director. Mr. Curry, a director of the Company
since 1989, is Vice Chairman of Central Bank, Lebanon, Missouri, with which
he has been affiliated since 1949, as well as President of Central Shares,
Inc., a bank holding company.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors held six (6) meetings during the last fiscal year.
The Board maintains an Audit Committee and a Compensation Committee of which
Messrs. Curry, George and Ellis are members. The Board formed a Nominating
Committee this year with Messrs. Curry, George and Ellis as voting members
and Michel E. Henry as a non-voting member. Each director attended at least
75% of all meetings of the Board of Directors and all committees on which
they served.
The Compensation Committee establishes and reviews the compensation and
benefits of the Executive Officers, considers incentive compensation plans
for our employees and carries out duties assigned to the Committee under our
stock option plans and our employee stock purchase plan. The newly formed
Nominating Committee identifies, evaluates and recruits qualified
individuals to stand for election to the Board of Directors. The Audit
Committee makes recommendations to the Board regarding the selection and
retention of an independent auditor, reviews the scope and results of the
audit with the independent auditor and management, reviews and evaluates our
audit and control functions, and regularly reviews regulatory compliance
matters pertaining to our outsourcing services and business recovery
operations. The Audit Committee operates under a written Audit Committee
Charter that has been adopted by the Board of Directors, a copy of which is
attached to this Proxy Statement as Exhibit A. The Audit Committee met four
(4) times and the Compensation Committee met once during the last fiscal
year. The Nominating Committee formed in the final quarter did not meet
during the last fiscal year.
DIRECTORS COMPENSATION
The directors who are employed by the Company do not receive any separate
compensation for service on the Board of Directors. Each non-employee
director receives $1,200 for each Board of Directors meeting, $600 for each
in-person committee meeting and $250 for each telephone committee meeting
attended and is reimbursed for out-of-pocket expenses incurred in attending
such meetings. Under the 1995 Non-Qualified Stock Option Plan, each non-
employee director is also compensated by the annual grant of non-statutory
stock options to purchase 30,000 shares of Common Stock, subject to an
overall grant limitation under the plan of 300,000 shares to each individual
director.
AUDIT COMMITTEE REPORT
The Audit Committee of the Company's Board of Directors is composed of
three independent directors. The Audit Committee operates under a written
charter adopted by the Board of Directors, a copy of which was attached to
the 2001 Proxy Statement. The Board of Directors and the Audit Committee
believe that the Audit Committee's current member composition satisfies the
rules of the National Association of Securities Dealers, Inc. (the "NASD")
that governs audit committee composition, including the requirement that
audit committee members all be "independent directors" as that term is
defined by NASD Rule 4200(a)(14).
The role of the Audit Committee is to assist the Board of Directors in its
oversight of the Company's financial reporting process. Management has the
primary duty for the financial statements and the reporting process,
including the systems of internal controls. The independent auditors are
responsible for auditing the Company's financial statements and expressing
an opinion as to their conformity to accounting principles generally
accepted in the United States.
In the performance of its oversight function, the Audit Committee has
reviewed and discussed with management and the independent auditors the
Company's audited financial statements. The Audit Committee also has
discussed with the independent auditors the matters required to be discussed
by Statement on Auditing Standards No. 61 relating to communication with
audit committees. In addition, the Audit Committee has received from the
independent auditors the written disclosures and letter required by
Independence Standards Board Standard No. 1 relating to independence
discussions with audit committees, has discussed with the independent
auditors their independence from the Company and its management, and has
considered whether the independent auditor's provision of non-audit services
to the Company is compatible with maintaining the auditor's independence.
The Audit Committee discussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. The Audit
Committee meets with the internal and independent auditors, with and without
management present, to discuss the results of their examinations, their
evaluations of the Company's internal controls and the overall quality of
the Company's financial reporting. These meetings without management
present are held at least once each year.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board has approved,
that the Company's audited financial statements be included in the Company's
2002 Annual Report to Shareholders and Annual Report on Form 10-K for the
year ended June 30, 2002 for filing with the Securities and Exchange
Commission.
George R. Curry
James J. Ellis
Burton O. George
Members of the Audit Committee
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
As of June 30, 2002, the executive officers and significant employees of the
Company, as well as certain biographical information about them, are as
follows:
Officer/Significant
Name Position with Company Employee Since
------------------------- ------------------------- --------------
Michael E. Henry Chairman of the Board and 1983
Chief Executive Officer
John W. Henry Vice Chairman and Senior 1977
Vice President
Jerry D. Hall Executive Vice President 1977
Terry W. Thompson President 1990
John F. Prim Chief Operating Officer 2001
Kevin D. Williams Chief Financial Officer 2001
and Treasurer
Marguerite P. Butterworth Vice President 1993
Tony L. Wormington Vice President 1998
The following information is provided regarding the executive officers and
significant employees not already described herein, all of whom are United
States citizens:
Terry W. Thompson, age 52, President. In January 2001, Mr. Thompson was
appointed by the Board of Directors to serve as President of the Company.
He also served as Chief Operating Officer from January to June of 2001. He
previously served as Vice President, Chief Financial Officer and Treasurer
of the Company since 1990.
John F. Prim, age 47, Chief Operating Officer. Mr. Prim has served as Chief
Operating Officer since July 2001. Mr. Prim joined the Company in 1995 as
part of the acquisition of the Liberty division of Broadway & Seymour, Inc.
He previously served as General Manager of the E-Services Division from July
2000 to June 2001 and as General Manager of the OutLink Services Division
from 1995 to 2000. The Company has announced a succession plan under which
Mr. Prim will become President of the Company upon Mr. Thompson's retirement
in January of 2003.
Kevin D. Williams, age 43, Chief Financial Officer and Treasurer. In
January 2001, Mr. Williams was appointed by the Board of Directors to serve
as Chief Financial Officer and Treasurer of the Company. He previously
served as Controller of the Company since joining the Company in 1998.
Marguerite P. Butterworth, age 54, Vice President. Ms. Butterworth has
served as Vice President since February of 1993. Ms. Butterworth joined the
Company in 1983 and has been Hardware Manager since 1984.
Tony L. Wormington, age 40, Vice President. Mr. Wormington has served as
Vice President since October 1998. Mr. Wormington joined the Company in 1980
and has served as Research and Development Manager since 1993. Under the
succession plan announced by the Company, Mr. Wormington will become Chief
Operating Officer in January of 2003.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company is required to identify any director, officer or greater than
ten percent beneficial owners who failed to timely file with the Securities
and Exchange Commission a report required under Section 16(a) of the
Securities Exchange Act of 1934 relating to ownership and changes in
ownership of the Company's common stock. The required reports consist of
initial statements on Form 3, statements of changes on Form 4 and annual
statements on Form 5.
To the Company's knowledge, based solely on its review of the copies of such
forms received by it, the Company believes that during the fiscal year ended
June 30, 2002, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were
complied with, except that JKHY Partners reported one transaction seven days
late on a Form 4 and director James J. Ellis reported two gift transactions
seven and twenty-one days late on Form 4's.
EXECUTIVE COMPENSATION
The following table sets forth certain information with regard to the
compensation paid to the Chief Executive Officer and to the Company's other
four most highly compensated executive officers for the three years ended
June 30, 2002.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Shares
Underlying
Name and Principal Position Year Salary Bonus (1) Options (2)
--------------------------- ---- -------- -------- -------
Michael E. Henry 2002 $ 286,400 $ 5,000 -
Chairman and Chief Executive 2001 255,800 5,000 -
Officer 2000 247,647 5,000 200,000
Terry W. Thompson 2002 274,133 5,000 -
President 2001 210,176 45,000 -
2000 139,133 5,000 40,000
John F. Prim 2002 242,466 5,000 -
Chief Operating Officer 2001 164,967 5,000 225,000
2000 149,758 5,000 40,000
Kevin D. Williams 2002 164,133 5,000 -
Treasurer and Chief 2001 144,040 35,000 -
Financial Officer 2000 126,843 5,000 -
Tony L. Wormington 2002 150,800 5,000 -
Vice President 2001 132,467 5,000 -
2000 104,967 5,000 40,000
(1) Includes corporate 401(k) matching contribution of $5,000 for each
executive officer in each period.
(2) Adjusted for stock splits effected as dividends.
Following is information with respect to stock options granted to and
exercised by the executive officers named in the Summary Compensation Table
during the fiscal year ended June 30, 2002, together with the number of
options outstanding as of such date. Data, as appropriate, have been
adjusted for stock splits.
OPTION GRANTS IN FISCAL 2002
The Company did not grant options to any of the executive officers named in
the Summary Compensation Table during the fiscal year ended June 30, 2002.
AGGREGATED OPTION EXERCISES IN FISCAL 2002 AND JUNE 30, 2002, OPTION VALUES
Number of Shares Value of
Shares Underlying Unexercised Unexercised In-the-Money
Acquired on Value Options at 6/30/02 Options at 6/30/02
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------------------ -------- -------- ----------- ------------- ----------- -------------
Michael E. Henry 120,000 $2,701,386 1,070,000 - $11,696,320 -
Terry W. Thompson 52,400 962,534 80,000 - 426,350 -
Kevin D. Williams - - 140,000 - 1,045,975 -
Tony L. Wormington - - 260,000 - 2,961,800 -
John F. Prim - - 365,000 - 1,159,000 -
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of June 30, 2002 with respect
to the Company's equity compensation plans under which our Common Stock is
authorized for issuance:
Number of securities
remaining available
for future issuance
under equity
Number of Weighted- compensation
securities to average plans (excluding
be issued upon exercise price securities in
exercise of of outstanding the first column
outstanding options options of this table)
------------------- -------------- --------------------
Equity Compensation
Plans approved by
security holders:
1987 Stock Option 1,328,850 $3.45 0
Plan (Employees)
1995 Non-Qualified 600,000 $13.58 570,000
Stock Option Plan
(Non-employee
Directors)
1996 Stock Option 8,224,959 $15.64 968,940
Plan (Employees)
Equity Compensation 63,760 $9.65 0
Plans not approved
by security holders
(Plan assumed in
acquisition and
individual option
contracts)
COMPENSATION COMMITTEE REPORT
The Company's executive officer compensation program is administered and
reviewed by the Compensation Committee. The Compensation Committee consists
of three independent, non-employee directors of the Company. There was no
insider participation on the Compensation Committee.
The objectives of our executive officer compensation program are to:
Encourage continuation of JHA's entrepreneurial spirit;
Attract and retain highly qualified and motivated executives; and
Encourage esprit de corps and reward outstanding performance.
In meeting the foregoing objectives, the Compensation Committee strives for
the interests of management and stockholders to be the same - the
maximization of stockholder value. The components of the executive
compensation program which are employed by the Committee to meet these goals
include base salary, discretionary bonuses, and stock options.
Salaries and bonuses are established at levels to compensate for the
position held and contributions made by each executive. Recommendations
regarding bonuses and increases in salary are based upon subjective
evaluations of each individual's performance and contribution.
Longer term incentives are provided by the award of stock options because
the ultimate value of options granted will be determined by long-term growth
in the Company's stock price. Awards of options are believed to help focus
executives attention on managing the Company from the perspective of an
owner with an equity stake in the business. This component of executive
compensation is provided through the 1996 Stock Option Plan, under which the
executive officers, and all other employees of the Company and its
subsidiaries, are eligible to receive options. The Committee has discretion
to designate optionees and to determine the terms of the options granted.
However, option prices shall be fixed at not less than 100% of fair market
value of the stock at the date of grant, and options may not be exercisable
more than ten years after the date of grant.
In employing the foregoing three elements of compensation, the Compensation
Committee considers the experience, prior compensation levels, personal
performance, number and value of previously granted options, and other
subjective factors relating to each individual and seeks to optimize the
balance between base salary, short-term and long-term incentives.
The base salary of Chief Executive Officer Michael E. Henry was modestly
increased in our 2002 fiscal year as a part of our efforts to bring the
Company's low executive salaries closer to industry norms.
The Compensation Committee notes that there is a $1,000,000 cap on the
income tax deduction which may be taken with respect to any individual
officer's compensation. While current cash compensation paid to our
executive officers is substantially less than the cap, the ultimate value of
stock options is not now known, and thus the cap may be important in some
future year. The cap has been considered by the Committee and we intend to
take the steps necessary to conform the Company's compensation structure to
comply with the cap if the issue arises in a future period.
George R. Curry
Burton O. George
James J. Ellis
Members of the Compensation Committee
COMPANY PERFORMANCE
The following graph presents a comparison for the five-year period ended
June 30, 2002, of the market performance of the Company's common stock with
the S & P 500 Index and an index of peer companies selected by the Company:
The following information depicts a line graph with the following values:
JKHY Peer Group S&P 500
1997 100 100 100
1998 142.91 113.47 130.16
1999 164.34 131.77 159.78
2000 422.60 143.13 171.37
2001 525.03 170.76 145.95
2002 284.28 180.65 119.70
This comparison assumes $100 was invested on July 1, 1997, and assumes
reinvestments of dividends. Total returns are calculated according to
market capitalization of peer group members at the beginning of each period.
Peer companies selected are in the business of providing specialized
computer software, hardware and related services to financial institutions
and other businesses. Companies in the peer group are Bisys Group, Elite
Information, Cerner Corp., Computer Science, Crawford & Co., Electronic
Arts, First Data, Fiserv, Keane, National Data, Hyperfeed Technology,
Rainbow Technology and SEI Investments.
PROPOSAL 2
APPROVAL OF AMENDMENT TO
1996 STOCK OPTION PLAN
INTRODUCTION
At the Annual Meeting, the Company's stockholders are being asked to approve
an amendment to the 1996 Stock Option Plan (the "Plan") to increase the
number of shares of Common Stock reserved for issuance under the Plan by
5,000,000 shares, to an aggregate of 18,000,000 shares. The Board of
Directors adopted the amendment, subject to stockholder approval at the
Annual Meeting.
The Company believes that long-term equity compensation in the form of stock
options is critical in order to attract qualified employees to the Company
and to retain and provide incentive to current employees, particularly in
light of the competitive environment for talented personnel. As of June 30,
2002, there were 968,940 shares available for future grants under the Plan.
The Board of Directors believes that the number of shares currently
available under the Plan is insufficient in light of potential continued
growth in the Company's operations, including potential increases in the
number of employees. For this reason, the Board of Directors has determined
that it is in the best interests of the Company and its stockholders to
increase the number of shares available for issuance under the Plan by
5,000,000 shares.
The Board of Directors believes that the Company and its stockholders have
benefited substantially over the years from the use of stock options as an
effective means to secure, motivate and retain qualified and competent
employees of the Company and its subsidiaries. Accordingly, the Board of
Directors recommends that the stockholders vote FOR approval of the
amendment of the Plan. Unless otherwise directed therein, the Proxies
solicited hereby will be voted for approval of the amendment of the Plan.
Although the Company is only proposing to amend the number of shares
available for issuance under the Plan, set forth below is a summary of the
principal features of the Plan. The summary, however, does not purport to be
a complete description of all the provisions of the Plan. Any stockholder of
the Company who wishes to obtain a copy of the actual plan document may do
so upon written request to the Secretary at the Company's principal offices
at 663 Highway 60, P.O. Box 807, Monett, Missouri 65708.
GENERAL
The purposes of the Plan are to obtain for the Company the benefits of the
incentive inherent in the ownership of the Company s Common Stock by
employees of the Company and its subsidiaries who are important to the
success and the growth of the business of the Company, to help the Company
retain the services of such persons, and to compensate such persons for
their service to the Company and its subsidiaries. All employees of the
Company and its subsidiaries are eligible for grants of options under the
Plan. The number of employees of the Company and its subsidiaries eligible
to participate in the Plan as of June 30, 2002 is 2,250.
The aggregate number of shares which may be issued and as to which stock
options may be granted under the Plan is 13,000,000 shares of Common
Stock (excluding any increase by the proposed amendment), subject to
proportionate adjustment by reason of merger, consolidation, reorganization,
recapitalization, or exchange of shares or by stock dividend, stock split,
combination of shares, or other changes in capital structure effected
without receipt of consideration. If any stock option granted under the Plan
expires, is surrendered in whole or in part, or terminates for any reason
without being exercised in full, then the number of shares subject to the
stock option will again be available for purposes of the Plan. The shares
of Common Stock that may be issued under the Plan may be either authorized
but unissued shares or treasury shares, or both.
An option holder shall have none of the rights of a stockholder with respect
to any shares covered by the option until such individual has exercised the
option, paid the option price and been issued a stock certificate for the
purchased shares. Upon exercise of the option, payment of the option price
and issuance of the stock certificate, the option holder shall have all of
the rights of a stockholder with respect to such shares, including voting
and dividend rights.
ADMINISTRATION
The Plan is administered by the Company's Board of Directors (the "Board").
The Board, however, may at any time appoint a committee (the "Committee") of
two or more non-employee directors and delegate to such Committee
administrative powers allocated to the Board under the provisions of the
Plan, including (without limitation) the power to determine the person or
persons to be granted options under the Plan, the number of such options,
whether such options are to be incentive stock options ("Incentive Options")
under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") or nonqualified options ("Nonqualified Options") not intended to
meet the requirements of Section 422, and the time or times at which options
are to be exercisable. The Board or the Committee, as the case may be, has
the power to interpret and amend the Plan, subject to further approval
by the stockholders for certain amendments relating to option shares,
grants, pricing, term and eligibility. All questions of interpretation and
application of the Plan, or as to stock options granted under the Plan, are
subject to the determination of the Board or the Committee, which will be
final and binding.
ELIGIBILITY AND GRANT OF STOCK OPTIONS
The persons who shall be eligible to receive options pursuant to the Plan
are such employees of the Company, and subsidiary corporations of the
Company or any affiliated entity of the Company, as defined in the Plan,
including employees who are also members of the Board, as the Board or the
Committee shall from time to time select.
The Board or the Committee shall have the full and absolute authority to
determine the number of shares to be covered by granted options, whether
options are to be Incentive Options or Nonqualified Options, as well as the
time or times at which options are to be exercisable and such other terms
and conditions as may be applicable to such options. However, no option
granted under the Plan shall have a term in excess of 10 years from the
grant date. Provided, further, that the aggregate fair market value of the
Common Stock with respect to which Incentive Options granted under the Plan
are exercisable shall not exceed $100,000 per grantee or such greater amount
as may be permitted by later amendments to Section 422 of the Code.
The option price per share shall be fixed by the Board or the Committee, but
in no event shall the option price per share be less than 100% of the fair
market value of a share of Common Stock on the date of the option grant.
The Plan has specific provisions for determining the fair market value of
Common Stock for the purpose of determining the option price. As of August
19, 2002 the last sale price of Common Stock, as reported on the NASDAQ
Stock Market, was $16.29 per share.
PERMITTED TRANSFERS
For the first 6 months after the date of grant, no option granted under the
plan shall be transferable by the optionee other than by will or by the laws
of descent and distribution. Thereafter, options may be transferred during
the lifetime of an optionee to any Permitted Transferee, as defined under
the Plan. Permitted Transferees include members of the immediate family of
the optionee and any trust established for the benefit of the optionee or
the optionee's immediate family members. Immediate family member means the
optionee's spouse, children and grandchildren and any partnership,
corporation, limited liability company or other entity, all the beneficial
interest in which are held by the optionee or immediate family members.
Permitted Transferees may only transfer options to other Permitted
Transferees of the optionee. Notwithstanding any of the foregoing,
Incentive Options shall be exercisable only by the optionees and shall not
be assignable or transferrable by the optionee otherwise than by will or by
the laws of decent and distribution.
ADJUSTMENT OF SHARES
If any changes made in the shares subject to the Plan or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, split-up, combination of
shares, exchange of shares, issuance of rights to subscribe, or change in
capital structure), appropriate adjustments or substitutions shall be made
by the Board or the Committee in or for such shares (including adjustments
in the maximum number of shares subject to the Plan and the number of such
shares and price per share subject to the Plan and the number of such shares
and price per share subject to outstanding options granted under the Plan)
as the Board or the Committee, in its sole discretion shall deem equitable
to prevent dilution or enlargement of option rights.
SURRENDER AND TERMINATION OF OPTIONS
In the event of a sale of all or substantially all of the assets of the
Company or 50% or more of the outstanding voting stock of the Company by
means of a sale, merger, reorganization or liquidation, the Board shall have
discretionary authority to authorize the surrender of all unexercised
options in exchange for a cash distribution equal in amount to the
difference between (i) the fair market value at the authorized surrender
date of the shares for which the surrendered option or portion thereof is at
the time exercisable, and (ii) the aggregate option price payable for such
shares.
Further, if, in connection with any such sale, merger, reorganization or
liquidation, a provision is made for each outstanding option to either be
assumed by the successor corporation (or parent thereof) or be replaced with
a comparable option to purchase shares of the capital stock of the successor
corporation (or parent thereof), each person holding unexercised options
shall be entitled to have such options assumed by the successor corporation
(or parent thereof) or replaced with a comparable option, as the case may
be. The determination of option comparability will be made by the Board,
and its determination shall be final, binding and conclusive.
AMENDMENT AND TERMINATION OF THE PLAN
The Board shall have the exclusive power and authority to amend or modify
the Plan in any or all respects, whatsoever; provided, however, that no such
amendment or modification shall, without the consent of the option holders,
adversely affect rights and obligations with respect to options at the time
outstanding under the Plan; and provided, further, that the Board shall not,
without the approval of the stockholders of the Company, (i) increase the
maximum number of shares issuable under the Plan, except for permissible
adjustments; (ii) materially modify the eligibility requirements for the
grant of options under the Plan; or (iii) make any other changes in the Plan
which require stockholder approval pursuant to Section 422 of the Code.
The Plan, unless sooner terminated, shall terminate at the close of business
on November 1, 2006. While there are no current plans to do so, the Board
has the authority to effect, at any time and from time to time, with the
consent of the affected optionees, the cancellation of any or all
outstanding options under the Plan and to grant in substitution new options
under the Plan covering the same or different numbers of shares of Common
Stock but having an option price per share not less than 100% of fair market
value on the new grant date.
PLAN BENEFITS
The Company cannot currently determine the number of shares subject to
options that may be granted in the future to executive officers, directors
and employees under the Plan. The following table sets forth information
with respect to the stock options granted (both exercised and unexercised)
under the Plan through June 30, 2002, to the named executive officers, all
current executive officers as a group and all employees and consultants
(including all current officers who are not executive officers) as a group
under the Plan.
Number Of Shares Subject Weighted Average
To Options Granted Under Exercise Price
Name The 1996 Plan Per Share
---- ------------------------ ----------------
Michael E. Henry 400,000 $10.394532
Terry W. Thompson 80,000 $11.453125
John F. Prim 305,000 $23.032787
Kevin D. Williams 160,000 $9.21875
Tony L. Wormington 80,000 $11.453125
All current executive 1,105,000 $13.942591
officers as a group
(8 persons)
All current directors 0 0
(other than executive
officers) as a group
(3 persons, none eligible
for grant under the Plan)
All employees (excluding 11,296,960 $13.74555
executive officers) as a
group (721 persons)
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal federal income tax
consequences of the grant and exercise of non-statutory and statutory stock
options under present law.
TAX TREATMENT - NONQUALIFIED STOCK OPTIONS
An optionee does not recognize any taxable income for federal income tax
purposes upon receipt of a Nonqualified (non-statutory) Option.
Upon the exercise of a Nonqualified Option with cash, the amount by which
the fair market value of the shares received, determined as of the date of
exercise, exceeds the option price is generally treated as compensation
received in the year of exercise. If the option price is paid in whole or
in part with shares of Common Stock, no income, gain or loss is recognized
on the receipt of shares equal in value on the date of exercise to the
shares delivered in payment of the option price. The fair market value of
the remainder of the shares received upon exercise, determined as of the
date of exercise, less the amount of cash, if any, paid upon exercise, is
generally treated as compensation received on the date of exercise.
Individuals are subject to special Federal income tax rules upon the
exercise of a Nonqualified Option (i) if the exercise is within six months
of the date of grant, or (ii) in the event the fair market value of the
shares acquired is less than the option price on the date of exercise.
In each instance that an amount is treated as compensation received by the
individual, the Company generally is entitled to a corresponding deduction
in the same amount for compensation paid to the optionee in such taxable
year.
TAX TREATMENT - INCENTIVE STOCK OPTIONS
The grant of an Incentive (statutory) Option pursuant to Section 422 of the
Code has no tax consequences to the optionee. Thus, optionees have no
income from the receipt of Incentive Options, and the Company has no
business expense deductions from the grant of the Incentive Option.
When the Incentive Option is exercised, no income is attributed to the
optionee to whom stock is transferred. However, to obtain this tax deferred
treatment, the individual must maintain the shares he or she acquires
through the exercise of the Incentive Option for the required holding
period. In short, there must be no disposition of the stock: (i) within two
years after the option is granted, or (ii) within one year after the stock
is transferred to the optionee. These holding period requirements do not
apply to Incentive Options that are exercised after the employee's death.
If an individual fails to hold the stock for the requisite holding period,
the tax is deferred only until the tax year in which the stock is disposed
of, and the gain is treated as ordinary income. On the other hand, when the
requisite holding periods are met, an individual is taxed at capital gains
rate when stock obtained pursuant to the exercise of the Incentive Option is
sold.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the Common Stock
present at the Annual Meeting in person or by proxy and entitled to vote is
required to approve the proposed amendment of the Plan. An abstention from
voting on a matter by a stockholder present in person or represented by
proxy and entitled to vote has the same legal effect as a vote "AGAINST" the
proposed amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
AMENDMENT TO THE 1996 STOCK OPTION PLAN.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended June 30, 2002, the Company paid $727,788 to
Group VI InterMedia, LLC for marketing and advertising services. Group VI
InterMedia, LLC is owned by Christopher Harding and Vicki Jo Henry who are
husband and wife. Vicki Jo Henry is the daughter of John W. Henry, Director
and Senior Vice President of the Company and the sister of Michael E. Henry,
Chairman of the Board and Chief Executive Officer of the Company. Vicki Jo
Henry is also a general partner in JKHY Partners, a family partnership which
owns 5.4% of the common stock of the Company. The Company believes that the
rates and charges incurred in the transactions with Group VI InterMedia, LLC
are reasonable and competitive with other marketing and advertising
providers of comparable services.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, certified public accountants, served as independent
auditors for the Company for the year ended June 30, 2002. The Company has
not selected its auditors for the current year, because the Company does not
select its auditors until after the final Audit Committee meeting on the
prior year's audit is held. Representatives of Deloitte & Touche LLP are
expected to be present at the Annual Meeting with the opportunity to make a
statement if they desire to do so and to be available to respond to
appropriate questions.
PRINCIPAL ACCOUNTING FIRM FEES
Audit Fees. The aggregate fees billed by the Company's accounting firm,
Deloitte & Touche LLP, for professional services rendered for the audit of
the Company's annual consolidated financial statements for the fiscal year
ended June 30, 2002 and for the reviews of the consolidated financial
statements included in the Company's Quarterly Reports on Forms 10-Q for
that fiscal year were $178,550.
Financial Information Systems Design and Implementation Fees. No fees were
billed by Deloitte & Touche LLP to the Company for professional services
with regard to financial information systems design and implementation.
All Other Fees. The aggregate fees billed for services rendered by Deloitte
& Touche LLP for the year ended June 30, 2002, other than the services
described above, were $58,660.
The Audit Committee determined that the provision of non-audit services did
not negatively impact the maintenance of the auditors' independence
STOCKHOLDER PROPOSALS
Stockholders who intend to present proposals for inclusion in the proxy
statement and form of proxy for the 2003 Annual Meeting of Stockholders must
submit their proposals to the Company's Secretary on or before June 6, 2003.
A shareholder who wishes to present a proposal at the 2003 Annual Meeting,
but who does not request inclusion in the proxy statement, must submit the
proposal to the Company's Secretary by September 13, 2003.
COST OF SOLICITATION AND PROXIES
Proxy solicitation is being made by mail, although it may also be made by
telephone, telegraph or in person by officers, directors and employees of
the Company not specifically engaged or compensated for that purpose. The
Company will bear the entire cost of the Annual Meeting, including the cost
of preparing, assembling, printing and mailing the Proxy Statement, the
Proxy and any additional materials furnished to stockholders. Copies of the
solicitation materials will be furnished to brokerage houses, fiduciaries
and custodians for forwarding to the beneficial owners of shares held of
record by them and, upon their request, such persons will be reimbursed for
their reasonable expenses incurred in completing the mailing to such
beneficial owners.
FINANCIAL STATEMENTS
Consolidated financial statements of the Company are contained in the 2002
Annual Report which accompanies this Proxy Statement, and are incorporated
herein by reference.
OTHER MATTERS
The Board of Directors knows of no matters that are expected to be presented
for consideration at the 2002 Annual Meeting which are not described herein.
However, if other matters properly come before the meeting, it is intended
that the persons named in the accompanying Proxy will vote thereon in
accordance with their best judgment.
By Order of the Board of Directors
/s/ Michael E. Henry
---------------------
Michael E. Henry
Chairman of the Board
Monett, Missouri
September 25, 2002
A copy of the Company's Annual Report is included herewith. The Company will
furnish without charge a copy of its Annual Report on Form 10-K as filed
with the Securities and Exchange Commission upon written request directed to
Kevin D. Williams, Chief Financial Officer, Jack Henry & Associates, Inc.,
663 Highway 60, Post Office Box 807, Monett, Missouri, 65708.
PROXY CARD
PROXY
Jack Henry & Associates, Inc. This proxy is Solicited on
663 Highway 60 Behalf of the Board of Directors
P.O. Box 607
Monett, Missouri 65708 The undersigned hereby appoints
Michael E. Henry and Terry W.
Thompson as Proxies, each with the
power to appoint his or her
substitute, and hereby authorizes
them to represent and to vote, as
designated below, all the shares
of common stock of Jack Henry &
Associates, Inc. held of record by
the undersigned on September 23,
2002, at the annual meeting of
shareholders to be held on October
29, 2002 or any adjournment
thereof.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below)
J. Henry, J. Hall, M. Henry, J. Ellis, B. George, G. Curry
2. To approve an amendment to the 1996 Stock Option Plan to increase the
number of shares available for issuance under the plan by an aggregate
of 5,000,000 shares to 18,000,000:
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
[Map of Jack Henry Corporate Offices & Monett City Park Casino Appears Here]
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy
will be voted FOR Proposal 1 and for 2.
Please sign exactly as name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Dated ______________________, 2002
----------------------------------
Signature
----------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE
APPENDIX
JACK HENRY & ASSOCIATES. INC.
1996 STOCK OPTION PLAN
(as amended)
1. PURPOSES OF THE PLAN
This 1996 Stock Option Plan (the "Plan") is intended to promote
the interests of JACK HENRY & ASSOCIATES, INC. ("JHA") by providing a
method whereby those employees of JHA or its subsidiaries who are
primarily responsible for the management, growth and financial success
of JHA and its subsidiaries may be offered incentives and rewards
which will encourage them to acquire a proprietary interest, or
otherwise increase their proprietary interest in JHA and remain in the
service and employ of JHA or its subsidiaries.
2. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Board of Directors
(the "Board") of JHA. The Board, however, may at any time appoint a
committee ("Committee") of two (2) or more non-employee directors and
delegate to such Committee one or more of the administrative powers
allocated to the Board under the provisions of the Plan, including
(without limitation) the power to determine the person or persons to
be granted options under the Plan, the number of shares to be covered
by such options, whether such options are to be incentive stock
options ("Incentive Option") under Section 422A of the Internal
Revenue Code of 1986, as amended (the "Code") or nonqualified options
not intended to meet the requirements of Section 422A, and the time or
times at which options are to be exercisable. Members of the Committee
shall serve for such period of time as the Board may determine and
shall be subject to removal by the Board at any time. The Board may
also at any time terminate the functions of the Committee and reassume
all powers and authority previously delegated to the Committee.
(b) References to the Committee in various sections of the Plan
shall be of no force or effect unless the Committee is at the time
responsible for the administration of the section of the Plan which
includes the reference to the Committee. The Board is authorized
(subject to the provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for the proper administration
of the Plan and to make such determinations under, and issue such
interpretations of, the Plan and any outstanding options as it may
deem necessary or advisable. Decisions of the Board or the Committee,
as the case may be, shall be final and binding on all parties who have
an interest in the Plan or any outstanding option.
(c) All determinations made and other actions taken by the Board
or Committee shall be made by the affirmative vote of a majority of
the members of the Board or Committee, but any determination or action
reduced to writing and signed by a majority of the members of the
Board or Committee shall be fully as effective as if it had been made
or taken by a majority vote at a meeting duly called and held.
3. ELIGIBILITY FOR OPTION GRANTS
(a) The persons who shall be eligible to receive options
pursuant to the Plan are such employees of JHA, any Subsidiary
Corporation of JHA ("Subsidiary Corporation") or any Affiliated
Company of JHA, as hereinafter defined, including employees who are
members of the Board of JHA, as the Board or Committee shall from time
to time select. As used herein, the term "Subsidiary Corporation"
shall be defined as set forth in Section 425(f) of the Code.
(b) The Board or Committee shall have full authority to
determine the number of shares to be covered by granted options,
whether options are to be Incentive Options under Section 422A of the
Code or nonqualified options not intended to meet the requirements of
Section 422A, the time or times at which options are to be
exercisable, and such other terms and conditions as may be applicable
to such options.
4. STOCK SUBJECT TO THE PLAN
(a) The stock issuable under the Plan shall be shares of JHA
authorized but unissued or reacquired Common Stock par value $.01
("Common Stock"). The aggregate number of shares which may be issued
under the Plan shall not exceed Eighteen Million (18,000,000) shares.
The total number of shares issuable under the Plan shall be subject
to adjustment from time to time in accordance with subsection (c)
below. [Reflects amendments of 11-29-99 and 8-27-02, and stock splits
through 3-2-01.]
(b) Should an option expire, be surrendered in whole or in part
or terminate for any reason without being exercised, then the shares
subject to the portion of the option expired, surrendered or not so
exercised shall be available for subsequent option grants under the
Plan; provided, however, shares subject to any option or portion
thereof surrendered in accordance with Section 7 of the Plan shall not
be available for subsequent option grants under the Plan.
(c) In the event any change is made to the Common Stock issuable
under the Plan (whether by reason of merger, consolidation,
reorganization, recapitalization, or exchange of shares or by stock
dividend, stock split, combination of shares, or other change in
capital structure effected without receipt of consideration), then
unless such change results in the termination of all outstanding
options pursuant to the provisions of Section 7 of the Plan, such
adjustments shall be made in the maximum number and/or class of shares
issuable under the Plan and in the number, class of shares and/or the
option price per share of the stock subject to each outstanding option
as may be determined by the Board to be appropriate in order to
prevent the dilution of benefits hereunder or under outstanding
options.
5. TERMS AND CONDITIONS OF OPTIONS
(a) Option Agreements. The granting of an option hereunder shall
occur at the time the Board or Committee adopts a resolution granting
an option pursuant to this Plan or at such later date as may be
specified by the Board or the Committee in such resolution (the "Grant
Date"). Options granted pursuant to the Plan shall be evidenced by
instruments in such form and containing such terms and conditions as
the Board shall from time to time authorize; provided, however, that
each such instrument shall comply with and incorporate the terms and
conditions specified in this Section 5.
(b) Option Price.
(1) The option price per share shall be fixed by the Board or
Committee, but in no event shall the option price per share be less
than one hundred percent (100%) of the fair market value of a share of
Common Stock on the date of the option grant.
(2) The option price shall become immediately due upon exercise
of the option and shall be payable in one of the alternative forms
specified below:
(A) full payment in cash, or by check or wire transfer payable to
JHA;
(B) full payment in shares of Common Stock having a fair market
value on the Exercise Date (as such term is defined below)
equal to the option price; or
(C) any combination of cash, check or wire transfer payable to
JHA and/or shares of Common Stock valued at fair market
value on the Exercise Date, equal in the aggregate to the
option price.
For purposes of this subsection (2), the Exercise Date shall be the
date on which written notice of the exercise of the option is delivered
to JHA, together with payment of the option price for the purchased
shares. [Reflects amendment of 8-27-02]
(3) The fair market value of a share of Common Stock on any
relevant date under subsections (1) and (2) above (and for all other
valuation purposes under the Plan) shall be determined in accordance
with the following provisions:
(A) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange, but is traded in the over-the-
counter market, the fair market value shall be the reported
closing price of one share of Common Stock on the valuation
date in the over-the-counter market, as such prices are
reported by the National Association of Securities Dealers,
Inc. through its NASDAQ system or any successor system. If
there is no reported closing price on the valuation date,
then the mean between the last reported bid price and last
reported asked price (or, if available, the closing price) on
the last date preceding the valuation date for which such
quotations or prices existed shall be determinative of fair
market value. [Reflects amendment of 8-27-02]
(B) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the fair market value
shall be the reported closing price of one share of Common
Stock on the valuation date on the stock exchange determined
by the Board or Committee to be the primary market for the
Common Stock, as such price is officially quoted by such
exchange. If there is no reported closing price on such
exchange on the valuation date, then the fair market value
shall be the mean between the last reported high and low
sales prices (or, if available, the closing price) on the
exchange on the last date preceding the valuation date for
which such quotations exist. [Reflects amendment of 8-27-02]
(C) If the Common Stock at the time is neither listed nor
admitted to trading on any stock exchange nor traded in the
over-the-counter market, then the fair market value shall be
determined by the Board after taking into account such
factors as the Board shall deem appropriate, including
valuations of the stock performed by independent appraisers
selected by the Board.
(c) Term and Exercise of Options. Each option granted under the
Plan shall become exercisable at such time or times and upon
fulfillment of such conditions as are determined by the Board and for
such period of time thereafter and for such number of shares as shall
be determined by the Board or Committee and set forth in the
instrument evidencing such option. However, no option granted under
the Plan shall have a term in excess of ten (10) years from the grant
date.
(d) Assignability. For the first six (6) months after the date
of grant, no option granted under the Plan shall be transferable by
the optionee other than by will or by the laws of descent and
distribution. Following the first six (6) months after the date of
grant, options may be transferred during the lifetime of an optionee,
to any "Permitted Transferee". "Permitted Transferees" shall include
members of the immediate family of the optionee, any charity qualified
under 501(c)(3) of the Internal Revenue Code and any trust established
for the benefit of the optionee or the optionee's immediate family
members. For this purpose, "immediate family member" shall mean the
optionee's spouse, children, step-children, grandchildren and step-
grandchildren and any partnership, corporation, limited liability
company or other entity, all the beneficial interests in which are
held by the optionee or immediate family members. Permitted
Transferees may only transfer options to other Permitted Transferees
of the optionee. JHA may disregard any transfer of an option which
has not been properly registered with JHA or its agents. In the event
of a death of a Permitted Transferee who held options at death, such
options shall thereafter be exercisable, as provided in subsection
(f)(3), by such person(s) entitled to do so under the will of the
Permitted Transferee, or by the legal representative of the Permitted
Transferee.
(e) Employment Status. For purposes of Section (f) of this
Section 5, an optionee shall be deemed to be an employee of JHA if
such optionee is employed by i) JHA; ii) a Parent Corporation (as that
term is defined in Section 425(e) of the Code) of JHA ("Parent
Corporation"); iii) a Subsidiary Corporation of JHA; or iv) any
corporation in which JHA directly or indirectly owns stock possessing
at least twenty percent (20%) of the total combined voting power of
all classes of stock:, or any partnership in which JHA directly or
indirectly owns at least twenty percent (20%) of the capital interest
or profits interest ("Affiliated Company") (JHA and all such other
companies are sometimes hereinafter referred to as the "employer
corporation"); provided, however, that if an optionee is employed by
an Affiliated Company, no shares of stock acquired by such optionee
upon exercise of an Incentive Option will be eligible to qualify for
tax treatment under Section 422A of the Code unless such optionee was
employed by JHA, a Subsidiary Corporation or a Parent Corporation of
JHA on the date such Incentive Option was granted and such optionee
acquires such stock by exercising such Incentive Option not later than
three (3) months from the date such optionee is last employed by JHA,
a Subsidiary Corporation or a Parent Corporation of JHA.
(f) Effect of Termination of Employment
(1) In the event the employment of an employee to whom an option
has been granted under the Plan shall be terminated other than by
reason of permanent disability within the meaning of Section 22 (e) (3)
of the Code, retirement pursuant to any retirement plan of an employer
corporation, or by death, then (i) all unvested options shall
immediately terminate and (ii) all vested and exercisable options held
by such employee under the Plan shall terminate and no longer be
exercisable after 30 days following the date of such termination of
employment (but in any event not later than the termination date of the
option). Options granted under the Plan shall not be affected by any
change of duties or position so long as the optionee continues to be in
the employ of JHA. The option agreements may contain such provisions as
the Board shall approve with reference to the effect of approved leaves
of absence. If an interest in an option granted under the Plan is
required by law to be transferred to a non-employee spouse of the
Optionee pursuant to an order of a court in a divorce proceeding, such
option must be exercised by the non-employee spouse within thirty (30)
days following such transfer. If the non-employee spouse fails to
exercise the option within the thirty day period, such option shall be
deemed to be terminated and forfeited notwithstanding any vesting or
other terms herein. [as amended 1-28-00 and 4-26-01]
(2) If an employee holding an option which has not expired or
terminated shall become permanently disabled within the meaning of
Section 22(e) (3) of the Code, then the employee shall have a period of
one (1) year from the date of cessation of employee status during which
to exercise such option or options for the number of shares for which
such option or options are exercisable on the date of cessation of
employee status, but in no event shall such options be exercisable
after the specified expiration date of the option term. Upon the
expiration of such limited period of exercisability, or (if earlier)
upon the expiration of the option term, the option shall terminate and
cease to be exercisable.
(3) If an employee holding an option which has not expired or
terminated shall retire pursuant to any retirement plan of any employer
corporation, then the employee shall have a period of three (3) months
from the date of cessation of employee status during which to exercise
such option or options for the number of shares for which such option
or options are exercisable on the date of cessation of employment
status, but in no event shall such options be exercisable after the
specified expiration date of the option. Upon the expiration of such
limited period of exercisability, or (if earlier) upon the expiration
of the option term, the option shall terminate and cease to be
exercisable.
(4) If a person holding an option which has not expired or
terminated shall die, then the estate of the decedent or the person or
persons to whom his or her rights under the option were transferred by
will or by the laws of descent and distribution shall have a period of
one (1) year from the date of death during which to exercise such
option or options for the number of shares as to which the decedent
could have exercised such option at the time of his or her death, but
in no event shall such options be exercisable after the specified
expiration date of the option term. Any such exercise shall be effected
by written notice to the Board from the persons entitled to exercise
the option and the person or persons giving the same shall furnish to
the Board such other documents or papers as the Board may reasonably
require, including, without limitation, evidence of the authority of
such person or persons to exercise the option and evidence satisfactory
to the Board that any death taxes payable with respect to such shares
have been paid or provided for. Upon the expiration of such limited
period of exercisability, or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be exercisable.
(g) Stockholder Rights. An option holder shall have none of the
rights of a stockholder with respect to any shares covered by the
option until such individual shall have exercised the option, paid the
option price and been issued a stock certificate for the purchased
shares. Upon exercise of the option, payment of the option price and
issuance of the stock certificate, the option holder shall have all of
the rights of a stockholder with respect to such shares including
voting and dividend rights, subject only to the provisions of this
Plan and other instruments implementing the provisions hereof.
(h) Change in Option Terms. Notwithstanding the terms of
this Plan or of individual option agreements granted hereunder, the
Board or Committee may, in its discretion, upon the death, disability
or termination of employment of the option holder, extend the term of
the option or accelerate vesting thereof. In no event, however, shall
the term of any option be extended to a date after ten (10) years from
the grant date. [Added 8-27-02]
6. INCENTIVE OPTIONS.
(a) The additional terms and conditions specified below shall be
applicable to all Incentive Options granted under the Plan. Options
which are specifically designated as "nonqualified" options when
issued under the Plan shall not be subject to such additional terms
and conditions.
(1) Dollar Limitation. The aggregate fair market value
(determined as of the respective date or dates of grant) of the Common
Stock with respect to which Incentive Options granted under the Plan
(or any other plan of JHA or its parent or subsidiary corporations) are
exercisable for the first time by any optionee during any calendar year
shall not exceed One Hundred Thousand Dollars ($100,000) or such
greater amount as may be permitted under subsequent amendments to
Section 422A of the Code.
(2) Ten Percent (10%) Shareholder. If any employee to whom an
Incentive Option is to be granted pursuant to the provisions of the
Plan is on the date of grant the owner of stock (as determined under
Section 425(d) of the Code) possessing more than 10% of the total
combined voting power of all classes of stock of JHA or any one of its
Parent or Subsidiary Corporations, then the following special
provisions shall be applicable to the Incentive Option granted to such
individual:
(A) The option price per share of the Common Stock subject to
such Incentive Option shall not be less than one hundred ten
percent (110%) of the fair market value of one share of
Common Stock on the date of grant; and
(B) No such Incentive Option shall have a term in excess of five
(5) years from the date of grant.
(3) Assignability. During the lifetime of the optionee, the
Incentive Option shall be exercisable only by the optionee and shall
not be assignable or transferable by the optionee otherwise than by
will or by the laws of descent and distribution.
(b) Except as modified by the preceding provisions of this
Section 6, all the provisions of the Plan shall be applicable to
Incentive Options granted hereunder.
7. SURRENDER AND TERMINATION OF OPTIONS.
(a) If either JHA or its stockholders enter into an agreement to
dispose of all or substantially all of the assets of JHA or fifty
percent (50%) or more of the outstanding voting stock of JHA by means
of a sale, merger, reorganization or liquidation, then the Board shall
have the discretionary authority, exercisable upon such terms and
conditions as it deems appropriate, to authorize the surrender of all
unexercised options in exchange for a cash distribution equal in
amount to the difference between i) the fair market value at the
authorized surrender date of the shares for which the surrendered
option or portion thereof is at the time exercisable, and ii) the
aggregate option price payable for such shares.
(b) If, in connection with any such sale, merger, reorganization
or liquidation, provision is made for each outstanding option to
either be assumed by the successor corporation (or parent thereof) or
be replaced with a comparable option to purchase shares of the capital
stock of the successor corporation (or parent thereof), each person
holding unexercised options shall be entitled to have such options
assumed by the successor corporation (or parent thereof) or replaced
with a comparable option, as the case may be. The determination of
option comparability will be made by the Board, and its determination
shall be final, binding and conclusive.
(c) Upon consummation of such sale, merger, reorganization or
liquidation, all outstanding options under the Plan shall terminate
and cease to be exercisable, unless assumed by the successor
corporation (or parent thereof).
(d) The grant of options under the Plan shall in no way restrict
or affect the right of JHA or its stockholders to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to
merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
8. CANCELLATION AND NEW GRANT OF OPTIONS.
The Board shall have the authority to effect, at any time and
from time to time, with the consent of the affected option holders,
the cancellation of any or all outstanding options under the Plan and
to grant in substitution therefore new options under the Plan covering
the same or different numbers of shares of Common Stock but having an
option price per share not less than one hundred percent (100%) of
fair market value on the new grant date.
9. AMENDMENT OF THE PLAN.
The Board shall have the exclusive power and authority to amend
or modify the Plan in any or all respects whatsoever; provided,
however, that no such amendment or modification shall, without the
consent of the option holders, adversely affect rights and obligations
with respect to options at the time outstanding under the Plan; and
provided, further, that the Board shall not, without the approval of
the stockholders of JHA, i) increase the maximum number of shares
issuable under the Plan, except for permissible adjustments under
Section 4(c); ii) materially modify the eligibility requirements for
the grant of options under the Plan; or iii) make any other changes in
the Plan which require stockholder approval pursuant to Section 422A
of the Internal Revenue Code.
10. EFFECTIVE DATE AND TERM OF PLAN.
(a) The Plan shall become effective upon the later of i)
November 1, 1996 or ii) the date the Plan shall have been approved by
the JHA stockholders. The Board or Committee may grant options under
the Plan at any time after the effective date and before the date
fixed herein for termination of the Plan. The JHA 1987 Stock Option
Plan shall terminate upon the effective date of this Plan, provided
that all options then outstanding under the 1987 Stock Option Plan
shall thereafter continue to have force and effect in accordance with
the provisions of the instruments evidencing such options.
(b) Unless sooner terminated by the Board or otherwise, the Plan
shall terminate upon the earlier of i) the tenth (10th) anniversary of
the effective date of the Plan, or ii) the date on which all shares
available for issuance under the Plan shall have been issued pursuant
to the exercise or surrender of options granted hereunder. If the date
of termination is determined under clause (i) above, then options
outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the instruments evidencing
such options.
(c) Options may be granted under this Plan to purchase shares of
Common Stock in excess of the number of shares then available for
issuance under the Plan, provided i) an amendment to increase the
maximum number of shares issuable under the Plan is adopted by the
Board prior to the initial grant of any such option and is thereafter
approved by the stockholders of JHA, and ii) each option so granted is
not to become exercisable, in whole or in part, at any time prior to
the obtaining of such stockholder approval.
11. USE OF PROCEEDS.
The proceeds received by JHA from the sale of shares pursuant
to options granted under the Plan shall be used for general corporate
purposes.
12. STOCK RESERVE.
JHA shall, at all times during the term of this Plan, reserve and
keep available such number of shares of stock as will be sufficient to
satisfy the requirements of this Plan. Such obligation to reserve
shares of stock shall apply only with respect to options actually
outstanding under this Plan and not with respect to the total number
of shares available under this Plan for which options have not been
granted.
13. LISTING, REGISTRATION AND COMPLIANCE WITH LAWS AND REGULATIONS .
Each option shall be subject to the requirement that if at any
time the Board shall determine, in its discretion, that the listing of
the shares subject to the option upon any securities exchange or the
registration or qualification of such shares under any state or
federal securities or other law or regulation, or the consent or
approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of
such option or the issue or purchase of the shares thereunder, no such
option may be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the
Board, and the option holder will supply JHA with such certificates,
representations and information as JHA shall request and shall
otherwise cooperate with JHA in obtaining such listing, registration,
qualification, consent or approval. In the case of officers and other
persons subject to Section 16(b) of the Securities Exchange Act of
1934, the Board may at any time impose any limitations upon the
exercise of an option which, in the Board's discretion, are necessary
or desirable to permit transactions hereunder by such persons to
comply with Section 16(b) and the rules and regulations thereunder. If
JHA, as part of an offering of securities or otherwise, finds it
desirable because of federal or state regulatory requirements to
reduce the period during which any options may be exercised, the Board
may, in its discretion and without the option holders' consent, so
reduce such period on not less than fifteen (15) days' written notice
to the option holders.
[Plan as amended to 8-27-02]