SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[x] Preliminary information statement [ ] Confidential, for use of the
Commission only (as permitted
by Rule 14c-5(d)(2))
[ ] Definitive information statement
GRISTEDE'S SLOAN'S,INC.
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(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which 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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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PRELIMINARY COPY
GRISTEDE'S SLOAN'S, INC.
823 Eleventh Avenue
New York, New York 10019-3535
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held August 12, 1999
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To the Stockholders:
The Annual Meeting of Stockholders of Gristede's Sloan's, Inc.
(hereinafter called the "Company") will be held at The New York Hilton
and Towers Hotel, 1335 Avenue of the Americas, New York, New York 10019, on
Thursday, the 12th day of August, 1999 at 10:00 A.M., to consider and vote
on the following matters described in this Notice and Information Statement:
1. To elect two Class 1 directors to serve for a term expiring
at the 2002 Annual Meeting of Stockholders.
2. To approve an amendment to the 1998 Stock Option Plan to
increase the number of shares of Common Stock reserved for issuance upon
exercise of options granted under the Plan from 500,000 to 1,500,000.
3. To approve an amendment to the Certificate of Incorporation
of the Company to change the name of the Company to Gristede's Foods, Inc.
4. To transact such other business as may properly come before
the meeting or adjournments thereof.
The Board of Directors has fixed the close of business on July
12, 1999 as the record date for determining stockholders entitled to notice
of, and to vote at, the meeting.
By Order of the Board of Directors
Michael Seltzer
Vice President and Secretary
New York, New York
July __, 1999
<PAGE>
PRELIMINARY COPY
GRISTEDE'S SLOAN'S, INC.
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INFORMATION STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
August 12, 1999
This information statement is being furnished to stockholders
beginning on or about July __, 1999 in connection with the Annual Meeting
of Stockholders of Gristede's Sloan's, Inc. (the "Company") to be held on
August 12, 1999 or any adjournments thereof, for the purposes set forth
in the foregoing Notice of Annual Meeting.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY. However, you may vote your shares of Common Stock
at the Annual Meeting.
OUTSTANDING SHARES AND
VOTING RIGHTS
The Board of Directors has set the close of business on July 12,
1999 as the record date for determining the stockholders entitled to notice
of, and to vote at, the Annual Meeting of Stockholders (the "Annual
meeting"). On that date, the Company had outstanding 19,636,574 shares
of Common Stock, par value $.02 per share ("Common Stock"), each of which
is entitled to one vote on each matter. No other class of securities other
than Common Stock will be entitled to vote at the meeting. There are no
cumulative voting rights.
As of July ___, 1999, John A. Catsimatidis, the Chairman of the
Board and Chief Executive Officer of the Company, owned of record, directly
or indirectly, an aggregate of 17,834,050 shares of Common Stock,
constituting approximately 90.8% of the shares entitled to vote at the
Annual Meeting.
Mr. Catsimatidis has informed the Company that he intends to vote
all of the shares owned directly or indirectly by him in favor of each of
the Board of Directors' nominees for directors listed below, for approval
of the amendment to the Company's 1998 Stock Option Plan (the "1998 Option
Plan") and for approval of the amendment to the Company's Certificate of
Incorporation to change the name of the Company to Gristede's Foods, Inc.
Consequently, such elections and approvals are expected to occur.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding
ownership of Common Stock on July ___, 1999 by: (i) each stockholder known
to the Company to own beneficially more than 5% of the outstanding shares
of Common Stock; (ii) each of the Company's directors and nominees for
director; and (iii) all officers and directors of the Company as a group.
The address of each person is c/o Gristede's Sloan's, Inc., 823 Eleventh
Avenue, New York, N.Y. 10019-3535. The Company believes that ownership of
the shares by the persons named below is both of record and beneficial and
such persons have sole voting and investment power with respect to the
shares indicated.
Name and Address of Number of
Beneficial Owner Shares Percent of Class
------------------- --------- ----------------
John Catsimatidis 18,359,050 (1) 91.1%
Martin Steinberg 112,642 *
Dennis Berberich 20,000 (2) *
Kishore Lall 15,000 *
Frederick Selby 13,110 (3) *
Martin Bring 11,000 (3) *
All officers and directors
as a group (8 persons) 18,568,802 (1)(2)(4) 91.9%
- --------------------------
* Less than 1%.
(1) Includes an aggregate of 12,456,174 shares held by corporations
controlled by Mr. Catsimatidis, 52,300 shares held by Mr. Catsimatidis
as a custodian, 2,057 shares held by a profit sharing plan of which
Mr. Catsimatidis is a trustee, 605 shares held by Mr. Catsimatidis as a
trustee of individual retirement accounts and currently exercisable
options to purchase an aggregate of 525,000 shares of Common Stock.
(2) Includes 14,000 shares of Common Stock owned by Mr. Berberich's wife,
as to which shares Mr. Berberich disclaims beneficial ownership.
(3) Includes for each of Messrs. Selby and Bring an aggregate of 11,000
shares of Common Stock which may be purchased upon the exercise of
currently exercisable stock options.
(4) Includes an aggregate of 563,000 shares of Common Stock which may be
purchased upon the exercise of currently exercisable stock options.
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ELECTION OF DIRECTORS
Two Class 1 directors to serve for a term expiring at the 2002
Annual Meeting shall be elected.
The Class 1 directors shall each be elected by the affirmative vote of
a plurality of the votes cast at the Annual Meeting. Directors are elected
by a plurality of the votes cast by the shares entitled to vote in the
election at a meeting at which a quorum is present. "Plurality" means
that the individuals who receive the largest number of votes are elected as
directors. Therefore, any shares not voted, whether by withheld authority,
broker non-vote or otherwise, have no effect in the election of directors.
The Board of Directors does not expect that any of the nominees will become
unavailable to serve for any reason. If that should occur before the
meeting, another nominee or nominees may be selected by the Board of
Directors.
In accordance with the Company's By-Laws, any stockholder entitled to
vote for the election of directors at a meeting may nominate persons for
election as directors only if written notice of such stockholder's intent
to make such nomination is given, either by personal delivery or by U.S.
mail, to the Secretary of the Company at the main office of the Company not
later than (i) with respect to an election to be held at any annual meeting
of stockholders, 20 days in advance of such meeting, and (ii) with respect
to an election to be held at a special meeting of stockholders for the
election of directors, the close of business on the seventh day following
the date on which notice of such meeting is first given to the
stockholders. Each notice shall set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons
to be nominated; (b)a representation that such stockholder is a holder of
record of stock of the Company entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (c) a description of all arrangements or
understandings between such stockholder and each nominee and any other
person or persons (naming such person(s)) pursuant to which the
nomination(s) are to be made by such stockholder; (d) such other
information regarding each nominee proposed by such stockholder as would
have been required to be included in a proxy statement filed pursuant to
the proxy rules promulgated by the Commission had each nominee been
nominated or intended to be nominated by the Board of Directors; and (e)
the consent of each nominee to serve as a director of the Company if so
elected. The Chairman of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing
provisions.
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The names of, and certain information with respect to, each of the
persons nominated for election as the Class 1 directors are as follows:
Director Principal Occupation
Name and Age Since for the Past Five Years
- ------------ -------- ---------------------------------
Martin Steinberg, 66 1998 Independent consultant. Mr.
Steinberg also served as a director
of the Company from May 1974 to
January 1991.
Kishore Lall, 51 1997 Director of the Company since
October 1997; consultant to Red
Apple Group, Inc. from January 1997
to October 1997; private investor
from June 1994 to December 1996;
Senior Vice President and Head of
Commercial Banking of ABN AMRO
Bank, New York branch from January
1991 until May 1994.
OTHER DIRECTORS AND EXECUTIVE OFFICERS
The names of, and certain information with respect to, the two Class 2
directors (whose terms expire at the 2000 Annual Meeting) and the two Class
3 directors (whose terms expire at the 2001 Annual Meeting) are as follows:
Director Principal Occupation
Name and Age Since for the Past Five Years
- ------------ -------- ---------------------------------
Class 2
- -------
Martin Bring, 56 1988 Member of the law firm of Wolf,
Block, Schorr and Solis-Cohen LLP,
New York, New York and predecessor
firm for more than five years.
Frederick Selby, 61 1978 Chairman of Selby Capital Partners
(acquisition and sale of privately
owned firms and divisions of
public companies) for more than
five years.
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Director Principal Occupation
Name and Age Since for the Past Five Years
- ------------ -------- ---------------------------------
Class 3
- -------
John A. Catsimatidis, 50 1988(1) Chairman of the Board,President
and Chief Executive Officer of the
Company since July 29, 1988;
Treasurer of the Company from July
28, 1988 to March 17, 1998;
President and Chief Executive
Officer of Red Apple Group, Inc. (a
private diversified holding
company) and Chairman of the Board
and Chief Executive Officer and
Director of United Refining Company
(a refiner and retailer of
petroleum products) for more than
five years; Director of News
Communications Inc., a public
company whose stock is traded
over-the-counter, since December
4, 1991.
Dennis E. Berberich, 60 ---- Independent consultant. Prior to
January 1999, President of Canada
Dry Bottling Company of New York, a
privately held soft drink
distributor, for more than ten
years.
- -------------------
(1) Mr. Catsimatidis also served as a director of the Company
from November 4, 1986 to November 27, 1987.
The other executive officers of the Company are Stuart Spivak and
Michael Seltzer. Mr. Spivak, age 62, has been Executive Vice President and
Chief Financial Officer of the Company since March 1998 and was Chief
Financial Officer of various corporations which were acquired by the
Company by merger in November 1997 (the "Food Group") for more than ten
years prior thereto. Mr. Seltzer, age 49, has been Vice President and
Secretary of the Company since March 1998 and was Vice President and
Controller of the Food Group for more than ten years prior thereto.
Meetings of Board of Directors and Committees
The Board of Directors met two times during the fiscal year ended
November 29, 1998 ("Fiscal 1998") and acted three times by unanimous
written consent of the directors during Fiscal 1998. All incumbent
directors (other than Martin Bring and Dennis Berberich, each of whom
missed one meeting), attended all meetings.
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The Board of Directors has a Compensation Committee, a Stock Option
Committee and an Audit Committee. Frederick Selby, Martin Steinberg and
Dennis Berberich are the members of each of the foregoing committees. The
Compensation Committee and the Stock Option Committee did not meet during
Fiscal 1998. The Audit Committee met once during Fiscal 1998.
The function of the Audit Committee is to periodically review the
conduct and scope of the audit of the Company's financial statements by its
independent certified public accountants, to review the conduct of
management of the Company in connection with such audit, and at such time
as in the opinion of the Audit Committee, the scope of the business of the
Company shall require it, to establish an internal audit committee for the
Company. The Company does not have a nominating committee of the Board of
Directors or committee performing similar functions.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires directors and officers of the Company and persons
who own more than 10 percent of the Company's Common Stock to file with the
Securities and Exchange Commission (the "Commission") initial reports of
ownership and reports of changes in ownership of the common stock.
Directors, officers and more than 10 percent stockholders are required by
the Exchange Act to furnish the Company with copies of all Section 16(a)
forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no
other reports were required during Fiscal 1998, all Section 16(a) filings
applicable to its directors, officers and more than 10 percent beneficial
owners were timely filed.
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EXECUTIVE COMPENSATION
The following table sets forth for Fiscal 1998, the nine month transition
period from March 3, 1997 to November 30, 1997 (the "Transition
Period") and the fiscal year ended March 2, 1997 certain information
concerning the compensation paid or accrued to the Chief Executive Officer
of the Company. During these periods, there were no persons serving as
executive officers of the Company whose total salary and bonus exceeded
$100,000.
<TABLE>
<CAPTION>
Long-term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------------- ---------------
Other All
annual Restricted Other
Name and Compen- Stock Options LTIP Compen-
pricipal Salary Bonus sation award(s) /Sar's payouts sation
position Year ($) ($) ($) ($) (#) ($) ($)
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
John Catsimatidis, 1998 100,000 $- $- $- - - -
Chairman of the Transition - - - - - - -
Board, President Period from
and Chief March 3, 1997
Executive to November
Officer 30, 1997
1997 - - - - - - -
=======================================================================================
</TABLE>
Stock Options
No stock options were granted to or exercised by Mr. Catsimatidis during
Fiscal 1998. The following table sets forth certain information with
respect to options to purchase Common Stock held by John Catsimatidis on
November 29, 1998.
Number of Unexercised Value of Unexercised
Options Held on in-the-Money Options on
November 29, 1998 November 29, 1998
--------------------- -----------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
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John Catsimatidis 525,000/0 0/0
===========================================================================
The closing sales price of the Common Stock on the American Stock
Exchange on November 25, 1998 (the last trading day before November 29,
1998) was $2.31. On November 29, 1998 Mr. Catsimatidis held options to
purchase 275,000 shares of Common Stock at $3.75 per share and options to
purchase 250,000 shares at $2.875 per share.
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Compensation of Directors
Non-officer directors receive a quarterly stipend of $1,500 and $500
for each meeting attended. Directors who serve on committees receive $500
for each meeting attended. On April 15, 1999 certain non-officer directors
of the Company were granted options to purchase an aggregate of 100,000
shares at an exercise price of $1.875 per share. Such options shall become
exercisable in equal installments on the first, second and third anniversaries
of the date of grant.
Compensation Committee Interlocks and Insider Participation
The Board of Directors has a Compensation Committee of which Frederick
Selby was the only member during Fiscal 1998 (Messrs. Martin Steinberg and
Dennis Berberich were appointed as members on April 15, 1999). Mr. Selby
is not and has never been an employee or officer of the Company. Since the
beginning of Fiscal 1998 Mr. Selby has had no relationship with the Company
requiring disclosure under applicable Commission disclosure rules.
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Philosophy. The Company's executive compensation philosophy is to provide
competitive levels of compensation, integrate management's pay with the
achievement of the Company's annual and long-term performance goals, reward
above average corporate performance, recognize individual initiative and
achievement, and assist the Company in attracting and retaining qualified
management. Executive compensation consists of base salary and long term
incentive compensation in the form of stock options. The compensation of
the Company's executive officers is reviewed and approved by the Compensation
Committee, which is composed entirely of non-employee directors. Management
compensation is intended to be set at levels that the Compensation Committee
believes is consistent with others in the Company's industry.
In reviewing compensation levels of the Company's key executives, the
Compensation Committee considers, among other items, corporate
profitability on an absolute basis as well as relative to budget; previous
years' and competitors' profitability; revenues; and the quality of the
Company's services. No specific weight is accorded to any single factor.
Relative weights differ from executive to executive and change from time to
time as circumstances warrant.
Base Salaries. Base salaries for new management employees are determined
initially by evaluating the responsibilities of the position held and the
experience of the individual, and by reference to the competitive marketplace
for managerial talent. Salary adjustments are determined by evaluating
the performance of the executive and any increased responsibility assumed
by the executive, the competitive marketplace and the performance of the
Company.
Equity Ownership. The Company established a stock option plan for its key
employees in October 1994 and in March 1998 the Board of Directors approved
the 1998 Option Plan for key employees, directors and consultants. In
April 1999 the Board of Directors approved an amendment to the 1998 Option
Plan to increase the number of shares of stock reserved under the plan from
500,000 to 1,500,000, which amendment is subject to stockholder approval at
this Annual Meeting. The Compensation Committee believes that equity
ownership by management is a means of aligning management's and
stockholders' interests in the enhancement of stockholder value. A Stock
Option Committee consisting solely of non-employee directors serves as the
stock option committee under the 1994 Stock Option Plan and the 1998 Option
Plan. The purpose of the Stock Option Committee is to administer the plans.
Compensation of Chief Executive Officer. Mr. Catsimatidis is the
principal stockholder of the Company and from August 1991 to November 10, 1997
served the Company without receiving a salary. During the fiscal year
ended March 2, 1997, the period from March 3, 1997 to November 9, 1997,
Mr. Catsimatidis received no compensation from the Company. Since
November 10, 1997 Mr. Catsimatidis has been earning a salary at the rate of
$100,000 per year.
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COMPARATIVE PERFORMANCE BY THE COMPANY
The Securities and Exchange Commission requires the Company to present a
chart comparing the cumulative total stockholder return on its Common Stock
with the cumulative total stockholder return of (i) a broad equity market
index and (ii) a published industry index or "peer group." This chart
compares for the period from February 28, 1994 to November 27, 1998, the
cumulative total stockholder return on the Common Stock with (i) the
American Stock Exchange Market Value Index and (ii) the Media General
Industry Group 511 Index - Retail Trade -Food Stores (the "MG Industry
Index"), and assumes an investment of $100 on February 28, 1994 in
each of the Common Stock, the stocks comprising the American Stock Exchange
Market Value Index and the stocks comprising the MG Industry Index. The total
return for each of the Company's Common Stock, the American Stock Exchange
Market Value Index and the MG Industry Index assumes there investment of
all dividends (although no dividends were declared on the Company's Common
Stock during such period). Each index is adjusted for additions and
deletions of securities from the index.
Gristede's Sloan's Inc. AMEX Market Index MG Group Index
- --------------------------------------------------------------------------
February 28, 1994 100.00 100.00 100.00
February 24, 1995 65.67 91.73 97.50
March 1, 1996 52.30 111.07 120.76
February 28, 1997 44.18 118.34 156.08
November 28, 1997 32.46 132.64 177.57
November 27, 1998 33.36 131.03 238.61
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Under a Management Agreement, dated November 10, 1997 (the "Management
Agreement"), Namdor Inc., a subsidiary of the Company, performs consulting
and managerial services for three supermarkets owned by corporations
controlled by John Catsimatidis. In consideration of such services, Namdor
Inc. is entitled to receive on a quarterly basis a cash payment of one and
one-quarter (1.25%) percent of all sales of inventory and merchandise made
at or from the managed supermarkets. During Fiscal 1998 management fee
income was $ 119,000.
On February 6, 1998 the Company purchased substantially all of the assets
and assumed certain of the liabilities of a supermarket located at 1644
York Avenue, New York, New York owned by a corporation controlled by
John Catsimatidis. The purchase price is to be the value of the
supermarket based upon an appraisal to be conducted by a firm selected by a
committee of independent directors of the Company less the amount of
certain liabilities assumed by the Company. The appraisal will be based
on, among other things, a review of the operating statement of the
supermarket for the period from February 6, 1998 to a date no earlier than
January 31, 1999. The purchase price will be subject to adjustment to the
extent that the acquired inventory is greater or less than the sum of trade
payables and liabilities for employee vacation and sick pay that have been
assumed by the Company. The purchase price will be paid at such time and
by such method as shall be recommended by a committee of the independent
directors of the Company and approved by the Board of Directors of the
Company, John Catsimatidis abstaining.
In consideration of accommodations extended to the Company by H.S.
Realty Corp. ("H.S. Realty"), a corporation wholly owned by John
Catsimatidis which enabled the Company to consummate the sale of assets of
the Company's Howard H. Sweet & Son Inc. subsidiary ("Sweet") to Tiffco
Jewelry and Chain Crafts, Inc. ("Tiffco"), on January 23, 1990, the
Company, among other things, advanced to H.S. Realty approximately $204,000.
The $204,000 advance was originally to be repayable on the earlier
of January 23, 1991 or five days after the sale by H.S. Realty to Tiffco of
certain real property leased to Tiffco by H.S. Realty after the sale of
assets. Since January 23, 1991, the Board of Directors has extended the
repayment date of the advance on an annual basis, the most recent extension
being until January 23, 1999 or five days after the sale by H.S. Realty to
Tiffco of the Sweet Property. Such indebtedness was fully repaid during
Fiscal 1998.
Effective as of January 1, 1994, the Company entered into Indemnification
Agreements with each of its then directors and officers. The Company
entered into an Indemnification Agreement with Kishore Lall effective as of
October 30, 1997, and also entered into Indemnification Agreements with
each of Stuart Spivak, and Michael Seltzer effective March 17, 1998,
Martin Steinberg effective July 21, 1998 and Dennis Berberich effective
August 18, 1998. Said agreements supplement the indemnification provisions
of the Company's By-laws and the Delaware General Corporation Law. The
stockholders of the Company authorized the Company to enter into such
agreements with each of its directors at the Annual Meeting of Stockholders
held on August 21, 1987. The Board of Directors has authorized the Company
to enter into such agreements with each of its officers.
C & S Acquisition Corp. (formerly, Red Apple Leasing, Inc.,) a
corporation wholly owned by John Catsimatidis, leases equipment to the
Company. Such leases are primarily for store operating equipment.
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<PAGE>
Obligations under capital leases at November 29, 1998 were $821,305 and
require monthly payments of $35,114 through March 1, 2001. Obligations
under operating leases were $41,676 per month during Fiscal 1998.
Advertising services are provided to the Company by an affiliated
company, MCV Advertising Associates Inc. For Fiscal 1998 the costs
incurred were $1,072,544.
On March 1, 1999, John Catsimatidis issued a limited $1,000,000 guarantee
of the collection of accounts receivable assigned to the Company as a
result of the merger into subsidiaries of the Company on November 10, 1997
of four corporations directly or indirectly owned by Mr. Catsimatidis (the
"Merger"). In order to cover his contingent liability, Mr. Catsimatidis
agreed not to permit the liabilities to Mr. Catsimatidis and certain of his
affiliates which were assumed by the Company in the Merger to fall below
$1,000,000 prior to the issuance of the Company's audited financial
statements for the fiscal year ending November 28, 1999. Mr. Catsimatidis
also agreed not to require the Company to repay all or any portion of the
$4,000,000 in liabilities to Mr. Catsimatidis or his affiliates which were
assumed by the Company in the Merger until November 30, 2003.
During the period from January 8, 1999 to June 3, 1999 corporations
controlled by Mr. Catsimatidis made non-interest bearing bridge loans to
the Company in the aggregate amount of $5,270,000. The loans are
repayable on demand.
By virtue of his ownership of Common Stock and his position as Chairman
of the Board of the Company, John Catsimatidis may be deemed to be a
"parent" of the Company under rules promulgated by the Securities and
Exchange Commission.
The Company leases three locations from Red Apple Real Estate, Inc., a
company solely owned by John Catsimatidis. During Fiscal 1998 the Company
paid to Red Apple Real Estate, Inc. $605,373 for rent and real estate taxes
under such leases.
Wolf, Block, Schorr and Solis-Cohen LLP, a law firm of which Martin
Bring, a director of the Company, is a member, received fees of
approximately $219,035 for rendering legal services to the Company during
Fiscal 1998.
PROPOSAL TO APPROVE THE
1998 OPTION PLAN
Summary Description of Amendment and 1998 Option Plan
On April 15, 1999, the Board of Directors adopted, subject to
stockholder approval, a resolution to amend the 1998 Option Plan to
increase from 500,000 to 1,500,000 the aggregate number of shares of Common
Stock which may be issued upon exercise of all options under the 1998
Option Plan.
The 1998 Option Plan is designed to provide long-term incentive
benefits by the grant of stock options to key employees, officers,
directors and other persons who perform services for or on behalf of
the Company. An aggregate of 1,500,000 shares are currently reserved for
issuance upon exercise of options which may be granted under the 1998
Option Plan. Currently there are approximately 60 persons that are
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<PAGE>
eligible to receive options under the 1998 Option Plan, of which 48 are
Company employees, three are executive officers, four provide services to
the Company and five are non-employee directors.
The 1998 Option Plan authorizes the issuance of incentive stock options
("ISOs"), as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") and stock options that do not qualify under that
Code section ("NSOs").
The 1998 Plan provides that it is to be administered by the Board of
Directors or by one or more committees composed solely of two or more
non-employee directors within the meaning of Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended (the "Committee").
The Board of Directors or the Committee has authority to administer and
interpret the provisions of the 1998 Option Plan; to determine when and to
whom options will be granted; whether such options will be ISOs or NSOs,
and to prescribe the terms and conditions of the options (including the
number of shares of Common Stock subject to each option, the exercise price
of the option, the number of installments, if any, in which the option may
be exercised and the duration of the option), subject to the provisions of
the 1998 Option Plan.
Options granted under the 1998 Option Plan are not transferable other
than by will or the laws of descent and distribution. In the case of an
ISO, the exercise price of each option shall not be less than 100% of the
fair market value of the underlying Common Stock on the date the ISO is
granted.
If the holder of an ISO ceases to be employed by the Company for any
reason other than such person's death or permanent disability, the ISO will
immediately become void upon such termination; provided, however, that the
option may be exercised within three months after the date the holder
ceases to be employed, but only to the extent the option was exercisable on
the date of such cessation of employment. Special provisions relating to
the termination of the option apply in the case of death or permanent
disability of the holder of an ISO. Termination of employment with the
Company by the holder of an NSO (including as a result of death or
permanent disability) will have the effect specified in the individual
option agreement as determined by the Board of Directors or the
Committee.
The purchase price for options granted under the 1998 Option Plan must
be paid in full by any one or a combination of the following methods: (i)
in cash or by certified or cashier's check payable to the order of the
Company, (ii) by cancellation of indebtedness, (iii) through the delivery
of other shares of Common Stock having an aggregate fair market value equal
to the total exercise price of the option being exercised, (iv) with the
approval of the Board of Directors or the Committee, by a promissory note
made by the optionee in favor of the Company upon the terms and conditions
to be determined by the Board of Directors or the Committee and secured by
the shares issuable upon exercise of such option, (v) through any combination
of the foregoing, or (vi) in such other manner as the Board of Directors or
the Committee may specify in order to facilitate the exercise of options by
the holders thereof.
The Board of Directors is authorized to suspend, terminate or amend the
1998 Option Plan at any time, provided that, without the consent of the
optionee, no amendment, suspension or termination shall be made that would
impair any rights or obligations of the optionee under any option
theretofore granted under the 1998 Option Plan. If stockholder approval is
required pursuant to Rule 16b-3 or any other rule or regulation under the
13
<PAGE>
Exchange Act, no amendment shall be effective unless approved by the
stockholders of the Company if such amendment shall (i) increase the
maximum number of shares which may be acquired pursuant to options under
the 1998 Option Plan, (ii) change the minimum exercise price of any option
which may be granted, (iii) increase the maximum term of any option which
may be granted or (iv) change the designation of persons eligible to
receive options under the 1998 Option Plan.
Federal Income Tax Consequences
Options granted under the 1998 Option Plan that qualify as ISOs under
Section 422 of the Code will be treated as follows:
No tax consequences will result to the optionee or the Company from the
grant of an ISO to, or the exercise of an ISO by, the optionee. Instead,
the optionee will recognize gain or loss when he sells or disposes
of the shares transferred to him upon exercise of the option. For the
purposes of determining such gain or loss, the optionee's basis in such
shares will be his option price. If the date of sale or disposition of
such shares is at least two years after the date of the grant of the ISO
and at least one year after the transfer of the shares to him upon exercise
of the option, the optionee will be entitled to long-term capital gain
treatment upon the sale or disposition.
The Company generally will not be allowed a deduction with respect to
an ISO. However, if an optionee fails to meet the foregoing holding period
requirements, any gain recognized by the optionee upon sale or disposition
of the shares transferred to him upon exercise of an ISO will be treated in
the year of such sale or disposition as ordinary income, rather than
capital gain, to the extent of the excess, if any, of the fair market value
of the shares at the time of exercise (or, if less, in certain cases the
amount realized on such sale or disposition) over their option price, and
in that case the Company will be allowed a corresponding deduction.
The amount, if any, by which the fair market value of the shares
transferred to the optionee upon the exercise of an ISO exceeds the option
price will constitute an "item of adjustment" that increases the optionee's
"alternative minimum taxable income" subject in certain circumstances to
the "alternative minimum tax." Such item of tax adjustment will increase
the optionee's basis in his stock for purposes of the alternative minimum
tax.
Options granted under the 1998 Option Plan which are NSOs will be
treated as follows:
There are no federal income tax consequences to an optionee or to the
Company upon the grant of an NSO under the 1998 Option Plan. Except as
described below, upon exercise of an NSO, the optionee will be treated as
having received ordinary income in an amount equal to the excess of the
fair market value of the Common Stock over the exercise price.
The ordinary income recognized by an optionee with respect to the
exercise of an option is subject to both wage withholding and employment
taxes. The Company will generally be entitled to a deduction for federal
income tax purposes of an amount equal to the ordinary income taxable to
the optionee upon exercise, provided that applicable income tax withholding
requirements are satisfied.
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An optionee's tax basis in the Common Stock received on exercise of
such option is equal to the amount of any cash paid on exercise plus the
amount of ordinary income recognized as a result of the receipt of such
shares. The holding period for such Common Stock generally begins on the
date of exercise or, in the case of an officer, director or beneficial
owner of more than 10% of any class of equity securities of the Company, on
the earlier of (i) six months after acquisition, or (ii) the earliest date
on which such person may sell such shares of Common Stock at a profit
without being subject to suit under Section 16(b) of the Exchange Act
(unless the optionee elects to be taxed as of the date of exercise).
If an optionee exercises an option by delivering Common Stock held by
the optionee, the optionee will recognize ordinary income (and the Company
will be entitled to an equivalent tax deduction) to the extent that the
value of Common Stock received exceeds the exercise price under the option;
however, based upon rulings issued by the Internal Revenue Service, in
general, no gain or loss should be recognized upon the transfer of such
previously acquired Common Stock to the Company upon exercise of the
option. Provided the optionee receives a separate identifiable stock
certificate therefor, the optionee's tax basis in that number of shares of
Common Stock received on such exercise which is equal to the number of
shares exchanged therefor will be equal to his tax basis in the shares of
Common Stock surrendered. Common Stock received by the optionee in excess
of the number of previously acquired shares of Common Stock surrendered
upon exercise of the option will have a tax basis equal to the amount of
ordinary income recognized in connection with such exercise. The holding
period for such additional shares will commence on the date ordinary income
is recognized.
On the disposition of Common Stock received upon exercise of an option,
the difference between the amount realized and the tax basis of the Common
Stock will be a long-term or short-term capital gain or loss, depending on
whether the optionee held the Common Stock for the requisite holding period.
15
<PAGE>
New Plan Benefits
The following table sets forth the benefits or amounts that have been
received or allocated to each of the following under the 1998 Option Plan.
Additional benefits or amounts that may be received by or allocated to
potential participants in the 1998 Option Plan are not determinable.
Shares
of
Name and Position Dollar Value * Common Stock
- ----------------- -------------- ------------
John Catsimatidis 0 0
Chairman of the Board
and Chief Executive Officer
Executive Group 0 80,000
Non-Executive Director Group $25,000 100,000
Non-Executive Officer Employee Group 0 617,500
- ----------------------
* Based on a comparison of the closing sales price of the Common Stock on
the American Stock Exchange on June 21, 1999 ($2.125) and the exercise
price for the options granted to the person or group and assuming the
options are fully vested. On March 17, 1998, options to purchase an
aggregate of 500,000 shares of Common Stock were granted under the 1998
Option Plan at an exercise price of $2.625 per share to certain employees
of the Company and other persons. On April 15, 1999, options to purchase
an aggregate of 197,500 shares of Common Stock were granted at an exercise
price of $2.625 per share to certain employees and executive officers of
the Company and options to purchase 100,000 shares of Common Stock were
granted at an exercise price of $1.875 per share to certain directors of
the Company.
Recommendation and Requisite Vote
The Board of Directors believes that the 1998 Option Plan has
advanced the interests of the Company by providing equity incentive to
motivate and retain key employees and directors of the Company and by
further aligning the interests of said persons with those of the Company's
stockholders. As of June 21, 1999, all of the 500,000 shares of Common
Stock originally reserved under the 1998 Option Plan were subject to
outstanding options granted under the 1998 Option Plan and options to
purchase an additional 297,500 shares of Common Stock had been granted
subject to stockholder approval of the amendment to the 1998 Option Plan to
be considered at the Annual Meeting. The Board of Directors believes that
in order for the 1998 Option Plan to continue to effectively achieve its
aforementioned purposes, it is necessary to increase the number of shares
of Common Stock reserved under the 1998 Option Plan.
The affirmative vote of the holders of a majority of shares of
Common Stock present, in person or by proxy, and entitled to vote at the
Annual Meeting is required to approve the amendment to the 1998 Option Plan
to increase the number of shares reserved under the 1998 Option Plan from
500,000 to 1,500,000.
16
<PAGE>
PROPOSAL TO CHANGE
THE COMPANY'S NAME TO GRISTEDE'S FOODS, INC.
The Board of Directors has adopted a resolution to amend the
Company's Certificate in order to change the name of the Company to
Gristede's Foods, Inc. Because 31 of the Company's 41 supermarkets are
currently operated under the tradename "Gristede's," management believes that
the proposed name will be more descriptive of the business to be conducted by
the Company than its present name.
The affirmative vote of holders of a majority of the outstanding
shares of Common Stock entitled to vote thereon at the Annual Meeting
(9,818,288 shares based on 19,636,574 shares outstanding) with each share
entitled to one vote, is required for approval of the proposed amendment to
the Certificate.
The Board of Directors recommends a vote FOR the approval of the
proposed amendment to the Company's Certificate of Incorporation.
OTHER MATTERS
Any stockholder intending to submit a proposal for presentation at
the Company's next Annual Meeting of Stockholders must submit such proposal
to the Company at its executive offices by ________, 2000.
A representative of BDO Seidman, LLP is expected to be present at
the meeting and will have the opportunity to make any desired statement and
respond to appropriate questions.
The Board of Directors knows of no other matters to be brought
before this meeting. The expense of preparing, assembling and mailing this
information statement will be borne by the Company. The Company will
reimburse brokerage houses, banks and custodians for their out-of-pocket
expenses in forwarding the Notice of Annual Meeting and Information
Statement and the Company's Annual Report to Stockholders to the beneficial
owners of stock held of record.
The Company will provide to any stockholder of record at the close
of business on July 12, 1999, without charge, upon written request to its
Secretary, Michael Seltzer, a copy of the Company's Annual Report on Form
10-K for the fiscal year ended November 29, 1998.
<PAGE>
APPENDIX
AMENDED AND RESTATED
1998 STOCK OPTION PLAN
OF
GRISTEDE'S SLOAN'S, INC. (1)
1. PURPOSE
The purpose of this Stock Option Plan (the "Plan") of Gristede's
Sloan's, Inc., a Delaware corporation (the "Company"), is to secure for the
Company and its stockholders the benefits arising from stock ownership by
selected key employees of the Company or its subsidiaries, directors,
consultants or other persons ("Participants") as the Board of Directors of
the Company, or a committee thereof constituted for the purpose, may from
time to time determine. The Plan will provide a means whereby (i) such
employees (including employees who are directors) may purchase shares of
the Common Stock of the Company pursuant to options that will qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") and (ii) such employees, directors,
consultants or other person may purchase shares of the Common Stock of the
Company pursuant to "non-qualified stock options."
2. ADMINISTRATION
2.1 The Plan shall be administered by the Board of Directors of the
Company (the "Board of Directors") or by one or more committees of the
Board of Directors (the "Committee") each composed solely of two or more
"Non-Employee Directors", as that term is defined in Rule 16b-3(b)(3) of
the General Rules and Regulations under the Securities Exchange Act of 1934
(the "Exchange Act"), of the Company. Any action of the Board of Directors
or the Committee with respect to administration of the Plan shall be taken
by a majority vote or written consent of its members. No person on the
Board of Directors or Committee shall participate in any matter pertaining
to him.
2.2 Subject to the provisions of the Plan, the Board of Directors or
the Committee shall have authority (i) to construe and interpret the Plan,
(ii) to define the terms used therein, (iii) to prescribe, amend and
rescind rules and regulations relating to the Plan, (iv) to determine the
____________________
(1) The original Plan was approved by the Board of Directors of the
Company on March 17, 1998 and ratified by the stockholders of the
Company on August 18, 1998. An amendment to the original Plan
to increase from 500,000 to 1,500,000 the aggregate number of shares
of the Company's Common Stock which may be issued upon exercise of
All options under the Plan was approved by the Board of Directors on
April 15, 1999 [and the stockholders on August 12, 1999].
<PAGE>
individuals to whom and the time or times at which options shall be
granted, whether any options granted will be incentive stock options or
non-qualified stock options, the number of shares to be subject to each
option, the exercise price of an option, the number of installments, if
any, in which each option may be exercised, and the duration of each
option, (v) to approve and determine the duration of leaves of absence
which may be granted to Participants without constituting a termination of
their employment for the purposes of the Plan, and (vi) to make all other
determinations necessary or advisable for the administration of the Plan.
All determinations and interpretations made by the Board of Directors or
the Committee shall be binding and conclusive on all Participants in the
Plan and their legal representatives and beneficiaries.
3. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Pararaph 14 hereof, the shares
to be issued under the Plan shall consist of the Company's Common Stock.
The aggregate number of shares of common stock, par value $.02 per share of
the Company ("Shares") which may be issued upon exercise of all options
under the Plan shall not exceed 1,5000,000, subject to adjustment as
provided in Paragraph 14. If any option granted under the Plan shall
expire or terminate for any reason, without having been exercised in full,
the unpurchased shares subject thereto shall again be available for options
to be granted under the Plan.
4. ELIGIBILITY AND PARTICIPATION
4.1 All regular salaried employees of the Company or any subsidiary
corporation (as defined in Section 424(f) of the Code) shall be eligible to
receive incentive stock options and non-qualified stock options. Directors
of the Company or any subsidiary corporation, consultants and other persons
who are not regular salaried employees of the Company or any subsidiary
corporation are not eligible to receive incentive stock options, but are
eligible to receive non-qualified stock options.
4.2 No incentive stock options may be granted to any employee who,
at the time the incentive stock option is granted, owns shares possessing
more than ten percent of the total combined voting power of all classes of
stock of the Company (or of its subsidiary corporations as defined in
Section 424(f) of the Code), unless the exercise price of such incentive
stock option is at least one hundred ten percent of the fair market value
of the Common Stock, determined by fair market value as of the date each
respective option is granted in accordance with Paragraph 7, and such
incentive stock option by its terms is not exercisable after the expiration
of five years from the date such incentive stock option is granted. In
addition, and anything to the contrary contained in this Plan
notwithstanding, no employee of the Company shall be granted in any
calendar year options to purchase more than 100,000 Shares.
4.3 The aggregate fair market value of the Common Stock for which
incentive stock options granted to any one employee under this Plan or any
2
<PAGE>
other incentive stock option plan of the Company which may by their terms
first become exercisable during any calendar year shall not exceed
$100,000, determined by fair market value as of the date each respective
option is granted.
4.4 All options granted under the Plan shall be granted within ten
years from March 17, 1998.
5. DURATION OF OPTIONS
Each option and all rights associated therewith shall expire on such
date as the Board of Directors or the Committee may determine, but in no
event later than ten years from the date on which the option is granted,
and shall be subject to earlier termination as provided herein.
6. PRICE AND EXERCISE OF OPTIONS
6.1 Subject to Paragraph 4.2, the purchase price of the Common
Stock covered by each option shall be determined by the Board of Directors
or the Committee, but in the case of an incentive stock option shall not be
less than one hundred percent of the fair market value of such Common Stock
on the date the incentive stock option is granted. The purchase price of
the Common Stock upon exercise of an option shall be paid in full at the
time of exercise (i) in cash or by certified or cashier's check payable to
the order of the Company, (ii) by cancellation of indebtedness owed by the
Company to the Participant, (iii) by delivery of shares of Common Stock of
the Company already owned by, and in the possession of the Participant,
(iv) if authorized by the Board of Directors or the Committee or if
specified in the option being exercised, by a promissory note made by the
Participant in favor of the Company, subject to terms and conditions
determined by the Board of Directors or the Committee, secured by the
Common Stock, issuable upon exercise, and in compliance with applicable law
(including, without limitation, state, corporate and federal requirements),
(v) by any combination thereof, or (vi) in such other manner as the Board
of Directors or the Committee may specify in order to facilitate the
exercise of options by the holders thereof. Shares of Common Stock used to
satisfy the exercise price of an option shall be valued at their fair
market value determined in accordance with Paragraph 7 hereof.
6.2 No option granted under this Plan shall be exercisable if such
exercise would involve a violation of any applicable law or regulation
(including without limitation, federal and state securities laws and
regulations). Each option shall be exercisable in such installments during
the period prior to its expiration date as the Board of Directors or
Committee shall determine; provided, however, that unless otherwise
determined by the Board of Directors or Committee, if the Participant shall
not in any given installment period purchase all of the shares which the
Participant is entitled to purchase in such installment period, then such
Participant's right to purchase any shares not purchased in such
installment period shall continue until the expiration date or sooner
termination of the Participant's option. No option may be exercised for a
fraction of a share and no partial exercise of any option may be for less
than ten shares.
3
<PAGE>
7. FAIR MARKET VALUE OF COMMON STOCK
The "Fair Market Value of a Share of Common Stock" of the Company
shall be defined and determined as follows:
(a) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation
the National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("Nasdaq") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such system or
exchange (or the exchange with the greatest volume of trading in Common
Stock) on the date of grant, as reported in The Wall Street Journal or such
other source as the Board deems reliable;
(b) If the Common Stock is quoted on Nasdaq (but not on the
National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, 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 Board deems reliable, or;
(c) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the Board.
8. WITHHOLDING TAX
Upon (i) the disposition of shares of Common Stock acquired pursuant
to the exercise of an incentive stock option granted pursuant to the Plan
within two years of the granting of the incentive stock option or within
eighteen months after exercise of the incentive stock option, or (ii) the
exercise of a non-qualified stock option, the Company shall have the right
to require such employee or other person, and such employee or other
person, by accepting the options granted under the Plan agrees, to pay the
Company the amount of any taxes which the Company may be required to
withhold with respect thereto. In the event of (i) or (ii), then such
employee or other person may elect to pay the amount of any taxes which the
Company may be required to withhold by delivering to the Company shares of
the Company's Common Stock having a fair market value determined in
accordance with Paragraph 7 equal to the withholding tax obligation
determined by the Company. Such shares so delivered may be either shares
withheld by the Company upon the exercise of the option or other shares.
Such election shall comply with all applicable laws (including without
limitation, state, corporate and federal requirements).
9. NONTRANSFERABILITY
An option granted under the Plan shall, by its terms, be
nontransferable by the holder either voluntarily or by operation of law,
4
<PAGE>
other than by will or the laws of descent and distribution and shall be
exercisable during the holder's lifetime only by the holder, regardless of
any community property interest therein of the spouse of the holder, or
such spouse's successors in interest. If the spouse of the holder shall
have acquired a community property interest in an option, the holder, or
the holder's permitted successors in interest, may exercise the option on
behalf of the spouse of the holder or such spouse's successors in interest.
10. HOLDING OF STOCK AFTER EXERCISE OF OPTION
Shares shall not be issued pursuant to the exercise of an option
unless the exercise of such option and the issuance and delivery of such
Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, state
securities laws, and the requirements of any stock exchange on which the
Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of
any such exercise 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
by any of the aforementioned relevant provisions of law.
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.
11. TERMINATION OF EMPLOYMENT
If a holder of an incentive stock option ceases to be employed by
the Company or one of its subsidiary corporations (as defined in Section
424(f) of the Code) for any reason other than the holder's death or
permanent disability (within the meaning of Section 22(e)(3) of the Code),
the holder's incentive stock options shall immediately become void and of
no further force or effect; provided, however, that within three months
after the date the holder ceases to be an employee of the Company or such
subsidiary such incentive stock option may be exercised to the extent
exercisable on the date of such cessation of employment. A leave of
absence approved in writing by the Board of Directors or the Committee
shall not be deemed a termination of employment for the purposes of this
Paragraph 11, but no incentive stock option may be exercised during any
such leave of absence, except during the first three months thereof.
Termination of employment or other relationship with the Company by the
holder of a non-qualified stock option will have the effect specified in
the individual option agreement or certificate of grant as determined by
the Board of Directors or the Committee.
12. DEATH OR PERMANENT DISABILITY OF OPTION HOLDER
5
<PAGE>
If the holder of an incentive stock option dies or becomes
permanently disabled while the option holder is employed by the Company or
one of its subsidiary corporations (as defined in Section 424(f) of the
Code), the holder's option shall expire one year after the date of such
death or permanent disability unless by its terms it expires sooner.
During such period after death, such incentive stock option may, to the
extent that it remains unexercised (but exercisable by the holder according
to such option's terms) upon the date of such death, be exercised by the
person or persons to whom the option holder's right under the incentive
stock option shall pass by the option holder's will or by the laws of
descent and distribution. The death or permanent disability of a holder of
a non-qualified stock option will have the effect specified in the
individual option agreement or certificate of grant as determined by the
Board of Directors or the Committee.
13. PRIVILEGES OF STOCK OWNERSHIP
No person entitled to exercise any option granted under the Plan
shall have any of the rights or privileges of a stockholder of the Company
in respect of any shares of Common Stock issuable upon exercise of such
option until certificates representing such shares shall have been issued
and delivered. No shares shall be issued and delivered upon exercise of
any option unless and until, in the opinion of counsel for the Company
there shall have been full compliance with any applicable registration
requirements of the Act, any applicable listing requirements of any
national securities exchange on which the Common Stock is then listed, and
any other requirements of law or of any regulatory bodies having
jurisdiction over such issuance and delivery.
14. ADJUSTMENTS
14.1 If the outstanding shares of Common Stock of the Company are
increased, decreased, changed into or exchanged for a different number or
kind of shares or securities of the Company through a reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse
stock split or other similar transaction, an appropriate and proportionate
adjustment shall be made in the maximum number and kind of shares as to
which options may be granted under this Plan. A corresponding adjustment
changing the number or kind of shares allocated to unexercised options or
portions thereof, which shall have been granted prior to any such change,
shall likewise be made. Any such adjustment in the outstanding options
shall be made without change to the aggregate purchase price applicable to
the unexercised portion of the option but with a corresponding adjustment
in the purchase price for each share covered by the option.
14.2 Notwithstanding the foregoing, the Board of Directors or the
Committee may provide in writing in connection with such transaction for
any or all of the foregoing alternatives (separately or in combination):
(i) for options therefore granted to become immediately exercisable; (ii)
for the assumption by the successor corporation of the options theretofore
granted or the substitution by such corporation for such options or new
stock options covering the stock of the successor corporation, or a parent
or subsidiary thereof, with appropriate adjustments as to the number and
kind of shares and prices; and (iii) for the continuance of the Plan by
6
<PAGE>
such successor corporation in which event the Plan and the options
therefore granted shall continue in the manner and under the terms so
provided.
14.3 Adjustments under this Paragraph 14 shall be made by the Board
of Directors or Committee, whose determination as to what adjustments shall
be made, and the extent thereof, shall be final, binding and conclusive.
No fractional shares of stock shall be issued under the Plan on any such
adjustment.
15. AMENDMENT AND TERMINATION OF PLAN
15.1 The Board of Directors or the Committee may at any time
suspend or terminate the Plan. The Board of Directors or the Committee may
also at any time amend or revise the terms of the Plan, provided, however,
that if stockholder approval is required pursuant to Rule 16b-3 or another
Rule of the General Rules and Regulations under the Exchange Act, no such
amendment or revision to (i) increase the maximum number of shares which
may be acquired pursuant to options, granted under the Plan, (ii) change
the minimum purchase price set forth in Paragraph 4.2 and 6, (iii) increase
the maximum term of options provided for in Paragraph 5, or (iv) change
the designation of persons eligible to receive options or as provided in
Paragraph 4, shall become effective until such stockholder approval of such
amendment or revision is obtained.
15.2 No amendment, suspension or termination of the Plan shall,
without the consent of the holder, alter or impair any rights or
obligations under any option or theretofore granted under the Plan.
16. EFFECTIVE DATE OF PLAN
16.1 No option may be granted under the Plan unless and until (i)
the options and underlying shares have been registered under the Act and
qualified with the appropriate state regulatory agencies, or (ii) the
Company has been advised by counsel that such options and underlying shares
are exempt from such registration and/or qualification.
16.2 The Plan shall be effective as of March 17, 1998, the date on
which it was approved by the Board. However, notwithstanding any other
provisions contained herein, the Plan and all stock options granted under
the Plan shall be void if the Plan is not approved at the next Annual
Meeting of Stockholders by the holders of a majority of the outstanding
voting stock of the Company (voting as a single class) present, or
represented, and entitled to vote at a meeting of such stockholders duly
held in accordance with the Delaware General Corporation Law. No stock
option issued under the Plan shall become exercisable in whole or in part
until the Plan is so approved by stockholders.
7
<PAGE>
17. 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.
8
