<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 2, 1998
-----------
/ /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---- ----
Commission file number 1-1394
------
Edison Brothers Stores, Inc.
----------------------------
(Exact name of registrant as specified in its charter)
Delaware 43-0254900
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 N. Broadway, St. Louis, Missouri 63102
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 314-331-6000
------------
Not applicable
--------------
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report:
Common Stock, $.01 par value - 9,634,201
----------------------------------------
<PAGE> 2
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
Part I. Financial Information
Condensed Consolidated Balance Sheets as of
May 2, 1998 and January 31, 1998 1
Condensed Consolidated Statements of Operations for
the 13 weeks ended May 2, 1998 and May 3, 1997 2
Condensed Consolidated Statements of Cash Flows for
the 13 weeks ended May 2, 1998 and May 3, 1997 3
Notes to Condensed Consolidated Financial Statements 4
Management's Discussion and Analysis of Operating Results 8
and Financial Condition
Part II. Other Information II-1
Signatures
<PAGE> 3
PART I FINANCIAL INFORMATION
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
As Reorganized
---------------------------------------
ASSETS May 2, 1998 January 31, 1998
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 18.1 $ 58.2
Merchandise inventories 163.3 167.9
Other current assets 29.3 28.1
- - ---------------------------------------------------------------------------------------------------------------------------
Total Current Assets 210.7 254.2
Property and equipment, net 119.9 121.1
Reorganization value in excess of identifiable assets, net of accumulated
amortization of $1.7 and $1.0. 27.7 28.4
Other assets 37.8 39.3
- - ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $396.1 $443.0
- - ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 2.9 $ --
Merchandise accounts payable 32.2 43.2
Expense accounts payable 28.2 29.3
Other current liabilities 57.0 72.8
- - ---------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 120.3 145.3
Long-term debt 127.5 127.7
Post-retirement and other employee benefits 46.8 46.7
Other liabilities 2.1 1.6
- - ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 296.7 321.3
- - ---------------------------------------------------------------------------------------------------------------------------
Common stockholders' equity:
Common stock 0.1 0.1
Capital in excess of par value 130.5 130.5
Common stock warrants 7.0 7.0
Accumulated deficit (37.7) (15.4)
Foreign currency translation adjustment (0.5) (0.5)
- - ---------------------------------------------------------------------------------------------------------------------------
Total Common Stockholders' Equity 99.4 121.7
- - ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND COMMON STOCKHOLDERS' EQUITY $396.1 $443.0
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE> 4
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
As Reorganized Pre-Confirmation
------------------------------------------
13 Weeks Ended 13 Weeks Ended
May 2, 1998 May 3, 1997
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET RETAIL SALES $206.2 $224.0
- - -----------------------------------------------------------------------------------------------------------------------
Cost of goods sold, occupancy, and buying expenses 155.6 158.2
Store operating and administrative expenses 59.3 62.5
Depreciation and amortization 9.2 7.6
Interest expense, net 3.8 0.9
Restructuring and reorganization expenses -- 8.1
Other operating expenses 0.4 2.6
- - ----------------------------------------------------------------------------------------------------------------------
Total Expenses 228.3 239.9
- - ----------------------------------------------------------------------------------------------------------------------
Loss before income taxes (22.1) (15.9)
Income tax provision 0.2 1.1
- - ----------------------------------------------------------------------------------------------------------------------
Net loss $(22.3) $(17.0)
- - ----------------------------------------------------------------------------------------------------------------------
Net loss per basic and diluted share $(2.18) $(0.77)
- - ----------------------------------------------------------------------------------------------------------------------
Basic and diluted average shares outstanding (in thousands) 10,225 22,202
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 5
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
As Reorganized Pre-Confirmation
----------------------------------------
13 Weeks Ended 13 Weeks Ended
May 2, 1998 May 3, 1997
- - -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Loss $(22.3) $(17.0)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 9.2 7.6
Loss on disposal of fixed assets 1.2 1.7
Restructuring and reorganization expenses, non cash portion -- 2.3
Working capital changes (24.6) (20.9)
Other 1.3 (0.1)
- - -----------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING ACTIVITIES (35.2) (26.4)
- - -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7.4) (8.4)
Decrease in investments -- 68.4
Other (0.1) 0.1
- - -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTING ACTIVITIES (7.5) 60.1
- - -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term borrowings 2.9 --
Other (0.3) --
- - -----------------------------------------------------------------------------------------------------------------------
TOTAL FINANCING ACTIVITIES 2.6 --
- - -----------------------------------------------------------------------------------------------------------------------
CASH (USED) PROVIDED (40.1) 33.7
Beginning Cash and Cash Equivalents 58.2 125.6
- - -----------------------------------------------------------------------------------------------------------------------
ENDING CASH AND CASH EQUIVALENTS $ 18.1 $159.3
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 6
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions)
NOTE 1: GENERAL
The financial statements as of May 2, 1998 and May 3, 1997, of Edison Brothers
Stores, Inc. (the "Company") are unaudited, and are presented pursuant to the
rules and regulations of the Securities and Exchange Commission. Accordingly,
Notes to the Consolidated Financial Statements which are contained in the
Company's 1997 Annual Report should be read in conjunction with these Financial
Statements. In the opinion of management, the accompanying unaudited
consolidated financial statements reflect all adjustments (which are of a normal
recurring nature) necessary to present fairly the financial position, results of
operations and cash flows for the interim periods presented, but are not
necessarily indicative of the results of operations for a full fiscal year.
On November 3, 1995, Edison Brothers Stores, Inc. (the Company) and 65 of its
subsidiaries filed petitions for reorganization under Chapter 11 of the U.S.
Bankruptcy Code. An Amended Joint Plan of Reorganization (the Plan) was
confirmed by the Bankruptcy Court on September 9, 1997. The Company emerged from
Chapter 11 on September 26, 1997. During the period from November 3, 1995
through September 26, 1997, the Company conducted business as
debtor-in-possession.
Due to the Restructuring and implementation of Fresh Start Accounting, the
condensed consolidated financial statements for the new Reorganized Company
(period starting October 5, 1997) are not comparable to those of the Predecessor
Company (periods prior to October 5, 1997). For financial reporting purposes,
the effective date of the Company's emergence from bankruptcy is considered to
be the close of business on October 4, 1997.
A black line has been drawn on the accompanying condensed consolidated financial
statements to distinguish between the Reorganized Company and the Predecessor
Company.
NOTE 2: OTHER CURRENT ASSETS
Components of other current assets include:
<TABLE>
<CAPTION>
As Reorganized
------------------------------------
May 2, 1998 Jan. 31, 1998
----------- -------------
<S> <C> <C>
Prepaid expenses $15.0 $13.7
Senior note interest escrow 11.3 11.2
Other 3.0 3.2
- - --------------------------------------------------------------------------------------------------------------------------
TOTAL $29.3 $28.1
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 7
NOTE 3: OTHER ASSETS
Components of other assets include:
<TABLE>
<CAPTION>
As Reorganized
------------------------------------------
May 2, 1998 Jan. 31, 1998
----------- -------------
<S> <C> <C>
Assets held for senior note interest escrow $10.3 $10.3
Intangible assets, net of accumulated
amortization of $1.6 and $1.0 3.7 4.3
Prepaid pension expense 18.7 19.3
Other 5.1 5.4
- - --------------------------------------------------------------------------------------------------------------------------
TOTAL $37.8 $39.3
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 4: OTHER CURRENT LIABILITIES
Components of other current liabilities include:
<TABLE>
<CAPTION>
As Reorganized
------------------------------------------
May 2, 1998 Jan. 31, 1998
----------- -------------
<S> <C> <C>
Assumed prepetition reclamation $ 2.4 $ 3.0
Accrued payroll and vacations 9.5 10.2
Other taxes 15.7 28.2
Other 29.4 31.4
- - --------------------------------------------------------------------------------------------------------------------------
TOTAL $57.0 $72.8
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 5: FINANCING ARRANGEMENTS
SENIOR NOTES
Pursuant to the Plan, the Company issued senior notes in the aggregate principal
amount of $120 due on September 26, 2007 ("Senior Notes"). The Senior Notes bear
interest at a fixed rate of 11% per annum, payable semi-annually on January 31
and July 31 of each year. To secure the payment of approximately the first three
years of interest on the Senior Notes, the Company, entered into a Funding
Escrow Agreement. Additionally, the Company transferred assets held for sale
into the escrow account established pursuant to the Funding Escrow Agreement.
The Senior Notes may be redeemed, at the option of the Company, in increments of
not less than $5 at the following Redemption Prices (expressed as percentages of
the principal amount):
September 26, 1997 through June 30, 1998 100% of par
July 1, 1998 through June 30, 1999 104% of par
July 1, 1999 through June 30, 2000 103% of par
July 1, 2000 through June 30, 2001 102% of par
July 1, 2001 through June 30, 2002 101% of par
July 1, 2002 through September 26, 2007 100% of par
In the event there occurs a change in control (as defined in the Trust Indenture
and First Supplemental Trust Indenture (together, the "Indenture") pursuant to
which the Senior Notes were issued), each holder of Senior Notes may, at the
option of the holder, require the Company to repurchase all or any of such
holder's Senior Notes at a price equal to 101% of par plus accrued interest. In
the event the Company makes extraordinary asset sales (as defined in the
5
<PAGE> 8
Indenture) and if the net proceeds thereof not otherwise required to be paid to
other lenders exceeds $5, 50% of such net sale proceeds must be used to pay
principal under the Senior Notes.
The Indenture limits, without prior consent, the incurrence of new indebtedness
and liens, disposition of assets and the payment of dividends. As of May 2,
1998, the Company was in compliance with these covenants.
CREDIT FACILITY
At the Emergence Date, the Company entered into a loan agreement with Congress
Financial Corporation, as agent (the "Agent") and the CIT Group/Business Credit,
Inc. as co-agent for a $200 revolving credit facility secured by inventory and
other related assets, to fund ongoing working capital needs and to provide
letter of credit financing (the "Credit Facility"). The Credit Facility has a
sublimit of $150 for the issuance of letters of credit. The Credit Facility is
intended to provide the Company with the cash and liquidity to conduct its
operations and expires on September 26, 2002.
At the Company's option, the Company may borrow under the Credit Facility at the
Prime Rate (as defined in the Credit Facility), or at the Eurodollar Rate (as
defined in the Credit Facility) plus 2.25%. The borrowing rate as of May 2, 1998
was 8.5%.
The maximum borrowing, up to $200, is limited to 60% of the value of eligible
inventory (as defined in the Credit Facility) or 85% of the Net Recovery Cost
Percentage of the inventory (as defined in the Credit Facility) multiplied by
the cost of eligible inventory, plus 95% of the aggregate amount of cash held by
the Agent as collateral, less any availability reserves established by the
Agent. During the period commencing August 1 through and including December 15
of each year, the borrowing limit calculation uses 70% of eligible inventory and
100% of the Net Recovery Cost Percentage.
The Company is required to pay an unused line fee of .375% per annum.
The Credit Facility, as amended, contains various covenants including a
limitation on store closings, limitations on the incurrence of additional liens
and indebtedness, limitations on sales of assets, required minimum adjusted net
worth, as defined, and a prohibition on paying dividends.
As of May 2, 1998, $2.9 was outstanding under the Credit Facility. Outstanding
letters of credit were $66.6 and available borrowings, before availability
reserves established by the Agent, if any, under the Credit Facility, were
$51.0.
NOTE 6: RESTRUCTURING AND REORGANIZATION EXPENSES
In accordance with SOP 90-7, expenses resulting from the Chapter 11
reorganization are reported separately as restructuring and reorganization
expenses in the condensed consolidated statements of operations. These amounts
are summarized below.
<TABLE>
<CAPTION>
13 Weeks Ended
May 3, 1997
-----------
<S> <C>
Legal and consulting fees $4.7
Estimated costs of store closings 2.4
Payroll and related expenses 2.1
Interest income (2.2)
Other 1.1
---------------------------------------------------------------
TOTAL $8.1
---------------------------------------------------------------
</TABLE>
6
<PAGE> 9
NOTE 7: INCOME TAXES
The effective tax rate of 0.1% of the pre-tax loss for the 13 weeks ended May 2,
1998, differs from the Company's customary relationship between the income tax
provision and pre-tax accounting loss. The difference is due to the uncertainty
of the Company producing future taxable income that will be available to absorb
net operating loss carry-forwards. Accordingly, no tax benefit relative to
current operating results has been recorded, since the Company has concluded
that it likely will not be able to realize its deferred tax assets. The
provision for the 13 weeks ended May 2, 1998 of $0.2 on the 1998 condensed
consolidated statements of operations relates to state taxes and foreign
operations of the Company.
The Company has net operating loss carryforwards for federal income tax purposes
of approximately $71.4 available (with certain annual limits) to offset future
taxable income of the reorganized company. These carryforwards will expire over
various periods through the year 2013.
The Company is currently undergoing an examination by the Internal Revenue
Service ("IRS") of its income tax returns for 1992 through 1996. Also, the IRS
has asserted deficiencies against the income tax returns of the Company for the
tax years 1986 through 1991, which the Company is contesting. The Company
believes that the ultimate resolution of these matters will not have a material
adverse impact on its financial condition.
NOTE 8: EARNINGS (LOSS) PER SHARE
Net income (loss) per common share is based on the weighted average common
shares outstanding during each period. The Company reported a loss for all
periods presented and, therefore, shares issuable under stock option plans are
antidilutive.
NOTE 9: COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board (FASB) adopted Statement
of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and disclosure of
comprehensive income and its components. Effective February 1, 1998, the Company
adopted SFAS No. 130. For the periods ended May 2, 1998 and May 3, 1997,
comprehensive loss was $22.3 and $17.0, respectively. The Company's other
comprehensive income consists solely of cumulative translation adjustments and
had no impact on the financial statements for the periods ended May 2, 1998 and
May 3, 1997.
NOTE 10: NEW ACCOUNTING PRONOUNCEMENTS
In February 1998, the FASB adopted SFAS No. 132, "Employer's Disclosures about
Pensions and Other Postretirement Benefits," which establishes reporting
requirements related to a business' pensions and other postretirement benefits.
SFAS No. 132 is effective for fiscal years beginning after December 15, 1997,
and does not apply to interim financial statements in the year of adoption. The
Company will adopt SFAS No. 132 for the fiscal year ended January 30, 1999.
In June 1997, the FASB adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes reporting requirements
related to a business' operating segments, products and services, geographic
areas of operations and major customers. SFAS No. 131 is effective for fiscal
years beginning after December 15, 1997, and does not apply to interim financial
statements in the year of adoption. The Company will adopt SFAS No. 131 for the
fiscal year ended January 30, 1999. The Company does not expect SFAS No. 131 to
have a significant impact on its Consolidated Financial Statements and the
related disclosures.
7
<PAGE> 10
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in Millions)
On November 3, 1995, Edison Brothers Stores, Inc. (the Company) and 65 of its
subsidiaries filed petitions for reorganization under Chapter 11 of the U.S.
Bankruptcy Code. An Amended Joint Plan of Reorganization (the Plan) was
confirmed by the Bankruptcy Court on September 9, 1997. The Company emerged from
Chapter 11 on September 26, 1997. During the period from November 3, 1995
through September 26, 1997, the Company conducted business as
debtor-in-possession.
OPERATING RESULTS
Net sales for the first quarter of 1998 were $206.2 million, a decrease of 7.9%
from the comparable period of 1997. The decrease reflected an 8.8% decrease in
the average number of stores in operation between the first quarter of 1997 and
first quarter of 1998. Same-store sales declined 2.4%.
Cost of goods sold, including occupancy and buying expenses, was 75.5% of sales
for the first quarter of 1998 compared to 70.6% for the comparable period in
1997. This increase of 4.9% as a percentage of sales was primarily due to higher
cost of goods sold. Markdowns as a percentage of sales were higher for all
chains during the first quarter of 1998 as the Company initiated an aggressive
markdown program to clear older merchandise at the end of the quarter.
Store operating and administrative expenses increased to 28.8% of sales in the
first quarter of 1998 from 27.9% for the same period in 1997. Store operating
and administrative expenses in the first quarter of 1998 decreased $3.2 million
compared to the first quarter of 1997, but increased as a percentage of sales.
In addition to the recent reorganization of field management, the Company has
centralized the planning and allocation, merchandising support and marketing
functions rather than performing these functions separately by chain. The
Company expects to realize savings from these changes beginning in the second
quarter of this year.
Depreciation and amortization expense increased $1.6 million or 21.1% in the
first quarter of 1998 as compared to 1997 primarily due to amortization of the
reorganization value in excess of identifiable assets and favorable lease rights
recorded by the Company's adoption of Fresh Start Accounting and depreciation on
the $41 in capital expenditures incurred in 1997.
Restructuring and reorganization expenses of $8.1 million were incurred in the
first quarter of 1997 for early lease termination costs and write-offs of
fixtures and equipment and discontinued operations, legal and consulting fees,
severance payroll and related fringe benefits, and other bankruptcy related
expenses, offset by interest income while the Company was in bankruptcy.
8
<PAGE> 11
FINANCIAL CONDITION
Liquidity and Capital Resources
The Company's principal short-term cash needs are for inventory expenditures
during both normal and peak selling times. The Company experiences a significant
increase in sales during the Christmas selling season (Thanksgiving through
Christmas). This selling season generally accounts for approximately 14% of
annual sales. The Company funds the short-term cash needs during normal and peak
periods through a combination of cash flows provided by operations, normal trade
credit arrangements and the Credit Facility.
The Company has a credit facility totaling $200 million subject to certain
limitations on the value of inventory (as defined in the Credit Facility) with a
sublimit of $150 million for the issuance of letters of credit. See Note 5 of
the Notes to Condensed Consolidated Financials. At May 2, 1998, the Company had
outstanding borrowings of $2.9 million, outstanding letters of credit of $66.6
million and available borrowings of $51.0 million.
Cash and cash equivalents were $141.2 million lower at the end of first quarter
1998 compared with first quarter 1997 primarily due to the cash payments made
pursuant to the Plan. Overall, cash and cash equivalents decreased $40.1 million
since the end of fiscal 1997 as the Company used cash to fund operations and
working capital needs during the first quarter of 1998. Cash flow from
operations decreased $8.8 million during the first quarter of 1998 compared to
1997. The decrease was primarily due to the increase in the net loss and the
reduction of merchandise accounts payable consistent with the lower inventory
levels and the payment of the excise tax related to the termination of the
Company's pension plan. Merchandise inventories decreased by $43.2 million from
first quarter 1997 to first quarter 1998 due to the numerous store closings and
tighter inventory controls.
Capital Expenditures
Capital expenditures totaled $7.4 million for the first quarter 1998 compared to
$8.4 million in the first quarter 1997. These expenditures related primarily to
the remodeling of certain stores and costs incurred in connection with
implementing new information systems.
For 1998, the Company expects capital expenditures to total approximately $24
million depending primarily on the number of stores opened or remodeled. The
Company expects that capital expenditures will be funded principally by net cash
provided by operating activities and borrowings under the Credit Facility.
KNOWN TRENDS AND UNCERTAINTIES
The efficient operation of the Company's business is dependent in part on its
computer software programs and operating systems (collectively, "Programs and
Systems"). These Programs and Systems are used in several key areas of the
Company's business, including merchandise purchasing, inventory management,
pricing, sales, shipping and financial reporting, as well as in various
administrative functions. The Company has been evaluating its Programs and
Systems to identify potential "Year 2000" compliance problems. These actions are
necessary to ensure that the Programs and Systems will recognize and process the
year 2000 and beyond. It is anticipated that modification or replacement of most
of the Company's Programs and Systems will be necessary to make such Programs
and Systems "Year 2000" compliant. The Company is also communicating with
suppliers, financial institutions and others to coordinate year 2000 conversion.
Based on present information, the Company believes that it will be able to
achieve such "Year 2000" compliance through a combination of modification of
some existing Programs and Systems, and the replacement of other Programs and
Systems with new Programs and Systems that are already "Year 2000" compliant.
However, no assurance can be given that these efforts will be successful. The
Company estimates that the expenses associated with achieving "Year 2000"
compliance will be $9.5 million in 1998 and $2.9 million in 1999.
9
<PAGE> 12
The Company is currently undergoing a restructuring process, involving changes
such as the consolidation of business functions, elimination of work and
personnel reductions. This restructuring process is designed to allow the
Company to focus its resources in ways that will best enhance its prospects for
profitability and growth. The majority of these changes will be in effect by the
end of fiscal year 1998.
The Company experiences peak selling periods, such as Easter (early spring),
back-to-school (July to August), and Christmas (Thanksgiving to Christmas), with
the Christmas selling season accounting for a significant portion of the full
year sales (14% for fiscal year 1997). Sales from the recent Christmas period
and fiscal 1998 have fallen below the Company's business plan. If this sales
trend continues through the remainder of 1998, it will have a material adverse
effect on operating results.
This Report contains "forward-looking statements" within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended. The words "anticipate,"
"believe," "expect," "will," "could" and similar expressions are intended to
identify certain forward-looking statements. Such statements reflect the
Company's current views with respect to future events and financial performance
and involve risks and uncertainties, including, without limitation, the risks
described above under the caption "Known Trends and Uncertainties" and such
other risks as are described in the Company's other filings with the Securities
and Exchange Commission. Should one or more of these risks or uncertainties
occur, or should underlying assumptions prove incorrect, actual results may vary
materially and adversely from those anticipated, believed or otherwise
indicated. Consequently, all of the forward-looking statements made in this
Report are qualified by these cautionary statements.
10
<PAGE> 13
EDISON BROTHERS STORES, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
Items 1, 2, 3, 4 and 5 of Part II are not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No.
- - -----------
2 Debtors' Amended Joint Plan of Reorganization under Chapter 11
of the Bankruptcy Code, dated June 30, 1997, as modified, was
filed as an Exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended November 1, 1997 and is incorporated herein
by reference.
Amended and Restated Certificate of Incorporation of the
3.1 Company was filed as an Exhibit to the Company's Quarterly Report
on Form 10-Q for the quarter ended November 1, 1997, and is
incorporated herein by reference.
3.2 Amended and Restated Bylaws of the Company were filed as an
Exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended November 1, 1997, and are incorporated herein by
reference.
4.1 Loan and Security Agreement, dated as of September 26,
1997, by and among the Company, Edison Brothers Apparel Stores,
Inc. and Edison Puerto Rico Stores, Inc., as Borrowers, the
Guarantors named therein, the financial institutions named therein
as Lenders, Congress Financial Corporation, as Agent, and The
CITGroup/Business Credit, Inc., as Co-Agent, was filed as an
Exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended November 1, 1997, and is incorporated herein by
reference.
4.2 Amendment No. 1 to Loan and Security Agreement, dated as of April
13, 1998, by and among the Company, Edison Brothers Apparel
Stores, Inc. and Edison Puerto Rico Stores, Inc., as Borrowers,
the Guarantors named therein, the financial institutions named
therein as Lenders, Congress Financial Corporation, as Agent, and
The CIT Group/Business Credit, Inc., as Co-Agent, was filed as an
Exhibit to the Company's Annual Report on Form 10-K for the year
ended January 31, 1998 and is incorporated herein by reference.
4.3 Indenture, dated as of September 26, 1997, between the Company
and The Bank of New York, as Trustee, was filed as an Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarter ended
November 1, 1997 and is incorporated herein by reference.
4.4 First Supplemental Trust Indenture, dated as of September 26,
1997, between the Company and The Bank of New York, as Trustee,
was filed as an Exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended November 1, 1997 and is incorporated
herein by reference.
4.5 Funding Escrow Agreement, dated as of September 26, 1997, among
the Company, Edison Brothers Apparel Stores, Inc. and Mercantile
Trust Company, N.A., as Escrow Agent, was filed as an Exhibit to
the Company's Quarterly Report on Form 10-Q for the quarter ended
November 1, 1997 and is incorporated herein by reference.
II-1
<PAGE> 14
4.6 Registration Rights Agreement, dated as of September 26, 1997,
between the Company and Swiss Bank Corporation was filed as an
Exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended November 1, 1997 and is incorporated herein by
reference.
4.7 Warrant Agreement, dated as of September 26, 1997 between the
Company and ChaseMellon Shareholder Services, L.L.C., as Warrant
Agent, was filed as an Exhibit to the Company's Quarterly Report
on Form 10-Q for the quarter ended November 1, 1997 and is
incorporated herein by reference.
10.1 Form of Indemnification Agreement between the Company and each of
its Directors was filed as an Exhibit to the Company's Quarterly
Report on Form 10-Q for the quarter ended November 1, 1997 and is
incorporated herein by reference.
10.2 Edison Brothers Stores, Inc. 1997 Stock Option Plan was filed as
an Exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended November 1, 1997 and is incorporated herein by
reference.
10.3 Edison Brothers Stores, Inc. 1997 Directors Stock Option Plan,
as amended April 15, 1998, was filed as an Exhibit to the
Company's Annual Report on Form 10-K for the year ended January
31, 1998 and is incorporated herein by reference.
10.4 Edison Brothers Stores, Inc. 1998 Equity Incentive Plan.
10.5 Edison Brothers Stores, Inc. 1998 Deferred Stock Compensation
Plan for Non-Employee Directors.
10.6 Edison Brothers Stores, Inc. 1998 Restricted Stock Plan for
Non-Employee Directors.
10.7 Form of Restricted Stock Agreement, entered into by the Company
on June 4, 1997 with certain executive officers of the Company,
was filed as an Exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended November 1, 1997 and is incorporated
herein by reference.
10.8 Employment Termination Agreement, dated September 4, 1997,
between the Company and Alan D. Miller, former Chairman of the
Board, President and Chief Executive Officer of the Company, was
filed as an Exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended November 1, 1997 and is incorporated herein
by reference.
10.9 Form of Employment Agreements entered into by the Company on
September 4, 1997 with certain executive officers of the
Company, and schedule of material differences, were filed as
Exhibits to the Company's Quarterly Report on Form 10-Q for the
quarter ended November 1, 1997, and are incorporated herein by
reference.
10.10 Form of Employment Agreements entered into by the Company on
September 4, 1997 with certain other executive officers of the
Company, and schedule of material differences, were filed as
Exhibits to the Company's Quarterly Report on Form 10-Q for the
quarter ended November 1, 1997, and are incorporated herein by
reference.
10.11 Employment Agreement entered into by the Company on January 12,
1998 with Lawrence E. Honig, Chairman, President and Chief
Executive Officer of the Company, was filed as an Exhibit to the
Company's Annual Report on Form 10-K for the year ended January
31, 1998 and is incorporated herein by reference.
II-2
<PAGE> 15
27 Financial Data Schedule
(b) There were no reports filed on Form 8-K during the 13 weeks ended May 2,
1998.
II-3
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EDISON BROTHERS STORES INC.
DATE: June 15, 1998
/s/ John F. Burtelow
----------------------------
By John F. Burtelow
Executive Vice President
Chief Administrative and Chief Financial Officer
II-4
<PAGE> 1
EXHIBIT 10.4
EDISON BROTHERS STORES, INC.
1998 EQUITY INCENTIVE PLAN
1. PURPOSE. The purpose of the 1998 Equity Incentive Plan is to
attract and retain consultants, officers and other key employees for Edison
Brothers Stores, Inc., a Delaware corporation and its Subsidiaries, and to
provide to such persons incentives and rewards for superior performance.
2. DEFINITIONS. As used in this Plan,
"Board" means the Board of Directors of the Company and, to
the extent of any delegation by the Board to a committee (or subcommittee
thereof) pursuant to Section 14 of this Plan, such committee (or subcommittee).
"Change in Control" shall have the meaning provided in Section
10 of this Plan.
"Chapter 11 Case" means the case commenced by the Company on
November 3, 1995 under Chapter 11 of Title 11 of the United States Code in the
United States Bankruptcy Court in the State of Delaware (Case No. 95-1354
(PJW)).
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Common Stock" means the Common Stock, par value $0.01 per
share, of the Company authorized and issued pursuant to the terms of the plan of
reorganization of the Company under Chapter 11 of Title 11 of the United States
Code as confirmed by the Bankruptcy Court in the Chapter 11 Case or any security
into which such shares of Common Stock may be changed by reason of any
transaction or event of the type referred to in Section 9 of this Plan.
"Company" means Edison Brothers Stores, Inc., a Delaware
corporation.
"Covered Employee" means a Participant who is, or is
determined by the Board likely to become, a "covered employee" within the
meaning of Section 162(m) of the Code (or any successor provision).
"Date of Grant" means the date specified by the Board on which
a grant of Option Rights, or Performance Shares or a grant or sale of Restricted
Shares or Deferred Shares shall become effective (which date shall not be
earlier than the date on which the Board takes action with respect thereto).
"Deferral Period" means the period of time during which
Deferred Shares are subject to deferral limitations under Section 6 of this
Plan.
"Deferred Shares" means an award made pursuant to Section 6 of
this Plan of the right to receive shares of Common Stock at the end of a
specified Deferral Period.
"Director" means a member of the Board of Directors of the Company.
<PAGE> 2
"Eligible Transferee" means (i) one or more members of the
Participant's Immediate Family, (ii) one or more trusts established solely for
the benefit of one or more members of such Participant's Immediate Family, (iii)
one or more corporations or limited liability companies in which the only equity
holders are members of such Participant's Immediate Family, or (iv) one or more
partnerships in which the only partners are members of such Participant's
Immediate Family.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, as such law, rules and
regulations may be amended from time to time.
"Immediate Family" has the meaning ascribed thereto in Rule
16a-1(e) under the Exchange Act (or any successor rule to the same effect) as in
effect from time to time.
"Incentive Stock Options" means Option Rights that are
intended to qualify as "incentive stock options" under Section 422 of the Code
or any successor provision.
"Management Objectives" means the measurable performance
objective or objectives established pursuant to this Plan for Participants who
have received grants of Performance Shares or, when so determined by the Board,
Option Rights, Restricted Shares, Deferred Shares and dividend credits pursuant
to this Plan. Management Objectives may be described in terms of Company-wide
objectives or objectives that are related to the performance of the individual
Participant or of the Subsidiary, division, department, region or function
within the Company or Subsidiary in which the Participant is employed. The
Management Objectives may be made relative to the performance of other
corporations. The Management Objectives applicable to any award to a Covered
Employee shall be based on specified levels of or growth in one or more of the
following criteria:
1. market value;
2. book value;
3. earnings per share;
4. market share;
5. operating profit;
6. net income;
7. cash flow;
8. return on capital;
9. return on assets;
10. return on equity;
11. margins;
12. shareholder return;
13. sales or product volume growth;
14. quantifiable and objective productivity improvement;
15. costs or expenses;
16. net assets; or
17. debt/capital ratio.
If the Board determines that a change in the business,
operations, corporate structure or capital structure of the Company, or the
manner in which it conducts its business, or other events or circumstances
render the Management Objectives unsuitable, the Board may in its discretion
modify such Management Objectives or the related minimum acceptable level of
achievement, in whole or in part, as the Board deems appropriate and equitable,
except in the case of a Covered Employee where such action would result in the
loss of the otherwise available exemption of the award under Section 162(m) of
the
2
<PAGE> 3
Code. In such case, the Board shall not make any modification of the Management
Objectives or minimum acceptable level of achievement.
"Market Value per Share" means, as of any particular date, the
average of the highest and lowest selling prices of a share of Common Stock as
reported for that date (or, if no prices are quoted for that date, for the last
preceding date for which such prices are quoted) on the New York Stock Exchange,
or, if the Common Stock is not then listed on the New York Stock Exchange, on
such other national securities exchange on which the Common Stock is listed or,
if not so listed, then on the Nasdaq National Market. If, as of a particular
date, the Common Stock is not listed or quoted on any national securities
exchange or on the Nasdaq National Market, then the Market Value per Share of a
share of Common Stock as of such date shall be determined according to such
criteria as the Board in good faith shall deem appropriate.
"Non-Employee Director" means a person who is a "non-employee
director" within the meaning of Rule 16b-3.
"Optionee" means the optionee named in an agreement evidencing an
outstanding Option Right.
"Option Price" means the purchase price payable on exercise of an
Option Right.
"Option Right" means the right to purchase shares of Common
Stock upon exercise of an option granted pursuant to Section 4 of this Plan.
"Outside Director" means a person who is an "outside director"
within the meaning of Section 162(m) of the Code.
"Participant" means a person who is selected by the Board to
receive benefits under this Plan and who is at the time a consultant, an
officer, or other key employee of the Company or any one or more of its
Subsidiaries, or who has agreed to commence serving in any of such capacities.
"Performance Period" means, in respect of a Performance Share,
a period of time established pursuant to Section 7 of this Plan within which the
Management Objectives relating to such Performance Share are to be achieved.
"Performance Share" means a bookkeeping entry that records the
equivalent of one share of Common Stock awarded pursuant to Section 7 of this
Plan.
"Plan" means this Edison Brothers Stores, Inc. 1998 Equity
Incentive Plan.
"Restricted Shares" means shares of Common Stock granted or
sold pursuant to Section 5 of this Plan as to which neither the substantial risk
of forfeiture nor the prohibition on transfers referred to in such Section 5 has
expired.
"Rule 16b-3" means Rule 16b-3 under the Exchange Act (or any
successor rule to the same effect) as in effect from time to time.
"Subsidiary" means a corporation, company or other entity (i)
more than 50 percent of whose outstanding shares or securities (representing the
right to vote for the election of directors or other managing authority) are, or
(ii) which does not have outstanding shares or securities (as may be the case in
a partnership, joint venture or unincorporated association) but more
3
<PAGE> 4
than 50 percent of whose ownership interest representing the right
generally to make decisions for such other entity is, now or hereafter, owned or
controlled, directly or indirectly, by the Company except that for purposes of
determining whether any person may be a Participant for purposes of any grant of
Incentive Stock Options, "Subsidiary" means any corporation in which at the time
the Company owns or controls, directly or indirectly, more than 50 percent of
the total combined voting power represented by all classes of stock issued by
such corporation.
"Voting Power" means, at any time, the total votes relating to
the then-outstanding securities entitled to vote generally in the election of
Directors.
3. SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustment as
provided in Section 3(b) and Section 9 of this Plan, the number of shares of
Common Stock that may be issued or transferred (i) upon the exercise of Option
Rights, (ii) as Restricted Shares and released from substantial risks of
forfeiture thereof, (iii) as Deferred Shares, (iv) in payment of Performance
Shares that have been earned, or (v) in payment of dividend equivalents paid
with respect to awards made under the Plan, shall not exceed in the aggregate
700,000 shares of Common Stock. Such shares may be shares of original issuance
or treasury shares or a combination of the foregoing.
(b) The number of shares available in Section 3(a) above shall
be adjusted to account for shares relating to awards that expire, are forfeited
or are transferred, surrendered or relinquished upon the payment of any Option
Price by the transfer to the Company of shares of Common Stock or upon
satisfaction of any withholding amount. Upon payment in cash of the benefit
provided by any award granted under this Plan, any shares that were covered by
that award shall again be available for issue or transfer hereunder.
(c) Notwithstanding anything to the contrary in this Section 3
or elsewhere in this Plan, and subject to adjustment as provided in Section 9 of
this Plan, (i) the aggregate number of shares of Common Stock actually issued or
transferred by the Company upon the exercise of Incentive Stock Options shall
not exceed 700,000 shares of Common Stock; (ii) no Participant shall be granted
Option Rights, in the aggregate, for more than 700,000 shares of Common Stock
during any calendar year; and (iii) the number of shares issued as Restricted
Shares shall not in the aggregate exceed 200,000 shares of Common Stock.
(d) Notwithstanding any other provision of this Plan to the
contrary, in no event shall any Participant in any calendar year receive an
award of Performance Shares intended to qualify for exemption under Section
162(m) of the Code of more than 700,000 shares of Common Stock.
(e) The method of counting shares subject to the limits
described in subsection (ii) of Section 3(c) and Section 3(d) shall conform to
any requirements applicable to performance-based compensation under Section
162(m) of the Code.
4. OPTION RIGHTS. The Board may, from time to time and upon such terms
and conditions as it may determine, authorize the granting to Participants of
options to purchase shares of Common Stock. Each such grant may utilize any or
all of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
4
<PAGE> 5
(a) Each grant shall specify the number of shares of Common
Stock to which it pertains subject to the limitations set forth in Section 3 of
this Plan.
(b) (i) Except as provided in subsection (ii) of this Section
4(b), each grant shall specify an Option Price per share, which may not be less
than the Market Value per Share on the Date of Grant.
(ii) The Option Price per share of any Option Rights
granted to any executive officer of the Company in
connection with the negotiation and execution of such officer's initial
employment agreement with the Company may not be less than the lesser of (x) the
Market Value per Share on the Date of Grant, or (y) the Market Value per Share
on the date immediately prior to the date on which the Company publicly
announces such officer's agreement to commence serving as an executive officer
of the Company.
(c) Each grant shall specify whether the Option Price shall be
payable (i) in cash or by check acceptable to the Company, (ii) by the tender to
the Company of shares of Common Stock owned by the Optionee and registered in
the name of the Optionee having an aggregate fair market value on the date of
exercise equal to the total Option Price, such fair market value to be
determined based on the Market Value per Share on the date of exercise, (iii) by
delivery of irrevocable instructions to a financial institution or broker to
deliver promptly to the Company sale or loan proceeds with respect to the shares
sufficient to pay the total Option Price, (iv) through the written election of
the Optionee to have shares of Common Stock withheld by the Company from the
shares otherwise to be received, with such withheld shares having an aggregate
fair market value on the date of exercise equal to the total Option Price of the
shares being purchased, or (v) by any combination of the payment methods
specified in clauses (i) through (iv) hereof.
(d) Successive grants may be made to the same Participant
whether or not any Option Rights previously granted to such Participant remain
unexercised.
(e) Each grant shall specify the period or periods of
continuous service by the Optionee with the Company or any Subsidiary, if any,
or other conditions (including the satisfaction of Management Objectives) that
may be necessary before the Option Rights or installments thereof will become
exercisable and may provide for the earlier exercise of such Option Rights in
the event of a Change in Control or other circumstances.
(f) Option Rights granted under this Plan may be (i) options,
including, without limitation, Incentive Stock Options, that are intended to
qualify under particular provisions of the Code, (ii) options that are not
intended so to qualify, or (iii) combinations of the foregoing.
(g) The Board may, at or after the Date of Grant of any Option
Rights (other than Incentive Stock Options), provide for the payment of dividend
equivalents to the Optionee on either a current or deferred or contingent basis
or may provide that such equivalents shall be credited against the Option Price.
(h) No Option Right shall be exercisable more than 10 years
from the Date of Grant.
(i) The Board, in its sole discretion, may grant tax-offset
bonus rights ("TOBRs") with respect to awards of Option Rights. Such TOBRs
5
<PAGE> 6
may be granted to an Optionee at the time of the grant of the related
Option Right or subsequent thereto. A TOBR shall entitle the Optionee to receive
from the Company upon exercise of the related Option Right an amount of cash
equal to (i) the excess, if any, of the aggregate market price of the shares of
Common Stock acquired by the exercise of the Option Right on the date of
exercise over the aggregate Option Price of the shares of Common Stock acquired
by such exercise multiplied by (ii) a percentage (either fixed or by formula)
determined solely by the Board. The Board shall determine all other terms and
provisions of any TOBR. No TOBR shall be assignable or transferable except to
the extent authorized by the Board.
(j) Each grant of Option Rights shall be evidenced by an
agreement executed on behalf of the Company by a duly authorized officer and
delivered to and accepted by the Optionee and shall contain such terms and
provisions, consistent with this Plan, as the Board may approve.
5. RESTRICTED SHARES. The Board may authorize the grant or sale of
Restricted Shares to Participants. Each such grant or sale may utilize any or
all of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
(a) Each such grant or sale shall constitute an immediate
transfer of the ownership of shares of Common Stock to the Participant in
consideration of the performance of services, entitling such Participant to
voting, dividend and other ownership rights, but subject to the substantial risk
of forfeiture and restrictions on transfer hereinafter referred to.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is less
than Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall provide that the Restricted
Shares covered by such grant or sale shall be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code for a period to be
determined by the Board at the Date of Grant, except (if the Board shall so
determine) in the event of a Change in Control or other circumstances.
(d) Each such grant or sale shall provide that during the
period for which such substantial risk of forfeiture is to continue, the
transferability of the Restricted Shares shall be prohibited or restricted in
the manner and to the extent prescribed by the Board at the Date of Grant (which
restrictions may include, without limitation, rights of repurchase or first
refusal in the Company or provisions subjecting the Restricted Shares to a
continuing substantial risk of forfeiture in the hands of any transferee).
(e) Any grant of Restricted Shares may specify Management
Objectives that, if achieved, will result in termination or early termination of
the restrictions applicable to such shares. Each grant may specify in respect of
such Management Objectives a minimum acceptable level of achievement and may set
forth a formula for determining the number of Restricted Shares on which
restrictions will terminate if performance is at or above the minimum level but
falls short of full achievement of the specified Management Objectives.
(f) Any such grant or sale of Restricted Shares may require
that any or all dividends or other distributions paid thereon during the period
of such restrictions be automatically deferred and reinvested in additional
Restricted Shares, which may be subject to the same restrictions as the
underlying award.
6
<PAGE> 7
(g) Each grant or sale of Restricted Shares shall be evidenced
by an agreement executed on behalf of the Company by a duly authorized officer
and delivered to and accepted by the Participant and shall contain such terms
and provisions, consistent with this Plan, as the Board may approve. Unless
otherwise directed by the Board, all certificates representing Restricted Shares
shall be held in custody by the Company until all restrictions thereon shall
have lapsed, together with a stock power or powers executed by the Participant
in whose name such certificates are registered, endorsed in blank and covering
such Shares.
6. DEFERRED SHARES. The Board may authorize the granting or sale of
Deferred Shares to Participants. Each such grant or sale may utilize any or all
of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
(a) Each such grant or sale shall constitute the agreement by
the Company to deliver shares of Common Stock to the Participant in the future
in consideration of the performance of services, but subject to the fulfillment
of such conditions during the Deferral Period as the Board may specify.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is less
than the Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall be subject to a Deferral
Period as determined by the Board at the Date of Grant except (if the Board
shall so determine) in the event of a Change in Control or other circumstances.
(d) During the Deferral Period, the Participant shall have no
right to transfer any rights under his or her award and shall have no rights of
ownership in the Deferred Shares and shall have no right to vote them, but the
Board may, at or after the Date of Grant, authorize the payment of dividend
equivalents on such Shares on either a current or deferred or contingent basis,
either in cash or in additional shares of Common Stock.
(e) Each grant or sale of Deferred Shares shall be evidenced
by an agreement executed on behalf of the Company by a duly authorized officer
and delivered to and accepted by the Participant and shall contain such terms
and provisions, consistent with this Plan, as the Board may approve.
7. PERFORMANCE SHARES. The Board may authorize the granting of
Performance Shares that will become payable to a Participant upon achievement of
specified Management Objectives. Each such grant may utilize any or all of the
authorizations, and shall be subject to all of the requirements, contained in
the following provisions:
(a) Each grant shall specify the number of Performance Shares
to which it pertains, which number may be subject to adjustment to reflect
changes in compensation or other factors; provided, however, that no such
adjustment shall be made in the case of a Covered Employee where such action
would result in the loss of the otherwise available exemption of the award under
Section 162(m) of the Code.
(b) The Performance Period with respect to each Performance
Share shall be such period of time as shall be determined by the Board at the
time of grant, except (if the Board shall so determine) in the event of a
7
<PAGE> 8
Change in Control or other circumstances; provided, however, that no
acceleration determination shall be made in the case of a Covered Employee where
such action would result in the loss of the otherwise available exemption of the
award under Section 162(m) of the Code.
(c) Any grant of Performance Shares shall specify Management
Objectives which, if achieved, will result in payment or early payment of the
award, and each grant shall specify in respect of such specified Management
Objectives a minimum acceptable level of achievement and shall set forth a
formula for determining the number of Performance Shares that will be earned if
performance is at or above the minimum level but falls short of full achievement
of the specified Management Objectives. The grant of Performance Shares shall
specify that, before the Performance Shares shall be earned and paid, the Board
must certify that the Management Objectives have been satisfied.
(d) Each grant shall specify the time and manner of payment of
Performance Shares that have been earned. Any grant may specify that the amount
payable with respect thereto may be paid by the Company in cash, in shares of
Common Stock or in any combination thereof and may either grant to the
Participant or retain in the Board the right to elect among those alternatives.
(e) Any grant of Performance Shares may specify that the
amount payable with respect thereto may not exceed a maximum specified by the
Board at the Date of Grant.
(f) The Board may, at or after the Date of Grant of
Performance Shares, provide for the payment of dividend equivalents to the
holder thereof on either a current or deferred or contingent basis, either in
cash or in additional shares of Common Stock.
(g) Each grant of Performance Shares shall be evidenced by an
agreement executed on behalf of the Company by a duly authorized officer and
delivered to and accepted by the Participant and shall contain such terms and
conditions, consistent with this Plan, as the Board may approve.
8. TRANSFERABILITY. (a) Except as otherwise determined by the Board,
but subject to the provisions of Section 8(c), no Option Right or other
derivative security granted under the Plan shall be transferable by a
Participant other than by will or the laws of descent and distribution. Except
as otherwise determined by the Board, Option Rights shall be exercisable during
the Optionee's lifetime only by the Optionee or by the Optionee's guardian or
legal representative.
(b) The Board may specify at the Date of Grant that part or
all of the shares of Common Stock that are (i) to be issued or transferred by
the Company upon the exercise of Option Rights, upon the termination of the
Deferral Period applicable to Deferred Shares or upon payment under any grant of
Performance Shares or (ii) no longer subject to the substantial risk of
forfeiture and restrictions on transfer referred to in Section 5 of this Plan,
shall be subject to further restrictions on transfer.
(C) Notwithstanding the provisions of Section 8(a), but
subject to the prior authorization by the Board (which may be a general
authorization), Option Rights (other than Incentive Stock Options), Restricted
Shares, Deferred Shares and Performance Shares shall be transferable by a
Participant, without payment of consideration therefor by the transferee, to any
Eligible Transferee; provided, however, that (i) no such transfer shall be
8
<PAGE> 9
effective unless ten (10) days' prior notice thereof is delivered to the Company
and such transfer is thereafter effected in accordance with any terms and
conditions that shall have been made applicable thereto by the Company or the
Board and (ii) any such Eligible Transferee shall be subject to the same terms
and conditions hereunder as the Participant.
9. ADJUSTMENTS. The Board shall make or provide for such
adjustments in the numbers of shares of Common Stock covered by outstanding
Option Rights, Deferred Shares, and Performance Shares granted hereunder, in the
Option Price, and in the kind of shares covered thereby, as the Board, in its
sole discretion, exercised in good faith, may determine is equitably required to
prevent dilution or enlargement of the rights of Participants or Optionees that
otherwise would result from (a) any stock dividend, stock split, combination of
shares, recapitalization or other change in the capital structure of the
Company, or (b) any merger, consolidation, spin-off, split-off, spin-out,
split-up, reorganization, partial or complete liquidation or other distribution
of assets, issuance of rights or warrants to purchase securities, or (c) any
other corporate transaction or event having an effect similar to any of the
foregoing. Moreover, in the event of any such transaction or event, the Board,
in its discretion, may provide in substitution for any or all outstanding awards
under this Plan such alternative consideration as it, in good faith, may
determine to be equitable in the circumstances and may require in connection
therewith the surrender of all awards so replaced. The Board may also make or
provide for such adjustments in the numbers of shares specified in Section 3 of
this Plan as the Board in its sole discretion, exercised in good faith, may
determine is appropriate to reflect any transaction or event described in this
Section 9; provided, however, that any such adjustment to the number specified
in Section 3(c)(i) shall be made only if and to the extent that such adjustment
would not cause any Option Right intended to qualify as an Incentive Stock
Option to fail so to qualify.
10. CHANGE IN CONTROL. For purposes of this Plan, a "Change in Control"
shall mean the occurrence at any time of any of the following events:
(i) any "person" or "group" (as such terms are used in Section
13(d) of the Exchange Act) becomes the "beneficial owner" (as determined
pursuant to Rules 13d-3 and 13d-5 promulgated under the Exchange Act), directly
or indirectly, of securities of the Company having more than 33% of the total
Voting Power of the Company;
(ii) at any time during any 24-month period, individuals who
at the beginning of such period constituted the Board (together with any new
directors whose election, or nomination for election by the stockholders of the
Company, to the Board was approved by a majority of the directors then still in
office who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board then in office;
(iii) the Board approves an agreement providing for the sale,
lease, transfer or other disposition of all or substantially all of the assets
of the Company, in one transaction or a series of related transactions, to any
"person" or "group" (as such terms are used in Section 13(d) of the Exchange
Act) other than a wholly-owned subsidiary of the Company;
(iv) the Board approves an agreement providing for the merger
or consolidation of the Company with another corporation, other than a merger in
which the Company would be the surviving corporation and which would result in
9
<PAGE> 10
(a) securities having more than 50% of the total Voting Power of the surviving
or resulting corporation being "beneficially owned" (as determined pursuant to
Rules 13d-3 and 13d-5 under the Exchange Act) by the holders of the capital
stock of the Company immediately prior to such merger and (b) no "person" or
"group" (as such terms are used in Section 13(d) of the Exchange Act)
"beneficially owning" (as determined pursuant to Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, securities having more than 33% of the
total Voting Power of the surviving or resulting corporation; or
(v) the Board approves a plan for the liquidation or
dissolution of the Company.
11. FRACTIONAL SHARES. The Company shall not be required to issue any
fractional shares of Common Stock pursuant to this Plan. The Board may provide
for the elimination of fractions or for the settlement of fractions in cash.
12. WITHHOLDING TAXES. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for such withholding are insufficient, it
shall be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory
to the Company for payment of the balance of such taxes required to be withheld,
which arrangements (in the discretion of the Board) may include relinquishment
of a portion of such benefit.
13. FOREIGN EMPLOYEES. In order to facilitate the making
of any grant or combination of grants under this Plan, the Board may provide for
such special terms for awards to Participants who are foreign nationals or who
are employed by the Company or any Subsidiary outside of the United States of
America as the Board may consider necessary or appropriate to accommodate
differences in local law, tax policy or custom. Moreover, the Board may approve
such supplements to or amendments, restatements or alternative versions of this
Plan as it may consider necessary or appropriate for such purposes, without
thereby affecting the terms of this Plan as in effect for any other purpose, and
the Secretary or other appropriate officer of the Company may certify any such
document as having been approved and adopted in the same manner as this Plan.
No such special terms, supplements, amendments or restatements, however, shall
include any provisions that are inconsistent with the terms of this Plan as then
in effect unless this Plan could have been amended to eliminate such
inconsistency without further approval by the stockholders of the Company.
14. ADMINISTRATION OF THE PLAN. (a) (i) Subject to subsection (ii) of
this Section 14(a), this Plan shall be administered by the Board, which may from
time to time delegate all or any part of its authority under this Plan to a
committee of the Board (or subcommittee thereof) consisting of not less than two
Non-Employee Directors appointed by the Board.
(ii) Awards of Option Rights are, and certain awards of
Restricted Shares and Performance Shares may be, intended to qualify as
performance-based compensation under Section 162(m) of the Code. The grant of
such awards, and the administration thereof and any determinations to be made in
connection therewith, shall be carried out only by a committee of the Board (or
subcommittee thereof) consisting of not less than two Outside Directors
appointed by the Board. Such committee shall grant such awards in a manner
10
<PAGE> 11
consistent with the rules governing performance-based compensation under Section
162(m) of the Code.
(b) To the extent of any delegation described in subsection
(a) of this Section 14, references in this Plan to the Board shall be deemed to
be references to any such committee or subcommittee. The interpretation and
construction by the Board of any provision of this Plan or of any agreement,
notification or document evidencing the grant of Option Rights, Restricted
Shares, Deferred Shares or Performance Shares and any determination by the Board
pursuant to any provision of this Plan or of any such agreement, notification or
document shall be final and conclusive. No member of the Board shall be liable
for any such action or determination made in good faith.
15. AMENDMENTS, ETC. (a) The Board may at any time and
from time to time amend the Plan in whole or in part; provided, however, that
(i) any amendment which must be approved by the stockholders of the Company in
order to comply with applicable law or the rules of the Nasdaq National Market
or, if the Common Stock is not traded on the Nasdaq National Market, the
principal national securities exchange upon which the Common Stock is traded or
quoted, shall not be effective unless and until such approval has been obtained
and (ii) no amendment of this Plan may, without the written consent of a
Participant to whom awards under the Plan have been granted, adversely affect
the rights of such Participant under such awards, which rights shall include all
rights of such Participant under the Plan as it existed as of the Date of Grant
of such awards. Presentation of this Plan or any amendment hereof for
stockholder approval shall not be construed to limit the Company's authority to
offer similar or dissimilar benefits under other plans without stockholder
approval.
(b) The Board also may permit Participants to elect to defer
the issuance of shares of Common Stock or the settlement of awards in cash under
the Plan pursuant to such rules, procedures or programs as it may establish for
purposes of this Plan. The Board also may provide that deferred issuances and
settlements include the payment or crediting of dividend equivalents or interest
on the deferral amounts.
(c) The Board may condition the grant of any award or
combination of awards authorized under this Plan on the surrender or deferral by
the Participant of his or her right to receive a cash bonus or other
compensation otherwise payable by the Company or a Subsidiary to the
Participant.
(d) In case of termination of employment by reason of death,
disability or normal or early retirement, or in the case of hardship or other
special circumstances, of a Participant who holds an Option Right not
immediately exercisable in full, or any Restricted Shares as to which the
substantial risk of forfeiture or the prohibition or restriction on transfer has
not lapsed, or any Deferred Shares as to which the Deferral Period has not been
completed, or any Performance Shares which have not been fully earned, or who
holds shares of Common Stock subject to any transfer restriction imposed
pursuant to Section 8(b) of this Plan, the Board may, in its sole discretion,
accelerate the time at which such Option Right may be exercised or the time at
which such substantial risk of forfeiture or prohibition or restriction on
transfer will lapse or the time when such Deferral Period will end or the time
at which such Performance Shares will be deemed to have been fully earned or the
time when such transfer restriction will terminate or may waive any other
limitation or requirement under any such award.
11
<PAGE> 12
(e) This Plan shall not confer upon any Participant any right
with respect to continuance of employment or other service with the Company or
any Subsidiary, nor shall it interfere in any way with any right the Company or
any Subsidiary would otherwise have to terminate such Participant's employment
or other service at any time.
(f) To the extent that any provision of this Plan would
prevent any Option Right that was intended to qualify as an Incentive Stock
Option from qualifying as such, that provision shall be null and void with
respect to such Option Right. Such provision, however, shall remain in effect
for other Option Rights and there shall be no further effect on any provision of
this Plan.
16. TERMINATION. No grant shall be made under this Plan after the tenth
anniversary (the "Termination Date") of the date on which this Plan is first
approved by the stockholders of the Company, but all grants made on or prior to
the Termination Date shall continue in effect thereafter subject to the terms
thereof and of this Plan.
17. INVESTMENT PURPOSE. Each award granted under the Plan shall be
granted only on the condition that all purchases of stock thereunder shall be
for investment purposes, and not with a view to resale or distribution, except
that the Board may make such provision in awards granted under the Plan as it
deems necessary or advisable for the release of such condition upon registration
with the Securities and Exchange Commission of the shares available for issuance
under the Plan, or upon the happening of any other contingency warranting the
release of such condition.
18. EFFECTIVE TIME. The Plan shall become effective as of the date of
Board approval (the "Effective Date"), subject to the approval of the Company's
stockholders within twelve (12) months after the Effective Date; provided,
however, that notwithstanding anything herein to the contrary, all awards
intended to qualify as performance-based compensation under Section 162(m) of
the Code made prior to such stockholder approval shall (a) not vest or be
exercisable until such approval shall have been obtained, and (b) be void if
such approval has not been obtained by the end of such twelve-month period.
12
<PAGE> 1
EXHIBIT 10.5
EDISON BROTHERS STORES, INC.
1998 DEFERRED STOCK COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
ARTICLE I
INTRODUCTION
1.1 Purpose of the Plan. The Edison Brothers Stores, Inc. 1998 Deferred
Stock Compensation Plan for Non-Employee Directors (the "Plan"), by allowing
fees payable to such Directors to be deferred and received in the form of Common
Stock of the Company, is intended to encourage such Directors to acquire a
greater personal stake in the success of the Company and thereby increase the
identification of interests between such Directors and the stockholders of the
Company.
1.2 Effective Date. The Plan shall be subject to approval by the
stockholders of the Company at the Company's 1998 Annual Meeting of
Stockholders, and if so approved, shall become effective on the date of such
approval.
ARTICLE II
DEFINITIONS
2.1 "Board" means the Board of Directors of the Company.
2.2 "Committee" means the Board or a committee of the Board comprised
of two or more Outside Directors appointed by the Board to administer the Plan.
2.3 "Common Stock" means the Common Stock of the Company, par value
$.01 per share.
2.4 "Company" means Edison Brothers Stores, Inc., a Delaware
corporation, or any successor thereto.
2.5 "Deferral Election" means a written election to defer Fees under
the Plan.
2.6 "Director" means a member of the Board who is not an employee of
the Company or any of its subsidiaries or affiliates. For purposes of the Plan,
an employee is an individual whose wages are subject to the withholding of
federal income tax under Section 3401 of the Internal Revenue Code of 1986, as
amended.
<PAGE> 2
2.7 "Effective Date" means the date on which the Plan is approved by
the Stockholders of the Company as provided in Section 1.2.
2.8 "Fee Payment Date" means the date Fees would otherwise have been
paid to a Participant.
2.9 "Fees" means any retainer or meeting fees payable to a Director for
serving as a member of the Board or of any committee thereof. Fees shall not
include any expenses paid directly or through reimbursement.
2.10 "Market Value," when used with reference to a share of Common
Stock as of a particular date, means the closing price of a share of Common
Stock as reported for that date (or, if no prices are quoted for that date, for
the last preceding date for which such prices are quoted) on the New York Stock
Exchange, or, if the Common Stock is not then listed on the New York Stock
Exchange, on such other national securities exchange on which the Common Stock
is listed or, if not so listed, then on the Nasdaq National Market. If, as of a
particular date, the Common Stock is not listed or quoted on any national
securities exchange or on the Nasdaq National Market, then the Market Value of a
share of Common Stock as of such date shall be determined according to such
criteria as the Committee in good faith shall deem appropriate.
2.11 "Outside Director" means a member of the Board who is a
"non-employee director" as such term is defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended.
2.12 "Participant" means a Director who defers Fees under Article V of
the Plan.
2.13 "Secretary" means the Secretary of the Company.
2.14 "Shares" means shares of Common Stock.
2.15 "Stock Units" means the credits to a Participant's Stock Unit
Account under Article V of the Plan.
2.16 "Stock Unit Account" means the account established by the Company
pursuant to Section 5.5.
2.17 "Termination of Service" means termination of service as a member
of the Board for any reason.
<PAGE> 3
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee shall have complete authority to interpret
the Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, and to make all other determinations necessary or desirable for the
administration of the Plan. The decisions of the Committee with respect to the
matters set forth in this Article III shall be final and binding on all
interested parties.
ARTICLE IV
ELIGIBILITY
Each person who is a Director on a Fee Payment Date shall be eligible
to defer Fees payable on such date in accordance with Article V of the Plan. If
any Director subsequently becomes an employee of the Company or any of its
subsidiaries, but does not incur a Termination of Service, such Director shall
continue as a Participant with respect to Fees previously deferred, but shall
cease eligibility with respect to all future Fees, if any, earned while an
employee.
ARTICLE V
DEFERRAL ELECTIONS
5.1 General Rule. Each Director may, in lieu of receipt of Fees, defer
all or part of such Fees in accordance with this Article V, provided that such
Director is eligible under Article IV of the Plan to defer such Fees on the Fee
Payment Date.
5.2 Timing of Election. Each Director who is serving on the Board on
the Effective Date may make a Deferral Election at any time prior to that date,
which election shall be effective as of the Effective Date. Any Director who is
serving on the Board on the Effective Date who does not make a Deferral Election
prior to the Effective Date, and any person who is not serving as a Director on
the Effective Date but thereafter becomes a Director, may make a Deferral
Election at any time before the commencement of any subsequent calendar year,
which election shall be effective as of the first day of such calendar year.
5.3 Duration of Election. A Deferral Election shall apply to Fees
payable after the date such Deferral Election becomes effective and shall be
deemed to be continuing unless the Participant revokes or modifies such Deferral
Election by filing a new Deferral Election before the first day of any
subsequent calendar year, which new Deferral
<PAGE> 4
Election shall be effective as of the first day of such calendar year,
subject to the last sentence of Section 6.1 of the Plan.
5.4 Form of Election. A Deferral Election shall be made by completing
and filing with the Secretary a notice of election in the form specified by the
Committee. A Deferral Election shall set forth (a) the portion (up to 100%) of
Fees to be deferred by the Participant, and (b) when the payout shall be made or
commence, and whether it shall be delivered in a lump sum or according to an
installment schedule as provided in Section 6.1 of the Plan.
5.5 Stock Unit Account. The Company shall establish a Stock Unit
Account for each Participant. On each Fee Payment Date, each Participant's Stock
Unit Account shall be credited with a number of Stock Units equal to the portion
of the Fee payable on such Fee Payment Date deferred by such Participant,
divided by the Market Value of a Share on such Fee Payment Date. Fractional
Stock Units shall be calculated to three decimal places and credited
cumulatively.
5.6 Crediting of Dividends. If a dividend or distribution is paid on
the Common Stock in cash or in property other than Shares, then on the date of
payment of the dividend or distribution the Stock Unit Account of each
Participant shall be credited with that number of Stock Units (including
fractional units) equal to the number of Stock Units credited to the account as
of the record date for such dividend or distribution, times the cash amount of
the dividend paid or the fair market value of the property distributed per
Share, divided by the Market Value of a Share on the date such dividend or
distribution is paid.
ARTICLE VI
SETTLEMENT OF STOCK UNIT ACCOUNTS
6.1 Payment Options. A Participant's Stock Unit Account is to be
settled by delivering to the Participant a number of Shares equal to the number
of Stock Units then credited to the Participant's Stock Unit Account. Such
delivery shall be made in one lump sum on, or as soon as administratively
feasible after, the first day of the calendar month immediately following the
month in which the Participant incurs a Termination of Service; provided,
however, that, in lieu thereof, a Participant may elect (a) to have the delivery
of Shares in settlement of his or her Stock Unit Account made or commence (as
the case may be) on, or as soon as administratively feasible after, January 1 of
the year immediately following the date on which the Participant incurs a
Termination of Service, and/or (b) to have the delivery of Shares in settlement
of his or her Stock Unit Account made in annual installments over a period not
to exceed ten years following the date of the first such payment. If a
Participant elects to have the delivery made in annual installments, the number
of Shares delivered in each such installment shall be determined by multiplying
(i) the number of Stock Units credited to the Stock Unit Account on the date of
payment of such installment by (ii) a fraction, the numerator of which is one
and
<PAGE> 5
the denominator of which is the number of remaining unpaid installments.
Notwithstanding the foregoing, if an election made by a Participant would result
in the delivery of Shares in installments of fewer than 100 Shares per annum,
then all of the Shares to be delivered to the Participant in settlement of his
or her Stock Unit Account shall be delivered in one lump sum. If a lump sum
payment or the final installment payment hereunder would result in the issuance
of a fractional Share, cash in lieu of such fractional Share shall be paid to
the Participant based on the Market Value of a Share on the day immediately
preceding the date of such payment. A Participant's Stock Unit Account shall
continue to be credited with dividends or distributions paid on the Common Stock
pursuant to Section 5.6 and shall be subject to adjustment pursuant to Article
IX until the entire balance of the Stock Unit Account has been distributed. The
election described in this Section 6.1 shall be made when a Deferral Election is
filed under Article V. A Participant may change the manner in which his or her
Stock Unit Account is to be distributed by filing a new Deferral Election with
the Secretary, provided, however, that (a) such change may be made only with the
prior consent of the Committee and (b) the new Deferral Election must be filed
at least six months before the date on which the Participant incurs a
Termination of Service.
6.2 Payment Upon Death of a Participant. If a Participant dies before
the entire balance of his or her Stock Unit Account has been distributed, the
balance of the Participant's Stock Unit Account shall be paid in a lump sum, as
soon as administratively feasible after the Participant's death, to the
beneficiary designated by the Participant under Article VIII.
ARTICLE VII
UNFUNDED STATUS
The interest of each Participant in any Fees deferred under the Plan
(and any Stock Units or Stock Unit Account relating thereto) shall be solely
that of a general creditor of the Company. Stock Unit Accounts, and Stock Units
credited thereto, shall at all times be maintained by the Company only as
bookkeeping entries evidencing unfunded and unsecured general obligations of the
Company. The Company shall not be required to acquire, reserve, segregate or
otherwise set aside Shares for the payment of its obligations under the Plan,
but shall make available as and when required a sufficient number of Shares to
meet the needs of the Plan.
ARTICLE VIII
DESIGNATION OF BENEFICIARY
Each Participant may designate, on a form provided by the Committee,
one or more beneficiaries to receive payment of the Participant's Stock Unit
Account if the Participant dies before receiving full payment. The Company may
rely upon the most
<PAGE> 6
recent beneficiary designation, provided that such form was executed by
the Participant or his or her legal representative and filed with the Secretary
prior to the Participant's death. If the Participant fails to designate a
beneficiary, or if all designated beneficiaries of the Participant die before
complete payment is made hereunder, any remaining unpaid amounts shall be paid
in one lump sum to the estate of the Participant.
ARTICLE IX
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
The number of Stock Units credited to each Participant's Stock Unit
Account shall be proportionately adjusted to reflect any dividend or other
distribution on the outstanding Shares payable in Shares or any split or
consolidation of the Shares. If the outstanding Shares shall be changed into or
exchangeable for a different class or classes of securities of the Company or
securities of another corporation, whether through reorganization,
reclassification, recapitalization, merger, consolidation or otherwise, then, in
a manner that the Committee deems equitable, there shall be substituted for each
Share to be delivered upon settlement of Stock Unit Accounts the number and kind
of shares of stock or other securities into which each outstanding Share shall
be so changed or for which each such Share shall be exchanged.
ARTICLE X
GENERAL PROVISIONS
10.1 No Stockholder Rights Conferred. Nothing contained in the Plan
will confer upon any Participant or beneficiary any rights of a Stockholder of
the Company, unless and until Shares are actually issued or transferred to such
Participant or beneficiary in accordance with Article VI.
10.2 Service as Director. Nothing in this Plan shall be construed as
conferring any right upon any Director to continue as a member of the Board.
10.3 Changes to the Plan. The Board may at any time amend, suspend or
terminate the Plan, provided that no amendment, suspension or termination of the
Plan may, without the written consent of an affected Participant, adversely
affect the rights of such Participant with respect to any Stock Units credited
to his or her Stock Unit Account at the time of such amendment, suspension or
termination.
10.4 Compliance with Laws. The obligation of the Company to issue or
deliver Shares under the Plan shall be subject to (i) the effectiveness of a
registration statement under the Securities Act of 1933, as amended, with
respect to such Shares, if deemed necessary or appropriate by counsel for the
Company, (ii) the condition that the Shares shall have been listed (or
authorized for listing upon official notice of issuance) upon
<PAGE> 7
each stock exchange or national quotation system, if any, on which
shares of the Common Stock may then be listed, and (iii) such other conditions
or requirements as, in the opinion of the Company's counsel, may be necessary to
comply with all other applicable laws, regulations, rules and orders then in
effect.
10.5 Non-Alienability of Benefits. Neither a Participant nor any
beneficiary designated by such Participant may alienate, assign, transfer,
pledge, sell or encumber any Stock Unit, Stock Unit Account or any benefit or
right under the Plan, nor shall any Stock Unit, Stock Unit Account or any
benefit or right under the Plan be subject to the claims of any creditors of any
Participant or designated beneficiary.
10.6 Governing Law. The validity, construction and effect of the Plan
will be governed by (i) the Delaware General Corporation Law, and (ii) to the
extent applicable, the laws (other than the corporation laws) of the State of
Missouri.
<PAGE> 1
EXHIBIT 10.6
EDISON BROTHERS STORES, INC.
1998 RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
Edison Brothers Stores, Inc., a Delaware corporation (the "Company"),
hereby establishes the Edison Brothers Stores, Inc. 1998 Restricted Stock Plan
for Non-Employee Directors (the "Plan").
1. PURPOSE. The purpose of the Plan is to provide ownership of the
Company's common stock to non-employee members of the Board of Directors in
order to improve the Company's ability to attract and retain highly qualified
individuals to serve as directors of the Company, to provide competitive
remuneration for Board service, and to strengthen the commonality of interest
between directors and stockholders.
2. EFFECTIVE DATE. The Plan shall be subject to approval by the
stockholders of the Company at the Company's 1998 Annual Meeting of
Stockholders, and, if so approved, shall become effective on the date of such
approval.
3. DEFINITIONS. As used in the Plan,
(a) "Board" means the Board of Directors of the Company.
(b) "Change in Control" shall mean the occurrence of any of the
following events:
(i) any "person" or "group" (as such terms are used in Section
13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) becomes the "beneficial owner" (as determined pursuant to Rules
13d-3 and 13d-5 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company having more than 33% of the
total voting power of all classes of capital stock of the Company
entitled to vote generally in the election of directors of the Company;
(ii) at any time during any 24-month period, individuals who
at the beginning of such period constituted the Board (together with
any new directors whose election, or nomination for election by the
stockholders of the Company, to the Board was approved by a majority of
the directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the Board then in office;
(iii) the Board approves an agreement providing for the sale,
lease, transfer or other disposition of all or substantially all of the
assets of the Company, in one transaction or a series of related
transactions, to any "person" or
<PAGE> 2
"group" (as such terms are used in Section 13(d) of the Exchange
Act) other than a wholly-owned subsidiary of the Company;
(iv) the Board approves an agreement providing for the merger
or consolidation of the Company with another corporation, other than a
merger in which the Company would be the surviving corporation and
which would result in (x) securities having more than 50% of the total
voting power of all classes of capital stock entitled to vote generally
in the election of directors of the surviving or resulting corporation
being "beneficially owned" (as determined pursuant to Rules 13d-3 and
13d-5 under the Exchange Act) by the holders of the capital stock of
the Company immediately prior to such merger and (y) no "person" or
"group" (as such terms are used in Section 13(d) of the Exchange Act)
"beneficially owning" (as determined pursuant to Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, securities having more
than 33% of the total voting power of all classes of capital stock
entitled to vote generally in the election of directors of the
surviving or resulting corporation; or
(v) the Board approves a plan for the liquidation or dissolution
of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Committee" means the Compensation Committee of the Board and, to
the extent the administration of this Plan has been assumed by the Board
pursuant to Section 9, the Board.
(e) "Common Stock" means the common stock of the Company, par value
$0.01 per share.
(f) "Date of Grant" means the date on which Restricted Stock is granted
to a Director.
(g) "Disability" means an inability to perform the duties of a member
of the Board by reason of a medically determined physical or mental impairment
which has existed for a continuous period of at least 26 weeks.
(h) "Director" means a member of the Board who is not an employee of
the Company or any Subsidiary.
(i) "Effective Date" means the date on which the Plan is approved by
the stockholders of the Company as provided in Section 2.
(j) "Restricted Period" means the period of time from the Date of Grant
of Restricted Stock until the risk of forfeiture expires with respect to such
Restricted Stock, as specified in Section 6.
<PAGE> 3
(k) "Restricted Stock" means shares of Common Stock granted
pursuant to Section 5 as to which the Restricted Period has not expired.
(l) "Rule 16b-3" means Rule 16b-3 of the Securities and Exchange
Commission (or any successor rule to the same effect) as in effect from time to
time.
(m) "Subsidiary" means any corporation with respect to which the
Company owns or controls, directly or indirectly, not less than 50% of the total
voting power of all classes of stock entitled to vote generally in the election
of directors of such corporation.
4. SHARES AVAILABLE UNDER PLAN. Subject to adjustment as provided in
Section 7, the total number of shares of Common Stock which may be granted as
Restricted Stock under the Plan shall not exceed 75,000. Such shares may be
shares of original issuance or treasury shares or a combination of the
foregoing. Any shares of Restricted Stock that are forfeited or surrendered or
cancelled for any reason will again be available for issuance under the Plan.
5. GRANTS OF RESTRICTED STOCK.
(a) Each person who is a Director at the close of business on the
Effective Date shall automatically be granted on that date 7,500 shares of
Restricted Stock. Each person who first becomes a Director after the Effective
Date shall automatically be granted, on the date such person first becomes a
Director, 7,500 shares of Restricted Stock.
(b) Each grant of Restricted Stock shall constitute an immediate
transfer of the ownership of shares of Common Stock to the Director in
consideration of the performance of services, entitling such Director to voting,
dividend and other ownership rights, but subject to the substantial risk of
forfeiture and restrictions on transfer hereinafter referred to.
(c) Each grant of Restricted Stock shall be made without additional
consideration.
(d) Each grant of Restricted Stock shall provide that the shares of
Restricted Stock covered by such grant will be subject to forfeiture if the
Director ceases to be a member of the Board during the Restricted Period.
(e) Each grant of Restricted Stock shall provide that during the
Restricted Period the Restricted Stock shall not be transferable.
(f) Unless the shares of Common Stock for issuance under the Plan are
then registered under the Securities Act of 1933, as amended, each grant of
Restricted Stock shall require that the Director to whom such Restricted Stock
is granted represent to the Company in writing that the Restricted Stock is
being acquired for investment for the Director's own account and not with a view
to the sale or distribution thereof.
<PAGE> 4
(g) All certificates issued for Restricted Stock shall be held by the
Secretary of the Company until the expiration of the Restricted Period
applicable to such Restricted Stock, at which time the certificates shall be
delivered to the Director to whom such Restricted Stock was issued. If any
Restricted Stock must be transferred back to the Company pursuant to this Plan,
the Secretary of the Company shall take appropriate action to cancel the related
certificates.
(h) Each grant of Restricted Stock shall be evidenced by an agreement
duly executed on behalf of the Company and delivered to and accepted by the
Director containing such terms and provisions, consistent with this Plan, as the
Committee may approve.
6. RESTRICTED PERIOD.
(a) The Restricted Period will begin on the Date of Grant and will
expire (subject to earlier expiration pursuant to Section 6(b)) with respect to
one-third of the shares of Restricted Stock covered by the grant on the first
anniversary of the Date of Grant, with respect to an additional one-third of the
shares of Restricted Stock covered by the grant on the second anniversary of the
Date of Grant and with respect to the remaining one-third of the shares of
Restricted Stock covered by the grant on the third anniversary of the Date of
Grant (each, a "Vesting Date"), provided that the Director has remained a member
of the Board for the entire period from the Date of Grant to the relevant
Vesting Date, or to the date specified in Section 6(b), if applicable. If the
Director ceases to be a member of the Board during the Restricted Period, all of
the shares of Restricted Stock with respect to which the Restricted Period has
not expired will be forfeited and all right, title and interest of the Director
to such shares will terminate without further obligation on the part of the
Company.
(b) The Restricted Period will immediately expire with respect to all
shares of Restricted Stock held by a Director in the event of (i) the Director's
death or Disability or (ii) a Change in Control.
7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. If, by reason of a stock
dividend, stock split, combination of shares, recapitalization, spinoff,
split-up, merger, consolidation or otherwise, the outstanding shares of Common
Stock shall be changed into or exchangeable for a different number or class of
shares of common stock or other securities of the Company or securities of
another corporation, then (a) the aggregate number and/or type of securities
available for grant under the Plan as set forth in Section 4 shall be
appropriately adjusted and (b) there shall be substituted for each share of
Restricted Stock the number and type of securities into which each outstanding
share of Common Stock shall be so changed or for which each such share of Common
Stock shall be exchanged.
<PAGE> 5
8. FRACTIONAL SHARES. The Company will not be required to issue any
fractional shares of Common Stock pursuant to this Plan. The Committee may
provide for the elimination of fractions or for the settlement of fractions in
cash.
9. ADMINISTRATION OF THE PLAN. Unless the administration of the Plan
has been expressly assumed by the Board pursuant to a resolution of the Board,
the Plan will be administered by the Committee, which at all times will consist
of not less than two directors appointed by the Board, each of whom will be a
"non-employee director" within the meaning of Rule 16b-3. The interpretation by
the Committee of any provision of the Plan or of any agreement or document
evidencing the grant of Restricted Stock, and any determination by the Committee
pursuant to the Plan or any such agreement or document, will be final and
binding on all interested parties.
10. CHANGES TO THE PLAN. The Board may at any time amend, suspend or
terminate the Plan, provided that (i) any amendment which must be approved by
the stockholders of the Company in order to comply with applicable law or the
rules of the Nasdaq National Market (or, if the Common Stock is not then traded
on the Nasdaq National Market, the rules of any national securities exchange
upon which the Common Stock is then traded) shall not be effective unless and
until such approval has been obtained and (ii) no amendment, suspension or
termination of the Plan may, without the written consent of a Director to whom
Restricted Stock has been granted under the Plan, adversely affect the rights of
such Director with respect to such Restricted Stock, which rights shall include
all rights of the Director under the Plan as it existed as of the Date of Grant
of such Restricted Stock.
11. SERVICE AS DIRECTOR. Nothing in this Plan shall be construed as
conferring any right upon any Director to continue as a member of the Board.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet as of May 2, 1998, and the condensed
consolidated statement of operations of the Company for the 13 weeks ended
May 2, 1998, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-30-1997
<PERIOD-START> FEB-01-1998
<PERIOD-END> MAY-02-1998
<CASH> 18,100
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 163,300
<CURRENT-ASSETS> 210,700
<PP&E> 137,100
<DEPRECIATION> 17,200
<TOTAL-ASSETS> 396,100
<CURRENT-LIABILITIES> 120,300
<BONDS> 127,500
0
0
<COMMON> 102
<OTHER-SE> 99,300
<TOTAL-LIABILITY-AND-EQUITY> 396,100
<SALES> 206,200
<TOTAL-REVENUES> 206,200
<CGS> 155,600
<TOTAL-COSTS> 68,500
<OTHER-EXPENSES> 400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,800
<INCOME-PRETAX> (22,100)
<INCOME-TAX> 200
<INCOME-CONTINUING> (22,300)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,300)
<EPS-PRIMARY> (2.18)
<EPS-DILUTED> (2.18)
</TABLE>
