SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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|_| Definitive Proxy Statement |_| Definitive Additional Materials |_|
Soliciting Material Pursuant to 240, 14a-11(c) or 240, 14a-12
LOEHMANN'S, INC.
(Name of Registrant Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee:
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|X| No fee required.
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1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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to Exchange Act Rule 0-11:
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|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
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<PAGE>
PRELIMINARY COPY
LOEHMANN'S, INC.
2500 HALSEY STREET
BRONX, NEW YORK 10461
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
JUNE 19, 1997
TO OUR STOCKHOLDERS:
The Annual Meeting of the stockholders of Loehmann's, Inc., a Delaware
corporation (the "Company"), will be held at the offices of the Company at 9:00
a.m., June 19, 1997 to consider and vote on the following matters described in
this notice and the accompanying Proxy Statement:
1. To elect two directors each to serve as a Class B Director for the
ensuing three years and until their successors are duly elected and qualified.
2. To consider and act upon a proposal to amend and restate the
Certificate of Incorporation of the Company pursuant to which, among other
things, the number of authorized shares of Preferred Stock is reduced from
41,500,000 to 5,000,000.
3. To approve the Company's Stock Option Plan for Non-Employee
Directors.
4. To approve the Company's Directors Deferred Compensation Plan.
5. To approve the Company's Amended and Restated New Stock Incentive Plan
pursuant to which the number of shares of Common Stock reserved for issuance
under such plan will be increased by 200,000 shares and certain other changes
will be made to reflect recent changes to the rules promulgated under Section 16
of the Securities Exchange Act of 1934, as amended.
6. To ratify the appointment of Ernst & Young LLP as independent
accountants for the Company for the fiscal year ending January 31, 1998.
7. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on April 28, 1997
as the record date for determination of stockholders entitled to vote at the
Annual Meeting, or any adjournments thereof, and only record holders of Common
Stock at the close of business on that day will be entitled to vote.
TO ASSURE REPRESENTATION AT THE ANNUAL MEETING, STOCKHOLDERS ARE URGED TO
SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE
POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. Any stockholder
attending the Annual Meeting may vote in person even if he or she previously
returned a proxy.
If you do plan to attend the Annual Meeting in person, we would appreciate
your response by indicating at the appropriate place on the proxy card enclosed.
By Order of the Board of Directors,
Philip Kaplan
President, Chief Operating Officer and
Secretary
New York, New York
May 2, 1997
<PAGE>
LOEHMANN'S, INC.
2500 HALSEY STREET
BRONX, NEW YORK 10461
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MEETING DATE: JUNE 19, 1997
This Proxy Statement is being sent on or about May 2, 1997 in connection
with the solicitation of proxies by the Board of Directors of Loehmann's, Inc.,
a Delaware corporation (the "Company"). The proxies are for use at the 1997
Annual Meeting of the Stockholders of the Company (the "Annual Meeting"), which
will be held at the offices of the Company, June 19, 1997, at 9:00 a.m., and at
any meetings held upon adjournment thereof (the "Annual Meeting"). The record
date for the Annual Meeting is the close of business on April 28, 1997 (the
"Record Date"). Only holders of record of the Company's Common Stock, $0.01 par
value per share (the "Common Stock"), on the Record Date are entitled to notice
of the Annual Meeting and to vote at the Annual Meeting and at any meetings held
upon adjournment thereof.
A proxy card is enclosed. Whether or not you plan to attend the Annual
Meeting in person, please date, sign and return the enclosed proxy card as
promptly as possible, in the postage-prepaid envelope provided, to ensure that
your shares will be voted at the Annual Meeting. Any stockholder who returns a
proxy in such form has the power to revoke it at any time prior to its effective
use by filing an instrument revoking it or a duly executed proxy bearing a later
date with the Secretary of the Company or by attending the Annual Meeting and
voting in person. Unless contrary instructions are given, any such proxy, if not
revoked, will be voted at the Annual Meeting for (i) the nominees for election
as directors as set forth in this Proxy Statement, (ii) the proposal to amend
and restate the Certificate of Incorporation of the Company (the "Restated
Certificate"), (iii) the proposal to approve the Company's Stock Option Plan for
Non-Employee Directors (the "Directors Stock Option Plan"), (iv) the proposal to
approve the Company's Directors Deferred Compensation Plan (the "Directors
Deferred Compensation Plan"), (v) the proposal to approve the Company's Amended
and Restated New Stock Incentive Plan, pursuant to which the Company will
reserve an additional 200,000 shares of Common Stock for issuance under the
Company's New Stock Incentive Plan and certain other changes will be made to
reflect recent changes to the rules promulgated under Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (as amended,
the "Amended and Restated New Stock Plan"), (vi) the ratification of the
appointment of Ernst & Young LLP as independent accountants for the Company and
(vii) with regard to all other matters which may properly come before the Annual
Meeting, for or against such matters as recommended by the Board of Directors,
in its discretion.
An Annual Report to Stockholders for the year ended February 1, 1997,
including financial statements, is being concurrently distributed to
stockholders of record as of the Record Date. The date of this Proxy Statement
is the approximate date on which the Proxy Statement and form of proxy were
first sent or given to stockholders.
<PAGE>
2
VOTING SECURITIES
At the Record Date, there were 8,759,763 shares of Common Stock
outstanding. The presence, either in person or by proxy, of persons entitled to
vote a majority of the Company's outstanding Common Stock is necessary to
constitute a quorum for the transaction of business at the Annual Meeting.
Abstentions and broker non-votes are counted for purposes of determining a
quorum, but are not considered as having voted for purposes of determining the
outcome of a vote. No other voting securities of the Company were outstanding at
the Record Date. Holders of Common Stock have one vote for each share on any
matter that may be presented for consideration and action by the stockholders at
the Annual Meeting. The Restated Certificate must be approved by the holders of
a majority of the outstanding Common Stock on the Record Date. The Directors
Stock Option Plan, the Directors Deferred Compensation Plan, the New Stock Plan
Amendment and the ratification of the appointment of the independent accountants
must be approved by a majority vote of the stockholders present in person or
represented by proxy at the Annual Meeting. Each director will be elected by a
plurality of the votes cast by the stockholders present in person or represented
by proxy at the Annual Meeting.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 1,
1997 with respect to beneficial ownership of shares of the Common Stock by (i)
all stockholders known by the Company to be beneficial owners of more than 5% of
such class, (ii) each director, (iii) each executive officer named in the
Summary Compensation Table and (iv) all directors and executive officers as a
group. Unless otherwise indicated in the notes below, the address of each
beneficial owner is in care of Loehmann's, Inc., 2500 Halsey Street, Bronx, New
York 10461.
Name and Address of Beneficial Owner Shares of Common Stock Percentage
- ------------------------------------ ---------------------- ----------
Sefinco Ltd.(1) .................................. 674,026 7.7%
Sprout Capital V(2) .............................. 200,779 2.3
Sprout Growth, L.P.(2) ........................... 242,769 2.8
Sprout Growth, Ltd.(2) ........................... 27,025 *
DLJ Venture Capital Fund II, L.P.(2) ............. 12,065 *
Donaldson, Lufkin & Jenrette
Securities Corporation(2)
126,161 1.4
Putnam Investments, Inc.(3) ...................... 1,006,430 11.5
AIM Management Group Inc.(4) ..................... 663,400 7.6
FMR Corp.(5) ..................................... 1,090,100 12.4
First Union Corporation (6) ...................... 588,048 6.7
Norman S. Matthews(7) ............................ 107,217 1.2
Robert Friedman(8) ............................... 153,608 1.7
Philip Kaplan(9) ................................. 208,590 2.3
Bonnie Dexter(10) ................................ 6,136 *
Robert Glass(11) ................................. 6,702 *
Jan Heppe(12) .................................... 2,234 *
Janet A. Hickey(2) ............................... -- --
Richard E. Kroon(2) .............................. -- --
Christina A. Mohr ................................ -- --
<PAGE>
3
Name and Address of Beneficial Owner Shares of Common Stock Percentage
- ------------------------------------ ---------------------- ----------
Arthur E. Reiner.................. - -
Cynthia R. Cohen ................. - -
All directors and executive officers as a 484,488 5.2
group (11 persons)(13)..........
- ------------
* Less than 1%
(1) Because of its ownership of a majority of the capital stock of Sefinco Ltd.,
Entrecanales y Tavora S/A may be deemed to beneficially own all of the
shares of Common Stock beneficially owned by Sefinco Ltd. The business
address of Sefinco Ltd. and Entrecanales Inc. is c/o Entrecanales Inc.,
767 Fifth Avenue, 5th Floor, New York, New York 10153.
(2) Based in part upon information provided in a Schedule 13G filed with the
Securities and Exchange Commission (the "Commission"). Sprout Capital V,
Sprout Growth, L.P., Sprout Growth, Ltd., DLJ Venture Capital II, L.P.,
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ" and, collectively
with the other entities named above, the "Sprout Group") are all affiliates.
Ms. Hickey, who is a Director, and Mr. Kroon, who is a Director, are general
partners of, or executive officers in (1) certain of the affiliates of DLJ
that own shares of Common Stock or (2) entities that control such
affiliates. The business address of all such Sprout Group entities is 277
Park Avenue, New York, New York 10172. Ms. Hickey and Mr. Kroon disclaim
beneficial ownership of such shares. Because of their direct and indirect
ownership of a majority of the capital stock of DLJ, AXA Assurances I.A.R.D.
Mutuelle, AXA Assurances Vie Mutuelle, Alpha Assurances I.A.R.D. Mutuelle,
Alpha Assurances Vie Mutuelle, AXA Courtage Assurance Mutuelle, AXA and The
Equitable Companies Incorporated may be deemed to beneficially own all of
the shares of Common Stock beneficially owned by the Sprout Group. The
business address of Alpha Assurances I.A.R.D. Mutuelle and Alpha Assurances
Vie Mutuelle is 100-101 Terrasse Boieldien, 92042 Paris La Defense France.
The business address of AXA Assurances I.A.R.D. Mutuelle and AXA Assurances
Vie Mutuelle is 21, rue de Chateaudun, 75009 Paris France. The business
address of AXA Courtage Assurance Mutuelle is 26, rue Louis le Grand, 75002
Paris France. The business address of AXA is 23, avenue Matignon, 75008
Paris France. The business address of The Equitable Companies Incorporated
is 787 Seventh Avenue, New York, New York 10019.
(3) Based upon information provided in a Schedule 13G filed with the Commission.
The holdings of Putnam Investments, Inc. include all shares of Common Stock
beneficially owned by Putnam Investment Management, Inc. and The Putnam
Advisory Company, Inc., investment advisors which are subsidiaries of
Putnam Investments, Inc. Because of its ownership of all of the capital
stock of Putnam Investments, Inc., Marsh & McLennan Companies, Inc. may
be deemed to beneficially own all of the shares of Common Stock beneficially
owned by Putnam Investments, Inc. The business address of Putnam
Investments, Inc., Putnam Investment Management, Inc. and the Putnam
Advisory Company, Inc. is One Post Office Square, Boston, Massachusetts
02109. The business address of Marsh & McLennan Companies, Inc. is 1166
Avenue of the Americas, New York, New York 10036.
(4) Based upon information provided in a Schedule 13G filed with the Commission.
The holdings of AIM Management Group Inc. include all shares of Common Stock
beneficially owned by AIM Advisors, Inc. and AIM Capital Management, Inc.,
investment advisors which are subsidiaries of AIM Management Group Inc. The
business address of all such entities is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046.
(5) Based upon information provided in a Schedule 13G filed with the Commission.
The holdings of FMR Corp. include all shares of Common Stock beneficially
owned by Fidelity Management & Research Company and Fidelity Management
Trust Company, investment advisors which are subsidiaries of FMR Corp.
Because of their predominant ownership of the capital stock of FMR Corp.,
Edward C. Johnson 3d and Abigail P. Johnson may be deemed to beneficially
own all of the shares of Common Stock beneficially owned by FMR Corp. The
business address of all such entities is c/o FMR Corp., 82 Devonshire
Street, Boston, Massachusetts 02109.
<PAGE>
4
(6) Based upon information provided in a Schedule 13G filed with the Commission.
The holdings of First Union Corporation include all shares of Common Stock
beneficially owned by Keystone Investment Management Company, an investment
advisor which is a subsidiary of First Union Corporation. The business
address of such entities is One First Union Center, Charlotte, North
Carolina 28288-0137.
(7) Includes 22,344 shares of Class B Common Stock which are convertible into
Common Stock and options to purchase 67,034 shares of Common Stock which are
exercisable within sixty (60) days of the date hereof. Does not include
options to purchase 22,345 shares of Common Stock which are not exercisable
within sixty (60) days of the date hereof.
(8) Includes options to purchase 153,608 shares of Common Stock which are
exercisable within sixty (60) days of the date hereof. Does not include
options to purchase 152,622 shares of Common Stock which are not exercisable
within sixty (60) days of the date hereof.
(9) Includes options to purchase 208,590 shares of Common Stock which are
exercisable within sixty (60) days of the date hereof. Does not include
options to purchase 12,584 shares of Common Stock which are not exercisable
within sixty (60) days of the date hereof.
(10)Includes options to purchase 5,136 shares of Common Stock which are
exercisable within sixty (60) days of the date hereof. Does not include
options to purchase 31,622 shares of Common Stock which are not exercisable
within sixty (60) days of the date hereof.
(11)Includes options to purchase 6,702 shares of Common Stock which are
exercisable within sixty (60) days of the date hereof. Does not include
options to purchase 35,642 shares of Common Stock which are not exercisable
within sixty (60) days of the date hereof.
(12)Includes options to purchase 2,234 shares of Common Stock which are
exercisable within sixty (60) days of the date hereof. Does not include
options to purchase 28,938 shares of Common Stock which are not exercisable
within sixty (60) days of the date hereof.
(13)Includes 22,345 shares of Class B Common Stock which are convertible into
Common Stock and options to purchase 443,304 shares of Common Stock which
are exercisable within sixty (60) days of the date hereof. Does not include
options to purchase 283,753 shares of Common Stock which are not exercisable
within sixty (60) days of the date hereof.
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of eight members and
is divided into three classes ("Classes"; each a "Class") serving staggered
terms. At the Annual Meeting, the stockholders will elect two Class B Directors
for a term of three years expiring in 2000 and until their respective successors
shall have been duly elected and qualified. The term of the Class C Directors
expires at the first annual meeting of the Company's stockholders following the
end of the Company's fiscal year ending January 31, 1998, and the term of the
Class A Directors expires at the first annual meeting of the Company's
stockholders following the end of the Company's fiscal year ending January 30,
1999, at which times Directors of the appropriate Class will be elected for
three-year terms. The two nominees are presently serving as Directors of the
Company. If no direction to the contrary is given, all proxies received by the
Board of Directors will be voted "FOR" the election as Directors of Richard E.
Kroon and Christina A. Mohr. The Class B Directors will be elected by a
plurality of the votes cast. In the event that any nominee is unable or declines
to serve, the proxy solicited herewith may be voted for the election of another
person in his stead at the discretion of the proxies. The Board of Directors
knows of no reason to anticipate that this will occur.
<PAGE>
5
Biographical information follows for each person nominated and each
Director whose term of office continues after the meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
NOMINEES NAMED BELOW. UNLESS OTHERWISE INSTRUCTED, SIGNED PROXIES
WHICH ARE RETURNED IN A TIMELY MANNER WILL BE VOTED IN FAVOR OF
SUCH NOMINEES.
NOMINEES
CLASS B DIRECTORS
RICHARD E. KROON has been a Director of the Company since September 1995
and was a Director of Loehmann's Holdings, Inc., a predecessor of the Company
("Holdings"), from 1988 until May 1996. Mr. Kroon has been Managing Partner of
the Sprout Group, the venture capital affiliate of Donaldson Lufkin & Jenrette,
Inc. ("DLJ"), since 1981. Mr. Kroon is President, Director and Chief Executive
Officer of DLJ Capital Corporation, a subsidiary of DLJ. He is a Director of
Educational Medical, Inc., a national venture capital association, and several
private companies.
CHRISTINA A. MOHR has been a Director of the Company since September 1995
and was a director of Holdings from January 1994 until May 1996. Ms. Mohr has
been Managing Director at Salomon Brothers, Inc, an investment banking firm,
since February 1997. Prior to that, Ms. Mohr had been Managing Director, Banking
Group of Lazard Freres & Co. LLC, an investment banking firm, from 1990 to
February 1997. She was a Vice President, Banking Group, from 1984 to 1990. She
is a Director of United Retail Group, Inc., a retail chain.
CONTINUING DIRECTORS
CLASS A DIRECTORS
ROBERT N. FRIEDMAN has been Chairman, Chief Executive Officer and a
Director of the Company since November 1995 and was President, Chief
Executive Officer and a Director of the Company from September to November 1995.
Mr. Friedman was President and Chief Executive Officer of Holdings from April
1992 until May 1996. Prior to joining the Company, Mr. Friedman was employed
by R.H. Macy Co., Inc. for 28 years in various capacities, including
President and Vice Chairman, Merchandising, at Macy's East from 1990-1992,
Chairman and C.E.O. of Macy's Bamberger Division and Chairman and C.E.O. of
Macy's South/Bullocks. He serves on the Board of Trustees of The Fashion
Institute of Technology.
PHILIP KAPLAN has been President, Chief Operating Officer, Secretary and a
Director of the Company since November 1995. He was Chairman, Chief Operating
Officer and a Director of the Company from September to November 1995 and
Chairman, Chief Operating Officer, Secretary and Treasurer from September 1988
to September 1995. Mr. Kaplan was Vice Chairman, Treasurer and a Director of
Holdings from February 1987 until May 1996. Mr. Kaplan was president of Verdi
International, a manufacturer of luggage, from 1983 to 1987, Senior Vice
President of Abraham and Strauss, a division of Federated Department Stores,
Inc., from 1979 until 1983 and Executive Vice President-Chief Financial Officer
of E.J. Korvette's from 1971 until 1979.
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6
NORMAN S. MATTHEWS has been Chairman of the Board and a Director of the
Company since September 1995. Mr. Matthews served as Chairman of the Board of
Holdings from December 1993 until May 1996 and as a Director of Holdings from
October 1988 until May 1996. Mr. Matthews currently serves as a consultant to
various retailers. He was President of Federated Department Stores from March
1987 until April 1988 and served in other executive capacities with Federated
Department Stores prior to that date. He is a Director of Progressive Corp., an
insurance holding company, Lechters, Inc., a housewares chain, Finlay Fine
Jewelry, a jewelry lessee in major department stores, Toys "R" Us, a children's
specialty retailer, and Eye Care Centers of America, Inc.
CLASS C DIRECTORS
JANET A. HICKEY has been a Director of the Company since September 1995
and was a Director of Holdings from 1988 until May 1996. Ms. Hickey has been
Senior Vice President and General Partner of the Sprout Group, a shareholder
of the Company and the venture capital affiliate of DLJ, and a Divisional
Senior Vice President of DLJ Capital Corporation, a subsidiary of DLJ,
since June 1985. Ms. Hickey is a director of Corporate Express, Inc. and other
private companies.
ARTHUR E. REINER has been a Director of the Company since August 1996. Mr.
Reiner has been President and Chief Executive Officer of Finlay Enterprises, the
parent of Finlay Fine Jewelry, since January 1996 and Chairman and Chief
Executive Officer of Finlay Fine Jewelry since January 1995. Prior to that, he
was employed by R.H. Macy Co., Inc., serving as Chairman and Chief Executive
Officer of Macy's East from January 1992 to October 1994 and Chairman and Chief
Executive Officer of Macy's Northeast from April 1988 to January 1992.
CYNTHIA R. COHEN has been a Director of the Company since September 1995
and was a Director of Holdings from January 1994 until May 1996. Ms. Cohen has
been President of MARKETPLACE 2000, a retail marketing and strategy consulting
firm, which she founded in 1990. Prior to that, Ms. Cohen was a partner of
Touche Ross (a predecessor of Deloitte & Touche LLP). Ms. Cohen is a Director of
One Price Clothing, Inc., an apparel retail chain, Specs Music Stores, Inc., a
music and video retailer, Office Depot, an office products retailer, the Mark
Group and Capital Factors, Inc., a factoring company.
MEETINGS AND COMMITTEES
The Company has an Executive Committee, an Audit Committee and a
Compensation Committee. There is no standing nominating committee.
The Executive Committee, currently comprised of Messrs. Matthews, Friedman
and Kaplan and Ms. Hickey, is authorized and empowered, to the extent of
Delaware law, to exercise all functions of the Board of Directors in the
interval between meetings of the Board of Directors. The Audit Committee,
currently comprised of Mss. Hickey, Mohr and Cohen, assists the Board of
Directors in overseeing the financial reporting and internal operating control
of the Company. The functions of the Compensation Committee, currently comprised
of Mr. Matthews, Mr. Kroon and Ms. Cohen, are to determine and review the
compensation of the executive officers of the Company.
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7
During the fiscal year ended February 1, 1997, there were eight meetings
of the Board of Directors, four meetings of the Compensation Committee and one
meeting of the Audit Committee. Each Director attended more than 75% of the
total number of meetings of the Board and the meetings held by all committees on
which he or she served.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following persons are the executive officers and directors of the
Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Norman S. Matthews(1)(3)..... 64 Chairman of the Board and Director
Robert M. Friedman(1)........ 56 Chairman, Chief Executive Officer and Director
Philip Kaplan(1)............. 66 President, Chief Operating Officer, Secretary and
Director
Bonnie Dexter................ 45 Senior Vice President, Merchandising
Robert Glass................. 50 Senior Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary
Jan Heppe.................... 45 Senior Vice President and Director of Stores
Janet A. Hickey(1)(2)........ 52 Director
Richard E. Kroon(3).......... 54 Director
Christina A. Mohr(2)......... 41 Director
Arthur E. Reiner............. 56 Director
Cynthia R. Cohen(2)(3)....... 44 Director
</TABLE>
- ------------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
Set forth below are biographies of executive officers of the Company who
are not also directors.
BONNIE DEXTER has been Senior Vice President, Merchandising of the Company
since May 1994. Ms. Dexter joined the Company as Vice President, Merchandising
in May 1993. Prior to that time, she was a Vice President of Retail and
Wholesale for Belle France and held a number of merchandising and store
management positions at various retail chains, including as a buyer of the May
Company of Los Angeles, as a buyer and as a merchandise manager of Filene's and
as Senior Vice President, Stores of Accessory Place.
ROBERT GLASS has been Senior Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary of the Company since September 1994. From 1992
to 1994, Mr. Glass served as a retail consultant. Prior to that time, he held a
number of senior retail management positions, including Chief Financial Officer
and later President of Gold Circle Stores, a division of Federated Department
Stores, Inc., and Executive Vice President of Thrifty Drug from 1990 to 1992.
<PAGE>
8
JAN HEPPE has been Senior Vice President and Director of Stores of the
Company since September 1995. Prior to that time, she held a number of senior
retail management positions including Senior Vice President/General Manager of
the John Wanamaker Department Store in Philadelphia, Pennsylvania from 1992
through 1995, Divisional Vice President/General Manager of the John Wanamaker
Department Store in Moorestown, New Jersey from 1991 to 1992 and a senior
management retail position at Henri Bendel in 1991. Prior to 1991, Ms. Heppe was
General Manager of On Course, a catalog and wholesale operation and also held
various executive positions at Gimbels, New York.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of Forms 3 and 4 and amendments thereto furnished to
the Company during and with respect to its most recent fiscal year and upon
written representations from persons known to the Company to be subject to
Section 16 of the Exchange Act (a "reporting person") that no Form 5 is required
to be filed for any such reporting person, no one, except Jan Heppe, Bonnie
Dexter and Arthur Reiner, did not file when due reports required by Section
16(a) of the Exchange Act during the fiscal year ended February 1, 1997. Jan
Heppe and Bonnie Dexter each filed her Form 5 late, and Arthur Reiner filed his
Form 3 late.
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded to, earned by or
paid to the named executive officers for services rendered to the Company during
the fiscal years ended February 1, 1997, February 3, 1996 and January 28, 1995.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
-------------
ANNUAL COMPENSATION AWARDS
----------------------------------------------
OTHER SECURITIES
NAME AND FISCAL ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)(1)
- ----------------------- ----- -------- -------- -------------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Robert N. Friedman.... 1996 550,000 550,000 (2) 63,614 2,750
Chairman and Chief 1995 475,000 135,000 (2) 187,639 3,471
Executive Officer 1994 450,000 301,000 (2) -- 3,129
Philip Kaplan......... 1996 374,400 240,000 (2) 25,170 1,875
President and Chief 1995 356,250 105,000 (2) 14,657 3,471
Operating Officer 1994 350,000 234,000 (2) 10,261 3,129
Robert Glass(3)....... 1996 232,500 58,125 (2) 31,172 1,213
Senior Vice President 1995 211,250 17,500 (2) -- 574
and Chief Financial 1994 74,546 12,947 -- 11,172 4,552
Officer
Jan Heppe(4)..........
Senior Vice President 1996 198,875 49,219 (2) 31,172 1,125
and Director of Stores 1995 62,327 10,000 (2) -- --
1994 -- -- -- -- --
Bonnie Dexter.........
Senior Vice President, 1996 180,000 45,000 (2) 31,172 925
Merchandising 1995 165,000 20,000 (2) -- 3,471
1994 139,054 26,985 (2) 3,910 1,442
- ----------------
</TABLE>
(1)Consists of (i) Company contributions in fiscal 1996 under the Loehmann's
401(k) Savings and Investment Plan of $2,750 for Mr. Friedman, $1,875 for Mr.
Kaplan, $1,213 for Mr. Glass, $1,125 for Ms. Heppe and $925 for Ms. Dexter;
(ii) Company contributions in fiscal 1995 under the Loehmann's, Inc. Deferred
Profit Sharing Plan of $3,471 for each of Mr. Friedman, Mr. Kaplan and Ms.
Dexter and reimbursement of moving expenses in fiscal 1995 of $574 for Mr.
Glass; and (iii) Company contributions in fiscal 1994 under the Company's
Deferred Profit
<PAGE>
9
Sharing Plan of $3,129 for each of Mr. Friedman and Mr. Kaplan and $1,442 for
Ms. Dexter and reimbursement of moving expenses in fiscal 1994 of $4,552 for
Mr. Glass.
(2)For each named executive officer, the aggregate amount of other annual
compensation is less than the lesser of 10% of such officer's total salary
and bonus for such year or $50,000.
(3)Mr. Glass became an executive officer of the Company in September 1994.
(4)Ms. Heppe became an executive officer of the Company in October 1995.
The following table provides certain summary information concerning
individual grants of stock options made to each of the executives named in the
Summary Compensation Table above during the fiscal year ended February 1, 1997.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
----------------------------------------------------------------------
NUMBER OF
SECURITIES POTENTIAL REALIZABLE
UNDERLYING VALUE AT ASSUMED
----------- ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS-GRANTED EXERCISE OR APPRECIATION
OPTIONS TO EMPLOYEES IN BASE-PRICE EXPIRATION ----------------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5% 10%
- ----------------------- ---------- --------------- ---------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Robert N. Friedman... 35,707 10.5% $8.06 (1) $79,627 $175,678
27,907 8.2% $8.06 (2) 62,233 137,302
Philip Kaplan........ 14,656 4.3% $5.01 (1) 20,227 44,850
6,840 2.0% $8.06 (1) 15,253 33,653
3,673 1.1% $8.06 (3) 18,622 47,161
Robert Glass......... 11,172 3.3% $8.06 (4) 56,642 143,448
20,000 5.9% $22.69 (5) 285,400 723,200
Jan Heppe............ 11,172 3.3% $8.06 (4) 56,642 143,448
20,000 5.9% $22.69 (5) 285,400 723,200
Bonnie Dexter........ 11,172 3.3% $8.06 (4) 56,642 143,448
20,000 5.9% $22.69 (5) 285,400 723,200
- -------------
</TABLE>
(1) One half of these options vest in each of fiscal 1996 and 1997 and expire
five years from the date of vesting with certain exceptions.
(2) One third ofthese options vest in each of fiscal 1996, 1997 and 1998 and
expire with certain exceptions, on the tenth anniversary date of grant.
(3) One half of these options vest in each of fiscal 1996 and 1997 and expire
with certain exceptions, on the tenth anniversary date of grant.
(4) One fifth of the options vest in each of fiscal 1997, 1998, 1999, 2000
and 2001 and expire on the tenth anniversary of the date of grant.
(5) These options fully vest on the fifth anniversary of the date of grant
and expire on the tenth anniversary of the date of grant.
The following table sets forth information concerning the value of
unexercised options as of February 1, 1997 held by the executives named in the
Summary Compensation Table above.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
SHARES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED VALUE UNEXERCISED OPTIONS IN THE MONEY OPTIONS
ON EXERCISE REALIZED AT-FISCAL-YEAR-END(#) AT FISCAL YEAR END ($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------------------- -------- --------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert N. Friedman.... 85,326 $2,215,063 153,608 152,622 $1,706,966 $1,451,563
Philip Kaplan......... 12,846 333,482 208,590 12,584 2,893,184 112,852
Robert Glass.......... - - 6,702 35,642 79,450 159,396
Jan Heppe............. - - 5,136 31,622 57,236 102,344
Bonnie Dexter......... - - 2,234 28,938 16,071 64,300
- -------------
</TABLE>
(1) Based on a stock price at January 31, 1997 of $15.25.
<PAGE>
10
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company is a party to an employment agreement with each of Messrs.
Friedman and Kaplan (the "Employment Agreements").
MR. FRIEDMAN
Mr. Friedman's employment agreement, as amended (the "Friedman
Agreement"), provides that he will serve as Chairman and Chief Executive Officer
of the Company from November 1, 1995 through January 31, 1999, for an annual
base salary of not less than $550,000 for fiscal 1996, $575,000 for fiscal 1997
and $600,000 for fiscal 1998. Mr. Friedman also is eligible to receive an annual
bonus equal to 100% of his base salary in effect for each of fiscal 1996 and
fiscal 1997 and 60% of his base salary in effect for fiscal 1998 if, for each
such fiscal year, the Company attains its targeted financial goals (as defined
by the Compensation Committee). The Friedman Agreement also provides or certain
insurance and other benefits to be maintained and paid by the Company.
The Friedman Agreement provided for a grant to Mr. Friedman on November 1,
1995, of options to purchase up to 187,639 shares of Common Stock at an exercise
price of $5.01 per share. Of such options, 71,475 vested in fiscal 1996, 71,475
vest automatically at the end of fiscal 1997 and 44,689 vest automatically at
the end of fiscal 1998. In addition, on February 23, 1996, the Company granted
Mr. Friedman options to purchase up to 35,707 shares of Common Stock at an
exercise price of $8.06. One-half of such options vested automatically at the
end of fiscal 1996 and the remainder will vest at the end of fiscal 1997. As of
April 1, 1997, 284,853 of Mr. Friedman's options had vested and, of these vested
options, 131,245 had been exercised.
The Friedman Agreement provides that if Mr. Friedman's employment is
terminated by the Company without Cause or by Mr. Friedman with Good Reason (as
such terms are defined in the Friedman Agreement), the Company will be required
to pay his base salary then in effect for the greater of 12 months following his
termination or the remainder of his term of employment. Mr. Friedman also will
be entitled to receive any bonus earned with respect to any previously completed
fiscal year which remains unpaid as of the date of termination. If Mr.
Friedman's employment is terminated, either by the Company or by Mr. Friedman
for Good Reason, coincident with or within one-year after a Change of Control
(as defined in the Friedman Agreement), the Company will be required to pay Mr.
Friedman a lump sum, in cash, equal to two times his base salary then in effect
and all unvested options will vest in full. If Mr. Friedman's employment is
terminated by the Company without Cause, Mr. Friedman for Good Reason or as a
result of a Change of Control, the Company also, with certain exceptions, will
be required to continue to maintain life insurance for Mr. Friedman for the
remainder of his life or until he attains the age of 70 with a death benefit
equal to his base salary at the date of termination and medical insurance for
Mr. Friedman and his spouse until their respective deaths. The Company also will
be required to maintain life insurance for Mr. Friedman and medical insurance
for Mr. Friedman and his spouse, as described in the foregoing sentence, upon
Mr. Friedman's retirement or voluntary termination from the Company after the
period of employment provided for in the Friedman Agreement.
The Friedman Agreement provides that the Company has certain rights to
purchase shares of the Common Stock and/or vested options held by Mr. Friedman
upon termination of his
<PAGE>
11
employment. Finally, the Friedman Agreement provides that Mr. Friedman will not,
with certain exceptions, "engage or be engaged in a competing business" (as
defined in the Friedman Agreement) for a period of two years following
termination of his employment (unless he is terminated without Cause or he
resigns with Good Reason).
MR. KAPLAN
Mr. Kaplan's employment agreement, as amended (the "Kaplan Agreement"),
provides that he will serve as president and Chief Operating Officer of the
Company from November 1, 1995 through January 31, 1998, for an annual base
salary of $375,000. Mr. Kaplan also is eligible to receive an annual bonus equal
to 64% of his base salary in effect for each fiscal year during the term of the
Kaplan Agreement if, for such fiscal year, the Company attains its targeted
financial goals (as defined by the Compensation Committee). The Kaplan Agreement
also provides for certain insurance and other benefits to be maintained and paid
by the Company.
The Kaplan Agreement provided for a grant on November 1, 1995 of options
to purchase 14,657 shares of Common Stock at an exercise price of $5.01 per
share. Such options vest automatically during the term of Mr. Kaplan's
employment. In addition, on February 23, 1996, the Company granted Mr. Kaplan
options to purchase up to 6,840 shares of Common Stock at an exercise price of
$8.06. One-half of such options vested automatically at the end of fiscal 1996
and the remainder will vest at the end of fiscal 1997. As of April 1, 1996,
277,297 of Mr. Kaplan's options had vested and, of these vested options, 68,707
had been exercised.
The Kaplan Agreement provides that if Mr. Kaplan's employment is
terminated by the Company without Cause or by Mr. Kaplan for Good Reason (as
such terms are defined in the Kaplan Agreement), the Company will be required to
pay his base salary, annual bonus and life and medical insurance through the
remainder of his term of employment, and certain of Mr. Kaplan's unvested
options will vest. In addition, if such termination is subsequent to a Change of
Control of the Company (as defined in the Kaplan Agreement), the Company will be
required to pay Mr. Kaplan's base salary and bonus in one lump sum promptly
following such termination, all of Mr. Kaplan's unvested options will vest and
the Company will be required to continue to maintain life insurance for Mr.
Kaplan for the remainder of his life with a death benefit equal to his base
salary at the date of his termination and medical insurance for Mr. Kaplan and
his spouse until their respective deaths. The Company also will be required to
maintain life insurance for Mr. Kaplan and medical insurance for Mr. Kaplan and
his spouse, as described in the foregoing sentence, upon Mr. Kaplan's retirement
or voluntary termination from the Company after the period of employment
provided for in the Kaplan Agreement.
The Kaplan Agreement provides that the Company has certain rights to
purchase shares of the Common Stock held by Mr. Kaplan upon termination of his
employment, and that Mr. Kaplan has certain rights to require the Company to
purchase shares and/or vested options held by him upon termination. Upon the
expiration of the term of Mr. Kaplan's Employment Agreement, Mr. Kaplan has
agreed to act as a consultant to the Company for a period of five years and to
serve on the Board of Directors of the Company (unless the Board requests his
resignation therefrom) in exchange for which the Company will pay him 20% of his
base salary and will provide him with an automobile. Finally, the Kaplan
Agreement provides that Mr. Kaplan will not, with certain exceptions, "engage or
be engaged in a competing business" (as defined in the Kaplan Agreement) for a
period of two years following termination of his employment (unless he is
terminated without Cause or he resigns with Good Reason).
<PAGE>
12
COMPENSATION OF MEMBERS OF THE BOARD OF DIRECTORS
For serving as a director of the Company, each non-employee director
receives, commencing on February 1, 1997, $15,000 per year, $1,000 per Board of
Directors meeting attended in person, $500 per Board of Directors meeting
attended by telephone, and $500 per Board of Directors committee meeting
attended. In addition, if the Directors Stock Option Plan and/or the Directors
Deferred Compensation Plan are approved by the stockholders at the Annual
Meeting, certain directors who are not employees of the Company or any of the
Company's affiliates will be entitled to receive benefits under the Directors
Stock Option Plan and all directors of the Company will be entitled to receive
benefits under the Directors Deferred Compensation Plan. See "Approval of
Directors Stock Option Plan -- Description of the Directors Stock Option Plan"
and "Approval of Directors Deferred Compensation Plan --Description of Deferred
Compensation Plan." In addition, in connection with Mr. Reiner's election as a
director in August 1996, the Company agreed to pay him for his service in fiscal
1996, an annual retainer of $15,000 and meeting fees of $1,000 per board meeting
($500 for telephonic meetings).
In connection with Ms. Mohr's and Ms. Cohen's service as directors of the
Company, Entrecanales Inc., an affiliate of Sefinco Ltd., entered into
agreements with each of Ms. Mohr and Ms. Cohen providing for (a) compensation
for Ms. Mohr and Ms. Cohen of $25,000 and $40,000 per annum, respectively,
payable by Entrecanales, and (b) the grant by Entrecanales to each of Ms. Mohr
and Ms. Cohen of 44,680 stock appreciation rights ("SARs"), on terms described
below. The compensation payments were made in fiscal 1996 and have been
discontinued in fiscal 1997.
The SARs were not granted by and are not obligations of the Company. All
SARs have vested in accordance with their terms. Upon redemption of any vested
SAR, the holder is entitled to receive the amount by which the market value per
share of Common Stock exceeds $5.59 per SAR. In 1996, Ms. Cohen exercised all of
her SARs and Ms. Mohr exercised 20,000 of her SARs. The remainder of Ms. Mohr's
vested and unredeemed SARs lapse on June 1, 1998.
COMPENSATION OF CHAIRMAN OF THE BOARD
The Company has a consulting agreement with Mr. Matthews, pursuant to
which he is currently paid $75,000 per annum. In addition, in connection with
Mr. Matthews' agreement to serve as Chairman of the Board, Mr. Matthews was
granted options pursuant to the 1988 Stock Option Plan (the "1988 Stock Plan")
to purchase up to 91,232 shares of the Common Stock, 24,197 exercisable at $1.07
per share, 22,345 exercisable at $4.48 per share, 22,345 exercisable at $2.24
per share and 22,345 exercisable at $8.95 per share. All such options have
vested. Mr. Matthews has exercised options on 24,197 shares at $1.07 per share
and 22,345 shares at $2.24 per share.
In addition, on July 1, 1995 Mr. Matthews was granted options pursuant to
the 1988 Stock Plan to purchase 44,689 shares of the Common Stock at $5.01 per
share. Half of the options vested on July 1, 1996 and the other half will vest
on July 1, 1997. Unvested options vest upon certain changes in control of the
Company. Within 180 days upon termination, depending on the cause of
termination, the Company has the right to purchase Mr. Matthews'
<PAGE>
13
shares and unexercised vested options. The Company also has a right of first
refusal upon notice of proposed sale of shares by Mr. Matthews.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1996, Messrs. Kroon and Matthews and Ms. Cohen served as
members of the Compensation Committee of the Board of Directors.
Each of Mr. Kroon and Ms. Hickey is a director of the Company and a
general partner of, or an executive officer in, (i) certain of the affiliates of
DLJ that own shares of Common Stock or (ii) entities that control such
affiliates. DLJ and certain of its affiliates are significant stockholders of
the Company, and DLJ acted as an underwriter in the offering of the Company's
117/8% Senior Notes due 2003 (the "Debt Offering"). In addition, (i) members of
the Sprout Group sold 594,726 shares of Common Stock in a public offering that
was consummated in October 1996 (the "Secondary Offering") for $17,098,371 in
the aggregate, (ii) members of the Sprout Group sold 104,653 shares of Common
Stock in the Initial Public Offering for $1,654,564 in the aggregate, (iii)
approximately $20.9 million of the proceeds from the Company's initial public
offering (the "Initial Public Offering") and the Debt Offering were used to
redeem all of the outstanding Series A Preferred Sock, par value $0.005602241
per share (the "Series A Preferred Stock"), certain of which shares were owned
by DLJ and other significant holders of the Company's Common Stock and (iv) DLJ
was paid $50,000 for financial advisory services rendered to the Company during
the last fiscal year. See "Certain Transactions."
Mr. Matthews has a consulting agreement with the Company, pursuant to
which, among other things, he is paid $75,000 per annum and has received
grants of options to purchase Common Stock. See "Compensation of Chairman
of the Board."
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee is responsible for making or reviewing all
compensation decisions of the Company for its executive officers, including base
salaries, determining annual bonus incentives for the entire Company and
granting stock options.
The Company's compensation philosophy, as stated in the Company's Mission
Statement, is that its employees are its most valuable assets. Executive
officers of the Company, together with senior management, direct the Company's
strategic planning and have overall responsibility for the Company's results.
Because the Company operates in a highly competitive and difficult economic
environment for retailers, the Company has planned a compensation structure
intended to attract and retain highly talented individuals, reward the
creativity of its executive officers in maximizing business opportunities and
provide incentives to the executive officers to execute the Company's objectives
and enhance stockholder value by achieving both short and long term business
objectives.
BASE SALARY
The Company sets base salaries taking into consideration individual
performance and prevailing market data for similar positions. In fiscal 1996,
salary determinations with respect to executive officers and other key
executives were made jointly by Mr. Friedman and Mr.
<PAGE>
14
Kaplan and were subject to the approval of the Compensation Committee in the
case of executive officers. Messrs. Friedman and Kaplan and the Compensation
Committee subjectively evaluate the performance of each executive officer by
taking into account several factors, including achievement of corporate or
divisional operating performance, individual achievements and accomplishments
and the overall contribution to the Company made by each such executive, without
any specific weight being assigned to any particular factor. With respect to
Messrs. Friedman and Kaplan, base salary and other aspects of their overall
compensation are set by their employment agreements. See "Management--Employment
and Severance Agreements."
ANNUAL BONUS INCENTIVES
The Company encourages its executives to realize certain annual goals
(tied to pre-tax income), which are established by the Compensation Committee at
the beginning of each fiscal year. The Company's Performance Incentive Plan (the
"Performance Incentive Plan") is designed to provide a cash bonus to executives
who make significant contributions to successful Company performance. Bonus
amounts for executive officers generally are a function of two components: the
Company's earnings, which accounts for 75% of the bonus, and the satisfaction of
individual goals, which accounts for 25% of the bonus. The Performance Incentive
Plan offers each of the Company's executive officers the opportunity to earn a
bonus equal to up to thirty percent (30%) of his or her base salary, depending
upon his or her position, if targeted performance goals are met and possibly
exceeded.
The Performance Incentive Plan establishes three levels of performance
standards: (i) maximum performance, which requires that the highest established
goals be achieved, in which case the executive is entitled to his or her maximum
incentive bonus; (ii) target performance, which requires that targeted
(expected) goals be achieved, in which case the executive is entitled to
two-thirds (2/3) of his or her maximum incentive bonus; and (iii) threshold
performance, which requires that minimum goals be achieved, in which case the
executive is entitled to one-third (1/3) of his or her maximum incentive bonus.
The achievement of performance levels between the threshold and the maximum
levels results in a pro-rated incentive bonus being paid to an executive. For
the fiscal year ended February 1, 1997, each of Mr. Glass, Ms. Heppe and Ms.
Dexter will receive a bonus equal to approximately 25% of his or her base
salary.
Annual bonus criteria for each of Messrs Friedman and Kaplan are defined
by each of their employment agreements. For the year ended February 1, 1997, Mr.
Friedman's employment agreement provided an opportunity for him to earn up to
one hundred percent (100%) of his base salary based upon the Company's
achievement of certain EBITDA goals. Because the maximum EBITDA target of $35
million was met, Mr. Friedman received his maximum bonus equal to 100% of his
base salary. Mr. Kaplan's employment agreement provided an opportunity for him
to earn up to sixty four percent (64%) of his base salary based on the same
criteria as are contained in Mr. Friedman's employment agreement. Because the
maximum EBITDA target of $35 million was met, Mr. Kaplan received his maximum
bonus equal to 64% of his base salary. See "Management -- Employment and
Severance Agreements."
OPTION GRANTS
Grants of stock options are awarded to the Company's executive officers
and other key employees as a long term incentive vehicle. The Compensation
Committee's intention in granting stock options is to award employees for their
contribution to the Company's achievement of long
<PAGE>
15
term financial performance goals, to encourage stock ownership and to align the
objectives of the Company with those of its employees. In addition, stock
options granted to employees of the Company have vesting schedules that are
designed to reward employees who remain with the Company for long periods of
time.
Stock option grants periodically are awarded to the Company's executive
officers pursuant to the New Stock Plan. Stock option grants are determined by
the Compensation Committee based upon the level and responsibility of each
individual executive. The Compensation Committee also considers each executive's
expected and potential contribution to the Company's performance.
In the fiscal year ended February 1, 1997, prior to the Initial Public
Offering, stock option grants were made to the Company's executive officers
based upon the Company's successful performance in fiscal 1995 and each
executive officer's relative contribution to such success. Five executive
officers were granted options to purchase an aggregate of 122,298 shares of
Common Stock at exercise prices of $5.01 per share and $8.06 per share. In
addition, after the Initial Public Offering, certain executive officers of the
Company were awarded cliff option grants to provide longer term incentives and
encourage the executive officers to remain with the Company for long periods of
time and continue to contribute to the Company's successful performance. Three
executive officers were granted options to purchase an aggregate of 60,000
shares of Common Stock. All cliff option grants are for five years and were
issued on August 19, 1996 at an exercise price of $22.69. For more information,
see "Management-Executive Compensation."
CEO COMPENSATION
As determined above, in fiscal 1996, the amount of Mr. Friedman's salary
and bonus were determined by his employment agreement. In fiscal 1996, options
to acquire 63,614 shares of Common Stock at $8.06 per share were granted to Mr.
Friedman. The number of stock options awarded to Mr. Friedman during the fiscal
year ended February 1, 1997 was based in part on the Company's overall
performance and the Compensation Committee's evaluation of Mr. Friedman's
contribution to the growth and development of the Company. Stock option grants
to Mr. Friedman during fiscal 1996 also were in recognition of Mr. Friedman's
accomplishments in connection with the Company's successful restructuring in
fiscal 1995 and the Initial Public Offering in fiscal 1996. The Compensation
Committee also considered the Company's improved profitability (as evidenced by
the growth in earnings before depreciation interest, taxes and amortization),
the opening of additional stores in fiscal 1995 and 1996 and the increase in
comparable stores revenues in establishing the number of options to be awarded
to Mr. Friedman. The Compensation Committee believes that Mr. Friedman has been
instrumental in the recent successful developments of the Company and has
awarded stock options to Mr. Friedman accordingly.
SECTION 162(M) OF THE INTERNAL REVENUE CODE OF 1986
It is the Compensation Committee's philosophy to generally structure
compensation arrangements for the Company's executive officers in a manner that
complies with the exemptive requirements of Section 162(m) of the Internal
Revenue Code in order to avoid applicability of the limit on deductibility
otherwise imposed by such Section, while reserving the discretion to
<PAGE>
16
pay compensation that does not qualify for exemption under Section 162(m) where
the Compensation Committee believes such action to be in the Company's best
interest.
Compensation Committee
Norman S. Matthews
Richard E. Kroon
Cynthia R. Cohen
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative performance of
the Company's Common Stock with the Standard & Poor's Composite-500 Stock Index
(the "S&P 500") and the Dow Jones Apparel Retailers Index as of May 7, 1996 (the
date on which the Company's Common Stock began to trade on the Nasdaq market),
January 31, 1997 (the date nearest the end of the Company's fiscal year for
which index data is readily available) and April 1, 1997 (a recent practicable
date). The graph assumes that $100 was invested on May 10, 1996 in each of the
Company's Common Stock, the S&P 500 and the Dow Jones Apparel Retailers Index
and that all dividends were reinvested.
[Graph which shows performance of the Common Stock and indexes described above]
TOTAL SHAREHOLDER RETURNS
DATE LOEHMANN'S, INC. (1) S&P 500 INDEX PEER GROUP
05/07/96 $100.00 $100.00 $100.00
01/31/97 64.55 123.17 92.65
04/01/97 71.43 119.02 99.52
- ------------
(1) In accordance with the rules of the Securities and Exchange Commission, the
share price of the Company's Common Stock on May 7, 1996 used for the
performance graph is $23.625, the closing price on the first day of trading
of the Common Stock on the Nasdaq National Market. If the performance graph
had been based upon the Initial Public Offering price of $17.00 per share of
Common Stock on May 7, 1996, the value of a $100 invested in the Common
Stock of the Company on May 7, 1996 would be $89.71 and $99.27 on January
31, 1997 and April 1, 1997, respectively.
CERTAIN TRANSACTIONS
Pursuant to agreements with certain stockholders of the Company, the
Company paid all of the fees and expenses for the Registration Statement on Form
S-1 for the Initial Public Offering, which fees and expenses totaled
approximately $748,000 and agreed to indemnify the underwriters in the Initial
Public Offering against certain liabilities, including civil liabilities under
the Securities Act of 1933, as amended (the "Securities Act"). The Company did
not pay the fees and expenses for the Registration Statement on Form S-1 for the
Secondary Offering.
<PAGE>
17
In connection with that offering, the Company agreed to indemnify the
underwriters in the Secondary Offering against certain liabilities, including
civil liabilities under the Securities Act. Certain of the principal
stockholders of the Company (including Sefinco Ltd., the Sprout Group,
Equity-Linked Investors, L.P., Equity-Linked Investors-II, Putnam Investors and
Messrs. Matthews, Friedman and Kaplan) sold 535,800 shares of Common Stock for
$8,470,998 in the aggregate in the Initial Public Offering and 2,241,891 shares
of Common Stock for $64,454,374 in the aggregate in the Secondary Offering.
Entrecanales Inc., a principal stockholder, was paid $50,000 for financial
advisory services rendered to the Company during the last fiscal year.
Certain of the principal stockholders of the Company (including Putnam
Investors) have owned and currently own debt securities of the Company.
Certain transactions involving DLJ, the Sprout Group, Richard E. Kroon and
Janet A. Hickey are described in "Management--Compensation Committee Interlocks
and Insider Participation."
APPROVAL OF THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
Subject to stockholder approval, the Board of Directors of the Company has
adopted a resolution approving the Amended and Restated Certificate of
Incorporation of the Company (the "Restated Certificate") pursuant to which (i)
the number of authorized shares of Preferred Stock, par value $0.01 per share
(the "Preferred Stock"), is reduced from 41,500,000 shares to 5,000,000 shares,
and (ii) references to the Series A Preferred Stock are eliminated from the
Company's Certificate of Incorporation.
REASONS FOR AND GENERAL EFFECTS OF THE RESTATEMENT At the close of
business on the Record Date, no shares of Preferred Stock were issued and
outstanding. The Restated Certificate would reduce the number of authorized
shares of Preferred Stock from 41,500,000 to 1,000,000. The reduction in the
number of authorized shares was made possible as a result of the redemption of
the Company's Series A Preferred Stock in connection with the Initial Public
Offering and will result in an annual savings of approximately $50,000 by
reducing the amount of annual franchise taxes payable to the State of Delaware,
the Company's state of incorporation. Franchise taxes in Delaware are currently
determined in accordance with a formula that is based, in part, on the amount of
a corporation's authorized shares of capital stock. The Board of Directors
believes that 1,000,000 shares of Preferred Stock is sufficient to meet the
Company's present and anticipated future needs.
Approval of the Restated Certificate and the reduction in the number of
authorized shares of Preferred Stock would have no effect on the powers,
designations, preferences or relative, participating, optional or other special
rights, qualifications or restrictions of shares of the Preferred Stock of the
Company.
The Restated Certificate would also eliminate references to the Series A
Preferred Stock in the Certificate of Incorporation. All of the Series A
Preferred Stock was redeemed on June 14, 1996.
<PAGE>
18
REQUIRED VOTE. The affirmative vote of a majority of the outstanding
shares of Common Stock entitled to vote on this proposal is required to approve
the Restated Certificate.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS APPROVAL OF THE RESTATED
CERTIFICATE BY THE STOCKHOLDERS. UNLESS OTHERWISE INSTRUCTED, SIGNED PROXIES
WHICH ARE RETURNED IN A TIMELY MANNER WILL BE VOTED IN FAVOR OF THE RESTATED
CERTIFICATE.
APPROVAL OF DIRECTORS STOCK OPTION PLAN
DESCRIPTION OF THE DIRECTORS STOCK OPTION PLAN
The Board of Directors has approved the Directors Stock Option Plan,
subject to the approval by the holders of the Common Stock. A summary of the
material provisions of the Directors Stock Option Plan is set forth below. This
summary is not complete and is qualified in its entirety by the terms of the
Directors Stock Option Plan attached hereto as Exhibit A.
The purpose of the Directors Stock Option Plan is to create an employment
incentive by securing the Company the benefits of the ownership of Common Stock
by non-employee directors of the Company and to help the Company secure and
retain the services of such non-employee directors. The Directors Stock Option
Plan is effective upon approval by the holders of the Common Stock (the
"Effective Date"). The Directors Stock Option Plan is intended to be a largely
self-governing formula plan and requires minimal discretionary action except
with respect to certain discretionary grants described below. To the extent that
questions of administration arise they are resolved by the Board of Directors.
Only directors of the Company who are not employees of the Company or any of its
subsidiaries ("Eligible Directors") are eligible to participate in the Directors
Stock Option Plan. There are currently six (6) Eligible Directors who would be
eligible to participate in the Directors Stock Option Plan.
The maximum number of shares that are currently reserved for issuance
under the Directors Stock Option Plan is 200,000. Under the terms of the
Directors Stock Option Plan, each person who is first elected, appointed or
otherwise first becomes an Eligible Director will be granted an option to
purchase 6,000 shares of Common Stock as of the date on which such person first
becomes an Eligible Director (an "Initial Option"). Each person who is an
Eligible Director as of the Effective Date and who has not previously been
awarded options to acquire Common Stock under any other plan, program or
agreement with the Company shall receive an option to purchase 6,000 shares of
Common Stock as of the Effective Date (a "Special Option"). In addition, each
person who is an Eligible Director on February 1st of each year will receive an
option to purchase 3,000 shares of Common Stock (an "Annual Option"). The
Directors Stock Option Plan also provides that the Board of Directors shall have
discretionary authority to award options to acquire up to an aggregate of
100,000 shares of Common Stock to one or more Eligible Directors ("Discretionary
Options"). All options granted under the Directors Stock Option Plan are
"nonqualified" stock options ("NSOs") subject to the provisions of Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code").
Each Initial Option and Special Option vests and becomes exercisable in
1/3 increments on each of the first, second and third anniversaries of the
date of grant; PROVIDED that the Eligible Director is in the service of the
Company as a director on such date. Each Annual Option vests
<PAGE>
19
and becomes exercisable in full on the one year anniversary of the date of
grant; PROVIDED that the Eligible Director is in the service of the Company as a
director on such date. In the event of the termination of the Eligible
Director's service as a director prior to the time all or any portion or an
Initial Option, a Special Option, or an Annual Option vests, such option, to the
extent not yet vested, terminates. Discretionary Options are subject to vesting
conditions established by the Board of Directors and provided in a separate
award agreement evidencing the award of such Discretionary Option. Any
unexercised portion of an option automatically becomes null and void at the time
of the earliest to occur of (i) the expiration of 10 years from the grant date,
and (ii) the expiration of one year from the date the Eligible Director's
service terminates.
The Directors Stock Option Plan provides that the option exercise price
for the options shall be the "fair market value" (as defined in the Directors
Stock Option Plan) of the Common Stock on the date of grant. Options granted
under the Directors Stock Option Plan are deemed exercised upon (a) delivery of
written notice to the Company at its principal business office of the decision
to exercise, (b) tender of full payment by certified or official bank check, or,
with the consent of the Board of Directors, personal check, or by delivery of
previously-acquired shares owned by the grantee for at least six months (or such
longer or shorter period that the Board of Directors may prescribe that will not
result in variable accounting) having a fair market value equal to the portion
of the option exercise price being paid thereby. In addition, the Directors
Stock Option Plan provides that, subject to such rules as may be established by
the Board of Directors, payment may be deemed to be satisfied by delivery to the
Company of an assignment of a sufficient amount of the proceeds from the sale of
Common Stock acquired upon exercise to pay for all of the Common Stock acquired
upon exercise and an authorization to the broker or selling agent to pay such
amount to the Company, which shall be made at the optionee's direction at the
time of exercise.
The Directors Stock Option Plan provides that it will terminate, unless
earlier terminated as provided therein, on the tenth anniversary of the
Effective Date. The Directors Stock Option Plan provides that it may be amended
or terminated at any time by the Board of Directors; provided that (i) any such
amendment shall be in compliance with applicable laws and applicable stock
exchange listing requirements, and (ii) any amendment for which stockholder
approval is necessary to comply with any tax or regulatory requirement shall not
be effective until such approval has been obtained. In addition, no amendment,
modification or termination without the consent of an optionee may adversely
affect the rights of the optionee with respect to their options.
<PAGE>
20
NEW PLAN BENEFITS
Set forth below are the benefits that will be received in fiscal year 1997
(other than discretionary awards which are not determinable) if the Directors
Stock Option Plan is approved by the stockholders:
NUMBER OF
SHARES OF
COMMON STOCK
DOLLAR VALUE(1) UNDERLYING OPTIONS
Non-Employee Directors as a Group. $457,500 30,000
(1) Dollar Value based on stock price of $15.25 on January 31, 1997
FEDERAL INCOME TAX CONSEQUENCES OF
DIRECTORS STOCK OPTION PLAN PARTICIPATION
The following sets forth a summary of the principal federal income tax
consequences of options granted under the Directors Stock Option Plan. It is
general in nature and is not intended to cover all tax consequences that may
apply to a particular director or to the Company. The provisions of the Code and
the regulations thereunder relating to these matters are complicated and their
impact in any one case may depend upon the particular circumstances. Each holder
of an option under the Directors Stock Option Plan should consult his or her own
accountant, legal counsel or other financial advisor regarding the tax
consequences of participation in the Directors Stock Option Plan. This
discussion is based on the Code as currently in effect.
All options granted under the Directors Stock Option Plan are NSOs and are
not entitled to special tax treatment under Section 422 of the Code. If an NSO
is granted to an Eligible Director in accordance with the terms of the Directors
Stock Option Plan, generally no income will be recognized by such director at
the time the option is granted. Rather, upon exercise of an NSO, the amount by
which the fair market value of the shares of the Common Stock on the date of
exercise exceeds the exercise price of such shares will be taxable to the
Eligible Director as ordinary income. The disposition of shares acquired upon
exercise of an NSO under the Directors Stock Option Plan will ordinarily result
in long-term or short-term capital gain or loss (depending on the applicable
holding period) in an amount equal to the difference between the amount realized
on such disposition and the sum of the purchase price and the amount of ordinary
income recognized in connection with the exercise of the nonqualified option.
The Company generally will be entitled to a deduction at the time that the
holder recognizes ordinary income.
The payment by an optionee of the exercise price, in full or in part, with
previously acquired shares will not affect the tax treatment of the exercise
described above. No gain or loss generally will be recognized by the optionee
upon the surrender of the previously acquired shares to the Company, and shares
received by the optionee, equal in number to the previously surrendered shares,
will have the same tax basis as the shares surrendered to the Company and will
have a holding period that includes the holding period of the shares
surrendered. The value of shares received by the optionee in excess of the
number of shares surrendered to the Company
<PAGE>
21
will be taxable to the optionee. Such additional shares will have a tax basis
equal to the fair market value of such additional shares as of the date ordinary
income is recognized, and will have a holding period that begins on the date
ordinary income is recognized.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS APPROVAL OF THE PROPOSED
DIRECTORS STOCK OPTION PLAN BY THE STOCKHOLDERS. UNLESS OTHERWISE INSTRUCTED,
SIGNED PROXIES WHICH ARE RETURNED IN A TIMELY MANNER WILL BE VOTED IN FAVOR OF
THE DIRECTORS STOCK OPTION PLAN.
APPROVAL OF DIRECTORS DEFERRED COMPENSATION PLAN
DESCRIPTION OF DIRECTORS DEFERRED COMPENSATION PLAN.
The Board of Directors has approved the Directors Deferred Compensation
Plan, subject to the approval by the holders of the Common Stock. A summary of
the material provisions of the Directors Deferred Compensation Plan is set forth
below. This summary is not complete and is qualified in its entirety by the
terms of the Directors Deferred Compensation Plan attached hereto as Exhibit B.
The purpose of the Directors Deferred Compensation Plan is to promote the
long-term growth and financial success of the Company by attracting and
retaining non-employee directors of outstanding ability and assisting the
Company in promoting a greater identity of interest between the Company's
non-employee directors and its stockholders. Only Eligible Directors may
participate in the Directors Deferred Compensation Plan. The Directors Deferred
Compensation Plan is effective upon approval by the holders of the Common Stock
(the "Effective Date"). The Directors Deferred Compensation Plan is administered
by the Board of Directors. The maximum number of shares available under the
Directors Deferred Compensation Plan is 50,000. Shares are authorized and
unissued shares, treasury shares or shares purchased by, or on behalf of, the
Company in open market transactions.
Under the Directors Deferred Compensation Plan, an Eligible Director may
elect to receive payment of all or any portion of his annual cash retainer and
meeting fees ("Fees") currently in cash or to defer all or a part of such Fees.
Such election must be made prior to the year such Fees are earned. Under the
plan, the Eligible Director may elect to have all or a part of the deferred Fees
credited to a Share Unit Account and/or a Cash Account. The amounts elected to
be credited to the Share Unit Account shall be credited with Units that are
equivalent to shares of Common Stock ("Share Units"). The number of Share Units
credited to the Eligible Director's Account shall be an amount equal to the
results obtained by dividing (i) the deferred amount allocated to the Share Unit
Account by (ii) the "fair market value" (as defined in the Directors Deferred
Compensation Plan) of a share of Common Stock on the first business day
following the date on which the Eligible Director becomes entitled to payment of
the Fees. The amounts elected to be credited to the Cash Account shall be
credited to the Cash Account on the first business day following the date on
which the Eligible Director becomes entitled to payment of the Fees. As of the
day prior to the date a distribution is made and as of the last day of each
quarter, each Cash Account is credited with interest at the prime rate,
compounded quarterly. Each Eligible Director may designate a distribution date
which is not later than ten years from
<PAGE>
22
the date Fees become payable. The amounts in the Eligible Director's Share Unit
Account and Cash Account shall be paid following the earlier of (i) the elected
distribution date or (ii) the Eligible Director's termination of service.
Distributions shall be made from the Share Unit Account in shares of Common
Stock (and cash for fractional shares) and from the Cash Account in cash.
The benefits or amounts that will be received under the Directors Deferred
Compensation Plan in fiscal year 1997 are not determinable as they are
contingent upon the number of meetings that are held in such year which is not
determinable at this time. See "Compensation of Members of the Board of
Directors" for a discussion of the fees payable to directors of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS APPROVAL OF THE PROPOSED
DIRECTORS DEFERRED COMPENSATION PLAN BY THE STOCKHOLDERS. UNLESS OTHERWISE
INSTRUCTED, SIGNED PROXIES WHICH ARE RETURNED IN A TIMELY MANNER WILL BE VOTED
IN FAVOR OF THE DIRECTORS DEFERRED COMPENSATION PLAN.
APPROVAL OF THE AMENDED AND RESTATED NEW STOCK PLAN
PROPOSED AMENDMENT TO THE NEW STOCK PLAN
Prior to the consummation of the Initial Public Offering, the Company
adopted, and its stockholders approved, the Company's New Stock Incentive Plan
(the "New Stock Plan"). Under the New Stock Plan, a maximum of 446,892 shares of
Common Stock (subject to adjustment as described below) are authorized to be
delivered by the Company pursuant to options, SARs, restricted stock,
unrestricted stock and performance awards (collectively, "awards") granted under
the New Stock Plan, subject to specified aggregate limits on certain types of
awards and annual individual limits on certain types of awards. The Board of
Directors has approved, subject to the approval of the stockholders, an
amendment to the New Stock Plan to increase the maximum number of shares under
the New Stock Plan from 446,892 to 646,892 and to make certain other changes in
order to reflect recent changes to the rules promulgated under Section 16 of the
Exchange Act (the New Stock Plan, as so amended, is hereinafter referred to as
the "Amended and Restated New Stock Plan"). The principal provisions of the
Amended and Restated New Stock Plan are summarized below. This summary is not
complete and is qualified in its entirety by the terms of the Amended and
Restated New Stock Plan attached hereto as Exhibit C.
DESCRIPTION OF THE AMENDED AND RESTATED NEW STOCK PLAN
The purpose of the Amended and Restated New Stock Plan is to provide
certain officers, directors and key employees of the Company and certain
affiliates an incentive to maintain and enhance the long-term performance and
profitability of the Company and to permit the granting of awards that will
constitute performance-based compensation for certain executive officers, as
described in Section 162(m) of the Code. Only officers, directors and executive,
managerial and professional employees of the Company and its affiliates are
eligible for awards under the Amended and Restated New Stock Plan. The five
executive officers and approximately forty-five other employees of the Company
participate in the New Stock Plan. The Amended and Restated New Stock Plan is
administered by a committee appointed by the Company's Board of Directors
consisting of at least two directors each of whom is intended to qualify as a
"Non-Employee Director" and an "outside director" within the meaning of Rule
16b-3 of the Exchange Act and
<PAGE>
23
Section 162(m) of the Code, respectively. During the ten-year term of the plan,
the committee will have authority, subject to the terms of the Amended and
Restated New Stock Plan, to determine when and to whom to make grants under the
plan, the number of shares to be covered by the grants, the types and terms of
options, SARs, restricted stock, unrestricted stock and performance awards
granted and the exercise price of options and SARs and to prescribe, amend and
rescind rules and regulations relating to the Amended and Restated New Stock
Plan. The committee may, in its discretion, with the grantee's consent, cancel
any award under the plan and issue a new award in substitution therefor or
accelerate the exercisability of any award granted under the plan or extend the
scheduled expiration date of an award.
The Company's Board of Directors may amend, alter, suspend, discontinue or
terminate the Amended and Restated New Stock Plan at any time; PROVIDED that no
such amendment, alteration, suspension, discontinuation or termination shall be
made without stockholder approval if such approval is necessary to comply with
any tax or regulatory requirement applicable to the Amended and Restated New
Stock Plan and PROVIDED FURTHER that no such amendment, alteration, suspension,
discontinuance or termination that would impair the rights of any award
theretofore made shall to that extent be effective without the consent of the
person to whom such award was made.
Under the terms of the Amended and Restated New Stock Plan, "incentive
stock options" ("ISOs") within the meaning of Section 422 of the Code, NSOs,
SARs, restricted stock, unrestricted stock and performance awards may be granted
to key employees (including officers and directors who are employees) of the
Company and any of its affiliates (as defined in the Amended and Restated New
Stock Plan), except that ISOs may be granted only to employees of the Company,
its parent company and subsidiaries of the Company. The Amended and Restated New
Stock Plan limits the number of shares with respect to which options and SARs
may be granted to any individual to 223,446 in any year. Shares subject to
issuance under the Amended and Restated New Stock Plan may be authorized and
unissued or treasury shares of Common Stock.
Initially, each ISO will be exercisable over a period, determined by the
committee in its discretion, but not to exceed ten years from the date of grant,
as required by the Code. In addition, in the case of an ISO granted to an
individual who, at the time such ISO is granted, owns shares possessing ten
percent (10%) or more of the total combined voting power of all classes of stock
of the Company or its parent or subsidiary corporations (a "10% Stockholder"),
the exercise period for an ISO may not exceed five years from the date of grant.
In the case of NSOs, the exercise period, generally not to exceed ten years from
the date of grant, shall in all cases be determined by the committee.
The option exercise price of an ISO and the appreciation base of a SAR may
not be less than the fair market value of the shares of the Common Stock on the
date of grant, except that, in the case of an ISO granted to a 10% Stockholder,
the option exercise price may not be less than 110% of such fair market value on
the date of grant. The option exercise price of a NSO shall not be less than the
par value of the shares of the Common Stock on the date of grant.
The committee may grant SARs either alone ("unrelated SARs") or in
connection with all or part of an option. Upon the exercise of a SAR, a holder
generally is entitled, without payment to the Company, to receive cash, shares
of Common Stock or any combination thereof, as determined by the committee, in
an amount equal to the excess of the fair market value of one
<PAGE>
24
share of Common Stock on the exercise date over (i) the option exercise price of
the related option (in the case of SAR granted in connection with an option) or
(ii) the appreciation base of the SAR (in the case of an unrelated SAR),
multiplied by the number of shares in respect of which the SAR is exercised.
The committee may grant restricted stock awards along or in tandem with
other awards under the Amended and Restated New Stock Plan. Vesting of
restricted stock awards may be conditioned upon the completion of a specified
period of service, the attainment of specified performance goals or such other
factors as the committee may determine. The committee may, in its discretion,
require a grantee to pay an amount to acquire any restricted or unrestricted
stock, which amount may be refunded to such grantee upon such events as the
committee may determine. During the restricted period, the grantee may not
assign, transfer or otherwise encumber or dispose of the restricted stock,
except as permitted in the applicable award agreement. During the restricted
period, the grantee will have the right to vote the restricted stock and to
receive any dividends if and to the extent so provided in the applicable award
agreement.
The committee may grant performance awards relating to a specified number
of shares to be delivered based upon attainment over a specified performance
cycle of specified measures of the performance of the Company, one or more of
its subsidiaries or affiliates or the grantee, as may be established by the
committee. The committee may provide for full or partial credit, prior to
completion of such performance cycle or achievement of the degree of attainment
of the measures of performance specified in connection with such performance
award, in the event of the grantee's death, retirement or disability, or in
other circumstances.
The committee may grant performance awards intended to constitute
performance-based compensation within the meaning of Section 162(m) of the Code.
The following rules will apply to such performance awards: (i) payments under
the performance award shall be made solely on account of the attainment of one
or more objective performance goals established in writing by the committee not
later than 90 days after the commencement of the period of service to which the
performance award relates (or, if less, 25% of such period of service); (ii) the
performance goals to which the performance award relates shall be based on one
or more of the following business criteria applied to the grantee, a business
unit of the Company and or an affiliate of the Company: stock price, market
share, sales, earnings per share, return on equity or costs; (iii) in any year,
a grantee may not be granted performance awards covering a total of more than
223,446 shares of Common Stock; and (iv) once granted, the committee may not
increase the amount payable under such performance award.
Except as otherwise provided in the applicable award agreement, the
following will apply upon the grantee's termination of employment with the
Company and its affiliates: If the employment of the grantee terminates for any
reason other than by reason of death or termination for cause or if the grantee
quits, the grantee may, within the 60-day period (or other period specified by
the committee in certain events) following such termination, exercise such
awards to the extent the grantee was entitled to exercise at the date of
termination. If the grantee dies while employed (or within 60 days or such other
period after termination of employment in accordance with the preceding
sentence), all outstanding awards, to the extent then vested, may be exercised
within one year after the grantee's death by the person or persons to whom the
grantee's rights pass. If the employment of the grantee is terminated for cause
(including if the grantee terminates employment in breach of a written
employment contract) or if the grantee
<PAGE>
25
quits, all awards granted to such grantee shall terminate on the day the
grantee's employment terminates. In no case may awards be exercised later than
the expiration date specified in the grant. Awards may be transferred by a
grantee only by will or by the laws of descent and distribution, and during his
or her lifetime may be exercised only by the grantee. The continued
exercisability or vesting of any award following a grantee's termination of
employment is generally subject to the grantee's continued compliance with
noncompetition and confidentiality requirements.
In the event that the Company is to be merged or consolidated with another
corporation or reorganized or liquidated, then the committee may, in its
discretion, provide that awards granted to a grantee will terminate unless
exercised within the period determined by the committee (not less than 30 days),
in which case the committee may, in its discretion, accelerate the
exercisability of such awards and/or provide that restrictions on restricted
stock awards may lapse.
The shares of Common Stock purchased pursuant to an award are to be paid
by check or, if and to the extent provided in the applicable award agreement, by
broker's advance or by delivery of previously acquired shares of Common Stock
with a value equal to the total purchase price, or in a combination of such
methods.
Inasmuch as future grants under the New Stock Plan are not determinable,
the following table sets forth specific grants of stock option awards that were
made under the Amended and Restated New Stock Plan during the fiscal year ended
February 1, 1997. All but 120,000 options vest equally over a two, three or five
year period beginning on the first anniversary of the date of grant and will
become 100% vested in the second, third or fifth anniversary of the date of
grant. The remainder of the options vest on the fifth anniversary of the date of
grant. Additional awards may be made under the plan upon such terms and
conditions as determined by the committee in its discretion as described above.
<PAGE>
26
NEW PLAN BENEFITS
NUMBER OF
SHARES
UNDERLYING OPTION EXERCISE
NAME AND POSITION OPTIONS PRICE
Robert N. Friedman ........................... 63,614 $8.06
Chairman and Chief Executive Officer
Philip Kaplan................................. 14,656 $5.01
President and Chief Operating Officer ..... 10,513 $8.06
Robert Glass ................................. 11,172 $8.06
Senior Vice President and Chief Financial Officer 20,000 $22.69
Jan Heppe..................................... 11,172 $8.06
Senior Vice President and Director of Stores 20,000 $22.69
Bonnie Dexter ................................ 11,172 $8.06
Senior Vice President, Merchandising....... 20,000 $22.69
All Executive Officers as a Group ............ 14,656 $5.01
167,643 $8.06-$22.69
All Employees who are not Executive Officers as
a Group 146,353 $8.06-$23.13
FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE NEW STOCK PLAN
The following summary of the Federal income tax consequences of the grant
and exercise of nonqualified and incentive stock options awarded under the
Amended and Restated New Stock Plan, and the disposition of shares purchased
pursuant to the exercise of such stock options, is intended to reflect the
current provisions of the Code and the regulations thereunder. This summary
is not intended to be a complete statement of applicable law, nor does it
address state and local tax considerations.
No income will be realized by an optionee upon grant of a nonqualified stock
option. Upon exercise of a nonqualified stock option, the optionee will
recognize ordinary compensation income in an amount equal to the excess, if any,
of the fair market value of the underlying stock over the option exercise price
(the "Spread") at the time of exercise. The Spread will be deductible by the
Company for federal income tax purposes subject to the possible limitations on
deductibility under sections 280G and 162(m) of the Code of compensation paid to
executives designated in those sections. The optionee's tax basis in the
underlying shares acquired by exercise of a nonqualified stock option will equal
the exercise price plus the amount taxable as compensation to the optionee. Upon
sale of the shares received by the optionee upon exercise of the nonqualified
stock option, any gain or loss is generally long-term or short-term capital gain
or loss, depending on the holding period. The optionee's holding period for
shares acquired pursuant to the exercise of a nonqualified stock option will
begin on the date of exercise of such option.
<PAGE>
27
Pursuant to currently applicable rules under section 16(b) of the Exchange
Act, the grant of an option (and not its exercise) to a person who is subject to
the reporting and short-swing profit provisions under section 16 of the Exchange
Act (a "Section 16 Person") begins the six-month period of potential short-swing
liability. The taxable event for the exercise of an option that has been
outstanding at least six months ordinarily will be the date of exercise. If an
option is exercised by a Section 16 Person within six months after the date of
grant, however, taxation ordinarily will be deferred until the date which is six
months after the date of grant, unless the person has filed a timely election
pursuant to section 83(b) of the Code to be taxed on the date of exercise.
Pursuant to a recent amendment to the rules under Section 16(b) of the Exchange
Act, the six month period of potential short-swing liability may be eliminated
if the option grant (i) is approved in advance by the Company's board of
directors (or a committee composed solely of two or more non-employee directors)
or (ii) approved in advance, or subsequently ratified by the Company's
shareholders no later than the next annual meeting of shareholders.
Consequently, the taxable event for the exercise of an option that satisfies
either of the conditions described in clauses (i) or (ii) above will be the date
of exercise.
The payment by an optionee of the exercise price, in full or in part, with
previously acquired shares will not affect the tax treatment of the exercise
described above. No gain or loss generally will be recognized by the optionee
upon the surrender of the previously acquired shares to the Company, and shares
received by the optionee, equal in number to the previously surrendered shares,
will have the same tax basis as the shares surrendered to the Company and will
have a holding period that includes the holding period of the shares
surrendered. The value of shares received by the optionee in excess of the
number of shares surrendered to the Company will be taxable to the optionee.
Such additional shares will have a tax basis equal to the fair market value of
such additional shares as of the date ordinary income is recognized, and will
have a holding period that begins on the date ordinary income is recognized.
The Code requires that, for incentive stock option treatment, shares acquired
through exercise of an incentive stock option cannot be disposed of before two
years from the date of grant and one year from the date of exercise. Incentive
stock option holders will generally incur no federal income tax liability at the
time of grant or upon exercise of such options. However, the Spread will be an
"item of tax preference" which may give rise to "alternative minimum tax"
liability at the time of exercise. If the optionee does not dispose of the
shares before two years from the date of grant and one year from the date of
exercise, the difference between the exercise price and the amount realized upon
disposition of the shares will constitute long-term capital gain or loss, as the
case may be. Assuming both the holding periods are satisfied, no deduction will
be allowable to the Company for federal income tax purposes in connection with
the grant or exercise of the option. If, within two years of the date of grant
or within one year from the date of exercise, the holder of shares acquired
through the exercise of an incentive stock option disposes of such shares, the
optionee will generally realize ordinary taxable compensation at the time of
such disposition equal to the difference between the exercise price and the
lesser of the fair market value of the stock on the date of initial exercise or
the amount realized on the subsequent disposition, and such amount will
generally be deductible by the Company for federal income tax purposes, subject
to the possible limitations on deductibility under sections 280G and 162(m) of
the Code for compensation paid to executives designated in those sections.
The foregoing constitutes a brief summary of the principal federal income tax
consequences of the transactions based on current federal income tax laws. This
summary is not intended to be exhaustive and does not describe state, local or
foreign tax consequences. Grantees in the
<PAGE>
28
New Stock Plan are urged to consult their own tax advisors with respect to the
consequences of their participation in the Amended and Restated New Stock Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS APPROVAL OF THE NEW STOCK PLAN
AMENDMENT BY THE STOCKHOLDERS. UNLESS OTHERWISE INSTRUCTED, SIGNED PROXIES WHICH
ARE RETURNED IN A TIMELY MANNER WILL BE VOTED IN FAVOR OF THE NEW STOCK PLAN
AMENDMENT.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTS
The Board of Directors has selected the firm of Ernst & Young LLP as the
Company's independent certified public accountants for the year ending January
31, 1998. Ratification of such appointment requires the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock represented and
voting in person or by proxy at the Annual Meeting or any adjournment thereof.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting, at which time they will have the opportunity to make a statement if
they desire to do so and to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS RATIFICATION OF THE APPOINTMENT
OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY FOR THE
YEAR ENDING JANUARY 31, 1998. UNLESS OTHERWISE INSTRUCTED, SIGNED PROXIES WHICH
ARE RETURNED IN A TIMELY MANNER WILL BE VOTED IN FAVOR OF SUCH APPOINTMENT.
OTHER BUSINESS
As of the date of this Proxy Statement, the only business which the Board of
Directors intends to present, and knows that others will present, at the Annual
Meeting is that set forth herein. If any other matter or matters are properly
brought before the Annual Meeting or any adjournments thereof, it is the
intention of the persons named in the accompanying form of proxy to vote the
proxy on such matter as recommended by the Board of Directors.
ANNUAL REPORT
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, WITHOUT EXHIBITS, WILL BE FURNISHED WITHOUT
CHARGE TO ANY PERSON FROM WHOM THE ACCOMPANY PROXY IS SOLICITED UPON WRITTEN
REQUEST TO THE COMPANY'S SECRETARY AT LOEHMANN'S, INC., 2500 HALSEY STREET,
BRONX, NEW YORK 10461.
<PAGE>
29
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Company's 1998
Annual Meeting of Stockholders must be received by the Company on or prior to
January 2, 1998 to be eligible for inclusion in the Company's Proxy Statement
and form of Proxy to be used in connection with the 1998 Annual Meeting.
OTHER INFORMATION
The cost of preparing, assembling, printing and mailing this Proxy Statement
and the accompanying form of proxy, and the cost of soliciting proxies relating
to the Annual Meeting, will be borne by the Company.
By order of the Board of Directors,
Philip Kaplan
President, Chief Operating Officer
and Secretary
New York, New York
May 2, 1997
<PAGE>
EXHIBIT A
LOEHMANN'S, INC.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
Loehmann's, Inc., a Delaware corporation (the "Company"), hereby
formulates and adopts the following Stock Option Plan (the "Plan") for
Non-Employee Directors of the Company.
1. PURPOSE. The purpose of the Plan is to secure for the Company the
benefits of the additional incentive inherent in the ownership of Common Stock,
par value $.01 per share, of the Company ("Common Stock") by non-employee
directors of the Company and to help the Company secure and retain the services
of such non-employee directors.
2. ADMINISTRATION. The Plan is intended to be a largely
self-governing formula plan. To this end, the Plan requires minimal
discretionary action by any administrative body with regard to any transaction
under the Plan, other than with respect to those discretionary option grants
expressly permitted under Section 4(d) of the Plan. To the extent, if any, that
questions of administration arise, these shall be resolved by the Board of
Directors of the Company (the "Board of Directors").
Subject to the express provisions of the Plan, the Board of
Directors shall have plenary authority to interpret the Plan, to prescribe,
amend and rescind the rules and regulations relating to it and to make all other
determinations deemed necessary and advisable for the administration of the
Plan. The determination of the Board of Directors shall be conclusive.
3. COMMON STOCK SUBJECT TO OPTIONS. Subject to the adjustment
provisions of Section 13 below, a maximum of 200,000 shares of Common Stock may
be made subject to options granted under the Plan. If, and to the extent that,
options granted under the Plan shall terminate, expire or be canceled for any
reason without having been exercised, new options may be granted in respect of
the shares covered by such terminated, expired or canceled options. The granting
and terms of such new options shall comply in all respects with the provisions
of the Plan.
Shares sold upon the exercise of any option granted under the Plan
may be shares of authorized and unissued Common Stock, shares of issued Common
Stock held in the Company's treasury or both.
There shall be reserved at all times for sale under the Plan a
number of shares, of either authorized and unissued shares of Common Stock or
shares of Common Stock held in the Company's treasury, or both, equal to the
maximum number of shares that may be purchased pursuant to options granted or
that may be granted under the Plan.
4. GRANT OF OPTIONS.
(a) INITIAL AWARDS. Each person who is first elected,
appointed or otherwise first becomes an "Eligible Director" (as defined in
Section 5) after the Effective Date
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(as defined in Section 17) shall receive an option to purchase 6,000 shares of
Common Stock as of the date on which such person first becomes an Eligible
Director ("Initial Options").
(b) SPECIAL ONE-TIME AWARD. Each person who is an Eligible
Director as of the Effective Date and who has not previously been awarded any
options to acquire Common Stock under any other plan, program or agreement with
the Company shall receive an option to purchase 6,000 shares of Common Stock as
of the Effective Date ("Special Option").
(c) SUBSEQUENT AWARDS. On February 1st of each year, each
person who is an Eligible Director on such date will automatically receive an
option to purchase 3,000 shares of Common Stock for service as a director of the
Company ("Annual Options").
(d) DISCRETIONARY AWARDS. In addition to the formula awards
described in paragraphs (a), (b) and (c) of this Section 4 above, the Board of
Directors shall have discretionary authority under the Plan to award options to
acquire up to an aggregate of 100,000 shares of Common Stock to one or more
Eligible Directors ("Discretionary Options").
(e) TYPE OF OPTIONS. All options granted under the Plan shall
be "nonqualified" stock options subject to the provisions of section 83 of the
Internal Revenue Code of 1986, as amended (the "Code").
5. INDIVIDUALS ELIGIBLE. Only directors of the Company who are
not employees of the Company or any subsidiary of the Company ("Eligible
Directors") shall participate in the Plan. A director receiving an option
pursuant to the Plan may hereinafter be referred to as an "Optionee."
6. PRICE.
(a) The option price of each share of Common Stock purchasable
under any option granted pursuant to the Plan shall be the Fair Market Value (as
defined below) thereof at the time the option is granted.
(b) For purposes of the Plan, "Fair Market Value" of a share
of Common Stock shall mean:
(i) the average of the high and low closing bid prices
of the shares of Common Stock on the NASDAQ National Market if shares are
approved for quotation on such system, or, if not so approved, the mean between
the high and low sales prices of the shares of Common Stock as reported on the
New York Stock Exchange if shares of Common Stock are then trading upon such
exchange or, if not then trading on such exchange, then such average on such
other stock exchange on which the shares of Common Stock are principally trading
on such date, or if, there were no sales on such date, on the closest preceding
date on which there were sales of shares of Common Stock; or
(ii) in the event there shall be no public market for
the shares of Common Stock on such date, the fair market value of the shares
of Common Stock as determined in good faith by the Board of Directors based
upon the valuation of an independent appraiser.
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7. DURATION OF OPTIONS.
(a) VESTING.
(i) INITIAL OPTIONS AND SPECIAL OPTIONS. Each Initial
Option and Special Option granted hereunder shall vest and become exercisable in
1/3 increments on each of the first, second and third anniversaries of the date
such Initial Option or Special Option is granted; PROVIDED that the Optionee is
in the service of the Company as a director on such date. In the event of the
termination of the Optionee's service as a director of the Company prior to the
third anniversary of the date such Initial Option or Special Option is granted,
such Option, to the extent not yet vested, shall automatically and without
notice terminate and become null and void.
(ii) ANNUAL OPTIONS. Each Annual Option granted
hereunder shall vest and become exercisable in full on the one year anniversary
of the date such option is granted; PROVIDED that the Optionee is in the service
of the Company as a director on such date. In the event of the termination of
the Optionee's service as a director of the Company prior to the one year
anniversary of the date such Annual Option is granted, such option shall
automatically and without notice terminate and become null and void.
(iii) DISCRETIONARY OPTIONS Each Discretionary
Option granted hereunder shall be subject to such vesting conditions as may be
established by the Board of Directors and provided in the award agreement
evidencing the award of such Discretionary Option.
(b) Notwithstanding any provision of the Plan to the contrary
(other than Section 7(a)), the unexercised portion of any option granted under
the Plan shall automatically and without notice terminate and become null and
void at the time of the earliest to occur of the following:
(i) The expiration of 10 years from the date on which
such option was granted; and
(ii) The expiration of one year from the date the
Optionee's service with the Company shall terminate for any reason.
8. EXERCISE OF OPTIONS.
(a) An option granted under the Plan shall be deemed exercised
when the person entitled to exercise the option:
(i) delivers written notice to the Company at its
principal business office, directed to the attention of its Corporate Secretary,
of the decision to exercise; and
(ii) concurrently tenders to the Company full payment
for the shares to be purchased pursuant to such exercise.
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(b) Payment for shares with respect to which an option is
exercised may be made in any combination of the following: (i) by certified or
official bank check payable to the Company (or the equivalent thereof acceptable
to the Board of Directors); (ii) with the consent of the Board of Directors in
its sole discretion, by personal check (subject to collection) and which may in
the Board of Directors' discretion be deemed conditional; and (iii) by delivery
of previously-acquired shares of Common Stock owned by the grantee for at least
six months (or such longer or shorter period as the Board of Directors may
prescribe that will not result in variable accounting treatment) having a fair
market value (determined as of the option exercise date) equal to the portion of
the option exercise price being paid thereby. In addition, subject to such rules
as may be established by the Board of Directors, payment in accordance with
clause (a) of this Section 8 may be deemed to be satisfied by delivery to the
Company of an assignment of a sufficient amount of the proceeds from the sale of
Common Stock acquired upon exercise to pay for all of the Common Stock acquired
upon exercise and an authorization to the broker or selling agent to pay that
amount to the Company, which sale shall be made at the Optionee's direction at
the time of exercise.
9. NONTRANSFERABILITY OF OPTIONS. No option or any right evidenced
thereby shall be transferable in any manner other than by will or the laws of
descent and distribution, and, during the lifetime of an Optionee, only the
Optionee (or the Optionee's court-appointed legal representative) may exercise
an option.
10. RIGHTS OF OPTIONEE. Neither the Optionee nor the Optionee's
executor or administrator shall have any of the rights of a stockholder of the
Company with respect to the shares subject to an option until certificates for
such shares shall actually have been issued upon the due exercise of such
option. Unless the Board of Directors otherwise determines in accordance with
Section 13 below, no adjustment shall be made for any regular cash dividend for
which the record date is prior to the date of such due exercise and full payment
for such shares has been made therefor.
11. RIGHT TO TERMINATE SERVICE. Nothing in the Plan or in any option
shall confer upon any Optionee the right to continue in the services of the
Company or affect the right of the Company to terminate the Optionee's service
at any time, subject, however, to the provisions of any agreement between the
Company and the Optionee.
12. NONALIENATION OF BENEFITS. No right or benefit under the Plan
shall be subject to anticipation, alienation, sale, assignment, hypothecation,
pledge, exchange, transfer, encumbrance or charge, and any attempt to
anticipate, alienate, sell, assign, hypothecate, pledge, exchange, transfer,
encumber or charge the same shall be void. To the extent permitted by applicable
law, no right or benefit hereunder shall in any manner be liable for or subject
to the debts, contracts, liabilities or torts of the person entitled to such
benefits.
13. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC. In the event
that the Board of Directors determines that any dividend or other distribution
(whether in the form of cash, shares of Common Stock, other securities, or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, or exchange
of shares of Common Stock or other securities of the Company, issuance of
warrants or other rights to purchase shares of Common Stock or other securities
of the Company, or other similar corporate transaction or event affects the
shares of Common Stock such that an adjustment is determined by the Board of
Directors in its discretion to be appropriate
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in order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the Board of
Directors shall, in such manner as it may deem equitable, adjust any or all of
(i) the number of shares of Common Stock or other securities of the Company (or
number and kind of other securities or property) with respect to which options
may be granted, (ii) the number of shares of Common Stock or other securities of
the Company (or number and kind of other securities or property) subject to
outstanding options, and (iii) the grant or exercise price with respect to any
option or, if deemed appropriate, make provision for a cash payment to the
holder of an outstanding option in consideration for the cancellation of such
option.
14. FORM OF AGREEMENTS WITH OPTIONEES. Each option granted pursuant
to the Plan shall be evidenced by an individual agreement ("Agreement") in
writing and shall have such form, terms and provisions, not inconsistent with
the provisions of the Plan, as the Board of Directors shall provide for such
option. In the event that any provisions of an Agreement differ from the terms
of the Plan, the Plan provisions shall govern.
15. PURCHASE FOR INVESTMENT. Whether or not the options and shares
covered by the Plan have been registered under the Securities Act of 1933, as
amended, each person exercising an option under the Plan may be required by the
Company to give a representation in writing that such person is acquiring such
shares for investment and not with a view to, or in connection with, the sale,
transfer or distribution of any part thereof. The Company will endorse any
necessary legend referring to the foregoing restriction upon the certificate or
certificates representing any shares issued or transferred to the Optionee upon
the exercise of any option granted under the Plan.
16. TERMINATION AND AMENDMENT OF PLAN AND OPTIONS.
(a) Unless the Plan shall theretofore have been terminated as
hereinafter provided, options may be granted under the Plan, as provided in
Section 4 hereof, prior to the tenth anniversary of the Effective Date on which
date the Plan will expire, except as to options then outstanding under the Plan.
Such options shall remain in effect until they have been exercised, have expired
or have been canceled.
(b) The Plan may be terminated or amended at any time by the
Board of Directors; PROVIDED, HOWEVER, that (i) any such amendment shall comply
with all applicable laws and applicable stock exchange listing requirements and
(ii) any amendment for which stockholder approval is necessary to comply with
any tax or regulatory requirement shall not be effective until such approval has
been obtained.
(c) No termination, modification or amendment of the Plan,
without the consent of the Optionee, may adversely affect the rights of such
person with respect to any option previously granted under the Plan.
17. EFFECTIVE DATE OF PLAN. The Plan shall become effective upon
approval of the Plan by the Company's stockholders (the "Effective Date").
18. GOVERNMENT AND OTHER REGULATIONS. The obligation of the
Company with respect to options granted under the Plan shall be subject to all
applicable laws, rules and regulations and such approvals by any governmental
agency as may be required, including,
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without limitation, the effectiveness of any registration statement required
under the Securities Act of 1933, as amended, and the rules and regulations of
any securities exchange on which the Common Stock may be listed.
19. WITHHOLDING. The Company's obligation to deliver shares of
Common Stock in respect of any option granted under the Plan shall be subject to
any applicable federal, state and local tax withholding requirements. Federal,
state and local withholding tax, if any, due upon the exercise of any option,
may be paid in shares of Common Stock (including the withholding of shares
subject to an option).
20. SEPARABILITY. If any part of the Plan is declared by any court
or governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not invalidate any portion of the Plan not declared to be
unlawful or invalid. Any Section or part of a Section so declared to be unlawful
or invalid shall, if possible, be construed in a manner which will give effect
to the terms of such Section or part of a Section to the fullest extent possible
while remaining lawful and valid.
21. NON-EXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by
the Board of Directors nor the submission of the Plan to the stockholders of the
Company for approval shall be construed as creating any limitation on the power
of the Board of Directors to adopt such other incentive arrangements as it may
deem desirable, including, without limitation, the granting of stock options and
the awarding of stock and cash otherwise than under the Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
22. EXCLUSION FROM PENSION AND PROFIT-SHARING COMPUTATION. By
acceptance of an option, each Optionee shall be deemed to have agreed that such
grant is special incentive compensation that will not be taken into account, in
any manner, as salary, compensation or bonus in determining the amount of any
payment under any pension, retirement or other employee benefit plan of the
Company or any of its affiliates. In addition, such option will not affect the
amount of any life insurance coverage, if any, provided by the Company on the
life of the Optionee.
23. GOVERNING LAW. The Plan shall be governed by, and construed
in accordance with, the laws of the State of New York.
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EXHIBIT B
LOEHMANN'S, INC.
DIRECTORS DEFERRED COMPENSATION PLAN
1. PURPOSE. Loehmann's, Inc., a Delaware corporation (the
"Company"), hereby adopts this Directors Deferred Compensation Plan (the "Plan")
to promote the long-term growth and financial success of the Company by
attracting and retaining non-employee directors of outstanding ability and
assisting the Company in promoting a greater identity of interest between the
Company's non-employee directors and its stockholders.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors
of the Company (the "Board").
(b) The Board shall have the authority (i) to exercise all of
the powers granted to it under the Plan, (ii) to construe, interpret and
implement the Plan and all documents executed pursuant to the Plan (including
all election forms), (iii) to prescribe, amend and rescind rules relating to the
Plan, (iv) to make any determination necessary or advisable in administering the
Plan and (v) to correct any defect, supply any omission and reconcile any
inconsistency in the Plan.
(c) The determination of the Board on all matters relating to
the Plan or any document executed pursuant to the Plan shall be conclusive.
(d) No member of the Board shall be liable for any action or
determination made in good faith with respect to the Plan.
3. ELIGIBILITY. Only directors of the Company who are not
employees of the Company or any affiliate of the Company ("Eligible Directors")
shall participate in the Plan.
4. SHARES SUBJECT TO THE PLAN.
(a) SHARES. For purposes of the Plan, "Shares" shall mean
shares of common stock, par value $.01 per share, of the Company ("Common
Stock") and any other stock into which such common stock shall thereafter be
changed by reason of any merger, reorganiza tion, recapitalization,
consolidation, split-up, combination of shares or similar event as set forth in
and in accordance with this Section 4.
(b) SHARES AVAILABLE FOR AWARDS. Subject to Section 4(c)
(relating to adjustments upon changes in capitalization), as of any date, the
total number of Shares issuable under the Plan shall be 50,000. Shares that
shall be issuable pursuant to the Plan shall be authorized and unissued Shares,
treasury Shares or Shares purchased by, or on behalf of, the Company in
open-market transactions.
(c) ADJUSTMENTS. In the event of any stock split, stock
dividend, stock change, reclassification, recapitalization or combination of
shares that changes the character or amount of Common Stock, the number of
Shares issuable under the Plan and the Share Units
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(as defined in Section 5(c)) then credited pursuant to Section 5(c) shall be
appropriately adjusted as determined by the Board in its sole discretion.
5. PAYMENT OF FEES.
(a) IN GENERAL. Subject to the timing requirements set forth
in Section 5(b) below, commencing on the effective date of the Plan, each
Eligible Director may elect either (i) to receive payment in cash of all or part
of the annual cash retainer payable to such Eligible Director for services as a
member of the Board and its committees and/or fees payable to such Eligible
Director for meetings of the Board or committees of the Board, including fees
for chairing committees ("Fees") on the date on which such amounts become
payable, or (ii) to defer all or part of such Fees in accordance with the
provisions of Section 5(b). Any payment that an Eligible Director has not
elected to defer in accordance with the provisions of Section 5(b) shall be paid
within 60 days after such amount becomes payable.
(b) ELECTIVE DEFERRALS.
(i) An Eligible Director may elect to defer the
payment of Fees by submitting an election form (a "Deferred Payment Election
Form") to the Board, indicating: (I) the percentage of the Fees that are to be
deferred; (II) the date on which the commencement of payments of deferred
amounts (the "Distribution Date") should begin, as contemplated by Section
5(e)(i); and (III) the percentage of such deferred amounts that shall be
credited to the Share Unit Account and the Cash Account, as described in
Sections 5(c) and 5(d) below, respectively. A Deferred Payment Election Form
shall become effective with respect to the Eligible Director's Fees becoming
payable with respect to services performed in the calendar year following the
calendar year in which such Deferred Payment Election Form is submitted to the
Board.
(ii) An election under this Section 5(b) shall continue
in effect until revoked by written notice to the Board or superseded by a new
effective Deferred Payment Election Form; PROVIDED, HOWEVER, that (I) no
revocation or supersession shall be effective to make any change with respect to
amounts deferred pursuant to previously filed Deferred Payment Election Forms,
and (II) no revocation of a Deferred Payment Election Form or supersession of
such form by submission of a new Deferred Payment Election Form shall be
effective to make any change with respect to Fees to be paid to the Eligible
Director in respect of services in the calendar year in which such revocation
or supersession occurs.
(iii) An Eligible Director may designate, in an election
form, one or more beneficiaries to receive any distributions under the Plan upon
the death of the Eligible Director, and such designation may be changed at any
time by submitting a new designation to the Board, which shall become effective
immediately upon receipt by the Board.
(c) SHARE DEFERRALS. An Eligible Director may elect to have
all or part of the Fees (the "Deferred Amount") credited to an account (a "Share
Unit Account") in units that are equivalent in value to Shares ("Share Units").
The Deferred Amount allocated to the Share Unit Account shall be credited to the
Share Unit Account as of the first business day following the date on which the
Eligible Director becomes entitled to payment of the Fees, as the case may be,
and the number of Share Units credited to such Share Unit Account shall be an
amount equal to the results obtained by dividing (i) the Deferred Amount
allocated to the Share
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Unit Account by (ii) the Fair Market Value of a Share on the first business day
following the date on which the Eligible Director becomes entitled to payment of
the Fees, as the case may be. If Share Units exist in an Eligible Director's
Share Unit Account on a dividend record date for the Company's Shares, the Share
Unit Account shall be credited, on the dividend payment date, with an additional
number of Share Units equal to (i) the cash dividend paid on one Share, times
(ii) the number of Share Units in the Share Unit Account on the dividend record
date, divided by (iii) the Fair Market Value of a Share on the dividend payment
date.
(d) CASH DEFERRALS. An Eligible Director may elect to have all
or part of the Deferred Amount credited to a cash account (a "Cash Account").
The Deferred Amount allocated to the Cash Account shall be credited to the Cash
Account on the first business day following the date on which the Eligible
Director becomes entitled to payment of the Fees, as the case may be. As of the
day prior to the date a distribution is made under this Plan and as of the last
day of each quarter of each fiscal year of the Company, each Cash Account shall
be credited with interest, compounded quarterly, payable at the prime rate
announced from time to time by Citibank, N.A., or any successor thereto or such
other rate as the Board may establish.
(e) DISTRIBUTIONS.
(i) DISTRIBUTION DATE. Each Eligible Director shall designate
on a Deferred Payment Election Form a distribution date with respect to the
Deferred Amount credited to the Eligible Director's Stock Unit Account and/or
Cash Account thereafter which is not later than 10 years from the date the Fees
become payable (the "Elected Distribution Date"). The amounts in an Eligible
Director's Share Unit Account and Cash Account shall be paid on the first day of
the month following the earlier of (I) the Elected Distribution Date, or (II)
the Eligible Director's termination of service for any reason (the "Payment
Date").
(ii) DISTRIBUTION METHOD. Distributions shall be made from
the Eligible Director's Share Unit Account in a single payment in the form of
whole Shares valued at their Fair Market Value on the Payment Date and cash
representing any fractional interest in a Share. Distributions shall be made
from the Eligible Director's Cash Account in a single payment and shall be made
in cash.
6. FAIR MARKET VALUE. "Fair Market Value" shall mean, with respect to each
Share for any day:
(i) the average of the high and low closing bid prices of the
shares of Common Stock on the NASDAQ National Market if shares are approved for
quotation on such system, or if not so approved, the mean between the high and
low sales price of the shares of Common Stock as reported on the New York Stock
Exchange if shares of Common Stock are then trading upon such exchange or, if
not then trading on such exchange then such average on such other stock exchange
on which the shares of Common Stock are principally trading on such date, or if,
there were no sales on such date, on the closest preceding date on which there
were sales of shares of Common Stock; or
(ii) in the event there shall be no public market for the shares
of Common Stock on such date, the fair market value of the shares of Common
Stock as
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determined in good faith by the Board of Directors based upon the valuation of
an independent appraiser.
7. ISSUANCE OF CERTIFICATES.
(a) RESTRICTIONS ON TRANSFERABILITY. All Shares delivered
under the Plan shall be subject to such stop-transfer orders and other
restrictions as the Company may deem advisable or legally necessary under any
laws, rules, regulations and other legal requirements, including, without
limitation, those of any stock exchange upon which the Shares are then listed
and any applicable federal, state or foreign securities laws.
(b) COMPLIANCE WITH LAWS. Anything to the contrary herein
notwithstanding, the Company shall not be required to issue any Shares under the
Plan if, in the opinion of the Company's legal counsel, the issuance and
delivery of such Shares would constitute a violation by the Eligible Director or
the Company of any applicable law or regulation of any governmental authority,
including, without limitation, federal and state securities laws and the rules
of any stock exchange on which the Company's securities may then be listed.
If and to the extent that the Board determines that it would be
illegal, impracticable or inadvisable to issue Shares under the Plan, the Board
shall make any distribution of Shares otherwise required under the Plan in cash
or such other property as may be reasonably acceptable to the distributee.
8. WITHHOLDING AND OTHER OBLIGATIONS. The Company shall require as a
condition of delivery of any Shares to an Eligible Director that such Director
remit an amount sufficient to satisfy any foreign, federal, state, local and
other governmental withholding tax requirements relating thereto and any
indebtedness or other obligation of the Eligible Directors to the Company.
9. PLAN AMENDMENTS AND TERMINATION. The Board may suspend or
terminate the Plan at any time and may amend it at any time and from time to
time, in whole or in part; PROVIDED, HOWEVER, that no amendment or termination
may adversely affect any rights of any Eligible Director with respect to amounts
that have been deferred prior to the date of such amendment or termination
without the affected Eligible Director's consent and; PROVIDED FURTHER, that any
amendment for which stockholder approval is necessary to comply with any tax or
regulatory requirement shall not be effective until such approval has been
obtained.
10. LISTING, REGISTRATION AND LEGAL COMPLIANCE. If the Board shall
at any time determine that any Consent (as hereinafter defined) is necessary or
desirable as a condition of, or in connection with, the issuance of Shares or
other rights hereunder or the taking of any other action hereunder (each such
action being hereinafter referred to as a "Plan Action"), then such Plan Action
shall not be taken, in whole or in part, unless and until such Consent shall
have been effected or obtained. The term "Consent" as used herein with respect
to any Plan Action means (i) the listing, registration or qualification of any
Shares issued under the Plan on any securities exchange or under any foreign,
federal, state or local law, rule or regulation, (ii) any and all consents,
clearances and approvals in respect of a Plan Action by any governmental or
other regulatory bodies or (iii) any and all written agreements and
representations by an Eligible Director with respect to the disposition of
Shares or with respect to any other matter that the Board shall deem necessary
or desirable in order to comply with the terms of any such listing,
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registration or qualification or to obtain an exemption from the requirement
that any such listing, qualification or registration be made.
11. RIGHT OF DISCHARGE RESERVED. Nothing in the Plan shall confer
upon any Eligible Director the right to continue in the service of the Company
or affect any right that the Company may have to terminate the service of such
Eligible Director.
12. OTHER PAYMENTS OR AWARDS. By participation in the Plan, each
Eligible Director so participating shall be deemed to have agreed that any
payments made under the Plan are special incentive compensation that will not be
taken into account, in any manner, as salary, compensation or bonus in
determining the amount of any payment under any pension, retirement or other
employee benefit plan of the Company or any of its affiliates. In addition, such
participation will not affect the amount of any life insurance coverage, if any,
provided by the Company on the life of any such Eligible Director.
13. RIGHTS NOT TRANSFERABLE OR SUBJECT TO ALIENATION. No rights
granted to an Eligible Director under this Plan may be sold, assigned or
otherwise transferred by the Eligible Director other than by will or the laws of
descent or distribution; all rights granted to an Eligible Director under this
Plan may be exercised during the Eligible Director's lifetime only by such
Eligible Director. An Eligible Director's rights to payments under the Plan are
not subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment or garnishment by his creditors or
his beneficiaries.
14. RIGHTS AS A STOCKHOLDER. An Eligible Director shall have no
rights as a stockholder of the Company with respect to any Shares issuable under
the Plan until such Shares have been delivered to the Eligible Director.
15. UNFUNDED PLAN. The Plan shall be unfunded and shall not create
(or be construed to create) a trust or separate fund. The Plan shall not
establish any fiduciary relationship between the Company and any Eligible
Director or other person and shall constitute a mere promise by the Company to
make payments in the future. The Company may, in its sole discretion, establish
a separate trust to hold assets set aside to provide benefits under the Plan,
provided that no Eligible Director shall have an interest in the assets of any
such trust and the assets of such trust shall be available to pay claims of the
Company's general creditors on such terms and conditions as the trust may
provide. To the extent any person holds any rights by virtue of a pending
deferral under the Plan, such rights shall be no greater than the rights of an
unsecured general creditor of the Company.
16. GOVERNING LAW. The Plan shall be governed by, and construed in
accordance with, the laws of the State of New York.
17. SEVERABILITY. If any portion of the Plan is declared by any
court or governmental authority to be invalid, such invalidity shall not affect
any portion not declared to be invalid. Any portion so declared to be invalid
shall, if possible, be construed in a manner that will give effect to the terms
of such portion to the fullest extent possible while remaining valid.
18. NOTICES. All notices and other communications hereunder shall
be given in writing and shall be personally delivered against or sent by
registered or certified mail, return receipt requested or by reputable
overnight delivery service. Any notice shall be deemed given
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on the date of delivery or mailing, and if mailed, shall be addressed (a) to the
Company, at 2500 Halsey Street, Bronx, New York 10461, Attention: Corporate
Secretary, and (b) to an Eligible Director, at the Eligible Director's principal
residential address last furnished to the Company. Either party may, by notice,
change the address to which notice to such party is to be given.
19. SECTION HEADINGS. The Section headings contained herein are
for convenience only and are not intended to define or limit the contents of
said Sections.
20. EFFECTIVE DATE. This Plan shall become effective upon
approval by the Company's stockholders.
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EXHIBIT C
LOEHMANN'S, INC.
AMENDED AND RESTATED
NEW STOCK INCENTIVE PLAN
ARTICLE 1
GENERAL
1.1 PURPOSE. The purpose of this New Stock Incentive Plan (the
"Plan") is to provide for certain officers, directors and key employees of
Loehmann's, Inc. (the "Company") and certain of its Affiliates an incentive to
maintain and enhance the long-term performance and profitability of the Company.
It is the further purpose of this Plan to permit the granting of awards that
will constitute performance based compensation for certain executive officers,
as described in section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), and regulations promulgated thereunder.
1.2 ADMINISTRATION.
(a) The Plan shall be administered by a committee (the
"Committee") appointed by the Board of Directors of the Company (the "Board"),
which committee shall consist of two or more directors. It is intended that the
directors appointed to serve on the Committee shall be "Non-Employee Directors"
(within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934 (the "Act") and "outside directors" (within the meaning of Code section
162(m)) to the extent Rule 16b-3 and Code section 162(m), respectively, are
applicable; however, the mere fact that a Committee member shall fail to qualify
under either of the foregoing requirements shall not invalidate any award made
by the Committee which award is otherwise validly made under the Plan. The
members of the Committee shall be appointed by, and may be changed at any time
and from time to time in the discretion of, the Board.
(b) The Committee shall have the authority (i) to exercise all
of the powers granted to it under the Plan, (ii) to construe, interpret and
implement the Plan and any Plan agreements executed pursuant to Sections 2.3 and
2.9, (iii) to prescribe, amend and rescind rules and regulations relating to the
Plan, (iv) to make all determinations necessary or advisable in administering
the Plan, and (v) to correct any defect, supply any omission and reconcile any
inconsistency in the Plan.
(c) The determination of the Committee on all matters relating
to the Plan or any Plan agreement shall be conclusive.
(d) No member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any award
hereunder.
1.3 PERSONS ELIGIBLE FOR AWARDS. Awards under the Plan may be made
to such officers, directors and executive, managerial or professional employees
("key personnel") of the Company or its Affiliates, as the Committee shall in
its sole discretion select; provided, that officers and directors who are not
employees of either the Company or an Affiliate shall not be eligible to receive
awards under the Plan.
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1.4 TYPES OF AWARDS UNDER PLAN.
(a) Awards may be made under the Plan in the form of (i) stock
options ("options"), (ii) stock appreciation rights ("stock appreciation
rights") related to an option ("related stock appreciation rights"), (iii) stock
appreciation rights not related to any option ("unrelated stock appreciation
rights"), (iv) restricted stock awards, (v) unrestricted stock awards, and (vi)
performance awards, all as more fully set forth in Article 2.
(b) Options granted under the Plan may be either (i)
"nonqualified" stock options subject to the provisions of section 83 of the
Internal Revenue Code of 1986, as amended (the "Code") or (ii) options intended
to qualify for incentive stock option treatment described in Code section 422.
(c) All options when granted are intended to be nonqualified
stock options, unless the applicable Plan agreement explicitly states that an
option is intended to be an incentive stock option. If an option is granted with
the stated intent that it be an incentive stock option, and if for any reason
such option (or any portion thereof) shall not qualify as an incentive stock
option, then, to the extent of such nonqualification, such option (or portion)
shall be regarded as a nonqualified stock option appropriately granted under the
Plan provided that such option (or portion) otherwise satisfies the terms and
conditions of the Plan relating to nonqualified stock options generally.
1.5 SHARES AVAILABLE FOR AWARDS.
(a) Subject to Section 3.5 (relating to adjustments upon
changes in capitalization), as of any date the total number of shares of Common
Stock with respect to which awards may be granted under the Plan shall be equal
to the excess (if any) of (i) 446,892 shares, over (ii) the sum of (A) the
number of shares subject to outstanding options, outstanding unrelated stock
appreciation rights and outstanding restricted stock awards not vested pursuant
to the lapse of restrictions granted under the Plan, (B) the number of shares
previously issued pursuant to the exercise of options granted under the Plan,
and (C) the number of shares in respect of which stock appreciation rights
granted under the Plan shall have previously been exercised, (D) the number of
shares previously vested pursuant to the lapse of restrictions under restricted
stock awards granted under the Plan, (E) the number of shares issued pursuant to
unrestricted stock awards, and (F) the number of shares underlying performance
awards. In accordance with (and without limitation upon) the preceding sentence,
if and to the extent an award under the Plan expires, terminates or is canceled
for any reason whatsoever without the grantee having received any benefits of
ownership (other than, in the case of forfeited restricted shares, voting rights
and dividends that are likewise forfeited), the shares covered by such award
shall again become available for future awards under the Plan.
(b) Shares of Common Stock that shall be subject to issuance
pursuant to the exercise of options or stock appreciation rights, the grant of
restricted stock awards, unrestricted stock awards or performance awards made
under the Plan shall be authorized and unissued or treasury shares of Common
Stock.
(c) Without limiting the generality of the preceding
provisions of this Section 1.5, the Committee may, but solely with the grantee's
consent, agree to cancel any award under the Plan and issue a new award in
substitution therefor upon such terms as the Committee
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may in its sole discretion determine, provided that the substituted award
satisfies all applicable Plan requirements as of the date such new award is
made.
(d) In any year, a participant eligible for awards under the
Plan may not be granted options and/or stock appreciation rights under the Plan
covering a combined total of more than 223,446 shares of Common Stock.
1.6 DEFINITIONS OF CERTAIN TERMS.
(a) The term "Affiliate" as used herein means any person or
entity which, at the time of reference, directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, the Company.
(b) The term "Common Stock" as used herein means the shares of
common stock of the Company, par value $.01 per share, as constituted on the
effective date of the Plan, and any other shares into which such common stock
shall thereafter be changed by reason of a recapitalization, merger,
consolidation, split-up, combination, exchange of shares or the like.
(c) Except as otherwise determined by the Committee in its
sole discretion, the term "fair market value" as used herein as of any date and
in respect of any share of Common Stock shall refer to the average of the high
and low closing bid prices on the Nasdaq National Market if shares are approved
for quotation on such system, or if not so approved then the mean between the
high and low sales prices of a share of Common Stock as reported on the New York
Stock Exchange if shares of Common Stock are then trading upon such exchange, or
if not then trading on such exchange then such average on such other stock
exchange on which shares of the Common Stock are principally trading, on such
date. In no event shall the fair market value of any share be less than its par
value.
ARTICLE 2
STOCK OPTIONS;
STOCK APPRECIATION RIGHTS;
STOCK AWARDS; PERFORMANCE AWARDS
2.1 GRANT OF STOCK OPTIONS. The Committee may grant options under
the Plan to purchase shares of Common Stock to such key personnel, and in such
amounts and subject to such terms and conditions, as the Committee shall from
time to time determine in its sole discretion, subject to the terms and
provisions of this Plan.
2.2 GRANT OF STOCK APPRECIATION RIGHTS.
(a) The Committee may grant a related stock appreciation right
in connection with all or any part of an option granted under the Plan, either
at the time the related option is granted or any time thereafter prior to the
exercise, termination or cancellation of such option, and subject to such terms
and conditions as the Committee shall from time to time determine in its sole
discretion, subject to the terms and provisions of the Plan. The grantee of a
related stock appreciation right shall, subject to the terms and conditions of
the Plan and the applicable Plan agreement, have the right to surrender to the
Company for cancellation all or a
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portion of the related option granted under the Plan, but only to the extent
that such option is then exercisable, and to be paid therefor an amount equal to
the excess (if any) of (i) the aggregate fair market value of the shares of
Common Stock subject to the option or portion thereof surrendered (determined as
of the date of exercise of such stock appreciation right), over (ii) the
aggregate appreciation base (determined pursuant to Section 2.3(d)) of the
shares of Common Stock subject to the stock appreciation right or portion
thereof surrendered.
(b) The Committee may grant an unrelated stock appreciation
right to such key personnel, and in such amount and subject to such terms and
conditions as the Committee shall from time to time determine in its sole
discretion, subject to the terms and provisions of the Plan. The grantee of an
unrelated stock appreciation right shall, subject to the terms and conditions of
the Plan and the applicable Plan agreement, have the right to surrender to the
Company for cancellation all or a portion of such stock appreciation right, but
only to the extent that such stock appreciation right is then exercisable, and
to be paid therefor an amount equal to the excess (if any) of (i) the aggregate
fair market value of the shares of Common Stock subject to the stock
appreciation right or portion thereof surrendered (determined as of the date of
exercise of such stock appreciation right), over (ii) the aggregate appreciation
base (determined pursuant to Section 2.3(d)) of the shares of Common Stock
subject to the stock appreciation right or portion thereof surrendered.
(c) Payment due to the grantee upon exercise of a stock
appreciation right shall be made (i) by check, (ii) in Common Stock (valued at
the fair market value thereof as of the date of exercise), or (iii) partly in
the manner provided in clause (i) and partly in the manner provided in clause
(ii), all as determined by the Committee in its sole discretion. If the
Committee shall determine to make all of such payments in Common Stock, no
fractional shares shall be issued and no payments shall be made in lieu of
fractional shares.
2.3 AGREEMENTS EVIDENCING STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.
(a) Options and stock appreciation rights granted under the
Plan shall be evidenced by written agreements ("Plan agreements") which shall
contain such provisions not be inconsistent with the terms and provisions of the
Plan as the Committee may in its sole discretion deem necessary or desirable.
(b) Each Plan agreement with respect to the granting of an
option or an unrelated stock appreciation right shall set forth the number of
shares of Common Stock subject to the option or unrelated stock appreciation
right granted thereby. Each Plan agreement with respect to the granting of a
related stock appreciation right shall set forth the number of shares of Common
Stock subject to the related option which shall also be subject to the related
stock appreciation right granted thereby.
(c) Each Plan agreement with respect to the granting of an
option shall set forth the amount (the "option exercise price") payable by the
grantee to the Company in connection with the exercise of the option evidenced
thereby. The option exercise price per share shall in no event be less than 100%
of the par value of a share of Common Stock on the date the option is granted.
(d) Each Plan agreement with respect to a stock appreciation
right shall set forth the amount (the "appreciation base") over which
appreciation will be measured upon exercise of the stock appreciation right
evidenced thereby. The appreciation base per share
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of Common Stock subject to a stock appreciation right shall in no event be less
than (i) in the case of an unrelated stock appreciation right, 100% of the fair
market value of a share of Common Stock on the date the stock appreciation right
is granted, or (ii) in the case of a related stock appreciation right, the
option exercise price per share of Common Stock subject to the related option.
2.4 EXERCISE OF RELATED STOCK APPRECIATION RIGHT REDUCES SHARES
SUBJECT TO OPTION. Upon any exercise of a related stock appreciation right or
any portion thereof, the number of shares of Common Stock subject to the related
option shall be reduced by the number of shares of Common Stock in respect of
which such stock appreciation right shall have been exercised.
2.5 EXERCISABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS.
Subject to the other provisions of this Plan:
(a) Except as hereinafter provided, each Plan agreement with
respect to an option or stock appreciation right shall set forth the period
during which and the conditions subject to which the option or stock
appreciation right evidenced thereby shall be exercisable, such periods and
conditions to be determined by the Committee in its discretion. Unless the
applicable Plan agreement otherwise specifies: no option or stock appreciation
right shall be exercisable prior to the first anniversary of the date of grant,
and each option or stock appreciation right granted under the Plan shall become
cumulatively exercisable with respect to 20% of the shares of Common Stock
subject thereto, rounded down to the next lower full share, on the first
anniversary of the date of grant, and with respect to an additional 20% of the
shares of Common Stock subject thereto, rounded down to the next lower full
share, on each of the second, third and fourth anniversaries of the date of
grant, and shall become 100% exercisable on the fifth anniversary of the date of
grant, and shall remain 100% exercisable until the day prior to the tenth
anniversary of the date of grant and shall terminate and cease to be exercisable
on the tenth anniversary of the date of grant.
(b) Notwithstanding the foregoing or any other provision of
the Plan, no Plan agreement shall permit an option or stock appreciation right
to be exercisable more than 10 years after the date of grant.
(c) Subject to any restrictions imposed by the applicable Plan
agreement, a related stock appreciation right shall be exercisable at any time
during the period that the related option may be exercised.
(d) Unless the applicable Plan agreement otherwise provides,
an option or stock appreciation right granted under the Plan may be exercised
from time to time as to all or part of the full number of shares as to which
such option or stock appreciation right shall then be exercisable.
(e) An option or stock appreciation right shall be exercisable
by the filing of a written notice of exercise with the Company, on such form and
in such manner as the Committee shall in its sole discretion prescribe, and by
payment in accordance with Section 2.6. Unless the applicable Plan agreement
otherwise provides or the Committee in its sole discretion otherwise determines,
the date of exercise of an option or stock appreciation right shall be the date
the Company receives such written notice of exercise.
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2.6 PAYMENT OF OPTION PRICE.
(a) Unless the applicable Plan agreement otherwise provides or
the Committee, in its sole discretion otherwise determines, any written notice
of exercise of an option shall be accompanied by payment of the full purchase
price for the shares being purchased.
(b) Payment of the option exercise price shall be made in any
combination of the following: (i) by certified or official bank check payable to
the Company (or the equivalent thereof acceptable to the Committee); (ii) with
the consent of the Committee in its sole discretion, by personal check (subject
to collection) and which may in the Committee's discretion be deemed
conditional; and/or (iii) if and to the extent provided in the applicable Plan
agreement, by delivery or previously-acquired shares of Common Stock owned by
the grantee for at least six months (or such longer or shorter period as the
Committee may prescribe) having a fair market value (determined as of the option
exercise date) equal to the portion of the option exercise price being paid
thereby, provided that the Committee may require, as a condition of accepting
any such delivery of shares of Common Stock, that the grantee furnish, if so
requested by the Committee, an opinion of counsel acceptable to the Company to
the effect that such delivery would not result in the grantee incurring any
liability under Section 16(b) of the Act and does not require any Consent (as
defined in Section 3.2). Payment in accordance with clause (i) of this Section
2.6 may be deemed to be satisfied, if and to the extent that the applicable Plan
agreement so provides, by delivery to the Company of an assignment of a
sufficient amount of the proceeds from the sale of Common Stock acquired upon
exercise to pay for all of the Common Stock acquired upon exercise and an
authorization to the broker or selling agent to pay that amount to the Company,
which sale shall be made at the grantee's direction at the time of exercise,
provided that the grantee furnish, if so requested by the Committee, an opinion
of counsel acceptable to the Company to the effect that such delivery would not
result in the grantee incurring any liability under Section 16(b) of the Act and
does not require any Consent (as defined in Section 3.2). As soon as practicable
after receipt of full payment, the Company shall, subject to the provisions of
Section 3.2, deliver to the grantee a certificate or certificates for the shares
of Common Stock so purchased, which certificate or certificates may bear such
legends as the Company may deem appropriate concerning restrictions on their
disposition in accordance with applicable federal and state securities laws,
rules and regulations or otherwise.
2.7 TERMINATION OF EMPLOYMENT. Subject to the other provisions of
the Plan and except as the applicable Plan agreement may otherwise provide:
(a) GENERAL RULE. All of a grantee's outstanding awards shall
terminate upon his termination of employment for any reason (including death)
except to the extent post-employment exercise of the vested portion of an award
is permitted in accordance with this Section 2.7. The "vested portion" of any
option or stock appreciation right shall mean the portion thereof which is
exercisable immediately prior to the grantee's termination of employment for any
reason.
(b) IMPROPER ACTIVITY; QUITS. If the grantee's employment is
terminated for cause or if the grantee quits employment, whether or not he is a
party to a written employment contract, all options and stock appreciation
rights granted to such grantee shall terminate and expire on the day the
grantee's employment terminates. For purposes of this Section 2.7, a grantee's
employment shall be deemed to have been terminated for "cause" if he is
discharged on account of fraud or embezzlement or other unlawful or tortious
conduct, whether or not involving or against the Company or any Affiliate, or
for violation of a policy of the
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Company or any Affiliate or for serious and willful acts of misconduct
detrimental to the business or reputation of the Company or any Affiliate
(whether or not such acts constitute "cause" pursuant to any written employment
contract with the grantee) or if he is discharged for "cause" or any like term
as defined in any written employment contract with the grantee.
(c) REGULAR TERMINATION; LEAVES OF ABSENCE. If the grantee's
employment terminates for reasons other than as provided in subsection (b) or
(d) of this Section 2.7, the vested portion of options and stock appreciation
rights granted to such grantee may be exercised until the earlier of (a) 60 days
after the day his employment terminates or (b) the date on which the options and
stock appreciation rights otherwise terminate or expire in accordance with the
applicable provisions of the Plan (disregarding this Section 2.7) and the Plan
agreement; provided that the Committee may determine in its sole discretion such
longer or shorter period for exercise in the case of an individual whose
employment terminates solely because his employer ceases to be an Affiliate or
he transfers his employment with the Company's consent to a purchaser of a
business disposed of by the Company. The Committee may in its discretion
determine (i) whether any leave of absence constitutes a termination of
employment within the meaning of the Plan, and (ii) the impact, if any, of any
such leave on awards under the Plan theretofore made to a grantee who takes any
such leave.
(d) DEATH. In the event that the grantee's employment
terminates by reason of death, or if the grantee's employment shall terminate as
described in Section 2.7(c) and he dies within the period for exercise provided
for therein, the vested portion of his options and stock appreciation rights
shall be exercisable by the person to whom the options and stock appreciation
rights have passed under the grantee's will (or if applicable, pursuant to the
laws of descent and distribution) until the earlier of (a) one year after the
grantee's death or (b) the date on which the options and stock appreciation
rights otherwise terminate or expire in accordance with the applicable
provisions of the Plan (disregarding this Section 2.7) and the Plan agreement.
2.8 SPECIAL ISO REQUIREMENTS. In order for a grantee to receive
special tax treatment with respect to stock acquired under an option granted as
an incentive stock option, the grantee of such option must be, at all times
during the period beginning on the date of grant and ending on the day three
months before the date of exercise of such option, an employee of the Company or
any of the Company's parent or subsidiary corporations (within the meaning of
Code section 424), or of a corporation or a parent or subsidiary corporation of
such corporation issuing or assuming a stock option in a transaction in which
Code section 424(a) applies. If an option granted under the Plan is intended to
be an incentive stock option, and if the grantee, at the time of grant, owns
stock possessing 10 percent or more of the total combined voting power of all
classes of stock of the grantee's employer corporation or of its parent or
subsidiary corporation, then (i) the option exercise price per share shall in no
event be less than 110% of the fair market value of the Common Stock on the date
of such grant and (ii) such option shall not be exercisable after the expiration
of five years after the date such option is granted.
2.9 RESTRICTED AND UNRESTRICTED STOCK AWARDS.
(a) The Committee may grant restricted stock awards, alone or
in tandem with other awards, under the Plan to such key personnel, subject to
the terms and provisions of the Plan and subject to such restrictions, terms and
conditions as the Committee shall determine in its sole discretion and as shall
be evidenced by written Plan agreements. The vesting of a restricted stock award
granted under the Plan may be conditioned upon the completion of a specified
period of employment with the Company or any Affiliate, upon the
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attainment of specified performance goals, and/or upon such other criteria as
the Committee may determine in its sole discretion.
(b) The Committee may grant unrestricted stock awards, alone
or in tandem with other awards, under the Plan to such key personnel, subject to
such terms and conditions as the Committee shall determine in its sole
discretion.
(c) Each Plan agreement with respect to a restricted stock
award shall set forth the amount (if any) to be paid by the grantee with respect
to such award. If a grantee made any payment for a restricted stock award which
does not vest, appropriate payment may be made to the grantee upon or following
such forfeiture on such terms and conditions as the Committee may determine.
(d) Unless otherwise provided in the applicable Plan
agreement, if a grantee's employment terminates for any reason (including death)
before all of his restricted stock awards have vested, or in the event any
conditions to the vesting of restricted stock are not satisfied by the deadline
therefor, such awards shall terminate and expire on the day the grantee's
employment terminates or on the day of such deadline, as the case may be except
to the extent post-employment vesting is permitted in accordance with the
provisions of Section 2.9(e). Any restricted stock awards that fail to vest in
accordance with the provisions of this Section 2.9(d) shall terminate and
expire, and any such unvested shares shall be returned to the Company, all on
such terms and conditions as the Committee may determine.
(e) Notwithstanding the provisions of Section 2.9(d), unless
otherwise provided in the applicable Plan agreement, upon the grantee's death
while in service, the portion of the grantee's restricted stock awards that
would, but for such death, vest within three years following the grantee's death
shall become vested on the date of such grantee's death.
(f) The Committee may provide that a certificate or
certificates representing restricted stock awards shall be registered in the
grantee's name and bear an appropriate legend specifying that such share is not
transferable and is subject to the provisions of the Plan and the restrictions,
terms and conditions set forth in the applicable Plan agreement, or that such
certificate or certificates shall be held in escrow by the Company on behalf of
the grantee until such shares become vested or are forfeited, all on such terms
and conditions as the Committee may determine. Except as the applicable Plan
agreement may otherwise provide, no share of restricted stock may be assigned,
transferred, or otherwise encumbered or disposed of by the grantee until such
share has vested in accordance with the terms of such award. Subject to the
provisions of Section 3.2, as soon as practicable after any restricted stock
award shall vest, the Company shall issue or reissue to the grantee (or to his
designated beneficiary in the event of the grantee's death) a certificate or
certificates for the Common Stock represented by such restricted stock award
without such restricted legend.
(g) Except as the applicable Plan agreement may otherwise
provide, a grantee shall have the right to vote and receive dividends on a
restricted stock award granted under the Plan. To the extent provided in the
applicable Plan agreement, any stock received as a dividend on, or in connection
with a stock split of, a restricted stock award shall be subject to the same
restrictions as such restricted stock.
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(h) Notwithstanding the foregoing or any other provision of
the Plan, no Plan agreement shall permit a restricted stock award to vest more
than 10 years after the date of grant.
(i) PAYMENT OF PURCHASE PRICE. Unless an applicable Plan
agreement otherwise provides or the Committee in its sole discretion otherwise
determines, any amount payable by a grantee under any restricted stock award
shall be payable at the time such award is granted in accordance with the
provisions of Section 2.6(b).
2.10 PERFORMANCE AWARDS.
(a) GRANT OF AWARDS. The Committee may grant performance
awards, alone or in tandem with other awards, under the Plan to such key
personnel to acquire shares of Common Stock in such amounts and subject to such
terms and conditions as the Committee shall from time to time in its sole
discretion determine, subject to the terms of the Plan and as shall be evidenced
by written Plan agreements.
(b) PERFORMANCE AWARDS. Each performance award under the Plan
shall relate to a specified maximum number of shares, and shall be exchangeable
for all or a portion of such shares, or cash (or such other form of
consideration as may be determined by the Committee equivalent in value thereto)
in up to an amount equal to the fair market value of an equal number of
unrestricted shares, at the end of such specified period (a "performance cycle")
as may be established by the Committee. The number of such shares which may be
deliverable pursuant to such performance award shall be based upon the degree of
attainment over such performance cycle of such measure of the performance of the
Company, one or more of its subsidiaries or Affiliates or the participant as may
be established by the Committee. The Committee may provide for full or partial
credit, prior to completion of such performance cycle or achievement of the
degree of attainment of the measures of performance specified in connection with
such performance award, in the event of the participant's death, normal
retirement, early retirement, or total or permanent disability, or in such other
circumstances as the Committee may determine to be fair and equitable to the
participant or in the interest of the Company.
(c) In the event that the Committee grants a performance award
that is intended to constitute performance-based compensation within the meaning
of Code section 162(m), the following rules shall apply: (i) payments under the
performance award shall be made solely on account of the attainment of one or
more objective performance goals pre-established in writing by the Committee not
later than 90 days after the commencement of the period of service to which the
performance award relates (or if less, after 25% of such period of service);
(ii) the performance goal(s) to which the performance award relates shall be
based on one or more of the following business criteria applied to the
participant, a business unit or the Company and/or an Affiliate: stock price,
market share, sales, earnings per share, return on equity or costs; (iii) in any
year, a participant may not be granted performance awards covering a total of
more than 223,446 shares of Common Stock; and (iv) once granted, the Committee
may not have discretion to increase the amount payable under such performance
award.
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ARTICLE 3
MISCELLANEOUS
3.1 AMENDMENT OF THE PLAN; MODIFICATION OF AWARDS.
(a) The Board may amend, alter, suspend, discontinue, or
terminate the Plan or any portion thereof at any time; provided that no such
amendment, alteration, suspension, discontinuation or termination shall be made
without stockholder approval if such approval is necessary to comply with any
tax or regulatory requirement applicable to the Plan and provided further that
any such amendment, alteration, suspension, discontinuance or termination that
would impair any rights under any award theretofore made under the Plan shall
not to that extent be effective without the consent of the person to whom such
award was made.
(b) With the consent of the grantee and subject to the terms
and conditions of the Plan (including Section 3.1(a)), the Committee may amend
outstanding Plan agreements with such grantee, including, without limitation,
any amendment which would (i) accelerate the time or times at which an award may
vest or be exercised and/or (ii) extend the scheduled expiration date of the
award.
3.2 RESTRICTIONS.
(a) If the Committee shall at any time determine that any
Consent (as hereinafter defined) is necessary or desirable as a condition of, or
in connection with, the granting of any award under the Plan, the acquisition,
issuance or purchase of shares or other rights hereunder or the taking of any
other action hereunder (each such action being hereinafter referred to as a
"Plan Action"), then such Plan Action shall not be taken, in whole or in part,
unless and until such Consent shall have been effected or obtained to the full
satisfaction of the Committee. Without limiting the generality of the foregoing,
in the event that (i) the Committee shall be entitled under the Plan to make any
payment in cash, Common Stock or both, and (ii) the Committee shall determine
that Consent is necessary or desirable as a condition of, or in connection with,
payment in any one or more of such forms, then the Committee shall be entitled
to determine not to make any payment whatsoever until such Consent shall have
been obtained in the manner aforesaid.
(b) The term "Consent" as used herein with respect to any Plan
Action means (i) any and all listings, registrations or qualifications in
respect thereof upon any securities exchange or other self-regulatory
organization or under any federal, state or local law, rule or regulation, (ii)
the expiration, elimination or satisfaction of any prohibitions, restrictions or
limitations under any federal, state or local law, rule or regulation or the
rules of any securities exchange or other self-regulatory organization, (iii)
any and all written agreements and representations by the grantee with respect
to the disposition of shares, or with respect to any other matter, which the
Committee shall deem necessary or desirable to comply with the terms of any such
listing, registration or qualification or to obtain an exemption from the
requirement that any such listing, qualification or registration be made, and
(iv) any and all consents, clearances and approvals in respect of a Plan Action
by any governmental or other regulatory bodies or any parties to any loan
agreements or other contractual obligations of the Company or any of its
Affiliates.
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3.3 NONTRANSFERABILITY. No award granted to any grantee under the
Plan or under any Plan agreement shall be assignable or transferable by the
grantee other than by will or by the laws of descent and distribution. During
the lifetime of the grantee, all rights with respect to any award granted to the
grantee under the Plan or under any Plan agreement shall be exercisable only by
him.
3.4 WITHHOLDING TAXES.
(a) Whenever under the Plan shares of Common Stock are to be
delivered upon exercise of an option or stock appreciation right or upon the
lapse of restrictions on a restricted stock award or in connection with a
performance award, the Committee shall be entitled, to require as a condition of
delivery that the grantee remit an amount sufficient to satisfy all federal,
state and other governmental withholding tax requirement related thereto.
Whenever cash is to be paid under the Plan (whether upon the exercise of a stock
appreciation right or otherwise), the Company shall be entitled as a condition
of its payment to deduct therefrom, or from any salary or other payments due to
the grantee, an amount sufficient to satisfy all federal, state and other
governmental withholding tax requirements related thereto or to the delivery of
any shares of Common Stock under the Plan.
(b) Without limiting the generality of paragraph (a) above, a
grantee may satisfy, in whole or in part, the foregoing withholding requirements
by delivery of unrestricted shares of Common Stock owned by the grantee for at
least six months (or such shorter or longer period as the Committee may approve
or require) having a fair market value (determined as of the date of such
delivery by the grantee) equal to all or part of the amount to be so withheld or
by having the Company withhold from the number of shares of Common Stock
otherwise issuable pursuant to the exercise of the award(s) giving rise to the
tax withholding obligation a number of shares of Common Stock having a fair
market value (determined as of the date of exercise of such award) equal to all
or part of the amount to be so withheld. The Committee may require, as a
condition of accepting any such delivery of shares of Common Stock, that the
grantee furnish an opinion of counsel acceptable to the Company to the effect
that such delivery would not result in the grantee incurring any liability under
Section 16(b) of the Act.
3.5 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. If and to the extent
specified by the Committee, the number or kind of shares of Common Stock which
may be issued under the Plan, the number or kind of shares of Common Stock
subject to options, unrelated stock appreciation rights, restricted stock awards
and performance awards theretofore granted under the Plan, and the option
exercise price and appreciation base of options and stock appreciation rights
theretofore granted under the Plan, and the amount payable by a grantee in
respect of an award may be appropriately adjusted (as the Committee may
determine) for any increase or decrease in the number of issued shares of Common
Stock resulting from the subdivision or combination of shares of Common Stock or
other capital adjustments, or the payment of a stock dividend after the
effective date of the Plan, or other increase or decrease in such shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that any options to purchase, common stock, unrelated stock
appreciation rights or restricted stock awards covering fractional shares of
Common Stock resulting from any such adjustment shall be eliminated, and
provided further, that each incentive stock option granted under the Plan shall
not be adjusted in a manner that causes such option to fail to continue to
qualify as an "incentive stock option" within the meaning of Code section 422.
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Adjustments under this Section shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.
3.6 RIGHT OF DISCHARGE RESERVED. Nothing in the Plan or in any Plan
agreement shall confer upon any officer, director, employee or other person the
right to continue in the employment of the Company or any of its Affiliates or
affect any right which the Company or any of its Affiliates may have to
terminate the employment of such officer, director, employee or other person.
3.7 NO RIGHTS AS A STOCKHOLDER. No grantee or other person
exercising an option or stock appreciation right shall have any of the rights of
a stockholder of the Company with respect to shares subject to an option or
shares deliverable upon exercise of a stock appreciation right until the
issuance of a stock certificate to him for such shares. Except as otherwise
provided in Section 3.5, no adjustment shall be made for dividends,
distributions or other rights (whether ordinary or extraordinary, and whether in
cash, securities or other property) for which the record date is prior to the
date such stock certificate is issued. In the case of a grantee of a restricted
stock award which has not yet vested, the grantee shall have the rights of a
stock holder of the company if and only to the extent provided in the applicable
Plan agreement.
3.8 NATURE OF PAYMENTS.
(a) Any and all grants of options, stock appreciation rights
or restricted stock awards and payments of cash or issuances of shares of Common
Stock hereunder shall be granted, issued, delivered or paid, as the case may be,
in consideration of services performed for the Company or for its Affiliates by
the grantee.
(b) All such grants, issuances and payments shall constitute a
special incentive payment to the grantee and shall not, unless otherwise
determined by the Committee, be taken into account in computing the amount of
salary or compensation of the grantee for the purposes of determining any
pension, retirement, death or other benefits under (i) any pension, retirement,
life insurance or other benefit plan of the Company or any Affiliate or (ii) any
agreement between the Company or any Affiliate, on the one hand, and the grantee
on the other hand.
(c) By accepting an award under the plan, the grantee shall
thereby be understood to have waived any claim to continued exercise or vesting
of an award or to damages or severance entitlement related to non-continuation
of the award beyond the period provided herein or in the applicable Plan
agreement, notwithstanding any contrary provision in any written employment
contract with the grantee, whether any such contract is executed before of after
the grant date of the award.
3.9 NON-UNIFORM DETERMINATIONS. The Committee's determinations under
the Plan need not be uniform and may be made by it selectively among persons who
receive, or are eligible to receive, awards under the Plan (whether or not such
persons are similarly situated). Without limiting the generality of the
foregoing, the Committee shall be entitled, among other things, to make
non-uniform and selective determinations, and to enter into non-uniform and
selective Plan agreements, as to (a) the persons to receive awards under the
Plan, (b) the terms and provisions of awards under the Plan, (c) the exercise by
the Committee of its discretion in
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respect of the exercise of stock appreciation rights pursuant to the terms of
the Plan, and (d) the treatment of leaves of absence pursuant to Section 2.7(c).
3.10 OTHER PAYMENTS OR AWARDS. Nothing contained in the Plan shall
be deemed in any way to limit or restrict the Company, any Affiliate or the
Committee from making any award or payment to any person under any other plan,
arrangement or understanding, whether now existing or hereafter in effect.
3.11 REORGANIZATION.
(a) In the event that the Company is merged or consolidated
with another corporation and, whether or not the Company shall be the surviving
corporation, there shall be any change in the shares of Common Stock by reason
of such merger or consolidation, or in the event that all or substantially all
of the assets of the Company are acquired by another person, or in the event of
a reorganization or liquidation of the Company (each such event being
herein-after referred to as a "Reorganization Event") or in the event that the
Board shall propose that the Company enter into a Reorganization Event, then the
Committee may in its discretion, by written notice to a grantee, provide that
his options and stock appreciation rights will be terminated unless exercised
within 30 days (or such longer period as the Committee shall determine in its
sole discretion) after the date of such notice; and provided further that if the
Committee takes such action the Committee also may in its discretion accelerate
the dates upon which all outstanding options and stock appreciation rights of
such grantee shall be exercisable. The Committee also may in its discretion, by
written notice to a grantee, provide that the restrictions on his restricted
stock awards may lapse in the event of a Reorganization Event upon such terms
and conditions as the Committee may determine.
(b) Whenever deemed appropriate by the Committee, the actions
referred to in Section 3.11(a) may be made conditional upon the consummation of
the applicable Reorganization Event.
3.12 NONCOMPETITION REQUIREMENT. Unless the Committee otherwise
provides, during any period that an award continues to be exercisable or to vest
following a grantee's termination of service with the Company and its
Affiliates, such continued exercisability or vesting shall be conditioned on (a)
the grantee not becoming associated with any entity, whether as principal,
partner, employee, consultant or shareholder (other than as a holder of not more
than one percent of the outstanding voting shares of any publicly traded
corporation) that is actively engaged in any business which is in competition
with any business of the Company or an Affiliate and (b) the grantee's
compliance with any noncompetition, confidentiality or similar agreement
applicable to the grantee under any employment or similar agreement or any
written policy of the Company or its Affiliates. If any condition contained in
this Section 3.12 shall be unenforceable by reason of the extent, duration or
geographical scope thereof, or otherwise, then the court making such
determination shall have the right to reduce such extent, duration, geographical
scope or other provision in order to make this Section 3.12 enforceable in the
manner contemplated hereby.
3.13 SECTION HEADINGS. The section headings contained herein are
for the purposes of convenience only and are not intended to define or limit
the contents of said sections.
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3.14 EFFECTIVE DATE AND TERM OF PLAN.
(a) This Plan shall be deemed adopted and become effective
upon the approval thereof by the Board; provided that, notwithstanding any other
provision of the Plan, no award made under the Plan shall be exercisable unless
the Plan is approved, directly or indirectly, by (i) the express consent of
stockholders holding at least a majority of the Company's voting stock voting in
person or by proxy at a duly held stockholders' meeting, or (ii) the unanimous
written consent of the stockholders of the Company, within 12 months before or
after the date the Plan is adopted.
(b) The Plan shall terminate 10 years after the earlier of the
date on which it becomes effective or the date on which it is approved by
shareholders, and no awards shall thereafter be made under the Plan.
Notwithstanding the foregoing, all awards made under the Plan prior to such
termination date shall remain in effect until such awards have been satisfied or
terminated in accordance with the terms and provisions of the Plan and the
applicable Plan agreement.
3.15 GOVERNING LAW. This Plan shall be governed by the laws of the
State of New York applicable to agreements made and to be performed entirely
within such state.
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