SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
Burlington Coat Factory Warehouse Corporation
----------------------------------------------
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock, $1.00 par value per share
---------------------------------------
2) Aggregate number of securities to which transaction applies:
Proxy Statement for Annual Meeting of Stockholders to be held
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10/15/98. On August 14, 1998 there were 47,349,031 shares of
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Common Stock issued and outstanding.
------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): N/A
-------
4) Proposed maximum aggregate value of transaction: N/A
-----
5) Total fee paid: N/A
-----
[ ] Fee paid previously with preliminary materials.
[ ] 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 off-
setting 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: N/A
-------
2) Form, Schedule or Registration No: N/A
------
3) Filing Party: N/A
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4) Date Filed: N/A
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Page 1 of 50<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
1830 ROUTE 130
BURLINGTON, NEW JERSEY 08016
___________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
____________________
You are cordially invited to attend the Annual Meeting of Stockholders of
Burlington Coat Factory Warehouse Corporation (the "Company") to be held at
11:00 A.M., New Jersey time, on Thursday, October 15, 1998 at the offices of
the Company, 1830 Route 130, Burlington, New Jersey 08016 for the following
purposes:
1. To elect seven directors.
2. To vote on a proposal to approve the Burlington Coat Factory Ware-
house Corporation 1998 Stock Incentive Plan.
3 To vote on a proposal to ratify the appointment of Deloitte & Touche
LLP as independent public accountants.
4 To transact such other business as may properly come before such
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on August 28,
--------------------------------------------------------------------
1998 as the record date for the determination of stockholders entitled to
- -------------------------------------------------------------------------
notice of, and to vote at, the meeting. If you do not expect to be present
- ---------------------------------------------------------------------------
at the meeting, but wish your shares to be voted, please fill in, date, sign
- ----------------------------------------------------------------------------
and return the enclosed proxy which is solicited by, and on behalf of, the
- --------------------------------------------------------------------------
Board of Directors.
- -------------------
Sincerely,
Henrietta Milstein
Secretary
Burlington, New Jersey
August 28, 1998
YOUR VOTE IS IMPORTANT
You are urged to sign, date and mail your proxy promptly in
the enclosed envelope.
Page 2 of 50<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
1830 ROUTE 130
BURLINGTON, NEW JERSEY 08016
________________________________
PROXY STATEMENT
---------------
Approximate Mailing
Date: September 1, 1998
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Burlington Coat Factory Warehouse
Corporation (the "Company") to be voted at the Annual Meeting of Stockholders
of the Company to be held on Thursday, October 15, 1998, at the offices of the
Company, 1830 Route 130, Burlington, New Jersey 08016 at 11:00 o'clock in the
morning, New Jersey time, for the purposes set forth in the accompanying Notice
of Annual Meeting of Stockholders.
The Board of Directors has fixed the close of business on August 28, 1998,
as the record date for the determination of stockholders entitled to receive
notice of, and to vote at, the forthcoming Annual Meeting of Stockholders or
any adjournment thereof. Any person giving a proxy in the form accompanying
this statement has the power to revoke it at any time prior to its exercise.
A proxy may be revoked by attendance and voting at the meeting or by written
notice to the Secretary of the Company received at the Company's offices at
1830 Route 130, Burlington, New Jersey 08016 prior to the date of the Annual
Meeting. When proxies are returned properly executed, the shares represented
thereby will be voted as directed in the executed proxy.
The expenses for soliciting proxies for the forthcoming Annual Meeting
of Stockholders are to be paid by the Company. Solicitation of proxies may
be made by means of personal calls upon, or telephonic or telegraphic
Communications with, stockholders or their personal representatives by
directors, officers and employees of the Company, who will not be specially
compensated for such services.
The Bylaws of the Company provide that, except as provided by law or by
the Company's Certificate of Incorporation, the holders of a majority of the
capital stock issued and outstanding and entitled to vote at a meeting of
stockholders, present in person or represented by proxy, shall constitute a
quorum for the transaction of business. Neither Delaware law nor the
Certificate of Incorporation of the Company provides for a different quorum for
the matters to be submitted to a vote of the Stockholders at the forthcoming
Annual Meeting of Stockholders. For the purposes of determining the presence
of a quorum at the forthcoming Annual Meeting of Stockholders, all shares
Page 3 of 50<PAGE>
of stock represented by ballots or proxies presented at the meeting shall be
counted whether or not such ballots or proxies shall include stockholder
directed abstentions or broker non-votes on one or more matters; provided,
however, that a ballot or proxy presented by a broker on which it has
indicated that it does not have discretionary authority to vote on any matter
shall not be counted towards the presence of a quorum.
Directors will be elected by a plurality of the votes of the shares of
stock cast by stockholders present in person or represented by proxy at the
meeting and entitled to vote, assuming there is a quorum. Thus assuming there
is a quorum, abstentions and broker non-votes will have no effect on deter-
mining the outcome of the election of directors. With respect to approval of
the Company's 1998 Stock Incentive Plan, for purposes of New York Stock
Exchange Listing requirements and Treasury Regulation Section 1.422-5(a) (with
respect to incentive stock options) the affirmative vote of a majority of the
votes cast at a meeting where a majority of the outstanding Stock has voted on
the proposal is required; therefore, abstentions will be counted as negative
votes, and broker non-votes will have the effect of negative votes if the total
number of votes cast does not otherwise constitute a majority of the out-
standing stock of the Company. With respect to the ratification of the
appointment of auditors, the affirmative vote of a majority of the shares of
stock held by stockholders present in person or represented by proxy at the
meeting and entitled to vote is required; therefore, abstentions and broker
non-votes will be counted as negative votes.
All stockholder meeting proxies, ballots and tabulations that identify
individual stockholders are kept confidential, and no such documents shall
be available for examination, nor shall the identity of any stockholder
be disclosed, except as may be required by law. Votes are counted by the
employees of American Stock Transfer Company, the Company's independent
transfer agent and registrar, and certified by the Inspector of Election,
who is also an employee of American Stock Transfer Company.
-2-
Page 4 of 50<PAGE>
VOTING SECURITIES AND PRINCIPAL SECURITY HOLDERS
As of August 14, 1998, the Company had outstanding and entitled to vote
(exclusive of treasury shares) 47,349,031 shares of Common Stock, par value
$1.00 per share ("Common Stock"). The holders of the Common Stock are
entitled to vote as a single class and to one vote per share, exercisable in
person or by proxy, at all meetings of stockholders.
To the knowledge of the Company, as of August 14, 1998, the following
table sets forth the ownership of the Company's Common Stock by each person
owning more than 5% of such Common Stock, by each director and by all
officers and directors as a group:
<TABLE>
<CAPTION>
Number of Shares
Name and Business Address of Common Stock Percent
of Beneficial Owners Beneficially Owned (1) of Class
- ------------------------ ---------------------- --------
<S> <C> <C>
Monroe G. Milstein (2)(3)(4)(5) 13,511,325 (6) 28.5%
Henrietta Milstein (2)(3)(4) 7,568,104 (6)(7) 16.0%
Lazer Milstein (3)(13) 2,377,378 5.0%
P.O. Box 643
Tallman, New York 10982
Andrew R. Milstein (2)(3)(4) 2,816,096 (8) 5.9%
Stephen E. Milstein (2)(3)(4) 2,582,444 (9) 5.5%
Harvey Morgan (4) 1,200 (4) -
599 Lexington Ave., 27th Fl.
New York, New York 10022
Mark A. Nesci (2)(4) 99,680 (10)(11) .2%
Irving Drillings (4) 900 (4) -
4740 South Ocean Blvd.
Highland Beach, Florida 33487
All directors and officers as 26,680,510 (12) 56.2%
group ( 11 persons)
</TABLE>
_______________
(1) Except as otherwise indicated, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them.
(2) Business address is 1830 Route 130, Burlington, New Jersey 08016.
-3-
Page 5 of 50<PAGE>
(3) Monroe G. Milstein and Henrietta Milstein are husband and wife, and
Andrew, Lazer and Stephen Milstein are their sons. Each member of the
Milstein family disclaims beneficial ownership of each other's shares
of Common Stock.
(4) A director of the Company.
(5) Monroe G. Milstein "controls" and is therefore a "parent" of the Company
as those terms are defined in Rule 405 under the Securities Act of 1933,
as amended.
(6) Includes 26,970 shares of Common Stock held by the Burlington Coat Factory
Warehouse Corporation 401(k) Profit Sharing Plan, of which Monroe G.
Milstein and Henrietta Milstein are the trustees. Monroe G. Milstein and
Henrietta Milstein hold voting and dispositive power with respect to such
shares but disclaim beneficial ownership of such securities except to the
extent of their respective pecuniary interests as participants in the
profit sharing plan.
(7) Includes 741,150 shares of Common Stock held by Henrietta Milstein as
trustee under trust agreement dated August 12, 1996 for the benefit of
Monroe G. Milstein and his issue. Henrietta Milstein holds voting and
dispositive power with respect to the shares but disclaims pecuniary
interest in such shares.
(8) Includes 79,945 shares of Common Stock held by Andrew Milstein as trustee
of the Stephen Milstein 1994 Trust, and 9,370 shares of Common Stock held
by Andrew Milstein as Trustee of the SGM 1995 Trust, trusts established
for the benefit of the children of Stephen Milstein. Mr. Andrew Milstein
holds voting and dispositive power with respect to the shares but dis-
claims any pecuniary interest in such shares. Also includes 16,800
shares of Common Stock underlying options granted to Andrew Milstein.
Excludes 87,182 shares of Common Stock donated by Mr. Andrew Milstein to
various trusts established for the benefit of the children of Andrew
Milstein, as to which shares Andrew Milstein disclaims beneficial
ownership.
(9) Includes (a) 4,740 shares of Common Stock held by Stephen Milstein as
trustee under trust agreement dated December 31, 1984 for the benefit of
the niece of Mr. Stephen Milstein and daughter of Mr. Andrew R. Milstein
and (b) 5,136 shares of Common Stock held by Stephen Milstein as trustee
under trust agreement dated November 4, 1988 for the benefit of the
nephew of Mr. Stephen Milstein and son of Mr. Andrew R. Milstein. Mr.
Stephen Milstein holds voting and dispositive power with respect to the
shares but disclaims any pecuniary interest in such shares. Also
includes 16,800 shares of Common Stock underlying options granted to
Stephen Milstein. Excludes 89,315 shares of Common Stock donated by Mr.
Stephen Milstein to a trust established for the benefit of his children,
as to which shares Mr. Stephen Milstein disclaims beneficial ownership.
(10) Includes 70,790 shares of Common Stock underlying options granted to such
individual.
(11) Includes 3,600 shares of Common Stock held by the minor children of Mr.
Mark Nesci. Excludes 1,800 shares of Common Stock held by the wife of
Mr. Mark Nesci, as to which shares Mr. Mark Nesci disclaims beneficial
ownership.
(12) Excludes 2,377,378 shares of Common Stock owned by Lazer Milstein but
includes an aggregate of 149,290 shares of Common Stock underlying
options granted to certain officers and directors. Also includes 77,306
shares held by an officer of the Company as trustee of the Andrew Milstein
1994 Trust, a trust established for the benefit of Andrew Milstein's
children.
(13) Listed because of stock ownership.
-4-
Page 6 of 50<PAGE>
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
Seven directors are to be elected to serve until the next Annual Meeting
of Stockholders or until their successors shall have been elected and
qualified. The persons named in the accompanying form of Proxy have advised
management that it is their intention to vote for the election of the following
nominees as directors:
Monroe G. Milstein Henrietta Milstein
Andrew R. Milstein Stephen E. Milstein
Harvey Morgan Irving Drillings
Mark A. Nesci
If at the time of the Annual Meeting of Stockholders any nominee is
unable or declines to serve, the discretionary authority provided in the proxy
will be exercised to vote for a substitute. Management has no reason to
believe that any substitute nominee will be required.
The following is certain information concerning each nominee:
Nominee, year
nominee first became Principal occupation and other
a director and age information concerning nominee
- --------------------- ------------------------------
Monroe G. Milstein (1) President and Chief Executive Officer since 1972.
1972
71
Henrietta Milstein (1) Vice President since 1983 and Secretary since 1972.
1972
69
Andrew R. Milstein (1) Vice President and Assistant Secretary since 1989
1972 and Executive Merchandise Manager since 1992.
45
Harvey Morgan Executive Managing Director of J.W. Genesis
1983 Financial Corp., an investment banking firm, since
56 March, 1996. From June, 1989 to March, 1996, Mr.
Morgan was Managing Director of Ladenburg,
Thalmann & Co. Inc., an investment banking firm.
Stephen E. Milstein (1) Vice President since 1978 and General Merchandise
1989 Manager since 1990.
42
-5-
Page 7 of 50<PAGE>
Mark A. Nesci Vice President - since 1989 and Chief Operating
1989 Officer since 1990.
42
Irving Drillings Retired clothing manufacturer and industrialist.
1992 For more than 35 years, from 1955 to 1991, Mr.
74 Drillings was president of Arlette Fashions, Inc.,
a manufacturer of ladies coats.
_________________
(1) See Note 3 to "Voting Securities and Principal Security Holders" for
information concerning the family relationship of certain directors.
During the fiscal year ended May 30, 1998, the Board of Directors
held four meetings. Each director attended all of the meetings of the
Board of Directors held during the fiscal year ended May 30, 1998.
During the year ended May 30, 1998, the Board of Directors also conducted
a portion of its business, as appropriate, by action by unanimous written
consent in lieu of a formal meeting. The Board of Directors has
established an Executive Committee, an Audit Committee, a Stock Incentive
Committee, and a Special Litigation Committee, but has not established any
nominating or compensation committee or any other committee performing
similar functions. The Executive Committee consists of Monroe G. Milstein
and Andrew R. Milstein. The Executive Committee acts, within certain
limits, in the absence of the full Board on matters other than major
corporate transactions, when convening the full Board is impractical.
During the fiscal year ended May 30, 1998, the Executive Committee took
actions by unanimous written consent in lieu of formal meetings and held
two special meetings. The Stock Incentive Committee consists of Monroe
G. Milstein, Henrietta Milstein and Harvey Morgan and administers the
Company's 1993 Stock Incentive Plan. During the fiscal year ended
May 30, 1998, the Stock Incentive Committee took one action by unanimous
written consent in lieu of formal meetings. The Special Litigation
Committee consists of Harvey Morgan and Irving Drillings. The Special
Litigation Committee was created to review issues related to the putative
securities class action lawsuit against the Company and certain of its
officers and directors and to determine the required action, if any, in
the event of any conflict arising between the Company and members of the
Board of Directors who were made defendants to the lawsuit. The Special
Litigation Committee held one meeting during the year ending May 30, 1998.
The Audit Committee oversees the general policies and practices of the
Company concerning accounting, financial reporting, and internal auditing
and financial controls and works with the Company's independent auditors.
During the year ended May 30, 1998, the members of the Audit Committee
were Harvey Morgan and Irving Drillings. The Audit Committee held three
meetings during the year ended May 30, 1998.
-6-
Page 8 of 50<PAGE>
Executive Officers and Key Personnel
- ------------------------------------
The executive officers and key personnel of the Company as of August 28,
1998 are set forth in the table below. All executive officers and key
personnel serve at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
Name Age Office Period Served
- ---- --- ------ -------------
<S> <C> <C> <C>
Monroe G. Milstein 71 President, Chief Executive Since 1972
Officer and Director
Henrietta Milstein 69 Vice President (since 1983), Since 1972
Secretary and Director
Andrew R. Milstein 45 Vice President, Executive Since 1989
Merchandise Manager (since
1992), Assistant Secretary
and Director
Stephen E. Milstein 42 Vice President, General Since 1978
Merchandise Manager (since
1990) and Director
Mark A. Nesci 42 Vice President, Chief Since 1989
Operating Officer (since
1990) and Director
Paul C. Tang 45 Vice President, General Since 1995 (1)
Counsel and Assistant
Secretary
Robert L. LaPenta, Jr. 44 Corporate Controller and Since 1986
Chief Accounting Officer
Steven Koster 50 President - Menswear Since 1997 (2)
Division
Bernard Brodsky 58 Vice President and Treasurer Since 1998 (3)
Monroe G. Milstein and Henrietta Milstein are husband and wife, and Andrew
R. Milstein and Stephen E. Milstein are their sons. No other family relation-
ship exists among any of the named directors or executive officers.
(1) Paul Tang has been General Counsel and Assistant Secretary of the Company
since November 1, 1993 and Vice President since March, 1995. Prior to
joining the Company, Mr. Tang has been an attorney engaged in private
practice for over the past five years. From July 1989 to October 1993,
Mr. Tang was a partner in the law firm of Reid & Priest in New York City.
(2) Steven Koster has been employed by the Company since 1981 and has served
in various positions since then.
(3) Bernard Brodsky was hired as Treasurer in February of 1998 and became a
Vice President in August 1998. Prior to joining the Company, Mr. Brodsky
was Vice President and Treasurer with Charming Shoppes, Inc., a women's
clothing retailer, where he was employed for 32 years.
-7-
Page 9 of 50<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the compensation
of the Chief Executive Officer and the four other most highly compensated
executive officers who served in such capacities as of May 30, 1998.
</TABLE>
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------------------------------
Awards
------------------
Long-Term
Fiscal Restricted Incentive
Year Other Annual Stock Plan All Other
Name and Principal Ended Salary Bonus Compensation Award(s) Option Payouts Compensation
Position May 31(1) ($) ($) ($) ($) ($) ($) ($)(2)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Monroe G. Milstein, 1998 297,600 - - - - - 7,500
President and Chief 1997 322,400 - - - - - 4,500
Executive Officer 1996 322,400 - - - - - 6,536
- ----------------------------------------------------------------------------------------------------
Mark A. Nesci, 1998 234,720 - - - 20,000 - 7,500
Vice President-Real 1997 242,600 - - - - - 4,500
Estate and Chief 1996 234,000 40,000 - 108,800(3) 12,000(4) - 6,536
Operating Officer
- ----------------------------------------------------------------------------------------------------
Andrew R. Milstein 1998 153,563 - - - 8,400 - 7,500
Vice President and 1997 154,678 - - - 8,400(4) - 4,382
Executive Merchandise 1996 146,078 - - - - - 6,536
Manager
- ----------------------------------------------------------------------------------------------------
Stephen E. Milstein 1998 160,320 - - - 8,400 - 7,500
Vice President and 1997 162,000 - - - 8,400(4) - 4,500
General Merchandise 1996 153,400 - - - - - 6,536
Manager
- ----------------------------------------------------------------------------------------------------
Paul C. Tang, 1998 165,000 15,000 - - 2,400 - 7,500
Vice President, 1997 166,346 5,000 - - - - 4,500
General Counsel and 1996 156,828 - - - 1,800(4) - 6,536
Assistant Secretary
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Compensation figures for years 1997 and 1996 are for the twelve month
periods ended June 30. Compensation figures for fiscal 1998 are for the
eleven months ended May 30, 1998 as the Company changed its fiscal year
during the latest period resulting in a shortened eleven month transition
year.
(2) Constitutes Company contribution to the Company's Profit Sharing Plan.
(3) Represents an aggregate fair market value of 10,000 (12,000 shares after
giving effect to a 6-for-5 stock split effected on October 16, 1997)
shares of restricted stock granted to Mr. Nesci in July, 1995, vesting
at various times through July, 1999. At May 30, 1998, 7,200 shares
were vested, leaving a balance of 4,800 shares of restricted stock with
an aggregate fair market value of $96,300. Shares of restricted stock
held by Mr. Nesci are entitled to a pro rata share of dividends declared
by the Company.
(4) Adjusted to reflect a 6-for-5 stock split effected on October 16, 1997.
-8-
Page 10 of 50<PAGE>
Option Grants During the Fiscal Year Ended May 30, 1998.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
- -----------------------------------------------------------------------------------------------
Potential Realizable Value
at Assumed Annual Rate
of Stock Price Appreciation
Individual Grants for Option Term
- -----------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/sh) Date 5%($) 10%($)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Andrew R. Milstein 8,400 11.1% $16,28 3/19/2008 $ 86,016 $217,980
Stephen E. Milstein 8,400 11.1% $16,28 3/19/2008 $ 86,016 $217,980
Mark A. Nesci 20,000 26.4% $16,28 3/19/2008 $204,816 $519,000
Paul C. Tang 2,400 3.2% $16,28 3/19/2008 $ 24,576 $ 62,280
</TABLE>
Option Exercises and Fiscal Year-End Values
The following table sets forth the number and value of unexercised stock
options held by the named executives on May 30, 1998.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised in-the-Money
Options at FY-End(#) Options at FY-End($)(2)
----------------------------------------------------
Shares Value
acquired on realized Exercisable
Name exercise (#) ($)(1) (3) Unexercisable Exercisable Unexercisable
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mark A. Nesci 13,567 $157,784 50,790 20,000 $591,819 $75,650
Andrew R. Milstein -0- N/A 8,400 8,400 $ 94,185 $31,773
Stephen E. Milstein -0- N/A 8,400 8,400 $ 94,185 $31,773
Paul C. Tang -0- N/A 6,000 2,400 $ 37,917 $ 9,078
</TABLE>
(1) Value realized is calculated based on the difference between the option
exercise price and the closing market price of the Company's Common
Stock on the date of exercise multiplied by the number of shares to which
the exercise relates.
(2) The closing price of the Company's Common Stock as reported on the New
York Stock Exchange Composite tape on May 29, 1998 was $20.0625 and is
used in calculating the value of unexercised options.
(3) Includes shares received pursuant to a 6-for-5 stock split effected on
October 16, 1997.
-9-
Page 11 of 50<PAGE>
Report on Executive Compensation
The Company's current executive compensation program consists of primarily
two elements: (1) base salary, reviewed annually and adjusted in light of the
Company's performance for the year and the individual executive's contribution
to that performance, and (2) incentive compensation consisting of stock awards,
principally stock options. Additionally, Company executives participate in
the Company's 401(k) Profit Sharing Plan (a defined contribution retirement
plan).
Executive compensation is determined primarily by Monroe G. Milstein, the
Company's founder and Chairman. In making decisions on compensation, Monroe
Milstein consults with certain of the Company's principal executive officers,
namely, Henrietta Milstein, Andrew R. Milstein, Stephen E. Milstein and Mark
A. Nesci, who, together with Monroe G. Milstein, act as an informal compen-
sation committee. However, the decision on executive compensation is made
by Monroe Milstein, based on his evaluation of the executive's performance
for the Company, subject to review by the Board of Directors.
An executive's performance at the Company is evaluated based upon the
executive's areas of responsibility at the Company. While objective factors
such as increase in sales and profitability in areas under an executive's
management are considered, subjective factors such as the executive's
ability to manage people and to contribute to the cohesiveness of the
management structure as well as the creativity and innovativeness with which
an executive performs his duties for the Company are weighed. The exec-
utive's compensation then, in turn, is linked to his or her performance and
tied to the long-term financial success of the Company, as measured by stock
performance, by the use of stock awards. The Company believes that the value
of such stock awards will, in the long-term, reflect the financial performance
of the Company.
In determining an executive's compensation, the executive's ownership of a
substantial amount of stock of the Company and familial relationship to the
Company's founder are considered in addition to such executive's performance
at the Company. For this reason, such executives are relatively less well
compensated in terms of salary than such individuals otherwise might be.
In keeping with this philosophy, the salary of Monroe G. Milstein, the
Company's Chairman and Chief Executive Officer, has not been increased in the
past three years, and, in fact, is approximately $97,000 less than his salary
was in 1983, the year of the Company's initial public offering. Net income of
the Company was approximately $12 million at the end of fiscal 1983 and
approximately $63.6 million at the end of fiscal 1998. Stockholders equity at
the end of fiscal 1983 was approximately $79,504,000 and at the end of fiscal
1998 was $516,089,000. For fiscal 1998, the Company's Common Stock traded in
a range from $14.50 to $23.625 and traded at $20.0625 at the end of the fiscal
year.
This report is submitted by the Board of Directors:
Monroe G. Milstein, Chairman Mark A. Nesci
Henrietta Milstein Irving Drillings
Andrew R. Milstein Harvey Morgan
Stephen E. Milstein
-10-
Page 12 of 50<PAGE>
Insider Participation
Monroe G. Milstein, Chairman of the Board, President and Chief Executive
Officer, is principally responsible for determining compensation for all
executive officers of the Company. In making compensation decisions, Monroe G.
Milstein consults from time to time with Henrietta Milstein, Andrew R.
Milstein, Stephen E. Milstein and Mark A. Nesci, who are officers of the
Company. In addition, Monroe G. Milstein and Henrietta Milstein, Vice
President and Secretary of the Company, are members of the Stock Incentive
Committee. However, they are not eligible to receive options under the
Company's 1993 Stock Incentive Plan.
Certain Relationships and Related Transactions
During the Fiscal year ended May 30, 1998, no officer, director, nominee
for director, five percent stockholder or family member of such person engaged
in, or proposed to engage in, any transaction with the Company or its
affiliates which are reportable under Reg. Section 229.404 promulgated by the
Commission under the Securities Exchange Act of 1934, as amended.
Stock Performance Graph
The following graph sets forth the yearly percentage change in the cumu-
lative total return on the Company's Common Stock during the preceding five
fiscal years ended May 30, 1998 compared with the cumulative total returns at
the S&P 500 Index and the published retail industry index. The comparison
assumes $100 was invested on May 31, 1993 in the Company's Common Stock and in
each of the foregoing indices and assumes reinvestment of dividends.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ ------
Burlington Coat Factory 100.0 110.64 66.54 67.35 125.07 154.61
Warehouse Corporation
S & P 500 100.0 101.41 127.85 161.09 216.99 271.42
S & P Retail Stores Comp 100.0 96.38 104.33 121.86 148.27 217.35
</TABLE>
-11-
Page 13 of 50<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG BURLINGTON COAT FACTORY WAREHOUSE
CORPORATION, THE S&P 500 INDEX AND
THE S&P RETAIL STORES COMPOSITE INDEX(1)
[FILED UNDER COVER OF FORM SE.]
*$100 INVESTED ON MAY 31, 1993 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING MAY 31
(1) Includes the following groups and companies:
RETAIL (DEPT. STORES) - Dillard Dept. Stores; May Dept. Stores; Mercantile
Stores; Nordstrom; Penney (J.C.)
RETAIL (DRUG STORES) - Longs Drug; Rite Aid; Walgreen Co.
RETAIL (FOOD CHAINS) - Albertson's; American Stores; Bruno's Inc.; Giant Food
C1. A; Great A&P; Kroger; Winn-Dixie.
RETAIL (GEN. MERCHANDISE)-Dayton-Hudson; Kmart; Sears, Roebuck; Wal-Mart
Stores.
RETAIL (SPECIALTY)-Blockbuster Entertainment; Circuit City Stores; Home Depot,
Lowe's Cos.; Melville Corp.; Pep Boys; Price Co.; Tandy Corp.; Toys R Us;
Woolworth.
RETAIL (SPECIALTY-APPAREL)-Charming Shoppes; Gap (The); Limited Inc.; TJX
Companies.
-12-
Page 14 of 50<PAGE>
Compensation of Directors
- -------------------------
For the fiscal year ended May 30, 1998, each director who was not an
employee of the Company received a fee of $15,000 for his services as a
director. No additional compensation is paid for membership on any committee
established by the Board of Directors. The Company also reimburses directors
for travel and out-of-pocket expenses incurred in connection with the
directors' services to the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP
----------------------------------
REPORTING COMPLIANCE
--------------------
SECTION 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors and persons who
own more than ten percent of a class of the Company's equity securities
registered under the Exchange Act (collectively, the "Reporting Persons") to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission and to furnish the Company with these reports.
Based upon the Company's review of the copies of reports received by it
and upon written representations received from the Reporting Persons, the
Company believes that all filings required to be made by the Reporting Persons
during the period from June 29, 1997 to May 30, 1998 were made on a timely
basis, except for a Form 4 of Stephen E. Milstein which was filed 2 days late.
PROPOSAL NUMBER TWO
APPROVAL OF 1998 STOCK INCENTIVE PLAN
-------------------------------------
In May 1998, the Board of Directors ("Board") voted unanimously to adopt
the Company's 1998 Stock Incentive Plan (the "1998 Stock Incentive Plan"),
which will, subject to the approval of the stockholders, replace the Company's
1993 Stock Incentive Plan (the "1993 Plan"). The 1993 Plan expired in August
of 1998. The purpose of the 1998 Stock Incentive Plan is to assist the Company
in achieving and maintaining its corporate objectives of growth and successful
operations by providing key officers, directors, consultants, advisors and
selected employees of the Company with a proprietary interest in the Company
and its growth and performance through stock ownership. The 1998 Plan is
attached hereto as Exhibit A. All terms used herein have the meanings set
forth in the 1998 Stock Incentive Plan, unless specifically defined herein.
An aggregate of 350,000 shares of Common Stock of the Company may be
issued or transferred pursuant to the 1998 Stock Incentive Plan. In the event
of any Change in Capitalization, however, the Stock Incentive Committee (as
defined below) may adjust the maximum number and class of shares with respect
to which Awards (as defined below) which may be granted under the 1998 Stock
Incentive Plan, the number and class of shares which are subject to outstanding
Awards granted under the 1998 Stock Incentive Plan and, if applicable, the
purchase prices therefor.
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Page 15 of 50<PAGE>
The 1998 Stock Incentive Plan will be administered by a committee (the
"Stock Incentive Committee") composed of at least two directors of the Company
(or if at any time a Committee shall not have been appointed or if appointed is
not so acting, then by the Board at a meeting at which a quorum is present or
by action by consent in lieu of a meeting as authorized by applicable law).
Pursuant to the 1998 Stock Incentive Plan, the Stock Incentive Committee may
grant Options, Stock Appreciation Rights, Restricted Stock, Performance Units
and Performance Shares (collectively, "Awards") to key officers, directors,
consultants, advisors and other selected employees of the Company and its
subsidiaries (collectively "Eligible Individuals"). The Stock Incentive
Committee will select Eligible Individuals to whom Awards will be granted and
determine the type, size, terms and conditions of Awards, including the per
share purchase price and the vesting provisions of Options and the
restrictions or performance criteria relating to Restricted Stock, Performance
Units and Performance Shares. The Stock Incentive Committee will administer,
construe and interpret the 1998 Stock Incentive Plan.
Because the granting of Awards under the 1998 Stock Incentive Plan will be
entirely within the discretion of the Stock Incentive Committee, it is not
possible to designate the Eligible Individuals to whom Awards will be granted
under the 1998 Stock Incentive Plan in the future or the number of shares to
be covered by such Awards. As of August 1, 1998, no Awards have been granted
under the 1998 Stock Incentive Plan.
The Stock Incentive Committee may grant to Eligible Individuals Options to
purchase shares of Common Stock. Subject to the provisions of the Internal
Revenue Code of 1986 (the "Code"), Options may be either Incentive Stock
Options (within the meaning of Section 422 of the Code) or Nonqualified Stock
Options. The per share purchase price (i.e., the exercise price) under each
Option will be established by the Stock Incentive Committee at the time the
Employee Option is granted. In the case of an Incentive Stock Option, the per
share exercise price will not be less than 100% of the Fair Market Value of a
share on the date the Incentive Stock Option is granted (110 %, in the case
of an Incentive Stock Option granted to a Ten Percent Stockholder). In the
case of a Nonqualified Stock Option, the per share exercise price will not be
less than 100% of the fair Market Value of a share of Common Stock on the date
the Nonqualified Stock Option is granted. Options will be exercisable at such
times and in such installments as determined by the Stock Incentive Committee.
The Stock Incentive Committee may accelerate the exercisability of any Option
at any time. The Option Agreement or Award Notice will set forth the terms and
conditions applicable upon an optionee's termination of employment. Each Option
granted pursuant to the 1998 Stock Incentive Plan will be for such term as
determined by the Stock Incentive Committee; however, no Option will be
exercisable after the expiration of 10 years from its grant date (five years,
in the case of an Incentive Stock Option granted to a Ten Percent Stockholder).
Options are not transferable by an optionee other than by will or the laws
of descent and distribution and may be exercised during the optionee's lifetime
only by the optionee or the optionee's guardian or legal representative.
Notwithstanding the foregoing, the Committee, in its discretion, may permit
the assignment or transfer of an option on such other terms or subject to such
other conditions as the Committee may deem necessary or appropriate or as
otherwise may be required or allowed by applicable law or regulation. The
purchase price for shares of Common Stock acquired pursuant to the exercise
of an Option must be paid (i) in cash or (ii) by tendering shares of
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Page 16 of 50<PAGE>
Common Stock to the Company upon such terms and conditions as may be determined
by the Stock Incentive Committee, (iii) if permitted by the Stock Incentive
Committee, tendering or surrendering another Option or Award, including
Restricted Stock, valued at Fair Market Value on the date of exercise less any
payment due to the Company upon exercise thereof, or (iv) if permitted by the
Stock Incentive Committee, any combination of the foregoing. The Committee may
provide loans from the Company to permit the exercise or purchase of an Option
and may provide for procedures to permit the exercise of an Option by use of
proceeds to be received from the sale of shares issuable pursuant to an Option.
The Optionee may also, upon providing instructions to the Company that upon
receipt of the purchase price in cash from the Optionee's broker or dealer,
designated as such on the written notice, in payment for any Shares purchased
pursuant to the exercise of an Option, the Company shall issue such Shares
directly to the designated broker or dealer. Upon a Change in Control (as
defined below), all Options outstanding under the 1998 Stock Incentive Plan
will become immediately and fully exercisable. In addition, to the extent set
forth in the Option Agreement, the optionee may, during the 60-day period
following the Change in Control, surrender for cancellation any Option (or
portion thereof) for a cash payment in respect of each share covered by the
Option, or portion thereof surrendered, equal to the excess, if any, of (i)(x)
in the case of an Incentive Stock Option, the Fair Market Value, on the date
preceding the date of surrender, of the shares of Common Stock subject to the
Option (or any portion thereof) surrendered or (y) in the case of a Non-
qualified Stock Option, the greater of (A) the Fair Market Value, on the date
preceding the date of surrender, of the shares of Common Stock subject to the
Option (or any portion thereof) surrendered or (B) the Adjusted Fair Market
Value of the shares of Common Stock subject to the Option (or any portion
thereof) surrendered, over (ii) the aggregate purchase price for such shares
of Common Stock under the Option or portion thereof surrendered. In the case
of an Option granted within six months prior to a Change in Control to any
optionee who may be subject to liability under Section 16(b) of the Exchange
Act, to the extent set forth in the Option Agreement or Award Notice, or other-
wise allowed by the Stock Incentive Committee, such optionee will be entitled
to surrender for cancellation his or her Option during the 60-day period
commencing upon the expiration of six months after the date of grant of any
such Option. A Change in Control is defined to include (i) with certain
exceptions, an acquisition of any of the Company's voting securities by any
"Person" within the meaning of Section 13(d) or 14(d) of the Exchange Act,
other than the Founders and their affiliates, after which such Person
beneficially owns securities representing 51 % or more of the Company's
outstanding voting power, (ii) stockholder approval of (A) certain mergers,
consolidations or reorganizations as a result of which, among other things,
the Company's stockholders immediately before such transaction own less than
60% of the combined voting power of the surviving or resulting corporation
immediately after such transaction or (B) the sale or other disposition of
all or substantially all of the Company's assets, or (iii) circumstances under
which individuals who as of August 1, 1998 are members of the Board of
Directors of the Company (the "Incumbent Board") cease to constitute at least
two-thirds of the members of the Board, with each new director who is approved
by a vote of at least two-thirds of the Incumbent Board, with certain
exceptions, being considered a member of the Incumbent Board.
The 1998 Stock Incentive Plan permits the granting of Stock Appreciation
Rights to Eligible Individuals in connection with an Option or as a free-
standing right. A Stock Appreciation Right permits the grantee to receive,
upon exercise of the Stock Appreciation Right, cash and/or shares of Common
Stock, at the discretion of the Stock Incentive Committee, equal in value to an
amount
-15-
Page 17 of 50<PAGE>
determined by multiplying (i) the excess, if any, of (x) for those
granted in connection with an Option, the then per share Fair Market Value on
the date preceding the exercise date over the per share purchase price under
the related Option, or (y) for those not granted in connection with an Option,
the then per share Fair Market Value on the date preceding the exercise date
over the per share Fair Market Value on the grant date of the Stock Appre-
ciation Right by (ii) the number of shares of Common Stock as to which such
Stock Appreciation Right is being exercised.
Stock Appreciation Rights granted in connection with an Option cover the
same shares of Common Stock as those covered by the Option and are generally
governed by the same terms. A Stock Appreciation Right granted in connection
with an Incentive Stock Option is exercisable only if the Fair Market Value of
the share of Common Stock on the exercise date exceeds the purchase price
specified in the Incentive Stock Option agreement. Freestanding Stock
Appreciation Rights will be on the terms determined by the Stock Incentive
Committee, but for a term not greater than 10 years. No Stock Appreciation
Right is exercisable prior to the date six months after the date of grant.
Upon a Change in Control, all Stock Appreciation Rights become immediately and
fully exercisable. In addition, to the extent set forth in the Stock
Appreciation Right Agreement, upon exercise of freestanding Stock Appreciation
Rights within 60 days of a Change in Control, the amount payable will be paid
in cash and will be equal to the excess of (i) the greater of (x) the Fair
Market Value of the shares of Common Stock on the date preceding the exercise
date and (y) the Adjusted Fair Market Value of the shares of Common Stock on
the date preceding the exercise date, over (ii) the aggregate Fair Market
Value of shares of Common Stock subject to the Stock Appreciation Right on
the date such Stock Appreciation Right was granted. In the case of a Stock
Appreciation Right granted within six months prior to a Change in Control to
any grantee who may be subject to liability under Section 16(b) of the Exchange
Act, to the extent set forth in the Stock Appreciation Right Agreement, or
otherwise permitted by the Stock Incentive Committee, such grantee will be
entitled to exercise his or her Stock Appreciation Right during the 60-day
period commencing upon the expiration of the six months after the date of grant
of any such Stock Appreciation Right.
The terms of a Restricted Stock Award, including the restrictions placed
on such shares and the time or times at which such restrictions will lapse,
will be determined by the Stock Incentive Committee at the time the Award is
made. Shares of Restricted Stock may be issued in payment in respect of vested
Performance Units. The Stock Incentive Committee may determine at the time an
award of Restricted Stock is granted that dividends paid on such Restricted
Stock may be paid to the grantee or deferred and, if deferred, whether such
dividends will be reinvested in shares of Common Stock. Deferred dividends
(together with any interest accrued thereon) will be paid upon the lapsing
of restrictions on shares of Restricted Stock or forfeited upon the for-
feiture of shares of Restricted Stock. The agreements evidencing Awards of
Restricted Stock will set forth the terms and conditions of such Awards
applicable upon a grantee's termination of employment. The Stock Incentive
Committee will determine at the time of the grant of an Award of Restricted
Stock the extent to which, if any, the restrictions on outstanding shares of
Restricted Stock will lapse upon a Change in Control.
Performance Units and Performance Shares will be awarded to Eligible
Individuals at such times as the Stock Incentive Committee may determined, and
the vesting of Performance Units and
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Page 18 of 50<PAGE>
Performance Shares will be based upon the Company's attainment of specified
performance objectives within the specified Performance Cycle. Performance
objectives and the length of the Performance Cycle for the Performance Units
and Performance Shares will be determined by the Stock Incentive Committee at
the time the Award is made. Prior to the end of a Performance Cycle, the Stock
Incentive Committee, in its discretion, may adjust the performance objectives
to reflect a Change in Capitalization, a change in the tax rate or book tax
rate of the Company or any Subsidiary, or any other event which may materially
affect the performance of the Company or any Subsidiary. The agreements
evidencing Awards of Performance Units and Performance Shares will set forth
the terms and conditions of such Awards, including those applicable in the
event of the grantee's termination of employment.
Each Performance Unit may be denominated in shares of Common Stock or a
specified dollar amount. Payments in respect of vested Performance Units will
be made in cash, shares of Common Stock, shares of Restricted Stock or any
combination thereof, as determined by the Stock Incentive Committee. Per-
formance Shares will be awarded in the form of shares of Common Stock. The
Stock Incentive Committee will determine, at the time the Award is made, the
total number of Performance Shares subject to an Award and the time or times at
which the Performance Shares will be issued to the grantee. In addition, the
Stock Incentive Committee will determine the time or times at which the awarded
but not issued Performance Shares will be issued to the grantee. At the time
the award of Performance Shares is made, the Stock Incentive Committee may
determine that dividends will be paid or deferred on the issued Performance
Shares and, if deferred, whether such dividends will be reinvested in shares of
Common Stock. Deferred dividends (together with any interest accrued thereon)
will be paid upon the lapsing of restrictions on Performance Shares or for-
feited upon the forfeiture of Performance Shares. Upon a Change in Control,
(x) a percentage of Performance Units, as determined by the Stock Incentive
Committee at the time an Award of Performance Units is made, will become vested
and the grantee will be entitled to receive a cash payment in an amount that
was determined by the Stock Incentive Committee at the time of the Award of
such Performance Units and as set forth in the agreement evidencing the Award,
and (y) with respect to Performance Shares, all restrictions will lapse on a
percentage of the Performance Shares, as determined by the Stock Incentive
Committee at the time the Award of Performance Shares is made. In addition,
the agreements evidencing the grant of Performance Shares and Performance Units
will contain provisions for the treatment of such Awards (or portions thereof)
which do not become vested as a result of a Change in Control, including,
without limitation, provisions for the adjustment of applicable performance
objectives.
The Stock Incentive Committee has the authority at the time an award is
granted, or at any time thereafter, to award to designated optionees or
grantees bonuses to pay taxes that will be payable on exercise of Options or
payment of other Awards. The Stock Incentive Committee will have full
authority to determine the amount of any such bonus to pay taxes and the terms
and conditions affecting the vesting and payment thereof.
The 1998 Stock Incentive Plan will terminate on the date preceding the
fifth anniversary of its adoption by the Board of Directors of the Company.
The Board may earlier terminate or amend the 1998 Stock Incentive Plan at any
time, except that (i) no such amendment or termination may adversely affect
outstanding Awards.
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Page 19 of 50<PAGE>
In general, an optionee will not recognize taxable income upon grant or
exercise of an Incentive Stock Option and the Company and its subsidiaries will
not be entitled to any business expense deduction with respect to the grant or
exercise of an Incentive Stock Option. (However, upon the exercise of an
Incentive Stock Option, the excess of the fair market value on the date of
exercise of the shares of Common Stock received over the exercise price of
shares of Common Stock will be treated as an adjustment to alternative minimum
taxable income.) In order for the exercise of an Incentive Stock Option to
qualify for the foregoing tax treatment, the optionee generally must be an
employee of the Company or a subsidiary (within the meaning of Section 422 of
the Code) from the date the Incentive Stock Option is granted through the date
three months before the date of exercise, except in the case of death or
disability, where special rules apply.
If the optionee disposes of shares of Common Stock acquired upon exercise
of an Incentive Stock Option at a time which is at least two years after the
date of grant of the Option and at least one year after the date of exercise,
upon disposition of the shares of Common Stock by the optionee, the difference,
if any, between the sales price of the shares of Common Stock and the exercise
price of the Option will be treated as long-term capital gain or loss. If the
optionee does not satisfy these holding period requirements, the optionee will
recognize ordinary compensation at the time of the disposition of the shares of
Common Stock generally in an amount equal to the excess of the fair market
value of the shares of Common Stock at the time the Option was exercised over
the exercise price of the Option. The balance of gain realized, if any, will
be long-term or short-term capital gain, depending upon whether or not the
shares of Common Stock were sold more than one year after the Option was
exercised. If the optionee sells the shares of Common Stock prior to the
satisfaction of the holding period requirements but at a price below the fair
market value of the shares of Common Stock at the time the Option was
exercised, the amount of ordinary compensation will be limited to the excess of
the amount realized on the sale over the exercise price of the Option. Subject
to applicable provisions of the Code and regulations thereunder, including
Section 162(m) of the Code, the employee's employer will generally be entitled
to a federal income tax deduction in the amount of such ordinary compensation
income.
In general, an optionee to whom a Nonqualified Stock Option is granted
will recognize no income at the time of the grant of the Option. Upon exercise
of a Nonqualified Stock Option, an optionee will recognize ordinary compen-
sation in an amount equal to the amount by which the fair market value of the
shares of Common Stock on the date of exercise exceeds the exercise price of
the Option. (Special rules may apply in the case of an optionee who is subject
to Section 16(b) of the Exchange Act.) The tax basis of such shares to such
optionee will be equal to the Option Price paid plus the amount includable in
the optionee's gross income, and the optionee's holding period for such shares
will commence on the day on which the optionee recognizes taxable income in
respect of such shares. Subject to applicable provisions of the Code and
regulations thereunder, including those under Section 162(m) of the Code, the
employer of such optionee will generally be entitled to federal income tax
deduction in respect of Non-qualified Stock Options in an amount equal to
ordinary compensation income recognized by the optionee. Any compensation
includable in the gross income of an employee in respect of a Non-qualified
Stock Option will be subject to appropriate federal income and employment
taxes.
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Page 20 of 50<PAGE>
Upon exercise of a Stock Appreciation Right, the optionee will recognize
ordinary income in an amount equal to the cash or the fair market value of the
shares of Common Stock received on the exercise date. If the Company complies
with applicable tax withholding requirements, the Company and its subsidiaries
will be entitled to a business expense deduction in the same amount and at the
same time as the optionee of a Stock Appreciation Right recognizes ordinary
income.
Under certain circumstances, the accelerated vesting or the cashout of
Options or the accelerated lapse of restrictions on other Awards in connection
with a Change in Control of the Company might be deemed an "excess parachute
payment" for purposes of the golden parachute tax provisions of Section 280G of
the Code. To the extent it is so considered, the optionee may be subject to a
20% excise tax and the Company may be denied a tax deduction.
Section 162(m) of the Code limits the Company's tax deduction to $1
million per year for certain compensation paid in a given year to the Chief
Executive Officer and the four highest compensated executives other than the
CEO named in the proxy statement. According to the Code and corresponding
regulations, compensation that is based on attainment of pre-established,
objective performance goals and complies with certain other requirements will
be excluded from the $1 million dollar deduction limitation. The Company's
policy is to structure compensation awards for covered executives that will
be fully deductible where doing so will further the purposes of the Company's
executive compensation programs. However, the Committee also considers it
important to retain flexibility to design compensation programs that recognize
a full range of performance criteria important to the Company's success, even
where compensation payable under such programs may not be fully deductible.
The Company expects that compensation derived from the 1998 Stock Incentive
Plan will be excluded from the deduction limitations of Section 162(m) and,
therefore, will be fully deductible by the Company.
The Million Dollar Cap limits the Company's tax deduction to $1 million
per year for certain compensation paid to each of the Company's covered
executives. This limitation does not apply to "performance-based compen-
sation." The 1998 Stock Incentive Plan contains provisions permitting the
Company to pay performance-based compensation to key employees. Options and
SARs may qualify as performance-based compensation if stockholders approve a
maximum limit on the number of shares underlying such awards that may be
granted to any Eligible Individual over a specified period. To satisfy this
requirement, the maximum number of common shares underlying Options and SARs
that may be granted any Eligible Individual in any calendar year is limited
to 50,000 subject to anti-dilution adjustments as provided in the 1998 Stock
Incentive Plan.
The discussion set forth above does not purport to be a complete analysis
of all potential tax consequences relevant to recipients of Options or their
employers or to describe tax consequences based on particular circumstances
and does not address Awards other than options. It is based on federal income
tax law and other authorities as of the date of this proxy statement, which are
subject to change at any time.
The Board of Directors recommends that the stockholders vote FOR approval
of the Company's 1998 Stock Incentive Plan.
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Page 21 of 50<PAGE>
PROPOSAL NUMBER THREE
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------------
Stockholders are being asked to vote for a proposal to ratify the
appointment of Deloitte & Touche LLP as the independent public accountants of
the Company for the fiscal year ending May 29, 1999. Neither the firm of
Deloitte & Touche LLP nor any of its associates has any relationship with the
Company except as independent certified public accountants of the Company. If
the stockholders, by affirmative vote of the holders of a majority of the votes
cast, do not ratify this appointment, the Board of Directors will reconsider
its action and select other independent public accountants without further
stockholder action.
A representative of Deloitte & Touche LLP is expected to be present at
the Annual Meeting to respond to appropriate questions and will be given the
opportunity to make a statement if such representative desires to do so.
The Board of Directors recommends that the stockholders vote FOR ratifi-
cation of the appointment of Deloitte & Touche LLP as the independent public
accountants of the Company.
STOCKHOLDER PROPOSALS
---------------------
Proposals of stockholders to be presented at the 1998 Annual Meeting of
Stockholders must be received by the Company at its principal executive
offices, 1830 Route 130, Burlington, New Jersey 08016, no later than May 4,
1999 in order to be included in the proxy statement and form of proxy
relating to that meeting. Any proposal by a stockholder to be presented at the
1999 Annual Meeting of Stockholders and NOT to be included in the Company's
proxy statement must be received at the Company's executive offices, 1830 Route
130, Burlington, New Jersey 08016, no later than the close of business July 17,
1999. Proposals shall be sent to the attention of the Secretary.
OTHER MATTERS
-------------
Management is not aware of any matters to be presented for action at the
meeting other than those set forth in this Proxy Statement. However, should
any other business properly come before the meeting, or any adjournment
thereof, the enclosed Proxy confers upon the persons entitled to vote the
shares represented by such Proxy, discretionary authority to vote the same in,
respect of any such other business in accordance with their best judgment in
the interest of the Company.
By Order of the Board of Directors,
Henrietta Milstein, Secretary
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Page 22 of 50<PAGE>
[FORM OF PROXY]
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
1830 ROUTE 130
BURLINGTON, NEW JERSEY 08016
PROXY -- Annual Meeting of Stockholders -- October 15, 1998 THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned hereby appoints
Monroe G. Milstein and Henrietta Milstein as Proxies, each with the power to
appoint his or her substitute, and hereby authorizes them to represent and to
vote, as designated below, all the shares of Common Stock of Burlington Coat
Factory Warehouse Corporation held of record by the undersigned on August 28,
1998, at the Annual Meeting of Stockholders to be held on October 15, 1998 or
any adjournment thereof.
1. ELECTION OF DIRECTORS
FOR [] WITHHOLD []
all nominees AUTHORITY
listed below to vote for all
(except as nominees
marked to the listed below
contrary below)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE
NOMINEE'S NAME IN THE LIST BELOW.)
MONROE G. MILSTEIN, HENRIETTA MILSTEIN, ANDREW R. MILSTEIN, HARVEY
MORGAN, STEPHEN E. MILSTEIN, MARK A. NESCI, IRVING DRILLINGS
2. PROPOSAL TO APPROVE THE COMPANY'S 1998 STOCK INCENTIVE PLAN
FOR [] AGAINST [] ABSTAIN []
3. PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS
THE INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE
FISCAL YEAR ENDING MAY 29, 1999.
FOR [] AGAINST [] ABSTAIN []
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Page 23 of 50<PAGE>
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF ALL NOMINEES LISTED
FOR ELECTION AS DIRECTORS AND FOR PROPOSALS 2 AND 3.
Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Signature of Stockholder(s)______________________ Date______________________
Signature, ifjointly held____________________________________________________
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.
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Page 24 of 50<PAGE>
EXHIBIT A
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
1998 STOCK INCENTIVE PLAN
1. Purpose.
The purpose of this Plan is to assist Burlington Coat
Factory Warehouse Corporation, a Delaware corporation (the
"Company"), in achieving and maintaining its corporate objectives
of growth and successful operations by providing incentive to its
key officers, directors, consultants, advisors and other selected
employees, and thereby encouraging them to devote their abilities
and industry to the success of the Company's business enterprise.
It is intended that this purpose be achieved by extending to key
officers, directors, consultants, advisors and other selected
employees of the Company and its Subsidiaries a proprietary
interest in the growth and performance of the Company and its
Subsidiaries and added long-term incentive for high levels of
performance through the grant of awards under the Plan.
2. Definitions.
For purposes of the Plan:
2.1 "Adjusted Fair Market Value" means, in the event of a
Change in Control, the greater of (i) the highest price per Share
paid to holders of the Shares in any transaction (or series of
transactions) constituting or resulting in a Change in Control or
(ii) the highest Fair Market Value of a Share during the ninety
(90) day period ending on the date of a Change in Control.
2.2 "Agreement" means the written agreement between the
Company and an Optionee or Grantee evidencing the grant of an
Option or Award and setting forth the terms and conditions thereof.
2.3 "Award" means a grant of any form of Option, Restricted
Stock, Stock Appreciation Right, Performance Award or any or all of
them, whether granted singly, in combination or in tandem pursuant
to any applicable terms, conditions and limitations as the
Committee may establish in order to fulfill the objectives of the
Plan.
2.4 "Award Notice" means a written notice given to an
Optionee or Grantee evidencing the grant of an Award and setting
forth the terms and conditions thereof and used by the Committee or
Board in lieu of an Agreement in their sole discretion.
2.5 "Board" means the Board of Directors of the Company.
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2.6 "Cause" means the commission of an act of fraud or
intentional misrepresentation or an act of embezzlement,
misappropriation or conversion of assets or opportunities of the
Company or any Subsidiary.
2.7 "Change in Capitalization" means any increase or
reduction in the number of Shares, or any change (including, but
not limited to, a change in value) in the Shares or exchange of
Shares for a different number or kind of shares or other securities
of the Company, by reason of a reclassification, recapitalization,
merger, consolidation, reorganization, spin-off, split-up, issuance
of warrants or rights or debentures, stock dividend, stock split or
reverse stock split, cash dividend, property dividend, combination
or exchange of shares, repurchase of shares, change in corporate
structure or otherwise.
2.8 A "Change in Control" shall mean the occurrence during
the term of the Plan of:
(a) An acquisition (other than directly from the
Company) of any voting securities of the Company (the "Voting
Securities") by any 'Person' (as the term person is used for
purposes of Section 13(d) or 14(d) of the Exchange Act), other than
the Founders or any of their affiliates (individually or in the
aggregate), immediately after which such Person has 'Beneficial
Ownership' (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of fifty percent (50%) or more of the combined voting
power of the Company's then outstanding Voting Securities;
provided, however, in determining whether a Change in Control has
occurred, Voting Securities which are acquired in a 'Non-Control
Acquisition' (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A 'Non-Control
Acquisition' shall mean an acquisition by (i) an employee benefit
plan (or a trust forming a part thereof) maintained by (A) the
Company or (B) any corporation or other Person of which a majority
of its voting power or its voting equity securities or equity
interest is owned, directly or indirectly, by the Company (for
purposes of this definition, a 'Subsidiary'), (ii) the Company or
its Subsidiaries, or (iii) any Person in connection with a
'Non-Control Transaction' (as hereinafter defined);
(b) The individuals who, as of August 1, 1998, are
members of the Board (the "Incumbent Board"), cease for any reason
to constitute at least two-thirds of the members of the Board;
provided, however, that if the election, or nomination for election
by the Company's common stockholders, of any new director was
approved by a vote of at least two-thirds of the Incumbent Board,
such new director shall, for purposes of this Plan, be considered
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as a member of the Incumbent Board; provided further, however, that
no individual shall be considered a member of the Incumbent Board
if such individual initially assumed office as a result of either
an actual or threatened 'Election Contest' (as described in Rule
14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board (a "Proxy Contest") including by
reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest; or
(c) Approval by stockholders of the Company of:
(i) A merger, consolidation or reorganization
involving the Company, unless
(A) the stockholders of the Company,
immediately before such merger, consolidation or reorganization,
own, directly or indirectly immediately following such merger,
consolidation or reorganization, at least sixty percent (60%) of
the combined voting power of the outstanding voting securities of
the corporation resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in substantially the
same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or reorganization,
(B) the individuals who were members of the
Incumbent Board immediately prior to the execution of the agreement
providing for such merger, consolidation or reorganization
constitute at least two-thirds of the members of the board of
directors of the Surviving Corporation,
(C) no Person other than the Company, any
Subsidiary, any employee benefit plan (or any trust forming a part
thereof) maintained by the Company, the Surviving Corporation, or
any Subsidiary, or any Person who immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of fifty
percent (50%) or more of the then outstanding Voting Securities,
has Beneficial Ownership of fifty percent (50%) or more of the
combined voting power of the Surviving Corporation's then
outstanding voting securities, and
(D) a transaction described in clauses (A)
through (C) shall herein be referred to as a 'Non-Control
Transaction';
(ii) A complete liquidation or dissolution of the
Company; or
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(iii) An agreement for the sale or other disposition
of all or substantially all of the assets of the Company to any
Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject Person")
acquired Beneficial Ownership of more than the permitted amount of
the outstanding Voting Securities as a result of the acquisition of
Voting Securities by the Company which, by reducing the number of
Voting Securities outstanding, increases the proportional number of
shares Beneficially Owned by the Subject Persons, provided that if
a Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of Voting Securities by
the Company, and after such share acquisition by the Company, the
Subject Person becomes the Beneficial Owner of any additional
Voting Securities which increases the percentage of the then
outstanding Voting Securities Beneficially Owned by the Subject
Person, then a Change in Control shall occur.
2.9 "Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
2.10 "Committee" means a committee consisting of at least two
(2) Directors appointed by the Board to administer the Plan and to
perform the functions set forth herein.
2.11 "Company" means Burlington Coat Factory Warehouse
Corporation, a Delaware corporation.
2.12 "Disability" means a physical or mental infirmity which
impairs the Optionee's ability to perform substantially his or her
duties for a period of one hundred eighty (180) consecutive days.
2.13 "Division" means any of the operating units or divisions
of the Company or a Subsidiary designated as a Division by the
Committee.
2.14 "Eligible Individual" means any officer, director,
consultant, advisor or employee of the Company, a Subsidiary or a
Division designated by the Committee as eligible to receive Options
or Awards subject to the conditions set forth herein.
2.15 "Employee Option" means an Option granted to an Eligible
Individual who is an employee of the Company, a Subsidiary or a
Division.
2.16 "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
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2.17 "Fair Market Value" on any date means the average of the
high and low sales prices of the Shares on such date on the
principal national securities exchange on which such Shares are
listed or admitted to trading, or if such Shares are not so listed
or admitted to trading, the arithmetic mean of the per Share
closing bid price and per Share closing asked price on such date as
quoted on the National Association of Securities Dealers Automated
Quotation System or such other market in which such prices are
regularly quoted, or, if there have been no published bid or asked
quotations with respect to Shares on such date, the Fair Market
Value shall be the value established by the Board in good faith
and, in the case of an Incentive Stock Option, in accordance with
Section 422 of the Code.
2.18 "Founders" means Monroe G. Milstein, Henrietta M.
Milstein, Lazer Milstein, Andrew R. Milstein and Stephen E.
Milstein.
2.19 "Grantee" means a person to whom an Award has been
granted under the Plan.
2.20 "Incentive Stock Option" means an Option satisfying the
requirements of Section 422 of the Code and designated by the
Committee as an Incentive Stock Option.
2.21 "Nonqualified Stock Option" means an Option which
is not an Incentive Stock Option.
2.22 "Option" means an Option granted pursuant to Section 5,
including, without limitation, an Employee Option.
2.23 "Optionee" means a person to whom an Option has been
granted under the Plan.
2.24 "Parent" means any corporation which is a parent
corporation (within the meaning of Section 424(e) of the Code) with
respect to the Company.
2.25 "Performance Awards" means Performance Units, Performance
Shares or either or both of them.
2.26 "Performance Cycle" means the time period specified by
the Committee at the time a Performance Award is granted during
which the performance of the Company, a Subsidiary or a Division
will be measured.
2.27 "Performance Shares" means Shares issued or transferred
to an Eligible Individual under Section 9.3.
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2.28 "Performance Unit" means Performance Units granted to an
Eligible Individual under Section 9.2.
2.29 "Restricted Stock" means Shares issued or transferred to
an Eligible Individual pursuant to Section 8.
2.30 "Plan" means the Burlington Coat Factory Warehouse
Corporation 1998 Stock Incentive Plan.
2.31 "Shares" means the common stock, par value $1.00
per share, of the Company.
2.32 "Stock Appreciation Right" means a right to receive all
or some portion of the increase in the value of the Shares as
provided in Section 7 hereof.
2.33 "Subsidiary" means any corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) with
respect to the Company.
2.34 "Successor Corporation" means a corporation, or a parent
or subsidiary thereof within the meaning of Section 424(a) of the
Code, which issues or assumes a stock option in a transaction to
which Section 424(a) of the Code applies.
2.35 "Ten-Percent Stockholder" means an Eligible Individual,
who, at the time an Incentive Stock Option is to be granted to him
or her, owns (within the meaning of Section 422(b)(6) of the Code)
stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company, or of a Parent
or a Subsidiary.
3. Administration.
3.1 The Plan shall be administered by the Committee, (or if
at any time a Committee shall not have been appointed or if
appointed is not so acting, then by the Board of the Company at a
meeting at which a quorum is present or by action by consent in
lieu of a meeting as authorized by applicable law) which shall hold
meetings at such times as may be necessary for the proper
administration of the Plan. The Committee (which term shall
include and mean the Board when a Committee has not been appointed
or if not so acting) shall keep minutes of its meetings. A quorum
shall consist of not less than two members of the Committee and a
majority of a quorum may authorize any action. Any decision or
determination reduced to writing and signed by a majority of all of
the members shall be as fully effective as if made by a majority
vote at a meeting duly called and held. Each member of the
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Committee shall be a Director. No member of the Committee shall be
liable for any action, failure to act, determination or
interpretation made in good faith with respect to this Plan or any
transaction hereunder, except for liability arising from his or her
own willful misfeasance, gross negligence or reckless disregard of
his or her duties. The Company hereby agrees to indemnify each
member of the Committee for all costs and expenses and, to the
extent permitted by applicable law, any liability incurred in
connection with defending against, responding to, negotiation for
the settlement of or otherwise dealing with any claim, cause of
action or dispute of any kind arising in connection with any
actions in administering this Plan or in authorizing or denying
authorization to any transaction hereunder.
3.2 Subject to the express terms and conditions set forth
herein, the Committee shall have the power from time to time to:
(a) determine those individuals to whom Options shall be
granted under the Plan and the number of Incentive Stock Options
and/or Nonqualified Stock Options to be granted to each Eligible
Individual and to prescribe the terms and conditions (which need
not be identical) of each Employee Option, including the purchase
price per Share subject to each Option, and make any amendment or
modification to any Agreement or Award Notice, as the case may be,
consistent with the terms of the Plan; and
(b) select those Eligible Individuals to whom Awards
shall be granted under the Plan, to determine the number of Stock
Appreciation Rights, Performance Units, Performance Shares, and/or
Shares of Restricted Stock to be granted pursuant to each Award,
the terms and conditions of each Award, including the restrictions
or performance criteria relating to such Units or Shares, the
maximum value of each Performance Unit and Performance Share and to
make any amendment or modification to any Agreement or Award Notice
consistent with the terms of the Plan.
3.3 Subject to the express terms and conditions set forth
herein, the Committee shall have the power from time to time:
(a) to construe and interpret the Plan and the Options
and Awards granted hereunder and to establish, amend and revoke
rules and regulations for the administration of the Plan,
including, but not limited to, correcting any defect or supplying
any omission, or reconciling any inconsistency in the Plan or in
any Agreement or Award Notice, in the manner and to the extent it
shall deem necessary or advisable so that the Plan complies with
applicable law including Rule 16b-3 under the Exchange Act and the
Code to the extent applicable, and otherwise to make the Plan fully
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effective. All decisions and determinations by the Committee in
the exercise of this power shall be final, binding and conclusive
upon the Company, its Subsidiaries, the Optionees and Grantees and
all other persons having any interest therein;
(b) to determine the duration and purposes for leaves of
absence which may be granted to an Optionee or Grantee on an
individual basis without constituting a termination of employment
or service for purposes of the Plan;
(c) to exercise its discretion with respect to the
powers and rights granted to it as set forth in the Plan; and
(d) generally, to exercise such powers and to perform
such acts as are deemed necessary or advisable to promote the best
interests of the Company with respect to the Plan.
3.4 Board Reservation and Delegation. The Board may, in its
discretion, reserve to itself or delegate to another committee of
the Board any or all of the authority and responsibility of the
Committee with respect to Options and Awards granted hereunder to
Eligible Individuals. Such other committee may consist of one or
more directors who may, but need not be, officers or employees of
the Company or of any of its Subsidiaries. To the extent that the
Board has reserved to itself or delegated the authority and
responsibility of the Committee to such other committee, all
references to the Committee in the Plan shall be to the Board or to
such other committee.
4. Stock Subject to the Plan.
4.1 The maximum number of Shares that may be issued pursuant
to Options and Awards granted under the Plan is 350,000. Upon a
Change in Capitalization the maximum number of Shares shall be
adjusted in number and kind pursuant to Section 11. The Company
shall reserve for the purposes of the Plan, out of its authorized
but unissued Shares or out of Shares held in the Company's
treasury, or partly out of each, such number of Shares as shall be
determined by the Board.
4.2 Upon the granting of an Option or an Award, the number of
Shares available under Section 4.1 for the granting of further
Options and Awards shall be reduced as follows:
In connection with the granting of an Option or an
Award (other than the granting of a Performance Unit denominated in
dollars), the number of Shares shall be reduced by the number of
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Shares in respect of which the Option or Award is granted or
denominated.
4.3 Whenever any outstanding Option or Award or portion
thereof expires, is canceled or is otherwise terminated for any
reason without having been exercised or payment having been made in
respect of the entire Option or Award, the Shares allocable to the
expired, canceled or otherwise terminated portion of the Option or
Award may again be the subject of Options or Awards granted
hereunder. In addition, Shares delivered to the Company or
withheld by the Company upon the exercise of an Option or Award may
again be subject to Options and shares originally linked to Awards
that are actually settled in cash or consideration other than
shares; provided, that the actual number of Shares issued pursuant
to Options and Awards granted under this Plan shall not exceed the
maximum number of Shares provided in Section 4.1 above.
4.4 During the period that any Options and Awards remain
outstanding under the Plan, the Committee may make good faith
adjustments with respect to the number of Shares attributable to
such Options and Awards for purposes of calculating the maximum
number of Shares available for the granting of future Options and
Awards under the Plan.
5. Option Grants for Eligible Individuals.
5.1 Authority of Committee. Subject to the provisions of the
Plan and to Section 4.1 above, the Committee shall have full and
final authority to select those Eligible Individuals who will
receive Options, the terms and conditions of which shall be set
forth in an Agreement; provided, however, that no person shall
receive any Incentive Stock Options unless he or she is an employee
of the Company, a Parent or a Subsidiary at the time the Incentive
Stock Option is granted.
5.2 Purchase Price. The purchase price or the manner in
which the purchase price is to be determined for Shares under each
Option shall be determined by the Committee and set forth in the
Agreement; provided, however, that the purchase price per Share
under each Option shall not be less than 100% of the Fair Market
value of a Share on the date the Option is granted (110% in the
case of an Incentive Stock Option granted to a Ten-Percent
Stockholder).
5.3 Maximum Duration. Options granted hereunder shall be for
such term as the Committee shall determine, provided that an
Incentive Stock Option shall not be exercisable after the
expiration of ten (10) years from the date it is granted (five (5)
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years in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder) and a Nonqualified Stock Option shall not
be exercisable after the expiration of ten (10) years from the date
it is granted. The Committee may, subsequent to the granting of
any Option, extend the term thereof but in no event shall the term
as so extended exceed the maximum term provided for in the
preceding sentence.
5.4 Vesting. Subject to Section 6.4 hereof, each Option
shall become exercisable in such installments (which need not be
equal) and at such times as may be designated by the Committee and
set forth in the Agreement; provided, however, that an Option
granted to a person subject to Section 16 of the Exchange Act shall
not be exercisable at any time less than six (6) months after the
date of granting and an Incentive Stock Option shall not be
exercisable at any time less than one (1) year after the date of
granting. To the extent not exercised, installments shall
accumulate and be exercisable, in whole or in part, at any time
after becoming exercisable, but not later than the date the Option
expires. The Committee may accelerate the exercisability of any
Option or portion thereof at any time.
5.5 Modification or Substitution. The Committee may, in its
discretion, modify outstanding Options or accept the surrender of
outstanding Options (to the extent not exercised) and grant new
Options in substitution for them; provided, however, that, no
modification or substitution may reduce or have the effect of
reducing the per share purchase price of any outstanding Option.
Notwithstanding the foregoing, no modification of an Option shall
adversely alter or impair any rights or obligations under the
Employee Option without the Optionee's consent.
6. Terms and Conditions Applicable to All Options.
6.1 Non-transferability. Except as provided in the last
sentence of this Section 6.1, no Option granted hereunder shall be
transferable by the Optionee to whom granted otherwise than by will
or the laws of descent and distribution, and an Option may be
exercised during the lifetime of such Optionee only by the Optionee
or his or her guardian or legal representative. The terms of such
Option shall be final, binding and conclusive upon the
beneficiaries, executors, administrators, heirs and successors of
the Optionee. The Committee, in its discretion, may permit the
assignment or transfer of an option on such other terms and subject
to such other conditions as the Committee may deem necessary or
appropriate or as otherwise may be required or allowed by
applicable law or regulation.
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6.2 Method of Exercise. The exercise of an Option shall be
made only by a written notice delivered in person or by mail to the
Committee or such person designated by the Committee from time to
time at the Company's principal executive office, specifying the
number of Shares to be purchased and accompanied by payment
therefor and otherwise in accordance with the Agreement pursuant to
which the Option was granted. The purchase price for any Shares
purchased pursuant to the exercise of an Option shall be paid in
full upon such exercise by any one or a combination of the
following: (i) cash, (ii) tendering Shares to the Company upon
such terms and conditions as determined by the Committee, (iii) if
permitted by the Committee, tendering or surrendering another
Option or Award, including Restricted Stock, valued at Fair Market
Value on the date of exercise less any payment due to the Company
upon exercise thereof, or (iv) if permitted by the Committee, any
combination of the foregoing. Notwithstanding the foregoing, the
Committee shall have discretion to determine at the time of grant
of each Option or at any later date (up to and including the date
of exercise) the form of payment acceptable in respect of the
exercise of such Option. The Committee may provide loans from the
Company to permit the exercise or purchase of an Option and may
provide for procedures to permit the exercise of an Option by use
of proceeds to be received from the sale of shares issuable
pursuant to an Option. Unless otherwise provided in the applicable
Agreement or Award Notice, in the event shares of Restricted Stock
are tendered as consideration for the exercise of an Option, a
number of shares issued upon exercise of the Option, equal to the
number of shares of Restricted Stock used as consideration
therefor, shall be subject to the same restrictions as the
Restricted Stock so submitted as well as any other additional
restrictions that may be imposed by the Committee. The written
notice pursuant to this Section 6.2 may also provide instructions
from the Optionee to the Company that upon receipt of the purchase
price in cash from the Optionee's broker or dealer, designated as
such on the written notice, in payment for any Shares purchased
pursuant to the exercise of an Option, the Company shall issue such
Shares directly to the designated broker or dealer. Any Shares
transferred to the Company as payment of the purchase price under
an option shall be valued at their Fair Market Value on the day
preceding the date of exercise of such Option. If requested by the
Committee, the Optionee shall deliver the Agreement evidencing the
Option to the Secretary of the Company who shall endorse thereon a
notation of such exercise and return such Agreement to the
Optionee. No fractional Shares (or cash in lieu thereof) shall be
issued upon exercise of an Option and the number of Shares that may
be purchased upon exercise shall be rounded to the nearest number
of whole shares.
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6.3 Rights of Optionees. No Optionee shall be deemed for any
purpose to be the owner of any Shares subject to any Option unless
and until (i) the Option shall have been exercised pursuant to the
terms thereof, (ii) the Company shall have issued and delivered the
Shares to the Optionee and (iii) the Optionee's name shall have
been entered as a stockholder of record on the books of the
Company. Thereupon, the Optionee shall have full voting, dividend
and other ownership rights with respect to such Shares.
6.4 Effect of Change in Control. Notwithstanding anything
contained in the Plan or an Agreement to the contrary, in the event
of a Change in Control, all Options outstanding on the date of such
Change in Control, shall become immediately and fully exercisable.
In addition, to the extent set forth in an Agreement evidencing the
grant of an Option, an Optionee will be permitted to surrender for
cancellation within sixty (60) days after such Change in Control,
any Option or portion of an Option to the extent not yet exercised
and the Optionee will be entitled to receive a cash payment in an
amount equal to the excess, if any, of (x) (A) in the case of a
Nonqualified Stock Option, the greater of (1) the Fair Market
Value, on the date preceding the date of surrender, of the Shares
subject to the Option or portion thereof surrendered or (2) the
Adjusted Fair Market Value of the Shares subject to the Option or
portion thereof surrendered or (B) in the case of an Incentive
Stock Option, the Fair Market Value, on the date preceding the date
of surrender, of the Shares subject to the Option or portion
thereof surrendered, over (y) the aggregate purchase price for such
Shares under the Option or portion thereof surrendered; provided,
however, that in the case of an Option granted within six (6)
months prior to the Change in Control to any Optionee who may be
subject to liability under Section 16(b) of the Exchange Act, such
Optionee shall be entitled to surrender for cancellation his or her
Option during the sixty (60) day period commencing upon the
expiration of six (6) months from the date of grant of any such
Option.
7. Stock Appreciation Rights. The Committee may, in its
discretion, either alone or in connection with the grant of an
Option, grant Stock Appreciation Rights in accordance with the Plan
and the terms and conditions of which shall be set forth in an
Agreement. If granted in connection with an Option, a Stock
Appreciation Right shall cover the Shares covered by the Option (or
such lesser number of Shares as the Committee may determine) and
shall, except as provided in this Section 7, be subject to the same
terms and conditions as the related Option.
7.1 Time of Grant. A Stock Appreciation Right may be granted
(i) at any time if unrelated to an Option, or (ii) if related to an
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Option, either at the time of grant, or at any time thereafter
during the term of the Option.
7.2 Stock Appreciation Right Related to an Option.
(a) Exercise. Subject to Section 7.6, a Stock
Appreciation Right granted in connection with an Option shall be
exercisable at such time or times and only to the extent that the
related Option is exercisable, and will not be transferable except
to the extent the related Option may be transferable. A Stock
Appreciation Right granted in connection with an Incentive Stock
Option shall be exercisable only if the Fair Market Value of a
Share on the date of exercise exceeds the purchase price specified
in the related Incentive Stock Option Agreement.
(b) Amount Payable. Upon the exercise of a Stock
Appreciation Right related to an Option, the Grantee shall be
entitled to receive an amount determined by multiplying (A) the
excess of the Fair Market Value of a Share on the date preceding
the date of exercise of such Stock Appreciation Right over the per
Share purchase price under the related Option, by (B) the number of
Shares as to which such Stock Appreciation Right is being
exercised. Notwithstanding the foregoing, the Committee may limit
in any manner the amount payable with respect to any Stock
Appreciation Right by including such a limit in the Agreement
evidencing the Stock Appreciation Right at the time it is granted.
(c) Treatment of Related Options and Stock Appreciation
Rights Upon Exercise. Upon the exercise of a Stock Appreciation
Right granted in connection with an Option, the Option shall be
canceled to the extent of the number of Shares as to which the
Stock Appreciation Right is exercised, and upon the exercise of an
Option granted in connection with a Stock Appreciation Right or the
surrender of such Option pursuant to Section 6.4, the Stock
Appreciation Right shall be canceled to the extent of the number of
Shares as to which the Option is exercised or surrendered.
7.3 Stock Appreciation Right Unrelated to an Option. The
Committee may grant to Eligible Individuals Stock Appreciation
Rights unrelated to Options. Stock Appreciation Rights unrelated
to Options shall contain such terms and conditions as to
exercisability (subject to Section 7.6), vesting and duration as
the Committee shall determine, but in no event shall they have a
term of greater than ten (10) years. Upon exercise of a Stock
Appreciation Right unrelated to an Option, the Grantee shall be
entitled to receive an amount determined by multiplying (A) the
excess of the Fair Market Value of a Share on the date preceding
the date of exercise of such Stock Appreciation Right over the Fair
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Market Value of a Share on the date the Stock Appreciation Right is
granted, by (B) the number of Shares as to which the Stock
Appreciation Right is being exercised. Notwithstanding the
foregoing, the Committee may limit in any manner the amount payable
with respect to any Stock Appreciation Right by including such a
limit in the Agreement evidencing the Stock Appreciation Right at
the time it is granted.
7.4 Method of Exercise. Stock Appreciation Rights shall be
exercised by a Grantee only by a written notice delivered in person
or by mail to the Committee or such person designated by the
Committee from time to time at the Company's principal executive
office, specifying the number of Shares with respect to which the
Stock Appreciation Right is being exercised. If requested by the
Committee, the Grantee shall deliver the Agreement evidencing the
Stock Appreciation Right being exercised and the Agreement
evidencing any related Option to the Secretary of the Company who
shall endorse thereon a notation of such exercise and return such
Agreement to the Grantee.
7.5 Form of Payment. Payment of the amount determined under
Sections 7.2(b) or 7.3 may be made in the discretion of the
Committee, solely in whole Shares in a number determined at their
Fair Market Value on the date preceding the date of exercise of the
Stock Appreciation Right, or solely in cash, or in a combination of
cash and Shares. If the Committee decides to make full payment in
Shares and the amount payable results in a fractional Share,
payment for the fractional Share will be made in cash.
7.6 Restrictions. No Stock Appreciation Right may be
exercised before the date six (6) months after the date it is
granted.
7.7 Modification or Substitution. Subject to the terms of
the Plan, the Committee may modify outstanding Awards of Stock
Appreciation Rights or accept the surrender of outstanding Awards
of Stock Appreciation Rights (to the extent not exercised) and
grant new Awards in substitution for them. Notwithstanding the
foregoing, no modification of an Award shall adversely alter or
impair any rights or obligations under the Agreement without the
Grantee's consent.
7.8 Effect of Change in Control. Notwithstanding anything
contained in this Plan to the contrary, in the event of a Change in
Control, all Stock Appreciation Rights shall, subject to Section
7.6, become immediately and fully exercisable. Notwithstanding
Sections 7.3 and 7.5, to the extent set forth in an Agreement
evidencing the grant of a Stock Appreciation Right unrelated to an
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Option, upon the exercise of such a Stock Appreciation Right or any
portion thereof during the sixty (60) day period following a Change
in Control, the amount payable shall be in cash and shall be an
amount equal to the excess, if any, of (A) the greater of (x) the
Fair Market Value, on the date preceding the date of exercise, of
the Shares subject to Stock Appreciation Right or portion thereof
exercised and (y) the Adjusted Fair Market Value, on the date
preceding the date of exercise, of the Shares over (B) the
aggregate Fair Market Value, on the date the Stock Appreciation
Right was granted, of the Shares subject to the Stock Appreciation
Right or portion thereof exercised; provided, however, that in the
case of a Stock Appreciation Right granted within six (6) months
prior to the Change in Control to any Grantee who may be subject to
liability under Section 16(b) of the Exchange Act, such Grantee
shall be entitled to exercise his Stock Appreciation Right during
the sixty (60) day period commencing upon the expiration of six (6)
months after the date of grant of any such Stock Appreciation
Right.
8. Restricted Stock.
8.1 Grant. The Committee may grant to Eligible Individuals
Awards of Restricted Stock, and may issue Shares or Restricted
Stock in payment in respect of vested Performance Units (as
hereinafter provided in Section 9.2), which shall be evidenced by
an Agreement between the Company and the Grantee. Each Agreement
shall contain such restrictions, terms and conditions as the
Committee may, in its discretion, determine and (without limiting
the generality of the foregoing) such Agreements may require that
an appropriate legend be placed on Share certificates. Awards of
Restricted Stock shall be subject to the terms and provisions set
forth below in this Section 8.
8.2 Rights of Grantee. Shares of Restricted Stock granted
pursuant to an Award hereunder shall be issued in the name of the
Grantee as soon as reasonably practicable after the Award is
granted provided that the Grantee has executed an Agreement
evidencing the Award, the appropriate blank stock powers and, in
the discretion of the Committee, an escrow agreement and any other
documents which the Committee may require as a condition to the
issuance of such Shares. If a Grantee shall fail to execute the
Agreement evidencing a Restricted Stock Award, the appropriate
blank stock powers and, in the discretion of the Committee, an
escrow agreement and any other documents which the Committee may
require within the time period prescribed by the Committee at the
time the Award is granted, the Award shall be null and void. At
the discretion of the Committee, Shares issued in connection with
a Restricted Stock Award shall be deposited together with the stock
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powers with an escrow agent (which may be the Company) designated
by the Committee. Unless the Committee determines otherwise and as
set forth in the Agreement, upon delivery of the Shares to the
escrow agent, the Grantee shall have all of the rights of a
stockholder with respect to such Shares, including the right to
vote the Shares and to receive all dividends or other distributions
paid or made with respect to the Shares.
8.3 Non-transferability. Until any restrictions upon the
Shares of Restricted Stock awarded to a Grantee shall have lapsed
in the manner set forth in Section 8.4, such Shares shall not be
sold, transferred or otherwise disposed of and shall not be pledged
or otherwise hypothecated, nor shall they be delivered to the
Grantee.
8.4 Lapse of Restrictions.
(a) Generally. Restrictions upon Shares of Restricted
Stock awarded hereunder shall lapse at such time or times and on
such terms and conditions as the Committee may determine, which
restrictions shall be set forth in the Agreement evidencing the
Award.
(b) Effect of Change in Control. The Committee shall
determine at the time of the grant of an Award of Restricted Stock
the extent to which, if any, the restrictions upon Shares of
Restricted Stock shall lapse upon a Change in Control. The
Agreement evidencing the Award shall set forth such provisions.
8.5 Modification or Substitution. Subject to the terms of
the Plan, the Committee may modify outstanding Awards of Restricted
Stock or accept the surrender of outstanding Shares of Restricted
Stock (to the extent the restrictions on such Shares have not yet
lapsed) and grant new Awards in substitution for them.
Notwithstanding the foregoing, no modification of an Award shall
adversely alter or impair any rights or obligations under the
Agreement without the Grantee's consent.
8.6 Treatment of Dividends. At the time the Award of Shares
of Restricted Stock is granted, the Committee may, in its
discretion, determine that the payment to the Grantee of dividends,
or a specified portion thereof, declared or paid on such Shares by
the Company shall be (i) deferred until the lapsing of the
restrictions imposed upon such Shares and (ii) held by the Company
for the account of the Grantee until such time. In the event that
dividends are to be deferred, the Committee shall determine whether
such dividends are to be reinvested in shares of Stock (which shall
be held as additional Shares of Restricted Stock) or held in cash.
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If deferred dividends are to be held in cash, there may be credited
at the end of each year (or portion thereof) interest on the amount
of the account at the beginning of the year at a rate per annum as
the Committee, in its discretion, may determine. Payment of
deferred dividends in respect of Shares of Restricted Stock
(whether held in cash or as additional Shares of Restricted Stock),
together with interest accrued thereon, if any, shall be made upon
the lapsing of restrictions imposed on the Shares in respect of
which the deferred dividends were paid, and any dividends deferred
(together with any interest accrued thereon) in respect of any
Shares of Restricted Stock shall be forfeited upon the forfeiture
of such Shares.
8.7 Delivery of Shares. Upon the lapse of the restrictions
on Shares of Restricted Stock, the Committee shall cause a stock
certificate to be delivered to the Grantee with respect to such
Shares, free of all restrictions hereunder.
9. Performance Award.
9.1 Performance Objectives. Performance objectives for
Performance Awards may be expressed in terms of (i) earnings per
Share, (ii) pre-tax profits, (iii) net earnings, (iv) net worth,
(v) return on equity or assets, (vi) any combination of the
foregoing, or (vii) any other standard or standards deemed
appropriate by the Committee at the time the Award is granted.
Performance objectives may be in respect of the performance of the
Company and its Subsidiaries (which may be on a consolidated
basis), a Subsidiary or a Division. Performance objectives may be
absolute or relative and may be expressed in terms of a progression
within a specified range. Prior to the end of a Performance Cycle,
the Committee, in its discretion, may adjust the performance
objectives to reflect a Change in the Capitalization, a change in
the tax rate or book tax rate of the Company or any Subsidiary, or
any other event which may materially affect the performance of the
Company, a Subsidiary or a Division, including, but not limited to,
market conditions or a significant acquisition or disposition of
assets or other property by the Company, a Subsidiary or a
Division.
9.2 Performance Units. The Committee, in its discretion, may
grant Awards of Performance Units to Eligible Individuals, the
terms and conditions of which shall be set forth in an Agreement
between the Company and the Grantee. Performance Units may be
denominated in Shares or a specified dollar amount and, contingent
upon the attainment of specified performance objectives within the
Performance Cycle, represent the right to receive payment as
provided in Section 9.2(b) of (i) in the case of Share-denominated
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Performance Units, the Fair Market Value of a Share on the date the
Performance Unit was granted, the date the Performance Unit became
vested or any other date specified by the Committee, (ii) in the
case of dollar-denominated Performance Units, the specified dollar
amount or (iii) a percentage (which may be more than 100%) of the
amount described in clause (i) or (ii) depending on the level of
performance objective attainment; provided, however, that the
Committee may at the time a Performance Unit is granted, specify a
maximum amount payable in respect of a vested Performance Unit.
Each Agreement shall specify the number of the Performance Units to
which it relates, the performance objectives which must be
satisfied in order for the Performance Units to vest and the
Performance Cycle within which such objectives must be satisfied.
(a) Vesting and Forfeiture. A Grantee shall become
vested with respect to the Performance Units to the extent that the
performance objectives set forth in the Agreement are satisfied for
the Performance Cycle.
(b) Payment of Awards. Payment to Grantees in respect
of vested Performance Units shall be made within sixty (60) days
after the last day of the Performance Cycle to which such Award
relates unless the Agreement evidencing the Award provides for the
deferral of payment, in which event the terms and conditions of the
deferral shall be set forth in the Agreement. Subject to Section
9.4, such payments may be made entirely in Shares valued at their
Fair Market Value as of the last day of the applicable Performance
Cycle or such other date specified by the Committee, entirely in
cash, or in such combination of Shares and cash as the Committee in
its discretion, shall determine at any time prior to such payment;
provided, however, that if the Committee in its discretion
determines to make such payment entirely or partially in Shares of
Restricted Stock, the Committee must determine the extent to which
such payment will be in Shares of Restricted Stock and the terms
of such Restricted Stock at the time the Award is granted.
9.3 Performance Shares. The Committee, in its discretion,
may grant Awards of Performance Shares to Eligible Individuals, the
terms and conditions of which shall be set forth in an Agreement
between the Company and the Grantee. Each Agreement may require
that an appropriate legend be placed on Share certificates. Awards
of Performance Shares shall be subject to the following terms and
provisions:
(a) Rights of Grantee. The Committee shall provide at
the time an Award of Performance Shares is made, the time or
times at which the actual Shares represented by such Award shall be
issued in the name of the Grantee; provided, however, that no
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Performance Shares shall be issued until the Grantee has executed
and Agreement evidencing the Award, the appropriate blank stock
powers and, in the discretion of the Committee, an escrow agreement
and any other documents which the Committee may require as a
condition to the issuance of such Performance Shares. If a Grantee
shall fail to execute the Agreement evidencing an Award of
Performance Shares, the appropriate blank stock powers and, in the
discretion of the Committee, an escrow agreement and any other
documents which the Committee may require within the time period
prescribed by the Committee at the time the Award is granted, the
Award shall be null and void. At the discretion of the Committee,
Shares issued in connection with an Award of Performance Shares
shall be deposited together with the stock powers with an escrow
agent (which may be the Company) designated by the Committee.
Except as restricted by the terms of the Agreement, upon delivery
of the Shares to the escrow agent, the Grantee shall have, in the
discretion of the Committee, all of the rights of a stockholder
with respect to such Shares, including the right to vote the Shares
and to receive all dividends or other distributions paid or made
with respect to the Shares.
(b) Non-transferability. Until any restrictions upon
the Performance Shares awarded to a Grantee shall have lapsed in
the manner set forth in Sections 9.3(c) or 9.4, such Performance
Shares shall not be sold, transferred or otherwise disposed of and
shall not be pledged or otherwise hypothecated, nor shall they be
delivered to the Grantee. The Committee may also impose such other
restrictions and conditions on the Performance Shares, if any, as
it deems appropriate.
(c) Lapse of Restrictions. Subject to Section 9.4,
restrictions upon Performance Shares awarded hereunder shall lapse
and such Performance Shares shall become vested at such time or
times and on such terms, conditions and satisfaction of performance
objectives as the Committee may, in its discretion, determine at
the time an Award is granted.
(d) Treatment of Dividends. At the time the Award of
Performance Shares is granted, the Committee may, in its
discretion, determine that the payment to the Grantee of
dividends, or a specified portion thereof, declared or paid on
actual Shares represented by such Award which have been issued by
the Company to the Grantee shall be (i) deferred until the lapsing
of the restrictions imposed upon such Performance Shares and (ii)
held by the Company for the account of the Grantee until such time.
In the event that dividends are to be deferred, the Committee shall
determine whether such dividends are to be reinvested in shares of
Stock (which shall be held as additional Performance Shares) or
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held in cash. If deferred dividends are to be held in cash, there
may be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year
at a rate per annum as the Committee, in its discretion, may
determine. Payment of deferred dividends in respect of Performance
Shares (whether held in cash or in additional Performance Shares),
together with interest accrued thereon, if any, shall be made upon
the lapsing of restrictions imposed on the Performance Shares in
respect of which the deferred dividends were paid, and any
dividends deferred (together with any interest accrued thereon) in
respect of any Performance Shares shall be forfeited upon the
forfeiture of such Performance Shares.
(e) Delivery of Shares. Upon the lapse of the
restrictions on Performance Shares awarded hereunder, the Committee
shall cause a stock certificate to be delivered to the Grantee with
respect to such Shares, free of all restrictions hereunder.
9.4 Effect of Change in Control. Notwithstanding anything
contained in the Plan or any Agreement to the contrary, in the
event of a Change in Control:
(a) With respect to the Performance Units, the Grantee
shall (i) become vested in a percentage of Performance Units as
determined by the Committee at the time of the Award of such
Performance Units and as set forth in the Agreement and (ii) be
entitled to receive in respect of all Performance Units which
become vested as a result of a Change in Control, a cash payment
within ten (10) days after such Change in Control in an amount as
determined by the Committee at the time of the Award of such
Performance Unit and as set forth in the Agreement.
(b) With respect to the Performance Shares, restrictions
shall lapse immediately on all or a portion of the Performance
Shares as determined by the Committee at the time of the Award of
such Performance Shares and as set forth in the Agreement.
(c) The Agreements evidencing Performance Shares and
Performance Units shall provide for the treatment of such Awards
(or portions thereof) which do not become vested as the result of
a Change in Control, including, but not limited to, provisions for
the adjustment of applicable performance objectives.
9.5 Non-transferability. No Performance Awards shall be
transferable by the Grantee otherwise than by will or the laws of
descent and distribution.
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9.6 Modification or Substitution. Subject to the terms of
the Plan, the Committee may modify outstanding Performance Awards
or accept the surrender of outstanding Performance Awards and grant
new Performance Awards in substitution for them. Notwithstanding
the foregoing, no modification of a Performance Award shall
adversely alter or impair any rights or obligations under the
Agreement without the Grantee's consent.
10. Effect of a Termination of Employment.
The Agreement evidencing the grant of each Employee
Option and each Award shall set forth the terms and conditions
applicable to such Employee Option or Award upon a termination or
change in the status of the employment of the Optionee or Grantee
by the Company, a Subsidiary or a Division (including a termination
or change by reason of the sale of a Subsidiary or a Division), as
the Committee may, in its discretion, determine at the time the
Employee Option or Award is granted or by amendment of the
Agreement thereafter. In the event of such a termination, the
Committee may, in its discretion, provide for the extension of the
exercisability of an Option or Award, accelerate the vesting
thereof, eliminate or make less restrictive any restrictions
contained therein, or otherwise amend or modify the Option or Award
in any manner not adverse to the Eligible Individual.
11. Adjustment Upon Changes in Capitalization.
(a) In the event of a Change in Capitalization, the
Committee shall conclusively determine the appropriate adjustments,
if any, to the (i) maximum number and class of Shares or other
stock or securities with respect to which Options or Awards may be
granted under the Plan, and (ii) the number and class of Shares or
other stock or securities which are subject to outstanding Options
or Awards granted under the Plan, and the purchase price therefor,
if applicable.
(b) Any such adjustment in the Shares or other stock or
securities subject to outstanding Incentive Stock Options
(including any adjustments in the purchase price) shall be made in
such manner as not to constitute a modification as defined by
Section 424(h)(3) of the Code and only to the extent otherwise
permitted by Sections 422 and 424 of the Code.
(c) If, by reason of a Change in Capitalization, a
Grantee of an Award shall be entitled to, or an Optionee shall be
entitled to exercise an Option with respect to, new, additional or
different shares of stock or securities, such new additional or
different shares shall thereupon be subject to all of the
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conditions, restrictions and performance criteria which were
applicable to the Shares subject to the Award or Option, as the
case may be, prior to such Change in Capitalization.
12. Effect of Certain Transactions.
Subject to Sections 6.4, 7.8, 8.4(b) and 9.4 or as
otherwise provided in an Agreement, in the event of (i) the
liquidation or dissolution of the Company or (ii) a merger or
consolidation of the Company (a "Transaction"), the Plan and the
Options and Awards issued hereunder shall continue in effect in
accordance with their respective terms and each Optionee and
Grantee shall be entitled to receive in respect of each Share
subject to any outstanding Options or Awards, as the case may be,
upon exercise of any Option or payment or transfer in respect of
any Award, the same number and kind of stock, securities, cash,
property, or other consideration that each holder of a Share was
entitled to receive in the Transaction in respect of a Share.
13. Termination and Amendment of the Plan.
The Plan shall terminate on the day preceding the fifth
anniversary of the date of its adoption by the Board and no Option
or Award may be granted thereafter. The Board may sooner terminate
the Plan and the Board may at any time and from time to time,
without approval of stockholders unless required by applicable law,
rule or regulation, amend, modify or suspend the Plan; provided,
however, that no such amendment, modification, suspension or
termination shall impair or adversely alter any Options or Awards
theretofore granted under the Plan, except with the consent of the
Optionee or Grantee, nor shall any amendment, modification,
suspension or termination deprive any Optionee or Grantee of any
Shares which he or she may have acquired through or as a result of
the Plan.
14. Non-Exclusivity of the Plan.
The adoption of the Plan by the Board shall not be
construed as amending, modifying or rescinding any previously
approved incentive arrangement or as creating any limitations on
the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under the Plan, and such
arrangements may be either applicable generally or only in specific
cases.
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15. Limitation of Liability.
As illustration of the limitations of liability of the
Company, but not intended to be exhaustive thereof, nothing in the
Plan shall be construed to:
(i) give any person any right to be granted an Option
or Award other than at the sole discretion of the Committee;
(ii) give any person any right whatsoever with respect
to Shares except as specifically provided in the Plan;
(iii) limit in any way the right of the Company to
terminate the employment of any person at any time; or
(iv) be evidence of any agreement or understanding,
expressed or implied, that the Company will employ any person at
any particular rate of compensation or for any particular period of
time.
16. Regulations and Other Approvals; Governing Law.
16.1 Except as to matters of federal law, this Plan and the
rights of all persons claiming hereunder shall be construed and
determined in accordance with the laws of the State of Delaware
without giving effect to conflicts of law principles.
16.2 The obligation of the Company to sell or deliver Shares
with respect to Options and Awards granted under the Plan shall be
subject to all applicable laws, rules and regulations, including
all applicable federal and state securities laws, and the obtaining
of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Committee.
16.3 The Plan is intended to comply with Rule 16b-3
promulgated under the Exchange Act and the Committee shall
interpret and administer the provisions of the Plan or any
Agreement or Award Notice in a manner consistent therewith. Any
provisions inconsistent with such Rule shall be inoperative and
shall not affect the validity of the Plan.
16.4 The Board may make such changes as may be necessary or
appropriate to comply with the rules and regulations of any
government authority, or to obtain for Eligible Individuals granted
Incentive Stock Options the tax benefits under the applicable
provisions of the Code and regulations promulgated thereunder.
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16.5 Each Option and Award is subject to the requirement that,
if at any time the Committee determines, in its discretion, that
the listing, registration or qualification of Shares issuable
pursuant to the Plan is required by any securities exchange or
under any state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or
Award or the issuance of Shares, no Options or Awards shall be
exercisable or payment made or Shares issued, in whole or in part,
unless listing, registration, qualification, consent or approval
has been effected or obtained free of any conditions, except as
acceptable to the Committee.
16.6 Notwithstanding anything contained in the Plan or any
Agreement to the contrary, in the event that the disposition of
Shares acquired pursuant to the Plan is not covered by a then
current registration statement under the Securities Act of 1933, as
amended, and is not otherwise exempt from such registration, such
Shares shall be restricted against transfer to the extent required
by the Securities Act of 1933, as amended, and Rule 144 or other
regulations thereunder. The Committee may require any individual
receiving Shares pursuant to an Option or Award granted under the
Plan, as a condition precedent to receipt of such Shares, to
represent and warrant to the Company in writing that the Shares
acquired by such individual are acquired without a view to any
distribution thereof and will not be sold or transferred other than
pursuant to an effective registration thereof under said Act or
pursuant to an exemption applicable under the Securities Act of
1933, as amended, or the rules and regulations promulgated
thereunder. The certificates evidencing any of such Shares shall
bear appropriate legend to reflect their status as restricted
securities as aforesaid.
17. Restrictions.
17.1 No Shares or other form of payment shall be issued with
respect to any Option or Award unless the Company shall be
satisfied based on the advice of its counsel that such issuance
will be in compliance with applicable federal and state securities
laws. It is the intent of the Company that this Plan comply in all
respects with Rule 16b-3, that any ambiguities or inconsistencies
in the construction of this Plan be interpreted to give effect to
such intention, and that if any provision of this Plan is found not
to be in compliance with Rule 16b-3, such provision shall be null
and void to the extent required to permit this Plan to comply with
Rule 16b-3. Certificates evidencing Shares delivered under this
Plan may be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules,
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regulations and other requirements of the Securities and Exchange
Commission, any securities exchange or transaction reporting system
upon which the Shares are then listed and any applicable federal
and state securities law. The Committee may cause a legend or
legends to be placed upon any certificates representing the Shares
to make appropriate reference to such restrictions.
17.2 No Eligible Individial may receive in any one calendar
year a number of Options and/or Stock Appreciation Rights which, in
the aggregate, exceeds 50,000.
18. Unfunded Plan. Insofar as it provides for awards of
cash, Shares or rights thereto, this Plan shall be unfunded,
although bookkeeping accounts may be established with respect to
Eligible Individuals who are entitled to cash, Shares or rights
thereto under this Plan. Any such accounts shall be used merely as
a bookkeeping convenience. The Company shall not be required to
segregate any assets that may at any time be represented by cash,
Shares or rights thereto, nor shall this Plan be construed as
providing for such segregation, nor shall the Company nor the Board
nor the Committee be deemed to be a trustee of any cash, Shares or
rights thereto to be granted under this Plan. Any liability or
obligation of the Company to any Eligible Individual with respect
to a grant of cash, Shares or rights thereto under this Plan shall
be based solely upon any contractual obligations that may be
created by this Plan and any Agreement or Award Notice, and no such
liability or obligation of the Company shall be deemed to be
secured by any pledge of, or other encumbrance on, any property of
the Company. Neither the Company nor the Board nor the Committee
shall be required to give any security or bond for the performance
of any obligation that may be created by this Plan.
19. Miscellaneous.
19.1 Multiple Agreements. The terms of each Option or Award
may differ from other Options or Awards granted under the Plan at
the same time, or at some other time. The Committee may also grant
more than one Option or Award to a given Eligible Individual during
the term of the Plan, either in addition to, or in substitution
for, one or more Options or Awards previously granted to that
Eligible Individual.
19.2 Withholding of Taxes. (a) The Company shall have the
right to deduct from any distribution of cash to any Optionee or
Grantee, an amount equal to the federal, state and local income
taxes and other amounts as may be required by law to be withheld
(the "Withholding Taxes") with respect to any Option or Award. If
an Optionee or Grantee is to experience a taxable event in
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connection with the receipt of Shares pursuant to an Option
exercise or payment of an Award (a "Taxable Event"), the Optionee
or Grantee shall pay the Withholding Taxes to the Company prior to
the issuance, or release of escrow, of such Shares.
(b) If an Optionee makes a disposition, within the
meaning of Section 424(c) of the Code and regulations promulgated
thereunder, of any Share or Shares issued to such Optionee pursuant
to the exercise of an Incentive Stock Option within the two-year
period commencing on the day after the date of the grant or within
the one-year period commencing on the day after the date of
transfer of such Share or Shares to the Optionee pursuant to such
exercise, the Optionee shall, within ten (10) days of such
disposition, notify the Company thereof, by delivery of written
notice to the Company at its principal executive office.
(c) The Committee shall have the authority, at the time
of grant of an Option or Award under the Plan or at any time
hereafter, to award tax bonuses to designated Optionees or
Grantees, to be paid upon their exercise of Employee Options or
payment in respect of Awards granted hereunder. The amount of any
such payments shall be determined by the Committee. The Committee
shall have full authority in its absolute discretion to determine
the amount of any such tax bonus and the terms and conditions
affecting the vesting and payment thereof.
20. Effective Date. The effective date of the Plan shall be
as determined by the Board, subject only to the approval by the
affirmative vote of the holders of a majority of the securities of
the Company present, or represented, and entitled to vote at a
meeting of stockholders duly held in accordance with the applicable
laws of the State of Delaware within twelve (12) months of the
adoption of the Plan by the Board.
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