SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant _X_
Filed by 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 Rule 14a-11(c) or Rule 14a-12
PHARMHOUSE CORP.
(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_ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
___ $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
___ 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:
_________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_________________________________________________________________
(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):
_________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
_________________________________________________________________
(5) Total fee paid:______________________________________________
___ 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 identfy the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
(1) Amount Previously Paid:
_________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
_________________________________________________________________
(3) Filing Party:
_________________________________________________________________
(4) Date Filed:
_________________________________________________________________
<PAGE>
PHARMHOUSE CORP.
860 Broadway
New York, New York 10003
NOTICE OF SPECIAL MEETING
IN LIEU OF ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD OCTOBER 26, 1995
-----------------------
PLEASE TAKE NOTICE that a Special Meeting in lieu of the
Annual Meeting of Shareholders of PHARMHOUSE CORP., a New York
corporation (the "Corporation"),will be held at 1177 Avenue of the
Americas, 2nd floor, New York City, at 10:00 a.m., New York time,
on October 26, 1995 for the following purposes:
1. To elect nine directors to hold office until the next
Annual Meeting of Shareholders and until their successors shall
have been duly elected and qualified.
2. To consider and vote upon a proposal to approve the
Corporation's 1995 Stock Option Plan.
3. To consider and vote upon a proposal to approve
amendments to the Corporation's 1992 Equity Compensation Plan for
Non-Employee Directors.
4. To ratify the appointment of Price Waterhouse to serve
as independent accountants of the Corporation.
5. To transact such other business as may properly come
before the Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on
October 3, 1995 as the record date for the determination of
shareholders of the Corporation entitled to notice of and to vote
at the Meeting.
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING, BUT DESIRE YOUR
COMMON SHARES TO BE VOTED, PLEASE FILL IN, DATE, SIGN AND RETURN
THE ENCLOSED PROXY.
By Order of the Board of Directors
MARCIE B. DAVIS,
Secretary
New York, New York
Dated: October 6, 1995
PHARMHOUSE CORP.
860 Broadway
New York, New York 10003
PROXY STATEMENT
--------------------------
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors (the "Board") of
Pharmhouse Corp. (the "Corporation") for use at a Special Meeting
in (lieu of the Annual Meeting) of Shareholders of the Corporation
to be held on October 26, 1995 (the "Meeting") at 1177 Avenue of
the Americas, 2nd floor, New York City, at 10:00 a.m., New York
time, and at any adjournments thereof. Shareholders of record as
of the close of business on October 3, 1995 will be entitled to
notice of and to vote at the Meeting and at any adjournments
thereof. As of that date, there were 2,233,104 Common Shares, par
value $.01 per share ("Common Shares"), issued and outstanding and
entitled to vote. Each such Common Share is entitled to one vote
on any matter presented to the Meeting.
If Proxies in the accompanying form are properly executed
and returned, unless contrary instructions are indicated thereon,
the Common Shares represented thereby will be voted as follows: (i)
for the election of the nine nominees named below as directors;
(ii) for the adoption of the 1995 Stock Option Plan (the "1995
Plan"); (iii) for the adoption of amendments to the 1992 Equity
Compensation Plan for Non-Employee Directors (the "Independent
Directors Plan"); (iv) for the ratification of the appointment of
Price Waterhouse as the Corporation's independent accountants for
the current fiscal year; and (v) in the discretion of the persons
named in the enclosed form of Proxy on any other proposals to
properly come before the Meeting or any adjournments thereof. Any
shareholder who has given a Proxy may revoke it by written notice
addressed to and received by the Secretary of the Corporation prior
to its exercise, or by submitting a duly executed Proxy bearing a
later date or by electing to vote in person at the Meeting. The
mere presence at the Meeting of the person appointing a Proxy does
not revoke the prior grant of a Proxy.
The presence in person or by proxy of a majority of the
outstanding Common Shares entitled to vote at the Meeting will be
necessary to constitute a quorum. Directors shall be elected by a
plurality of the votes cast by the Common Shares present in person
or represented by Proxy at the Meeting. The approval of the 1995
Plan and the amendments to the Independent Directors Plan each
requires the affirmative vote of a majority of the outstanding
Common Shares entitled to vote at the Meeting. Ratification of the
Corporation's independent accountants requires the affirmative vote
of a majority of the votes cast by the Common Shares present in
person or represented by Proxy at the Meeting.
Information with respect to beneficial ownership of Common
Shares by directors and officers of the Corporation is set forth
under the captions "Principal Shareholders" and "Security Ownership
of Management."
The approximate date of mailing of this Proxy Statement is
expected to be October 6, 1995.
MATTERS TO BE BROUGHT BEFORE THE MEETING
PROPOSAL NO. 1: ELECTION OF DIRECTORS
Nine directors are to be elected to hold office until the
next Annual Meeting of Shareholders and until their successors
shall have been duly elected and qualified. It is the intention of
the persons named in the enclosed form of Proxy to vote the Common
Shares represented thereby for the election as directors of the
persons named in the table below unless otherwise specified in the
Proxy. In the event that any of the nominees named below should
become unavailable or unable to serve as a director, it is intended
that the persons named in the Proxy will vote for the election, in
his or her place and stead, of any substitute nominee who shall be
designated by the Board. The Board has no reason to believe that
it will be necessary to designate any substitute nominees.
The following table contains information regarding all
nominees for election as directors of the corporation.
OTHER POSITIONS
WITH THE CORPORATION PERSON SERVED AS
OCCUPATIONS(S) OR EMPLOYMENT A DIRECTOR OF
NAME/AGE (1) DURING PAST FIVE YEARS THE CORPORATION
Manfred Brecker/68 Chairman of the Board of the Since 1968
Corporation since 1983; Chief
Executive Officer from 1983
to 1989; President and Chief
Operating Officer of the
Corporation from 1971 until
1983.(2)
Kenneth A. Davis/46 President, Chief Executive Since 1979
Officer and Chief Operating
Officer of the Corporation since
January 1990; President and Chief
Operating Officer of the
Corporation from 1983 to 1989;
from 1980 to 1983, Vice-President
of the Corporation; employee of
the Corporation since 1979.(2)
Melvin Katz/63 Partner, law firm of Maloney, Since 1972
Gerra, Mehlman & Katz since
April 1994; prior thereto,
practicing attorney in New
York City for more than 30
years.
OTHER POSITIONS
WITH THE CORPORATION PERSON SERVED AS
OCCUPATIONS(S) OR EMPLOYMENT A DIRECTOR OF
NAME/AGE (1) DURING PAST FIVE YEARS THE CORPORATION
Joseph Keller/49 Senior Vice President- Since 1991
Operations of the Corporation
since 1985; Vice President of
the Corporation from September
1984 to September 1985; employee
of the Corporation since 1963.
David Rubin/46 President of Brookgate Food Since 1991
Center, an operator of super-
markets, Cleveland, Ohio since
1974.
Raymond L. Steele/60 Retired. From August 1990 Since 1991
until September 1993,
Executive Vice President of
Pacholder Associates, Inc.,
Cincinnati, Ohio; prior thereto,
Executive Advisor at The Nickert
Group from 1989 through 1990;
Vice President, Trust Officer
and Chief Investment Officer of
The Provident Bank, Cincinnati,
Ohio, from 1984 through 1988.
Marcie B. Davis/42 Senior Vice President-Finance ---
of the Corporation since 1991
and Chief Financial Officer
since January 1995; Secretary
of the Corporation since 1990,
Treasurer since 1988 and Vice
President since 1984; Employee
of the Corporation since 1971.
Michael A. Feder/44 Managing Director in the ---
Investment Banking Department
of CS First Boston, an
international investment
banking firm with which Mr.
Feder has been associated in
the areas of investment banking
and capital markets since 1980;
prior thereto, a Vice President
of the Chase Manhattan Bank;
Mr. Feder is a graduate of the
Hackley School and of Hamilton
College.
Peter Gerard/49 Managing Director of Rauscher ---
Pierce & Clark, Inc., a London
based investment banking firm,
President in Dallas, Texas,
since July, 1995; Managing
Partner of Llama Associates,
a provider of mezzanine and
bridge financing, since 1990;
Chairman and Chief Executive
Officer of Spinnaker Partners,
Westbrooke Hospitality
Corporation and affiliates since
1984; prior to 1984, Senior
Vice President-Corporate
Finance of Schneider Bernet
& Hickman, an investment
banking and brokerage organization.
MEETING OF THE BOARD AND COMMITTEES
The Board held six meetings during the Corporation's fiscal
year ended January 28, 1995. During such fiscal year, each of the
incumbent directors attended at least 75% of the sum of (a) the
total number of meetings held by the Board during the period in
which he was a director and (b) the total number of meetings held
by the respective committees on which he served.
The Board has an Audit Committee, a 1991 Incentive Stock
Option Plan Committee and a 1991 Non-Qualified Stock Option Plan
Committee. The Board has no standing or Nominating Committee or
Compensation Committee, but intends, as discussed below, to appoint
a Compensation Committee.
The Audit Committee, currently consisting of Messrs. Katz
and Steele, oversees the Corporation's accounting and internal
control systems and the annual audit of the Corporation's financial
books and records. The Audit Committee has held two meetings since
January 29, 1994.
The 1991 Incentive Stock Option Plan Committee and the 1991
Non-Qualified Stock Option Plan Committee are each comprised of
Messrs. Brecker and Katz. These Committees administer the
Corporation's stock option plans. These Committees held no
meetings during the fiscal year ended January 28, 1995; however,
each such committee acted by unanimous written consent with respect
to one grant of stock options in February 1994.
______________________________________
(1) As of September 15, 1995.
(2) Mr. Davis is the son-in-law of Mr. Brecker. Ms. Davis
is the daughter of Mr. Brecker and the wife of Mr. Davis.
The Board intends, at a Special Meeting (in lieu of its
Annual Meeting) to be held on October 26, 1995 immediately
following the Meeting, to appoint new Audit and Compensation
Committees. See "Report of the Board of Directors on Executive
Compensation elsewhere in this Proxy Statement.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information, as of
September 8, 1995, with respect to holdings of the Corporation's
Common Shares by each person known by the Corporation to be the
beneficial owner of more than 5% of the total number of Common
Shares outstanding as of that date. Each beneficial owner has sole
voting and investment power with respect to the Common Shares set
forth opposite his or her name in the following table, except as
otherwise disclosed in the footnotes to the table.
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class(1)
Anne Brecker
860 Broadway 562,136 (2) 25.2%
New York, NY 10003
Rosenthal &
Rosenthal, Inc. 209,195 (3) 9.4%
1370 Broadway
New York, NY 10018
Kenneth A. Davis
860 Broadway 387,381 (4) 17.4%
New York, NY 10003
Marcie B. Davis
860 Broadway 132,472 (5) 5.9%
New York, NY 10003
Joseph Keller
860 Broadway 116,153 (6) 5.2%
New York, NY 10003
_____________________________
(1) Calculation based upon 2,233,077 Common Shares outstanding
as of September 8, 1995. As of such date, to the best of the
Corporation's knowledge, no amendment to the Schedule 13D and to
the Forms 4 relied upon in preparing the above table reflecting a
change in beneficial ownership of the Common Shares had been filed
with the Securities and Exchange Commission. The Corporation is
not aware, and has no reason to believe, that the information
contained in such filings is not complete and accurate or that a
statement or amendment should have been filed and was not, as of
the date hereof. However, changes in beneficial ownership of which
the Corporation is unaware may have occurred which have not been
reported.
(2) Includes 556,343 shares owned by Mrs. Brecker and 5,796
shares held by trusts, of which she is the trustee, for the benefit
of her adult children, other than Ms. Davis. Mrs. Brecker
disclaims beneficial ownership of the shares held by such trusts.
Does not include 1,281 shares beneficially owned by Mrs. Brecker's
husband, Manfred Brecker, with respect to which Mrs. Brecker
disclaims beneficial ownership.
(3) Includes 209,195 shares beneficially owned by Rosenthal &
Rosenthal, Inc. ("Rosenthal") which Rosenthal has the right to
acquire pursuant to warrants currently exercisable.
(4) Includes 54,414 shares subject to options granted to Mr.
Davis pursuant to the Corporation's 1991 Incentive Stock Option
Plan (the "Incentive Plan") and 153,663 shares subject to options
granted to Mr. Davis pursuant to the Corporation's 1991
Non-Qualified Stock Option Plan (the "Non-Qualified Plan"), all of
which are exercisable within 60 days. Does not include 132,472
shares beneficially owned by Mr. Davis' wife. Mr. Davis disclaims
beneficial ownership of the shares held by his wife.
(5) Includes 17,379 shares subject to options granted to Ms.
Davis pursuant to the Incentive Plan and 42,299 shares subject to
options granted to Ms. Davis pursuant to the Non-Qualified Plan,
all of which are exercisable within 60 days. Does not include
387,381 shares beneficially owned by Ms. Davis' husband. Ms. Davis
disclaims beneficial ownership of the shares held by her husband.
(6) Includes 26,000 shares subject to options granted to Mr.
Keller pursuant to the Incentive Plan and 12,874 shares subject to
options granted to Mr. Keller pursuant to the Non-Qualified Plan,
all of which are exercisable within 60 days.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information as of
September 8, 1995 with respect to holdings of the Corporation's
Common Shares beneficially owned by each of the Corporation's
directors, nominees for director and named executive officers and
by all officers and directors of the Corporation as a group.
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class
Manfred Brecker 1,287 (1) *
Kenneth A. Davis 387,381 (2) 17.3%
Joseph Keller 116,153 (3) 5.2%
Marcie B. Davis 132,472 (4) 5.9%
David Rubin 460 *
Melvin Katz 1,379 *
Raymond L. Steele 1,379 *
Michael A. Feder 0 --
Peter Gerard 0 --
Officers and directors
as a group (consisting
of 13 persons) 731,939 (5) 32.8%
* Less than 1%.
(1) Does not include 556,343 shares owned by Mr. Brecker's wife,
Anne Brecker, or 5,796 shares held by trusts for the benefit of Mr.
Brecker's adult children other than Ms. Davis, of which his wife is
the trustee, as to which Mr. Brecker disclaims beneficial
ownership.
(2) Includes 54,414 shares subject to options granted to Mr.
Davis pursuant to the Incentive Plan and 153,663 shares subject to
options granted to Mr. Davis pursuant to the Non-Qualified Plan,
all of which are exercisable within 60 days. Does not include
132,472 shares beneficially owned by Mr. Davis' wife, Marcie B.
Davis.
(3) Includes 26,000 shares subject to options granted to Mr.
Keller under the Incentive Plan and 12,874 shares subject to
options granted to Mr. Keller under the Non-Qualified Plan, all of
which are exercisable within 60 days.
<PAGE>
(4) Includes 17,379 shares subject to options granted to Ms.
Davis pursuant to the Incentive Plan and 42,299 shares subject to
options granted to Ms. Davis pursuant to the Non-Qualified Plan,
all of which are exercisable within 60 days. Does not include
387,381 shares beneficially owned by Ms. Davis' husband, Kenneth A.
Davis.
(5) Includes an aggregate of 126,621 shares subject to options
granted under the Incentive Plan and 218,583 shares subject to
options granted under the Non-Qualified Plan, all of which are
exercisable within 60 days.
REPORT OF BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
As of the date of this Proxy Statement, the Board has not
appointed a Compensation Committee. However, the Board intends, at
a Special Meeting of the Board (in lieu of its Annual Meeting) to
be held on October 26, 1995 immediately following the Meeting, to
appoint a Compensation Committee comprised entirely of independent,
non-employee directors of the Corporation. When appointed, the
Compensation Committee will review and approve compensation
arrangements for principal executive officers of the Corporation,
including the Chief Executive Officer, and will administer each of
the Corporation's stock option plans. Upon appointment of a
Compensation Committee, each of the Corporation's current Stock
Option Plan Committees will be dissolved.
To date, determinations of the levels and categories of
executive compensation have been made by the Board, based upon
various objectives including the following:
(1) To pay sufficient compensation to attract, retain
and motivate competent executive officers, subject, however, to the
limitations imposed by the Corporation's limited cash resources;
(2) To attempt to relate executive compensation to
individual and company-wide performance and improvement in the
future results of operations of the Corporation; and
(3) To more directly relate executives' financial
interests to the interests of shareholders by tying a significant
aspect of such executives' compensation to increases in the market
value of the Corporation's outstanding Common Shares through such
means as restricted stock awards and/or stock options.
COMPENSATION FOR LAST FISCAL YEAR
During the Corporation's last fiscal year, except for the
salary reductions described below, the Board determined not to
effect any changes in the amount of cash compensation payable to
its executive officers, including its Chief Executive Officer, from
that paid to such officers in the prior fiscal year. No new stock
options or stock awards were granted or awarded to such executive
officers during its last fiscal year. Accordingly, subject to such
salary reductions and the grant of non-qualified stock options to
certain executives in 1992, all of the compensation reported in
this Proxy Statement for the Corporation's last fiscal year
reflects determinations made by the Board in December 1991 in
connection with the Corporation's emergence from reorganization
under Chapter 11.
As noted under "Executive Compensation" in this Proxy
Statement, in light of the Corporation's limited cash resources,
effective upon the commencement of fiscal 1993, Messrs. Brecker and
Davis, the Corporation's Chairman of the Board and Chief Executive
Officer, respectively, each agreed to an annual salary reduction
from $258,554 to $175,000. In addition, in January 1994, Mr. Davis
recommended to the Board that, in light of the Corporation's
continuing losses from operations, the annual cash compensation
payable to its then four highest paid executive officers be further
reduced in the following respective amounts and by the following
percentages, which recommendation was accepted by the Board and
implemented effective as of the commencement of the 1995 fiscal
year:
<TABLE>
<CAPTION>
Name and Fiscal 1994 Cash Fiscal 1995 Cash Reduction in
Compensation
Principal Position Compensation Compensation Amount
Percentage
<S> <C> <C> <C> <C>
Manfred Brecker/ $175,000 $125,000 ($50,000) (28.6)
Chairman of the Board
Kenneth A. Davis/ $175,000 $135,000 ($40,000) (22.8)
President, Chief Executive
and Operating Officer
William Hoffert/ $132,000 $100,000 ($32,000) (24.2)
Senior Vice President-
Merchandising (1)
Joseph Keller/ $130,000 $100,000 ($30,000) (23.1)
Senior Vice President-
Operations
</TABLE>
(1) Mr. Hoffert resigned as a director, officer and employee of
the Corporation in August 1994.
In addition, in furtherance of the Board's objectives,
during the period following the Corporation's emergence from
Chapter 11, among other measures, the Corporation implemented a
three year salary reduction plan tied to the grant in 1992 of
non-qualified stock options under the Non-Qualified Plan (the
"Salary Reduction Plan"). By reason of the reductions in salary
described in the table above and salary reductions pursuant to the
Salary Reduction Plan, the Corporation achieved aggregate cash
savings of $402,138 during the three fiscal years ended January 28,
1995. Of such amount, $126,378 of cash savings was realized by the
Corporation during its last fiscal year.
COMPENSATION FOR CURRENT FISCAL YEAR
At the commencement of the current fiscal year, the Board
determined not to increase the compensation payable to the
Corporation's executive officers, including the Chief Executive
Officer. This determination was based upon the Corporation's
continuing losses from operations during fiscal 1995 and its need
to conserve its cash resources.* The Board noted, however, that
the Corporation's results of operations during such fiscal year had
improved and that such executive officers were expending great
effort to improve such results, including seeking additional
sources of financing and/or acquisition opportunities in order to
acquire additional stores, increase revenues and resume profitable
operations.
In July 1995, in light of the completion of the Rx Place
Acquisition, the Board determined to re-evaluate the compensation
payable to the Corporation's senior executives. In making its
determination, the Board considered a variety of factors, including
the following:
A. The significant increase in the size and complexity
of the Corporation's discount drug store business in light of the
Rx Place Acquisition. The Corporation now operates 38 stores in
eight states, compared to its operation of 14 stores in 5 states
prior to the Rx Place Acquisition. The combined reported revenues
of such 38 stores were $190,304,000 in fiscal 1995 compared to
revenues of $89,602,000 for the 14 Pharmhouse stores.
B. The improved financial condition and liquidity of
the Corporation, as evidenced by its greatly increased financing
availability under its revolving credit facility with its new
senior secured lender and its increased trade credit available from
vendors.
Based upon the foregoing, the following changes in executive
compensation were approved by the Board:
1. Employment Agreements were entered into with Messrs.
Brecker and Davis pursuant to which their base annual salaries were
restored to $175,000 and $225,000, respectively, subject to
additional increases, bonuses and other incentive based
compensation as described under "Agreements with Executive
Officers" in this Proxy Statement.
- ------------------------
* Notwithstanding such determination, uponcommencement of
the current fiscal year, compensation of those executives who had
participated in the Salary Reduction Plan, other than Mr. Davis,
was restored to the level in effect prior to implementation of the
Salary Reduction Plan. As noted elsewhere in this Proxy Statement,
the compensation of Mr. Davis was restored subsequent to the
consummation of the Rx Place Acquisition to the level in effect
prior to the effectiveness of the Salary Reduction Plan.
2. Five officers were paid one-time bonuses aggregating
$45,000 in consideration of their considerable efforts and the
results achieved in completing the Rx Place Acquisition.
3. In addition, the Board is considering increasing the
annual compensation of certain of the Corporation's executive
officers, however, no such increases have been effected as of the
date of this Report.
4. The Board approved a bonus program in principle
pursuant to which a defined group of executives of the Corporation
(other than the Chief Executive Officer) will be entitled to share
in a bonus pool equal to 5% to 10% of the Corporation's pre-tax net
income in future fiscal years. Allocations of the bonus pool to
individual executives will be made either pursuant to a formula to
be incorporated in the plan or by the Compensation Committee based
upon recommendations of the Chief Executive Officer (or through a
combination of such methods).
5. The 1995 Stock Option Plan was adopted, subject to
approval by shareholders, pursuant to which 500,000 Common Shares
have been reserved for issuance to officers and key employees upon
the exercise of stock options granted under such plan. See
"Proposal No. 2: Approval of 1995 Option Plan." As of the date of
this Report, no committee has been appointed to administer the 1995
Option Plan and therefore no options have been granted thereunder.
The Board anticipates that a significant number of options will be
granted under such plan to Messrs. Davis and Brecker and to other
executives of the Corporation, however, no action with respect to
any such grants has been taken as of the date of this Report.
COMPOSITION OF BOARD OF DIRECTORS DURING 1995 FISCAL YEAR
The determinations of executive officer compensation for the
last fiscal year and current fiscal year of the Corporation were
made by the Corporation's Board whose members included Manfred
Brecker, Chairman of the Board, Kenneth A. Davis, President and
Chief Executive Officer, Joseph Keller, Senior Vice President-Store
Operations and Melvin Katz, a member of a law firm which then
served, and of a second law firm which continues to serve, as
general counsel to the Corporation. For further information, see
"Certain Relationships and Related Transactions" in this Proxy
Statement.
CHIEF EXECUTIVE OFFICER COMPENSATION
During the past three fiscal years, the annual compensation
paid to Kenneth A. Davis, President and Chief Executive Officer,
was reduced substantially. As described in detail elsewhere in
this Proxy Statement, in July 1995, the Board determined to
increase Mr. Davis' compensation pursuant to the terms of an
employment agreement which is effective through the Corporation's
1999 fiscal year. See "Compensation for Current Fiscal Year" in
this Report and "Agreements with Executive Officers" elsewhere in
this Proxy Statement for a further description of such agreement
and the compensation arrangements with Mr. Davis.
The Board based its determination with regard to Mr. Davis'
compensation on considerations similar to those described under
"Compensation for Current Fiscal Year" in this Report and on its
evaluation of Mr. Davis invaluable contribution to the Corporation
in identifying, negotiating and effecting the Rx Place Acquisition,
as well as supervising its operations. In conducting its review of
the compensation levels of the Corporation's executives, including
the Chief Executive Officer, the Board concluded that, even after
implementation of the salary increases described herein, the annual
cash compensation to Mr. Davis' is in the lower range of
compensation paid to chief executives of comparable retail
companies. As indicated under "Agreements with Executive
Officers", Mr. Davis' new employment agreement provides for
significant additional performance-based compensation which is
conditioned upon the Corporation's future profitability, including
an increase in base salary effective the year in which the
Corporation achieves profitability and annual bonuses thereafter
based upon a formula that is conditioned upon the level of the
Corporation's pre-tax earnings per Common Share.
Mr. Davis therefore will have the opportunity to benefit
substantially from any future profits of the Corporation and
increases in the market value of the Common Shares. Such
arrangements are consistent with the Board's continuing policy of
conserving the Corporation's cash while attempting to incentivize
and motivate the Corporation's executives with performance based
compensation.
The Board of Directors
Manfred Brecker, Chairman
Kenneth A. Davis
Melvin Katz
Joseph Keller
David Rubin
Jeffrey Schultz
Raymond L. Steele
<PAGE>
EXECUTIVE COMPENSATION
All references to the Shares included in restricted stock
awards and to stock options granted to executive officers of the
Corporation in the Tables and Graph set forth under this caption
reflect the one for 4.35 reverse stock split effected by the
Corporation in April 1993.
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding
the cash compensation paid, as well as stock options and restricted
stock awards earned by the Corporation's Chief Executive Officer
and each of the four highest paid executive officers of the
Corporation whose aggregate compensation exceeded $100,000 for
services rendered in all capacities to the Corporation and its
subsidiaries during the fiscal year ended January 28, 1995:
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
NAME AND OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR (1) SALARY ($) (# OF SHARES)(2) COMPENSATION($)(3)
<S> <C> <C> <C> <C>
Manfred Brecker 1995 125,000 0 1,435
Chairman of the 1994 175,000 0 1,344
Board 1993 175,000 0 1,304
Kenneth A. Davis 1995 135,000 0 1,565
President, Chief 1994 175,000 0 1,731
Executive Officer 1993 175,000 153,663 1,755
& Chief Operating
Officer
Joseph Keller 1995 100,000 0 2,241
Senior Vice 1994 131,697 0 1,067
President-Store 1993 131,873 12,874 1,036
Operations
________________________
</TABLE>
(1) Refers to fiscal years ended January 28, 1995, January 29,
1994, and January 30, 1993, respectively.
(2) No options were granted by the Corporation in fiscal 1995 or
fiscal 1994 under any of its stock option plans. Options granted in
fiscal 1993 are non-qualified options granted in June 1992 pursuant
to the Non-Qualified Plan at an exercise price of $.544 per Common
Share. Each employee participating in the Non-Qualified Plan
elected to have his salary reduced for a period of three years
beginning February 1992 to purchase stock options with an exercise
price of 25% of the fair market value of such Common Shares on the
date of option grant. In the fiscal year ended January 30, 1993,
the salaries of Messrs. Davis and Keller were reduced by $83,556
and $7,008, respectively pursuant to such arrangement. These
options may be exercised in increments of 1/36th for each full
month of employment by the Corporation completed by the employee
during such three-year period.
(3) Includes contributions made by the Corporation to its 401(k)
plan on behalf of the named executive officers.
In July 1995, the Board approved an employee incentive bonus
program (the "Bonus Program") pursuant to which employees of the
Corporation would be eligible to receive annual bonuses from a
bonus pool equal to between 5% and 10% of the Corporation's pre-tax
net income for such fiscal year. Such pool would be used to pay
bonuses on an annual basis to such employees of the Corporation
(other than the Chief Executive Officer) as shall be determined by
the Board, based upon recommendations of the Chief Executive
Officer. No bonuses will be payable under the Bonus Program for
any fiscal year in which the Corporation does not realize a profit.
AGREEMENTS WITH EXECUTIVE OFFICERS
In July 1995, the Corporation entered into Executive
Employment Agreements with each of Manfred Brecker, Chairman of the
Board, and Kenneth A. Davis, President and Chief Executive Officer
of the Corporation. Each such agreement provides for an employment
term continuing through the end of the Corporation's 1999 fiscal
year (i.e., January 30, 1999). Under his employment agreement, Mr.
Brecker will be paid an annual base salary of $175,000, subject to
annual cost of living increases, and a special bonus, in
consideration of services rendered and to be rendered, in the
amount of $100,000, payable in four equal annual installments
commencing in 1995.
Pursuant to his employment agreement, Mr. Davis will be paid
an annual base salary of $225,000 (to be increased to $250,000 as
of the commencement of the Corporation's 1996 fiscal year), subject
to annual cost of living increases, and an annual bonus, commencing
in fiscal 1996, equal to $10,000 for every $.05 of per share pre-
tax net income for the appropriate fiscal year. Mr. Davis' base
salary will further increase to $300,000 retroactively to the first
day of the fiscal year in which the Corporation achieves
profitability.
The employment agreements with Messrs. Brecker and Davis
also provide that, if such executive's employment with the
Corporation is terminated (i) by the Corporation in breach of the
agreement or (ii) by the executive for "Good Reason," as defined
in the agreement to include, among other events, the occurrence of
a change in control of the Corporation, then such executive shall
be entitled to continue to be paid his base salary then in effect
for a period of three years from the date of termination of
employment or, in lieu thereof, a lump sum amount equal to the
discounted present value of such three years of base salary.
OPTION GRANTS IN FISCAL 1995
No stock options were granted by the Corporation under any
of its stock option plans during its fiscal year ended January 28,
1995.
OPTION EXERCISES AND FISCAL YEAR-END (JANUARY 28, 1995)
OPTION VALUES
No stock options were exercised by the named executive
officers during fiscal 1995. The following table sets forth
certain information concerning the outstanding options held by such
named executive officers.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY
ACQUIRED ON VALUE FY-END OPTIONS AT
NAME EXERCISE REALIZED # OF SHARES FY-END - $
<S> <C> <C> <C> <C> <C>
Manfred Brecker 0 0 0 Exercisable 0
Unexercisable 0
Kenneth A. Davis 0 0 208,077 Exercisable 208,077
0 Unexercisable 0
Joseph Keller 0 0 38,874 Exercisable 38,874
0 Unexercisable 0
</TABLE>
The exercisable options were granted pursuant to the
Incentive Plan and the Non-Qualified Plan at exercise prices of
$1.914 per share and $.544 per share, respectively. The options
have been valued based upon the average of the high and low bid
prices on January 28, 1995, i.e., $.3875 per Common Share.
<PAGE>
PERFORMANCE GRAPH
The following graph shows changes from January 1, 1989 to
December 31, 1994 in the value of $100 invested in: (1) Common
Shares of the Corporation, (2) the Standard & Poor's Retail-
Composite Index and (3) the Standard & Poor's 500 Index.
TOTAL RETURN TO SHAREHOLDERS
JANUARY 1990 TO JANUARY 1995
(Line Graph depicting information listed in table below)
INDEXED RETURNS [2/3/90=100]
Company Return Return Return Return Return
Name Jan 91 Jan 92 Jan 93(1) Jan 94(2) Jan 95(2)
Pharmhouse
Corp. 5.20 10.40 7.27 61.28 5.75
Retail Stores
Composite 117.33 163.95 195.70 188.61 174.65
S&P 500
Composite 108.39 132.99 147.06 166.00 166.88
(1) In December 1991, the Corporation effected an exchange of
one new Common Share for each 7.2 of its previously outstanding
Common Shares, $.10 par value, pursuant to its Plan of
Reorganization under Chapter 11 of the U.S. Bankruptcy Code.
(2) In April 1993, the Corporation effected a one for 4.35
reverse split of its outstanding Common Shares.
PENSION PLAN
The Corporation maintains a 401(k) contributory savings plan
for all employees over 21 years of age and with at least one year
of service. Under this plan, the Corporation is required to make
monthly contributions matching (a) the first $1.00 of an employee's
contribution per week, and (b) 25% of the employee's additional
contributions up to three percent of the employee's salary.
Participation in the plan is voluntary; employees may choose the
extent of their participation, if any, twice a year. An employee
may contribute to this plan from two to ten percent of total
earnings on a pre-tax basis up to a maximum of $9,240 per year,
subject to a cost of living adjustment. Upon termination of
employment, an employee receives 100% of his or her individual
contributions plus all or a portion of the Corporation's
contributions on his or her behalf, determined as follows:
Percentage Vesting of
Years of Service Corporation's Contributions
1 Year 20%
2 Years 40%
3 Years 60%
4 Years 80%
5 Years or More 100%
As of the date of this Proxy Statement, the Corporation is
considering but has not effected amendments to its 401(k) plan
which, among other matters, will increase the percentages of
employees' total pre-tax earnings which may be contributed to such
plan.
COMPENSATION OF DIRECTORS
As of July 14, 1995, each member of the Board who is not an
officer or employee of the Corporation or any of its subsidiaries
(an "Independent Director"), is entitled to receive a fee of $500
for each Board meeting attended and $250 for each Committee meeting
attended, in addition to each such Director's annual grant of
Common Shares pursuant to the Independent Directors Plan which has
been amended, subject to shareholders' approval, as described
elsewhere herein.
In April 1992 the Board authorized the Independent Directors
Plan which was approved by the Corporation's shareholders at the
Annual Meeting of Shareholders held June 30, 1992. Pursuant to the
Independent Directors Plan, a total of 11,500 Common Shares were
reserved for issuance to Independent Directors, which amount
reflects the one for 4.35 reverse split of the Common Shares
effected by the Corporation in April 1993. Prior to being amended
in July 1995, the Independent Directors Plan provided that each
Independent Director elected by shareholders to serve as a member
of the Board, through the 1996 Annual Meeting of Shareholders,
would be entitled to an award of 460 Common Shares upon his
election or re-election. Each annual award of Common Shares under
the Independent Directors Plan is effected automatically on the
business day next succeeding each of the Annual Meetings of
Shareholders (or Special Meetings in lieu thereof) at which an
Independent Director is elected. As of September 15, 1995, an
aggregate of 6,895 Common Shares have been issued to Independent
Directors under the Independent Directors Plan.
On July 14, 1995, the Board unanimously approved, subject to
approval by the shareholders of the Corporation, amendments to the
Independent Directors Plan, pursuant to which (i) the term of such
plan has been extended through the date of the Corporation's 1998
Annual Meeting of Shareholders (or Special Meeting in lieu thereof)
, (ii) the number Common Shares reserved for issuance thereunder
was increased to 50,000, and (iii) the annual award to each
eligible Independent Director thereunder was increased from 460 to
2,500 Common Shares. See "Proposal No. 3: Approval of Amendments
to Independent Directors Plan" for a further description of such
plan, as amended.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The law firm of which Mr. Katz, a director of the
Corporation, was a member during a portion of the Corporation's
fiscal year ended January 28, 1995, performed legal services for
the Corporation from January 1994 through March 1994. The law firm
of which Mr. Katz is currently a member performs legal services for
the Corporation and received fees for services rendered to the
Corporation in fiscal 1995. Such firm also represented the
Corporation in connection with its acquisition in April 1995 of 24
"The Rx Place" stores from F.W. Woolworth Co. (the "Rx Place
Acquisition") and the financing transactions related thereto, in
consideration for which such firm and its partners received fees
aggregating approximately $335,000.
PROPOSAL No. 2: APPROVAL OF 1995 STOCK OPTION PLAN
The Company's 1995 Stock Option Plan (the "1995 Plan") was
adopted by the Board on July 14, 1995, subject to approval by the
shareholders of the Corporation at the Corporation's next meeting
of shareholders. Under the 1995 Plan, a total of 500,000 Common
Shares have been reserved for issuance upon the exercise of stock
options and related stock appreciation rights ("SARs"). As of the
date of this Proxy Statement, no options or SARs have been granted
under the 1995 Plan. The following description of the material
provisions of the 1995 Plan will be made available to any
shareholder upon written request addressed to the Secretary of the
Corporation.
The 1995 Plan provides that the number of Common Shares
subject thereto and the number of outstanding stock options and
their exercise prices are to be appropriately adjusted in the event
of a reorganization, consolidation, reclassification,
recapitalization, combination or exchange of Common Shares, stock
split, reverse split, stock dividend or rights offering. Common
Shares allocated to options and/or SARs which have expired or been
terminated may be reallocated to other options and/or SARs under
such plan.
Pursuant to the 1995 Plan, the Corporation may grant (i)
incentive stock options ("ISOs"), as that term is defined in the
Internal Revenue Code of 1986, as amended (the "Code"), (ii)
nonqualified stock options ("NSOs"), and (iii) SARs to officers
directors and key employees of the Corporation. The 1995 Plan
provides for administration by the Board of the Corporation or by
a Committee of the Board which selects the optionees, authorizes
the grant of options and determines the exercise price and other
terms of the options, including the vesting schedule thereof, if
any. Currently, the 1995 Plan is administered by the Board;
however, as described elsewhere in this Proxy Statement, the Board
intends to appoint a Compensation Committee at a Special Meeting of
the Board (in lieu of its Annual Meeting), to be held immediately
following the Meeting, and, when created, such Committee will
administer the 1995 Plan. Each member of the Compensation
Committee will be "disinterested" within the meaning of Rule 16b-3
of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended (the "1934 Act").
The per share exercise price of each ISO granted under the
1995 Plan must be at least 100% of the fair market value of a
Common Share (and not less than 110% of the fair market value in
the case of any optionee of an ISO who beneficially owns more than
10% of the total combined voting power of the Corporation) on the
date such option is granted. The 1995 Plan provides that the per
share exercise price of an NSO must be at least 25% of the fair
market value of a Common Share on the date such option is granted.
Each option granted under the 1995 Plan may be exercisable for a
period determined by the Board or the committee administering the
plan, not to exceed ten years (or five years in the case of any
optionee of an ISO who beneficially owns more than 10% of the total
combined voting power of the Corporation) from the date of grant.
Options issued under the 1995 Plan will be exercisable as the
committee administering such plan may determine, but in no event
shall an option be exercisable prior to the later of (a) six months
after the date of grant, and (b) six months after the date on which
shareholder approval of the 1995 Plan has been obtained. If
shareholders of the Corporation do not approve the 1995 Plan within
twelve months of its adoption (i.e., by July 13, 1996), then such
plan shall automatically terminate and no options or SARs will be
granted thereunder.
Incentive stock options granted under the 1995 Plan are
non-transferrable, except upon death, by will or by operation of
the laws of descent and distribution, and may by exercised during
the employee's lifetime only by the optionee. There is no limit on
the number of shares with respect to which options may be granted
under the 1995 Plan to any participating employee. However, under
the terms of the 1995 Plan, the aggregate fair market value of the
stock with respect to which ISOs are exercisable for the first time
by an employee during any calendar year (under all such plans of
the Corporation and any parent and subsidiary corporations of the
Corporation) may not exceed $100,000.
Options granted under the 1995 Plan may be exercised within
twelve months after the date of an optionee's termination of
employment by reason of his death or disability, or within ninety
days after the date of termination by reason of retirement,
voluntary termination approved by the Board or involuntary
termination by the Company other than for Cause (as defined in the
1995 Plan), but, in any such case, not later than the expiration
date of such option and only to the extent the option was otherwise
exercisable at the date of termination. In the event an optionee's
employment is terminated by the Company for Cause or voluntarily
terminated by the optionee without the approval of the Board, such
optionee's option shall terminate immediately upon the date of such
termination.
The 1995 Plan also provides for the grant of SARs, which may
be granted on a stand-alone basis or in tandem with stock options,
which may be surrendered to the Corporation in exchange for cash,
Common Shares or a combination thereof, as determined by the
committee administering the 1995 Plan, having a value equal to the
dollar amount obtained by multiplying (x) the number of shares
subject to the surrendered SAR or option by (y) the amount by which
the fair market value per Common Share exceeds the exercise price
per share specified in the agreement governing the surrendered SARs
or options.
As noted elsewhere under this caption, no options or SARs
have been granted under the 1995 Plan. However, it is anticipated
that management will recommend to the Committee in the near future
the granting to executive officers of the Corporation of options
covering a significant number of Common Shares.
The 1995 Plan expires on July 13, 2005 unless terminated
earlier by the Board. The 1995 Plan is subject to amendment by the
Board without shareholder approval, except that no amendment which
increases the maximum aggregate number of shares which may be
issued under the 1995 Plan or changes the class of eligible
participants in the 1995 Plan will be effective without the
approval of the shareholders of the Corporation. The Board may
terminate the 1995 Plan at any time.
VOTE REQUIRED
Unless otherwise directed by a shareholder, a Proxy will be
voted in favor of approval of the adoption of the 1995 Plan.
Approval of the 1995 Plan requires the affirmative vote of the
holders of a majority of the Corporation's outstanding Common
Shares entitled to vote at the Meeting.
The Board unanimously recommends that the shareholders vote
FOR adoption of the 1995 Plan.
PROPOSAL NO. 3: APPROVAL OF AMENDMENTS TO 1992 EQUITY
COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
On July 14, 1995 the Board unanimously approved, subject to
shareholder approval, certain amendments to the 1992 Equity
Compensation Plan For Non-Employee Directors (as amended, the
"Amended Directors Plan"). Pursuant to the Amended Directors Plan,
a total of 50,000 Common Shares are reserved for issuance to
members of the Board who do not serve as officers or employees of
the Corporation or any of its subsidiaries (the "Independent
Directors").
The Amended Directors Plan provides that Independent
Directors elected to serve as members of the Board at Annual
Meetings of Shareholders, or Special Meetings of Shareholders held
in lieu thereof ("Shareholders Meetings"), commencing with the
forthcoming Shareholders Meeting to be held on October 26, 1995,
through the 1998 Shareholders Meeting, unless the Plan is sooner
terminated by the Board, shall each be entitled to an award of
2,500 Common Shares upon his or her election or re-election, as the
case may be. Assuming the election at the Meeting of the
Independent Directors named in "Proposal No. 1: Election of
Directors" set forth elsewhere in this Proxy Statement, an
aggregate of 15,000 Common Shares will be issued to such
Independent Directors under the Amended Directors Plan.
Set forth below is a brief description of the material
provisions of the Amended Directors Plan which is qualified in its
entirety by the terms of the Amended Directors Plan. The complete
text of the Amended Directors Plan will be made available to any
shareholder upon written request addressed to the Secretary of the
Corporation.
Each annual award of 2,500 Common Shares (the "Annual Share
Awards") to each Independent Director elected at a Shareholders
Meeting shall be effected automatically on the business day next
succeeding such Shareholders Meeting. The Amended Directors Plan
provides that it is to terminate after the grant of Share Awards
immediately following the Shareholders Meeting to be held by the
Corporation in 1998 unless the Amended Directors Plan is sooner
terminated by the Board. The Amended Directors Plan expressly
provides that each of the Annual Share Awards shall be comprised of
2,500 Common Shares and expressly stipulates the time of granting
such Annual Share Awards and the requirement that all such Awards
be granted only to Independent Directors who have been elected at
the relevant Shareholders Meetings. Accordingly, while the Amended
Directors Plan is to be administered by the Compensation Committee
to be appointed by the Board, which will consist of Independent
Directors, relevant provisions of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, provide that, by reason of the
express automatic provisions of the Amended Directors Plan with
respect to the number of Common Shares subject to the Annual Share
Awards and the timing and conditions required for Annual Share
Awards to be granted thereunder, such Independent Directors will be
deemed "disinterested" for purposes of serving as members of the
Compensation Committee under the Amended Directors Plan.
The Amended Directors Plan also provides that the number of
Common Shares reserved for issuance thereunder is to be
appropriately adjusted in the event of a reorganization,
consolidation, reclassification, recapitalization, combination or
exchange of Common Shares, stock split, stock dividend or rights
offering or similar event affecting the Corporation's Common
Shares.
<PAGE>
By reason of the provisions of the Amended Directors Plan,
no person elected to the Board of the Corporation at any time other
than at a Shareholders Meeting, who would otherwise be deemed an
Independent Director under the Amended Directors Plan, shall be
entitled to receive Share Awards under the Amended Directors Plan
unless and until such person is elected as a director of the
Corporation by the shareholders of the Corporation at a subsequent
Shareholders Meeting.
Common Shares issued pursuant to the Annual Share Awards
will be acquired by the Independent Directors subject to the
restriction (required by Rule 16b-3) that none of such Common
Shares may be sold or otherwise transferred by such Independent
Directors within six months after the date of grant of each such
Annual Shares Awards. Subject to that restriction, however, the
Common Shares issued to each of the Independent Directors pursuant
to such Annual Share Awards shall be held by them subject only to
restrictions against their resale or transfer to the extent
required under the Securities Act of 1933, as amended.
The Board may at any time amend or terminate the Amended
Directors Plan, except that no amendment to the Amended Directors
Plan shall be made more than once every six months, other than to
comport with changes in the U.S. Internal Revenue Code, the
Employment Retirement Income Security Act, or the rules promulgated
thereunder.
On July 14, 1995, the Board determined to pay each
Independent Director a fee of $500 for each Board meeting attended
by such director and $250 for each Committee meeting so attended.
Such fees are in addition to Annual Share Awards granted to such
director under the Amended Directors Plan.
VOTE REQUIRED
Unless otherwise directed by a shareholder a Proxy will be
voted in favor of approval of the adoption of the amendments to the
Independent Directors Plan. Approval of such amendments requires
the affirmative vote of the holders of a majority of the
Corporation's outstanding Common Shares entitled to vote at the
Meeting.
The Board unanimously recommends that the shareholders vote
FOR adoption of the amendments to the Independent Directors Plan.
PROPOSAL NO. 4: RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
It is proposed that the shareholders ratify the selection of
Price Waterhouse as the independent accountants of the Corporation
for the fiscal year ending February 3, 1996.
Price Waterhouse has examined the financial statements of
the Corporation and its subsidiaries since the Corporation's 1989
fiscal year. A representative of Price Waterhouse will have the
opportunity to address the shareholders if he so desires and is
expected to be present at the Meeting. The representative will be
available to answer appropriate questions from shareholders.
The Board recommends a vote FOR ratification of the
appointment of the firm of Price Waterhouse to serve as the
Corporation's independent accountants for the fiscal year ending
February 3, 1996.
OTHER MATTERS
The Board is not aware of any matters to be presented for
action at the Meeting other than the matters referred to above and
does not intend to bring any other matters before the Meeting.
However, if other matters should properly come before the Meeting,
it is intended that the holders of Proxies will vote thereon in
their discretion.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the
next Annual Meeting of Shareholders of the Corporation (expected to
be held in June 1996) must be received by the Corporation for
inclusion in the Corporation's Proxy Statement on or prior to March
1, 1996.
COST OF SOLICITATION
The Corporation will pay the expenses for soliciting Proxies
for the Meeting. Solicitations of Proxies may be made by personal
calls upon, or telephone or telegraphic communications with,
shareholders or their representatives by directors, officers and
employees of the Corporation, none of whom will be compensated
specially for these services.
By Order of the Board of Directors
Marcie B. Davis,
Secretary
_X_ PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE PHARMHOUSE CORP.
Proxy Solicited on Behalf of the Board of Directors of the
Corporation for a Special Meeting in Lieu of the Annual Meeting of
Shareholders on October 26, 1995
The undersigned hereby constitutes and appoints Joseph Keller and
Kenneth A. Davis, each of them with full power to act without the
other, his true and lawful agents and proxies with full power of
substitution and resubstitution in each, to represent the
undersigned at a Special Meeting in Lieu of the Annual Meeting of
Shareholders of PHARMHOUSE CORP. to be held at 1177 Avenue of the
Americas, 2nd Floor, New York, N.Y., at 10:00 A.M. on October 26,
1995 and any adjournments thereof, on all matters before said
meeting.
1. ELECTION OF DIRECTORS - (except as marked to the
contrary):
____ FOR ____ WITHHOLD ____ FOR ALL EXCEPT
Nominees: Manfred Brecker, Kenneth A. Davis, Melvin Katz,
Joseph Keller, David Rubin, Raymond L. Steele, Marcie B.
Davis, Michael Feder and Peter Gerard.
INSTRUCTION: To withhold your vote for any nominee(s), mark
"For All Except" and write that nominee's name on the line
below
___________________________________________________________
2. PROPOSAL TO APPROVE THE CORPORATION'S 1995 STOCK OPTION
PLAN (Mark Only One)
____ FOR ____ WITHHOLD ____ FOR ALL EXCEPT
3. PROPOSAL TO APPROVE AMENDMENTS TO THE CORPORATION'S
1992 EQUITY COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
(Mark Only One)
____ FOR ____ WITHHOLD ____ FOR ALL EXCEPT
4. RATIFICATION OF APPOINTMENT OF PRICE WATERHOUSE AS
INDEPENDENT ACCOUNTANTS OF THE CORPORATION (Mark One Only)
____ FOR ____ WITHHOLD ____ FOR ALL EXCEPT
5. In their discretion, upon other matters as may properly
come before the meeting.
This proxy when properly executed will be voted in the manner
directed herein by the undersigned shareholder. If no direction is
made, this proxy will be voted FOR all the nominees listed, FOR
approval of the 1995 Stock Option Plan, FOR approval of the
amendments to the 1992 Equity Compensation Plan for Non-Employee
Directors and FOR ratification of the appointment of PRICE
WATERHOUSE as independent accountants.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY IN THE BOX BELOW
Date______________________,1995
___________________________________________________________
Stockholder sign above Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope
provided.
PHARMHOUSE CORP.
This proxy must be signed as name appears hereon. Executors,
administrators, trustees, etc. should give full title as such. If
signer is a corporation, please sign full corporate name by duly
authorized officer.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
PHARMHOUSE CORP.
1995 STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT
1.1 Establishment
Pharmhouse Corp., a New York corporation, hereby establishes
the Pharmhouse Corp. 1995 Stock Option Plan (the "Plan").
1.2 Purpose
The purpose of the Plan is to promote the interests of the
Company and its shareholders. The Plan permits the grant of stock
options and stock appreciation rights to the officers, directors,
and employees of the Company and its Affiliates in order to allow
them to participate in the Company's future long-term growth and
financial success and to enable the Company or an Affiliate to
attract and retain such persons by offering them proprietary
interests in the Company. The Plan is adopted effective as of the
later of (i) the Effective Date and (ii) the date on which the Plan
has been approved by the shareholders of the Company.
1.3 Effective Date
The Plan was adopted by the Company's Board of Directors on
and as of July 14, 1995 and will become effective as of such date
if approved by the Company's shareholders in accordance with Rule
16b-3(b) promulgated under the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"). If the Company's shareholders do not approve the
Plan on or prior to July 13, 1996, the Plan shall automatically
terminate as of the close of business on such date and any Options
granted hereunder shall thereupon terminate.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms are defined as
set forth below:
2.1 "Affiliate" means any corporation, partnership, association,
joint-stock company, trust, unincorporated association, subsidiary
or other entity (other than the Company) that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or
is under common control with the Company including, without limitation,
any member of an affiliated group of which the Company is a common
parent corporation as provided in Section 1504 of the Code.
2.2 "Agreement" or "Award Agreement" means, individually or
collectively, any agreement entered into pursuant to the Plan
pursuant to which an Award is granted to a Participant.
2.3 "Award" means a Stock Option or Stock Appreciation Right.
2.4 "Board of Directors" or "Board" means the Board of Directors
of the Company.
2.5 "Cause" shall mean, for purposes of whether and when a
Participant has incurred a Termination of Employment for Cause, any
act or omission which permits the Company to terminate the written
agreement or arrangement between the Participant and the Company or
an Affiliate for "cause" as defined in such agreement or
arrangement, or in the event there is no such agreement or
arrangement or the agreement or arrangement does not define the
term "cause," then Cause shall mean (a) the conviction of the
Participant for committing a felony under Federal law or the law of
the state in which such action occurred or (b) the willful and
deliberate failure on the part of the Participant to perform the
Participant's duties to the Company or an Affiliate in any material
respect.
2.6 "Change in Control" and "Change in Control Price" have the
meanings set forth in Section 8.2 and 8.3, respectively.
2.7 "Code" or "Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended, and any subsequent Internal Revenue
Code.
2.8 "Commission" means the United States Securities and Exchange
Commission or any successor agency.
2.9 "Committee" means the person or persons appointed by the Board
of Directors to administer the Plan, as further described in the
Plan.
2.10 "Common Shares" or "Shares" means the regular voting Common
Shares, $.01 par value per share, of the Company whether presently
or hereafter issued, and any other stock or security resulting from
adjustment thereof as described hereinafter or the common shares of
any successor to the Company which is designated for the purpose of
the Plan.
2.11 "Company" means Pharmhouse Corp., a New York corporation, and
includes any successor or assignee corporation or corporations into
which the Company may be merged, changed or consolidated; any
corporation for whose securities the securities of the Company
shall be exchanged; and any assignee of or successor to substantially
all of the assets of the Company.
2.12 "Disability" means a mental or physical illness that entitles
the Participant to receive benefits under the long term disability
plan of the Company or an Affiliate, if any such plan exists, or if
the Participant is not covered by such a plan or the Participant is
not an employee of the Company or an Affiliate, a mental or physical
illness that renders a Participant totally and permanently
incapable of performing the Participant's duties for the Company or
an Affiliate. Notwithstanding the foregoing, a Disability shall
not qualify under the Plan if it is the result of (i) a willfully
self inflicted injury or willfully self-induced sickness; or (ii)
an injury or disease contracted, suffered, or incurred while
participating in a criminal offense. The determination of
Disability shall be made by the Committee. The determination of
Disability for purposes of the Plan shall not be construed to be an
admission of disability for any other purpose.
2.13 "Disinterested Person" shall mean a person who is deemed a
disinterested person within the meaning set forth in Rule 16b-
3(d)(3), or any successor definition adopted by the Commission.
2.14 "Effective Date" means the date the Plan was adopted by the
Board of Directors.
2.15 "Exchange Act" has the meaning specified in Section 1.3.
2.16 "Fair Market Value" means the value determined on the basis
of the good faith determination of the Committee, without regard to
whether the Common Shares are restricted or represent a minority
interest, pursuant to the applicable method described below:
(a) if the Common Shares are listed on a national securities
exchange or quoted on the NASDAQ National Market System
("NASDAQ/NMS"), the closing price of the Common Shares on the
relevant date (or the average of the closing bid and asked prices
on such date if no trades of Common Shares were made on such date),
as reported by the principal national exchange on which such shares
are traded (in the case of an exchange) or by the NASDAQ/NMS, as
the case may be;
(b) if the Common Shares are not listed on a national
securities exchange or quoted on the NASDAQ/NMS, but are actively
traded in the over-the-counter market, the average of the closing
bid and asked prices for the Common Shares on the relevant date,
or
the most recent preceding date for which such quotations are
reported; and
(c) if, on the relevant date, the Common Shares are not
publicly traded or reported as described in (i) or (ii), the value
determined in good faith by the Committee.
2.17 "Grant Date" means the date that as of which an Award is
granted pursuant to the Plan.
2.18 "Incentive Stock Option" means any Stock Option intended to
be and designated as an "incentive stock option" within the meaning
of Section 422 of the Code.
2.19 "Nonqualified Stock Option" means an Option to purchase
Common Shares granted under the Plan other than an Incentive Stock
Option within the meaning of Section 422 of the Code.
2.20 "Option Period" means the period during which the Option
shall be exercisable in accordance with the Agreement and Article
VI.
2.21 "Option Price" means the price at which the Common Shares may
be purchased under an Option as provided in Section 6.3.
2.22 "Participant" means a person who satisfies the eligibility
conditions of Article V and to whom an Award has been granted by
the Committee under the Plan, and, in the event a Representative is
appointed for a Participant in accordance with the Plan, then the
term "Participant" shall mean such appointed Representative, or
successor Representative appointed, as the case may be. The term
shall also include a trust for the benefit of the Participant, the
Participant's parents, spouse or descendants, or a custodian under
a uniform gifts to minors act or similar statute for the benefit of
the Participant's descendants, to the extent permitted by the
Committee and not inconsistent with Rule 16b-3. Notwithstanding
the foregoing, the term "Termination of Employment" shall mean the
Termination of Employment of the Participant.
2.23 "Plan" means this Pharmhouse Corp. 1995 Stock Option Plan, as
the same may be amended hereafter from time to time.
2.24 "Representative" means (a) the person or entity acting as the
executor or administrator of a Participant's estate pursuant to the
last will and testament of a Participant or pursuant to the laws of
the jurisdiction in which the Participant had the Participant's
primary residence at the date of the Participant's death; (b) the
person or entity acting as the guardian or temporary guardian of a
Participant; or (c) the person or entity which is the beneficiary
of the Participant upon or following the Participant's death;
provided that only one of the foregoing shall be the Representative
at any point in time as determined under applicable law and
recognized by the Committee.
2.25 "Retirement" means the Participant's Termination of
Employment from active employment with the Company or an Affiliate
pursuant to the early retirement provisions of the applicable
pension plan of the Company or an Affiliate, if any, or on or after
attaining age 70.
2.26 "Rule 16b-3" means Rule 16b-3 promulgated by the Commission
under the Exchange Act, as amended from time to time, or any successor
regulation thereto.
2.27 "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
2.28 "Stock Appreciation Right" means a right granted under
Article VII.
2.29 "Stock Option" or "Option" means an option granted under
Article VI.
2.30 "Termination of Employment" means the occurrence of any act
or event, whether pursuant to an employment agreement or otherwise,
that actually or effectively causes or results in the person's
ceasing, for whatever reason, to be an officer, director or
employee of the Company or of any Affiliate, including, without
limitation, death, Disability, dismissal, severance at the election
of the Participant, Retirement, or severance as a result of the
discontinuance, liquidation, sale or transfer by the Company or its
Affiliates of all businesses owned or operated by the Company or
its Affiliates. A Termination of Employment shall occur to an
employee who is employed by an Affiliate if the Affiliate shall
cease to be an Affiliate and the Participant shall not immediately
thereafter become an employee of the Company or another Affiliate.
In addition, certain other terms used herein have definitions
given to them in the first place at which they are used.
ARTICLE III
ADMINISTRATION
3.1 Committee Structure and Authority. The Plan shall be
administered and interpreted by the Committee which, except as
provided herein, may be comprised of one or more persons. The
Committee shall be the Compensation Committee of the Board of
Directors, unless such committee does not exist or the Board
establishes a committee whose sole purpose is the administration of
the Plan. A majority of the Committee shall constitute a quorum at
any meeting thereof (including any meeting held by telephone
conference) and the acts of a majority of the members present, or
acts approved in writing by a majority of the entire Committee
without a meeting, shall be the acts of the Committee for purposes
of the Plan, except that the Committee may authorize any one or
more of its members or an officer of the Company to execute and
deliver documents on behalf of the Committee. On and after the
Effective Date, the Committee shall be comprised of two (2) or more
Disinterested Persons. A member of the Committee shall not
exercise any discretion respecting himself or herself under the
Plan. The Board shall have the authority to remove, replace or
fill any vacancy of any member of the Committee upon notice to the
Committee and the affected member. Any member of the Committee may
resign upon notice to the Board. The Committee may allocate among
one or more of its members, or may delegate to one or more of its
agents, such duties and responsibilities as it determines. In the
event no Committee has been appointed, the Plan shall be administered
by the Board, which shall have all of the powers of the Committee hereunder.
Among other powers and authority, the Committee shall have the
authority, subject to the terms of the Plan, to:
(a)select those persons to whom Awards may be granted from
time to time;
(b) determine whether and to what extent Incentive Stock
Options and Nonqualified Stock Options or any combination thereof
are to be granted hereunder;
(c) determine the number of Common Shares to be covered by
each Award granted hereunder;
(d) determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the Option Price, the
Option Period, any exercise restriction or limitation and any
exercise acceleration or forfeiture waiver regarding any Award and
the Common Shares relating thereto);
(e) adjust the terms and conditions, at any time or from time
to time, of any Award, subject to the limitations of Section 9.1;
(f) determine to what extent and under what circumstances
Common Shares and other amounts payable with respect to an Award
shall be deferred;
(g) determine under what circumstances an Award may be paid
for in cash or Common Shares;
(h) provide for the forms of Agreement to be utilized in
connection with the Plan;
(i) determine whether a Participant has a Disability;
(j) determine what securities law requirements are applicable
to the Plan, Awards, and the issuance of Common Shares and to
require of a Participant that appropriate action be taken to comply
with such requirements;
(k) cancel, with the consent of the Participant or as
otherwise provided in the Plan or an Agreement, outstanding
Awards;
(l) require, as a condition of the exercise of an Award or the
issuance or transfer of a certificate of Common Shares, the
withholding from a Participant of the amount of any federal, state
or local taxes as may be necessary to order for the Company or any
other employer to obtain a deduction or as may be otherwise
required by law;
(m) determine whether and with what effect an individual has
incurred a Termination of Employment;
(n) determine whether the Company or any other person has a
right or obligation to purchase Common Shares from a Participant
and, if so, the terms and conditions on which such Common Shares
are to be purchased;
(o) determine the restrictions or limitations on the transfer
of Common Shares;
(p) determine whether an Award is to be adjusted, modified or
purchased, or is to become fully exercisable, under the Plan or the
terms of an Agreement;
(q) adopt, amend and rescind such rules and regulations as, in
its opinion, may be advisable in the administration of the Plan; and
(r) appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.
The Committee shall have the authority to adopt, alter and
repeal such administrative rules, guidelines and practices
governing the Plan as it shall, from time to time, deem advisable,
to interpret the terms and provisions of the Plan and any Award
issued under the Plan (and any Agreement) and to otherwise
supervise the administration of the Plan.
Any determination made by the Committee pursuant to the
provisions of the Plan shall be made in its sole discretion, and in
the case of any determination relating to an Award, may be made at
the time of the grant of the Award or, unless in contravention of
any express term of the Plan or an Agreement, at any time
thereafter. All decisions made by the Committee pursuant to the
provisions of the Plan shall be final and binding on all persons,
including the Company and the Participants.
ARTICLE IV
STOCK SUBJECT TO PLAN
4.1 Number of Shares. Subject to the adjustment under Section
4.6, the total number of Common Shares reserved and available for
distribution pursuant to Awards under the Plan shall be five
hundred thousand (500,000) Common Shares authorized for issuance on
the Effective Date. Such shares may consist, in whole or in part,
of authorized and unissued shares or treasury shares.
4.2 Release of Shares. Subject to Section 7.3(f), if any Common
Shares that have been optioned cease to be subject to an Award, if
any Common Shares that are subject to any Award are forfeited or if
any Award otherwise terminates without the issuance to the Participant
of Common Shares hereunder, such Shares, in the discretion of the Committee,
may again be available for distribution in connection with Awards under the
Plan.
4.3 Restrictions on Shares. Common Shares issued upon exercise of
an Award shall be subject to the terms and conditions specified
herein and to such other terms, conditions and restrictions as the
Committee, in its sole discretion, may determine or provide in the
Award Agreement. The Company shall not be required to issue or
deliver any certificates for Common Shares, cash or other property
prior to (i) the listing of such shares on any stock exchange (or
other inter-dealer quotation systems or public market) on which the
Common Shares may then be listed (or regularly traded), (ii) the
completion of any registration or qualification of such shares
under federal or state law, or any ruling or regulation of any
government body which the Committee determines to be necessary or
advisable, and (iii) the satisfaction of any applicable withholding
obligation in order for the Company or an Affiliate to obtain a
deduction with respect to the exercise of an Award or as may
otherwise be required by law. The Company may cause any
certificate for any Common Shares to be delivered to be properly
marked with a legend or other notation reflecting the limitations
on transfer of such Common Shares as provided in the Plan or as the
Committee may otherwise require. The Committee may require any
person exercising an Award to make such representations and furnish
such information as it may consider appropriate in connection with
the issuance or delivery of the Common Shares in compliance with
applicable law or otherwise. Fractional shares shall not be
delivered, but shall be rounded to the next lower whole number of
shares.
4.4 Shareholder Rights. No person shall have any rights of a
shareholder as to Common Shares subject to an Award until, after
proper exercise of the Award or other action required, such Shares
shall have been recorded on the Company's official shareholder
records as having been issued or transferred. No adjustment shall
be made for cash dividends or other rights for which the record
date is prior to the date such shares are recorded as issued or
transferred in the Company's official shareholder records, except
as provided herein or in an Agreement.
4.5 Anti-Dilution. In the event of any Company stock dividend,
stock split combination or exchange of shares, recapitalization or
other change in the capital structure of the Company, corporate
separation or division of the Company (including, but not limited
to, a split-up, spin-off, split-off or distribution to Company
shareholders other than a normal cash dividend), sale by the
Company of all or a substantial portion of its assets (measured on
either a stand-alone or consolidated basis), reorganization, rights
offering, a partial or complete liquidation, or any other corporate
transaction or event involving the Company and having an effect
similar to any of the foregoing, then the Committee shall adjust or
substitute, as the case may be, the number of Common Shares available
for Awards under the Plan, the number of Common Shares
covered by outstanding Awards, the exercise price per share of
outstanding Awards, or new or amended securities, and any other
characteristics or terms of the Awards as the Committee shall deem
necessary or appropriate to reflect equitably the effects of such
changes to the Participants; provided, however, that any fractional
shares resulting from any such adjustment shall be eliminated by
rounding to the next lower whole number of shares with appropriate
payment for such fractional share as shall reasonably be determined
by the Committee.
ARTICLE V
ELIGIBILITY
5.1 Eligibility. Except as herein provided, the persons who
shall
be eligible to participate in the Plan and be granted Awards shall
be those persons who are officers, directors or employees of the
Company or any Affiliate who shall be in a position, in the opinion
of the Committee, to make contributions to the growth, management,
protection and success of the Company and its Affiliates. Of those
persons described in the preceding sentence, the Committee may,
from time to time, select persons to be granted Awards and shall
determine the terms and conditions with respect thereto. In making
any such selection and in determining the form of the Award, the
Committee may give consideration to the functions and
responsibilities of the person's contributions to the Company and
its Affiliates, the value of the individual's service to the
Company and its Affiliates and such other factors deemed relevant
by the Committee. The Committee may designate in writing that a
person who would otherwise be eligible to participate in the Plan
will not be eligible to participate in the Plan.
ARTICLE VI
STOCK OPTIONS
6.1 General. The Committee shall have authority to grant Stock
Options under the Plan at any time or from time to time. Stock
Options may be either Incentive Stock Options or Nonqualified Stock
Options. A Stock Option shall entitle the Participant to receive
Common Shares upon exercise of such Stock Option, subject to the
Participant's satisfaction in full of any conditions, restrictions
or limitations imposed by the Company in accordance with the Plan
or an Agreement (the terms and provisions of which may differ from
other Agreements) including without limitation, payment of the
Option Price.
6.2 Grant and Exercise. The grant of a Stock Option shall occur
as of the date the Committee determines. Each Stock Option granted
under the Plan shall be evidenced by an Agreement, in a form
approved by the Committee, which shall embody the terms and
conditions of such Option and which shall be subject to the express
terms and conditions set forth in the Plan. Such Agreement shall
become effective upon execution by the Participant. Only a person
who is a common-law employee of the Company, (including, without
limitation, an employee within the meaning of Treasury Regulation
S 31.3401(c)-1), any parent corporation of the Company or a
subsidiary (as such terms are defined in Section 424 of the Code)
on the date of grant shall be eligible to be granted an Option
which is intended to be and is an Incentive Stock Option. To the
extent that any Stock Option is not (a) designated as an Incentive
Stock Option or (b) even if so designated, does not qualify as an
Incentive Stock Option, it shall constitute a Nonqualified Stock
Option. Anything in the Plan to the contrary notwithstanding, no
term of the Plan relating to Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be exercised, so as to disqualify
the Plan under Section 422 of the Code or, without the consent of
the Participant affected, to disqualify any Incentive Stock Option
under such Section 422. The aggregate Fair Market Value (determined
at the time an Incentive Stock Option is granted) of the Common Shares
with respect to which Incentive Stock Options are first exercisable by
a Participant during any calendar year (under the Plan and any other
plans of the Company) may not exceed $100,000.
6.3 Terms and Conditions. Stock Options shall be subject to such
terms and conditions as shall be determined by the Committee,
including the following:
(a) Option Period. The Option Period of each Stock Option
shall be fixed by the Committee; provided that no Nonqualified
Stock Option shall be exercisable more than ten (10) years after
the date the Stock Option is granted. In the case of an Incentive
Stock Option, the Option Period shall not exceed ten (10) years
from the date of grant or five (5) years in the case of an
individual who owns more than ten percent (10%) of the combined
voting power of all classes of stock of the Company, a corporation
which is a parent corporation of the Company or any subsidiary of
the Company (each as defined in Section 424 of the Code). No
Option shall be granted more than ten (10) years from the date the
Plan is adopted by the Company.
(b) Option Price. The Option Price per Common Share
purchasable under an Option shall be determined by the Committee.
If such Option is intended to qualify as an Incentive Stock Option,
the Option Price per share shall be not less than the Fair Market
Value per share on the date the Option is granted, or where granted
to an individual who owns or who is deemed to own stock possessing
more than ten percent (10%) of the combined voting power of all
classes of stock of the Company, a corporation which is a parent
corporation of the Company or any subsidiary of the Company (each
as defined in Section 424 of the Code), not less than one hundred
ten percent (110%) of such Fair Market Value per share. The Option
Price per share of any Nonqualified Stock Options shall be
determined by the Committee but shall not be less than 25% of the
Fair Market Value per share on the date such Stock Option is
granted.
(c) Exercisability. Subject to Section 8.1, Stock Options
shall be exercisable at such time or times and subject to such
terms and conditions as shall be determined by the Committee;
provided, however, that in no event shall an Option granted to an
officer of the Company (as determined in accordance with Rule 16b-
3) be exercisable prior to (i) six months after the date of grant
or (ii) six months after the Plan is approved by the Company's
shareholders. No Option shall be exercisable prior to the date
upon which the Plan is approved by the Company's shareholders. If
the Committee provides that any Stock Option is exercisable only in
installments, the Committee may at any time waive such installment
exercise provisions, in whole or in part. In addition, the
Committee may at any time accelerate the exercisability of any
Stock Option.
(d) Method of Exercise. Subject to the provisions of this
Article VI, a Participant may exercise a Stock Option, in whole or
in part, at any time during the Option Period by the Participant's
giving written notice of exercise on a form provided by the
Committee (if available) to the Company specifying the number of
Common Shares subject to the Stock Option to be purchased. Such
notice shall be accompanied by payment in full of the purchase
price by cash or check or such other form of payment as the Company
may accept. If approved by the Committee, payment in full or in
part may also be made (i) by delivering Common Shares already owned
by the Participant having a total Fair Market Value on the date of
such delivery equal to the Option Price; (ii) by the execution and
delivery of a note or other evidence of indebtedness (and any
security agreement thereunder satisfactory to the Committee and
permitted in accordance with Section 6.3(e)); (iii) by authorizing
the Company to retain Common Shares which would otherwise be
issuable upon exercise of the Option having a total Fair Market
Value on the date of delivery equal to the Option Price; (iv) by
the delivery of cash by a broker-dealer to whom the Participant has
submitted an irrevocable notice of exercise; or (v) by any
combination of the foregoing approved by the Committee. In the
case of an Incentive Stock Option, the right of a Participant to
make a payment in the form of previously owned Common Shares of the
same class as the Common Shares subject to the Stock Option may be
authorized only at the time the Stock Option is granted. No Common
Shares shall be issued until full payment therefor has been made.
A Participant shall have all of the rights of a shareholder of the
Company only upon issuance of the Common Shares by the Company
pursuant to the provisions of Section 4.4.
(e) Company Loan or Guarantee. Upon the exercise of any
Option and subject to the pertinent Agreement and the sole
discretion of the Committee, the Company may at the request of the
Participant:
(i) lend to the Participant, with recourse, an amount
equal to such portion of the Option Price as the Committee may
determine; or
(ii) guarantee a loan obtained by the Participant from a
third-party for the purpose of tendering the Option Price.
The terms and conditions of any loan or guarantee, including
the term, interest rate, and any security interest thereunder,
shall be determined by the Committee, except that no extension of
credit or guarantee shall obligate the Company for an amount to
exceed the lesser of the aggregate Fair Market Value of the Common
Shares on the date of exercise, less the par value of the Common
Shares to be purchased upon the exercise of the Award, or the
amount permitted under applicable laws or the regulations and rules
of the Federal Reserve Board and any other governmental agency
having jurisdiction.
(f) Non-transferability of Options. Except as provided
herein, no Stock Option shall be transferable by the Participant
other than by will or by the laws of descent and distribution, and
all Stock Options shall be exercisable during the Participant's
lifetime only by the Participant. The Committee may permit a Stock
Option to be transferred pursuant to a domestic relations order
which would be a "qualified domestic relations order" as defined in
Section 414 of the Code if such section applied to the Stock
Option, but only to the extent consistent with a Stock Option's
intended status as an Incentive Stock Option.
6.4 Termination by Reason of Death. If a Participant incurs a
Termination of Employment due to death, any unexpired and
unexercised Stock Option held by such Participant shall thereafter
be fully exercisable for a period of one (1) year (or such longer
period as the Committee may specify) immediately following the date
of such death or until the expiration of the Option Period, whichever
period is the shorter.
6.5 Termination by Reason of Disability. If a Participant incurs
a Termination of Employment due to a Disability, any unexpired and
unexercised Stock Option held by such Participant shall thereafter
be fully exercisable by the Participant for the period of one (1)
year (or such other period as the Committee may specify)
immediately following the date of such Termination of Employment or
until the expiration of the Option Period, whichever period is
shorter, and the Participant's death at any time following such
Termination of Employment due to Disability shall not affect the
foregoing. In the event of Termination of Employment by reason of
Disability, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of
Section 422 of the Code, such Stock Option will thereafter be
treated as a Nonqualified Stock Option.
6.6 Other Termination. Unless otherwise provided in an Agreement
or determined by the Committee, if a Participant incurs a
Termination of Employment due to Retirement, voluntary termination
by the Participant without the approval of the Board, or the
Termination of Employment is involuntary on the part of the
Participant (but is not due to death, Disability or with Cause),
any Stock Option held by such Participant shall thereupon
terminate, except that such Stock Option, to the extent then
exercisable, may be exercised for the lesser of the ninety day
period commencing with the date of such Termination of Employment
or until the expiration of the Option Period. If a Participant
incurs a Termination of Employment which is either (a) voluntary on
the part of the Participant (and is not due to Retirement) or (b)
with Cause, any Stock Option held by such Participant shall
terminate immediately. The death or Disability of a Participant
after a Termination of Employment otherwise provided herein shall
not extend the exercisability of the time permitted to exercise an
Option.
ARTICLE VII
STOCK APPRECIATION RIGHTS
7.1 General. The Committee shall have authority to grant Stock
Appreciation Rights under the Plan at any time or from time to
time. Subject to the Participant's satisfaction in full of any
conditions, restrictions or limitations imposed in accordance with
the Plan or an Agreement, a Stock Appreciation Right shall entitle
the Participant to surrender to the Company the Stock Appreciation
Right and to be paid in consideration therefor, in Common Shares,
cash or a combination thereof as herein provided, the amount
described in Section 7.3(b).
7.2 Grant. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the
Plan, in which case the exercise of the Stock Appreciation Right
shall require the cancellation of a corresponding portion of the
Stock Option. In the case of a Nonqualified Stock Option, such
rights may be granted either at or after the time of grant of such
Stock Option. In the case of an Incentive Stock Option, such
rights may be granted only at the time of grant of such Stock
Option. A Stock Appreciation Right may also be granted on a stand
alone basis. The grant of a Stock Appreciation Right shall occur
as of the date the Committee determines. Each Stock Appreciation
Right granted under the Plan shall be evidenced by an Agreement,
which shall embody the terms and conditions of such Stock
Appreciation Right and which shall be subject to the terms and
conditions set forth in the Plan.
7.3 Terms and Conditions. Stock Appreciation Rights shall be
subject to such terms and conditions as shall be determined by the
Committee, including the following:
(a) Period and Exercise. The term of a Stock Appreciation
Right shall be established by the Committee. If granted in
conjunction with a Stock Option, the Stock Appreciation Right shall
have a term which is the same as the Option Period and shall be
exercisable only at such time or times and to the extent the
related Stock Options would be exercisable in accordance with the
provisions of Article VI. A Stock Appreciation Right which is
granted on a stand alone basis shall be for such period and shall
be exercisable at such times and to the extent provided in an
Agreement, but shall be for a term not to exceed the term set forth
in the last sentence of Section 6.3(a). Stock Appreciation Rights
shall be exercised by the Participant's giving written notice of
exercise on a form provided by the Committee (if available) to the
Company specifying the portion of the stock Appreciation Right to
be exercised.
(b) Amount. Upon the exercise of a Stock Appreciation Right,
a Participant shall be entitled to receive an amount in cash,
Common Shares, or both, as determined by the Committee or as
otherwise permitted in an Agreement equal in value to the excess of
the Fair Market Value per Common Share over the Option Price per
Common Share specified in the related Agreement multiplied by the
number of shares in respect of which the Stock Appreciation Right
shall have been exercised. In the case of a Stock Appreciation
Right granted on a stand alone basis, the Agreement shall specify
the value to be used in lieu of the Option Price per Common
Share. The aggregate Fair Market Value of the Common Shares shall be
determined as of the date of exercise of such Stock Appreciation
Right.
(c) Special Rules. In the case of Stock Appreciation Rights
relating to Stock Options held by Participants who are actually or
potentially subject to Section 16(b) of the Exchange Act:
(i) the Committee may require that such Stock
Appreciation Rights be exercised only in accordance with the
applicable "window period" provisions of Rule 16b-3;
(ii) the Committee may provide that the amount to be paid
upon exercise of such Stock Appreciation Rights (other than those
relating to Incentive Stock Options) during a Rule 16b-3 "window
period" shall be based on the highest mean sales price of the
Common Shares on the principal exchange on which the Common Shares
are traded, NASDAQ/NMS, NASDAQ Small Cap Market or other relevant
market for determining value on any day during such "window
period"; and
(iii) no Stock Appreciation right shall be exercisable
during the first six months of its term.
(d) Non-transferability of Stock Appreciation Rights. Stock
Appreciation rights shall be transferable only when and to the
extent that a Stock Option would be transferable under the Plan
unless otherwise provided in an Agreement.
(e) Termination. A Stock Appreciation Right shall terminate
at such time as a Stock Option would terminate under the Plan,
unless otherwise provided in an Agreement.
(f) Effect on Shares Under the Plan. Upon the exercise of a
Stock Appreciation Right, the Stock Option or part thereof to which
such Stock Appreciation Right is related shall be deemed to have
been exercised for the purpose of the limitation set forth in
Section 4.2 on the number of Common Shares to be issued under the
Plan, but only to the extent of the number of Common Shares covered
by the Stock Appreciation Right at the time of exercise based on
the value of the Stock Appreciation Right at such time as
determined in accordance with Section 7.3(b) hereof.
(g) Incentive Stock Option. A Stock Appreciation Right
granted in tandem with an Incentive Stock Option shall not be
exercisable unless the Fair Market Value of the Common Shares on
the date of exercise exceeds the Option Price. In no event shall
any amount paid pursuant to the Stock Appreciation Right exceed the
difference between the Fair Market Value on the date of exercise
and the Option Price.
ARTICLE VIII
CHANGE IN CONTROL PROVISIONS
8.1 Impact of Event. Notwithstanding any other provision of the
Plan to the contrary, in the event of a Change in Control (as
defined in Section 8.2) the Committee, in its sole discretion, may
determine:
(a) that any Stock Appreciation Rights and Stock Options
outstanding as of the date such Change in Control is determined to
have occurred and not then exercisable shall become fully exercisable
to the full extent of the original; or
(b) with respect to Awards outstanding as of the date of such
Change in Control, to substitute or assume for such Awards a
corresponding new Award under the plan of the acquired corporation,
provided that (a) the excess of the aggregate Fair Market Value of
shares subject to the Award immediately after the substitution or
assumption above the aggregate award price of such new Shares is
not more than the similar excess subject to the Award immediately
before such substitution and (b) the new Award does not give the
Participant additional benefits, including any extension of the
exercise period, all in accordance with Section 424(a) of the
Code.
Notwithstanding any other provision of the Plan, in the event
of a Change in Control, unless the Committee shall provide
otherwise in an Agreement, a Participant shall have the right,
whether or not the Award is fully exercisable or may be otherwise
realized by the Participant by giving notice during the 60-day
period from and after a Change in Control to the Company, to elect
to surrender all or part of the Award to the Company and to receive
cash, within 30 days of such notice, in an amount equal to the
amount by which the "Change in Control Price" (as defined in
Section 8.3) per Common Share on the date of such election shall
exceed the amount which the Participant must pay to exercise the
Award per Common Share under the Award (the "Spread") multiplied by
the number of Common Shares granted under the Award as to which the
right granted hereunder shall have been exercised; provided,
however, that if the end of such 60-day period from and after a
Change in Control is within six months of the date of grant of the
Award held by a Participant who is an officer or director of the
Company (within the meaning of Section 16(b) of the Exchange
Act), such Award shall be cancelled in exchange for a cash payment to
the Participant, effected on the day which is six months and one day
after the date of grant of such Award, equal to the Spread
multiplied by the number of Common Shares granted under the
Award. With respect to any Participant who is an officer or director of
the Company (within the meaning of Section 16(b) of the Exchange
Act), the 60-day period shall be extended, if necessary, to include
the "window period" of Rule 16(b)-3 which first commences on or
after the date of the Change in Control, and the Committee shall
have sole discretion to approve the Participant's exercise
hereunder.
8.2 Definition of Change in Control. For purposes of the Plan, a
"Change in Control" shall mean the happening of any of the
following events:
(a) (i) An acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act (a "Person") of the beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of the then
outstanding Common Shares of the Company (the "Outstanding Company
Common Shares") or the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities") or (ii) the approval by the shareholders of the
Company of a reorganization, merger, consolidation, complete
liquidation or dissolution of the Company, the sale or disposition
of all or substantially all of the assets of the Company or similar
corporate transaction (in each case referred to in this Section 8.2
as a "Corporate Transaction") or, if consummation of such Corporate
Transaction is subject, at the time of such approval by
shareholders, to the consent of any government or governmental
agency, the obtaining of such consent (either explicitly or
implicitly); provided such acquisition of beneficial ownership or
such Corporation Transaction would result in any person (other than
the beneficial holders of the Outstanding Common Shares immediately
prior to the Corporate Transaction) beneficially owning (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) following
the acquisition or Corporate Transaction 25% or more of the
Outstanding Company Common Shares or 25% or more of the Outstanding
Company Voting Securities; excluding, however any acquisition by
any subsidiary of the Company or by an employee benefit plan (or
related trust) sponsored or maintained by the Company or an
Affiliate; or
(b) A change in the composition of the Board such that the
individuals who constitute the Board (such Board shall be
hereinafter referred to as the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided,
however, for purposes of this Section 8.2(b), that any individual
who becomes a member of the Board subsequent to the Effective Date
of the Plan, whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of those individuals who are members of the Board and who
were also members of the Incumbent Board (or deemed to be such
pursuant to this proviso) shall be considered as though such
individual were a member of the Incumbent Board; provided, further,
however that any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
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 shall not be so considered as a member of the
Incumbent Board.
(c) Change in Control Price. For purposes of the Plan,
"Change in Control Price" means the higher of (a) the highest
reported sales price of a Common Share in any transaction reported
on the principal exchange on which such shares are listed or on
NASDAQ/NMS or NASDAQ Small Cap Market during the 60-day period
prior to and including the date of a Change of Control or (b) if
the Change in Control is the result of a tender or exchange offer
or a Corporate Transaction, the highest price per Common Share paid
in such tender or exchange offer or a Corporate Transaction, except
that, in the case of Incentive Stock Options and Stock Appreciation
Rights relating to Incentive Stock Options, such price shall be
based only on the Fair Market Value of the Common Shares on the
date such Incentive Stock Option is exercised. To the extent that
the consideration paid in any such transaction described above
consists all or in part of securities or other non-cash
consideration, the value of such securities or other non-cash
consideration shall be determined in the sole discretion of the
Committee.
ARTICLE IX
MISCELLANEOUS
9.1 Amendments and Termination. The Board may amend, alter, or
discontinue the Plan at any time, but no amendment, alteration or
discontinuation shall be made which would (a) impair the rights of
a Participant under a Stock Option or Stock Appreciation Right
theretofore granted without the Participant's consent, except such
an amendment made to cause the Plan to qualify for the exemption
provided by Rule 16b-3 or (b) disqualify the Plan from the
exemption provided by Rule 16b-3. In addition, no such amendment
shall be made without the approval of the Company's shareholders to
the extent such approval is required by law, the Plan or agreement.
The Committee may amend the Plan at any time provided that (a)
no amendment shall impair the rights of any Participant under any
Award theretofore granted without the Participant's consent, (b) no
amendment shall disqualify the Plan from the exemption provided by
Rule 16b-3, and (c) any amendment shall be subject to the approval
or rejection of the Board.
The Committee may amend the terms of any Award theretofore
granted, prospectively or retroactively, but no such amendment
shall impair the rights of any Participant without the
Participant's consent, except such an amendment made to cause the
Plan or Award to qualify for the exemption provided by Rule 16b-3.
The Committee may also substitute new Stock Options or Stock
Appreciation Rights for previously granted Stock Options or Stock
Appreciation Rights, including previously granted Stock Options or
Stock Appreciation Rights having higher Option Prices but no such
substitution shall be made which would impair the rights of
Participants under such Stock Option or Stock Appreciation Right
theretofore granted without the Participant's Consent.
Subject to the above provisions, the Board shall have
authority to amend the Plan to take into account changes in law and
tax and accounting rules, as well as other developments and to
grant Awards which qualify for beneficial treatment under such
rules without shareholder approval.
9.2 Unfunded Status of Plan. It is intended that the Plan be an
"unfunded" plan for incentive and deferred compensation purposes.
The Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to
deliver Common Shares or make payments; provided, however, that
unless the Committee otherwise determines, the existence of such
trusts or other arrangements is consistent with the "unfunded"
status of the Plan.
9.3 General Provisions.
(a) Representation. The Committee may require each person
purchasing or receiving shares pursuant to an Award to represent to
and agree with the Company in writing that such person is acquiring
the shares without a view to the distribution thereof. The
certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfers.
(b) No Additional Obligation. Nothing contained in the Plan
shall prevent the Company or an Affiliate from adopting other or
additional compensation arrangements for its employees.
(c) Withholding. No later than the date as of which an
amount first becomes includable in the gross income of the
Participant for Federal income tax purposes with respect to any
Award, the Participant shall pay to the Company (or other entity
identified by the Committee), or make arrangements satisfactory to
the Company or other entity identified by the Committee regarding
the payment of, any Federal, state, local or foreign taxes of any
kind required by law to be withheld with respect to such amount
required in order for the Company or an Affiliate to obtain a
current deduction. Unless otherwise determined by the Committee,
withholding obligations may be settled with Common Shares,
including Common Shares that are part of the Award that gives rise
to the withholding requirement provided that any applicable requirements
under Section 16 of the Exchange Act are satisfied. The obligations of
the Company under the Plan shall be conditioned on such payment or
arrangements, and the Company and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the Participant.
(d) Representation. The Committee shall establish such
procedures as it deems appropriate for a Participant to designate
a Representative to whom any amounts payable in the event of the
Participant's death are to be paid.
(e) Controlling Law. The Plan and all Awards made and
actions taken thereunder shall be governed by and construed in
accordance with the laws of the State of New York (other than its
laws respecting choice of law). The Plan shall be construed to
comply with all applicable law, and to avoid liability to the
Company, an Affiliate or a Participant, including, without
limitation, liability under Section 16(b) of the Exchange Act.
(f) Offset. Any amounts owed to the Company or an Affiliate
by a Participant of whatever nature may be offset by the Company
from the value of any Common Shares, cash or other item of value
under the Plan or an Agreement to be transferred to the
Participant, and no Common Shares, cash or other item of value
under the Plan or an Agreement shall be transferred unless and
until all disputes between the Company and the Participant have
been fully and finally resolved and the Participant has waived all
claims to such against the Company or an Affiliate.
(g) Limited Transfer During Offering. In the event there is
an effective registration statement under the Securities Act pursuant
to which Common Shares shall be offered for sale in an underwritten
offering, a Participant shall not, during the period requested by the
underwriters managing the registered public offering, effect any public
sale or distribution of Common Shares issued directly or indirectly
pursuant to an Award.
(h) Committee Discretion. The Committee may in its discretion
include in any Agreement an obligation that the Company purchase a
Participant's Common Shares received upon the exercise of an Award
(including the repurchase of any unexercised Options which have not
expired), or may obligate a Participant to sell Common Shares to
the Company upon such terms and conditions as the Committee may
determine and set forth in an Agreement.
(i) No Company Obligation. Except as required by law,
neither the Company, nor any Affiliate, shall have any duty or
obligation to affirmatively disclose to a record or beneficial
holder of Common Shares or an Option, and such record or beneficial
holders shall have no right to be advised of, any material
information regarding the Company or an Affiliate at any time prior
to, upon or in connection with the exercise of an Award or the
Company's purchase of Common Shares or an Award from such holder in
accordance with the terms hereof. The Company shall have no duty
or obligation to register the Common Shares.
(j) Transfer of Shares. A Participant may at any time make
a transfer of Common Shares received pursuant to the exercise of an
Award to his parents, spouse or descendants or to any trust for the
benefit of the foregoing or to a custodian under a uniform gifts to
minors act or similar statute for the benefit of any of the Participant's
descendants. Any transfer of shares received pursuant to the exercise of
an Award shall not be permitted or valid unless and until the transferee
agrees to be bound by the provisions of the Plan, and any provision
respecting Common Shares under the Agreement; provided however, that
"Termination of Employment" shall continue to refer to the Termination of
Employment of the Participant.
9.4 Mitigation of Excise Tax. If any payment or right accruing
to a Participant under the Plan (without the application of this
Section 9.4), either alone or together with other payments or
rights accruing to the Participant from the Company or an Affiliate
("Total Payments") would constitute a "parachute payment" (as
defined in Section 280G of the Code and regulations thereunder),
such payment or right shall be reduced to the largest amount or
greatest right that will result in no portion of the amount payable
or right accruing under the Plan being subject to an excise tax
under Section 4999 of the Code or being disallowed as a deduction
under Section 280G of the Code. The determination of whether any
reduction in the rights or payments under the Plan is to apply
shall be made by the Committee in good faith after consultation
with the Participant, and such determination shall be conclusive
and binding on the Participant. The Participant shall cooperate in
good faith with the Committee in making such determination and
providing the necessary information for this purpose. The
foregoing provisions of this Section 9.4 shall apply with respect
to any person only if, after reduction for any applicable federal
excise tax imposed by Section 4999 of the Code and federal income
tax imposed by the Code, the Total Payments accruing to such person
would be less than the amount of the Total Payments as reduced, if
applicable, under the foregoing provisions of the Plan and after
reduction for only federal income taxes.
9.5 Rights with Respect to Continuation of Employment. Nothing
contained herein shall be deemed to alter the relationship between
the Company or an Affiliate and a Participant, or the contractual
relationship between a Participant and the Company or an Affiliate
if there is a written contract regarding such relationship.
Nothing contained herein shall be construed to constitute a
contract of employment between the Company or an Affiliate and a
Participant. The Company or an Affiliate and each of the
Participants continue to have the right to terminate the employment
or service relationship at any time for any reason, except as
provided in a written contract. The Company or an Affiliate shall
have no obligation to retain the Participant in its employ or
service as a result of the Plan. There shall be no inference as to
the length of employment or service hereby, and the Company or an
Affiliate reserves the same rights to terminate the Participant's
employment or service as existed prior to the individual becoming
a Participant in the Plan.
9.6 Awards in Substitution for Awards Granted by Other
Corporations. Awards may be granted under the Plan from time to
time in substitution for awards held by employees, directors or
service providers of other corporations who are about to become
officers, directors or employees of the Company or an Affiliate as
the result of a merger or consolidation of the employing
corporation with the Company or an Affiliate, or the acquisition by
the Company or an Affiliate of the assets of the employing
corporation, or the acquisition by the Company or Affiliate of the
stock of the employing corporation, as the result of which it
becomes a designated employer under the Plan. The terms and
conditions of the Awards so granted may vary from the terms and
conditions set forth in the Plan at the time of such grant as the
majority of the members of the Committee may deem appropriate to
conform, in whole or in part, to the provisions of the awards in
substitution for which they are granted.
9.7 Procedure for Adoption. Any Affiliate of the Company may by
resolution of such Affiliate's board of directors, with the consent
of the Board of Directors and subject to such conditions as may be
imposed by the Board of Directors, adopt the Plan for the benefit
of its employees as of the date specified in the board resolution.
9.8 Procedure for Withdrawal. Any Affiliate which has adopted the
Plan may, by resolution of such Affiliate's board of directors,
with the consent of the Board and subject to such conditions as may
be imposed by the Board of Directors, terminate its adoption of the
Plan.
9.9 Delay. If at the time a Participant incurs a Termination of
Employment (other than for Cause) or if at the time of a Change in
Control, the Participant is subject to "short-swing" liability
under Section 16 of the Exchange Act, any time period provided for
under the Plan or an Agreement shall be suspended and delayed
during the period the Participant would be subject to such
liability, but not more than six (6) months and one (1) day and not
to exceed the Option Period, or the period for exercise of a Stock
Appreciation Right as provided in the Agreement, whichever is
shorter. The Company shall have the right to suspend or delay any
time period described in the Plan or an Agreement if the Committee
shall determine that the action may constitute a violation of any
law or result in liability under any law to the Company, an
Affiliate or a shareholder of the Company until such time as the
action required or permitted shall not constitute a violation of
law or result in liability to the Company, an Affiliate or a
shareholder of the Company. The Committee shall have the
discretion to suspend the application of the provisions of the Plan
required solely to comply with Rule 16b-3 if the Committee shall
determine that Rule 16b-3 does not apply to the Plan.
9.10 Headings. The headings contained in the Plan are for
reference purposes only and shall not affect the meaning or
interpretation of the Plan.
9.11 Severability. If any provision of the Plan shall for any
reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not effect any other provision hereby, and
the Plan shall be construed as if such invalid or unenforceable
provision were omitted.
9.12 Successors and Assigns. The Plan shall inure to the benefit
of and be binding upon each successor and assign of the Company.
All obligations imposed upon a Participant, and all rights granted
to the Company hereunder, shall be binding upon the Participant's
heirs, legal representatives and successors and permitted assigns.
9.13 Entire Agreement. The Plan and the Agreement constitute the
entire agreement with respect to the subject matter hereof and
thereof, provided that in the event of any inconsistency between
the Plan and the Agreement, the terms and conditions of the Plan
shall control.
AMENDMENTS TO
PHARMHOUSE CORP.
(formerly S.E. Nichols Inc.)
1992 EQUITY COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORS
JULY 14, 1995
A. Background
On April 22, 1992, Pharmhouse Corp. (formerly known as S.E.
Nichols Inc.) (the "Company") adopted its 1992 Equity Compensation
Plan for Non-Employee Directors (the "Plan") providing for annual
grants of restricted stock awards to Directors of the Company who
are not officers or employees (as defined in the Plan) of the
Company. The Plan authorizes the grant of an aggregate of 11,494
Shares to non-employee Directors of the Company. Pursuant to the
Plan, each such Director is entitled to receive an Annual Grant of
460 Shares upon being elected as a member of the Board at a
Shareholders Meeting, through the 1996 Shareholders Meeting. All
references herein to numbers of Shares reflect the one for 4.35
reverse split of the Company's Shares effected by the Company in
April 1993.
The amendments to the Plan set forth herein (the "Amendments")
were adopted by the Board on July 14, 1995, subject to approval by
the Company's shareholders.
Capitalized terms used herein which are defined in the Plan
shall have the respective meanings ascribed thereto in the Plan.
B. Amendments to the Plan
Pursuant to Section 10 of the Plan, the Plan is hereby amended
as follows:
1. All references in the Plan to "S.E. Nichols Inc." shall
refer to "Pharmhouse Corp." The term "Company", as used in the
Plan, shall mean Pharmhouse Corp., a New York corporation formerly
known as S.E. Nichols Inc.
2. The first sentence of Section 4.1 of the Plan is hereby
deleted in its entirety and the following sentence shall be
inserted in its place:
"Fifty thousand (50,000) Shares are authorized for issuance
under the Plan in accordance with the provisions of the Plan
and subject to such restrictions or other provisions as the
Committee may from time to time deem necessary."
3. The first sentence of Section 6.1 of the Plan is hereby
deleted in its entirety and the following sentence shall be
inserted in its place:
"In consideration for such person's services as a member of
the Board during each Annual Term of Service as a member of
the Board, each Director shall be entitled to receive a Share
Award of 2,500 Shares upon being elected as a member of the
Board at the relevant Shareholders Meeting (an "Annual
Grant"), commencing with the 1995 Shareholders Meeting."
4. Section 12 of the Plan shall be deleted in its entirety and
the following new Section 12 shall be inserted in its place:
"Section 12
Duration of the Plan
The Plan shall terminate immediately prior to the election of
Directors at the Company's 1998 Shareholders Meeting or at such
earlier time as may be determined by the Board, and no Share Award
shall be granted under the Plan after the date of its termination."
C. Effective Date
The Amendments were adopted by the Board on and as of July 14,
1995 and will become effective as of such date if approved by the
Company's shareholders at the 1995 Shareholders Meeting. In the
event the Company's shareholders do not approve the Amendments at
the 1995 Shareholders Meeting, the Amendments, other than the
Amendments set forth in paragraph 1 above, shall automatically
terminate without further action by the Company or the Board.
