SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
(X) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
INTERSTATE JOHNSON LANE
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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 identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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(INTERSTATE/JOHNSON LANE LOGO)
INTERSTATE/JOHNSON LANE, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 21, 1997
------------------------------------------------------
TO THE SHAREHOLDERS OF
INTERSTATE/JOHNSON LANE, INC.
The annual meeting of the shareholders of Interstate/Johnson Lane, Inc.
(the "Company") will be held on Tuesday, January 21, 1997, at 3:00 P.M. at the
Radisson Plaza Hotel, 101 South Tryon Street, Charlotte, North Carolina, for the
following purposes:
(1) To consider and act upon a proposal to amend the Company's
Certificate of Incorporation and By-Laws to provide for the
classification of the Company's Board of Directors into three classes.
(2) To elect nine persons to serve as Directors for staggered
one-, two- and three-year terms.
(3) To ratify the appointment of Coopers & Lybrand L.L.P. as the
Company's independent certified public accountants for the fiscal year
ending September 30, 1997.
(4) To amend the Company's Restated Stock Award Plan as of
10/21/96 to increase the shares available for issuance under that Plan
by 1,000,000 shares to a total of 2,800,000 shares.
(5) To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed November 29, 1996, as the record date
for the determination of shareholders entitled to notice of and to vote at the
meeting.
Michael D. Hearn, Secretary
Dated: December 17, 1996
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AFTER VOTING THE ENCLOSED PROXY, PLEASE SIGN, DATE AND MAIL IN THE ENCLOSED
ENVELOPE SO AS TO INSURE A QUORUM AT THE MEETING. THIS IS IMPORTANT WHETHER YOU
OWN FEW OR MANY SHARES. DELAY IN RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO
ADDITIONAL EXPENSE.
- --------------------------------------------------------------------------------
<PAGE>
INTERSTATE/JOHNSON LANE, INC.
INTERSTATE TOWER
POST OFFICE BOX 1012
CHARLOTTE, NORTH CAROLINA 28201-1012
-------------------------
PROXY STATEMENT
-------------------------
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Interstate/Johnson Lane, Inc. (the
"Company") for use at the annual meeting of shareholders of the Company to be
held on Tuesday, January 21, 1997, and at any adjournment thereof. Unless the
context requires otherwise, all references in this proxy statement to the
Company refer to Interstate/Johnson Lane, Inc. and its subsidiaries. This proxy
statement and the accompanying proxy card are first being mailed to shareholders
on or about December 17, 1996.
Only shareholders of record at the close of business on November 29,
1996, are entitled to vote at the meeting. As of such date, the Company had
outstanding and entitled to vote 6,883,105 shares of common stock, par value
$.20 per share (the "Common Stock"), and approximately 986 shareholders of
record. Each outstanding share entitles the shareholder of record to one vote.
All proxies which are properly executed and received prior to the
meeting will be voted at the meeting. If a shareholder specifies how the proxy
is to be voted on any of the business to come before the meeting, the proxy will
be voted in accordance with such specification. If no specification is made, the
proxy will be voted for the amendment of the Company's Certificate of
Incorporation and By-Laws, election of directors, amendment of the Company's
Stock Award Plan and for the ratification of the appointment of Coopers &
Lybrand L.L.P. as the Company's independent certified public accountants for the
fiscal year ending September 30, 1997. A proxy may be revoked, to the extent it
has not been exercised, at any time prior to its exercise, by written notice to
the Secretary of the Company, by executing and delivering a proxy with a later
date or by voting in person at the meeting.
<PAGE>
PROPOSAL 1
AMENDMENT AND RESTATEMENT OF CERTIFICATE OF INCORPORATION
AND BY-LAWS TO PROVIDE FOR A CLASSIFIED BOARD OF DIRECTORS
NOTE THAT THE AMENDMENT AND RESTATEMENT OF CERTIFICATE OF INCORPORATION AND
BY-LAWS TO PROVIDE FOR A CLASSIFIED BOARD OF DIRECTORS HAS BEEN APPROVED BY THE
BOARD OF DIRECTORS AND WILL BE VOTED UPON BY THE STOCKHOLDERS AT THE ANNUAL
MEETING. THE AMENDMENT AND RESTATEMENT IS WHOLLY CONTINGENT UPON APPROVAL BY THE
STOCKHOLDERS.
The Board of Directors believes that it is in the best interests of the
Company to amend the current Certificate of Incorporation and By-Laws to provide
for a classified Board of Directors. In this regard, the Company's Board of
Directors has unanimously adopted, subject to the approval of the stockholders
at the Annual Meeting, an Amended and Restated Certificate of Incorporation,
which would amend Article VI of the Company's present Certificate of
Incorporation and Amended and Restated By-Laws, which would amend Articles II
and III of the Company's present By-Laws, to provide that directors shall be
classified, with respect to the time for which they severally hold office, into
three classes.
Delaware law permits provisions in the Certificate of Incorporation and
By-Laws approved by stockholders that provide for a classified board of
directors. The classified Board of Directors will serve staggered one-, two- and
three-year terms with one class holding office initially for a term expiring at
the 1998 annual meeting of stockholders, another class holding office initially
for a term expiring at the 1999 annual meeting and another class holding office
initially for a term expiring at the 2000 annual meeting, with the members of
each class holding office until their successors have been duly elected and
qualified. At each annual meeting following this initial classification and
election, the successors to the class of directors whose terms expire at that
meeting would be elected for a term of office to expire at the third succeeding
annual meeting after their election and until their successors have been duly
elected and qualified.
The Board believes that this will allow the Nominating Committee and
the Board to focus more effectively on Board composition and continuity.
However, the classification of the Board will have the effect of making it more
difficult to change the composition of the entire Board. At least two annual
stockholders' meetings, instead of one, will generally be required for
stockholders to effect a change in control of the Board. Although the Company
has not encountered any lack of continuity or stability, the Board believes that
requiring a longer period of time to elect a majority of directors will help to
assure continuity and stability of the Company's affairs and policies in the
future since a majority of directors at any given time will have prior
experience as directors of the Company. It should also be noted that the
classification provision will apply to every election of directors, whether or
not a change in the Board would be desirable in the opinion of some or a
majority of the stockholders.
The full text of the proposed Amended and Restated Certificate of
Incorporation and By-Laws is attached as Exhibits A and B to this Proxy
Statement. Stockholders should read Exhibit A carefully before voting on this
Proposal. THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THIS
PROPOSAL.
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<PAGE>
PROPOSAL 2
ELECTION OF DIRECTORS
NOTE THAT THE CLASSIFICATION OF THE BOARD OF DIRECTORS HAS BEEN APPROVED BY THE
BOARD OF DIRECTORS AND WILL BE VOTED UPON BY THE STOCKHOLDERS AT THE ANNUAL
MEETING. THE CLASSIFICATION OF THE BOARD OF DIRECTORS IS WHOLLY CONTINGENT UPON
APPROVAL BY THE STOCKHOLDERS.
If Proposal 1 is approved by the shareholders, it is the intention of
the persons named in this Proxy Statement to divide the nominees identified
below into classes and elect them to serve as directors of the Company for the
terms set forth below and until their successors are elected and qualified.
Nominations are made in order to provide that Directors are divided into three
classes, as nearly equal in number as possible. THE BOARD UNANIMOUSLY RECOMMENDS
THAT STOCKHOLDERS VOTE FOR THIS PROPOSAL.
CLASS I DIRECTORS - TERM EXPIRING 1998
Parks H. Dalton
Claude S. Abernethy, Jr.
Peter R. Kellogg
CLASS II DIRECTORS - TERM EXPIRING 1999
Dudley G. Pearson
Edward C. Ruff
Grady G. Thomas, Jr.
CLASS III DIRECTORS - TERM EXPIRING 2000
John B. Ellis
J. Alex McMillan, III
James H. Morgan
If the proposal to amend the Company's Certificate of Incorporation and
By-Laws to provide for a classified Board of Directors is not approved, it is
the intention of the persons named in this Proxy Statement to vote for the
election of the nominees identified below to serve for a term of one year and
until their successors are elected and qualified.
Should any nominee be unable to serve (which is not anticipated), the
Proxy will be voted for the election of such other person as shall be designated
by the Board of Directors. Information with respect to each current director and
nominee, including biographical data for at least the last five years, is set
forth below:
Claude S. Abernethy, Jr.
Mr. Abernethy, age 69, was elected a director of the Company in June,
1985. He was a director of Interstate/Johnson Lane Corporation, the Company's
wholly owned subsidiary, ("IJL Corporation") from 1953 to 1987 and a Senior Vice
President from 1963 to the present date. He has been affiliated with IJL
Corporation since 1951. Mr. Abernethy is also a director of Air Transportation
Holding Company, an air freight company, and Ridgeview, Inc., a manufacturer of
sports socks and hosiery.
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<PAGE>
Parks H. Dalton
Mr. Dalton, age 67, served as Chairman of the Company from 1985 until
his retirement in 1988, and as Chief Executive Officer from 1985 to 1986. He was
re-elected as a director of the Company in July, 1990 and as Chairman and Chief
Executive Officer of the Company in September, 1990. He served as Chief
Executive Officer from September, 1990, until October, 1994, and still serves as
Chairman. He also was a director of IJL Corporation from 1985 until his
retirement in 1988, and served as Chief Executive Officer of IJL Corporation
from 1968 to 1988, President from 1968 to 1983, and Chairman from 1983 to 1988.
In November, 1990, he was re-elected Chairman and Chief Executive Officer of IJL
Corporation until October 1994 when he was elected Chairman, the position in
which he currently serves. Mr. Dalton is also a director of ISC Realty
Corporation, which is managing general partner of The Carolinas Real Estate
Fund, Marketplace Income Properties, Atlantic Income Properties Limited
Partnership, Interstate Land Investors I Limited Partnership, and Interstate
Land Investors II Limited Partnership; all publicly held real estate investment
partnerships.
John B. Ellis
Mr. Ellis, age 72, was elected a director of the Company in April,
1992. He retired in 1986 as Senior Vice President-Finance and Treasurer
from Genuine Parts Company, a national distributor of automotive
replacement parts, and is presently director emeritus of that firm. Mr.
Ellis is also a director of Flowers Industries, Inc., Hughes Supply
Inc., Integrity Music, Inc., Intermet Corp., Oxford Industries, Inc.
and UAP, Inc.
Peter R. Kellogg
Mr. Kellogg, age 54, was elected a director of the Company in
October, 1989. Mr. Kellogg is Senior Managing Director and Chief
Executive Officer of the investment firm of Spear, Leeds & Kellogg
("SLK"), having joined them in 1967. Mr. Kellogg is also the Chairman
of IAT Reinsurance Syndicate Ltd. The Troster Singer Division of SLK
provides execution services to the Company on certain transactions in
over-the-counter securities.
J. Alex McMillan, III
Mr. McMillan, age 64 was elected a director of the Company in
July, 1996. Mr. McMillan retired from the House of Representatives in
1994 after a decade of service. He is currently President of the
McMillan Group, a merchant banking and public affairs consulting firm
specializing in the health care field.
James H. Morgan
Mr. Morgan, age 49, was elected President and Chief Operating Officer
of both the Company and IJL Corporation in September, 1990, and as a director of
both in October, 1990. He served as Chief Operating Officer from September, 1990
until October, 1994, when he was elected President and Chief Executive Officer,
positions in which he currently serves. From July 1989 to September 1990, Mr.
Morgan was President of Morgan Investments, Inc., a privately owned and operated
investment advisory business. Mr. Morgan served as Vice President of the Company
from 1987 to 1989, and was a director and Senior Vice President of IJL
Corporation in various research, equity marketing and investment policy roles
from 1986 to 1989.
Dudley G. Pearson
Mr. Pearson, age 53, was elected a director of the Company in
January, 1991. Mr. Pearson is Senior Vice President and Regional
Manager, having joined IJL Corporation in January, 1987. Mr. Pearson
served as Branch Manager of the Atlanta Monarch office from October,
1988, through April, 1995.
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<PAGE>
Edward C. Ruff
Mr. Ruff, age 57, was elected a director of the Company in 1988 and has
served as its Chief Financial Officer since 1985. He has been a director, Senior
Vice President and Chief Financial Officer of IJL Corporation since he joined
that firm in 1976, and in April 1996 was elected a Senior Managing
Director/Chief Financial Officer. Mr. Ruff is also a director of ISC Realty
Corporation, which is the managing general partner of The Carolinas Real Estate
Fund, Marketplace Income Properties, Atlantic Income Properties Limited
Partnership, Interstate Land Investors I Limited Partnership and Interstate Land
Investors II Limited Partnership, all publicly held real estate investment
partnerships.
Grady G. Thomas, Jr.
Mr. Thomas, age 53, was elected a director of the Company in
November, 1988. He joined IJL Corporation in 1977, was elected Senior
Vice President in 1978 and served as a director from 1987 to 1991. Mr.
Thomas is responsible for specialized institutional products and is
Manager of The Interstate Group, a division of IJL Corporation.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Coopers & Lybrand L.L.P. as
independent certified public accountants to examine the Company's financial
statements for the fiscal year ending September 30, 1997. A representative of
such firm is expected to attend the meeting, to respond to appropriate questions
from shareholders present at the meeting and, if such representative desires, to
make a statement. THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THIS PROPOSAL.
PROPOSAL 4
AMENDMENT OF THE COMPANY'S 1987 STOCK AWARD PLAN
THE AMENDMENT OF THE COMPANY'S 1987 STOCK AWARD PLAN HAS BEEN APPROVED BY THE
BOARD OF DIRECTORS AND WILL BE VOTED UPON BY THE STOCKHOLDERS AT THE ANNUAL
MEETING.
The Board of Directors of the Company, subject to shareholder approval,
has approved certain amendments to the Interstate/Johnson Lane, Inc. Restated
Stock Award Plan, as adopted on October 19, 1987, and thereafter amended and
restated (the "Restated Plan"), to, among other things, increase the number of
shares of Common Stock that may be issued under the Restated Plan by an
additional 1,000,000, from 1,800,000 to 2,800,000 (the "Amendment").
The purpose of the Restated Plan generally is to secure for the Company
and its shareholders the benefits of the incentive inherent in Common Stock
ownership by the employees of the Company and Outside Directors who are largely
responsible for the Company's future growth and financial success, and to afford
such persons the opportunity to obtain or increase a proprietary interest in the
Company on a favorable basis and, thereby, have an opportunity to share in its
success. A copy of the Restated Plan is attached to this proxy statement as
Exhibit C, and the following description is qualified in its entirety by
reference thereto.
The Restated Plan will be administered, with respect to grants and
awards to employees hereunder, by a committee of the Board of Directors (the
"Compensation & Stock Plans Committee"). The Compensation & Stock Plans
Committee will consist of not less than two persons who shall be members of the
Board and who shall be "non-employee directors" within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Act").
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The Compensation & Stock Plans Committee shall select from among the
approximately 1,300 officers and employees of the Company those persons to whom
awards shall be made. In making its selections, the Compensation & Stock Plans
Committee shall take into account the nature of services rendered by such
persons, commissions or other compensation earned, the capacity of such persons
to contribute to the success of the Company and other factors in the discretion
of the Compensation & Stock Plans Committee. The maximum number of shares of
Common Stock that may be issued under the Restated Plan and the number of shares
reserved for issuance thereunder is 2,800,000 (subject to adjustment in certain
events, including changes in capitalization). The shares may be authorized and
unissued shares or treasury shares.
Four types of benefits may be granted under the plan: nonstatutory
stock options ("SAP Options"), stock appreciation rights ("SARs"), restricted
shares ("Restricted Shares") and unrestricted shares ("Unrestricted Shares").
The Compensation & Stock Plans Committee, subject to the provisions of the
Restated Plan, determines which employees will receive SAP Options, SARs,
Restricted Shares and Unrestricted Shares and the terms and conditions of such
awards.
NONSTATUTORY STOCK OPTIONS
A nonstatutory stock option granted under the Restated Plan entitles
the participant to purchase shares of Common Stock at an exercise price
determined by the Compensation & Stock Plans Committee. As of November 29, 1996,
the closing price for the Company's Common Stock on the New York Stock Exchange
was $13.125 per share.
Each SAP Option will be evidenced by an SAP Option agreement containing
such terms and conditions consistent with the Restated Plan as are approved by
the Compensation & Stock Plans Committee. SAP Option agreements may provide for
the exercise of SAP Options in whole or in part from time to time during the
term of the SAP Option or in such installments and at such times as the
Compensation & Stock Plans Committee may determine. The SAP Options are not
designed or intended to be "incentive stock options" under Section 422 of the
Code. The maximum term of each SAP Option will not exceed ten years and one
month from the date of grant.
An SAP Option shall terminate and may not be exercised if the
participant to whom it is granted ceases to be employed by the Company or its
subsidiary, except that the SAP Option agreement may, at the discretion of the
Compensation & Stock Plans Committee, provide for exercisability for up to one
year following termination in certain cases, such as disability or death. Each
SAP Option agreement may also provide for acceleration of exercisability in the
event of retirement, death or disability or in the event of an extraordinary
corporate event, such as a change in control of the Company or the commencement
of a tender offer to acquire all or part of the Company's outstanding Common
Stock.
Any SAP Options granted under the Restated Plan are nontransferable and
nonassignable by the optionee other than by will or the laws of descent and
distribution and are exercisable during his/her lifetime only by him/her. No SAP
Option may be exercised after the expiration of its term. The SAP Option
exercise price is payable in full upon exercise of an SAP Option and, subject to
the terms of the SAP Option agreement, may be paid in cash or by tendering
shares of the Company's Common Stock already owned by the optionee. Any proceeds
received by the Company from the sale of Common Stock on the exercise of SAP
Options shall be used for general corporate purposes.
The number of shares of Common Stock covered by each outstanding SAP
Option, the number of shares of Common Stock to which each SAR relates, and the
per share exercise price under each outstanding SAP Option shall be adjusted
upon the occurrence of certain events involving a recapitalization or
reorganization of the Company.
STOCK APPRECIATION RIGHTS
The Compensation & Stock Plans Committee may grant SARs to any
participant granted SAP Options under the Restated Plan. Each SAR will be
evidenced by an SAR agreement containing such
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terms and conditions consistent with the Restated Plan as are approved by the
Compensation & Stock Plans Committee. The Compensation & Stock Plans Committee
will grant SARs based on consideration of the circumstances of the participant
and generally will grant SARs only in those instances where failure to do so
might, in the sole discretion of the Compensation & Stock Plans Committee, make
exercise of an SAP Option significantly burdensome to the participant. An SAR
may be satisfied in cash or in shares of Common Stock as determined by the
Compensation & Stock Plans Committee. The SAR agreement may limit the maximum
amount of appreciation taken into account under an SAR. An SAR may be exercised
only to the extent that a related SAP Option is exercisable. The exercise of an
SAR shall result in the termination of the related SAP Option with respect to
the number of shares covered by the exercise. If an SAR is exercised, the number
of shares that may be issued under the Restated Plan will be reduced by the
number of shares covered by the related SAP Option or portion thereof that is
terminated by the exercise of the SAR.
The SAR agreement shall also provide, among other things, that no SAR
shall be exercisable during the first six months after the date of grant and
that no SAR may be exercised on a date on which the fair market value of the
Common Stock is less than or equal to the exercise price per share of the
related SAP Option.
RESTRICTED SHARES
The Compensation & Stock Plans Committee may also award Restricted
Shares of Common Stock to any employee participant in the Restated Plan. Each
employee awarded Restricted Shares must enter into a restricted stock agreement
containing such terms and conditions as are permitted by the Restated Plan and
as may be approved by the Compensation & Stock Plans Committee. Such conditions
may include the deferral of a percentage of the employee's annual cash
compensation, not including dividends payable on Restricted Shares, if any, to
be applied toward the purchase of Restricted Shares upon such terms and
conditions, including discounts, as may be set forth in the restricted stock
agreement. Restricted Shares received by a participant may not be transferred or
encumbered during a restriction period beginning on the date of the award and
ending on such later date as may be designated by the Compensation & Stock Plans
Committee at the time of the award.
Each employee who is awarded Restricted Shares may, but need not, be
issued a stock certificate for the Restricted Shares upon expiration of the
restriction period. In no event will the restriction period end prior to the
payment by the employee to the Company of the amount of any federal, state or
local income or employment tax withholding that may be required with respect to
the Restricted Shares. During the restriction period, the participant will
otherwise have all the rights and privileges of a shareholder, including the
right to receive dividends and the right to vote the Restricted Shares.
Upon termination of a participant's employment with the Company or its
subsidiary before the end of the applicable restriction period, all of the
Restricted Shares will be forfeited and all of the participant's rights to the
Restricted Shares will terminate except that the restricted stock agreement may,
at the discretion of the Compensation & Stock Plans Committee, provide that the
participant's Restricted Shares will not be forfeited in whole or in part: (i)
if such participant's employment is terminated for any reason other than conduct
that involves dishonesty or action detrimental to the Company; (ii) if the
participant's employment is terminated by reason of total and permanent
disability; or (iii) if the participant dies while employed by the Company. Upon
the forfeiture (in whole or in part) of Restricted Shares, provided that the
forfeiting employee shall have received no dividends or other benefits of
ownership from the forfeited shares, the shares of Common Stock forfeited shall
be available again for grant under the plan. For purposes of the preceding
sentence, voting rights shall not be deemed a benefit of ownership.
If any change is made in the Common Stock by reason of any merger,
consolidation, reorganization, recapitalization, stock dividend, split up,
combination of shares, exchange of shares, change in corporate structure, or
otherwise, any shares received by a participant with respect to Restricted
Shares shall be subject to the same restrictions applicable to such Restricted
Shares and the
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certificates representing such shares shall be deposited with the
Company until the end of the restriction period.
Restricted Shares in Lieu of Directors' Annual Retainer. Directors of
the Company who are not employees ("Outside Director") shall receive Restricted
Shares under the Restated Plan in lieu of the annual cash retainer that would
otherwise be payable to such Outside Director in consideration of the services
rendered in his capacity as a member of the Board of Directors of the Company.
On the date on which such annual retainer would have been payable, the director
shall receive Restricted Shares equal in number to the amount of such annual
retainer divided by the closing price of the Common Stock on such date. Such
Restricted Shares shall not be sold, transferred, pledged, assigned or in any
manner disposed of for or during the six month period following the date such
Restricted Shares are awarded and any director who is awarded Restricted Shares
shall not be entitled to delivery of stock certificates representing such
Restricted Shares until the expiration of such restriction period. Such
Restricted Shares shall also be subject to the terms and conditions generally
applicable to Restricted Shares as outlined above, except that there shall be no
forfeiture of shares in the event of termination of an Outside Director's
service as a member of the Board. Currently there are three Outside Directors
eligible to receive Restricted Shares.
UNRESTRICTED SHARES
The Compensation & Stock Plans Committee may also award Unrestricted
Shares of Common Stock to any employee participant in the Restated Plan. Each
employee awarded Unrestricted Shares must enter into an unrestricted stock
agreement containing such terms and conditions as are permitted by the Restated
Plan and as may be approved by the Compensation & Stock Plans Committee. Such
conditions may include the deferral of a percentage of the employee's annual
cash compensation not including dividends payable on Unrestricted Shares, if
any, to be applied toward the purchase of Unrestricted Shares upon such terms
and conditions, including discounts, as may be set forth in the restricted stock
agreement.
Each employee who is awarded Unrestricted Shares may, but need not, be
issued a stock certificate for the Unrestricted Shares.
AMENDMENT; TERMINATION
The Board of Directors of the Company may amend the Restated Plan at
any time, except that the Board may not, to the extent necessary to comply
with the rules and regulations of any stock exchange upon which the Common
Stock is listed, increase the maximum number of shares which may be issued under
the Restated Plan, and the Board may not amend more than once every six
months (other than to comply with changes in certain regulations) any of the
provisions of the Restated Plan relating to the automatic grant of Restricted
Shares to Outside Directors in lieu of their annual retainer. In addition, the
Board may not alter or impair any benefit previously granted under the Restated
Plan without the consent of the person to whom the benefit was granted.
The Board of Directors may terminate or suspend the Restated Plan at
any time.
As of September 30, 1996, 261,678 SAR Options, and 1,035,962 Restricted
Shares had been granted over the life of the Restated Plan, of which 95,100 and
276,852, respectively, are currently outstanding. Without regard to the
Amendment, but taking into account prior exercises, deliveries and other
dispositions, 872,360 shares are available for future awards. No SARs have been
granted under the Restated Plan. Set forth below, except as otherwise indicated,
is information with respect to Restricted Shares granted during the fiscal year
ending September 30, 1996, to the officers named in the Summary Compensation
Table and other specified groups under the Restated Plan. SAP Options for 25,000
shares were granted to one executive officer in the fiscal year ending September
30, 1996, under the Restated Plan. No SARs have been granted.
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New Plan Benefits
Interstate/Johnson Lane, Inc. Restated Stock Award Plan
<TABLE>
<CAPTION>
Name and Position Dollar Value ($) No. of Units
----------------- ---------------- ------------
<S> <C> <C>
James H. Morgan * *
PRESIDENT & CHIEF EXECUTIVE OFFICER
Edward C. Ruff * *
SR. MANAGING DIRECTOR/CHIEF FINANCIAL OFFICER-IJL CORPORATION
Edwin A. Dalrymple, Jr. * *
SR. MANAGING DIRECTOR-IJL CORPORATION
Harvey D. Harrelson * *
SR. MANAGING DIRECTOR-IJL CORPORATION
Lewis F. Semones, Jr. * *
SR. MANAGING DIRECTOR-IJL CORPORATION
All current executive officers as a group * *
All current non-officer directors as a group * *
All current non-executive officer employees
as a group * *
</TABLE>
*The proposed increase in the number of shares available for issuance under the
Plan has no effect on the number of shares or other benefits allocated or
granted to any officer, executive officer, or director during the past or
current fiscal year. Therefore, the amounts or benefits to these individuals or
to these groups cannot be determined.
FEDERAL INCOME TAX CONSEQUENCES
SAP Options. No federal taxable income will be recognized by the
employee upon the grant of an SAP Option. The employee will, however, recognize
ordinary income in the year in which the SAP Option is exercised in the amount
by which the fair market value of the purchased shares on the date of exercise
exceeds the SAP Option exercise price. Employees who are officers, directors or
otherwise deemed to be affiliates of the Company and are thereby subject to
liability under the insider trading rules of Section 16(b) of the Act ("16(b)
Optionees"), are not deemed to realize the ordinary income attributable to
exercise until the occurrence of both an exercise and the expiration of six
months after the date of grant of the SAP Option (the "Realization Date"). The
amount of ordinary income to be recognized by 16(b) Optionees will equal the
excess of the fair market value at the Realization Date of the Company's shares
so purchased over the SAP Option exercise price, unless the 16(b) Optionee files
a written election with the IRS and the Company pursuant to Section 83(b) of the
Code within thirty days after exercise to have the ordinary income attributable
to exercise realized as of the exercise date.
The greater of the fair market value of the shares on the date of
exercise (or, in the case of 16(b) Optionees who do not make an 83(b) election,
on the Realization Date) and the SAP Option exercise price will constitute the
tax basis thereof for computing gain or loss on any subsequent sale. The Company
will be entitled to a business expense deduction for the Company's taxable year
during which the SAP Option is exercised equal to the amount of ordinary income
recognized by the participant. In the case of 16(b) Optionees, the Company's
deduction will be for the Company's taxable year that includes the last day of
the employee's taxable year in which the employee recognizes income as a result
of the exercise of the SAP Option. The income recognized by the optionee will be
treated as compensation income and will be subject to federal and state income
and employment tax withholding by the Company. Treasury regulations condition
the Company's deduction on the Company's fulfilling the
10
<PAGE>
applicable Form W-2 or 1099 reporting requirements with respect to the
compensation payment (in Common Stock) made to the employee. The optionee must
recognize ordinary income at the time of exercise (or, in the case of 16(b)
Optionees who do not make an 83(b) election, on the Realization Date), even if
the optionee continues to hold the shares until a later date. Additional gain or
loss shall be recognized by the optionee upon the subsequent disposition of the
shares.
If the SAP Option price under any SAP Option is paid in the form of
shares of Common Stock previously acquired either upon the exercise of SAP
Options or through open-market purchases, then the optionee will not recognize
any taxable income to the extent that the shares of Common Stock received upon
the exercise of the SAP Option equal the number of shares of Common Stock
delivered in payment of the SAP Option price. For federal income tax purposes,
these newly-acquired shares will have the same basis and holding period as the
delivered shares. Any additional shares of Common Stock received upon the
exercise of the SAP Option will, in general, have to be reported as ordinary
income for the year of exercise in an amount equal to the fair market value of
such shares at the date of exercise. These additional shares will have a tax
basis equal to such fair market value, and their holding period will, in
general, be measured from their date of transfer to the optionee.
Stock Appreciation Rights. An employee will not recognize income for
federal income tax purposes at the time of the grant to him of a stock
appreciation right. Upon exercise of a stock appreciation right, an amount equal
to the cash received by the employee is taxable to the employee as ordinary
income in the year of receipt. If an employee receives property other than cash
upon the exercise of a stock appreciation right, an amount equal to the value of
the property is taxable to him at the time that the property is not subject to a
substantial risk of forfeiture, or is transferable. The Company is entitled to a
deduction for federal income tax purposes in the amount of the income is that
includible in the gross income of the employee. In most cases, the Company's
deduction will be for its taxable year that includes the date the participant
recognizes income. The Company shall withhold federal, state, and local income
and employment taxes from amounts paid upon the exercise of a stock appreciation
right. Treasury regulations condition the Company's deduction on the Company's
fulfilling the applicable reporting requirements with respect to the recognition
of income by the employee.
Restricted Shares. An employee generally will recognize no income for
federal income tax purposes at the time the employee receives Restricted Shares
and will not recognize income during the restriction period except to the extent
the employee receives dividends with respect to the Restricted Shares. An amount
equal to the fair market value of Restricted Shares, at the time the
restrictions lapse, (i.e. when the Restricted Shares are either transferable or
no longer subject to a substantial risk of forfeiture), less any amounts the
employee has paid for the Restricted Shares other than through compensation
deferrals, generally is includible in gross income of the employee for federal
and state income and employment tax purposes for the year in which the
restrictions lapse. Gain or loss will be realized by the employee upon
disposition of Restricted Shares after the restrictions lapse. The employee's
holding period for the Restricted Shares will begin at the time just after the
restrictions lapse, or just after the stock is transferred to the employee,
whichever event results in inclusion of income. The employee's basis in the
Restricted Shares is equal to the sum of the amount includible in the gross
income of the employee and the amount paid by the employee for such Restricted
Shares.
If the employee makes a special election under Section 83(b) of the
Code, the receipt of Restricted Shares will result in taxable income to the
employee upon the employees receipt of the Restricted Shares. Specifically, an
employee may elect within thirty days after receipt of Restricted Shares, by
filing a statement with the IRS and the Company, to include in gross income the
fair market value of the Restricted Shares on the date of the receipt. The fair
market value for this purpose is determined without regard to the restrictions
that will lapse after the end of any restriction period. If such an election is
made and the employee subsequently forfeits the Restricted Shares, no loss will
be recognized by the employee on account of the forfeiture of the Restricted
Shares.
The Company is entitled to a deduction in an amount equal to the income
included in the gross income of the employee. The deduction is allowed for the
taxable year of the Company that includes the
11
<PAGE>
last day of the employee's taxable year in which the employee recognizes
income. The deduction is conditioned upon the Company's fulfilling its
reporting responsibilities.
Dividends received by the employee on the Restricted Shares prior to
the lapse of the restrictions are taxed to the employee as compensation and are
deductible by the Company. If, however, by virtue of the special Section 83(b)
election the value of the Restricted Shares is includible in the gross income of
the employee before the restrictions lapse, dividends on such shares after the
taxable event will be dividend income to the employee and will not be deductible
by the Company. If an employee forfeits previously taxed Restricted Shares, the
Company is required to include in income any deductions that it claimed with
respect to the forfeited Restricted Shares.
An Outside Director who receives Restricted Shares in lieu of the
annual retainer generally will have income tax consequences comparable to those
discussed above with respect to employees, except that withholding does not
apply to such income. The Company's tax treatment also is comparable to that
discussed above with respect to employees, except that withholding does not
apply to such income.
Unrestricted Shares - Federal Income Tax Consequences. An employee will
recognize ordinary income for federal income tax purposes upon the receipt of
Unrestricted Shares to the extent that the fair market value of the unrestricted
Shares on the date it is received exceeds the amount paid for such Unrestricted
Shares by the employee. Employees who are officers, directors or otherwise
deemed to be affiliates of the Company and are thereby subject to liability
under the insider trading rules of Section 16(b) of the Exchange Act ("16(b)
Employees"), are not deemed to realize the ordinary income attributable to the
receipt of Unrestricted Shares until the expiration of six months after such
receipt. The amount of ordinary income to be recognized by 16(b) Employees will
equal the excess of the fair market value at the end of the six-month period of
the shares of Unrestricted Shares so purchased over the amount paid for such
Shares, unless the 16(b) Employee files a written election with the IRS and the
Company pursuant to Section 83(b) of the Code within thirty days after receipt
of the Unrestricted Shares to have the ordinary income attributable to the
receipt of Unrestricted Shares realized as of the date such Unrestricted Shares
is received. Regardless of whether or not the employee is a 16(b) employee,
additional gain or loss shall be recognized by the employee upon the subsequent
disposition of the Unrestricted Shares. The employee's holding period for the
Unrestricted Shares for purposes of gain or loss will begin immediately after
the expiration of the six-month period, or immediately after the shares are
transferred to the employee, which ever event results in inclusion of income.
The Employee's basis in the Unrestricted Shares is equal to the sum of the
amount includible in the gross income of the employee and the amount paid by the
employee for such Unrestricted Shares.
Income and payroll taxes are required to be withheld on the amount of
taxable compensation resulting from Unrestricted Shares. The Company is entitled
to a deduction in an amount equal to the income included in the gross income of
the employee. The deduction is allowed for the taxable year of the Company that
includes the last day of the employee's taxable year in which the employee
recognizes income. The deduction is conditioned upon the Company's fulfillment
of applicable reporting requirements.
Dividends received by a 16(b) Employee with respect to the Unrestricted
Shares prior to the end of the six-month period following receipt of the
Unrestricted Shares are taxed to the 16(b) Employee as compensation and are
deductible by the Company. In the case of a 16(b) Employee who has made the
special Section 83(b) election discussed above, or an employee that is not a
16(b) Employee, dividends received with respect to Unrestricted Shares will be
dividend income to the employee and will not be deductible by the Company.
MISCELLANEOUS
Except as stated above, the Restated Plan does not provide for any
maximum number of shares which may be granted or optioned to any one
participant. In view of the discretionary authority vested in the Compensation &
Stock Plans Committee and the fact that there is no termination date for the
plan, it is impossible to estimate the number of shares that will be granted or
optioned to any individual or group of individuals over the life of the Restated
Plan.
12
<PAGE>
APPROVAL BY SHAREHOLDERS
Approval of the Amendment to the Restated Plan by the shareholders
requires the affirmative vote of a majority of the outstanding shares entitled
to vote. The Board of Directors believes that the Amendment will enhance the
overall performance of the Company's employees and directors. THE BOARD
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THIS PROPOSAL.
OTHER MATTERS
The Board of Directors of the Company knows of no matters which will be
presented for consideration at the meeting other than those set forth in this
Proxy Statement. However, if any other matters are properly presented for
action, it is the intention of the persons named in the Proxy to vote on them in
accordance with their best judgment.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 29, 1996, the number and
percentage of outstanding shares beneficially owned by each person known by the
Company to own more than 5% of the Company's Common Stock, by each director,
nominee for director and named executive officer of the Company, and by
directors and executive officers of the Company as a group. Unless otherwise
indicated, each shareholder named has sole voting and dispositive power with
respect to such shareholder's shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME BENEFICIALLY OWNED(1) OF CLASS
<S> <C> <C>
Claude S. Abernethy, Jr. 281,667 (2) 4.09%
Edwin A. Dalrymple, Jr. 25,414 (3) *
Parks H. Dalton 82,371 (4) 1.19%
John B. Ellis 4,692 (5) *
Harvey D. Harrelson 21,988 (6) *
Peter R. Kellogg 1,052,000 (7) 15.28%
J. Alex McMillan, III 741 (8) *
James H. Morgan 66,813 (9) *
NationsBank of North Carolina, Trustee of
Interstate/ Johnson Lane Corporation Employee
Stock Ownership and PAYSOP Plan and Trust 444,271 (10) 6.45%
Dudley G. Pearson 11,513 (11) *
Edward C. Ruff 116,519 (12) 1.69%
Lewis F. Semones, Jr. 23,980 (13) *
Grady G. Thomas, Jr. 100,434 (14) 1.45%
All directors and executive officers
as a group (14 persons) 1,846,270 (15) 26.82%
*Less than 1%
</TABLE>
(1) Does not include shares that might be deemed to be beneficially owned by a
director, nominee or executive officer serving on a committee which may direct
the investment of Common Stock in the Company's Profit Sharing and Capital
Accumulation Plan and Trust ("PSP/CAP") or Employee Stock Ownership and PAYSOP
Plan and Trust ("ESOP/ PAYSOP").
(2) Mr. Abernethy's shares include 21,400 shares owned by his wife; 32,800
shares owned by his children; 4,329 shares of restricted stock; 43,268 shares
issuable upon conversion of the Company's 7 3/4% Convertible Subordinated
Debentures due March 31, 2011 (the "Debentures"), which consist of 22,592 shares
owned by his wife and children; and 20,676 shares held by a trust of which Mr.
Abernethy is the Trustee; and 9,071 shares held in the ESOP/PAYSOP and PSP/CAP
plans.
13
<PAGE>
(3) Mr. Dalrymple's shares include 1,328 shares of restricted stock; 356 shares
held in the Dividend Reinvestment Plan ("DRIP"); and 1,630 shares held in the
ESOP/PAYSOP and PSP/CAP plans.
(4) Mr. Dalton's shares include 7,371 shares held in the ESOP/PAYSOP and
PSP/CAP plans.
(5) Mr. Ellis' shares include 741 shares of restricted stock obtained from the
Company in lieu of his annual director retainer fee.
(6) Mr. Harrelson's shares include 3,000 shares issuable under currently
exercisable stock options and 2,117 shares held in the ESOP/PAYSOP and PSP/CAP
plans.
(7) Mr. Kellogg's shares include 100,000 shares held by his wife; 100,000 shares
held by a Trust, of which he is a trustee; 499,500 shares held by IAT
Reinsurance Syndicate, Ltd., a Bermuda corporation, of which he is the sole
holder of the voting stock; and 741 shares of restricted stock obtained from the
Company in lieu of the annual director retainer fee.
(8) Mr. McMillan's shares include 741 shares of restricted stock obtained from
the Company in lieu of his annual director retainer fee.
(9) Mr. Morgan's shares include 86 shares owned by his wife; 274 shares owned by
his children; 747 shares of restricted stock; and 218 shares held in the
ESOP/PAYSOP and PSP/CAP plans.
(10) This shareholder has dispositive power with respect to these shares, and
voting power only as to shares not allocated to participants' accounts. The
address of this holder is: One NationsBank Plaza, Charlotte, North Carolina
28255-0001.
(11) Mr. Pearson's shares include 1,491 shares of restricted stock; 120
shares held in the DRIP plan; and 160 shares held in the ESOP/PAYSOP and
PSP/CAP plans.
(12) Mr. Ruff's shares include 12,500 shares issuable under currently
exercisable stock options; 112 shares issuable upon conversion of the Company's
Debentures; and 6,257 shares held in the ESOP/PAYSOP and PSP/CAP plans.
(13) Mr. Semones' shares include 2,210 shares of restricted stock; 789 shares
issuable upon conversion of the Company's Debentures; 186 shares held in the
DRIP plan; and 213 shares held in the ESOP/PAYSOP and PSP/CAP plans.
(14) Mr. Thomas' shares include 9,000 shares issuable under currently
exercisable stock options; and 3,987 shares held in the ESOP/PAYSOP and PSP/CAP
plans.
(15) Shares of all directors, nominees for director and executive officers as a
group include 42,500 shares issuable under currently exercisable stock options;
16,663 shares of restricted stock; 50,169 shares issuable upon conversion of the
Company's Debentures; 662 shares held in the DRIP plan; and 31,024 shares held
in the ESOP/PAYSOP and PSP/CAP plans.
MEETINGS AND COMMITTEES
BOARD OF DIRECTORS
During the fiscal year ended September 30, 1996, there were four meetings
of the Company's Board of Directors.
14
<PAGE>
AUDIT COMMITTEE
Messrs. Hamner, Kellogg and Mr. Richard Pechter served as the members of
the Audit Committee during the fiscal year ended September 30, 1996. The current
members of the Audit Committee are Mr. Peter R. Kellogg and Mr. J. Alex
McMillan. The principal functions of this Committee are to review the Company's
internal controls and confer with the Company's independent public accountants
concerning the scope and results of their audit and any recommendations they may
have, and to consider such other matters relating to auditing and accounting as
the Committee may deem appropriate. During the fiscal year ended September 30,
1996, the Audit Committee held three meetings.
COMPENSATION & STOCK PLANS COMMITTEE
Messrs. Ellis, Kellogg and Pechter served as the members of the
Compensation & Stock Plans Committee during the fiscal year ended September 30,
1996. The current members of the Compensation & Stock Plans Committee are Mr.
John B. Ellis, Mr. J. Alex McMillan and Mr. Peter R. Kellogg. The principal
function of this Committee is to review and approve the compensation of the
executive officers of the Company, to determine who will receive options and/or
stock appreciation rights under the Company's 1985 Non-Qualified Stock Option
Plan, and to determine who will receive options, restricted stock, and/or stock
appreciation rights under the Company's 1987 Stock Award Plan. During the fiscal
year ended September 30, 1996, the Compensation & Stock Plans Committee held
four meetings.
NOMINATING COMMITTEE
Messrs. Dalton, Kellogg and Ellis served as the members of the Nominating
Committee during the fiscal year ended September 30, 1996. The principal
function of this Committee is to nominate directors for the Board of Directors
of the Company. During the fiscal year ended September 30, 1996, the Nominating
Committee held four meetings.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
during the last three fiscal years of the Company's Chief Executive Officer and
each of its four other most highly compensated executive officers (the "named
executive officers") during the 1996 fiscal year:
SUMMARY COMPENSATION TABLE (6)
<TABLE>
<CAPTION>
Annual Compensation
Yr.End
Executive Officer 9/30 Salary Bonus Other Annual All Other
Compensation Compensation
Cash Stock Total (4) (5)
------ ------- -------
(2) (3)
<S> <C> <C> <C> <C> <C> <C> <C>
James H. Morgan 1996 225,000 675,000 0 675,000 3,053 3,020
PRESIDENT AND 1995 200,000 248,750 26,258 275,008 0 3,018
CHIEF EXECUTIVE OFFICER 1994 200,000 297,500 52,500 350,000 0 3,528
Edward C. Ruff 1996 160,000 400,000 0 400,000 0 3,020
CHIEF FINANCIAL OFFICER 1995 150,000 140,000 10,003 150,003 0 3,018
1994 150,000 157,500 17,505 175,005 0 3,528
Edwin A. Dalrymple, Jr. 1996 150,000 525,000 0 525,000 5,428 3,020
SR. MANAGING DIRECTOR - 1995 140,000 167,000 13,005 180,005 0 3,018
IJL CORPORATION 1994 135,000 180,000 20,003 200,003 0 3,528
Harvey D. Harrelson 1996 130,000 230,000 0 230,000 0 3,020
SR. MANAGING DIRECTOR - 1995 120,000 76,000 4,009 80,009 0 3,018
IJL CORPORATION 1994 120,000 72,000 8,003 80,003 0 3,518
Lewis F. Semones, Jr. (1) 1996 125,000 300,000 0 300,000 4,528 3,020
SR. MANAGING DIRECTOR - 1995 110,000 105,000 24,257 129,257 2,642 3,018
IJL CORPORATION 1994 -- -- -- -- -- --
</TABLE>
15
<PAGE>
(1) Mr. Semones became an executive officer on October 26, 1994.
(2) In fiscal 1995 and 1994, the named executive officers (who served as
executive officers in those years) were awarded 7,902 shares and 13,068
shares, respectively, of Company stock restricted for one year and bearing
the rights to dividends, if any.
(3) Aggregate restricted shareholdings and their respective values at September
30, 1996, for each of the named executive officers were as follows: Mr.
Morgan, 747 shares, $9,150.75; Mr. Dalrymple, 1,328 shares, $16,268.00; and
Mr. Semones, 2,210 shares, $27,072.50.
(4) Amounts reported herein reflect the price discount on stock deemed
purchased as of September 30, 1994, by the named executive officers under
the Company's 1993-1994 Employee Deferred Stock Purchase Program, which
shares were issued subsequent to the close of the 1996 fiscal year.
(5) Amounts reported herein reflect allocations of contributions by the Company
to the defined contribution plans enumerated on page 17 of this proxy
statement.
(6) There were no awards or payoffs of long-term compensation as defined in
Item 402(b)(2)(iv) of Regulation S-K under the Securities Exchange Act of
1934.
STOCK OPTIONS
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
No options or stock appreciation rights were granted to any of the
named executive officers during the fiscal year ended September 30, 1996.
AGGREGATE OPTION/SAR EXERCISES DURING FISCAL YEAR 1996
AND SEPTEMBER 30, 1996 OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
Number of Unexercised *Value of Unexercised
Option Options/SARs at In-The-Money Options/
Exercises Fiscal Year-End SARs at Fiscal Year-End
Shares Value
Acquired Realized Exercisable Unexercisable Exercisable Unexercisable
Executive Officer (#) ($) (#) (#) ($) ($)
- ----------------- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Edward C. Ruff 0 0 12,500 0 $62,375 0
Harvey D. Harrelson 0 0 3,000 0 $18,750 0
</TABLE>
*BASED ON THE DIFFERENCE BETWEEN THE EXERCISE PRICE OF THE
OPTIONS AND THE CLOSING PRICE OF THE COMPANY'S COMMON STOCK
ON THE NEW YORK STOCK EXCHANGE AT SEPTEMBER 30, 1996.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
No long-term incentive awards were granted to any of the named executive
officers with respect to the fiscal year ended September 30, 1996. However,
during the year the Board of Directors approved an equity-based Long-Term
Incentive Program (LTIP) for executive officers and other senior executives. The
LTIP provides for future awards of company stock ranging from 100,000 to 650,000
shares, depending on the level of aggregate earnings per share (before charges
for the LTIP) attained during the three-year period commencing October 1, 1995,
and ending September 30, 1998. No awards are payable for less than $3.51
aggregate earnings per shares (as defined) during that period. Should the
Company replicate its 1996 performance in 1997 and 1998, it is estimated that
300,000 shares of Company stock would be awarded to the group in October, 1998.
COMPENSATION OF DIRECTORS
The Company has adopted a policy of paying directors who are not employees
of the Company an annual retainer of $10,000 in restricted stock, plus $1,000
and reimbursement of reasonable expenses for each directors' meeting attended,
and $1,000, plus expenses, for each committee meeting not held in conjunction
with a directors' meeting. Non-salaried employees receive $1,000 per meeting,
plus expenses. The Company anticipates that the Board of Directors will continue
to meet quarterly.
16
<PAGE>
PROFIT SHARING AND CAPITAL ACCUMULATION PLAN AND TRUST
The Company maintains the PSP/CAP, which provides for participant
contributions on a pretax compensation reduction basis (a 401(k) arrangement).
To participate, an employee must have at least one full calendar quarter of
service, and complete 1,000 hours of service for that Plan year. An employee
meeting the standards of service required under the plan may elect to defer
receipt of a percentage of his annual compensation and contribute that amount to
the Capital Accumulation Plan. That amount was limited by federal regulation to
$9,500 in 1996. The employee's deferrals are fully vested at all times.
The Company may, at its discretion, match employee contributions, up to
three percent of covered compensation. A participant's interest in the Company's
matching contributions vests over five years. This interest also becomes fully
vested upon retirement at age 65, early retirement (age 62 with ten years of
service), death or total disability. Additional discretionary contributions may
be made annually by the Company and are allocated among participating employees
at the end of each fiscal year on the basis of their relative eligible
compensation.
EMPLOYEE STOCK OWNERSHIP (ESOP) AND PAYSOP PLAN AND TRUST
The Company maintains an ESOP/PAYSOP, to which it may make annual
contributions of cash, securities of the Company or other property for the
benefit of participating employees. The eligibility and vesting provisions and
administration responsibilities of the ESOP/PAYSOP are the same as those which
apply to the Profit Sharing and Capital Accumulation Plan and Trust. Cash
contributions to the ESOP/PAYSOP have been primarily invested in the Company's
Common Stock and are allocated among participating employees at the end of each
fiscal year on the basis of their relative eligible compensation.
RELATED TRANSACTIONS
From time to time, directors and executive officers of the Company may
borrow money from IJL Corporation through margin accounts. These loans are made
in the normal course of IJL Corporation's business as a broker-dealer, are made
on substantially the same terms and conditions, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons, and do not involve more than the normal risks of credit or
present other unfavorable features.
COMPENSATION & STOCK PLANS COMMITTEE REPORT
The Compensation & Stock Plans Committee establishes base salaries for the
Company's executive officers at the beginning of the fiscal year upon the
subjective recommendation of the Chief Executive Officer. Salary levels are
intended to reflect responsibilities in one or more of the Company's operating
units and to be competitive with positions of similar responsibility in other
comparable investment and financial services organizations, whether publicly
owned or privately held, some of which may be included in the Peer Group Index.
Compensation surveys by independent third parties, industry associations and ad
hoc conference groups, as well as published proxy data for firms of comparable
size and scope, all serve as resources to the Chief Executive and to this
Committee in its deliberations.
Annual bonuses for executive officers are discretionary, not contractual.
Messrs. Dalrymple and Harrelson are compensated primarily from the contributions
of the respective business units that they direct. They, the other named
executive officers, and certain additional executive officers also participate
in a corporate bonus pool which is based in part on the Company's annual return
on average beginning equity (ROBE), after giving effect to such bonuses, and in
part on discretionary adjustments by the Committee. The specifics of the
formularized portion of the corporate bonus pool vary from year to year. For
fiscal 1996 it provided for a bonus pool in an amount equal to 7% of pretax
profits (before giving effect to such bonuses) at a 10% ROBE, up to a maximum
12% of pretax profits when a 24% or greater ROBE was achieved. In fiscal 1996
the ROBE was 14.2%, and total funds available from the corporate pool were
$1,640,000, of which $1,375,000 was allocated among the named executive officers
on the basis of subjective recommendations to the Committee by the Chief
Executive Officer.
17
4
<PAGE>
In assessing total 1996 compensation for the named executive officers
relative to the Company's performance, the Committee considered the following
factors:
o Compensation paid to senior executives of other regional full-service
securities firms (including but not limited to some firms in the Peer Group
Index), as disclosed in proxy statements, relative to various financial
characteristics of those firms such as revenues, net income, and return on
equity.
o Operating results in all major business units improved markedly from fiscal
1995.
Prior to the 1996 fiscal year, Mr. Morgan's base salary had remained the
same for three years. In light of his successful assumption of Chief Executive
Officer responsibilities from Mr. Dalton during the 1995 fiscal year, the
Committee increased his salary effective October 1, 1995 to a level competitive
with chief executives of comparable securities firms. The Committee still
anticipates that a significant portion of Mr. Morgan's total compensation will
be performance oriented. Mr. Morgan's proportionate share of the corporate bonus
pool in 1996 was based upon a subjective assessment of his contribution to the
Company's performance during that year.
In regard to the $1 million limit on tax deductible compensation, the
Committee believes it is important to balance the effectiveness of executive
compensation plans with the materiality of potentially reduced tax deductions.
Accordingly, the Committee may from time to time recommend modifications to
corporate compensation plans to be responsive to both factors.
COMPENSATION & STOCK PLANS COMMITTEE:
JOHN B. ELLIS
PETER R. KELLOGG
RICHARD S. PECHTER
On October 21, 1996, Mr. Pechter was succeeded by Mr. McMillan as a member
of the Compensation and Stock Plans Committee.
COMPENSATION & STOCK PLANS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Kellogg, a member of the Compensation & Stock Plans Committee, is
Senior Partner and Chief Executive Officer of SLK, which, through its Troster
Singer Division, provides execution services to the Company on certain
transactions in over-the-counter securities.
STOCK PERFORMANCE GRAPHS
The following graph compares the five-year cumulative total return on
shares of the Company's Common Stock with the cumulative total return of the S&P
500 Index and a Peer Group Index comprised of eleven comparable regional
securities firms. The graph assumes that $100 was invested on September 30,
1991, in the Company's common stock and each of the other indexes, and that all
dividends were reinvested.
The Peer Group Index, which is weighted by market values, includes the
following firms:
Advest Group, Inc. Piper Jaffray Companies, Inc.
First Albany Companies, Inc. Rodman & Renshaw Capital Group, Inc.
Inter-Regional Financial Group, Inc. Scott & Stringfellow Financial, Inc.
Legg Mason, Inc. Southwest Securities Group, Inc.
McDonald & Company Investments, Inc. Stifel Financial Corp.
Morgan Keegan, Inc.
18
<PAGE>
COMPARATIVE FIVE-YEAR TOTAL RETURNS
(Comparative Chart appears here. Plot points are below.)
1991 1992 1993 1994 1995 1996
IJL $100.00 $158.07 $258.07 $205.25 $264.14 $327.16
S&P 500 $100.00 $111.29 $125.77 $129.73 $168.32 $202.54
Peer Group $100.00 $114.12 $180.95 $142.25 $204.49 $236.76
SHAREHOLDER PROPOSALS
SHAREHOLDER PROPOSALS RELATING TO THE COMPANY'S 1998 ANNUAL MEETING OF
SHAREHOLDERS MUST BE RECEIVED BY THE COMPANY NO LATER THAN TUESDAY, AUGUST 19,
1997. SHAREHOLDERS SHOULD SEND THEIR PROPOSALS TO THE ATTENTION OF THE COMPANY'S
SECRETARY AT ITS PRINCIPAL OFFICES, P. O. BOX 1012, INTERSTATE TOWER, CHARLOTTE,
NORTH CAROLINA 28201-1012.
SOLICITATION
THE EXPENSE OF PREPARING, PRINTING AND MAILING THE PROXY STATEMENT TO
SHAREHOLDERS WILL BE BORNE BY THE COMPANY. IN ADDITION TO SOLICITING PROXIES BY
MAIL, THE COMPANY MAY MAKE REQUESTS FOR PROXIES BY TELEPHONE OR BY PERSONAL
SOLICITATION BY EMPLOYEES OF THE COMPANY AT NOMINAL COST TO THE COMPANY. W. F.
DORING & CO. HAS BEEN RETAINED BY THE COMPANY ON BEHALF OF THE BOARD OF
DIRECTORS TO ASSIST IN THE SOLICITATION OF PROXIES FROM BROKERS AND NOMINEES FOR
A FEE OF APPROXIMATELY $3,500 PLUS REIMBURSEMENT OF REASONABLE OUT-OF-POCKET
EXPENSES. THE COMPANY ALSO WILL REIMBURSE BROKERS, DEALERS, BANKS AND OTHER
CUSTODIANS, NOMINEES AND FIDUCIARIES FOR THEIR REASONABLE EXPENSES IN FORWARDING
PROXY SOLICITATION MATERIALS TO BENEFICIAL OWNERS OF THE COMPANY'S COMMON STOCK.
THE BOARD OF DIRECTORS
INTERSTATE/JOHNSON LANE, INC.
DECEMBER 17, 1996
19
<PAGE>
EXHIBIT A
PROPOSED
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
INTERSTATE/JOHNSON LANE, INC.
- ---------------------------------------------------------------------
ARTICLE VI
The business of the corporation shall be managed by a Board of
Directors, and the number of Directors comprising the Board shall be fixed by
the By-Laws and such number may from time to time be increased or decreased in
such manner as provided by the By-Laws of the corporation. Each Director shall
be classified as Class I, Class II, and Class III Directors and will serve
staggered one-, two- and three-year terms, holding office until their successors
have been duly elected and qualified.
<PAGE>
EXHIBIT B
PROPOSED
AMENDED AND RESTATED BY-LAWS
OF
INTERSTATE/JOHNSON LANE, INC.
- ---------------------------------------------------------------------
ARTICLE II
Section 2. Annual Meeting. The annual meeting of stockholders shall be
held within one hundred twenty (120) days of the fiscal year of the corporation
at such time and place, either within or without the State of Delaware, as shall
be specified in the notice of meeting at which they shall elect by plurality of
vote a CLASSIFIED board of directors SERVING STAGGERED ONE-, TWO- AND THREE-YEAR
TERMS. AT EACH ANNUAL MEETING FOLLOWING THE INITIAL CLASSIFICATION AND ELECTION,
THE SUCCESSORS TO THE CLASS OF DIRECTORS WHOSE TERMS EXPIRE AT THAT MEETING
WOULD BE ELECTED FOR A TERM OF OFFICE TO EXPIRE AT THE THIRD SUCCEEDING ANNUAL
MEETING AFTER THEIR ELECTION AND UNTIL THEIR SUCCESSORS HAVE BEEN DULY ELECTED
AND QUALIFIED. THE ANNUAL MEETING OF STOCKHOLDERS SHALL ALSO SERVE TO transact
such other business as may properly be brought before the meeting.
ARTICLE III
Section 1. Number. The number of directors which shall constitute the
whole board shall be no less than three (3) and such number may be increased by
the vote of a majority of the directors then constituting the board of
directors. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article. THE DIRECTORS
SHALL BE CLASSIFIED SERVING STAGGERED ONE-, TWO- AND THREE-YEAR TERMS WITH ONE
CLASS HOLDING OFFICE INITIALLY FOR A TERM EXPIRING AT THE 1998 ANNUAL MEETING OF
STOCKHOLDERS, ANOTHER CLASS HOLDING OFFICE INITIALLY FOR A TERM EXPIRING AT THE
1999 ANNUAL MEETING AND ANOTHER CLASS HOLDING OFFICE INITIALLY FOR A TERM
EXPIRING AT THE 2000 ANNUAL MEETING, WITH THE MEMBERS OF EACH CLASS HOLDING
OFFICE UNTIL THEIR SUCCESSORS HAVE BEEN DULY ELECTED AND QUALIFIED. AT EACH
ANNUAL MEETING FOLLOWING THE INITIAL CLASSIFICATION AND ELECTION, THE SUCCESSORS
TO THE CLASS OF DIRECTORS WHOSE TERMS EXPIRE AT THAT MEETING WOULD BE ELECTED
FOR A TERM OF OFFICE TO EXPIRE AT THE THIRD SUCCEEDING ANNUAL MEETING AFTER
THEIR ELECTION AND UNTIL THEIR SUCCESSORS HAVE BEEN DULY ELECTED AND QUALIFIED.
Directors need not be stockholders.
<PAGE>
EXHIBIT C
INTERSTATE/JOHNSON LANE, INC.
RESTATED STOCK AWARD PLAN
OCTOBER 21, 1996
ARTICLE I
PURPOSE; EFFECTIVE DATE; DEFINITIONS
1.1 Purpose. The Interstate/Johnson Lane, Inc. Restated Stock Award
Plan ("Restated Plan"), is intended to secure for Interstate/Johnson lane, Inc.
and its shareholders the benefits of the incentive inherent in common stock
ownership by the employees and outside directors of the Company who are largely
responsible for the Company's future growth and continued financial success and
to afford such persons the opportunity to obtain or increase a proprietary
interest in the Company on a favorable basis and, thereby, to have an
opportunity to share in its success.
1.2 Effective Date. Subject to the approval of the Board and of the
Company's shareholders if required pursuant to Section 7.9 below, this Restated
Plan shall be effective as of October 21, 1996. The original effective date of
this Restated Plan was October 19, 1987; it was first amended on October 1,
1991; and it was subsequently restated as of October 27, 1992 and again restated
as of October 25, 1994.
1.3 Definitions. Throughout this Restated Plan, the following terms
shall have the meanings respectively indicated:
(a) "Act" shall mean the Securities Exchange Act of 1934, as
amended;
(b) "Benefits" shall mean any one or more of the following
three awards that may be offered by the Committee to Employees under this
Restated Plan:
(i) Options,
(ii) Stock Appreciation Rights,
(iii) Restricted Stock, or
(iv) Unrestricted Stock;
(c) "Board" shall mean the Board of Directors of
Interstate/Johnson Lane, Inc.;
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor revenue laws of the United States;
(e) "Committee" shall mean any committee of directors of the
Company designated by the Board to administer this Restated Plan;
<PAGE>
(f) "Common Stock" shall mean the common stock of
Interstate/Johnson Lane, Inc. par value $.20 per share;
(g) "Company" shall mean Interstate/Johnson Lane, Inc. and any
of its Subsidiaries;
(h) "Employee" shall mean any person engaged or proposed to be
engaged as an officer or employee of the Company;
(i) "Option" shall mean an option to purchase shares of common
Stock granted by the Committee to an Employee pursuant to this Restated Plan;
(j) "Option Agreement" shall mean an agreement between the
Company and an Employee whereby an Option is granted;
(k) "Option Shares" shall mean the shares of Common Stock
purchased upon the exercise of
an Option;
(l) "Restated Plan" shall mean this Interstate/Johnson Lane,
Inc. Restated Stock Award Plan, and any amendments hereto;
(m) "Restricted Stock" shall mean Common Stock (i) granted to
Employees under Section 6.1 of this Restated Plan, subject to such restrictions
as the Committee may determine, and (ii) issued to Outside Directors under
Section 6.2 of this Restated Plan in each case as evidenced in a Restricted
Stock Agreement;
(n) "Restricted Stock Agreement" shall mean an agreement
between the Company and an Employee or Outside Director pursuant to which
Restricted Stock is issued to the Employee or Outside Director pursuant to this
Restated Plan;
(o) "Restriction Period" shall mean the time period during
which the Restricted Stock is subject to the restrictions set forth in the
Restricted Stock Agreement;
(p) "SAR Agreement" shall mean an agreement between the
Company and an Employee pursuant to which a Stock Appreciation Right is issued
to the Employee pursuant to this Restated Plan;
(q) "Stock Appreciation Rights" shall mean the right to
receive cash or Common Stock, granted pursuant to Article V of this Restated
Plan and a SAR Agreement;
(r) "Subsidiary" shall mean a subsidiary corporation of
Interstate/Johnson Lane, Inc., as defined in Sections 424(f) and 424(g) of the
Code;
<PAGE>
(s) "Unrestricted Stock" shall mean Common Stock granted under
Article VI of this Plan that is not Restricted Stock; and
(t) "Unrestricted Stock Agreement" shall mean an agreement
between the Company and an Employee pursuant to which Unrestricted Stock is
issued to the Employee pursuant to this Plan.
ARTICLE II
ADMINISTRATION
2.1 Committee Administration. This Restated Plan, with respect to
grants and awards to Employees hereunder, shall be administered by the
Committee, which shall be appointed by the Board from time to time.
2.2 Committee Composition and Powers. The Committee shall consist of
not less than two persons who shall be members of the Board and shall be subject
to such terms and conditions as the Board shall prescribe. Each Committee member
shall be a "non-employee director" within the meaning of Rule 16b-3 promulgated
under the Act. Once designated, the Committee shall continue to serve until
otherwise directed by the Board. From time to time, the Board may increase the
size of the Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies however caused, and remove all members of the Committee.
A majority of the entire Committee shall constitute a quorum and the
action of a majority of the members present at any meeting at which a quorum is
present shall be deemed the action of the Committee. In addition, any decision
or determination reduced to writing and signed by all of the members of the
Committee shall be fully as effective as if it had been made by a majority vote
at a meeting duly called and held. Subject to the provisions of this Restated
Plan, to the provisions of the Company's by-laws, and to any terms and
conditions prescribed by the Board, the Committee may make such rules and
regulations for the conduct of its business as it shall deem advisable. The
Committee shall hold meetings at such times and places as it may determine.
The interpretation and construction by the Committee of any provisions
of this Restated Plan, with respect to grants and awards to Employees hereunder,
or of any Benefit granted under it shall be final unless otherwise determined by
the Board.
2.3 Limitation on Receipt of Benefits by Committee Members. No person
while a member of the Committee shall be eligible to receive Benefits under this
Restated Plan, provided, however, that (i) to the extent applicable, a Committee
member may receive shares of Restricted Stock in lieu of cash compensation
pursuant to the formula provisions of Section 6.2 hereof; and (ii) a member of
the Committee may exercise Options (but not Stock Appreciation Rights) granted
prior to his becoming a member of the Committee.
<PAGE>
2.4 Good Faith Determinations. No member of the Board, the board of
directors of any subsidiary or the Committee shall be liable for any action or
determination made in good faith with respect to this Restated Plan or any
Benefit granted under it.
ARTICLE III
ELIGIBILITY; TYPES OF BENEFITS; SHARES SUBJECT TO RESTATED PLAN
3.1 Eligibility. The Committee shall from time to time determine and
designate the Employees of the Company to receive Benefits under this Restated
Plan and the number of Options, Stock Appreciation Rights and shares of
Restricted Stock to be awarded to each such Employee, or the formula or other
basis on which such Benefits shall be awarded to Employees. In making any such
award, the Committee may take into account the nature of services rendered by an
Employee, commissions or other compensation earned by the Employee, the capacity
of the Employee to contribute to the success of the Company, and other factors
that the Committee may consider relevant.
3.2 Types of Benefits. Benefits under this Restated Plan may be granted
in any one or any combination of (a) Options; (b) Stock Appreciation Rights; (c)
Restricted Stock; and (d) Unrestricted Stock, as described in this Restated
Plan.
The Committee may: (a) give Employees a choice between two Benefits or
combinations of Benefits; (b) award Benefits in the alternative so that
acceptance of or exercise of one Benefit cancels the right of an Employee to
another; and (c) award Benefits in any combination or combinations and subject
to any condition or conditions consistent with the terms of this Restated Plan
that the Committee in its sole discretion may determine.
3.3 Shares Subject to this Restated Plan. Subject to the provisions of
Section 4.1(e) (relating to adjustment for changes in Common Stock), the maximum
number of shares that may be issued under this Restated Plan shall not exceed in
the aggregate 2,800,000 shares of Common Stock. Such shares may be authorized
and unissued shares, or authorized and issued shares that have been reacquired
by the Company as treasury stock. If any Options granted under this Restated
Plan shall for any reason terminate or expire or be surrendered without having
been exercised in full, the shares not purchased under such Options shall be
available again for grant under this Restated Plan. Upon the forfeiture (in
whole or in part) of Restricted Stock, the shares of Common Stock forfeited
shall be available again for grant under this Restated Plan.
ARTICLE IV
NONSTATUTORY STOCK OPTIONS
4.1 Grant; Terms and Conditions. The Committee from time to time may
grant nonstatutory stock options under this Restated Plan to the Employees,
which grant shall be evidenced by Option Agreements, which Option Agreements
shall be in such form and
<PAGE>
contain such provisions as the Committee shall from time to time approve
consistent with this Restated Plan. The Option Agreements need not be
identical, but each Option Agreement by appropriate language shall
include the substance of all of the following terms and conditions:
(a) Number of Shares. Each Option Agreement shall state the
number of shares to which it pertains.
(b) Option Price. Each Option Agreement shall state the Option
exercise price, which shall be determined by the Committee in its sole
discretion.
(c) Medium and Time of Payment. The Option shall be exercised
by the optionee by delivering to the Secretary of the Company, on any business
day during the term of the Option (the "Exercise Date"), (i) a written notice
specifying the number of Option Shares the optionee then desires to purchase
(the "Notice"), and (ii) payment in full in an aggregate amount in United States
dollars equal to the Option exercise price for the number of Option Shares
specified in the Notice (the "Total Option Price"). The payment of the Total
Option Price may be made (1) in cash or by check made payable to the order of
the Company, (2) with shares of Common Stock owned by the optionee, (3) by
permitting the Company to retain Option Shares otherwise issuable pursuant to
the Option, or (4) by any combination of the foregoing. In the case of clause
(2) or (3), the Common Stock or the Option Shares, as the case may be, shall be
valued at fair market value on the Exercise Date. In addition, in the case of
clause (3), the Corporation may retain that number of Option Shares otherwise
issuable pursuant to the Option having a fair market value equal to the amount
of any federal, state or local income, employment or other withholding taxes
applicable to the income recognized by such optionee and attributable to the
exercise of the Option (the "Withholding Taxes"). In all cases, the Notice shall
state that the optionee acknowledges that payment of the Total Option Price and
any Withholding Taxes is his or her absolute and personal liability enforceable
by the Corporation against him or her or his or her estate.
(d) Term and Exercise of Options. The term of each Option
shall be determined by the Committee. The Committee in its sole discretion may
impose a minimum on the number of shares which must be purchased at any one
time, which minimum (if any) shall be stated in the Option Agreement. During the
lifetime of the optionee, the Option shall be exercisable only by him and shall
not be assignable or transferable by him and no person shall acquire any rights
therein. An Option may be transferred (unless the Committee otherwise
prescribes) by will or the laws of descent or distribution.
(e) Recapitalization; Reorganization. Subject to any required
action by the shareholders of the Company, the maximum number of shares of
Common Stock that may be issued under this Restated Plan pursuant to Section 3.3
above, the number of shares of Common Stock covered by each outstanding Option,
the number of shares of Common Stock to which each Stock Appreciation Right
relates, and the per share
<PAGE>
exercise price under each outstanding Option, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a subdivision or consolidation of shares or the payment of a
stock dividend (but only on the Common Stock) or any other increase or decrease
in the number of such shares effected without receipt of consideration by the
Company.
Subject to any required action by the shareholders, if the
Company is the surviving corporation in any merger, each outstanding Option
shall pertain to and apply to the securities or other consideration that a
holder of the number of shares of Common Stock subject to the Option would have
been entitled to receive in the merger. A dissolution, liquidation or
consolidation of the Company or a merger in which the Company is not the
surviving corporation, other than a merger effected for the purpose of changing
the Company's domicile, shall cause each outstanding Option to terminate,
provided that each optionee shall, in such event, have the right immediately
prior to such dissolution, liquidation, merger or consolidation, to exercise his
Option in whole or in part without regard to any installment provision contained
in his Option Agreement but subject, however, to the restriction that if a Stock
Appreciation Right has been granted in connection with an option neither the
Option nor the Stock Appreciation Right shall be exercisable within six (6)
months after their grant except in the event of death or disability of the
optionee. In the case of a merger effected for the purpose of changing the
Company's domicile, each outstanding Option shall continue in effect in
accordance with its terms and shall apply to the same number of shares of common
stock of such surviving corporation as the number of shares of Common Stock to
which it applied immediately prior to such merger, adjusted for any increase or
decrease in the number of outstanding shares of common stock of the surviving
corporation effected without receipt of consideration.
In the event of a change in the Common Stock as presently
constituted, which change is limited to a change of all of the authorized shares
with par value into the same number of shares with a different par value or
without par value, the shares resulting from any such change shall be deemed to
be the Common Stock within the meaning of this Restated Plan.
The foregoing adjustments shall be made by the Committee,
whose determination shall be final, binding and conclusive.
Except as expressly provided in this subsection, the optionee
shall have no rights by reason of (i) any subdivision or consolidation of shares
of any class, (ii) any stock dividend, (iii) any other increase or decrease in
the number of shares of stock of any class, (iv) any dissolution, liquidation,
merger, or consolidation or spin-off, split-off or split-up of assets of the
Company or stock of another corporation, or (v) any issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class. Moreover, except as expressly provided in this subsection, the
occurrence of one or more of the above-listed events shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock
<PAGE>
subject to the option (or the number of shares with respect to a related Stock
Appreciation Right).
The grant of an Option pursuant to this Restated Plan shall
not affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell, or
transfer all or any part of its business or assets.
(f) Rights as a Shareholder. Subject to Section 7.10 of this
Restated Plan, an optionee or a transferee of an Option shall have no rights as
a shareholder with respect to any shares covered by his Option until the date of
the issuance of a stock certificate to him for those shares upon payment of the
exercise price. No adjustments shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in subsection 4.1(e).
(g) Modification, Extension and Renewal of Options. Subject to
the terms and conditions and within the limitations of this Restated Plan, the
Committee may modify, extend or renew outstanding Options granted under this
Restated Plan, or accept the surrender of outstanding Options (to the extent not
theretofore exercised) and authorize the granting of new Options in substitution
therefor (to the extent not theretofore exercised). No modification of an Option
shall, without the consent of the optionee, alter or impair any rights or
obligations under any Option theretofore granted under this Restated Plan.
(h) Exercisability and Term of Options. Options granted
pursuant to this Restated Plan are not intended to constitute "incentive stock
options" under Section 422 of the Code. Every Option Agreement shall provide
that unless an Option has earlier terminated, Options granted pursuant to this
Restated Plan shall be exercisable at any time on or after the date of exercise
set forth in the Option Agreement and before the date that is ten (10) years and
one (1) month after the date of grant; provided, however, an Option shall
terminate and may not be exercised if the Employee to whom it is granted ceases
to be employed by the Company except that the Option Agreement may, at the
discretion of the Committee, provide: (1) that if such Employee's employment
terminates for any reason other than conduct that in the judgment of the
Committee involves dishonesty or action by the Employee that is detrimental to
the best interest of the Company, the Employee may at any time within three
months after termination of his employment exercise his Option but only to the
extent the Option was exercisable by him on the date of termination of his
employment; (2) that if such Employee's employment terminates on account of
total and permanent disability, the Employee may at any time within one year
after termination of his employment exercise his Option but only to the extent
the Option was exercisable on the date of his termination of employment; or (3)
that if such Employee dies while in the employ of the Company, or within the
three or twelve month period following termination of his employment as
described in (1) or (2) above, his Option may
<PAGE>
be exercised at any time within twelve months following his death by the person
or persons to whom his rights under the Option shall pass by will or by the laws
of descent and distribution, but only to the extent that such Option was
exercisable by him on the date of his termination of employment. Each Option
Agreement may provide for acceleration of exercisability in the event of
retirement, death or disability. Notwithstanding anything to the contrary in
this subsection, an Option may not be exercised by anyone after the expiration
of its term.
4.2 Other Provisions. The Option Agreements authorized under this
Restated Plan shall contain such other provisions, including, without
limitation, restrictions upon the exercise of the Option and the consideration
to be received by the Company as payment for the Common Stock, as the Committee
shall deem advisable. (For example, the Committee could provide as to any Option
for a vesting schedule whereunder the optionee would be able to exercise his
Option as to (for example) one-third of his Option Shares after a period of (for
example) one year from the date of grant of the Option, another one-third after
two years, and so on.)
ARTICLE V
STOCK APPRECIATION RIGHTS
5.1 Grant of Stock Appreciation Rights. The Committee may, in its
discretion, from time to time grant Stock Appreciation Rights to Employees who
are granted Options under this Restated Plan. Such Stock Appreciation Rights
shall relate to and be granted only in conjunction with specific Options and, if
granted, shall be granted at the time of the grant of the related Option. Stock
Appreciation Rights may be granted with respect to all or a specified portion of
the shares covered by the related Option. It is contemplated that the Committee,
in determining whether or not to grant Stock Appreciation Rights relating to an
Option, will give consideration to the circumstances of the Employee and
generally will grant Stock Appreciation Rights in connection with Options only
in those instances where the failure to grant Stock Appreciation Rights might
make exercise of an Option significantly burdensome to the Employee.
5.2 Exercise. Stock Appreciation Rights shall entitle the holder of the
related Option, upon exercise in whole or in part of the Stock Appreciation
Rights, to receive payment in the amount and form determined pursuant to
subsection 5.3(d). Stock Appreciation Rights may be exercised only at times and
to the extent the related Option is then exercisable. The exercise of Stock
Appreciation Rights shall result in a termination of the Stock Appreciation
Rights with respect to the number of shares covered by the exercise and shall
further result in a termination of the related Option with respect to the number
of shares covered by the exercise.
5.3 Terms and Conditions. The Committee may from time to time grant
Stock Appreciation Rights under this Restated Plan to the Employees which grants
shall be evidenced by SAR Agreements, which SAR Agreements shall be in such form
and contain such provisions as the Committee shall from time to time approve
consistent with this
<PAGE>
Restated Plan. The SAR Agreements need not be identical,
but each SAR Agreement by appropriate language shall include the substance of
all of the following additional terms and conditions:
(a) No Stock Appreciation Right shall be exercisable before
September 30, 1988.
(b) Stock Appreciation Rights shall be exercisable at such
time or times and to the extent, but only to the extent, that the Option to
which they relate is then exercisable.
(c) Stock Appreciation Rights shall not be exercisable during
the first six months after their date of grant. Such rights shall not be
transferable other than by will or by the laws of descent and distribution and
shall be exercisable during the optionee's lifetime only by the optionee.
(d) Upon exercise of Stock Appreciation Rights, the optionee
shall be entitled to receive therefor payment, in the sole discretion of the
Committee, in the form of shares of Common Stock (rounded down to the next whole
number so that no fractional shares are issued), cash or any combination
thereof. The amount of such payment shall be equal in value to the difference
between the Option exercise price per share of the related Option and the fair
market value per share of the shares of Common Stock on the date the Stock
Appreciation Right is exercised multiplied by the number of shares with respect
to which the Stock Appreciation Right shall have been exercised.
(e) No Stock Appreciation Right may be exercised on a date on
which the fair market value (as determined above) of the Common Stock is less
than or equal to the exercise price per share of the related Option.
(f) Stock Appreciation Rights granted under this Restated Plan
will expire or terminate no later than the expiration or termination date of the
related Option.
(g) Any exercise by an officer or director of the Company of a
Stock Appreciation Right may be made only during the ten-day period beginning on
the third business day following the release for publication of any quarterly or
annual statement of sales and earnings by the Company and ending on the 12th
business day following the date of such release, or such other period of time as
may be provided under Rule 16b-3 of the Securities and Exchange Commission or
successor rule or regulation. "Officer" for the purposes of this subsection
shall mean only officers who are subject to the Act.
5.4 Effect on Related Stock Option. The number of shares with respect
to which Stock Appreciation Rights are exercised (rather than the number of
shares issued by the Company upon such exercise) shall be deemed for the purpose
of Section 3.3 to have been issued under an Option granted pursuant to this
Restated Plan and shall not thereafter be available for the granting of further
Options under this Restated Plan.
<PAGE>
ARTICLE VI
RESTRICTED AND UNRESTRICTED STOCK
6.1 Grants of Restricted Stock to Employees. The Committee from time to
time may award Restricted Stock to any Employee eligible to receive Benefits
under this Restated Plan. Each Employee who is awarded Restricted Stock shall
enter into a Restricted Stock Agreement with the Company in a form specified by
the Committee agreeing to the terms and conditions of the award and such other
matters consistent with this Restated Plan as the Committee in its sole
discretion shall determine. Such conditions may include, but shall not be
limited to, the deferral of a percentage of the Employee's annual cash
compensation, not including dividends paid on Restricted Stock, if any, to be
applied toward the purchase of Restricted Stock upon such terms and conditions,
including such discounts or forfeitures of compensation deferrals, as may be set
forth in the Restricted Stock Agreement.
Restricted Stock awarded to Employees may not be sold, transferred,
pledged or otherwise encumbered during a Restriction Period commencing on the
date of the award and ending at such later date or dates as the Committee may
designate at the time of the award. The Employee shall have the entire
beneficial ownership and most of the rights and privileges of a shareholder with
respect to Restricted Stock awarded to him, including the right to receive
dividends and the right to vote such Restricted Stock.
If an Employee ceases to be employed by the Company prior to the
expiration of the Restriction Period, he shall forfeit all of his Restricted
Stock with respect to which the Restriction Period has not yet expired;
provided, however, the Restricted Stock Agreements, at the discretion of the
Committee and pursuant to such terms and conditions as it may impose, may
provide: (1) that if such Employee's employment terminates for any reason other
than conduct that in the judgment of the Committee involves dishonesty or action
by the Employee that is detrimental to the best interests of the Company, the
Restricted Stock shall not be forfeited; (2) that if such Employee's employment
terminates on account of total and permanent disability, the Employee shall not
forfeit his Restricted Stock; or (3) that if such Employee dies while employed
by the Company, his Restricted Stock is not forfeited.
Subject to Section 7.10 of this Restated Plan, each Employee who is
awarded Restricted Stock may, but need not, be issued a stock certificate in
respect of such shares of Restricted Stock. Each certificate registered in the
name of an Employee, if any, shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such award as specifically set
forth in the Restricted Stock Agreement.
The Committee shall require that any stock certificate issued in the
name of an Employee evidencing shares of Restricted Stock be held in the custody
of the Company until the expiration of the Restriction Period applicable to such
Restricted Stock and that, as a condition of such issuance of a certificate for
Restricted Stock, the Employee shall
<PAGE>
have delivered a stock power, endorsed in blank, relating to the shares covered
by such certificate. In no event shall the Restriction Period end prior to the
payment by the Employee to the Company of the amount of any federal, state or
local income or employment tax withholding that may be required with respect to
the Restricted Stock.
If any change is made in the Common Stock by reason of any merger,
consolidation, reorganization, recapitalization, stock dividend, split up,
combination of shares, exchange of shares, change in corporate structure, or
otherwise, any shares received by an Employee with respect to Restricted Stock
shall be subject to the same restrictions applicable to such Restricted Stock
and the certificates representing such shares shall be deposited with the
Company.
6.2 Issuance of Restricted Stock to Outside Directors. During the term
of the Restated Plan, and subject to the availability of shares of Common Stock
pursuant to Section 3.3 hereof, each member of the Board of Directors of
Interstate/Johnson Lane, Inc. who is not an employee of the Company (an "Outside
Director") shall receive shares of Restricted Stock under the Restated Plan in
lieu of the annual cash retainer that would otherwise be payable to such Outside
Director in consideration of his service as a director of Interstate/Johnson
Lane, Inc. On the date on which any such retainer would have been payable, the
director shall receive shares of Restricted Stock equal in number to the amount
of such retainer divided by the closing price of the Common Stock on such date.
Such shares of Restricted Stock shall not be sold, transferred, pledged,
assigned or in any manner disposed of for or during the six month period
following the date such shares of Restricted Stock are issued and any director
who is issued shares of Restricted Stock shall not be entitled to delivery of
stock certificates representing such shares until the expiration of such six
month Restriction Period. Such shares of Restricted Stock shall also be subject
to the terms and conditions generally applicable to Restricted Stock as outlined
in Section 6.1 above, except that there shall be no forfeiture of shares in the
event of termination of an Outside Director's service as a member of the Board.
Each Outside Director who is issued Restricted Stock pursuant to this Section
6.2 shall enter into a Restricted Stock Agreement with the Company confirming
the terms and conditions of such issuance as stated herein.
6.3 Grants of Unrestricted Stock to Employees. The Committee from time
to time may award Unrestricted Stock to any Employee eligible to receive
Benefits under this Restated Plan. Each Employee who is awarded Unrestricted
Stock shall enter into an Unrestricted Stock Agreement with the Company in a
form specified by the Committee agreeing to the terms and conditions of the
award and such other matters consistent with this Restated Plan as the Committee
in its sole discretion shall determine. Such conditions may include, but shall
not be limited to, the deferral of a percentage of the Employee's annual cash
compensation, not including dividends paid on the Unrestricted Stock, if any, to
be applied toward the purchase of Unrestricted Stock upon such terms and
conditions, including such discounts or forfeitures of compensation deferrals,
as may be set forth in the Unrestricted Stock Agreement.
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Upon the issuance of Unrestricted Stock to an Employee hereunder, the
Employee shall have the entire beneficial ownership and all the rights and
privileges of a shareholder with respect to the Unrestricted Stock awarded to
him or her, including the right to receive dividends and the right to vote such
Unrestricted Stock.
Subject to Section 7.10 of this Restated Plan, each Employee who is
awarded Unrestricted Stock may, but need not, be issued a stock certificate in
respect of such shares of Unrestricted Stock.
ARTICLE VII
MISCELLANEOUS
7.1 Withholding Taxes. An Employee granted an Option, Restricted Stock,
Unrestricted Stock or Stock Appreciation Rights under this Restated Plan shall
be conclusively deemed to have authorized the Company to withhold from the
salary, commissions or other compensation of such Employee funds in amounts
equal to the federal, state and local income, employment or other withholding
taxes applicable to the income recognized by such Employee and attributable to
the Options, Option Shares, Restricted Stock, Unrestricted Stock or Stock
Appreciation Rights acquired pursuant to this Restated Plan at the time as may
be required by law; provided, however, that in lieu of the withholding of
federal, state and local taxes as herein provided, the Company may require that
the Employee (or other person exercising such Option or Stock Appreciation
Rights, or holding such Restricted Stock or Unrestricted Stock) pay the Company
an amount equal to the federal, state and local withholding taxes on such income
at the time such withholding is required or such other time as shall be
satisfactory to the Company.
7.2 Amendment, Modification, Suspension or Discontinuance of Restated
Plan. The Board may from time to time alter, amend, suspend or discontinue this
Restated Plan or revise it in any respect whatsoever for the purpose of
maintaining or improving the effectiveness of this Restated Plan as an incentive
device, or conforming this Restated Plan to applicable governmental regulations
or to any change in applicable law or regulations, or for any other purpose
permitted by law; provided, however that no such action by the Board shall
adversely affect any Benefit theretofore granted under this Restated Plan
without the consent of the holder so affected; and provided further that, to the
extent necessary to comply with the rules and regulations of any stock exchange
upon which the Common Stock is listed, the Board may not increase the number of
shares of Common Stock authorized under Section 3.3 of this Restated Plan
without the approval of the shareholders of Interstate/Johnson Lane, Inc.
Anything herein to the contrary notwithstanding, the provisions or Section 6.2
hereof shall not, directly or indirectly, be amended more than once ever six
months other than to comport with changes in the Code, the Employee Retirement
Income Security Act of 1974, as amended from time to time, or the rules
thereunder.
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7.3 Governing Law. This Restated Plan and all rights and obligations
hereunder shall be construed in accordance with and governed by the laws of the
State of North Carolina.
7.4 Designation. This Restated Plan may be referred to in other
documents and instruments as the "Interstate/Johnson Lane, Inc. Restated Stock
Award Plan."
7.5 Indemnification of Committee. In addition to such other rights of
indemnification as they may have as directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees actually and necessarily incurred
in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with this
Restated Plan or any Benefit granted thereunder, and against all amounts paid by
them in settlement thereof (provided such settlement is approved by independent
legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for negligence or misconduct in the performance of
his duties, provided that within 60 days after institution of any such action,
suit or proceeding, a Committee member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.
7.6 Reservation of Shares. The Company during the term of this Restated
Plan, shall at all times reserve and keep available, and will seek or obtain
from any regulatory body having jurisdiction any requisite authority in order to
issue such number of shares of its Common Stock as shall be sufficient to
satisfy the requirements of this Restated Plan. Inability of the Company to
obtain from any regulatory body having jurisdiction, the authority deemed by the
Company's counsel to be necessary to the lawful issuance of any shares of its
Common Stock hereunder shall relieve the Company of any liability in respect of
the nonissuance or sale of such stock as to which such requisite authority shall
not have been obtained.
7.7 Application of Funds. The proceeds received by the Company from the
sale of Common Stock pursuant to Options will be used for general corporate
purposes.
7.8 No Obligation to Exercise. The granting of an Option shall impose
no obligation upon the optionee to exercise that Option.
7.9 Approval of Shareholders. No Benefit shall be granted pursuant to
this Restated Plan unless and until this Restated Plan has been approved, to the
extent such approval is required by law or by any self-regulatory organization,
by the shareholders of the Company.
<PAGE>
7.10 Uncertificated Shares. Each Employee who exercises an Option to
acquire Common Stock or any person who is awarded Restricted Stock may, but need
not, be issued a stock certificate in respect of the Common Stock so acquired. A
"book entry" (i.e., a computerized or manual entry) shall be made in the records
of the Company to evidence the issuance of shares of Common Stock where no
physical certificate is issued. Such Company records, absent manifest error,
shall be binding on all parties. In all instances where the date of issuance of
shares may be deemed significant but no certificate is issued in accordance with
this Section 7.10, the date of the book entry shall be the relevant date for
such purposes.
