10
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant (X )
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( X ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to 240.14a-11(c) or
240.14a-12
HAROLD'S STORES, INC.
(Name of Registrant as Specified In Its Charter)
HAROLD'S STORES, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
( X ) $125.00 per Exchange Act Rules 0-11(c)(1)(ii), 14a-
6(i)(1), or 14a-6(j)(2).
( ) $500 per each party to the controversy pursuant to
Exchange Act Rules 14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies: __________.
2) Aggregate number of securities to which transaction
applies: __________.
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: _________.
4) Proposed maximum aggregate value of transaction:
__________.
( ) 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: ___________
NOTICE OF 1995
ANNUAL MEETING OF
SHAREHOLDERS AND
PROXY STATEMENT
Dear Harold's Shareholder:
On behalf of the Board of Directors and management of Harold's
Stores, Inc., I am pleased to invite you to attend the 1995
Annual Meeting of Shareholders. The meeting will be held in The
University of Oklahoma Memorial Union, Dining Room One (3rd
Floor), beginning at 2:00 p.m., Oklahoma time, on Friday, June
23, 1995. A copy of our Annual Report to shareholders for the
fiscal year ended January 28, 1995 is enclosed.
The attached Notice of Annual Meeting and Proxy Statement
describe the business to be conducted at the meeting, including
the election of eleven directors. During the meeting, there will
also be a report by management on the Company's business, as well
as a discussion period during which you will be able to ask
questions.
Whether or not you plan to attend in person, please mark your
proxy in the space provided. It is important that your shares be
represented by a proxy, even if you cannot be present. Take a
moment now to sign, date and return your proxy in the envelope
provided. If you have multiple accounts and received more than
one set of this material, please be sure to return each proxy.
I look forward to greeting you at this year's Annual Meeting.
Sincerely,
Harold G. Powell
Chairman of the Board
HAROLD'S STORES, INC., 765 ASP, POST OFFICE DRAWER 2970
NORMAN, OKLAHOMA 73070 (405) 329-4045
HAROLD'S STORES, INC.
765 Asp
Norman, Oklahoma 73069
NOTICE OF ANNUAL SHAREHOLDER'S MEETING
ON JUNE 23, 1995
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Harold's Stores, Inc. will
be held at The University of Oklahoma Memorial Union, Dining Room
One, located in Norman, Oklahoma, on Friday, June 23, 1995, at
2:00 p.m. for the following purposes:
1. To elect eleven (11) directors to hold office until the next
meeting of the shareholders and until their respective successors
shall have been elected and qualified.
2. To act upon a proposal to amend the Harold's Stores, Inc.
1993 Performance And Equity Incentive Plan.
3. To transact such other business as may properly be brought
before the Annual Meeting or any adjournment thereof.
The Annual Meeting may be adjourned from time to time and, at any
reconvened meeting, action with respect to the matters specified
in the notice may be taken without further notice to the
shareholders unless required by the Bylaws.
Shareholders of record of Common Stock at the close of business
on April 24, 1995 are entitled to notice of, and to vote on all
matters at, the Annual Meeting. A list of such shareholders will
be available for examination by any shareholder for any purpose
germane to the Annual Meeting, during normal business hours, at
the principal office of Harold's Stores, Inc., 765 Asp, Norman,
Oklahoma for a period of ten days prior to the Annual Meeting and
at the Annual Meeting
BY THE ORDER OF THE BOARD OF DIRECTORS
H. RAINEY POWELL
Secretary
DATED: May 19,1995
If you have not received or had access to Harold's Stores, Inc.'s
Annual Report to the shareholders for the 1995 fiscal year, which
includes financial statements, kindly notify the Harold's
Shareholder Relations Department, P.O. Drawer 2970, Norman, OK
73070, and a copy will be sent to you.
HAROLD'S STORES, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
JUNE 23, 1995
The following information is furnished in connection with the
Annual Meeting of Shareholders of Harold's Stores, Inc. (the
"Company") which will be held on Friday, June 23, 1995, at 2:00
p.m., Oklahoma time, at the University of Oklahoma Memorial
Union, Dining Room One, (3rd Floor), Norman, Oklahoma, and at any
adjournment of adjournments thereof, and will be mailed on or
about May 19, 1995, to the holders of record of Common Stock as
of the record date.
The record date for determining shareholders entitled to notice
of the Annual Meeting and to vote has been fixed as the close of
business on April 24, 1995. On that date, the Company had
4,705,205 shares of Common Stock outstanding. Each outstanding
share of Common Stock is entitled to one vote on all matters
presented at the Annual Meeting.
The enclosed proxy for the Annual Meeting is being solicited by
the Company's Board of Directors and is revocable at any time
prior to the exercise of the powers conferred thereby. The cost
of the solicitation of proxies in the enclosed form will be borne
by the Company. In addition to the use of the mail, proxies may
be solicited by personal interview, telephone, or facsimile, and
by banks, brokerage houses and other institutions. Nominees or
fiduciaries will be requested to forward the solicitation
material to their principals and to obtain authorization for the
execution of proxies. The Company will, upon request, reimburse
banks, brokerage houses and other institutions, nominees and
fiduciaries for their reasonable expenses in forwarding proxy
material to their principals.
Unless otherwise directed in the accompanying form of proxy, the
persons named therein will vote FOR the election of the eleven
director nominees and FOR the amendment of the 1993 Performance
and Equity Incentive Plan. Any shareholder returning the
accompanying proxy may revoke such proxy at any time prior to its
exercise by (a) giving written notice to the Company of such
revocation, (b) voting in person at the Annual Meeting or (c)
executing and delivering to the Company a later dated proxy.
Written revocations and later dated proxies should be sent to
Harold's Stores, Inc., Post Office Drawer 2970, Norman, Oklahoma
73070.
ANNUAL REPORT
The Company's Annual Report to Shareholders, covering the fiscal
year ended January 28, 1995, including audited financial
statements, is enclosed. No parts of the Annual Report are
incorporated in this Proxy Statement or are deemed to be a part
of the material for the solicitation of proxies.
OWNERSHIP OF EQUITY SECURITIES IN THE COMPANY
At April 24, 1995, the Company had 4,705,205 shares of Common
Stock outstanding. The following table sets forth, as of April
24, 1995, the number and percentage of shares beneficially owned,
along with the nature of such beneficial ownership, by those
persons known by the Company to be beneficial owners of more than
5% of the outstanding Common Stock, based on the most recent
information provided by such persons to the Company.
Name and Address of Beneficial Owner Number of Percentage
(1)(8) Shares
Harold G. Powell 504,481(2)(9) 10.7
765 Asp, Norman, OK 73069
Rebecca Powell Casey
4525 McKinney, Dallas, TX 75205 691,473(3)(4) 14.7
(9)
H. Rainey Powell
765 Asp, Norman, OK 73069 427,395(5)(9) 9.0
Lisa Powell Hunt
3940 Marquette, Dallas, TX 75225 381,610(6) 8.1
Michael T. Casey
4525 McKinney, Dallas, TX 75205 320,973(3) 6.8
The Security National Bank and Trust
Company of Norman, Trustee 621,559(7) 13.2
200 East Main, Norman, OK 73069
Inter-Him N.V., Prof. Kernkampweg 8a, 361,845 7.7
Post Office Box 3361, Curacao,
Netherlands Antilles
NOTES
(1) Unless otherwise indicated, each named beneficial owner has
sole voting and investment power over the shares listed opposite
his or her name.
(2) Included in this amount are 273,865 shares held by The
Security National Bank and Trust Company of Norman ("Security"),
as Trustee of the Elizabeth M. Powell Trust A, over which Mr.
Harold G. Powell possesses a general power of appointment
exercisable at his death. Such shares are also included in the
beneficial ownership of the Security. Mr. Powell may also be
deemed to have shared voting power over 347,694 shares held by
Security, as trustee of Elizabeth M. Powell Trust B, which are
not included in the number of shares indicated as beneficially
owner by Mr. Powell.
(3) Michael T. Casey and Rebecca Powell Casey are husband and
wife. The beneficial ownership of each spouse excludes the
shares held by the other. Mr. and Mrs. Casey disclaim beneficial
ownership of the other's shares.
(4) Included in this amount are 80,733 shares which are held by
Ms. Casey as custodian for the benefit of her minor children.
(5) Included in this amount are 53,822 shares which are held by
Mr. Rainey Powell as custodian for the benefit of his minor
children. Not included are 54,411 shares of Common Stock held by
Mr. Powell's wife, over which Mr. Powell disclaims beneficial
ownership. The beneficial ownership of each spouse excludes the
shares held by the other. Mr. & Mrs. Powell disclaim beneficial
ownership of the other's shares.
(6) Included in this amount are 63,917 shares which are held by
Ms. Hunt as custodian for the benefit of her minor children. Not
included are 26,911 shares of Common Stock held by Ms. Hunt's
husband, over which Ms. Hunt disclaims beneficial ownership. The
beneficial ownership of each spouse excludes the shares held by
the other. Mr. and Mrs. Hunt disclaim beneficial ownership of
the other's shares.
(7) All shares are held in its capacity as trustee. Of such
total, 273,865 shares are also included in Harold G. Powell's
beneficial ownership.
(8) Pursuant to a Shareholder's Agreement, effective August 18,
1987, Harold G. Powell, Rebecca Powell Casey, H. Rainey Powell,
Lisa Powell Hunt, Michael T. Casey and the Security, have agreed
to vote the Common Stock held by them in accordance with the
decision of those holding a majority of the shares of Common
Stock subject to the Agreement. Such group of shareholders may
be treated as the beneficial owners of 2,655,851 shares, or
approximately 63.2% of the outstanding Common Stock. Except as
otherwise stated above, each named person's beneficial ownership
set forth above excludes the ownership of other members of such
group.
(9) Includes shares which the named individuals have the right to
acquire by exercise of stock options granted under the 1993
Performance And Equity Incentive Plan, which are currently
exercisable as follows: Harold G. Powell - 6,208, Rebecca Powell
Casey - 6,471 and H. Rainey Powell - 5,096.
PROPOSAL 1:
ELECTION OF DIRECTORS
The Board of Directors of the Company, pursuant to the provisions
of the Company's Certificate of Incorporation and Bylaws, has
established an eleven-member Board of Directors, and has
nominated all of the current directors for re-election by the
shareholders at the Annual Meeting. If elected, the director
nominees will hold office until the next annual meeting and until
their successors are duly elected and qualified.
The Company's Board of Directors meets quarterly. During fiscal
1995, all directors attended at least 75% of the meetings of the
Board of Directors and the committees on which they served. All
of the nominees for re-election named below have indicated their
intent to serve if elected. If any nominee for a position on the
Board of Directors of the Company is unable to stand for election
for any reason, the proxy holders named in the proxy are expected
to vote for the substitute nominee in that position designated by
the Board of Directors or, if one is not so designated, are
expected to consult with the Board of Directors of the Company in
determining how to vote the shares they represent.
Nominees:
The following is certain biographical information relating to
each nominee-director:
Harold G. Powell, age 71, Chairman of the Board and founder of
the Company.
Rebecca Powell Casey, age 43, Vice Chairman of the Board and
Chief Executive Officer of the Company. Ms. Casey has been
employed by the Company in various managerial positions since
1977. Ms. Casey is a daughter of Harold G. Powell and wife of
Michael T. Casey.
H. Rainey Powell, age 41, President, Chief Operating Officer, and
Secretary of the Company. Mr. Powell has been employed by the
Company in various managerial positions since 1978. Mr. Powell
is the son of Harold G. Powell
Kenneth C. Row, age 30, Executive Vice President of the Company.
Mr. Row has been employed by the Company in various managerial
positions since 1986.
James A. Agar, age 63, President of Agar, Inc. and Advisory
Director of Agar, Ford, Jarmon and Muldrow Insurance Agency. He
serves as Chairman of the Special Real Estate Committee and
serves on the Audit, Strategic Planning and Compensation
Committees.
Michael T. Casey, age 46, Chairman of the Board of Grand Prairie
State Bank, Texas, a privately held bank since 1989, and
President of Casey Bancorp, Inc. Prior to and since that time,
Mr. Casey has been engaged in investments and banking. He
previously served as a Senior Vice President of the Company from
1989 until 1991. Mr. Casey currently serves on the board of
directors of several other privately held banking organizations
in metropolitan Dallas, Texas, including North American
Bancshares and American Bank of Texas. Mr. Casey is the husband
of Rebecca Powell Casey.
Robert B. Cullum, Jr., age 46, Partner with Fairway Capital
Partners, Ltd and Wayfair Capital Partners, Ltd, both of which
are privately held real estate investment partnerships based in
Dallas, Texas. Mr. Cullum was involved for 30 years in the
supermarket industry with Cullum Co., Inc. Presently, he is
actively engaged in real estate development with Wayfair Capital
Partners, Ltd. and Fairway Capital Partners, Ltd. He also serves
on the Board of Directors of Randall Food Markets, Inc., a
privately held corporation. He serves on the special Real Estate
Committee and the Audit Committee.
Lisa Powell Hunt, age 39, Investments, was formerly employed by
The First Boston Corporation as a registered institutional sales
executive from 1980 to 1984. Ms Hunt is the daughter of Harold
G. Powell.
W. Howard Lester, age 59, Chairman and Chief Executive Officer of
Williams-Sonoma, Inc. since 1978 and Director of The Good Guys,
Inc. Mr. Lester was elected to the Board of Directors of the
Company on April 14, 1995.
Gary C. Rawlinson, age 53, shareholder-director of the law firm
of Crowe & Dunlevy, Luttrell, Pendarvis & Rawlinson and has been
affiliated with such firm and its predecessor since 1968, which
firm serves as general counsel to the Company. Mr. Rawlinson
serves as Chairman of the Audit Committee and serves on the
Compensation and Strategic Planning Committees.
William F. Weitzel, PhD., age 58, Professor of Business
Administration at the University of Oklahoma since 1983, and a
Director of the College of Business Administration's Skills
Enhancement Program since 1986. Mr. Weitzel is President of
William Weitzel, Inc., a management consulting organization. Mr.
Weitzel serves as Chairman of the Compensation Committee and the
Strategic Planning Committee, and serves on the Audit Committee
and Special Real Estate Committee.
Ownership of Equity Securities By Executive Officers and
Directors
The following table sets forth the beneficial ownership of shares
and percentage of class of Common Stock of the Company owned by
each nominee for election as director, the executive officers
named in the Summary Compensation Table (page 14), and all
directors and executive officers as a group, which information is
as of April 24, 1995.
Name Number of Percent Year First
Shares of Class (7) Became
(1)(7) Director
Harold G. Powell 504,481(2) 10.7% 1987
Rebecca Powell Casey 691,473(3)4) 14.7% 1987
H. Rainey Powell 427,395(5) 9.0% 1987
Lisa Powell Hunt 381,610(6) 8.1% 1987
Michael T. Casey 320,973(3) 6.8% 1988
Kenneth C. Row 6,148(8) * 1993
James R. Agar 5,964 * 1987
Gary C. Rawlinson 4,988 * 1987
William F. Weitzel 4,504 * 1989
Robert B. Cullum, Jr. 1,210 * 1993
W. Howard Lester - * 1995
All directors and
executive officers as a 2,348,746 49.9%
group (11 persons)
NOTES
*less than 1%
(1) Unless otherwise indicated, each person has sole voting and
investment power over the shares listed opposite his or her name.
(2) See Notes 2 and 9 to the table on page 3.
(3) See Notes 3 and 9 to the table on page 3.
(4) See Notes 4 to the table on page 3.
(5) See Notes 5 and 9 to the table on page 3.
(6) See Note 6 to the table on page 3.
(7) The beneficial ownership of Harold G. Powell, Rebecca Powell
Casey, H. Rainey Powell, Lisa Powell Hunt, Michael T. Casey, and
directors and executive officers as a group, excludes ownership
which may be attributable to each such person and the group as a
result of the Shareholders Agreement described in note 8 to the
table set forth on page 3.
(8) Includes 3,400 presently exercisable stock options.
Committees
The Company's Board of Directors has an Audit Committee,
Compensation Committee, Strategic Planning Committee and a
Special Real Estate Committee. Each of these committees is
comprised of three outside directors.
The Audit Committee's functions include reviewing internal
controls and recommending to the Board of Directors the
engagement of the Company's independent certified public
accountants, reviewing with such accountants the plan for and
results of their audit of the consolidated financial statements
and determining the independence of such accountants. The Audit
Committee met twice during fiscal 1995.
The Compensation Committee's function is to evaluate and
recommend changes in compensation for all executive officers and
certain other key personnel, and the creation and implementation
of employee benefit plans and special employment and consulting
agreements. The Compensation Committee met three times during
fiscal 1995.
The Strategic Planning Committee's function is to review the
comprehensive plan developed by management stating how the
Company will accomplish its mission and objectives. The
Strategic Planning Committee met once during fiscal 1995.
The Special Real Estate Committee's functions include the review
and analysis of any significant real estate leasing or purchase
transactions. The Special Real Estate Committee met once during
fiscal 1995.
The Board of Directors does not have a nominating committee. The
entire Board performs this function and evaluates and recommends
nominees for election to the Board of Directors.
Director Compensation
Non-employee directors of the Company receive $1,000 for each
full Board and $500 for each standing committee meeting attended.
All directors of the Company are entitled to a discount on their
clothing purchases off the retail price before markdowns and
promotional discounts.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF
1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons who own more
than 10% of the Company's Common Stock to file with the
Securities and Exchange Commission and the American Stock
Exchange initial reports of ownership and reports of changes in
ownership of Common Stock of the Company. Officers, directors
and greater than 10% stockholders are required by SEC regulation
to furnish the Company with copies of all Section 16(a) reports
they file.
To the Company's knowledge, based solely on review of the copies
of such reports furnished to the Company and written
representations that no other reports were required during the
fiscal year ended January 28, 1995, all Section 16(a) filing
requirements applicable to its officers, directors and greater
than ten-percent beneficial owners were compiled with, except for
reports on Form 5 and amendments thereto, reporting various gifts
among family members and the following number of other exempt
transactions by the following persons: Harold G. Powell (two
transactions), H. Rainey Powell (two transactions), and Rebecca
P. Casey, Lisa P. Hunt, Michael T. Casey and Kenneth C. Row (one
transaction each). Each of the reported transactions was exempt
from the short-swing profit provisions of Section 16(b) of the
Securities and Exchange Act of 1934 and was eligible for deferred
reporting on Form 5.
PROPOSAL 2:
PROPOSAL TO APPROVE THE AMENDMENTS TO THE 1993 PERFORMANCE AND
EQUITY INCENTIVE PLAN OF THE COMPANY
In April, 1993, the Board of Directors adopted, and in July,
1993, the shareholders of the Company approved the 1993
Performance And Equity Incentive Plan of the Company (the "1993
Plan"). The 1993 Plan is designed to promote and to advance the
interests of the Company and its shareholders by enabling the
Company to attract, to retain and to reward managerial and other
key employees and to strengthen the mutuality of interests
between participants and the shareholders of the Company in the
Company's long-term growth, profitability and financial success
by offering a comprehensive incentive compensation program,
including stock and cash incentive awards based on performance
and other equity-based awards.
Summary of Proposed Amendments to 1993 Plan
Nonemployee Director Options. The Board of Directors, in order
to motivate and to reward Nonemployee Directors of the Company,
has proposed an amendment to the 1993 Plan which would extend
participation to Nonemployee Directors on the terms and subject
to the conditions described below. The existing terms of the
1993 Plan are also described below.
If the proposed amendments are approved, each existing
Nonemployee Director will receive an initial option to purchase
4,500 shares of the Common Stock of the Company immediately
following the Annual Meeting. Any new director elected after the
Annual Meeting will also receive an initial option of 4,500
shares of Common Stock immediately following such election. Each
Nonemployee Director will be granted an additional option to
purchase 1,500 shares of Common Stock at each annual meeting of
shareholders following the grant of the initial option. The
options will be the sole awards in which Nonemployee Directors
will be entitled to receive under the 1993 Plan.
The option price for options granted to Nonemployee Directors
will be equal to 100% of the fair market value per share of
Common Stock on the date the option is granted. Options granted
to Nonemployee Directors will be immediately vested and fully
exercisable beginning six (6) months after the date of grant, and
will remain exercisable for a period of ten (10) years from the
date of grant, subject to earlier termination in the event of
earlier termination of service as a director.
Other than as described above, all options granted to Nonemployee
Directors will be subject to the same terms and subject to the
same conditions as options granted to employees under the 1993
Plan, except that the Compensation Committee will not have
discretionary authority to make any determination that would
alter the effect of a provision of the 1993 Plan as to a
Nonemployee Director option. In the case of employee options,
for example, the Compensation Committee has the authority to
alter certain provisions of the 1993 Plan which provide
additional benefits in connection with a change in control of the
Company. See "Description of the 1993 Plan" below.
The Board of Directors will have the authority to amend the terms
of the 1993 Plan with respect to options to Nonemployee
Directors. However, solely to the extent necessary to satisfy
Rule 16b-3 under the Securities and Exchange Act of 1934, the
Board of Directors may not so act more than once every six
months.
Increase Common Stock Available for Awards. In order to ensure
that a sufficient number of shares of Common Stock are available
for issuance in connection with the Nonemployee Director Options
and to ensure that the Company otherwise remains able to offer
under the 1993 Plan appropriate equity incentives and competitive
compensation opportunities for its officers and key employees,
the Board of Directors at its meeting in April, 1995 adopted,
subject to shareholder approval, an amendment to the 1993 Plan to
increase the total number of shares of Common Stock that are
authorized for issuance pursuant to awards qranted under the 1993
Plan from 400,000 shares to 1,000,000 shares and directed that
the amendment be submitted to the shareholders for their approval
at the Annual Meeting. Such increased number of shares will be
available for all authorized purposes under the 1993 Plan.
Except as described elsewhere herein in connection with the
Nonemployee Director Options, the Compensation Committee has not
at this time considered or approved any future awards under the
1993 Plan, and, as a result, the identity of future award
recipients and the size and terms of future awards are not known
at this time.
Description of the 1993 Plan
The 1993 Plan empowers the Company from time to time until
November 30, 2002, to award to officers and other key managerial,
administrative and professional employees of the Company and its
subsidiaries Incentive, Non-Qualified and Deferred Compensation
Stock Options, Stock Appreciation Rights, Restricted Stock and
Restricted Unit Grants, Performance Equity and Performance Unit
Grants, any other Stock-Based Awards (collectively, the "Awards")
authorized by the Compensation Committee, and any combination of
any or all of such Awards, whether in tandem with each other or
otherwise. The 1993 Plan has been amended by the Board of
Directors to authorize the Board to issue Nonemployee Director
Options, which are also Non-Qualified Stock Options, pursuant to
the terms contained herein, subject to shareholder approval at
the Annual Meeting.
Administration. The 1993 Plan is administered by the
Compensation Committee. The Compensation Committee has the sole
authority to construe and to interpret the 1993 Plan, to make
rules and regulations relating to the implementation of the 1993
Plan, to select participants, to establish the terms and the
conditions of Awards and to grant Awards, with broad authority to
delegate its responsibilities to others, except with respect to
the selection for participation of, and the granting of Awards
to, officers of the Company who are subject to Section 16(b) of
the Exchange Act. If the proposed amendments are adopted, the
Nonemployee Directors will be entitled to participate in the 1993
Plan. Moreover, their participation will be limited to grants of
Nonemployee Director Options at stated times and in stated
amounts as described herein. See "Summary of Proposed Amendments
to the 1993 Plan".
Eligibility. Managerial employees, including all officers of the
Company, and other key employees of the Company who hold
positions of significant responsibility are eligible to receive
Awards under the 1993 Plan. On April 28, 1995, this group
consisted of approximately sixty-eight (68) persons. The
selection of recipients of, and the nature and the size of,
Awards granted under the 1993 Plan is wholly within the
discretion of the Compensation Committee. There is no limit on
the number of shares of Common Stock in respect to which Awards
may be granted to, or exercised by, any person. Whether an Award
may be exercised after a participant's termination of employment
shall be determined by the Compensation Committee, except that if
a participant's employment with the Company and its subsidiaries
terminates for any reason within six months after the date of
grant of any Award held by such participant, such Award shall
expire as of such date of termination.
Shares Subject to 1993 Plan. The number of shares of Common
Stock reserved for issuance, and in respect of which Awards may
be granted, pursuant to the respective components of the 1993
Plan was originally 400,000 shares. The 1993 Plan has been
amended by the Board of Directors to increase such number to
1,000,000 shares, subject to shareholder approval of the
amendments at the Annual Meeting. Such maximum number of shares
in payment of Awards granted or which may be subject to Awards is
subject to appropriate equitable adjustment in the event of a
reorganization, stock spilt, stock dividend, combination of
shares, merger, consolidation or other recapitalization of the
Company. If any Awards are forfeited, terminated, settled in
cash or exchanged for other Awards or expire unexercised, the
shares of Common Stock theretofore subject to such awards will
again be available for further awards. In addition, shares which
are subject to Stock Appreciation Rights which expire unexercised
or were not issued upon the exercise thereof and shares received
in payment of the purchase price of a stock option in the
exercise thereof will again be available for Awards under the
1993 Plan. No fractional shares may be issued under the 1993
Plan.
Incentive Stock Options. Options designated as Incentive Stock
Options within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), may be granted under the
1993 Plan. The number of shares of Common Stock in respect of
which Incentive Stock Options are first exercisable by any
optionee during any calendar year may not have a fair market
value (determined at the date of grant) in excess of $100,000 (or
such other limit as may be imposed by the Code). Incentive Stock
Options may be exercisable for such period or periods not in
excess of 10 years after the date of grant as shall be determined
by the Compensation Committee.
Non-Qualified Stock Options. Non-Qualified Stock Options may be
granted under the 1993 Plan for such number of shares of Common
Stock and will be exercisable for such period or periods as the
Compensation Committee may determine.
Deferred Compensation Stock Options. Deferred Compensation Stock
Options are designed to provide a means by which compensation
payments can be deferred to future dates. The number of shares
subject to a Deferred Compensation Stock Option is determined by
the Compensation Committee using the following formula:
Amount of Compensation Deferred =
Number of Optioned Shares (FMV - Exercise Price)
where, "FMV" means the fair market value of a share of Common
Stock at the date such option is granted and the "Exercise Price"
means the price at which such option may be exercised, as
determined by the Compensation Committee. Deferred Compensation
Stock Options will be exercisable for such period or periods as
the Compensation Committee shall determine.
Option Exercise Prices. In general, the exercise price of an
Incentive Stock Option must be at least 100% of the fair market
value of the Common Stock on the date of grant. Non-Qualified
Stock Options and Deferred Compensation Stock Options may be
issued at such option exercise price as the Compensation
Committee may determine, except that the Compensation Committee
will not issue such options at less than 100% of the fair market
value of the Common Stock of the Company at the date of grant
unless it has been determined that such "discount" option price
will not result in taxable income under the Code to the optionee
at the date of grant or the date such option becomes first
exercisable rather than at the date of exercise.
Exercise of Options. No stock option may be exercised, except as
provided below, unless the holder thereof remains in the
continuous employ of the Company. Stock options shall be
exercisable only upon the payment in full of the applicable
option exercise price in cash or, if approved by the Compensation
Committee, in shares of Common Stock (at the fair market value
thereof at exercise date) or by surrendering outstanding Awards
denominated in stock or stock units. No Incentive, Non-Qualified
or Deferred Compensation Stock Option may be exercised after the
optionee ceases to be an employee of the Company, except where
the Compensation Committee adopts terms and conditions relating
to such Option which permit its exercise.
Stock Appreciation Rights. Under the 1993 Plan, a Stock
Appreciation Right ("SAR") may be granted in tandem with, or
independent of, any other Award granted under the Plan. An SAR
is an Award which will entitle the holder to receive an amount
equal to all, or some portion (as determined by the Compensation
Committee in respect of each SAR granted), of the excess of the
fair market value of a share of Common Stock on the date of
exercise over the fair market value of such share at the date of
grant, multiplied by the number of shares as to which the holder
is exercising the SAR. The Company will pay such amount to the
holder in cash or in shares of Common Stock (at fair market value
on the date of exercise) or in Deferred Compensation Stock
Options, or combination thereof, as the Compensation Committee
may in its sole discretion determine, except that any SAR
exercised upon or after a Change in Control (as defined in the
1993 Plan) must be paid in cash.
When an SAR granted in tandem with an option is exercised, such
option is canceled to the extent that the SAR is exercised.
Conversely, if the optionee elects to exercise the option, the
tandem SAR is canceled. The exercise of an SAR granted in
respect of (but not in tandem with) an option, either at the time
the option is granted or subsequent to the grant of the option,
will not result in the cancellation of such related option and
the exercise of such option will not result in the cancellation
of the related SAR. The exercise of an SAR paid in cash will not
be included as an Award for the purpose of determining the number
of shares of Common Stock which may be issued under the 1993
Plan.
In no event may an SAR be exercised within six months after the
date granted, except in the event of the death or the disability
of the participant. The Compensation Committee may also
determine that an SAR shall be automatically exercised on one or
more specified dates, and will adopt procedures designed to limit
the exercise of SAR's by participants subject to Section 16(b) of
the Exchange Act in order to comply with the rules promulgated
under the Exchange Act.
Restricted Stock. An Award of Restricted Stock consists of a
specified number of shares of Common Stock which are transferred
to a participant selected by, and for such consideration as
determined by, the Compensation Committee and are subject to
forfeiture to the Company under such conditions and for such
periods of time as the Compensation Committee may determine. A
participant may vote and receive cash dividends on the shares of
Restricted Stock awarded, but may not sell, assign, transfer,
pledge or otherwise encumber such shares of Restricted Stock
during the restriction period. Certificates for Restricted Stock
will be held by the Company until all conditions have been
satisfied.
Restricted Units. An Award of Restricted Units (each unit having
a value equivalent to one share of Common stock) may be granted
to a participant on such terms and subject to conditions as the
Compensation Committee may deem appropriate. Restricted Units
may be paid upon the expiration of the relevant restriction
period in cash, in shares of Common Stock equal to the number
Restricted Units granted, in Deferred Compensation Stock Options,
or in any combination thereof, as determined by the Compensation
Committee.
Performance Equity and Performance Unit Grants. Performance
Equity grants (with each unit equal in value to one share of
Common Stock at the date of grant) and Performance Unit grants
(with each unit representing such monetary value as assigned by
the Compensation Committee) entitle the participant to receive
cash, shares of Common Stock. Deferred Compensation Stock
Options or any combination thereof, as determined by the
Compensation Committee, based upon the degree of achievement of
pre-established performance goals over a pre-established
performance period as determined by the Compensation Committee in
its discretion. Performance goals are fixed by the Compensation
Committee on the basis of such criteria and to accomplish such
goals as the Compensation Committee may select. The Compensation
Committee has sole discretion to determine the employees eligible
for Awards of Performance Equity or Performance Units, the
duration of each performance measurement period, the value of
each Performance Unit and the number of shares of units earned on
the basis of the Company's and/or the participant's performance
relative to the established goals. During a performance
measurement period, the Compensation Committee may adjust the
performance goals upward or downward.
At the end of any performance measurement period, the
Compensation Committee will determine the number of performance
shares and performance units which have been earned on the basis
of the actual performance in relation to the performance goals.
A participant must be an employee at the end of the performance
period to receive the proceeds of a Performance Equity or
Performance Unit Grant; provided, however, that if such
participant dies, retires, becomes disabled or ceases to be an
employee with the Compensation Committee's consent prior to the
end of the performance measurement period, the Compensation
Committee may authorize total or partial payment to such
participant or his or her legal representative. Performance
Equity grantees shall be entitled to receive payment for each
unit earned in an amount equal to the fair market value of shares
of Common Stock at the date of the vesting of the Performance
Equity Award. Performance Unit grantees shall be entitled to
receive payment for each unit earned in an amount equal to the
dollar value of such unit.
Other Stock-Based Grants; Deferrals. The Compensation Committee
has authority under the 1993 Plan to grant other Awards of Common
Stock or Awards denominated as stock units. The Compensation
Committee may also permit a participant to elect to defer receipt
of the proceeds of any Award granted under the 1993 Plan.
Transferability. No Award granted under the 1993 Plan, and no
right or interest therein, is assignable or transferable by a
participant except by will or the laws of descent and
distribution.
Term, Amendment and Termination. The 1993 Plan will terminate on
November 30, 2002, except with respect to Awards then
outstanding. The Board of Directors may amend or terminate the
1993 Plan at any time, except that the Board of Directors may
not, without approval of the shareholders of the Company, make
any amendment which would increase the total number of shares
available for issuance (except as permitted by the 1993 Plan to
reflect changes in capitalization), materially change the
eligibility requirements or materially increase the benefits
accruing to participants under the 1993 Plan.
Change in Control. In the event of a Change in Control of the
Company (defined in the 1993 Plan to mean the acquisition of 35%
or more of the Common Stock of the Company by any "Acquiring
Person" coupled with any change in the composition of the Board
of Directors with the effect that a majority of the directors are
not "Continuing Directors"), unless the Board of Directors
expressly provides otherwise as of the date of any such Change in
Control, ( I ) all Incentive, Non-Qualified and Deferred
Compensation Stock Options and Stock Appreciation rights then
outstanding shall be fully exercisable, (ii) all restrictions on
and conditions on and conditions of all Restricted Stock Grants
and Restricted Unit Grants then outstanding shall be deemed
satisfied, and ( iii ) all Performance Equity Grants and
Performance Unit Grants shall be deemed to have been fully
earned, subject in each case to the limitation that any such
Award shall have been outstanding at least six months.
FEDERAL INCOME TAX CONSEQUENCES
Based on current provisions of the Code, and the existing
regulations thereunder, the anticipated federal income tax
consequences in respect of the several types of Awards under the
1993 Plan (including grants of Nonemployee Director Options,
which are also Non-Qualified Stock Options) are as described
below.
At Grant of Options and SARs. An optionee will not recognize any
taxable income at the time an Incentive Stock Option or an SAR is
granted and the Company will not be entitled to a federal income
tax deduction at that time. The same rules should apply to Non-
Qualified and Deferred Compensation Stock Options. However,
because Non-Qualified Stock Options (with the exception of the
Nonemployee Director Options) and Deferred Compensation Stock
Options may be granted at option exercise prices substantially
below the fair market value of the Common Stock of the Company on
the date the option is granted, the Internal Revenue Service
("IRS") might take the position that under certain circumstances
income is recognized at the time granted equal to the amount of
the "discount" at which a Non-Qualified Stock Option or a
Deferred Compensation Stock Option was granted.
Incentive Stock Options. No ordinary income will be recognized
by the holder of an Incentive Stock Option at the time of
exercise. The excess of the fair market value of the shares at
the time of exercise over the aggregate option price will be an
adjustment to alternative minimum taxable income for purposes of
the federal "alternative minimum tax" at the date of exercise.
If the optionee holds the shares until the later of two years
after the date the option was granted or one year after the
acquisition of such shares, the difference between the aggregate
option price and the amount realized upon disposition of the
shares will constitute a long term capital gain or loss, as the
case may be, and the Company will not be entitled to a federal
income tax deduction. If the shares are disposed of in a sale,
exchange or other "disqualifying disposition" prior to either of
such holding periods, the optionee will realize ordinary income
in an amount equal to the excess of the fair market value of the
shares purchased at the time of exercise over the aggregate
option price and the Company will usually be entitled to a
federal income tax deduction equal to such amount.
Non-Qualified and Deferred Compensation Stock Options. If Non-
Qualified Stock Options are issued at an exercise price of at
least 100% of the fair market value of the Common Stock at the
date granted, ordinary income will be recognized by the holder at
the time of exercise of the option in an amount equal to the
excess of the fair market value of the shares purchased at the
time of such exercise over the aggregate option price. The
Company will usually be entitled to a corresponding federal
income tax deduction for the year of the exercise. At the time
of sale of the shares, the optionee will generally realize a
capital gain or loss based upon the difference between the per
share fair market value at the time of exercise and the per share
selling price at the time of such sale of the shares.
In the case of Non-Qualified Stock Options which may be, and
Deferred Compensation Stock Options which are intended to be,
issued at an option exercise price which is substantially less
than 100% of fair market value, the same rules should apply,
unless the IRS takes the position that such "discount" options
are subject to tax on the grant date or at the time they first
become exercisable. In such event, the Company would be entitled
to a corresponding federal income tax deduction at such time.
Stock Appreciation Rights. Upon the exercise of an SAR, the
holder will realize taxable ordinary income on the amount of cash
received and/or the then current fair market value of the shares
of Common Stock acquired and the Company will be entitled to a
corresponding federal income tax deduction. The holder's basis
in any shares of Common Stock acquired will be equal to the
amount of ordinary income upon which he or she was taxed. Upon
any subsequent disposition, any gain or loss realized will be a
capital gain or loss.
Restricted Stock. Unless a participant makes the election
described below, a participant receiving a Restricted Stock Award
will not recognize income and the Company will not be allowed a
deduction at the time such shares of Restricted Stock are
granted. While the restrictions on the shares are in effect, a
participant will recognize compensation income equal to the
amount of any dividends received and the Company will be allowed
a deduction in a like amount. When the restrictions on the
shares are removed or lapse, the excess of fair market value of
the shares on the date the restrictions are removed or lapse over
the amount paid, if any, by the participant for the shares will
be treated as ordinary compensation income to the participant and
allowed as a deduction for federal income tax purposes to the
Company. Upon disposition of the shares, any gain or loss
recognized by the participant will be treated as capital gain or
loss, and the capital gain or loss will be short term or long
term depending upon the period of time the shares are held by the
participant following the removal or lapse of the restrictions.
However, by filing a Section 83(b) election with the IRS within
30 days after the date of grant, a participant's ordinary income
and commencement of holding period and the Company's deduction
will be determined as of the date of grant. In such a case, the
amount of ordinary income recognized by such a participant and
deductible by the Company will be equal to the excess of the fair
market value of the shares as of the date of grant over the
amount paid, if any, by the participant for the shares. If such
election is made and a participant thereafter forfeits his or her
stock, no refund or deduction will be allowed for the amount
previously included in such participant's income.
Performance Equity, Performance Units and Restricted Units. A
participant receiving any Performance Award or any Restricted
Units will not recognize income, and the Company will not be
allowed a deduction, at the time such Award is granted. When a
participant receives payment in cash or shares of Common Stock,
the amount of cash and the fair market value of the shares of
Common Stock received will be ordinary income to the participant
and will be allowed as a deduction for federal income tax
purposes to the Company.
Special Rules. To the extent an optionee pays all or part of the
option price of a stock option by tendering shares of Common
Stock owned by the optionee, the tax consequences described above
apply except that the number of shares received upon such
exercise which is equal to the number of shares surrendered in
payment of the option price shall have the same basis and tax
holding period as the shares surrendered. If the shares
surrendered had previously been acquired upon the exercise of an
Incentive Stock Option, the surrender of such shares may be a
disqualifying disposition of such shares. The additional shares
received upon such exercise have a tax basis equal to the amount
of ordinary income recognized on such exercise and a holding
period which commences on the date of exercise.
Withholding Taxes. Withholding taxes must be paid at the time of
exercise of any Non-Qualified or Deferred Compensation Stock
Option or SAR. Withholding taxes must be paid in respect of any
Restricted Stock or Restricted Unit when the restrictions thereon
lapse. In respect of all other Awards, withholding taxes must be
paid whenever income to the 1993 Plan participant is recognized
for tax purposes.
Vote Required for Approval
The affirmative vote of the holders of a majority of the shares
of Common Stock which are present in person or represented by
proxy at the Annual Meeting is required to approve the amendments
to the 1993 Plan. Proxies marked "abstain" with regard to the
proposal to approve the amendments to the 1993 Plan will be
counted for the purpose of determining the number of shares
represented by proxy at the Annual Meeting. As a result, proxies
marked "abstain" with regard to the proposal will have the same
effect as if the shares represented thereby were voted against
approval. Shares subject to proxies returned by brokers without
authority to vote on the proposal are not taken into account for
purposes of determining whether the requisite approval has been
received. Such broker nonvotes are not considered shares
entitled to vote, due to the absence of authority on the part of
the broker to vote the shares with regard to the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" THE APPROVAL OF THE AMENDMENTS TO THE 1993 PLAN EXTENDING
ELIGIBILITY TO NONEMPLOYEE DIRECTORS AND INCREASING THE TOTAL
NUMBER OF SHARES OF COMMON STOCK THAT ARE AUTHORIZED FOR ISSUANCE
PURSUANT TO THE 1993 PLAN FROM 400,000 TO 1,000,000 SHARES.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table sets forth information with respect to the
chief executive officer and the other four most highly
compensated executive officers of the Company and its
subsidiaries as to whom the total annual salary and bonuses for
the year ended January 28, 1995 exceeded $100,000 (hereafter
referred to as the "named executive officers").
Annual Compensation
Name and Principal Fiscal Securiti All Other
Position Year Salary Bonus es Compensat
Ended Underlyi ion(2)
ng
Options
(#)
Rebecca Powell Casey 1995 $180,000 $70,000 43,137 1,416
Chief Executive Officer 1994 180,000 30,292 - 1,583
1993 180,000 18,270 - 1,433
Harold G. Powell 1995 $180,000 $29,000 41,384 $26,110
Chairman of the Board 1994 180,000 21,748 - 26,385
1993 200,000 15,660 - 25,909
H. Rainey Powell 1995 $140,000 $48,000 33,976 1,898
President, Chief 1994 140,000 25,632 - 843
Operating 1993 140,000 18,270 - 1,061
Officer and Secretary
Kenneth C. Row 1995 $100,000 $24,000 25,000 752(3)
Executive Vice 1994 100,000 17,000 - 738
President -
(1) Personal benefits provided by the Company to each of the
named executive officers do not exceed 10% of total annual salary
and bonus reported for the named executive officer and are not
included in this total.
(2) Includes contributions made by the Company to the Tax Savings
Retirement Thrift Plan and Employee Stock Purchase Plan on behalf
of the named officer and deferred compensation of $25,000 per
year payable to Harold G. Powell
(3) Does not include the grant of $10,000 in value of common
stock to be issued to Mr. Row in five equal annual installments
based on the closing price per share of Common Stock as of April
30 each year. As of April 30, 1994, the first year of the award,
Mr. Row received 210 shares of Common Stock.
Option Grants In Fiscal 1995
The following table provided information with respect to the name
executive officers
concerning the grant of options in Fiscal 1995.
Individual Option Grants In Last Fiscal Year (1)
Number
of Percent Potential
Securit of Total Realizable Value at
ies Options Assumed Annual
Name Underly Granted Exercise Expiration Date Rates of
ing to Price Stock Price
Options Employee Appreciation
Granted s in for Option Term(3)
(#)(2) Fiscal
Year
5% 10%
Harold G.Powell 20,692 7.85% $ 9.75 August 10, 2003 $127,100 $320,777
20,692 7.85% 10.725 August 10, 1998 36,314 102,890
Rebecca P. Casey 21,569 8.19% 9.75 August 10, 2003 132,488 334,373
21,568 8.18% 10.725 August 10, 1998 37,852 107,247
H. Rainey Powell 16,988 6.45% 9.75 August 10, 2003 104,348 263,356
16,988 6.45% 10.725 August 10, 1998 29,813 84,473
Kenneth C. Row 24,000 9.11% 9.75 August 10, 2003 147,420 372,060
(1) Except for Incentive Stock Options granted to employees who
are deemed to own 10% or more of the Company's Common Stock
(Harold G. Powell, Rebecca P. Casey and H. Rainey Powell own more
than 10% directly or by attribution) all options have an exercise
price of $9.75 (closing price on date of grant), a ten-year term,
and become vested and exercisable in annual installments of 10%
of the total number of shares covered by the option, beginning on
the grant date, and on each annual anniversary date of the grant
date, an additional 10% of the shares will vest and become
exercisable. In the case of each grantee, one-half of the total
number of options granted shall be Incentive Stock Options and
the other half shall be Nonqualified Stock Options under the
terms of the 1993 Plan. In the case of grantees who are deemed
to own 10% or more of the Company's Common Stock, under the terms
of the 1993 Plan, any Incentive Stock Option granted (1/2 of the
total option grant to each such grantee) to such grantee will
have an exercise price of $10.725 per share (110% of the closing
price on date of grant). In addition, such options will have a
five-year period with the options becoming vested and exercisable
beginning on the grant date in installments at the annual rate of
20% of the total number of shares covered by the Incentive Stock
Options, and on each annual anniversary date of the grant date an
additional 20% of the shares will vest and become exercisable.
(2) The options granted to Harold G. Powell, Rebecca P. Casey and
H. Rainey Powell reflect the information contained in footnote
(1) above.
(3) These amounts are calculated based on certain assumed rates
of appreciation and annual compounding from the date of grant to
the end of the option term. Actual gains, if any, on stock
option exercises and common stockholdings are dependent on the
future performance of the common stock and overall stock market
condition. There can be no assurance that the amounts reflected
in this table will be achieved.
January 28, 1995 Option Valuation Table
The following table provides information with respect to the
named executive officers concerning the exercise of options
during the fiscal year ended January 28, 1995 and unexercised
options held as of January 28, 1995. The market price of the
Company's Common Stock at such date was $10.50, while the
exercise price for all the in-the-money options was $9.75.
Option Exercises And Year-End Valuation Table
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options At
Options at January 28, 1995 Fiscal Year End ($)
(#)
Shares
Acquired Value
Name on Realized Exercisable Unexercisable Exercisable Unexercisable
Exercise ($)
(#)
Harold G. - - 6,207 35,177 $1,552 $13,967
Powell
Rebecca - - 6,469 36,668 1,617 14,559
P. Casey
H. Rainey - - 5,095 28,881 1,273 11,467
Powell
Kenneth - - 3,400 21,600 4,300 16,206
C. Row
Employment Agreements
The Company has an employment agreement with Harold G. Powell,
the Chairman of the Board of the Company, which continues until
January 31, 1998. Pursuant to this agreement. Mr. Powell is
paid an annual salary of $180,000 plus a performance bonus in an
annual amount to be determined by the Compensation Committee
after the results of operations covered by the employment
contract have been calculated and deferred annual compensation of
$25,000. Subject to certain terms, at the end of the agreement,
Mr. Powell's employment will be converted to that of part-time
consultant for a period of ten years at an annual salary of
$50,000.
The Company also has employment agreements with Rebecca Powell
Casey, the Chief Executive Officer of the Company, and H. Rainey
Powell, the President and Chief Operating Officer of the Company,
which terminate on January 31, 1998. Rebecca Powell Casey's
agreement provides annual compensation of $220,000 plus an annual
performance bonus. H. Rainey Powell's provides for annual
compensation of $160,000 plus an annual performance bonus.
Neither of these contracts provide for deferred compensation or
part-time consultant positions after the termination dates of
such contracts.
Compensation Committee Interlocks and Insider Participation
During fiscal 1995, the Compensation Committee of the Board of
Directors was composed of three, non-employee directors, James R.
Agar, Gary C. Rawlinson and William F. Weitzel. None of the
members of the compensation committee have ever been officers of
the Company or its subsidiaries. During fiscal 1995, none of the
Company's executive officers served as a director or member of
the compensation committee of another entity in which any member
of the Company's Compensation Committee or any other director of
the Company was an executive officer.
James R. Agar, a director of the Company and a member of the
Compensation Committee, and was the Chairman of the Board of
Directors of Agar, Ford, Jarmon and Muldrow, Inc., an independent
insurance broker ("Agar-Ford") until February 14, 1995. During
fiscal 1995, Agar-Ford received $389,000 in premiums for various
insurance policies acquired by the Company.
Gary C. Rawlinson, a director of the Company and a member of the
Compensation Committee, is a shareholder - director of the law
firm of Crowe & Dunlevy, which provides legal services to the
Company.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the
"Committee") establishes the general compensation policies of the
Company, including specific compensation levels for the Company's
executive officers, and administers the Company's 1993
Performance and Equity Incentive Plan ("1993 Plan") and other
employee incentive plans. The components of the Company's
executive officer compensation program and the basis on which
fiscal year 1995 compensation determinations were made by the
Compensation Committee with respect to the executive officers of
the Company, including the named executive officers, are
discussed below.
The Compensation Committee generally believes that the total cash
compensation of its executive officers should be similar to the
total cash compensation of similarly-situated executives of peer
group public companies within the apparel and accessories stores
industry. Further, a significant portion of the complete
compensation package should be tied to the Company's success in
achieving profit, cash flow, and Company growth.
A competitive base salary is considered vital to support the
continuity of management. The Compensation Committee has
established the base salaries of the Company's executive officers
based in part on a survey of executive compensation paid by local
and national retail companies. This survey was compiled for the
Compensation Committee by The Wyatt Company and others in fiscal
1995. The Compensation Committee also considers the experience,
capability and overall performance of the each executive officer,
as well as the competitive marketplace for executive talent in
establishing base salaries.
The Compensation Committee's goal in establishing the composition
and amount of executive compensations is to motivate, reward and
retain creative management talent which will accomplish the
Company's objectives of increasing the Company's profitability
and the basis for the value of its Common Stock. During the
fiscal year ended January 28, 1995, this goal was carried out
through awards to its named executive officers of base salary
increases and annual cash bonuses. Stock options were awarded to
executive officers during the fiscal year ended January 28, 1995.
The Compensation Committee believes that total executive
compensation in future years will also include additional cash
incentives and equity based incentive compensation, such as stock
options.
As previously discussed, the Company has employment agreements
with the three primary executive officers which will be
effective through the fiscal year ended February 3, 1996. These
agreements establish their base salaries as constant through the
duration of the agreements which terminate January 31, 1998. The
base salary of the other named executive officers was established
based primarily upon analysis of the surveys and the Company's
historical profitability. The Company believes that the
officers' cash bonuses should be tied to the Company's success in
achieving near-term results. Cash bonuses for the duration of
the executive officer's employment agreements are based on a
bonus pool which approximates 5% of net earnings before income
taxes. The Compensation Committee's primary goal in
establishing these agreements was to tie future increases in
executive compensation to the performance of the Company.
The Committee intends to reward long-term strategic management
practices and enhancement of shareholder value through the award
of stock options and other stock based awards under the other
Company programs. The objective of equity based compensation is
to more closely align the interest of the executive officers with
those of the shareholders. The ultimate value of the awards will
depend on the continual success of the Company, thereby creating
a continuing incentive for executive officers to perform long
after the initial grant.
Michael T. Casey, a director of the Company, provided real estate
consulting services to the Company during the preceding fiscal
year for which he was paid. Such consulting services included
the evaluation of perspective new retail store locations and
lease negotiation.
We believe that the Company has an appropriate compensation
structure which properly rewards and motivates its executive
officers to build stockholder value.
William F. Weitzel, Chairman
James R. Agar
Gary C. Rawlinson
Shareholder Return
The following graph shows the cumulative total stockholder return
on the Company's Common Stock over the last five fiscal years as
compared to the returns of the American Stock Exchange Market
Value Index (the "Broad Market") and the peer group (the "Peer
Group") selected by the Company. This peer group includes The
Gap, Inc., The Limited, Inc., Neiman Marcus, Merry-Go-Round and
other apparel and accessories stores.
Performance Graph
SEC proxy rules require a performance graph that compares over a
five-year period the performance of the Company's Common Stock
against (I) a published equity market index, including companies
whose equity securities are traded on the same stock exchange as
the Company ("AMEX Market Index"), and (ii) a peer group index
consisting of 69 companies selected by the Company on the basis
of the Company's belief that such peer issuers are engaged in a
comparable line of business. A complete listing for the
Company's "Peer Group Index" can be found in the footnote to the
table below.
The following graph assumes an investment of $100 at the
beginning of the five-year period on February 1, 1990, and
quarterly reinvestments of dividends.
Compare 5-year Cumulative Total Return
Among Harold's Stores, Inc.
Broad Market and Peer Group Index
FISCAL YEAR ENDING
COMPANY 1990 1991 1992 1993 1994 1995
Harolds Stores, Inc. 100 112.00 156.00 246.43 277.23 369.64
Industry Index 100 118.37 191.41 182.80 156.31 126.11
Broad Market 100 93.63 115.43 113.37 135.37 118.14
RELATED PARTY TRANSACTIONS
The Company leases its Norman, Oklahoma ladies' store and certain
related facilities in Norman, Oklahoma from a corporation, the
shareholders of which include the wife of Harold G. Powell and
certain trusts, the beneficiaries of which are Mr. Powell's
children, and the Company's men's store located in Norman is
leased from the mother of Harold G. Powell. The leases provide
for annual rentals of 4% of net sales with no fixed minimum of
rental, plus utilities and certain property taxes. For the
fiscal year ended January 28, 1995, the Company paid an aggregate
of approximately $133,000 pursuant to these leases. Management
believes that the lease of the Norman store and related
facilities are on terms at least as favorable to the Company as
it would reasonably expect to receive from an unrelated landlord
operating a building of equal quality in a similar location.
The Company leases a 10,000 square foot office building used as a
men's and ladies' buying office in Dallas, Texas, and a warehouse
facility located in Norman, Oklahoma. The lessors of these
facilities are two limited partnerships whose partners are
Michael T. Casey, Rebecca Powell Casey, Lisa Powell Hunt, Harold
G. Powell and H. Rainey Powell, all of whom are shareholders and
directors of the Company. The term of the buying office lease is
ten years commencing March 1, 1991. Rent payments are $158,000
per year payable in monthly installments plus utilities and
property taxes. The term of the warehouse lease is ten years
commencing December 1, 1992. Rent payments are $64,000 per year
payable in monthly installments plus utilities and property
taxes.
Under the terms of the distribution center lease, the Company has
the right, until June 1, 1995, to purchase the interest of the
lessor at lessor's adjusted cost. In addition, under both
leases, the Company has an option to purchase the Dallas buying
office and the distribution center for a purchase price equal to
the greater of the cost basis of the lessor at the time of
closing or 90% of appraised value, exercisable through the fifth
year of each lease. As of November 30, 1994, lessor's adjusted
cost of the Dallas buying office was approximately $1,500,000,
and lessor's adjusted cost of the distribution center was
approximately $735,000.
In the opinion of management, the terms of the lease agreements
are fair and reasonable and at least as favorable to the Company
as would be reasonably expected from an unrelated third party
operating properties of equal quality in similar locations at the
time of their execution. The above lease agreements were
approved by the Special Real Estate Committee, comprised of three
outside directors, and the Board of Directors, of the Company
prior to the execution of such leases.
VOTING
The election of each director at the Annual Meeting will be by
plurality vote. The affirmative vote of the holders of a
majority of the Common Stock represented in person or by proxy at
the Annual Meeting will be required to approve the proposed
amendments to the Company's 1993 Performance and Equity Incentive
Plan. Any other matters properly brought before the Annual
Meeting will be decided by a majority of the votes cast on the
matter, unless otherwise required by law.
The office of the Company's Secretary appoints an inspector of
election to tabulate all votes and to certify the results of all
matters voted upon at the Annual Meeting. Neither the corporate
law of the state of Oklahoma, the state in which the Company is
incorporated, nor the Company's Certificate of Incorporation or
Bylaws have any specific provisions regarding the treatment of
abstentions and broker non-votes. It is the Company's policy to
count abstentions or broker non-votes for the purpose of
determining the presence of a quorum at the meeting. Abstentions
will be treated as shares represented at the Annual Meeting for
determining results on actions requiring a majority vote but will
not be considered in determining results of plurality votes.
Shares represented by proxies returned by brokers where the
broker's discretionary authority is limited by stock exchange
rules will be treated as represented at the Annual Meeting only
as to such matter or matters voted on in the proxy. Shares
represented by limited proxies will be treated as represented at
the meeting only as to such matter or matters for which authority
is granted in the limited proxy.
As a result, proxies marked "abstain" with regard to proposed
amendments to the 1993 Performance and Equity Incentive Plan will
have the same effect as if the shares represented thereby were
voted against the proposed amendments in accordance with the By-
laws of the Company. However, because directors are elected by a
plurality vote rather than a majority of the shares present in
person or represented by proxy at the Annual Meeting, proxies
marked "without authority" with respect to any one or more
nominees will not affect the outcome of the nominee's election
unless the nominee receives no affirmative votes or unless other
candidates are nominated for election as directors.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors, as recommended by the Audit Committee,
has selected KPMG Peat Marwick LLP to serve as the Company's
independent certified public accountants for the fiscal year
ending January 27, 1996. They have been the auditors of the
accounts of the Company since 1987. Representatives of KPMG Peat
Marwick LLP are expected to be present at the Annual Meeting,
with the opportunity to make a statement if they desire to do so,
and will be available to respond to appropriate questions.
PROPOSALS OF SHAREHOLDERS
The Board of Directors will consider proposals of shareholders
intended to be presented for action at the Annual Meeting of
Stockholders. According to the rules of the Securities and
Exchange Commission, such proposals shall be included in the
Company's Proxy Statement if they are received in a timely manner
and if certain requirements are met. For a shareholder proposal
to be included in the Company's Proxy Statement relating to the
1996 Annual Shareholders' Meeting, a written proposal complying
with the requirements established by the Securities and Exchange
Commission must be received at the Company's principal executive
offices located at 765 Asp, Norman, Oklahoma 73069 no later than
February 24, 1996.
OTHER MATTERS
The Company does not know of any matters to be presented for
action at the meeting other than those listed in the Notice of
Meeting and referred to herein. If any other matters properly
come before the meeting, it is intended that the proxy solicited
hereby will be voted in accordance with the recommendation of the
Board of Directors.
Copies of the Annual Report of Harold's Stores, Inc. to the
Securities and Exchange Commission on Form 10-K may be obtained
after June 1, 1995 without charge to the stockholders, by writing
Shareholder Relations, Post Office Box 2970, Norman, Oklahoma
73070-2970.
(FORM OF PROXY CARD)
PROXY HAROLD'S STORES, INC.
765 Asp Avenue, Norman, Oklahoma 73069
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF HAROLD'S STORES,
INC. The undersigned hereby appoints H. Rainey Powell and Linda Daugherty, or
any one of them, each with the power to appoint her substitute, as proxies, and
hereby appoints and authorizes them to represent and vote as designated below,
all the shares of Common Stock, held of record by the undersigned on April 24,
1995, at the Annual Meeting of Shareholders of Harold's Stores, Inc. to be held
in The University of Oklahoma Memorial Union Dining Room One at 2:00 p.m. on
Friday, June 23, 1995, and at any adjournment thereof.
1. ELECTION OF DIRECTORS
_____FOR all nominees listed below ____WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees
below
Harold G. Powell, Michael T. Casey, Rebecca Powell Casey, H. Rainey Powell
Gary C. Rawlinson, Lisa Powell Hunt, James R. Agar, William. F. Weitzel,
Jr., Kenneth C. Row, Robert Brooks Cullum, Jr., W. Howard Lester
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through that nominee's name.)
2. FOR AGAINST ABSTAIN
Proposal to amend the 1993 Performance And Equity Plan.
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment
thereof.
IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY SHALL BE
VOTED IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS. THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE NOMINEES LISTED IN ITEM 1 AND FOR THE AMENDMENT TO THE 1993
PERFORMANCE AND EQUITY PLAN.
Please sign exactly as name appears below. When shares are held as joint
tenants, both should sign. When signing as attorney, as executor,
administrator, trustee, or guardian, please give full titles as such.
If a corporation, please sign full corporate name by President or other
authorized officer. If a partnership, please sign partnership name by
authorized person.
Date:_____________, 1995
___________________Signature
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
APPENDIX TO PROXY STATEMENT OF HAROLD'S STORES, INC.
CONTAINING SUPPLEMENTAL INFORMATION REQUIRED TO BE
PROVIDED TO THE SECURITIES AND EXCHANGE COMMISSION
The following is information required to be provided to
the Securities and Exchange Commission in connection with the
Definitive Proxy Materials of Harold's Stores, Inc. in connection
with 1995 Annual Meeting of Shareholders of the Company. This
information is not deemed to be a part of the Proxy Statement and
will not be provided to shareholders in connection with the Proxy
Statement.
1. The Company anticipates that the Definitive Proxy Materials
will be mailed to the shareholders on or about May 22, 1995.
2. The following information is provided pursuant to
Instruction 5, Item 10 of Schedule 14A: The shares of Common
Stock issuable by the Company pursuant to the 1993 Performance
and Equity Incentive Plan of the Company (the "1993 Plan") are
covered by the Company's Registration Statement on Form S-8 (File
No. 33-68604). In connection with the proposed increase in the
number of shares authorized for issuance pursuant to the 1993
Plan discussed in the Proxy Statement, the Company anticipates
that the Registration Statement will be post-effectively amended
to add such increased number of shares.
3. The complete text of the 1993 Plan is set forth below as
required by Instruction 3, Item 10 of Schedule 14A.
HAROLD'S STORES, INC.
1993 PERFORMANCE AND EQUITY INCENTIVE PLAN
1. Purpose. The purpose of the 1993 Performance and
Equity Incentive Plan (herein referred to as the "Plan") is to
promote and advance the interest of Harold's Stores, Inc. (the
"Company") and its shareholders by enabling the Company to
attract, retain and reward managerial and other key employees and
to strengthen the mutuality of interests between such employees
and the Company's s hareholders. The Plan is designed to meet
this intent by offering performance-based stock and cash
incentives and other equity-based incentive awards thereby
providing a proprietary interest in pursuing the long-term
growth, profitability and financial success of the Company.
2. Definitions. For purposes of the Plan, the
following terms shall have the meanings set forth below:
(a) "Award" or "Awards" means an award or grant
made to a Participant under Sections 6 through 10, inclusive, of
the Plan.
(b) "Board" means the Board of Directors of the
Company.
(c) "Code" means the Internal Revenue Code of
1986, as in effect from time to time or any successor thereto,
together with rules, regulations and interpretations promulgated
thereunder.
(d) "Committee" means the Committee of the Board
constituted as provided in Section 3 of the Plan.
(e) "Common Stock" means the Common Stock, par
value $0.01 per share, of the Company or any security of the
Company issued in substitution, exchange or lieu thereof.
(f) "Company" means Harold's Stores, Inc., a
Delaware corporation, or any successor corporation.
(g) "Deferred Compensation Stock Option" means
any Stock Option granted pursuant to the provisions of Section 6
of the Plan that is specifically designated as such.
(h) "Disability" means disability as determined
by the Committee in accordance with standards and procedures
similar to those under the Company's long-term disability plan.
(i) "Exchange Act" means the Securities Exchange
Act of 1934, as amended and in effect from time to time, or any
successor statute.
(j) "Fair Market Value" means, if the shares are
traded on a national securities exchange, the closing price of
the shares on such national securities exchange on the day on
which such value is to be determined or, if no shares were traded
on such day, on the next preceding day on which shares were
traded, as reported by National Quotation Bureau, Inc. or other
national quotation service. If the principal market for the
shares is the over-the-counter market, Fair Market Value means
the closing "asked" price of the shares in the over-the-counter
market on the date on which such value is to be determined or, if
such asked price is not available, the last sales price on such
day or, if no shares were traded on such day, on the next
preceding day on which the shares were traded, as reported by the
National Association of Securities Dealers Automatic Quotation
System (NASDAQ) or other national quotation service. If at any
time shares of Common Stock are not traded on an exchange or in
the over-the-counter market, Fair Market Value shall be the value
determined by the Committee, taking into consideration those
factors affecting or reflecting value which they deem
appropriate. For purposes of determining the exercise price of
an Incentive Stock Option, Fair Market Value shall not under any
circumstances exceed the amount contemplated by Section 422(b)(4)
of the Code.
(k) "Incentive Stock Option" means any Stock
Option granted pursuant to the provisions of Section 6 of the
Plan that is intended to be and is specifically designated as an
"incentive stock option" within the meaning of Section 422 of the
Code.
(l) "Non-Qualified Stock Option" means any Stock
Option granted pursuant to the provisions of Section 6 of the
Plan that is not an Incentive Stock Option.
(m) "Participant" means an employee of the
Company or a Subsidiary who is granted an Award under the Plan.
(n) "Performance Award" means an Award granted
pursuant to the provisions of Section 9 of the Plan the vesting
of which is contingent on performance attainment.
(o) "Performance Equity Grant" means an Award of
units representing shares of Common Stock granted pursuant to the
provisions of Section 9 of the Plan.
(p) "Performance Unit Grant" means an Award of
monetary units granted pursuant to the provisions of Section 9 of
the Plan.
(q) "Plan" means this 1993 Performance and Equity
Incentive Plan of the Company, as set forth herein and as it may
be hereafter amended and from time to time in effect.
(r) "Restricted Award" means an Award granted
pursuant to the provisions of Section 8 of the Plan.
(s) "Restricted Stock Grant" means an Award of
shares of Common Stock granted pursuant to the provisions of
Section 8 of the Plan.
(t) "Restricted Unit Grant" means an Award of
units representing shares of Common Stock granted pursuant to the
provisions of Section 8 of the Plan.
(u) "Retirement" means retirement from active
employment with the Company and its Subsidiaries on or after the
normal retirement date specified in the Company's retirement plan
for salaried employees or such earlier retirement date as
approved by the Committee for purposes of this Plan.
(v) "Stock Appreciation Right" means an Award to
benefit from the appreciation of Common Stock granted pursuant to
the provisions of Section 7 of the Plan.
(w) "Stock Option" means an Award to purchase
shares of Common Stock granted pursuant to the provisions of
Section 6 of the Plan.
(x) "Subsidiary" means any corporation or entity
in which the Company directly or indirectly controls 50% or more
of the total voting power of all classes of its stock having
voting power.
3. Administration.
(a) The Plan shall be administered by the
Committee to be appointed from time to time by the Board.
Members of the Committee shall serve at the pleasure of the Board
and the Board may from time to time remove members from, or add
members to, the Committee. A majority of the members of the
Committee shall constitute a quorum for the transaction of
business. Action approved in writing by a majority of the
members of the Committee then serving shall be fully effective as
if the action had been taken by unanimous vote at a meeting duly
called and held.
(b) The Committee is authorized to construe and
interpret the Plan to promulgate, amend and rescind rules and
regulations relating to the implementation of the Plan and to
make all other determinations necessary or advisable for the
administration of the Plan. The Committee may designate persons
other than members of the Committee to carry out its
responsibilities under such conditions and limitations as it may
prescribe. Any determination, decision or action of the
Committee in connection with the construction, interpretation,
administration, or application of the Plan shall be final,
conclusive and binding upon all persons participating in the Plan
and any person validly claiming under or through persons
participating in the Plan. The Committee's powers include, but
are not limited to, modifications, procedures and subplans as are
necessary to comply with provisions of federal and state
securities laws, including, but not limited to, provisions of
federal securities laws applicable to executive officers who
receive Awards under the Plan. The Company shall effect the
granting of Awards under the Plan in accordance with the
determinations made by the Committee, by execution of instruments
in writing in such form as approved by the Committee.
4. Plan Duration; Common Stock Subject to Plan.
(a) Term. The Plan shall terminate on November
30, 2002, except with respect to Awards then outstanding.
(b) Shares of Common Stock Subject to Plan. The
maximum number of shares of Common Stock in respect of which
Awards may be granted under the Plan, subject to adjustment as
provided in Section 15 of the Plan, is 400,000.
If any Awards are forfeited, terminated, expire
unexercised, settled in cash in lieu of stock or exchanged for
other Awards, the shares of Common Stock which were theretofor
subject to such Awards shall again be available for Awards under
the Plan to the extent of such forfeiture or expiration of such
Awards. Further, any shares of Common Stock which are used as
full or partial payment to the Company by a Participant of the
purchase price of shares of Common Stock upon exercise of a Stock
Option shall again be available for Awards under the Plan, as
shall any shares covered by Stock Appreciation Rights which are
not issued as payment upon exercise.
Common Stock which may be issued under the Plan
may be either authorized and unissued shares or issued shares
which have been reacquired by the Company. No fractional shares
of Common Stock shall be issued under the Plan.
5. Eligibility. Persons eligible for Awards under
the Plan shall consist of managerial and other key employees of
the Company and/or its Subsidiaries who hold positions of
significant responsibilities or whose performance or potential
contribution, in the sole judgment of the Committee, will benefit
the future success of the Company.
6. Stock Options. Stock Options granted under the
Plan may be in the form of Incentive Stock Options, Non-Qualified
Stock Options or Deferred Compensation Stock Options and such
Stock Options shall be subject to the following terms and
conditions and shall contain such additional terms and
conditions, not inconsistent with the express provisions of the
Plan, as the Committee shall deem desirable:
(a) Grant. Stock Options may be granted under
the Plan on such terms and conditions not inconsistent with the
provisions of the Plan and in such form as the Committee may from
time to time approve. Stock Options may be granted alone, in
addition to or in tandem with other Awards under the Plan.
(b) Stock Option Price. The option exercise
price per share of Common Stock purchasable under a Stock Option
shall be determined by the Committee at the time of grant, but in
no event shall the exercise price of an Incentive Stock Option be
less than one hundred percent (100%) of the Fair Market Value of
the Common Stock on the date of the grant of such Stock
Option.
(c) Option Term. The term of each Stock Option
shall be fixed by the Committee; except that the term of
Incentive Stock Options shall not exceed ten (10) years after the
date the Incentive Stock Option is granted.
(d) Exercisability. A Stock Option shall be
exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee at the date of
grant. Except as provided in Section 13 of this Plan, no Stock
Option may be exercised unless the holder thereof is at the time
of such exercise in the employ of the Company or a Subsidiary and
has been continuously so employed since the date such Stock
Option was granted.
(e) Method of Exercise. A Stock Option may be
exercised, in whole or in part, by giving written notice of
exercise to the Company specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full
of the purchase price in cash or, if acceptable to the Committee
in its sole discretion, in shares of Common Stock already owned
by the Participant, or by surrendering outstanding Awards
denominated in stock or stock units. The Committee may also
permit Participants, either on a selective or aggregate basis, to
simultaneously exercise Options and sell the shares of Common
Stock thereby acquired, pursuant to a brokerage or similar
arrangement, approved in advance by the Committee, and use the
proceeds from such sale as payment of the purchase price of such
shares.
(f) Special Rules for Incentive Stock Options.
With respect to Incentive Stock Options granted under the Plan,
the following additional provisions shall apply:
(i) The aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is granted)
of the number of shares with respect to which Incentive Stock
Options are exercisable for the first time by a Participant
during any calendar year shall not exceed One Hundred Thousand
Dollars ($100,000) or such other limit as may be required by the
Code;
(ii) If at the time an Incentive Stock Option
is granted, the Participant owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes
of stock of Company, then the terms of the Incentive Stock Option
shall specify that the exercise price shall be at least 110% of
the Fair Market Value of the Common Stock subject to the
Incentive Stock Option and such Incentive Stock Option shall not
be exercisable after the expiration of five (5) years from the
date granted; and
(iii) The Committee shall include any
other terms and conditions as may be required in order that the
Incentive Stock Options qualify under Section 422 of the Code or
successor provision.
(g) Deferred Compensation Stock Options.
Deferred Compensation Stock Options are intended to provide a
means by which compensation payments can be deferred to future
dates. The number of shares of Common Stock subject to a
Deferred Compensation Stock Option shall be determined by the
Committee, in its sole discretion, in accordance with the
following formula:
Amount of Compensation to be Deferred = Number of
(Fair Market Value - Exercise Price) Optioned Shares
Amounts of compensation deferred may include amounts earned
under Awards granted under the Plan or under any other
compensation plan, program or arrangement of the Company as
permitted by the Committee.
Deferred Compensation Stock Options will be
granted only if the Committee has reasonably determined that a
recipient of such an option will not be deemed at the date of
grant to be in receipt of the amount of income being deferred for
purposes of the Code.
7. Stock Appreciation Rights. The grant of Stock
Appreciation Rights under the Plan shall be subject to the
following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the express terms of
the Plan, as the Committee shall deem desirable:
(a) Stock Appreciation Rights. A Stock
Appreciation Right is an Award entitling a Participant to
receive an amount equal to (or if the Committee shall determine
at the time of grant, less than) the excess of the Fair Market
Value of a share of Common Stock on the date of exercise over the
Fair Market Value of a share of Common Stock on the date of grant
of the Stock Appreciation Right, or such other price as set by
the Committee, multiplied by the number of shares of Common Stock
with respect to which the Stock Appreciation Right shall have
been exercised.
(b) Grant. A Stock Appreciation Right may be
granted in tandem with, in addition to or completely independent
of a Stock Option or any other Award under the Plan.
(c) Exercise. A Stock Appreciation Right may be
exercised by a Participant in accordance with procedures
established by the Committee. In the case of the grant of a
Stock Appreciation Right to an officer who is subject to Section
16(b) of the Exchange Act, (i) the Stock Appreciation Right shall
not be exercisable within the first six (6) months after the date
of grant, except in the event of the death or Disability of the
Participant; and (ii) no payment in the form of cash may be made
upon the exercise of a Stock Appreciation Right at any time
unless such exercise is made during the period beginning on the
third business day and ending on the twelfth business day
following the date of release for publication of the
Corporation's quarterly or annual statement of earnings, or
unless the Committee has provided that the Stock Appreciation
Right shall be automatically exercised on one or more specified
dates outside of the control of the Participant.
(d) Form of Payment. Payment upon exercise of a
Stock Appreciation Right may be made in cash, in shares of Common
Stock, a Deferred Compensation Stock Option or any combination
thereof, as the Committee shall determine; provided, however,
that any Stock Appreciation Right exercised upon or subsequent to
the occurrence of a Change in Control (as defined in Section 16
hereof) shall be paid in cash.
8. Restricted Awards. Restricted Awards granted
under the Plan may be in the form of either Restricted Stock
Grants or Restricted Unit Grants. Restricted Awards shall be
subject to the following terms and conditions and shall contain
such additional terms and conditions, not inconsistent with the
express provisions of the Plan, as the Committee shall deem
desirable:
(a) Restricted Stock Grants. A Restricted Stock
Grant is an Award of shares of Common Stock transferred to a
Participant subject to such terms and conditions as the Committee
deems appropriate, including, without limitation, restrictions on
the sale, assignment, transfer or other disposition of such
shares and the requirement that the Participant forfeit such
shares back to the Company upon termination of employment for
specified reasons within a specified period of time.
(b) Restricted Unit Grants. A Restricted Unit
Grant is an Award of units (with each unit having a value
equivalent to one share of Common Stock) granted to a Participant
subject to such terms and conditions as the Committee deems
appropriate, including, without limitation, the requirement that
the Participant forfeit such units upon termination of employment
for specified reasons within a specified period of time.
(c) Grants of Awards. Restricted Awards may be
granted under the Plan in such form and on such terms and
conditions as the Committee may from time to time approve.
Restricted Awards may be granted alone, in addition to or in
tandem with other Awards under the Plan. Subject to the terms of
the Plan, the Committee shall determine the number of Restricted
Awards to be granted to a Participant and the Committee may
impose different terms and conditions on any particular
Restricted Award made to any Participant. Each Participant
receiving a Restricted Stock Grant shall be issued a stock
certificate in respect of such shares of Common Stock. Such
certificate shall be registered in the name of such Participant,
shall be accompanied by a stock power duly executed by such
Participant, shall bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such Award, and
shall be held in custody by the Company until the restrictions
thereon shall have lapsed.
(d) Restriction Period. Restricted Awards shall
provide that in order for a Participant to vest in such Awards,
the Participant must remain in the employment of the Company or
its Subsidiaries, subject to relief for specified reasons, for
such time period commencing on the date of the Award and ending
on such later date or dates as the Committee may designate at the
time of the Award ("Restriction Period"). During the Restriction
period, a Participant may not sell, assign, transfer, pledge,
encumber or otherwise dispose of shares of Common Stock received
under a Restricted Stock Grant. The Committee, in its sole
discretion, may provide for the lapse of restrictions in
installments during the Restriction Period. Upon expiration of
the applicable Restriction period (or lapse of restrictions
during the Restriction Period where the restrictions lapse in
installments) the Participant shall be entitled to receive his or
her Restricted Award or portion thereof, as the case may be.
(e) Payment of Awards. A Participant shall be
entitled to receive payment for a Restricted Unit Grant (or
portion thereof) in an amount equal to the aggregate Fair Market
Value of the shares of Common Stock covered by such Award upon
expiration of the applicable Restriction Period. Payment in
settlement of a Restricted Unit Grant shall be made as soon as
practicable following the conclusion of the respective
Restriction Period in cash, in shares of Common Stock equal to
the number of units granted under the Restricted Unit Grant with
respect to which such payment is made, a Deferred Compensation
Stock Option or in any combination thereof, as the Committee in
its sole discretion shall determine.
With respect to a Restricted Stock Grant, the
Committee may also, in its discretion, permit a Participant to
elect to receive, in lieu of shares of unrestricted stock at the
conclusion of a Restriction Period, a cash payment equal to the
Fair Market Value of the Restricted Stock vesting on the date the
restrictions lapse.
(f) Rights as a Shareholder. A Participant shall
have, with respect to the shares of Common Stock received under a
Restricted Stock Grant, all of the rights of a shareholder of the
Company, including the right to vote the shares, and the right to
receive any cash dividends. Stock dividends issued with respect
to the shares covered by a Restricted Stock Grant shall be
treated as additional shares under the Restricted Stock Grant and
shall be subject to the same restrictions and other terms and
conditions that apply to shares under the Restricted Stock Grant
with respect to which such dividends are issued.
9. Performance Awards. Performance Awards granted
under the Plan may be in the form of either Performance Equity
Grants or Performance Unit Grants. Performance Awards shall be
subject to the following terms and conditions and shall contain
such additional terms and conditions, not inconsistent with the
express provisions of the Plan, as the Committee shall deem
desirable:
(a) Performance Equity Grants. A Performance
Equity Grant is an Award of units (with each unit equivalent in
value to one share of Common Stock) granted to a Participant
subject to such terms and conditions as the Committee deems
appropriate, including, without limitation, the requirement that
the Participant forfeit such units or a portion of such units in
the event certain performance criteria are not met within a
designated period of time.
(b) Performance Unit Grants. A Performance Unit
Grant is an Award of units (with each unit representing such
monetary amount as designated by the Committee) granted to a
Participant subject to such terms and conditions as the Committee
deems appropriate, including, without limitation, the requirement
that the Participant forfeit such units or a portion of such
units in the event certain performance criteria are not met
within a designated period of time.
(c) Grants of Awards. Performance Awards may be
granted under the Plan in such form as the Committee may from
time to time approve. Performance Awards may be granted alone,
in addition to or in tandem with other Awards under the Plan.
Subject to the terms of the Plan, the Committee shall determine
the number of Performance Awards to be granted to a Participant
and the Committee may impose different terms and conditions on
any particular Performance Award made to any Participant.
(d) Performance Goals and Performance Periods.
Performance Awards shall provide that in order for a Participant
to vest in such Awards the Company and/or the individual
Participant, or his or her division or unit, must achieve certain
performance goals ("Performance Goals") over a designated
performance period ("Performance Period"). The Performance Goals
and Performance Period shall be established by the Committee, in
its sole discretion. The Committee shall establish Performance
Goals for each Performance Period before, or as soon as
practicable after, the commencement of the Performance Period.
The Committee shall also establish a schedule or schedules for
such Performance Period setting forth the portion of the
Performance Award which will be earned or forfeited based on the
degree of achievement of the Performance Goals actually achieved
or exceeded. In setting Performance Goals, the Committee may
use such measures of performance in such manner as it deems
appropriate, such as, for example, return on equity, earnings
growth, revenue growth, comparisons to peer companies or prior
period performance of the Participant or his or her division or
unit. During the Performance Period, the Committee shall have
the authority to adjust upward or downward the Performance Goals
in such manner as it deems appropriate.
(e) Payment of Awards. In the case of a
Performance Equity Grant, the Participant shall be entitled to
receive payment for each unit earned in an amount equal to the
aggregate Fair Market Value of the shares of Common Stock covered
by such Award at the time such Award is vested or otherwise
required to be settled in accordance with its terms. In the case
of a Performance Unit Grant, the Participant shall be entitled to
receive payment for each unit earned in an amount equal to the
dollar value of each unit times the number of units earned.
Payment in settlement of a Performance Award shall be made as
soon as practicable following the conclusion of the respective
Performance Period in cash, in shares of Common Stock, a Deferred
Compensation Stock Option or in any combination thereof, as the
Committee in its sole discretion shall determine.
10. Other Stock-Based and Combination Awards.
(a) The Committee may grant other Awards under
the Plan pursuant to which Common Stock is or may in the future
be acquired, or Awards denominated in stock units, including ones
valued using measures other than market value. Such Other
Stock-Based Grants may be granted either alone, in addition to or
in tandem with any other type of Award Granted under the Plan.
(b) The Committee may also grant Awards under the
Plan in tandem or combination with other Awards or in exchange of
Awards, or in tandem or combination with, or as alternatives to
grants or rights under any other employee plan of the Company,
including the plan of any acquired entity.
(c) Subject to the provisions of the Plan, the
Committee shall have authority to determine the individuals to
whom and the time or times at which such Awards shall be made,
the number of shares of Common Stock to be granted or covered
pursuant to such Awards, and any and all other conditions
and/or terms of the Awards.
11. Deferral Elections. The Committee may permit a
Participant to elect to defer his or her receipt of the payment
of cash or the delivery of shares of Common Stock that would
otherwise be due to such Participant by virtue of the earn out or
exercise of an Award made under the Plan. If any such election
is permitted, the Committee shall establish rules and procedures
for such payment deferrals, including, but not limited to, the
possible (a) payment or crediting of reasonable interest on such
deferred amounts credited in cash, (b) the payment or crediting
of dividend equivalents in respect of deferrals credited in units
of Common Stock, and (c) granting of Deferred Compensation Stock
Options.
12. Dividend Equivalents. Awards of Stock Options,
Stock Appreciation Rights, Restricted Unit Grants, Performance
Equity Grants, and other stock-based Awards may, in the
discretion of the Committee, earn dividend equivalents. In
respect of any such Award which is outstanding on a dividend
record date for Common Stock, the Participant may be credited
with an amount equal to the amount of cash or stock dividends
that would have been paid on the shares of Common Stock covered
by such Award had such covered shares been issued and outstanding
on such dividend record date. The Committee shall establish such
rules and procedures governing the crediting of dividend
equivalents, including the timing, form of payment and payment
contingencies of such dividend equivalents, as it deems are
appropriate or necessary.
13. Termination of Employment. The terms and
conditions under which an Award may be exercised after a
Participant's termination of employment shall be determined by
the Committee.
In the case of an Incentive Stock Option, such Award
shall expire no later than the date three months after the
termination of the Participant's employment for any reason other
than death or Disability. In the event of termination of the
Participant's employment by reason of death or Disability, the
Incentive Stock Option shall expire on the earlier of the
expiration of (i) the date specified in the Award which in no
event shall be later than 12 months after the date of such
termination, or (ii) the term specified in Section 6(c) of this
Plan.
Notwithstanding any other provision to the contrary, in
the event a Participant's employment with the Company or a
Subsidiary terminates for any reason within six (6) months of the
date of grant of any Award held by the Participant, such Award
shall expire as of the date of such termination of employment and
the Participant and the Participant's legal representative or
beneficiary shall forfeit any and all rights pertaining to such
Award.
14. Non-transferability of Awards. No Award under
the Plan, and no rights or interests therein, shall be assignable
or transferable by a Participant except by will or the laws of
descent and distribution. During the lifetime of a Participant,
Stock Options and Stock Appreciation Rights are exercisable only
by, and payments in settlement of Awards will be payable only to,
the Participant or his legal representative.
15. Adjustments Upon Changes in Capitalization, Etc.
(a) The existence of the Plan and the Awards
granted hereunder shall not affect or restrict in any way the
right or power of the Board or the shareholders of the Company to
make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure
or its business, any merger or consolidation of the Company, any
issue of bonds, debentures, preferred or prior preference stocks
ahead of or affecting the Company's capital stock or the rights
thereof, the dissolution or liquidation of the Company or any
sale or transfer of all or any part of its assets or business, or
any other corporate act or proceeding.
(b) In the event of any change in capitalization
affecting the Common Stock of the Company, such as a stock
dividend, stock split, recapitalization, merger, consolidation,
split-up, combination or exchange of shares or other form of
reorganization, or any other change affecting the Common Stock,
such proportionate adjustments, if any, as the Board in its
discretion may deem appropriate to reflect such change shall be
made with respect to the aggregate number of shares of Common
Stock for which Awards in respect thereof may be granted under
the Plan, the maximum number of shares of Common Stock which may
be sold or awarded to any Participant, the number of shares of
Common Stock covered by each outstanding Award, and the price per
share in respect of outstanding Awards.
(c) The Committee may also make such adjustments
in the number of shares covered by, and the price or other value
of any outstanding Awards in the event of a spin-off or other
distribution (other than normal cash dividends) of Company assets
to shareholders. In the event that another corporation or
business entity is being acquired by the Company, and the Company
agrees to assume outstanding employee stock options and/or stock
appreciation rights and/or the obligation to make future grants
of options or rights to employees of the acquired entity, the
aggregate number of shares of Common Stock available for Awards
under Section 4 of the Plan may be increased accordingly.
16. Change in Control.
(a) In the event of a Change in Control (as
defined below) of the Company, and except as the Board may
expressly provide otherwise, (i) all Stock Options and Stock
Appreciation Rights then outstanding shall become fully
exercisable as of the date of the Change in Control, whether or
not then exercisable, (ii) all restrictions and conditions of all
Restricted Stock Grants and Restricted Unit Grants then
outstanding shall be deemed satisfied as of the date of the
Change in Control, and (iii) all Performance Equity Grants and
Performance Unit Grants shall be deemed to have been fully earned
as of the date of the Change in Control, subject to the
limitation that any Award which has been outstanding less than
six (6) months on the date of the Change in Control shall not be
afforded such treatment.
(b) A "Change in Control" of the Company shall
have occurred if any Acquiring Person (other than the Company,
any Subsidiary, any employee benefit plan of the Company or of
any Subsidiary, or any person or entity organized, appointed or
established by the Company or any Subsidiary for or pursuant to
the terms of any such plans), alone or together with its
Affiliates and Associates, shall become the beneficial owner of
thirty-five percent (35%) or more of the shares of Common Stock
then outstanding (except pursuant to an offer for all outstanding
shares of the Company's Common Stock at a price and upon such
terms and conditions as a majority of the Continuing Directors
determine to be in the best interests of the Company and its
shareholders, (other than the Acquiring Person or any Affiliate
or Associate thereof on whose behalf the offer is being made)),
and the Continuing Directors no longer constitute a majority of
the Board.
(c) "Acquiring Person" means any person (any
individual, firm, corporation or other entity) who or which,
together with all Affiliates and Associates, shall be the
beneficial owner of a substantial block of the Company's Common
Stock; provided, however, that Acquiring Person shall not mean
Harold G. Powell or any Affiliate, Associate, spouse, or lineal
descendant of Harold G. Powell, including an adopted child of a
lineal descendant.
(d) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
(e) "Continuing Director" means (i) any
individual who is a member of the Board, while such individual is
a member of the Board, who is not an Acquiring Person, or an
Affiliate or Associate of an Acquiring Person, or a
representative or nominee of an Acquiring Person or of any such
Affiliate or Associate and was a member of the Board prior to the
occurrence of the Change in Control date, or (ii) any successor
of a Continuing Director, while such successor is a member of the
Board, and who is not an Acquiring Person, or an Affiliate or
Associate, and is recommended or elected to succeed the
Continuing Director by a majority of the Continuing Directors.
17. Amendment and Termination. The Board may at any
time at its sole discretion submit the Plan for the approval of
the shareholders of the Company, terminate the Plan, or amend it
from time to time in such respects as the Board may deem
advisable, including, without limitation, amendments to the Plan
to bring the Plan into compliance with, to take advantage of
exemptions or special treatment afforded under or to take into
account changes in applicable securities, federal income tax laws
and other applicable laws. To the extent permitted by applicable
law, the Board's ability to effect such amendments or
modifications to the Plan shall expressly extend to and include
corresponding amendments or modifications to the terms of
existing Awards.
18. Loans for Exercise of Options. The Committee
may, in its discretion, allow Participants to execute notes
payable to the Company in full or partial payment for the shares
of Common Stock acquired in connection with the exercise of Stock
Options granted under the Plan. In no event, however, may such
loan exceed the amounts allowable to be loaned by the Company to
such individual for the purposes stated hereunder as provided by
any regulation of the United States Treasury or other State or
Federal statute. The terms of any such loan, including the
interest rate, security and repayment terms, will be subject to
the discretion of the Committee.
19. Miscellaneous.
(a) Tax Withholding. The Company shall have the
right to deduct from any settlement, including the delivery or
vesting of shares, made under the Plan any federal, state or
local taxes of any kind required by law to be withheld with
respect to such payments or to take such other action as may be
necessary in the opinion of the Company to satisfy all obligation
for the payment of such taxes. If Common Stock is used to
satisfy tax withholding, such stock shall be valued based on the
Fair Market Value when the tax withholding is required to be
made.
(b) No Right to Employment. Neither the adoption
of the Plan nor the granting of any Award shall confer upon any
employee of the Company or any Subsidiary any right to continued
employment with the Company or any Subsidiary, as the case may
be, nor shall it interfere in any way with the right of the
Company or a Subsidiary to terminate the employment of any of its
employees at any time, with or without cause.
(c) Unfunded Plan. The Plan shall be unfunded
and the Company shall not be required to segregate any assets
that may at any time be represented by Awards under the Plan.
Any liability of the Company to any person with respect to any
Award under the Plan shall be based solely upon any contractual
obligations that may be effected pursuant to the Plan. No such
obligation of the Company shall be deemed to be secured by any
pledge of, or other encumbrance on, any property of the Company.
(d) Payments to Trust. The Committee is
authorized to cause to be established a trust agreement or
several trust agreements whereunder the Committee may make
payments of amounts due or to become due to Participants in the
Plan.
(e) Annulment of Awards. The grant of any Award
under the Plan payable in cash is provisional until cash is paid
in settlement thereof. The grant of any Award payable in Common
Stock is provisional until the Participant becomes entitled to
the certificate in settlement thereof. In the event the
employment of a Participant is terminated for cause (as defined
below), any Award which is provisional shall be annulled as of
the date of such termination for cause. For the purpose of this
Section 18(e), the term "terminated for cause" means any
discharge for violation of the policies and procedures of the
Company or for other job performance or conduct which is
detrimental to the best interests of the Company, as determined
by the Committee in its sole discretion.
(f) Engaging in Competition With Company. In the
event a Participant terminates his or her employment with the
Company or a Subsidiary for any reason whatsoever (except after a
Change in Control), and within eighteen (18) months after the
date thereof accepts employment with any significant competitor
of, or otherwise engages in material competition with, the
Company or a Subsidiary, the Committee, in its sole discretion,
may require such Participant to return to the Company the
economic value of any Award which is realized or obtained
(measured at the date of exercise, vesting or payment) by such
Participant at any time during the period beginning on that date
which is six months prior to the date of such Participant's
termination of employment with the Company or a Subsidiary.
(g) Other Company Benefit and Compensation
Programs. Payments and other benefits received by a Participant
under an Award made pursuant to the Plan shall not be deemed a
part of a Participant's regular, recurring compensation for
purposes of the termination indemnity or severance pay law of any
country and shall not be included in, nor have any effect on, the
determination of benefits under any other employee benefit plan
or similar arrangement provided by the Company or a Subsidiary
unless expressly so provided by such other plan or arrangements,
or except where the Committee expressly determines that inclusion
of an Award or portion of an Award should be included to
accurately reflect competitive compensation practices or to
recognize that an Award has been made in lieu of a portion of
competitive annual cash compensation. Awards under the Plan may
be made in combination with or in tandem with, or as alternatives
to, grants, awards or payments under any other Company or
Subsidiary plans. The Plan notwithstanding, the Company or any
Subsidiary may adopt such other compensation programs and
additional compensation arrangements as it deems necessary to
attract, retain and reward employees for their service with the
Company and its Subsidiaries.
(h) Securities Law Restrictions. No shares of
Common Stock shall be issued under the Plan unless counsel for
the Company shall be satisfied that such issuance will be in
compliance with applicable Federal and state securities laws.
Certificates for shares of Common Stock delivered under the Plan
may be subject to such stop-transfer orders and other
restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Common
Stock is then listed, and any applicable Federal or state
securities law. The Committee may cause a legend or legends to
be put on any such certificates to make appropriate reference to
such restrictions.
(i) Compliance With Rule 16b-3. With respect to
persons subject to Section 16(b) of the Exchange Act,
transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provision of the Plan or action
by the Board of Directors or the Committee fails to so comply,
such provision or action shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Board of
Directors or the Committee.
(j) Award Agreement. Each Participant receiving
an Award under the Plan shall enter into an agreement with the
Company in a form specified by the Committee agreeing to the
terms and conditions of the Award and such related matters as the
Committee shall, in its sole discretion, determine.
(k) Costs of Plan. The costs and expenses of
administering the Plan shall be borne by the Company.
(l) Governing Law. The Plan and all actions
taken thereunder shall be governed by and construed in accordance
with the laws of the State of Delaware.
(m) Effective Date. The Plan was adopted by the
Board of Directors on May 25, 1993, subject to approval of the
stockholders of the Company at the 1993 annual meeting or any
adjournment thereof.
