SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Rose's Stores, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
ROSE'S STORES, INC.
218 SOUTH GARNETT STREET
HENDERSON, NORTH CAROLINA 27536
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of stockholders of Rose's Stores, Inc. (the
"Corporation") will be held at the offices of Proskauer Rose Goetz & Mendelsohn
LLP, 1585 Broadway, 25th Floor, New York, New York 10036 on Thursday, June 26,
1997 at 9:00 a.m. (local time) for the following purposes:
1. to elect two directors;
2. to amend the Corporation's Certificate of Incorporation to restrict
certain transfers of the Corporation's securities in order to help
assure that the Corporation's substantial tax benefits (in the form of
net operating loss carryforwards) will continue to be available to
offset future taxable income;
3. to approve the Corporation's Long Term Stock Incentive Plan;
4. to consider and act upon a proposal to confirm the appointment of KPMG
Peat Marwick LLP as the independent certified public accountants of the
Corporation; and
5. to transact such other business as may come before the meeting or any
adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on May 14, 1997 as
the record date for determining stockholders entitled to notice of and to vote
at the meeting.
A proxy and return envelope are enclosed for your convenience.
By order of the Board of Directors,
G. TEMPLETON BLACKBURN, II
Secretary
May 23, 1997
YOUR VOTE IS IMPORTANT
PLEASE MARK, SIGN, AND DATE THE ENCLOSED PROXY
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
SELF-ADDRESSED, STAMPED ENVELOPE
<PAGE>
ROSE'S STORES, INC.
218 SOUTH GARNETT STREET
HENDERSON, NORTH CAROLINA 27536
This Proxy Statement is furnished to the stockholders of Rose's Stores,
Inc., a Delaware corporation (the "Corporation"), in connection with the
solicitation of proxies by the Board of Directors for use at the annual meeting
of stockholders of the Corporation to be held on June 26, 1997 and any
adjournment or adjournments thereof. A copy of the notice of meeting accompanies
this Proxy Statement. It is anticipated that the mailing of this Proxy Statement
will commence on or about May 23, 1997.
Only holders of securities entitled to vote at this meeting at the close of
business on May 14, 1997, the record date for the meeting, will be entitled to
notice of and to vote at the meeting. On the record date the Corporation had
issued and outstanding 8,575,331 shares of common stock, no par value (the
"Common Stock"), which are the only securities of the Corporation entitled to
vote at the meeting, each share being entitled to one vote.
Stockholders who execute proxies may revoke them by giving written notice
to the Secretary of the Corporation at any time before such proxies are voted.
Attendance at the meeting will not have the effect of revoking a proxy unless
the stockholder so attending, in writing, so notifies the Secretary of the
meeting at any time prior to the voting of the proxy.
The Board of Directors does not know of any matter that is expected to be
presented for consideration at the meeting, other than the election of
directors, the amendment of the Corporation's Certificate of Incorporation to
restrict certain transfers of stock, the approval of the Corporation's Long Term
Stock Incentive Plan and the confirmation of the appointment of the independent
certified public accountants of the Corporation for the current year. However,
if other matters properly come before the meeting, the persons named in the
accompanying proxy intend to vote thereon in accordance with their judgment.
The Corporation will bear the cost of the meeting and the cost of
soliciting proxies, including the cost of mailing the proxy material. In
addition to solicitation by mail, directors, officers and regular employees of
the Corporation (who will not be specifically compensated for such services) may
solicit proxies by telephone or otherwise. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries to forward
proxies and proxy material to their principals, and the Corporation will
reimburse them for their expenses.
All proxies received pursuant to this solicitation will be voted except as
to matters where authority to vote is specifically withheld and, where a choice
is specified as to the proposal, they will be voted in accordance with such
specification. If no instructions are given, the persons named in the proxy
solicited by the Board of Directors of the Corporation intend to vote for the
nominees for election as directors of the Corporation listed herein, for the
amendment of the Corporation's Certificate of Incorporation to restrict certain
transfers of stock, for the approval of the Corporation's Long Term Stock
Incentive Plan and for the confirmation of the appointment of KPMG Peat Marwick
LLP as the independent certified public accountants of the Corporation for the
current year. The presence, in person or by proxy, of the holders of a majority
of the outstanding shares of Common Stock will constitute a quorum at the
meeting. Shares represented by proxies that withhold authority to vote for a
nominee for director or indicate an abstention or a "broker non-vote" (i.e.,
shares represented at the meeting held by brokers or stockholder nominees as to
which (i) instructions have not been received from the beneficial owners thereof
or persons entitled to vote such shares and (ii) the broker or nominee does not
have the discretionary voting power on a particular matter with respect to such
shares) will count as shares present and entitled to vote for purposes of
determining the presence of a quorum. Abstentions and broker non-votes are not
counted as votes cast on any matter to which they relate.
1
<PAGE>
PRINCIPAL STOCKHOLDERS
The only person known by the Corporation to be the beneficial owner of more
than five percent of the outstanding shares of Common Stock as of May 14, 1997,
is indicated below:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
NAME AND ADDRESS OWNERSHIP (1) PERCENT OF CLASS
<S> <C> <C>
Ryback Management Corporation 1,748,041 shares 20.4
7711 Carondelet Avenue
Box 16900
St. Louis, Missouri 63105
</TABLE>
None of the shares is known by the Corporation to be shares with respect to
which the beneficial owner has the right to acquire beneficial ownership. The
Corporation believes the beneficial owner listed above has sole voting and
investment power with respect to the shares shown as being beneficially owned by
it.
BENEFICIAL OWNERSHIP OF DIRECTORS AND MANAGEMENT
Set forth below is certain information concerning the beneficial ownership
of Common Stock as of May 14, 1997 by (a) the Corporation's directors, (b) the
executive officers named in the Summary Compensation Table below and (c) all
directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP (1) PERCENT OF CLASS
<S> <C> <C>
R. Edward Anderson 158,950 1.8
Jack L. Howard 55,300 *
Warren G. Lichtenstein 42,000 *
Joseph L. Mullen 0 --
J. David Rosenberg 92,354 1.1
Harold Smith 0 --
N. Hunter Wyche, Jr. 0 --
Howard Parge 41,834 *
Jeanette Peters 47,199 *
G. Templeton Blackburn, II 17,669 *
David W. Howard 1,000 *
All directors and executive
officers as a group 457,449 5.3
(15 persons)
</TABLE>
* Less than 1% of the outstanding Common Stock
(1) Includes shares subject to warrants and options that are
exercisable within 60 days as follows: Mr. Anderson -- 91,667
shares; Mr. Parge -- 33,334 shares; Ms. Peters -- 33,334 shares;
Mr. Blackburn -- 16,667 shares; and all directors and executive
officers as a group -- 175,002 shares.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Under the Securities Exchange Act of 1934 (the "Exchange Act"), the
Corporation's directors, executive officers and any persons holding more than
10% of any class of the Corporation's equity securities registered pursuant to
Section 12 of the Exchange Act are required to report their ownership of such
equity securities and any changes in that ownership, on a timely basis to the
Securities and Exchange Commission. The Corporation believes that all such
reports required to be filed during the fiscal year ended January 25, 1997
("Fiscal 1996") were filed on a timely basis. The Corporation's belief is based
solely on its review of Forms 3, 4 and 5 and amendments thereto furnished to the
Corporation during, and with respect to, Fiscal 1996 by persons known to be
subject to Section 16 of the Exchange Act.
2
<PAGE>
BOARD COMMITTEES AND MEMBERSHIP
The Board of Directors held 22 meetings during Fiscal 1996. During Fiscal
1996, all directors attended more than 75% of the aggregate of (i) the total
number of meetings of the Board of Directors and (ii) the total number of
meetings of all committees of the Board of Directors on which such director
served.
The members of the Audit Committee of the Board of Directors are Messrs.
Rosenberg (Chairman), Mullen and Smith. The Audit Committee held six meetings
during Fiscal 1996. Duties of the Audit Committee include: recommending
independent certified public accountants; reviewing the scope of the audit
examinations, including fees and staffing; reviewing the independence of the
auditors; reviewing findings and recommendations of the auditors and
management's response; and reviewing the internal audit and control functions.
The members of the Compensation Committee of the Board of Directors are
Messrs. Wyche (Chairman), Howard, Rosenberg and Smith. The Compensation
Committee held two meetings during Fiscal 1996. Duties of the Compensation
Committee include: reviewing management compensation programs; reviewing and
approving compensation changes for senior executive officers; and administering
management stock option and incentive plans.
The Corporation does not have a nominating committee or an executive
committee.
DIRECTOR COMPENSATION
Directors who are officers of the Corporation receive no additional
compensation for service on the Board of Directors or committees thereof.
Directors who are not officers of the Corporation are paid an annual retainer
fee of $24,000 per year (the "Retainer Fee"), plus a meeting fee (a "Meeting
Fee") for each meeting (i) of the Board of Directors (in the amount of $1,500
per meeting for attendance in person or $750 for attendance by telephone), (ii)
of a committee of the Board of Directors that does not meet on the same day as a
meeting of the Board of Directors (in the amount of $1,500 per meeting), and
(iii) of a committee of the Board of Directors that meets on the same day as the
Board of Directors (in the amount of $500 per meeting). Committee members are
reimbursed for their actual travel and other expenses.
Subject to the approval of the stockholders of the Corporation of the 1997
Long-Term Incentive Stock Plan at this annual meeting ("Stockholder Approval"),
for the 1997 Fiscal Year (i) the Retainer Fee and Meeting Fees may be paid, at
the election of each director once in each fiscal year in the form of cash,
grants ("Stock Awards") of shares of the Corporation's common stock, no par
value ("Common Stock"), and options to purchase Common Stock ("Options"),
provided that a director electing to receive Stock Awards or Options must elect
to receive his Retainer Fee in such forms and may elect to receive his Meeting
Fees in such forms; (ii) compensation to be paid in the form of Options will be
valued using the Black-Scholes option pricing model and such assumptions as the
Corporation, in its sole discretion, deems reasonable; (iii) the exercise price
of the Options will be, and Stock Awards will be valued using, the closing price
of the Common Stock on the date of grant or issuance or deemed date of grant or
issuance; (iv) subject to Stockholder Approval, a director's entitlement to
receive Options and Stock Awards will vest, and will be granted or issued, or
deemed to be issued or granted, on the first day of the quarter as to which the
Retainer Fee is payable (in the case of the Retainer Fee) and on the date of any
meeting (in the case of Meeting Fees); (v) options will terminate on the fifth
anniversary of the date of issuance and will survive termination of membership
on the Board of Directors of the Corporation; and (vi) if Stockholder Approval
is not obtained prior to the end of the 1997 Fiscal Year, the election of a
director to receive Stock Awards or Options will be null and void and such
director shall be entitled to receive his Retainer Fee and Meeting Fees in the
form of cash.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Li Moran International, a retail management consulting firm of which Jospeh
L. Mullen, a director of the Corporation is a managing director, and the
Corporation were parties to a consulting agreement from February 1996 to
December 1996 pursuant to which Mr. Mullen served as a consultant overseeing the
Corporation's merchandise and marketing departments at a per diem rate of $1,250
plus expenses. Li Moran International was paid an aggregate of $251,250 in
connection therewith. Although Mr. Mullen continued to receive the Annual
Retainer fee paid to all non-employee Directors of the Corporation, he did not
receive Meeting Fees while the consulting agreement was in effect. The
Corporation believes that the terms of the consulting arrangement were as
favorable as those that could be obtained from an independent third party.
3
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
CASH AND OTHER COMPENSATION
The following table sets forth all the cash compensation paid or to be paid
by the Corporation, as well as certain other compensation paid or accrued,
during the fiscal years indicated, to the Chief Executive Officer and the four
other highest paid executive officers of the Corporation (collectively, the
"Named Executives") for Fiscal 1996 in all capacities in which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION
AWARDS PAYOUTS
(E)
(A) OTHER (F) (G) (H)
NAME AND (C) (D) ANNUAL RESTRICTED OPTIONS/ LTIP
PRINCIPAL (B) SALARY BONUS COMPENSATION STOCK SARS PAYOUTS
POSITION YEAR ($) ($) (1) AWARDS ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
R. EDWARD ANDERSON 1996 424,523 -- 5,094 -- -- --
President and Chief Executive Officer 1995 407,592 -- 4,518 -- 137,500 --
1994 322,936 -- 6,265 -- -- --
HOWARD PARGE 1996 179,575 -- 1,081 -- -- --
Senior Vice President 1995 175,323 -- 5,592 -- 50,000 --
Store Operations 1994 144,900 -- 4,291 -- -- --
JEANETTE PETERS 1996 159,575 -- 1,641 -- -- --
Senior Vice President 1995 156,346 -- 2,097 -- 50,000 --
CFO and Treasurer 1994 109,015 -- 2,288 -- -- --
G.T. BLACKBURN, II 1996 110,000 -- 114 -- -- --
Vice President Real Estate, General Counsel 1995 106,346 -- 46 -- 25,000 --
and Secretary 1994 82,131 -- 326 -- -- --
DAVID W. HOWARD 1996 114,467 -- -- -- -- --
Senior Vice President Distribution & 1995 126,964 25,000 562 -- 25,000 --
Information Services (3) 1994 103,077 -- 705 -- -- --
<CAPTION>
LONG-TERM COMPENSATION
PAYOUTS
(A) (I)
NAME AND ALL OTHER
PRINCIPAL COMPENSATION
POSITION ($)(2)
<S> <C>
R. EDWARD ANDERSON 6,198
President and Chief Executive Officer 6,198
5,760
HOWARD PARGE 5,528
Senior Vice President 4,784
Store Operations --
JEANETTE PETERS 5,528
Senior Vice President 5,528
CFO and Treasurer --
G.T. BLACKBURN, II --
Vice President Real Estate, General Counsel --
and Secretary --
DAVID W. HOWARD 4,678
Senior Vice President Distribution & 2,020
Information Services (3) --
</TABLE>
(1) "Other Annual Compensation" consists of tax gross-ups on medical expense
reimbursements.
(2) "All Other Compensation" consists of automobile allowance.
(3) Mr. Howard resigned as an officer of the Corporation effective October
29, 1996.
STOCK OPTIONS GRANTED DURING FISCAL YEAR
During Fiscal 1996, no options were granted to any of the Named Executives.
STOCK OPTIONS EXERCISED DURING FISCAL YEAR AND YEAR END VALUES OF UNEXERCISED
OPTIONS
None of the Named Executives owns any stock appreciation rights or, during
Fiscal 1996, exercised any options. The following table sets forth certain
information about unexercised stock options owned by the Named Executives.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES IN-THE
UNDERLYING MONEY
SHARES UNEXERCISED OPTIONS AT OPTIONS AT
ACQUIRED ON VALUE FY-END FY-END (2)
EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE
<S> <C> <C> <C> <C> <C>
R. Edward Anderson............................. 0 0 45,833 91,667 0
Howard Parge................................... 0 0 16,667 33,333 0
Jeanette Peters................................ 0 0 16,667 33,333 0
G.T. Blackburn, II............................. 0 0 8,333 16,667 0
David W. Howard (1)............................ 0 0 0 0 0
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE
MONEY
OPTIONS AT
FY-END (2)
UNEXERCISABLE
<S> <C>
R. Edward Anderson............................. 0
Howard Parge................................... 0
Jeanette Peters................................ 0
G.T. Blackburn, II............................. 0
David W. Howard (1)............................ 0
</TABLE>
(1) Mr. Howard resigned as an officer of the Corporation effective October
29, 1996, and all of his options have lapsed as of the date hereof.
(2) The closing price of the Common Stock on January 24, 1997, the last
trading day prior to the Corporation's fiscal year end, was $1.97.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Effective May 27, 1995, the Board of Directors approved a new employment
agreement with R. Edward Anderson, President and Chief Executive Officer of the
Corporation, which provides for his employment for an initial three-year term.
4
<PAGE>
Under the terms of the agreement, Mr. Anderson receives a base salary of
$425,000 and Mr. Anderson is further entitled to participate in all bonus,
incentive and equity plans and all pension, health, insurance and fringe benefit
plans, as well as perquisites, established by the Corporation. The agreement
also includes a severance allowance under certain conditions including in the
event of termination of his employment by the Corporation without cause or due
to disability or by Mr. Anderson with good reason. In such event, Mr. Anderson
would be eligible to receive his base salary for 24 months, continued health
insurance coverage for 24 months, a payment equal to 24 months additional
service credits under any then-existing pension plan, and immediate vesting of
all stock options and stock subject to vesting requirements. In the event of
termination due to disability there would also be a payment equal to two times
the greater of half of his base salary or the average cash bonus payable during
the preceding two years. The agreement also includes a change of control
allowance under which Mr. Anderson would be entitled to receive (i) his base
salary for 36 months, (ii) a lump sum equal to three times the greater of half
the base salary or the average cash bonus of the previous two years, (iii)
continued health insurance coverage for 36 months, (iv) a payment equal to 36
months of additional service credits under any pension plans in existence at
such time, (v) immediate vesting of all stock options and stock subject to
vesting requirements and (vi) a gross-up payment covering any excise tax payable
with respect to the foregoing change-in-control payments and any federal, state
and local income and payroll tax and excise tax on the gross-up payment.
The Corporation maintains a severance program providing for the payment of
certain benefits upon the cessation of employment of the executive officers of
the Corporation, including the Named Executives other than the Chief Executive
Officer. The severance allowance is payable upon (a) termination of employment
other than for misconduct as defined in the plan, (b) constructive or voluntary
termination due to a material reduction in salary or due to a material change in
job responsibilities, (c) termination on account of permanent disability or (d)
termination due to liquidation of the Corporation. Under this program, senior
vice presidents and vice presidents are eligible to receive their base salary
for six months in a lump sum and additional base salary for up to an additional
six months such additional amount being paid in installments which would cease
upon re-employment. In the event of termination following a change in control,
the full 12 months base salary would be payable in a lump sum payment. Each
officer would also be entitled to receive reimbursement for reasonable expenses
incurred to obtain re-employment, not to exceed $10,000, and continued medical,
dental and disability coverage under existing plans of the Corporation for a
three-month period following termination of employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During Fiscal 1996, the Compensation Committee was initially comprised of
Messrs. Loeb (Chairman), Mullen, Stone and Wyche. Mr. Loeb resigned from the
Board in August, 1996. Mr. Wyche then became, and is currently, Chairman of the
Compensation Committee. All of such members of the Compensation Committee during
the remainder of Fiscal 1996 were outside directors. From February 1996 until
December 1996, Mr. Mullen, a member of the Compensation Committee, served as a
consultant overseeing the Corporation's merchandise and marketing departments
pursuant to a consulting agreement between the Corporation and Li Moran
International, Incorporated, a retail management consulting firm of which Mr.
Mullen is managing director. See "Certain Relationships and Related
Transactions." Following the November 20, 1996 Annual Meeting of Stockholders,
the committees of the Board of Directors were reconstituted, and the
Compensation Committee has since that date consisted of Messrs. Wyche
(Chairman), Howard, Rosenberg and Smith. None of such members were officers or
employees of the Corporation during the 1996 Fiscal Year or in prior fiscal
years. None of the executive officers of the Corporation served as a member of
the board of directors of another entity or as a member of the compensation
committee of another entity during Fiscal 1996.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee determines the Corporation's executive
compensation policies. Subject to the terms of existing employment agreements
between the Corporation and certain of its executive officers, the Compensation
Committee determines the compensation of the Corporation's senior management and
executive officers and administers incentive and stock option plans for all
employees including the executive officers. The Compensation Committee met twice
during Fiscal 1996, and at both such meetings the Compensation Committee was
comprised solely of outside directors.
COMPENSATION POLICIES
The executive compensation policies of the Compensation Committee are based
on three fundamental goals: (i) to attract and retain corporate officers and
other key employees who are considered to be essential to the competitive
repositioning of the Corporation in its markets; (ii) to ensure that an
appropriate relationship exists between annual bonus compensation
5
<PAGE>
and the performance of the Corporation; and (iii) to ensure that an appropriate
relationship exists between executive compensation and the creation of
stockholder value. These policies are implemented through determinations as to
base salary, standards for determination of annual bonus compensation, and
awards of equity compensation under the Corporation's New Equity Compensation
Plan.
FISCAL 1996 EXECUTIVE COMPENSATION
The base salaries of the Named Executives, were approved in the Fall of
1995 and have not been altered since that date. The stock options granted to the
four most highly compensated executive officers, including the Chief Executive
Officer, were awarded pursuant to a plan approved by the bankruptcy court and no
other options or other equity compensation for such officers has been
implemented by the Corporation. A bonus program was approved by the Compensation
Committee providing for an annual bonus award based on the achievement of
certain financial objectives but no awards were made with respect to Fiscal
1996. A court-approved severance program expired on December 14, 1995 and was
replaced by a substantially similar program approved by the Compensation
Committee and by the Board of Directors. See "Employment Agreements, Termination
of Employment and Change-In-Control Arrangements." Stock options were granted to
four executive officers who were hired by the Corporation during Fiscal 1996 on
a basis consistent with those previously awarded to their predecessors.
FISCAL 1996 CHIEF EXECUTIVE OFFICER COMPENSATION
A court-authorized employment agreement between the Corporation and R.
Edward Anderson was in effect from August 22, 1994 until May 29, 1995. This
agreement was replaced by a new employment agreement approved by the
Compensation Committee and by the Board of Directors, effective as of May 29,
1995. Pursuant to the agreement, an increase to Mr. Anderson's base salary was
approved by the Compensation Committee and by the Board of Directors effective
August 22, 1995. See "Employment Agreements, Termination of Employment and
Change-In-Control Arrangements." Other than such adjustment to base salary, Mr.
Anderson has only received the amounts provided for under the agreement and has
not been granted a bonus or other additional perquisites.
COMPENSATION COMMITTEE MEMBERS
N. Hunter Wyche (Chairman)
J. David Rosenberg
Harold Smith
6
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of the cumulative total returns on
the Common Stock, the NASDAQ Composite Index, and an index of peer companies
selected by the Corporation for the period commencing on May 3, 1995 (the
initial listing date of the Corporation's stock after its reorganization under
Chapter 11 of the Bankruptcy Code), and ending on January 25, 1997. The graph
assumes that the value of the investment in Common Stock and each index was $100
on May 3, 1995 and that all dividends were reinvested.
COMPARISON OF 21 MONTH CUMULATIVE TOTAL
RETURN OF ROSES, PEER GROUP, AND MARKET
(Performance Graph appears here. Plot points are listed in table below.)
<TABLE>
<CAPTION>
5/3/95 6/30/95 9/30/95 12/31/95 1/31/96 3/29/96 6/28/96 9/30/96 12/31/96 1/24/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ROSES 100 63.02 69.23 47.04 50.89 60.95 60.95 47.04 55.62 58.28
SIC VARIETY STORES 100 110.68 106.24 93.50 87.28 102.88 117.85 119.64 113.78 116.62
NASDAQ 100 106.10 118.22 117.27 118.12 122.81 131.91 135.55 141.93 152.30
</TABLE>
The above graph compares the performance of the Corporation with the NASDAQ
Composite Index, and a group of peer companies with the investment weighted on
market capitalization. Companies in the peer group are those that fall under
Standard Industrial Classification Code 5331, Variety Stores. This group is
comprised of 99 Cents Only Stores, Ames Department Stores, Borders Group Inc.,
Bradlees Inc., Caldor Corp., Coles Myer Ltd., Consolidated Stores Corp., Cost
Plus Inc., Dayton Hudson Corp., Dollar General Corp., Dollar Tree Stores Inc.,
Duty Free Internat Inc., Family Dollar Stores Inc., Fred's Inc., Garden Ridge
Corp., Hills Stores Co., K-Mart Corp., Mac Frugals Bargains, Pamida Holdings
Corp., Price/Costco Inc., Shopko Stores Inc., TJX Companies Inc., Tuesday
Morning Corp., Venture Stores Inc., Waban Inc., Wal-Mart Stores Inc., Woolworth
Corp.
7
<PAGE>
ITEM 1
ELECTION OF DIRECTORS
The Board of Directors of the Corporation is currently comprised of seven
members. Pursuant to the Certificate of Incorporation and the Bylaws of the
Corporation, the Board of Directors is divided into three classes and each class
of directors is to serve a staggered term of office. Subject to their election
at this annual meeting of stockholders, the terms of Messrs. Anderson and
Rosenberg expire in 2000. The terms of Messrs. Lichtenstein and Mullen expire in
1998. The terms of Messrs. Howard, Smith and Wyche expire in 1999.
Subject to the foregoing, at each annual meeting of stockholders, the
successors to the class of directors whose term is then expiring shall be
elected to hold office for a term expiring at the third succeeding annual
meeting of stockholders or until their successors have been duly elected and
qualified. If any nominee listed in the table below should become unavailable
for any reason, which management does not anticipate, the proxy will be voted
for any substitute nominee or nominees who may be selected by management prior
to or at the meeting. Directors will be elected by a plurality of the votes
cast. The information concerning the nominees and their security holdings has
been furnished by them to the Corporation.
Certain information concerning the nominees for election at this year's
annual meeting, as well as information regarding the continuing directors whose
terms expire in 1998 and 1999, is set forth below. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR ALL NOMINEES.
NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
NAME AND AGE OCCUPATION AND OTHER DIRECTORSHIPS
<S> <C>
R. Edward Anderson (47) Mr. Anderson has served as a director of the Corporation since 1994. Mr. Anderson has
(term expires 2000) been Chairman of the Board, President and Chief Executive Officer of the Corporation
since August 1994. Prior thereto, Mr. Anderson held various positions with the
Corporation, including Executive Vice President and Chief Financial Officer.
J. David Rosenberg (48) Mr. Rosenberg has served as a director of the Corporation since 1995. Mr. Rosenberg has
(term expires 2000) been a partner of Keating, Muething & Klekamp, a law firm, since prior to 1992.
</TABLE>
CONTINUING DIRECTORS
<TABLE>
<S> <C>
Warren G. Lichtenstein (31) Mr. Lichtenstein has served as a director of the Corporation since 1996. Mr.
(term expires 1998) Lichtenstein has been Chief Executive of the General Partner of Steel Partners II, LP,
a private investment firm, since 1993 and Chairman of Steel Partners Services, Ltd., a
private investment firm, since 1993. Mr. Lichtenstein was Executive Vice President of
Alpha Technologies Group, Inc., a manufacturer of electronic components, from September p
1994 through September 1995. Mr. Lichtenstein is a director of Alpha Technologies
Group, Inc., SL Industries, Inc., Saratoga Spring Water Corporation, Inc. and Gateway
Industries, Inc. ("Gateway"). Gateway was the sole stockholder of Marsel Mirror and
Glass Products, Inc. ("Marsel") from November 1995 to December 1996. Mr. Lichtenstein
served as President of Marsel from its formation as an acquisition subsidiary until the
acquisition was consummated. Thereafter, Marsel appointed a President who had no prior
affiliation with Gateway. Mr. Lichtenstein served as Marsel's sole director until
Gateway disposed of its interest in Marsel. Marsel filed for protection under Chapter
11 of the Bankruptcy Code shortly following Gateway's disposition of Marsel.
</TABLE>
8
<PAGE>
CONTINUING DIRECTORS (CONTINUED)
<TABLE>
<CAPTION>
NAME AND AGE OCCUPATION AND OTHER DIRECTORSHIPS
<S> <C>
Joseph L. Mullen (51) Mr. Mullen has served as a director of the Corporation since 1995. Since January 1994,
(term expires 1998) Mr. Mullen has served as Managing Partner of Li Moran International, a management
consulting company and has functioned as a senior officer overseeing the merchandise
and marketing departments for such companies as Leewards Creative Crafts Inc., Office
Depot of Warsaw, Poland and Rose's Stores, Inc. From January 1994 to July 1994, Mr.
Mullen served as Senior Vice President for Leewards Creative Crafts Inc., a national
retail chain specializing in crafts. Prior to January 1994, Mr. Mullen was employed by
Hills Department Stores, Inc. ("Hills") for approximately 23 years and held a variety
of positions, including Vice President Hardlines. Hills filed for protection under
Chapter 11, Title 11 of the United States Code on February 4, 1991, while Mr. Mullen
was employed by Hills.
Jack L. Howard (35) Mr. Howard has served as a director of the Corporation since 1996. Mr. Howard has been
(term expires 1999) a registered principal of Mutual Securities, Inc., a division of Cowles, Sabol & Co.,
Inc., a stock brokerage firm, since prior to 1993. He is a director of Gateway
Industries, Inc.
Harold Smith (73) Mr. Smith has served as a director of the Corporation since 1995. Since 1990, Mr. Smith
(term expires 1999) has been President of Funding & Merchandising Resources Corp., a retail consulting
firm, and was formerly President and Chief Operating Officer of Woolco, a division of
F. W. Woolworth and President and Chief Executive Officer of Goldblatt's.
N. Hunter Wyche, Jr. (45) Mr. Wyche has served as a director of the Corporation since 1995. Mr. Wyche is a
(term expires 1999) founding partner of Wyche & Story, a law firm.
</TABLE>
ITEM 2
STOCK TRANSFER RESTRICTIONS
AMENDMENT TO CERTIFICATE OF INCORPORATION
INTRODUCTION
For the taxable year beginning January 26, 1997, the Corporation had
available net operating losses ("NOLs") of approximately $70 million to offset
taxable income recognized by the Corporation in the future. NOLs benefit the
Corporation by offsetting taxable income dollar-for-dollar by the amount of the
NOLs, thereby eliminating (subject to a relatively minor alternative minimum
tax) the federal corporate tax on such income. The benefit of the NOLs can be
reduced or eliminated if the Corporation undergoes an "ownership change" (as
described below) through transfers of stock by which stockholders exceed or
increase ownership above 5% of the outstanding stock. The Board of Directors
believes the best interests of the Corporation and its stockholders will be
served by adopting provisions (the "Transfer Restrictions") in its certificate
of incorporation that are designed to restrict direct and indirect transfers of
the Corporation's equity securities if the effect would be to increase the
ownership of stock by any person to 4.9% or more of the Corporation's stock, or
would increase the percentage of stock owned by a person owning 4.9% or more of
the Corporation's stock. The Transfer Restrictions will not, however, be
applicable to the stock owned by any existing 5 percent stockholder (within the
meaning of Section 382 of the Internal Revenue Code of 1986, as amended the
"Code"), other than any direct public group, on the date the Transfer
Restrictions become effective, and do not apply to sales of stock in the market
by less than 4.9% stockholders to persons who, taking the purchase into account,
own less than 4.9% of the Corporation's stock.
Under Delaware law, the affirmative vote of a majority of the outstanding
shares of Common Stock is required for approval of an amendment to the
Corporation's certificate of incorporation. The Transfer Restrictions will be
adopted as an amendment to the certificate of incorporation of the Corporation
as Article Fifteenth. STOCKHOLDERS ARE URGED TO READ CAREFULLY THE ACCOMPANYING
EXHIBIT A WHICH SETS FORTH THE TRANSFER RESTRICTIONS. The Transfer Restrictions
have been
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approved by the Board of Directors. The discussion set forth below is qualified
in its entirety by reference to the accompanying Exhibit A.
PURPOSE OF THE TRANSFER RESTRICTIONS
The Transfer Restrictions are designed to restrict direct and indirect
transfers of the Corporation's stock that could result in the imposition of
limitations on the use by the Corporation, for federal income tax purposes, of
the NOLs and other tax attributes that are and will be available to the
Corporation, as discussed more fully below.
THE CORPORATION'S NOLS AND SECTION 382
For the taxable year beginning January 26, 1997, the Corporation had
available NOLs of approximately $70 million to offset taxable income recognized
by the Corporation in the future. For federal income tax purposes, these NOLs
will expire in material amounts beginning in the year 2008. NOLs benefit the
Corporation by offsetting taxable income dollar-for-dollar by the amount of the
NOLs, thereby eliminating (subject to a relatively minor alternative minimum
tax) the federal corporate tax on such income. The maximum federal corporate tax
rate is currently 35%.
The benefit of a corporation's NOLs can be reduced or eliminated under
Section 382 if a corporation undergoes an "ownership change," as defined in
Section 382. Generally, an ownership change occurs if one or more stockholders,
each of whom owns 5% or more in value of a corporation's capital stock, increase
their aggregate percentage ownership by more than 50 percentage points over the
lowest percentage of stock owned by such stockholders over the preceding
three-year period. For this purpose, all holders who each own less than 5% of a
corporation's capital stock are generally treated together as one or more 5
percent stockholders. Transactions in the public markets among stockholders
owning less than 5% of the equity securities are not included in the
calculation. In addition, certain constructive ownership rules, which generally
attribute ownership of stock to the ultimate beneficial owner thereof without
regard to ownership by nominees, trusts, corporations, partnerships or other
entities, or to related individuals, are applied in determining the level of
stock ownership of a particular stockholder. Special rules, described below, can
result in the treatment of options (including warrants) as having been exercised
if such treatment would result in an ownership change. All percentage
determinations are based on the fair market value of a corporation's capital
stock, including any preferred stock that is voting or convertible or otherwise
participates in corporate growth.
If an ownership change of the Corporation were to occur, the amount of
taxable income in any year (or portion of a year) subsequent to the ownership
change that could be offset by NOLs or other carryovers prior to such ownership
change could not exceed the product obtained by multiplying (i) the aggregate
value of the Corporation's stock immediately prior to the ownership change (with
certain adjustments) by (ii) the then applicable federal long-term tax exempt
rate (currently 5.5%) (the "Section 382 limitation"). Based upon the
Corporation's stock price, if an ownership change were now to occur, the Section
382 limitation would be approximately $900,000. In addition, to the extent the
Corporation is determined to have a net unrealized built-in loss (generally
defined as the excess of the tax basis of a corporation's assets over their fair
market value) which is greater than the lesser of (i) 15 percent of the fair
market value of the Corporation's assets or (ii) $10 million, in the event of an
ownership change, any net unrealized built-in losses recognized within the
five-year period beginning on the date of the ownership change would be subject
to the Section 382 limitation (as if it were a pre-change NOL). The Corporation
believes that it currently has a substantial built-in loss with respect to its
assets. Any portion of the annual Section 382 limitation amount not utilized in
any year may be carried forward and increase the available Section 382
limitation amount for the succeeding tax year. Thus, the effect of an ownership
change would be to significantly eliminate the annual utilization of the NOLs,
and to cause a very substantial portion of the NOLs to expire prior to their
use.
DESCRIPTION OF THE TRANSFER RESTRICTIONS
THE FOLLOWING IS A BRIEF SUMMARY OF THE PROPOSED TRANSFER RESTRICTIONS.
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
PROPOSED TRANSFER RESTRICTIONS. ALL STOCKHOLDERS ARE URGED TO READ THE TRANSFER
RESTRICTIONS SET FORTH IN THE ACCOMPANYING EXHIBIT A HERETO IN THEIR ENTIRETY.
Upon adoption, Article Fifteenth generally will restrict any direct or
indirect transfer of "stock" (which term, for purposes of the Transfer
Restrictions, includes the Common Stock and any other equity security treated as
"stock" under Section 382) of the Corporation if the effect would be to increase
the ownership of stock by any person to 4.9% or more of the Corporation's stock,
or would increase the percentage of stock owned by a person owning 4.9% or more
of the Corporation's stock. Transfers included under the Transfer Restrictions
include sales to persons whose resulting percentage would exceed the thresholds
discussed above, or to persons whose ownership of shares would by attribution
cause another person to exceed
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<PAGE>
such thresholds. Numerous rules of attribution, aggregation and calculation
prescribed under the Code (and related regulations) will be applied in
determining whether the 4.9% threshold has been met and whether a group of less
than 4.9% stockholders will be treated as a "public group" that is a 5 percent
stockholder (reduced to 4.9% for purposes of the Transfer Restrictions) under
Section 382. As a result of these attribution rules, the Transfer Restrictions
could result in prohibiting ownership of the Corporation's stock as a result of
a change in the relationship between two or more persons or entities, or of a
transfer of an interest other than the Corporation's stock, such as an interest
in an entity that, directly or indirectly, owns the Corporation's stock. The
Transfer Restrictions may also apply to proscribe the creation or transfer of
certain "options" (which are broadly defined by Section 382) in respect of the
Corporation's stock to the extent, generally, that exercise of the option would
result in a proscribed level of ownership.
The Transfer Restrictions will not, however, be applicable to the stock
owned by any existing 5 percent stockholder (within the meaning of Section 382
of the Code), other than any direct public group, on the date the Transfer
Restrictions become effective, and do not apply to sales of stock in the market
by less than 4.9% stockholders to persons who, taking the purchase into account,
own less than 4.9% of the Corporation's stock.
Generally, the Transfer Restrictions will be imposed only with respect to
the amount of the Corporation's stock (or options with respect to the
Corporation's stock) purportedly transferred in excess of the threshold
established in the Transfer Restrictions. However, the restrictions will not
prevent a transfer if the purported transferee obtains the approval of the Board
of Directors, which approval may be granted or withheld in certain
circumstances, as more fully described below.
Assuming adoption of the Transfer Restrictions, all certificates
representing the Corporation's stock, including stock to be issued in the
future, would bear a legend providing that the transfer of the stock is subject
to restrictions. See Exhibit A. The Board of Directors also intends to issue
instructions to or make arrangements with the company's transfer agent (the
"Transfer Agent") to implement the Transfer Restrictions. The Transfer
Restrictions provide that the Transfer Agent will not record any transfer of the
Corporation's stock purportedly transferred in excess of the threshold
established in the Transfer Restrictions. The Transfer Agent also has the right
(but is not required), prior to and as a condition to registering any transfers
of the Corporation's stock on the Corporation's stock transfer records, to
request an affidavit from the purported transferee of the stock regarding such
purported transferee's actual and constructive ownership of the Corporation's
stock, and if the Transfer Agent does not receive such affidavit or the
affidavit evidences that the transfer would violate the Transfer Restrictions,
the Transfer Agent is required to notify the Corporation and not to enter the
transfer in the Corporation's stock transfer records. These provisions may
result in the delay or refusal of certain requested transfer of the
Corporation's stock.
Upon adoption and filing of the Transfer Restrictions, any direct or
indirect transfer of stock attempted in violation of the restrictions would be
void AB INITIO as to the purported transferee, and the purported transferee
would not be recognized as the owner of the shares owned in violation of the
restrictions for any purpose, including for purposes of voting and receiving
dividends or other distributions in respect of such stock, or in the case of
options, receiving stock in respect of their exercise. Stock acquired in
violation of the Transfer Restrictions is referred to as "Excess Stock."
Excess Stock automatically would be transferred to an agent of the
Corporation (the "Agent"), effective as of the close of business on the business
day prior to the date of the violative transfer. Any dividends or other
distributions paid prior to discovery by the Corporation that the stock has been
transferred to the Agent are treated as held by the purported transferee on
behalf of the Agent and must be paid to the Agent upon demand, and any dividends
or other distributions declared but unpaid after such time shall be paid to the
Agent. Votes cast by a purported transferee with respect to Excess Stock prior
to the discovery by the Corporation that the Excess Stock was transferred to the
Agent will be rescinded as void. As soon as practicable following the receipt of
notice from the Corporation that Excess Stock was transferred to the Agent, the
Agent is required to sell such Excess Stock in an arms'-length transaction that
would not constitute a violation under the Transfer Restrictions. The net
proceeds of the sale, after deduction of all costs incurred by the Corporation,
the Transfer Agent and the Agent, will be distributed first to the violating
stockholder in an amount equal to the lesser of such proceeds or the cost (or in
some circumstances the fair market value of the Excess Stock on the date of the
violative transfer) incurred by the stockholder to acquire such Excess Stock,
and the balance of the proceeds, if any, will be distributed to a charitable
beneficiary together with any other distributions with respect to such Excess
Stock received by the Agent. If the Excess Stock is sold by the purported
transferee, such person will be treated as having sold the Excess Stock on
behalf of the Agent, and shall be required to remit all proceeds to the Agent
(less, in certain cases, an amount equal to the amount such person otherwise
would have been entitled to retain had the Agent sold such shares).
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CONTINUED RISK OF OWNERSHIP CHANGE
Despite the adoption of the Transfer Restrictions, there still remains a
risk that certain changes in relationships among stockholders or other events
will cause an "ownership change" of the Corporation under Section 382.
The Corporation believes the Transfer Restrictions are enforceable. The
Internal Revenue Service (the "IRS") has issued several private letter rulings
in this area that indicate, that to the extent Transfer Restrictions are
enforceable and are enforced by a corporation, their terms will be respected for
purposes of applying Section 382. However, private letter rulings issued by the
IRS cannot be relied upon as legal precedent. There can be no assurance,
therefore, that if transfers in violation of the Transfer Restrictions are
attempted, that the IRS will not assert that such transfers have federal income
tax significance notwithstanding the Transfer Restrictions.
BOARD POWER TO WAIVE OR MODIFY TRANSFER RESTRICTIONS
The Board of Directors has the discretion to approve a transfer of stock
that would otherwise violate the Transfer Restrictions in circumstances where
(i) it obtains a written opinion of tax counsel that such transfer would not
jeopardize, or create a material limitation on, the Corporation's ability to use
its NOLs taking into account both the proposed transfer and reasonably
foreseeable future events or (ii) the overall economic benefits of the transfer
outweigh the detriments of such transaction. If the Board of Directors decides
to permit a transfer that would otherwise violate the Transfer Restrictions,
that transfer or later transfers may result in an ownership change that would
limit the use of the Corporation's NOLs.
In addition in the event of a change in law, the Board of Directors is
authorized to eliminate the Transfer Restrictions, modify the applicable
allowable percentage ownership interest (now at 4.9%) or modify any of the terms
and conditions of the Transfer Restrictions provided that the Board of Directors
determines in writing that such change is reasonably necessary or advisable to
preserve the Corporation's NOLs or that the continuation of the affected terms
and conditions of the Transfer Restrictions is no longer reasonably necessary
for such purpose. The Board of Directors' determination must be supported by a
written opinion of tax counsel. Written notice of any such determination will be
provided to stockholders.
As a result of the foregoing, the Transfer Restrictions serve to reduce,
but not necessarily eliminate, the risk that Section 382 will cause the
limitations described above on the use of tax attributes of the Corporation.
ANTITAKEOVER EFFECT
Because some corporate takeovers occur through the acquiror's purchase, in
the public market or otherwise, of sufficient stock to give it control of a
company, any provision that restricts the transferability of shares can have the
effect of preventing such a takeover. The Transfer Restrictions therefore may be
deemed to have an "antitakeover" effect because they will restrict the ability
of a person or entity or group thereof from accumulating an aggregate of 4.9% or
more of the Common Stock and the ability of persons, entities or groups now
owning 4.9% or more of the Common Stock from acquiring additional securities.
The Transfer Restrictions would discourage or prohibit accumulations of
substantial blocks of shares for which stockholders might receive a premium
above market value.
The indirect "antitakeover" effect of the Transfer Restrictions is not the
reason for the Transfer Restrictions. The Board of Directors considers the
Transfer Restrictions to be reasonable and in the best interests of the
Corporation and its stockholders because the Transfer Restrictions reduce
certain of the risks that the Corporation will be unable to utilize its
available NOLs. In the opinion of the Board of Directors, the fundamental
importance to the Corporation's stockholders of maintaining the availability of
the NOLs to the Corporation is a more significant consideration than the
indirect "antitakeover" effect the Transfer Restrictions may have.
POSSIBLE EFFECT ON LIQUIDITY
The Transfer Restrictions will restrict a stockholder's ability to acquire,
directly or indirectly, additional stock of the Corporation in excess of the
specified limitations. Furthermore, a stockholder's ability to dispose of his
stock of the Corporation may be restricted as a result of the Transfer
Restriction, and a stockholder's ownership of stock of the Corporation may
become subject to the Transfer Restrictions as a result of actions taken by
persons related to that stockholder.
VOTE REQUIRED TO APPROVE THE TRANSFER RESTRICTIONS CHARTER AMENDMENT
Approval of the Transfer Restrictions requires the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock. Stockholders
should be aware that a vote in favor of the Transfer Restrictions may result in
a waiver of the stockholder's ability to contest the enforceability of the
Transfer Restrictions. Consequently, all stockholders should
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<PAGE>
carefully consider this in determining whether to vote in favor of the Transfer
Restrictions. The Corporation intends to enforce vigorously the Transfer
Restrictions against all current and future holders of its stock.
Should the Transfer Restrictions be adopted, they contain a provision which
will require the affirmative vote of the holders of not less than two-thirds of
the shares of the Corporation then entitled to vote generally in an election of
directors, voting together as a single class, in order to amend or repeal the
Transfer Restrictions or adopt any provision of the Certificate of Incorporation
that would be inconsistent with these provision.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE IN
FAVOR OF THIS PROPOSAL TO AMEND THE CORPORATION'S CERTIFICATE OF INCORPORATION.
ITEM 3
APPROVAL OF THE LONG TERM STOCK INCENTIVE PLAN
BACKGROUND
On April 24, 1997, the Board of Directors of the Corporation adopted
(subject to stockholder approval) the Rose's Stores, Inc. Long Term Stock
Incentive Plan (the "Plan"). The following description of the Plan is a summary
and is qualified in its entirety by reference to the Plan which accompanies this
proxy statement as Exhibit B.
PURPOSE
The purpose of the Plan is to enhance the profitability and value of the
Corporation for the benefit of stockholders by enabling the Corporation to offer
employees and consultants of the Corporation stock-based incentives and other
equity interests in the Corporation and to offer non-employee directors of the
Corporation stock-based incentives (in lieu of their Retainer or Total Director
Fees) in order to attract, retain and reward such individuals and strengthen the
mutuality of interests between such individuals and the Corporation's
stockholders.
ADMINISTRATION
The Plan will be administered by a committee of the Board of Directors of
the Corporation which is intended to consist of two or more non-employee
directors, each of whom will be, to the extent required by Rule 16b-3 under the
Exchange Act ("Rule 16b-3") and Section 162(m) of the Code, a non-employee
director as defined in Rule 16b-3 and an outside director as defined under
Section 162(m) of the Code (the "Committee"). If no Committee exists which has
the authority to administer the Plan, the functions of the Committee will be
exercised by the Board of Directors of the Corporation. The Committee has the
full authority to grant awards under the Plan and to determine the persons to
whom awards will be granted, the time or times such awards will be granted, the
terms and conditions of such awards and the amounts of such awards.
ELIGIBILITY
All employees and consultants of the Corporation and its subsidiaries (if
any) designated by the Committee to participate in the Plan are eligible to be
granted options, restricted stock, stock appreciation rights, performance
shares, performance units and other stock-based awards (collectively, the
"Awards") under the Plan. All non-employee directors of the Corporation are only
eligible to receive Common Stock or nonqualified stock options in lieu of
Retainer or Total Director Fees under the Plan.
AVAILABLE SHARES
A maximum of 500,000 shares of Common Stock may be issued under the Plan;
however, the Committee may make appropriate adjustments to the number of shares
available for Awards and the terms of outstanding Awards under the Plan to
reflect any change in the Corporation's capital structure or business, stock
dividend, stock split, recapitalization, reorganization, merger, consolidation
or sale of all or substantially all the assets of the Corporation.
The maximum number of shares of Common Stock subject to options that may be
granted to any individual under the Plan is 100,000 for each fiscal year of the
Corporation.
The maximum number of shares of restricted stock for which the lapse of
restrictions is subject to the attainment of performance goals which may be
granted under the Plan to any individual may not exceed 100,000 shares during
any fiscal year of the Corporation.
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The maximum number of performance shares which may be awarded under the
Plan to any individual may not exceed 100,000 during any fiscal year of the
Corporation.
The maximum value of performance units which may be granted under the Plan
during any fiscal year of the Corporation will be $50,000.
The maximum number of shares of Common Stock subject to any stock
appreciation right which may be granted under the Plan to any individual may not
exceed 100,000 shares during any fiscal year of the Corporation. If a stock
appreciation right or a limited stock appreciation right is granted in tandem
with a stock option, it will apply against the individual limits for both stock
options and stock appreciation rights, but only once against the maximum number
of shares available under the Plan.
In general, upon the expiration, termination, cancellation or forfeiture of
an Award, the unissued shares of Common Stock subject to such Award will again
be available for Awards under the Plan, but will still count against the
individual specified limits.
AMENDMENTS
The Plan provides that it may be amended by the Board of Directors of the
Corporation, except that no such amendment, without stockholder approval to the
extent such approval is required by the laws of the State of Delaware, for the
exception for performance-based compensation under Section 162(m) of the Code or
under Section 422 of the Code, may increase the aggregate number of shares of
Common Stock that may be issued under the Plan, increase the maximum individual
limits for any fiscal year, change the classification of employees, consultants
and non-employee directors eligible to receive Awards, decrease the minimum
option price of any option, extend the maximum option period under the Plan,
change any rights with respect to non-employee directors, materially alter the
performance criteria for certain Awards or to make any other change that
requires stockholder approval pursuant to the exemption for performance-based
compensation under Section 162(m) of the Code or under Section 422 of the Code.
TYPES OF AWARDS
The Plan provides for the grant of any or all of the following types of
awards to eligible employees: (i) stock options, including incentive stock
options and nonqualified stock options; (ii) stock appreciation rights, in
tandem with stock options or freestanding; (iii) restricted stock; (iv)
performance units; (v) performance shares; and (vi) other stock-based awards. In
addition, the Plan provides for the award of Common Stock or options to
non-employee directors of the Corporation as described below. Each of these
types of awards is discussed in more detail below. Awards may be granted singly,
in combination, or in tandem, as determined by the Committee.
STOCK OPTIONS
Under the Plan, the Committee may grant awards in the form of options to
purchase shares of Common Stock. Options may be in the form of incentive stock
options or nonqualified stock options. The Committee will, with regard to each
option, determine the number of shares subject to the option, the term of the
option (which shall not exceed 10 years, provided, however, that the term of an
incentive stock option granted to a 10% stockholder of the Corporation shall not
exceed five years), the exercise price per share of stock subject to the option,
the vesting schedule (if any), and the other material terms of the option. No
option may have an exercise price less than the fair market value of the Common
Stock at the time of grant (or, in the case of an incentive stock option granted
to a ten percent stockholder of the Corporation, 110% of fair market value).
Notwithstanding the foregoing, if an option is modified, extended or renewed
and, thereby, deemed to be the issuance of a new option under the Code, the
exercise price of the option may continue to be the original exercise price even
if less than the fair market value of the Common Stock at the time of such
modification, extension or renewal.
The option price upon exercise may, to the extent determined by the
Committee at or after the time of grant, be paid by a participant in cash, in
shares of Common Stock owned by the participant (free and clear of any liens and
encumbrances), in shares of restricted stock valued at fair market value on the
payment date as determined by the Committee (without regard to any forfeiture
restrictions applicalbe to restricted stock), by a reduction in the number of
shares of Common Stock issuable upon exercise of the option or by such other
method as is approved by the Committee. If an option is exercised by delivery of
shares of restricted stock, the shares of Common Stock acquired pursuant to the
exercise of the option will generally be subject to the same restrictions as
were applicable to such restricted stock. All options may be made exercisable in
installments, and the exercisability of options may be accelerated by the
Committee. The Committee may at any time offer to buy an option previously
granted on such terms and conditions as the Committee shall establish. Options
may, at the discretion of
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the Committee, provide for "reloads," whereby a new option is granted for the
same number of shares as the number of shares of Common Stock or restricted
stock used by the participant to pay the option price upon exercise.
RESTRICTED STOCK
The Plan authorizes the Committee to award shares of restricted stock. A
recipient of restricted stock may be required to pay the par value of such
shares to receive such restricted stock. Upon the award of restricted stock, the
recipient has all rights of a stockholder with respect to the shares, other than
the right to receive dividends currently, unless so specified by the Committee
at the time of grant, subject to the conditions and restrictions generally
applicable to restricted stock or specifically set forth in the recipient's
restricted stock award agreement. Unless otherwise determined by the Committee
at grant, payment of dividends, if any, shall be deferred until the date that
the relevant share of restricted stock vests.
Recipients of restricted stock are required to enter into a restricted
stock award agreement with the Corporation which states that the restrictions to
which the shares are subject and the date or dates on which such restrictions
will lapse. Within these limits, based on service, attainment of objective
performance goals, and such other factors as the Committee may determine in its
sole discretion, or a combination thereof, the Committee may provide for the
lapse of such restrictions in installments in whole or in part or may accelerate
or waive such restrictions at any time.
If the lapse of the relevant restriction is based on the attainment of
objective performance goals, the Committee shall establish the objective
performance goals and the applicable vesting percentage for the restricted stock
awards applicable to participants. The performance goals shall be based on one
or more of the following criteria: (i) the attainment of certain target levels
of, or a percentage increase in, after-tax or pre-tax profits of the Corporation
(or in any case a subsidiary, division, or other operational unit of the
Corporation); (ii) the attainment of certain target levels of, or a specified
increase in, operational cash flow of the Corporation (or a subsidiary,
division, or other operational unit of the Corporation); (iii) the achievement
of a certain level of, reduction of, or other specified objectives with regard
to limiting the level of increase in, all or a portion of, the Corporation's
bank debt or other long-term or short-term public or private debt or other
similar financial obligations of the Corporation, which may be calculated net of
such cash balances and/or other offsets and adjustments as may be established by
the Committee; (iv) the attainment of a specified percentage increase in
earnings per share or earnings per share from continuing operations of the
Corporation (or a subsidiary, division or other operational unit of the
Corporation); (v) the attainment of certain target levels of, or a specified
percentage increase in, revenues, net income, earnings before interest, taxes,
depreciation and/or amortization of the Corporation (or a subsidiary, division,
or other operational unit of the Corporation); (vi) the attainment of certain
target levels of, or a specified increase in, return on capital employed or
return on investment; (vii) the attainment of certain target levels of, or a
percentage increase in, after-tax or pre-tax return on stockholders' equity of
the Corporation (or any subsidiary, division or other operational unit of the
Corporation); and (viii) the attainment of a certain target level of, or
reduction in, selling, general and administrative expense as a percentage of
revenue of the Corporation (or any subsidiary, division or other operational
unit of the Corporation).
PERFORMANCE SHARES AND PERFORMANCE UNITS
Under the Plan, the Committee may grant performance shares to eligible
employees and consultants entitling them to receive a fixed number of shares of
Common Stock or the cash equivalent thereof, as determined by the Committee,
upon the attainment of performance goals established by the Committee based on a
specified performance period from among those set forth with regard to
restricted stock above. The Committee may also grant performance units to
eligible employees entitling them to receive a value payable in cash or shares
of Common Stock, as determined by or with the consent of the Committee, upon the
attainment of performance goals established by the Committee based on a
specified performance period from among those set forth with regard to
restricted stock above. Performance units shall be awarded in a dollar amount
and shall be converted for calculation purposes of growth in value to shares of
Common Stock based on the fair market value of the shares of Common Stock at the
close of trading on the first business day following the announcement of the
annual financial results of the Corporation for the fiscal year of the
Corporation immediately preceding the fiscal year of the commencement of the
measurement period for the performance cycle, provided that the Committee may
provide with regard to any grant that the minimum price for such conversion
shall be the fair market value on the date of grant.
At the time of any award of performance shares or performance units the
Committee may also award eligible employees and consultants the right to receive
the cash value of any dividends and other distributions that would have been
received had the eligible employee held each share of Common Stock of the earned
performance share award or performance unit award from the first day of the
second year of the performance period until the actual distribution of the
related share of Common
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Stock or cash value thereof to the eligible employee. Such amounts, if awarded,
shall be paid to the eligible employee as and when the shares of Common Stock or
cash value thereof are distributed to the eligible employee.
The Committee may subject such grants of performance shares and performance
units to such vesting and forfeiture conditions as it deems appropriate.
OTHER STOCK-BASED AWARDS
Awards of Common Stock and other Awards that are valued in reference to
Common Stock may be granted either alone or in addition to or in tandem with
other Awards under the Plan.
STOCK APPRECIATION RIGHTS ("SARS")
The Plan authorizes the Committee to grant SARs either with a stock option
("Tandem SARs") or independent of a stock option ("Non-Tandem SARs"). An SAR is
a right to receive a payment either in cash or Common Stock as the Committee may
determine, equal in value to the excess of the fair market value of a share of
Common Stock on the date of exercise over the reference price per share of
Common Stock established in connection with the grant of the SAR. The reference
price per share covered by an SAR will be the per share exercise price of the
related option in the case of a Tandem SAR and will be a percentage designated
by the Committee of the per share fair market value of the Common Stock on the
date of grant (or any other date chosen by the Committee) in the case of a
Non-Tandem SAR.
A Tandem SAR may be granted at the time of the grant of the related stock
option or, if the related stock option is a nonqualified stock option, at any
time thereafter during the term of the option. A Tandem SAR generally may be
exercised at and only at the times and to the extent the related option is
exercisable. A Tandem SAR is exercised by surrendering the same portion of the
related option. A Tandem SAR expires upon the termination of the related option.
A Non-Tandem SAR will be exercisable as provided by the Committee and will
have such other terms and conditions as the Committee may determine. A
Non-Tandem SAR may have a term no longer than ten years from its date of grant.
A Non-Tandem SAR is subject to acceleration of vesting or immediate termination
upon termination of employment in certain circumstances.
The Committee is also authorized to grant "limited SARs", either as Tandem
SARs or Non-Tandem SARs. Limited SARs would become exercisable only upon the
occurrence of a Change in Control (as defined in the Plan) or such other event
as the Committee may designate at the time of grant or thereafter.
AWARDS TO NON-EMPLOYEE DIRECTORS
The Plan provides for the Award of Common Stock or options to non-employee
directors in lieu of their annual directors' Retainer Fees or in lieu of their
Total Director Fees (which includes both Retainer Fees and Meeting Fees) to the
extent elected by each such non-employee director under the terms of the Plan.
The Retainer Fee and Total Director Fees may be paid, at the election of each
director made in writing prior to the first day of the Corporation's fiscal year
in the form of cash, grants ("Stock Awards") of shares of the Corporation's
Common Stock or options, provided that (i) awards attributable to Retainer Fees
will be made on the first day of each quarter of the fiscal year and awards
attributable to Meeting Fees will be made on the dates of the meetings to which
they relate; (ii) compensation to be paid in the form of options will be valued
using the Black-Scholes option pricing model and such assumptions as the
Corporation, in its sole discretion, deems reasonable; (iii) the exercise price
of the options will be, and Stock Awards will be valued using, the closing price
of the Common Stock on the date of grant or issuance or deemed date of grant or
issuance; (iv) options will terminate on the fifth anniversary of the date of
issuance and will survive termination of membership on the Board of Directors of
the Corporation; and (v) if Stockholder Approval is not obtained prior to the
end of the 1997 Fiscal Year, the election of a director to receive Stock Awards
or options will be null and void and such director shall be entitled to receive
his Retainer Fee and Meeting Fees in the form of cash.
CHANGE IN CONTROL
Unless determined otherwise by the Committee at the time of grant, upon a
Change in Control (as defined in the Plan), all vesting and forfeiture
conditions, restrictions, and limitations in effect with respect to any
outstanding award will immediately lapse and any unvested awards will
automatically become 100 percent vested. However, unless otherwise determined by
the Committee at the time of grant, no acceleration of exercisability shall
occur with regard to certain options that the
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Committee reasonably determines in good faith prior to a Change in Control will
be honored or assumed or new rights substituted therefor by a participant's
employer immediately following the Change in Control.
MISCELLANEOUS
Subject to limited post-employment exercise periods and vesting in certain
instances, Awards to a participant under the Plan are generally forfeited upon
any termination of employment. Participants required to file reports under
Section 16(a) of the Exchange Act may be limited to certain specific exercise,
election or holding periods with respect to the Awards granted to them under the
Plan. Awards will be nonassignable (except by will or the laws of descent and
distribution) and will have such terms and will terminate upon such conditions
as may be contained in individual Awards.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The rules concerning the federal tax consequences with respect to options
granted pursuant to the Plan are quite technical. The applicable statutory
provisions are subject to change, as are their interpretations and applications
which may vary in individual circumstances. Therefore, the following is designed
to provide a general understanding of the federal tax consequences (state and
local tax consequences are not addressed below).
Under current federal income tax laws, the grant of an incentive stock
option can be made solely to employees and generally has no income tax
consequences for the optionee or the Corporation. In general, no taxable income
results to the optionee upon the grant or exercise of an incentive stock option.
However, the amount by which the fair market value of the stock acquired
pursuant to the incentive stock option exceeds the exercise price is an
adjustment item for purposes of alternative minimum tax. If no disposition of
the shares is made within either two years from the date the incentive stock
option was granted or one year from the date of exercise of the incentive stock
option, any gain or loss realized upon disposition of the shares will be treated
as a long-term capital gain or loss to the optionee. The Corporation will not be
entitled to a tax deduction upon the exercise of an incentive stock option, nor
upon a subsequent disposition of the shares, unless the disposition occurs prior
to the expiration of the holding period described above. In general, if the
optionee does not satisfy these holding period requirements, any gain equal to
the difference between the exercise price and the fair market value of the stock
at exercise (or, if a lesser amount, the amount realized on disposition over the
exercise price) will constitute ordinary income. In the event of such a
disposition before the expiration of the holding period described above, the
Corporation is entitled to a deduction at that time equal to the amount of
ordinary income recognized by the optionee. Any gain in excess of the amount
recognized by the optionee as ordinary income would be taxed to the optionee as
short-term or long-term capital gain (depending on the applicable holding
period).
In general, an optionee will realize no taxable income upon the grant of
nonqualified options and the Corporation will not receive a deduction at the
time of such grant, unless the option has a readily ascertainable fair market
value (as determined under applicalbe tax law) at the time of grant. Upon
exercise of a nonqualified stock option, an optionee generally will recognize
ordinary income in an amount equal to the excess of the fair market value of the
stock on the date of exercise over the exercise price. Upon a subsequent sale of
the stock by the optionee, the optionee will recognize short-term or long-term
capital gain or loss, depending upon his holding period for the stock. Subject
to the possible application of Section 162(m) of the Code, the Corporation will
generally be allowed a deduction equal to the amount recognized by the optionee
as ordinary income.
In addition: (i) any officers and directors of the Corporation subject to
Section 16(b) of the Exchange Act may be subject to special tax rules regarding
the income tax consequences concerning their options; (ii) any entitlement to a
tax deduction on the part of the Corporation is subject to the applicable
federal tax rules, including, without limitation, Code Section 162(m) regarding
a $1 million limitation on deductible compensation; and (iii) in the event that
the exercisability of an option is accelerated because of a Change in Control,
payments relating to the options, either alone or together with certain other
payments may constitute parachute payments under Section 280G of the Code.
The Plan is not subject to any of the requirements of the Employee
Retirement Income Security Act of 1974, as amended. The Plan is not, nor is it
intended to be, qualified under Section 401(a) of the Code.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE IN
FAVOR OF THIS PROPOSAL TO ADOPT THE LONG TERM STOCK INCENTIVE PLAN.
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ITEM 4
INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG Peat Marwick LLP, independent
certified public accountants, to audit the books and records of the Corporation
for the current year. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE IN FAVOR OF THE PROPOSAL TO CONFIRM SUCH APPOINTMENT.
Representatives of KPMG Peat Marwick LLP are expected to be available at
the meeting of stockholders to respond to appropriate questions and will be
given the opportunity to make a statement if they desire to do so.
STOCKHOLDERS PROPOSALS
Stockholders of the Corporation wishing to include proposals in the proxy
material in relation to the annual meeting of the Corporation to be held in 1998
must submit the same in writing so as to be received at the executive offices of
the Corporation on or before February 14, 1998. Such proposals must also meet
the other requirements of the rules of the Securities and Exchange Commission
relating to stockholders proposals.
By Order of the Board of Directors,
G. Templeton Blackburn, II
Secretary
May 23, 1997
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EXHIBIT A -- AMENDMENT TO
ROSES STORES, INC. CERTIFICATE OF INCORPORATION
ARTICLE FIFTEENTH
FIFTEENTH:
(a) For purposes of this Article Fifteenth, the following terms shall have
the meanings indicated below:
(i) "Agent" shall mean the Person designated by the Corporation for
purposes of effectuating the transactions described in paragraphs (c) and
(d) of this Article.
(ii) "Board" shall mean the board of directors of the Corporation.
(iii) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute, and the regulations
thereunder.
(iv) "Corporation" shall mean Rose's Stores, Inc.
(v) "Excess Stock" shall mean, with respect to a Transfer of Stock,
the amount of such Stock that is in excess of the amount of Stock that may
be transferred without restriction pursuant to subparagraph (b)(i) of this
Article.
(vi) "Existing Five Percent Stockholder" shall mean any five percent
stockholder (within the meaning of Section 382 of the Code) of the
Corporation, other than a direct Public Group of the Corporation, on the
date the Transfer restrictions contained in this Article Fifteenth become
effective.
(vii) "Expiration Date" shall mean the beginning of a taxable year of
the Corporation to which the Board determines in writing that no Tax
Benefits may be carried forward, unless the Board shall fix an earlier date
in accordance with paragraph (h) of this Article.
(viii) "Initial Transferor" shall mean the Person who initially
purported to Transfer Excess Stock to a Purported Acquiror.
(ix) "Optionee" shall mean any Person holding an Option Right to
acquire Stock.
(x) "Option Right" shall mean any option, warrant or other right to
acquire, convert into, or exchange or exercise for, or any similar
interests in, shares of Stock.
(xi) "Ownership Interest Percentage" shall mean the sum of such
Person's or Public Group's direct ownership interest in the Corporation, as
determined under Treasury Regulation Section 1.382-2T(f)(8) (or any
successor regulation), and such Person's or Public Group's indirect
ownership interest in the Corporation, as determined under Treasury
Regulation Section 1.382-2T(f)(15) or 1.1502-92T(c) (or any successor
regulations), except that, for purposes of determining a person's indirect
ownership interest in the Corporation, Treasury Regulation Sections 1.382-
2T(g)(2), 1.382-2T(g)(3), 1.382-2T(h)(2) (iii) and 1.382-2T(h)(6) (iii) (or
any successor regulations) shall not apply and any Option Right to acquire
Stock shall be deemed to have been exercised.
(xii) "Person" shall mean any individual, corporation, estate, trust,
association, company, partnership, joint venture, or other entity or
organization, including, without limitation, any "entity"within the meaning
of Treasury Regulation Section 1.382-3(a) (or any successor or regulation).
(xiii) "Prohibited Distribution" shall mean dividends or other
distributions made with respect to Stock received by a Purported Acquiror.
(xiv) "Prohibited Party" shall mean that Person or Public Group that
is caused to be in violation of subparagraph (b)(i) of this Article as a
result of a Transfer which does not involve a Transfer of Stock of the
Corporation.
(xv) "Public Group" shall mean a group of individuals, entities or
other Persons described in Treasury Regulation Section 1.382-2T(f)(13).
(xvi) "Purported Acquiror" shall mean a Transferee of Excess Stock.
(xvii) "Sales Proceeds" shall mean the proceeds received upon a sale
of Excess Stock, and the sum of all Prohibited Distributions received with
respect to the Excess Stock.
(xviii) "Stock" shall mean shares of stock of the Corporation (other
than stock described in Section 1504(a)(4) of the Code or stock that is not
described in Section 1504(a)(4) solely because it is entitled to vote as a
result of dividend
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arrearages), any Option Rights to acquire Stock, and all other interests
that would be treated as stock of the Corporation pursuant to Treasury
Regulation Section 1.382-2T(f)(18) (or any successor regulation).
(xix) "Tax Benefits" shall mean the Corporation's net operating loss
carryovers, capital loss carryovers and built-in losses.
(xx) "Transfer" shall mean any issuance, sale, transfer, gift,
assignment, devise or other disposition, as well as any other event, that
causes a Person or Public Group to acquire or increase an Ownership
Interest Percentage in the Corporation, or any agreement to take any such
actions or cause any such events, including, without limitation, (x) the
granting or exercise of any Option Right with respect to Stock, (y) the
disposition of any securities or rights convertible into or exchangeable or
exercisable for Stock or any interest in Stock or any exercise of any such
conversion or exchange or exercise right and (z) transfers of interests in
other entities that result in changes in direct or indirect ownership of
Stock, in each case, whether voluntary or involuntary, of record, by
operation by law or otherwise; provided, however, that a pledge shall not
be deemed a Transfer, but a foreclosure pursuant thereto shall be deemed to
be a Transfer.
(xxi) "Transferee" shall mean any Person to whom Stock is transferred.
(xxii) "Treasury Regulation" shall mean any of the treasury
regulations promulgated under the Code.
(b) In order to preserve the Tax Benefits to which the Corporation is
entitled under the Code, the following restrictions shall apply until the
Expiration Date.
(i) No Person, other than the Corporation, shall engage in any
Transfer of Stock with any other Person to the extent that such Transfer,
if effective, would cause the Ownership Interest Percentage of any Person
or Public Group to (i) increase to 4.9 percent or above, (ii) increase from
4.9 percent or above to a greater Ownership Interest Percentage or (iii)
create a new Public Group under Treasury Regulation Section 1.382-2T(j)
(3)(i), except as otherwise permitted pursuant to subparagraph (b)(ii).
(ii) Any Transfer that would otherwise be prohibited pursuant to
subparagraph (b)(i) shall nonetheless be permitted if (i) the Transfer is
by an Existing Five Percent Stockholder of Stock owned by such stockholder
on the date the Transfer restrictions contained in subparagraph (b)(i)
become effective or (ii) information relating to a specific proposed
transaction is presented to the Board and the Board determines in its
discretion that (x) based upon a written opinion of tax counsel selected by
the Board, such transaction will not jeopardize or create a material
limitation on the Corporation's then current or future ability to utilize
its Tax Benefits, taking into account both the proposed transaction and
potential future transactions, or (y) the overall economic benefits of such
transaction to the Corporation outweigh the detriments of such transaction.
Nothing in this subparagraph shall be construed to limit or restrict the
Board in the exercise of its fiduciary duties under applicable law.
(c) (i) Any attempted Transfer of Excess Stock shall be void ab initio and
not effective to transfer ownership of the Excess Stock to the Purported
Acquiror thereof, who shall not be entitled to any rights as a stockholder
of the Corporation with respect to the Excess Stock (including, without
limitation, the right to vote or to receive dividends with respect thereto
and, to the extent that a vote is cast by a Purported Acquiror, the vote
shall be rescinded as void), or otherwise as the holder of the Excess
Stock, unless approval of the Board is obtained as provided in subparagraph
(b)(ii) of this Article Fifteenth.
(ii) Upon demand by the Corporation, the Purported Acquiror shall
transfer any certificate or other evidence of purported ownership of the
Excess Stock within the Purported Acquiror's possession or control, along
with any Prohibited Distributions received by the Purported Acquiror, to
the Agent. If, prior to the notification by the Agent of such demand, the
Purported Acquiror has sold the Excess Stock to an unrelated party in an
arm's-length transaction that would not constitute a prohibited Transfer
pursuant to subparagraph (b)(i) of this Article Fifteenth if made by the
Initial Transferor, the Purported Acquiror shall be deemed to have sold the
Excess Stock on behalf of the Initial Transferor, and, in lieu of
transferring the Excess Stock to the Agent, shall transfer the Sale
Proceeds to the Agent, except to the extent that the Agent grants written
permission to the Purported Acquiror to retain a portion of the Sale
Proceeds not exceeding the amount that would have been payable by the Agent
to the Purported Acquiror pursuant to subparagraph (c)(iii) if the Excess
Stock had been sold by the Agent rather than by the Purported Acquiror. Any
purported Transfer of the Excess Stock by the Purported Acquiror, other
than a Transfer described in one of the two preceding sentences, shall not
be effective to transfer any ownership of the Excess Stock.
(iii) The Agent shall sell in an arm's-length transaction (on the
public securities market in which the Stock is traded, if possible) any
Excess Stock transferred to the Agent by the Purported Acquiror to the
extent such sale would
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not constitute a prohibited Transfer pursuant to subparagraph (b)(i) of
this Article Fifteenth. The Sales Proceeds shall be allocated and paid to
the Purported Acquiror up to the following amount: (x) where applicable,
the purported purchase price paid or value of consideration surrendered by
the Purported Acquiror for the Excess Stock and (y) where the purported
Transfer of the Excess Stock to the Purported Acquiror was by gift,
inheritance or any similar purported Transfer, the fair market value of the
Excess Stock at the time of such purported Transfer. Any Sale Proceeds in
excess of the amount allocable to the Purported Acquiror pursuant to the
preceding sentence, shall be transferred to an entity designated by the
Corporation that is described in Section 501(c)(3) of the Code. In no event
shall any such amounts inure to the benefit of the Corporation or the
Agent, but such amounts may be used to cover expenses incurred by the Agent
in performing its duties under this paragraph.
(d) In the event of any Transfer which does not involve a Transfer of
Stock, but which would cause a Prohibited Party to violate a restriction on
Transfers provided for in this Article Fifteenth, (such as, for example, the
acquisition by a third entity of two unrelated entities each previously holding
4 percent of the Stock), the application of subparagraphs (c)(ii) and (c)(iii)
shall be modified as described in this paragraph (d). The Prohibited Party shall
not be required to dispose of any interest that is not Stock, but shall be
deemed to have disposed of or caused the disposition of, and shall be required
to dispose of or cause the disposition of, sufficient Stock to cause the
Prohibited Party following such disposition, not to be in violation of
subparagraph (b)(i) of this Article Fifteenth. Such disposition shall be deemed
to occur simultaneously with the Transfer giving rise to the application of this
provision, and such Stock that is deemed to be disposed of shall be considered
Excess Stock and shall be disposed of through the Agent as provided in
subparagraph (c)(ii) and subparagraph (c)(iii) of this Article Fifteenth, except
that the maximum aggregate amount payable to the Prohibited Party in connection
with such sale shall be the fair market value of the Excess Stock at the time of
the purported Transfer. All expenses incurred by the Agent in disposing of the
Excess Stock shall be paid out of any amounts due the Prohibited Party.
(e) Within 30 business days after learning of a purported Transfer of
Excess Stock to a Purported Acquiror or a Transfer that would cause a Person to
become a Prohibited Party, the Corporation (through its Secretary) shall demand
that the Purported Acquiror or Prohibited Party surrender to the Agent the
certificates representing the Excess Stock, or any Sale Proceeds, and any
Prohibited Distributions. If such surrender is not made by the Purported
Acquiror or Prohibited Party within 30 business days from the date of such
demand, the Corporation may institute legal proceedings to compel such transfer;
provided, however, that nothing in this paragraph (e) shall preclude the
Corporation in its discretion from immediately bringing legal proceedings
without a prior demand, and also provided that failure of the Corporation to act
within the time periods set forth in this paragraph (e) shall not constitute a
waiver of any right of the Corporation under this Article Fifteenth.
(f) The Corporation may require as a condition to the registration of the
Transfer of any shares of its Stock that the proposed Transferee furnish to the
Corporation all information reasonably requested by the Corporation with respect
to all the proposed Transferee's direct or indirect ownership interests in, or
options to acquire, Stock.
(g) All certificates evidencing ownership of shares of Stock shall bear
substantially the following legend:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER FOR THE PURPOSE OF THE PRESERVATION OF THE
CORPORATION'S NET OPERATING LOSS CARRYOVERS AND RELATED TAX ATTRIBUTES
PURSUANT TO SECTION 382 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
WITHOUT THE AUTHORIZATION OF THE BOARD OF DIRECTORS, NO PERSON OTHER THAN
THE CORPORATION, SHALL ENGAGE IN ANY TRANSFER OF STOCK WITH ANY OTHER
PERSON TO THE EXTENT THAT SUCH TRANSFER, IF EFFECTIVE, WOULD CAUSE THE
OWNERSHIP INTEREST PERCENTAGE OF ANY PERSON OR PUBLIC GROUP TO (I) INCREASE
TO 4.9 PERCENT OR ABOVE, (II) INCREASE FROM 4.9 PERCENT OR ABOVE TO A
GREATER OWNERSHIP INTEREST PERCENTAGE OR (III) CREATE A NEW PUBLIC GROUP
UNDER TREASURY REGULATION SECTION 1.382-2T(J)(3)(I). (FOR THIS PURPOSE
OWNERSHIP INCLUDES OWNERSHIP BY ATTRIBUTION AS WELL AS DIRECT OWNERSHIP).
NOTWITHSTANDING THE FOREGOING, THE TRANSFER RESTRICTIONS DO NOT APPLY TO
THE TRANSFER BY A STOCKHOLDER WHICH IS A FIVE PERCENT STOCKHOLDER (WITHIN
THE MEANING OF SECTION 382) ON THE DATE THE TRANSFER RESTRICTIONS BECAME
EFFECTIVE OF STOCK OWNED BY SUCH STOCKHOLDER ON THAT DATE. ITALICIZED TERMS
IN THIS LEGEND HAVE THE MEANINGS DEFINED IN ARTICLE FIFTEEN OF THE
CERTIFICATE OF INCORPORATION. A COPY OF THE RESTRICTIONS ON TRANSFER, WILL
BE SENT WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS. IF THE
RESTRICTIONS ON TRANSFER ARE VIOLATED, THE TRANSFER WILL BE VOID AB INITIO
WITH THE CORPORATION RETAINING THE RIGHT TO REPOSSESS AND DISPOSE OF SUCH
STOCK IN A PERMITTED TRANSFER.
(h) Nothing contained in this Article Fifteenth shall limit the authority
of the Board to take such other action to the extent permitted by law as it
deems necessary or advisable to protect the Corporation and the interests of the
holders of its Stock in preserving the Tax Benefits. Without limiting the
generality of the foregoing, in the event of a change in law making one or more
of the following actions necessary or desirable, the Board may, by adopting a
written resolution of the Board, (i) accelerate or extend the Expiration Date,
(ii) modify the Ownership Interest Percentage in the Corporation specified in
the first sentence of subparagraph (b)(i) or (iii) modify the definitions of any
terms set forth in this Article Fifteenth; provided,
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however, that the Board shall not cause there to be such acceleration,
extension, change or modification unless it concludes in writing that such
action is reasonably necessary or advisable to preserve the Tax Benefits or that
the continuation of these restrictions is no longer reasonably necessary for the
preservation of the Tax Benefits, and its conclusion is based upon a written
opinion of tax counsel to the Corporation. Such written conclusion shall be
filed with the Secretary of the Corporation and shall be mailed by the Secretary
to all stockholders of this Corporation within 10 days after the date of any
such conclusion.
(i) The Corporation and the members of the Board shall be fully protected
in relying in good faith upon the information, opinions, reports or statements
of the chief executive officer, the chief financial officer or the chief
accounting officer of the Corporation or of the Corporation's legal counsel,
independent auditors, transfer agent, investment bankers or other employees and
agents in making the determinations and findings contemplated by this Article
Fifteenth and the members of the Board shall not be responsible for any good
faith errors made in connection therewith.
(j) Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law that might otherwise permit a lesser or no
vote, but in addition to any affirmative vote of the holders of any particular
class or series of the capital stock of the Corporation required by law or by
this Certificate of Incorporation, the affirmative vote of the holders of not
less than two-thirds of the shares of the Corporation then entitled to be voted
generally in an election of directors, voting together as a single class, shall
be required to amend or repeal, or to adopt any provision inconsistent with,
this Article Fifteenth.
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EXHIBIT B
ROSE'S STORES, INC.
LONG TERM STOCK INCENTIVE PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I PURPOSE........................................................................................... 1
ARTICLE II. DEFINITIONS....................................................................................... 1
ARTICLE III. ADMINISTRATION.................................................................................... 4
ARTICLE IV. SHARE AND OTHER LIMITATIONS....................................................................... 6
ARTICLE V. ELIGIBILITY....................................................................................... 8
ARTICLE VI. STOCK OPTION GRANTS............................................................................... 8
ARTICLE VII. RESTRICTED STOCK AWARDS........................................................................... 9
ARTICLE VIII. STOCK APPRECIATION RIGHTS......................................................................... 10
ARTICLE IX. PERFORMANCE SHARES................................................................................ 12
ARTICLE X. PERFORMANCE UNITS................................................................................. 13
ARTICLE XI. OTHER STOCK-BASED AWARDS.......................................................................... 14
ARTICLE XII. NON-EMPLOYEE DIRECTOR AWARDS...................................................................... 14
ARTICLE XIII. NON-TRANSFERABILITY AND TERMINATION OF EMPLOYMENT/CONSULTANCY PROVISIONS.......................... 16
ARTICLE XIV. CHANGE IN CONTROL PROVISIONS...................................................................... 17
ARTICLE XV. TERMINATION OR AMENDMENT OF THE PLAN.............................................................. 19
ARTICLE XVI. UNFUNDED PLAN..................................................................................... 19
ARTICLE XVII. GENERAL PROVISIONS................................................................................ 19
ARTICLE XVIII. EFFECTIVE DATE OF PLAN............................................................................ 21
ARTICLE XIX. TERM OF PLAN...................................................................................... 21
ARTICLE XX. NAME OF PLAN...................................................................................... 21
EXHIBIT A PERFORMANCE GOALS................................................................................. 22
</TABLE>
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ROSE'S STORES, INC.
LONG TERM STOCK INCENTIVE PLAN
ARTICLE I.
PURPOSE
The purpose of this Rose's Stores, Inc. Long Term Stock Incentive Plan
(this "Plan") is to enhance the profitability and value of Rose's Stores, Inc.
(the "Company") for the benefit of their stockholders by enabling the Company
(i) to offer employees and Consultants of the Company and Designated
Subsidiaries, stock based incentives and other equity interests in the Company,
thereby creating a means to raise the level of stock ownership by employees and
Consultants in order to attract, retain and reward such individuals and
strengthen the mutuality of interests between such individuals and the Company's
stockholders and (ii) to offer Non-Employee Directors stock based incentives, in
lieu of payment of their Retainer Fees (as defined below) or Total Director Fees
(as defined below) in cash, thereby attracting, retaining and rewarding such
Non-Employee Directors, and strengthening the mutuality of interests between
Non-Employee Directors and the Company's stockholders.
ARTICLE II.
DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
2.1. "Acquisition Events" shall have the meaning set forth in Section
4.2(d).
2.2. "Alternative Option" shall have the meaning set forth in Section
14.1(c).
2.3. "Award" shall mean any award under this Plan of any Stock Option,
Common Stock, Restricted Stock, Stock Appreciation Right, Performance Unit,
Performance Share or Other Stock-Based Award. All Awards, other than Common
Stock [and Stock Options] elected under Article XII, shall be confirmed by, and
subject to the terms of, a written agreement executed by the Company and the
Participant.
2.4. "Board" shall mean the Board of Directors of the Company.
2.5. "Cause" shall mean, with respect to a Participant's Termination of
Employment or Termination of Consultancy, (i) in the case where there is no
employment or consulting agreement, change in control agreement or similar
agreement in effect between the Company or a Designated Subsidiary and the
Participant at the time of the relevant grant or Award, or where there is an
employment or consulting agreement, change in control agreement or similar
agreement in effect at the time of the relevant grant or Award but such
agreement either does not define "cause" (or words of like import) or a "cause"
termination would not be permitted under such agreement at that time because
other conditions were not satisfied, termination due to a Participant's
dishonesty, fraud, insubordination, willful misconduct, refusal to perform
services (for any reason other than illness or incapacity) or materially
unsatisfactory performance of his or her duties for the Company or a Designated
Subsidiary; or (ii) in the case where there is an employment or consulting
agreement, change in control agreement or similar agreement in effect between
the Company or a Designated Subsidiary and the Participant at the time of the
relevant grant or Award that defines "cause" (or words of like import) and a
"cause" termination would be permitted under such agreement at that time,
termination that is or would be deemed to be for "cause" (or words of like
import) as defined under such agreement; provided, that with regard to any
agreement that conditions "cause" on occurrence of a change in control, such
definition of "cause" shall not apply until a change in control actually takes
place and then only with regard to a termination thereafter. With respect to a
Participant's Termination of Directorship, "cause" shall mean an act or failure
to act that constitutes "cause" for removal of a director under applicable
Delaware law.
2.6. "Change in Control" and "Change in Control Price" shall have the
meanings set forth in Article XIV.
2.7. "Code" shall mean the Internal Revenue Code of 1986, as amended. Any
reference to any section of the Code shall also be a reference to any successor
provision.
2.8. "Committee" shall mean a committee of the Board appointed from time to
time by the Board, which committee shall be intended to consist of two or more
non-employee directors, each of whom shall be, to the extent required by Rule
16b-3 and Section 162(m) of the Code, a non-employee director as defined in Rule
16b-3 and an outside director as defined under Section 162(m) of the Code.
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2.9. "Common Stock" shall mean the Common Stock, $.01 par value per share,
of the Company.
2.10. "Company" shall mean Rose's Stores, Inc.
2.11. "Consultant" shall mean any adviser or consultant to the Company and
its Designated Subsidiaries who is eligible pursuant to Section 5.1 to be
granted Awards under this Plan.
2.12. "Designated Subsidiary" shall mean any subsidiary of the Company
within the meaning of Section 424(f) of the Code.
2.13. "Disability" shall mean total and permanent disability, as defined in
Section 22(e)(3) of the Code.
2.14. "Effective Date" shall mean the effective date of the Plan as defined
in Article XVIII.
2.15. "Eligible Employees" shall mean the employees of the Company and the
Designated Subsidiaries who are eligible pursuant to Section 5.1 to be granted
Awards under this Plan.
2.16. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
2.17. "Fair Market Value" for purposes of this Plan, unless otherwise
required by any applicable provision of the Code or any regulations issued
thereunder, shall mean, as of any date, the last sales price reported for the
Common Stock on the applicable date (i) as reported by the principal national
securities exchange in the United States on which it is then traded, or (ii) if
the Common Stock is not then traded on any such national securities exchange, as
quoted on an automated quotation system sponsored by the National Association of
Securities Dealers. If the Common Stock is not readily tradable on a national
securities exchange or any system sponsored by the National Association of
Securities Dealers, Fair Market Value of the Common Stock shall be set in good
faith by the Committee on the advice of a registered investment adviser (as
defined under the Investment Advisers Act of 1940). For purposes of the grant of
any Award (other than a Performance Unit Award granted in a dollar amount), the
applicable date shall be the date for which the last sales price is available at
the time of grant. For purposes of the conversion of a monetary Performance Unit
Award to an aggregate number of shares of Common Stock for reference purposes,
the applicable date shall be the date determined by the Committee in accordance
with Section 10.1. For purposes of the exercise of any Stock Appreciation Right
the applicable date shall be the date a notice of exercise is received by the
Committee or, if not a day on which the applicable market is open, the next day
that it is open.
2.18. "Good Reason" shall mean, with respect to a Participant's Termination
of Employment or Termination of Consultancy, (i) in the case where there is no
employment or consulting agreement, change in control or similar agreement in
effect between the Company or a Designated Subsidiary and the Participant at the
time of the relevant grant or Award, or where there is an employment or
consulting agreement, change in control or similar agreement in effect at the
time of the relevant grant or Award, but such agreement either does not define
"good reason" (or words of like import) or a good reason termination would not
be permitted under such agreement at that time because other conditions were not
satisfied, a voluntary termination due to "good reason," as the Committee, in
its sole discretion, decides to treat as a Good Reason termination; or (ii) in
the case where there is an employment or consulting agreement, change in control
or similar agreement in effect, between the Company or a Designated Subsidiary
and the Participant at the time of the relevant grant or Award that defines
"good reason" (or words of like import) and a good reason termination would be
permitted under such agreement at that time, termination due to "good reason"
(or words of like import) as specifically provided in such agreement; provided,
that with regard to any agreement that conditions "good reason" on occurrence of
a change in control, such definition of "good reason" shall not apply until a
change in control actually takes place and then only with regard to a
termination thereafter.
2.19. "Incentive Stock Option" shall mean any Stock Option awarded under
this Plan intended to be and designated as an "Incentive Stock Option" within
the meaning of Section 422 of the Code.
2.20. "Limited Stock Appreciation Right" shall mean an Award made pursuant
to Section 8.6 of this Plan which may be a Tandem Stock Appreciation Right or a
Non-Tandem Stock Appreciation Right.
2.21. "Meeting Fees" shall mean any fees to which a Non-Employee Director
is entitled for attending Board meetings or for attending the meetings of any
Board committee of which the Non-Employee Director is a member.
2.22. "Non-Employee Director" shall mean any non-employee director of the
Company or any Designated Subsidiary who is not an employee of the Company or
any Designated Subsidiary and who is eligible pursuant to Section 5.2 to elect
to receive Common Stock [or Stock Options] in lieu of Retainer Fees or Total
Director Fees payable in cash, pursuant to Article XII.
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2.23. "Non-Qualified Stock Option" shall mean any Stock Option awarded
under this Plan that is not an Incentive Stock Option.
2.24. "Non-Tandem Stock Appreciation Right" shall mean a Stock Appreciation
Right entitling the holder to receive an amount in cash or stock equal to the
excess of (x) the Fair Market Value of a share of Common Stock on of the date
such right is exercised, over (y) the aggregate exercise price of such right,
otherwise than on surrender of a Stock Option.
2.25. "Other Stock-Based Award" shall have the meaning set forth in Article
XI.
2.26. "Participant" shall mean the following persons to whom an Award has
been made pursuant to this Plan: Eligible Employees and Consultants of the
Company and Designated Subsidiaries and Non-Employee Directors of the Company
who elect to receive Common Stock [or Stock Options] in lieu of Retainer Fees or
Total Director Fees payable in cash, pursuant to Article XII.
2.27. "Performance Cycle" shall have the meaning set forth in Section 10.1.
2.28. "Performance Period" shall have the meaning set forth in Section 9.1.
2.29. "Performance Share" shall mean an Award made pursuant to Article IX
of this Plan of the right to receive Common Stock or, as determined by the
Committee in its sole discretion, cash of an equivalent value at the end of a
specified Performance Period or thereafter.
2.30. "Performance Unit" shall mean an Award made pursuant to Article X of
this Plan of the right to receive an amount payable in cash or Common Stock or a
combination of both at the end of a specified Performance Cycle or thereafter.
2.31. "Reloads" shall have the meaning set forth in Section 6.3(h).
2.32. "Restricted Stock" shall mean an award of shares of Common Stock
under the Plan that is subject to restrictions under Article VII.
2.33. "Restriction Period" shall have the meaning set forth in Section
7.3(a) with respect to Restricted Stock for Eligible Employees and Consultants.
2.34. "Retainer Fee" shall mean the fee to which a Non-Employee Director is
entitled for service on the Board as a director during a fiscal year of the
Company.
2.35. "Retirement" with respect to a Participant's Termination of
Employment or Termination of Consultancy shall mean a termination without Cause
from the Company and/or a Designated Subsidiary by a Participant who has
attained (i) at least age 65; (ii) at least age 62 and performed 10 or more
years of service with the Company (or its predecessors) and/or a Designated
Subsidiary; or (iii) such earlier date after age 55 as approved by the Committee
with regard to such Participant. With respect to a Participant's Termination of
Directorship, Retirement shall mean the failure to stand for reelection or the
failure to be reelected after a Participant has attained age 65.
2.36. "Rule 16b-3" shall mean Rule 16b-3 under Section 16(b) of the
Exchange Act as then in effect or any successor provisions.
2.37. "Section 162(m) of the Code" shall mean the exception for
performance-based compensation under Section 162(m) of the Code and any Treasury
regulations thereunder.
2.38. "Stock Appreciation Right" shall mean the right pursuant to an Award
granted under Article VIII.
2.39. "Stock Option" or "Option" shall mean any Option to purchase shares
of Common Stock granted to Eligible Employees or Consultants pursuant to Article
VI or any Option to purchase shares of Common Stock granted to Non-Employee
Directors pursuant to Article XII.
2.40. "Tandem Stock Appreciation Right" shall mean a Stock Appreciation
Right entitling the holder to surrender to the Company all (or a portion) of a
Stock Option in exchange for an amount in cash or stock equal to the excess of
(i) the Fair Market Value, on the date such Stock Option (or such portion
thereof) is surrendered, of the Common Stock covered by such Stock Option (or
such portion thereof), over (ii) the aggregate exercise price of such Stock
Option (or such portion thereof).
2.41. "Ten Percent Stockholder" shall mean a person owning stock of the
Company possessing more than 10% of the total combined voting power of all
classes of stock of the Company, as defined in Section 422 of the Code.
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2.42. "Termination of Consultancy" shall mean, with respect to a
Consultant, that the Consultant is no longer acting as a Consultant to the
Company and its Designated Subsidiaries. In the event an entity shall cease to
be a Designated Subsidiary, there shall be deemed a Termination of Consultancy
of any individual who is not otherwise a Consultant of the Company or another
Designated Subsidiary at the time the entity ceases to be a Designated
Subsidiary.
2.43. "Termination of Directorship" shall mean, with respect to a
Non-Employee Director, that the Non-Employee Director has ceased to be a
director of the Company or has become an employee of the Company.
2.44. "Termination of Employment" shall mean (i) a termination of service
(for reasons other than a military or personal leave of absence granted by the
Company) of a Participant from the Company and its Designated Subsidiaries; or
(ii) when an entity which is employing a Participant ceases to be a Designated
Subsidiary, unless the Participant thereupon becomes employed by the Company or
another Designated Subsidiary.
2.45. "Total Director Fees" shall mean the sum of a Non-Employee Director's
Retainer Fee and Meeting Fees for a fiscal year of the Company.
2.46. "Transfer" or "Transferred" shall mean anticipate, alienate, attach,
sell, assign, pledge, encumber, charge or otherwise transfer.
ARTICLE III.
ADMINISTRATION
3.1. THE COMMITTEE. The Plan shall be administered and interpreted by the
Committee, except that, if and to the extent that no Committee exists which has
the authority to administer the Plan, the functions of the Committee shall be
exercised by the Board. If for any reason the appointed Committee does not meet
the requirements of Rule 16b-3 or Section 162(m) of the Code, such noncompliance
with the requirements of Rule 16b-3 or Section 162(m) of the Code shall not
affect the validity of the awards, grants, interpretations or other actions of
the Committee.
3.2. AWARDS. The Committee shall have full authority to grant, pursuant to
the terms of this Plan (including Article V hereof): (i) Stock Options; (ii)
Restricted Stock; (iii) Stock Appreciation Rights; (iv) Performance Shares; (v)
Performance Units; and (vi) Other Stock-Based Awards to Eligible Employees and
Consultants. Non-Employee Directors of the Company may elect to receive Common
Stock [or Stock Options] in lieu of Retainer Fees or Total Director Fees
pursuant to Article XII. In particular, the Committee shall have the authority:
(a) to select the Eligible Employees and Consultants to whom Stock
Options, Restricted Stock, Stock Appreciation Rights, Performance Shares,
Performance Units and Other Stock-Based Awards may from time to time be
granted hereunder;
(b) to determine whether and to what extent Stock Options, Restricted
Stock, Stock Appreciation Rights, Performance Shares, Performance Units,
Other Stock-Based Awards or any combination thereof, are to be granted
hereunder to one or more Eligible Employees or Consultants;
(c) to determine, in accordance with the terms of this Plan, the
number of shares of Common Stock to be covered by each Award to an Eligible
Employee, Consultant or Non-Employee Director granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the
terms of this Plan, of any Award granted hereunder to an Eligible Employee
or Consultant (including, but not limited to, the exercise or purchase
price (if any), any restriction or limitation, any vesting schedule or
acceleration thereof, or any forfeiture restrictions or waiver thereof,
regarding any Stock Option or other Award, and the shares of Common Stock
relating thereto, based on such factors, if any, as the Committee shall
determine, in its sole discretion);
(e) to determine whether and under what circumstances a Stock Option
may be settled in cash, Common Stock and/or Restricted Stock under Section
6.3(d);
(f) to determine whether, to what extent and under what circumstances
to provide loans (which may be on a recourse basis and shall bear interest
at the rate the Committee shall provide) to Eligible Employees and
Consultants in order to exercise Options under the Plan;
(g) to determine whether a Stock Appreciation Right shall be a Tandem
Stock Appreciation Right or Non-Tandem Stock Appreciation Right; and
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(h) to determine whether to require an Eligible Employee, Consultant
or Non-Employee Director, as a condition of the granting of any Award, to
not sell or otherwise dispose of shares acquired pursuant to the exercise
of an Option or as an Award for a period of time as determined by the
Committee, in its sole discretion, following the date of the acquisition of
such Option or Award.
3.3. GUIDELINES. Subject to Article XV hereof, the Committee shall have the
authority to adopt, alter and repeal such administrative rules, guidelines and
practices governing this Plan and perform all acts, including the delegation of
its administrative responsibilities, as it shall, from time to time, deem
advisable; to construe and interpret the terms and provisions of this Plan and
any Award issued under this Plan (and any agreements relating thereto); and
otherwise to supervise the administration of this Plan. The Committee may
correct any defect, supply any omission or reconcile any inconsistency in this
Plan or in any agreement relating thereto in the manner and to the extent it
shall deem necessary to carry this Plan into effect but only to the extent any
such action would be permitted under the applicable provisions of both Rule
16b-3 and Section 162(m) of the Code. The Committee may adopt special guidelines
and provisions for persons who are residing in, or subject to, the taxes of,
countries other than the United States to comply with applicable tax and
securities laws. To the extent applicable, this Plan is intended to comply with
Section 162(m) of the Code and the applicable requirements of Rule 16b-3 and
shall be limited, construed and interpreted in a manner so as to comply
therewith.
3.4. DECISIONS FINAL. Any decision, interpretation or other action made or
taken in good faith by or at the direction of the Company, the Board, or the
Committee (or any of its members) arising out of or in connection with this Plan
shall be within the absolute discretion of all and each of them, as the case may
be, and shall be final, binding and conclusive on the Company and all employees
and Participants and their respective heirs, executors, administrators,
successors and assigns.
3.5. RELIANCE ON COUNSEL. The Company, the Board or the Committee may
consult with legal counsel, who may be counsel for the Company or other counsel,
with respect to its obligations or duties hereunder, or with respect to any
action or proceeding or any question of law, and shall not be liable with
respect to any action taken or omitted by it in good faith pursuant to the
advice of such counsel.
3.6. PROCEDURES. If the Committee is appointed, the Board shall designate
one of the members of the Committee as chairman and the Committee shall hold
meetings, subject to the By-Laws of the Company, at such times and places as the
Committee shall deem advisable. A majority of the Committee members shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. Any decision or determination reduced to writing and
signed by all the Committee members in accordance with the By-Laws of the
Company, shall be fully as effective as if it had been made by a vote at a
meeting duly called and held. The Committee shall keep minutes of its meetings
and shall make such rules and regulations for the conduct of its business as it
shall deem advisable.
3.7. DESIGNATION OF CONSULTANTS/LIABILITY.
(a) The Committee may designate employees of the Company and
professional advisors to assist the Committee in the administration of this
Plan and may grant authority to employees to execute agreements or other
documents on behalf of the Committee.
(b) The Committee may employ such legal counsel, consultants and
agents as it may deem desirable for the administration of this Plan and may
rely upon any opinion received from any such counsel or consultant and any
computation received from any such consultant or agent. Expenses incurred
by the Committee or Board in the engagement of any such counsel, consultant
or agent shall be paid by the Company. The Committee, its members and any
person designated pursuant to Section 3.7(a) shall not be liable for any
action or determination made in good faith with respect to this Plan. To
the maximum extent permitted by applicable law, no officer of the Company
or member or former member of the Committee or of the Board shall be liable
for any action or determination made in good faith with respect to this
Plan or any Award granted under it. To the maximum extent permitted by
applicable law and the Certificate of Incorporation and By-Laws of the
Company and to the extent not covered by insurance, each officer and member
or former member of the Committee or of the Board shall be indemnified and
held harmless by the Company against any cost or expense (including
reasonable fees of counsel reasonably acceptable to the Company) or
liability (including any sum paid in settlement of a claim with the
approval of the Company), and advanced amounts necessary to pay the
foregoing at the earliest time and to the fullest extent permitted, arising
out of any act or omission to act in connection with this Plan, except to
the extent arising out of such officer's, member's or former member's own
fraud or bad faith. Such indemnification shall be in addition to any rights
of indemnification the officers, directors or members or former officers,
directors or members may have under applicable law, under the Certificate
of Incorporation or By-Laws of the Company or
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Designated Subsidiary or otherwise. Notwithstanding anything else herein,
this indemnification will not apply to the actions or determinations made
by an individual with regard to Awards granted to him or her under this
Plan.
ARTICLE IV.
SHARE AND OTHER LIMITATIONS
4.1. SHARES.
(a) GENERAL LIMITATION. The aggregate number of shares of Common Stock
which may be issued or used for reference purposes under this Plan shall
not exceed 500,000 shares (subject to any increase or decrease pursuant to
Section 4.2) which may be either authorized and unissued Common Stock or
Common Stock held in or acquired for the treasury of the Company. If any
Option or Stock Appreciation Right granted under this Plan expires,
terminates or is canceled for any reason without having been exercised in
full or, with respect to Options, the Company repurchases any Option
pursuant to Section 6.3(f), the number of shares of Common Stock underlying
the repurchased Option, and/or the number of shares of Common Stock
underlying any unexercised Stock Appreciation Right or Option shall again
be available for the purposes of Awards under this Plan. If any shares of
Restricted Stock awarded under this Plan to a Participant are forfeited or
repurchased by the Company for any reason, the number of forfeited or
repurchased shares of Restricted Stock shall again be available for the
purposes of Awards under this Plan. If any Performance Shares, Performance
Units or Other Stock-Based Awards awarded under this Plan are forfeited,
the number of shares of Common Stock underlying the forfeited Performance
Shares, Performance Units or Other Stock-Based Awards shall again be
available for purposes of Awards under this Plan. If a Tandem Stock
Appreciation Right or a Limited Stock Appreciation Right granted in tandem
with an Option is granted under this Plan, such grant shall only apply once
against the maximum number of shares of Common Stock which may be issued
under this Plan.
(b) INDIVIDUAL PARTICIPANT LIMITATIONS. (i) The maximum number of
shares of Common Stock subject to any Option which may be granted under
this Plan during any fiscal year of the Company to each Eligible Employee
or Consultant shall be 100,000 shares (subject to any increase or decrease
pursuant to Section 4.2).
(ii) The maximum number of shares of Restricted Stock for which the
lapse of the relevant Restriction Period is subject to the attainment of
preestablished performance goals in accordance with Section 7.3(a) (ii)
herein which may be granted under this Plan to each Eligible Employee or
Consultant shall be 100,000 shares (subject to any increase or decrease
pursuant to Section 4.2) during any fiscal year of the Company. There
are no annual individual Eligible Employee or Consultant share
limitations on Restricted Stock for which the lapse of the relevant
Restriction Period is not subject to attainment of preestablished
performance goals in accordance with Section 7.3(a)(ii) herein.
(iii) The maximum number of shares of Common Stock subject to any
Stock Appreciation Right which may be granted under this Plan during any
fiscal year of the Company to each Eligible Employee or Consultant shall
be 100,000 shares (subject to any increase or decrease pursuant to
Section 4.2). If a Tandem Stock Appreciation Right or Limited Stock
Appreciation Right is granted in tandem with an Option it shall apply
against the Eligible Employee's or Consultant's individual share
limitations for both Stock Appreciation Rights and Options.
(iv) The maximum value at grant of Performance Units which may be
granted under this Plan during any fiscal year of the Company to each
Eligible Employee or Consultant shall be $50,000. Each Performance Unit
shall be referenced to one share of Common Stock and shall be charged
against the available shares under this Plan at the time the unit value
measurement is converted to a referenced number of shares of Common
Stock in accordance with Section 10.1.
(v) The maximum number of Performance Shares which may be granted
under this Plan during any fiscal year of the Company to each Eligible
Employee or Consultant shall be 100,000 shares (subject to any increase
or decrease pursuant to Section 4.2).
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4.2. CHANGES.
(a) The existence of this Plan and the Awards granted hereunder shall
not affect in any way the right or power of the Board or the stockholders
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, or Designated
Subsidiaries, any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting Common Stock, the authorization or issuance of
additional shares of Common Stock, the dissolution or liquidation of the
Company or Designated Subsidiaries, any sale or transfer of all or part of
its assets or business or any other corporate act or proceeding.
(b) In the event of any change in the capital structure or business of
the Company by reason of any stock dividend or extraordinary dividend,
stock split or reverse stock split, recapitalization, reorganization,
merger, consolidation, or exchange of shares, distribution with respect to
its outstanding Common Stock or capital stock other than Common Stock,
reclassification of its capital stock, any sale or Transfer of all or part
of the Company's assets or business, or any similar change affecting the
Company's capital structure or business and the Committee determines an
adjustment is appropriate under this Plan, then the aggregate number and
kind of shares which thereafter may be issued under this Plan, the number
and kind of shares or other property (including cash) to be issued upon
exercise of an outstanding Option or other Awards granted under this Plan
and the purchase or exercise price thereof shall be appropriately adjusted
consistent with such change in such manner as the Committee may deem
equitable to prevent substantial dilution or enlargement of the rights
granted to, or available for, Participants under this Plan or as otherwise
necessary to reflect the change, and any such adjustment determined by the
Committee in good faith shall be binding and conclusive on the Company and
all Participants and employees and their respective heirs, executors,
administrators, successors and assigns.
(c) Fractional shares of Common Stock resulting from any adjustment in
Options or Awards pursuant to Section 4.2(a) or (b) shall be aggregated
until, and eliminated at, the time of exercise by rounding-down for
fractions less than one-half and rounding-up for fractions equal to or
greater than one-half. No cash settlements shall be made with respect to
fractional shares eliminated by rounding. Notice of any adjustment shall be
given by the Committee to each Participant whose Option or Award has been
adjusted and such adjustment (whether or not such notice is given) shall be
effective and binding for all purposes of this Plan.
(d) In the event of a merger or consolidation in which the Company is
not the surviving entity or in the event of any transaction that results in
the acquisition of substantially all of the Company's outstanding Common
Stock by a single person or entity or by a group of persons and/or entities
acting in concert, or in the event of the sale or transfer of all or
substantially all of the Company's assets (all of the foregoing being
referred to as "Acquisition Events"), then the Committee may, in its sole
discretion, terminate all outstanding Options and Stock Appreciation Rights
of Eligible Employees and Consultants, effective as of the date of the
Acquisition Event, by delivering notice of termination to each such
Participant at least 20 days prior to the date of consummation of the
Acquisition Event; provided, that during the period from the date on which
such notice of termination is delivered to the consummation of the
Acquisition Event, each such Participant shall have the right to exercise
in full all of his or her Options and Stock Appreciation Rights that are
then outstanding (without regard to any limitations on exercisability
otherwise contained in the Option or Award Agreements) but contingent on
the occurrence of the Acquisition Event, and, provided that, if the
Acquisition Event does not take place within a specified period after
giving such notice for any reason whatsoever, the notice and exercise shall
be null and void. If an Acquisition Event occurs, to the extent the
Committee does not terminate the outstanding Options and Stock Appreciation
Rights pursuant to this Section 4.2(d), then the provisions of Section
4.2(b) shall apply.
4.3. PURCHASE PRICE. Notwithstanding any provision of this Plan to the
contrary, if authorized but previously unissued shares of Common Stock are
issued under this Plan, such shares shall not be issued for a consideration
which is less than as permitted under applicable law.
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ARTICLE V.
ELIGIBILITY
5.1. All employees and Consultants of the Company and its Designated
Subsidiaries are eligible to be granted Options, Restricted Stock, Stock
Appreciation Rights, Performance Shares, Performance Units and Other Stock-Based
Awards under this Plan. Eligibility under this Plan shall be determined by the
Committee.
5.2. Non-employee directors of the Company are only eligible to receive
Common Stock [or Stock Options] in lieu of Retainer Fees or Total Director Fees
payable in cash, in accordance with Article XII of the Plan.
ARTICLE VI.
STOCK OPTION GRANTS
6.1. OPTIONS. Each Stock Option granted hereunder shall be an Incentive
Stock Option or a Non-Qualified Stock Option.
6.2. GRANTS. The Committee shall have the authority to grant to any
Eligible Employee one or more Incentive Stock Options, Non-Qualified Stock
Options, or both types of Stock Options (in each case with or without Stock
Appreciation Rights). To the extent that any Stock Option does not qualify as an
Incentive Stock Option (whether because of its provisions or the time or manner
of its exercise or otherwise), such Stock Option or the portion thereof which
does not so qualify, shall constitute a separate Non-Qualified Stock Option. The
Committee shall have the authority to grant to any Consultant one or more
Non-Qualified Stock Options (with or without Stock Appreciation Rights). Under
no circumstances shall the Committee grant Incentive Stock Options to any
Consultant.
6.3. TERMS OF OPTIONS. Options granted under this Plan shall be subject to
the following terms and conditions, and shall be in such form and contain such
additional terms and conditions, not inconsistent with the terms of this Plan,
as the Committee shall deem desirable:
(a) EXERCISE PRICE. The exercise price per share of Common Stock
purchasable under an Incentive Stock Option shall be determined by the
Committee at the time of grant but shall not be less than 100% of the Fair
Market Value of a share of Common Stock at the time of grant; provided,
however, that if an Incentive Stock Option is granted to a Ten Percent
Stockholder, the purchase price shall be no less than 110% of the Fair
Market Value of the Common Stock. The exercise price per share of Common
Stock purchasable under a Non-Qualified Stock Option shall be determined by
the Committee but shall not be less than the 100% of the Fair Market Value
of a share of Common Stock at the time of grant. Notwithstanding the
foregoing, if an Option is modified, extended or renewed and thereby deemed
to be the issuance of a new Option under the Code, the exercise price of an
Option may continue to be the original exercise price even if less than the
Fair Market Value of the Common Stock at the time of such modification,
extension or renewal.
(b) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than 10 years
after the date the Option is granted, provided, however, the term of an
Incentive Stock Option granted to a Ten Percent Stockholder may not exceed
five years.
(c) EXERCISABILITY. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by
the Committee at the time of grant. If the Committee provides, in its
discretion, that any Stock Option is exercisable subject to certain
limitations (including, without limitation, that it is exercisable only in
installments or within certain time periods), the Committee may waive such
limitations on the exercisability at any time at or after the time of grant
in whole or in part (including, without limitation, that the Committee may
waive the installment exercise provisions or accelerate the time at which
Options may be exercised), based on such factors, if any, as the Committee
shall determine, in its sole discretion.
(d) METHOD OF EXERCISE. Subject to whatever installment exercise and
waiting period provisions apply under Section 6.3(c), Stock Options may be
exercised in whole or in part at any time during the Option term, 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
exercise price in such form, or such other arrangement for the satisfaction
of the exercise price, as the Committee may accept. If and to the extent
determined by the Committee in its sole discretion at or after grant,
payment in full or in part may also be made in the form of Common Stock
withheld from the shares to be received on the exercise of a Stock Option
hereunder, Common Stock owned by the Participant (and for which the
Participant has good title free and clear of any liens and encumbrances) or
Restricted Stock based, in each case, on the Fair Market Value of the
Common Stock on the payment date (without regard to any forfeiture
restrictions applicable to such
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Restricted Stock). No shares of Common Stock shall be issued until payment
therefor, as provided herein, has been made or provided for. If payment in
full or in part has been made in the form of Restricted Stock, an
equivalent number of shares of Common Stock issued on exercise of the
Option shall be subject to the same restrictions and conditions, during the
remainder of the Restriction Period, applicable to the Restricted Stock
surrendered therefor.
(e) INCENTIVE STOCK OPTION LIMITATIONS. To the extent that the
aggregate Fair Market Value (determined as of the time of grant) of the
Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by an Eligible Employee during any calendar year under
this Plan and/or any other stock option plan of the Company or any
Designated Subsidiary or parent corporation (within the meaning of Section
424(e) of the Code) exceeds $100,000, such Options shall be treated as
Options which are not Incentive Stock Options.
Should the foregoing provision not be necessary in order for the Stock
Options to qualify as Incentive Stock Options, or should any additional
provisions be required, the Committee may amend this Plan accordingly,
without the necessity of obtaining the approval of the stockholders of the
Company.
(f) BUY OUT AND SETTLEMENT PROVISIONS. The Committee may at any time
on behalf of the Company offer to buy out an Option previously granted,
based on such terms and conditions as the Committee shall establish and
communicate to the Participant at the time that such offer is made.
(g) FORM, MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to
the terms and conditions and within the limitations of this Plan, an Option
shall be evidenced by such form of agreement or grant as is approved by the
Committee, and the Committee may modify, extend or renew outstanding
Options granted under this Plan (provided that the rights of a Participant
are not reduced without his consent), or accept the surrender of
outstanding Options (up to the extent not theretofore exercised) and
authorize the granting of new Options in substitution therefor (to the
extent not theretofore exercised).
(h) OTHER TERMS AND CONDITIONS. Options may contain such other
provisions, which shall not be inconsistent with any of the foregoing terms
of the Plan, as the Committee shall deem appropriate including, without
limitation, permitting reloads such that the same number of Options are
granted as the number of Options exercised, shares used to pay for the
exercise price of Options or shares used to pay withholding taxes
("Reloads"). With respect to Reloads, the exercise price of the new Stock
Option shall be the Fair Market Value on the date of the Reload and the
term of the Stock Option shall be the same as the remaining term of the
Options that are exercised, if applicable, or such other exercise price and
term as determined by the Committee.
ARTICLE VII.
RESTRICTED STOCK AWARDS
7.1. AWARDS OF RESTRICTED STOCK. Shares of Restricted Stock may be issued
to Eligible Employees or Consultants either alone or in addition to other Awards
granted under the Plan. The Committee shall determine the eligible persons to
whom, and the time or times at which, grants of Restricted Stock will be made,
the number of shares to be awarded, the price (if any) to be paid by the
recipient (subject to Section 7.2), the time or times within which such Awards
may be subject to forfeiture, the vesting schedule and rights to acceleration
thereof, and all other terms and conditions of the Awards. The Committee may
condition the grant of Restricted Stock upon the attainment of specified
performance goals or such other factors as the Committee may determine, in its
sole discretion.
7.2. AWARDS AND CERTIFICATES. The prospective Participant selected to
receive a Restricted Stock Award shall not have any rights with respect to such
Award, unless and until such Participant has delivered to the Company a fully
executed copy of the agreement evidencing the Restricted Stock Award and has
otherwise complied with the applicable terms and conditions of such Restricted
Stock Award. Further, such Restricted Stock Award shall be subject to the
following conditions:
(a) PURCHASE PRICE. The purchase price of Restricted Stock shall be
fixed by the Committee. Subject to Section 4.3, the purchase price for
shares of Restricted Stock may be zero to the extent permitted by
applicable law, and, to the extent not so permitted, such purchase price
may not be less than par value.
(b) ACCEPTANCE. Awards of Restricted Stock must be accepted within a
period of 90 days (or such shorter period as the Committee may specify at
grant) after the Award date, by executing a Restricted Stock Award
agreement and by paying whatever price (if any) the Committee has
designated thereunder.
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(c) LEGEND. A Restricted Stock Award shall be evidenced by a stock
certificate in respect of such shares of Restricted Stock, unless the
Committee elects to use another system, such as book entries by the
transfer agent. A certificate evidencing a Restricted Stock Award shall
bear an appropriate legend referring to the terms, conditions and
restrictions applicable thereto substantially in the following form:
"The anticipation, alienation, attachment, sale, transfer, assignment,
pledge, encumbrance or charge of the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture) of the Rose's
Stores, Inc. (the "Company ") Long Term Stock Incentive Plan and an
Agreement entered into between the registered owner and the Company dated
. Copies of such Plan and Agreement are on file at the principal
office of the Company."
(d) CUSTODY. The Committee may require that any stock certificates
evidencing such shares be held in custody by the Company or of a third
party until the restrictions thereon shall have lapsed, and that, as a
condition of any Restricted Stock Award, the Participant shall have
delivered a duly signed stock power, endorsed in blank, relating to the
Common Stock covered by such Award.
7.3. RESTRICTIONS AND CONDITIONS ON RESTRICTED STOCK AWARDS.
The shares of Restricted Stock awarded pursuant to this Plan shall be
subject to Article XIII and the following restrictions and conditions:
(a) RESTRICTION PERIOD; VESTING AND ACCELERATION OF VESTING. (i) The
Participant shall not be permitted to Transfer shares of Restricted Stock
awarded under this Plan during a period set by the Committee (the
"Restriction Period") commencing with the date of such Award, as set forth
in the Restricted Stock Award agreement and such agreement shall set forth
a vesting schedule and any events which would accelerate vesting of the
shares of Restricted Stock. Within these limits, based on service,
attainment of objective performance goals established pursuant to Section
7.3(a) (ii) and/or such other factors or criteria as the Committee may
determine in its sole discretion, the Committee may provide for the lapse
of such restrictions in installments in whole or in part, or may accelerate
the vesting of all or any part of any Restricted Stock Award and/or waive
the deferral limitations for all or any part of any Restricted Stock Award.
(ii) PERFORMANCE GOALS, FORMULAE OR STANDARDS (THE "PERFORMANCE
GOALS"). If the lapse of restrictions is based on the attainment of
objective Performance Goals, the Committee shall establish the objective
Performance Goals and the applicable vesting percentage of the
Restricted Stock Award applicable to each Participant or class of
Participants in writing prior to the beginning of the applicable fiscal
year or at such later date as otherwise determined by the Committee and
while the outcome of the Performance Goals is substantially uncertain.
Such Performance Goals may incorporate provisions for disregarding (or
adjusting for) changes in accounting methods, corporate transactions
(including, without limitation, dispositions and acquisitions) and other
similar events or circumstances. With regard to a Restricted Stock Award
that is intended to comply with Section 162(m) of the Code, to the
extent any such provision would create impermissible discretion under
Section 162(m) of the Code or otherwise violate Section 162(m) of the
Code, such provision shall be of no force or effect. The applicable
Performance Goals shall be based on one or more of the performance
criteria set forth in Exhibit A hereto.
(b) RIGHTS AS STOCKHOLDER. Except as provided in this Section 7.3(b)
and Section 7.3(a) and as otherwise determined by the Committee, the
Participant shall have, with respect to the shares of Restricted Stock, all
of the rights of a holder of shares of Common Stock including, without
limitation, the right to receive any dividends, the right to vote such
shares and, subject to and conditioned upon the full vesting of shares of
Restricted Stock, the right to tender such shares. The Committee may, in
its sole discretion, determine at the time of grant that the payment of
dividends shall be deferred until, and conditioned upon, the expiration of
the applicable Restriction Period.
(c) LAPSE OF RESTRICTIONS. If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock subject to such
Restriction Period, the certificates for such shares shall be delivered to
the Participant. All legends shall be removed from said certificates at the
time of delivery to the Participant, except as otherwise required by
applicable law.
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ARTICLE VIII.
STOCK APPRECIATION RIGHTS
8.1. TANDEM STOCK APPRECIATION RIGHTS. A Tandem Stock Appreciation Right
may be granted in conjunction with all or part of any Stock Option (a "Reference
Stock Option") granted under this Plan. In the case of a Tandem Stock
Appreciation Right which is granted in conjunction with a Non-Qualified Stock
Option, such rights may be granted either at or after the time of the grant of
such Reference Stock Option. In the case of a Tandem Stock Appreciation Right
which is granted in conjunction with an Incentive Stock Option, such rights may
be granted only at the time of the grant of such Reference Stock Option.
Consultants shall not be eligible for a grant of Tandem Stock Appreciation
Rights granted in conjunction with all or part of an Incentive Stock Option.
8.2. TERMS AND CONDITIONS OF TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock
Appreciation Rights shall be subject to such terms and conditions, not
inconsistent with the provisions of this Plan, as shall be determined from time
to time by the Committee, including Article XIII and the following:
(a) TERM. A Tandem Stock Appreciation Right or applicable portion
thereof granted with respect to a Reference Stock Option shall terminate
and no longer be exercisable upon the termination or exercise of the
Reference Stock Option, except that, unless otherwise determined by the
Committee, in its sole discretion, at the time of grant, a Tandem Stock
Appreciation Right granted with respect to less than the full number of
shares covered by the Reference Stock Option shall not be reduced until and
then only to the extent the exercise or termination of the Reference Stock
Option causes the number of shares covered by the Tandem Stock Appreciation
Right to exceed the number of shares remaining available and unexercised
under the Reference Stock Option.
(b) EXERCISABILITY. Tandem Stock Appreciation Rights shall be
exercisable only at such time or times and to the extent that the Reference
Stock Options to which they relate shall be exercisable in accordance with
the provisions of Article VI and this Article VIII.
(c) METHOD OF EXERCISE. A Tandem Stock Appreciation Right may be
exercised by an optionee by surrendering the applicable portion of the
Reference Stock Option. Upon such exercise and surrender, the Participant
shall be entitled to receive an amount determined in the manner prescribed
in this Section 8.2. Stock Options which have been so surrendered, in whole
or in part, shall no longer be exercisable to the extent the related Tandem
Stock Appreciation Rights have been exercised.
(d) PAYMENT. Upon the exercise of a Tandem Stock Appreciation Right a
Participant shall be entitled to receive up to, but no more than, an amount
in cash and/or Common Stock (as chosen by the Committee in its sole
discretion) equal in value to the excess of the Fair Market Value of one
share of Common Stock over the option price per share specified in the
Reference Stock Option multiplied by the number of shares in respect of
which the Tandem Stock Appreciation Right shall have been exercised, with
the Committee having the right to determine the form of payment.
(e) DEEMED EXERCISE OF REFERENCE STOCK OPTION. Upon the exercise of a
Tandem Stock Appreciation Right, the Reference Stock Option or part thereof
to which such Stock Appreciation Right is related shall be deemed to have
been exercised for the purpose of the limitation set forth in Article IV of
the Plan on the number of shares of Common Stock to be issued under the
Plan.
8.3. NON-TANDEM STOCK APPRECIATION RIGHTS. Non-Tandem Stock Appreciation
Rights may also be granted without reference to any Stock Options granted under
this Plan.
8.4. TERMS AND CONDITIONS OF NON-TANDEM STOCK APPRECIATION RIGHTS.
Non-Tandem Stock Appreciation Rights shall be subject to such terms and
conditions, not inconsistent with the provisions of this Plan, as shall be
determined from time to time by the Committee, including Article XIII and the
following:
(a) TERM. The term of each Non-Tandem Stock Appreciation Right shall
be fixed by the Committee, but shall not be greater than ten (10) years
after the date the right is granted.
(b) EXERCISABILITY. Non-Tandem Stock Appreciation Rights shall be
exercisable at such time or times and subject to such terms and conditions
as shall be determined by the Committee at grant. If the Committee
provides, in its discretion, that any such right is exercisable subject to
certain limitations (including, without limitation, that it is exercisable
only in installments or within certain time periods), the Committee may
waive such limitation on the exercisability at any time at or after grant
in whole or in part (including, without limitation, that the Committee may
waive the installment exercise provisions or accelerate the time at which
rights may be exercised), based on such factors, if any, as the Committee
shall determine, in its sole discretion.
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(c) METHOD OF EXERCISE. Subject to whatever installment exercise and
waiting period provisions apply under subsection (b) above, Non-Tandem
Stock Appreciation Rights may be exercised in whole or in part at any time
during the option term, by giving written notice of exercise to the Company
specifying the number of Non- Tandem Stock Appreciation Rights to be
exercised.
(d) PAYMENT. Upon the exercise of a Non-Tandem Stock Appreciation
Right a Participant shall be entitled to receive, for each right exercised,
up to, but no more than, an amount in cash and/or Common Stock (as chosen
by the Committee in its sole discretion) equal in value to the excess of
the Fair Market Value of one share of Common Stock on the date the right is
exercised over the Fair Market Value of one share of Common Stock on the
date the right was awarded to the Participant.
8.5. EXERCISE OF TANDEM AND NON-TANDEM STOCK APPRECIATION RIGHTS. A
Participant required to file reports under Section 16(a) of the Exchange Act
with respect to securities of the Company may exercise his or her Stock
Appreciation Right, provided, that solely to the extent required by Section 16
of the Exchange Act, it is made during any period in which such election or
exercise may be made under the applicable provisions of Rule 16b-3.
8.6. LIMITED STOCK APPRECIATION RIGHTS. The Committee may, in its sole
discretion, grant Limited Stock Appreciation Rights. Limited Stock Appreciation
Rights may be exercised only upon the occurrence of a Change in Control or such
other event as the Committee may, in its sole discretion, designate at the time
of grant or thereafter. Upon the exercise of Limited Stock Appreciation Rights,
except as otherwise provided in an Award agreement, the Participant shall
receive in cash or Common Stock, as determined by the Committee, an amount equal
to the amount (1) set forth in Section 8.2(d) with respect to Tandem Stock
Appreciation Rights or (2) set forth in Section 8.4(d) with respect to
Non-Tandem Stock Appreciation Rights.
ARTICLE IX.
PERFORMANCE SHARES
9.1. AWARD OF PERFORMANCE SHARES. Performance Shares may be awarded either
alone or in addition to other Awards granted under this Plan. The Committee
shall, in its sole discretion, determine the Eligible Employees and Consultants
to whom and the time or times at which such Performance Shares shall be awarded
to any person, the duration of the period (the "Performance Period") during
which, and the conditions under which, a Participant's right to Performance
Shares will be vested and the other terms and conditions of the Award in
addition to those set forth in Section 9.2.
Each Performance Share awarded shall be referenced to one share of Common
Stock. Except as otherwise provided herein, the Committee shall condition the
right to payment of any Performance Share Award upon the attainment of objective
Performance Goals established pursuant to Section 9.2(c) below and such other
nonperformance based factors or criteria as the Committee may determine in its
sole discretion.
9.2. TERMS AND CONDITIONS. The prospective Participant selected to receive
Performance Shares shall not have any rights with respect to such Awards, unless
and until such Participant has delivered a fully executed copy of a Performance
Share Award agreement evidencing the Award to the Company and has otherwise
complied with Article XIII hereof and the following terms and conditions:
(a) EARNING OF PERFORMANCE SHARE AWARD. At the expiration of the
applicable Performance Period, the Committee shall determine the extent to
which the Performance Goals established pursuant to Section 9.2(c) are
achieved and the percentage of each Performance Share Award that has been
earned.
(b) PAYMENT. Following the Committee's determination in accordance
with Section 9.2(a), shares of Common Stock or, as determined by the
Committee in its sole discretion, the cash equivalent of such shares shall
be delivered to the Participant, in an amount equal to such individual's
earned Performance Share Award. Notwithstanding the foregoing, the
Committee may, in its sole discretion, and to the extent applicable and
permitted under Section 162(m) of the Code, award an amount less than the
earned Performance Share Award and/or subject the payment of all or part of
any Performance Share Award to additional vesting and forfeiture conditions
as it deems appropriate.
(c) PERFORMANCE GOALS, FORMULAE OR STANDARDS (THE "PERFORMANCE
GOALS"). The Committee shall establish the objective Performance Goals for
the earning of Performance Shares based on a Performance Period applicable
to each Participant or class of Participants in writing prior to the
beginning of the applicable Performance Period or at such later date as
permitted under Section 162(m) of the Code and while the outcome of the
Performance Goals is substantially uncertain. Such Performance Goals may
incorporate, if and only to the extent permitted under Section 162(m) of
the
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Code, provisions for disregarding (or adjusting for) changes in accounting
methods, corporate transactions (including, without limitation,
dispositions and acquisitions) and other similar events or circumstances.
To the extent any such provision would create impermissible discretion
under Section 162(m) of the Code or otherwise violate Section 162(m) of the
Code, such provision shall be of no force or effect. The applicable
Performance Goals shall be based on one or more of the performance criteria
set forth in Exhibit A hereto.
(d) DIVIDENDS AND OTHER DISTRIBUTIONS. At the time of any Award of
Performance Shares, the Committee may, in its sole discretion, award an
Eligible Employee or Consultant the right to receive the cash value of any
dividends and other distributions that would have been received as though
the Eligible Employee or Consultant had held each share of Common Stock
referenced by the earned Performance Share Award from the last day of the
first year of the Performance Period until the actual distribution to such
Participant of the related share of Common Stock or cash value thereof.
Such amounts, if awarded, shall be paid to the Participant as and when the
shares of Common Stock or cash value thereof are distributed to such
Participant and, at the discretion of the Committee, may be paid with
interest from the first day of the second year of the Performance Period
until such amounts and any earnings thereon are distributed. The applicable
rate of interest shall be determined by the Committee in its sole
discretion; provided, that for each fiscal year or part thereof, the
applicable interest rate shall not be greater than a rate equal to the
four-year U.S. Government Security rate on the first day of each applicable
fiscal year.
ARTICLE X.
PERFORMANCE UNITS
10.1. AWARDS OF PERFORMANCE UNITS. Performance Units may be awarded either
alone or in addition to other Awards granted under this Plan. The Committee
shall, in its sole discretion, determine the Eligible Employees and Consultants
to whom and the time or times at which such Performance Units shall be awarded
to any person, the duration of the period (the "Performance Cycle") during
which, and the conditions under which, a Participant's right to Performance
Units will be vested and the other terms and conditions of the Award in addition
to those set forth in Section 10.2.
Performance Units shall be awarded in a dollar amount determined by the
Committee and shall be converted for calculation purposes of growth in value to
a referenced number of shares of Common Stock based on the Fair Market Value of
shares of Common Stock at the close of trading on the first business day
following the announcement of the annual financial results of the Company for
the fiscal year of the Company immediately preceding the fiscal year of the
commencement of the relevant Performance Cycle, provided that the Committee may
provide that the minimum price for such conversion shall be the Fair Market
Value on the date of grant.
Each Performance Unit shall be referenced to one share of Common Stock.
Except as otherwise provided herein, the Committee shall condition the right to
payment of any Performance Unit Award upon the attainment of objective
Performance Goals established pursuant to Section 10.2(c) and such other
nonperformance based factors or criteria as the Committee may determine in its
sole discretion. The cash value of any fractional Performance Unit Award
subsequent to conversion to shares of Common Stock shall be treated as a
dividend or other distribution under Section 10.2(d) to the extent any portion
of the Performance Unit Award is earned.
10.2. TERMS AND CONDITIONS. A Participant selected to receive Performance
Units shall not have any rights with respect to such Awards, unless and until
such Participant has delivered a fully executed copy of a Performance Unit Award
agreement evidencing the Award to the Company and has otherwise complied with
Article XIII and the following terms and conditions:
(a) EARNING OF PERFORMANCE UNIT AWARD. At the expiration of the
applicable Performance Cycle, the Committee shall determine the extent to
which the Performance Goals established pursuant to Section 10.2(c) are
achieved and the percentage of each Performance Unit Award that has been
earned.
(b) PAYMENT. Following the Committee's determination in accordance
with Section 10.2 (a), cash and/or shares of Common Stock, as determined by
the Committee in its sole discretion, shall be delivered to the
Participant, in an amount equal to such individual's earned Performance
Unit Award. Notwithstanding the foregoing, the Committee may, in its sole
discretion, and to the extent applicable and permitted under Section 162(m)
of the Code, award an amount less than the earned Performance Unit Award
and/or subject the payment of all or part of any Performance Unit Award to
additional vesting and forfeiture conditions as it deems appropriate.
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(c) PERFORMANCE GOALS, FORMULAE OR STANDARDS (THE "PERFORMANCE
GOALS"). The Committee shall establish the objective Performance Goals for
the earnings of Performance Units based on a Performance Cycle applicable
to each Participant or class of Participants in writing prior to the
beginning of the applicable Performance Cycle or at such later date as
permitted under Section 162(m) of the Code and while the outcome of the
Performance Goals is substantially uncertain. Such Performance Goals may
incorporate, if and only to the extent permitted under Section 162(m) of
the Code, provisions for disregarding (or adjusting for) changes in
accounting methods, corporate transactions (including, without limitation,
dispositions and acquisitions) and other similar events or circumstances.
To the extent any such provision would create impermissible discretion
under Section 162(m) of the Code or otherwise violate Section 162(m) of the
Code, such provision shall be of no force or effect. The applicable
Performance Goals shall be based on one or more of the performance criteria
set forth in Exhibit A hereto.
(d) DIVIDENDS AND OTHER DISTRIBUTIONS. At the time of any Award of
Performance Units, the Committee may, in its sole discretion, award an
Eligible Employee or Consultant the right to receive the cash value of any
dividends and other distributions that would have been received as though
the Eligible Employee or Consultant had held each share of Common Stock
referenced by the earned Performance Unit Award from the last day of the
first year of the Performance Cycle until the actual distribution to such
Participant of the related share of Common Stock or cash value thereof.
Such amounts, if awarded, shall be paid to the Participant as and when the
shares of Common Stock or cash value thereof are distributed to such
Participant and, at the discretion of the Committee, may be paid with
interest from the first day of the second year of the Performance Cycle
until such amounts and any earnings thereon are distributed. The applicable
rate of interest shall be determined by the Committee in its sole
discretion; provided, that for each fiscal year or part thereof, the
applicable interest rate shall not be greater than a rate equal to the
four-year U.S. Government Security rate on the first day of each applicable
fiscal year.
ARTICLE XI.
OTHER STOCK-BASED AWARDS
11.1. OTHER AWARDS. Other Awards of Common Stock and other Awards that are
valued in whole or in part by reference to, or are payable in or otherwise based
on, Common Stock ("Other Stock-Based Awards") may be granted either alone or in
addition to or in tandem with Stock Options, Stock Appreciation Rights,
Restricted Stock, Performance Shares or Performance Units.
Subject to the provisions of this Plan, the Committee shall, in its sole
discretion, determine the Eligible Employees and Consultants to whom and the
time or times at which such Awards shall be made, the number of shares of Common
Stock to be awarded pursuant to such Awards, the ability of Participants to
defer the receipt of Common Stock pursuant to such Awards and all other
conditions of the Awards. The Committee may also provide for the grant of Common
Stock under such Awards upon the completion of a specified performance period.
11.2. TERMS AND CONDITIONS. Other Stock-Based Awards made pursuant to this
Article XI shall be subject to Article XIII and the following terms and
conditions:
(a) DIVIDENDS. Unless otherwise determined by the Committee at the
time of Award, subject to the provisions of the Award agreement and this
Plan, the recipient of an Award under this Article XI shall be entitled to
receive, currently or on a deferred basis, dividends or dividend
equivalents with respect to the number of shares of Common Stock covered by
the Award, as determined at the time of the Award by the Committee, in its
sole discretion.
(b) VESTING. Any Award under this Article XI and any Common Stock
covered by any such Award shall vest or be forfeited to the extent so
provided in the Award agreement, as determined by the Committee, in its
sole discretion.
(c) WAIVER OF LIMITATION. The Committee may, in its sole discretion,
waive in whole or in part any or all of the limitations imposed hereunder
(if any) with respect to any or all of an Award under this Article XI.
(d) PRICE. Common Stock issued on a bonus basis under this Article XI
may be issued for no cash consideration; Common Stock purchased pursuant to
a purchase right awarded under this Article XI shall be priced as
determined by the Committee. Subject to Section 4.3, the purchase price of
shares of Common Stock may be zero to the extent permitted by applicable
law, and, to the extent not so permitted, such purchase price may not be
less than par value.
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ARTICLE XII.
NON-EMPLOYEE DIRECTOR AWARDS
12.1. GENERAL. The terms of this Article XII shall apply only to
Non-Employee Directors who are eligible to elect to receive Common Stock and
Stock Options in lieu of Retainer Fees or Total Director Fees payable in cash.
12.2. NON-EMPLOYEE DIRECTOR ELECTION. Each Non-Employee Director may elect,
in accordance with Section 12.3 below, to receive Awards of Common Stock or
Stock Options in lieu of receiving (i) cash payment of Retainer Fees, or (ii)
cash payment of Total Director Fees. A Non-Employee Director may not elect to
receive Common Stock or Stock Options solely in lieu of receiving cash payment
of Meeting Fees.
12.3. TIMING AND MANNER OF ELECTION. Any election to receive Common Stock
or Stock Options as payment of Retainer Fees or Total Director Fees shall be
made in writing to the Board prior to the first day of the Company's fiscal year
during which the Retainer Fees or Total Director Fees are earned. Each election,
which shall be made in a manner as determined by the Board, shall designate (i)
whether the election applies to Retainer Fees or Total Director Fees, and (ii)
whether the Retainer Fees or Total Director Fees, as applicable, are to be
awarded in cash, Common Stock or Stock Options.
(a) IRREVOCABLE ELECTION. An election under this Article XII is
irrevocable and is only valid for the Company's fiscal year following the
election. If a new election is not made with respect to any subsequent
fiscal year, the Retainer Fees and Meeting Fees earned during such
subsequent fiscal year will be paid in cash.
(b) MID-YEAR PARTICIPATION. An individual who becomes a Non-Employee
Director after the date by which an election would otherwise be required to
be made hereunder with respect to a fiscal year may elect to receive an
Award during that fiscal year by making an election, in the form required
hereunder, within thirty days after the individual becomes a Non-Employee
Director and such election shall become effective the first day of the
month following the date of the election.
12.4. DATE OF GRANT. Awards that are attributable to Retainer Fees will be
made on the first day of each quarter of the Company's fiscal year. Awards that
are attributable to Meeting Fees will be made on the dates of the Board meetings
and/or committee meetings with respect to which such Awards relate.
12.5. COMMON STOCK. On each date of grant, as determined in accordance with
Section 12.4 above, each Non-Employee Director shall receive that number of
shares of Common Stock determined by dividing (i) the amount of Retainer Fees or
Total Director Fees that the Non-Employee Director elected to receive in Common
Stock, by (ii) the Fair Market Value of the Common Stock at the time of grant.
Common Stock granted under this Article XII shall be subject to the following
terms and conditions:
(a) FRACTIONAL SHARES. The value of fractional shares of Common Stock
shall be paid in cash.
(b) PURCHASE PRICE. The purchase price of a share of Common Stock
shall be zero to the extent permitted by applicable law, and, to the extent
not so permitted, such purchase price may not be less than par value.
(c) LEGENDS. Each Non-Employee Director receiving Common Stock granted
under this Article XII shall be issued a stock certificate in respect of
such shares of Common Stock. Such certificate shall be registered in the
name of the Non-Employee Director and shall bear an appropriate legend, to
the extent required by applicable law, as the Company may determine upon
advice of counsel, referring to the legal restrictions applicable to such
shares. Shares of Common Stock shall be subject to the requirements of
Section 17.1.
12.6. STOCK OPTIONS. On each date of grant, as determined in accordance
with Section 12.4 above, each Non-Employee Director shall receive that number of
Stock Options determined by dividing (i) the amount of Retainer Fees or Total
Director Fees that the Non-Employee Director elected to receive in the form of
Stock Options, by (ii) the value of one Stock Option on the date of grant as
determined in good faith by the Board, based on a Black-Scholes Option pricing
model (calculated by an accounting, investment banking or appraisal firm
selected by the Board) and such other factors as the Board deems appropriate.
Options granted under this Article XII shall be subject to the following terms
and conditions and shall be in such form and contain such additional terms and
conditions, not inconsistent with terms of this Plan, as the Board shall deem
desirable:
(a) FRACTIONAL OPTIONS. Stock Option Awards for fractional shares of
Common Stock shall be disregarded.
(b) NON-QUALIFIED OPTION. Stock Options granted under this Article XII
shall be Non-Qualified Stock Options.
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(c) OPTION PRICE. The purchase price per share deliverable upon the
exercise of an Option granted pursuant to this Section 12.6 shall be 100%
of the Fair Market Value of such Common Stock at the time of the grant of
the Option, or the par value of the Common Stock, whichever is greater.
(d) EXERCISABILITY. Any Option granted under this Article XII shall
always be fully vested and exercisable.
(e) METHOD FOR EXERCISE. A Non-Employee Director electing to exercise
one or more Options shall give written notice of exercise to the Company
specifying the number of shares to be purchased. Common Stock purchased
pursuant to the exercise of Options shall be paid for at the time of
exercise in cash or by delivery of unencumbered Common Stock owned by the
Non-Employee Director or a combination thereof or by such other method as
approved by the Board.
(f) OPTION TERM. If not previously exercised each Option shall expire
upon the fifth anniversary of the date of the grant thereof.
ARTICLE XIII.
NON-TRANSFERABILITY AND TERMINATION OF
EMPLOYMENT/CONSULTANCY PROVISIONS
13.1. NO STOCK OPTION, STOCK APPRECIATION RIGHT, PERFORMANCE SHARE,
PERFORMANCE UNIT OR OTHER STOCK-BASED AWARD SHALL BE TRANSFERRED BY THE
PARTICIPANT OTHERWISE THAN BY WILL OR BY THE LAWS OF DESCENT AND DISTRIBUTION.
All Stock Options and all Stock Appreciation Rights shall be exercisable, during
the Participant's lifetime, only by the Participant. Tandem Stock Appreciation
Rights may be Transferred, to the extent permitted above, only with the
underlying Stock Option. Shares of Restricted Stock under Article VII may not be
Transferred prior to the date on which shares are issued, or, if later, the date
on which any applicable restriction, performance or deferral period lapses. No
Award shall, except as otherwise specifically provided by law or herein, be
Transferred in any manner, and any attempt to Transfer any such Award shall be
void, and no such Award shall in any manner be used for the payment of, subject
to, or otherwise encumbered by or hypothecated for the debts, contracts,
liabilities, engagements or torts of any person who shall be entitled to such
Award, nor shall it be subject to attachment or legal process for or against
such person.
13.2. TERMINATION OF EMPLOYMENT OR TERMINATION OF CONSULTANCY. The
following rules apply with regard to the Termination of Employment or
Termination of Consultancy of a Participant:
(a) TERMINATION OF EMPLOYMENT OR TERMINATION OF CONSULTANCY FOR STOCK
OPTIONS AND STOCK APPRECIATION RIGHTS.
(i) TERMINATION BY REASON OF DEATH. If a Participant's Termination
of Employment or Termination of Consultancy is by reason of death, any
Stock Option or Stock Appreciation Right held by such Participant,
unless otherwise determined by the Committee at grant, may be exercised,
to the extent exercisable at the Participant's death (or to such greater
extent as the Committee, in its sole discretion, shall determine), by
the legal representative of the estate, at any time within a period of
[one year] from the date of such death, but in no event beyond the
expiration of the stated term of such Stock Option or Stock Appreciation
Right.
(ii) TERMINATION BY REASON OF DISABILITY. If a Participant's
Termination of Employment or Termination of Consultancy is by reason of
Disability, any Stock Option or Stock Appreciation Right held by such
Participant, unless otherwise determined by the Committee at grant, may
be exercised, to the extent exercisable at the Participant's termination
(or to such greater extent as the Committee, in its sole discretion,
shall determine), by the Participant at any time within a period of [one
year] from the date of such termination, but in no event beyond the
expiration of the stated term of such Stock Option or Stock Appreciation
Right.
(iii) TERMINATION BY REASON OF RETIREMENT. If a Participant's
Termination of Employment or Termination of Consultancy is by reason of
Retirement, any Stock Option or Stock Appreciation Right held by such
Participant, unless otherwise determined by the Committee at grant,
shall be fully vested and may thereafter be exercised by the Participant
at any time within a period of [one year]from the date of such
termination (or to such greater extent as the Committee, in its sole
discretion, shall determine), but in no event beyond the expiration of
the stated term of such Stock Option or Stock Appreciation Right;
provided, however, that, if the Participant dies within such exercise
period, any unexercised Stock Option or Non-Tandem Stock Appreciation
Right held by such Participant shall thereafter be exercisable, to the
extent to which it was exercisable at the time of death, for a period of
[one year] (or such other period as the Committee may specify at grant
or, if no rights of the Participant's estate are reduced,
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thereafter) from the date of such death, but in no event beyond the
expiration of the stated term of such Stock Option or Non-Tandem Stock
Appreciation Right.
(iv) INVOLUNTARY TERMINATION WITHOUT CAUSE OR TERMINATION FOR GOOD
REASON. If a Participant's Termination of Employment or Termination of
Consultancy is by involuntary termination without Cause or is for Good
Reason, any Stock Option or Stock Appreciation Right held by such
Participant, unless otherwise determined by the Committee at grant, may
be exercised, to the extent exercisable at termination (or to such
greater extent as the Committee, in its sole discretion, shall
determine), by the Participant at any time within a period of [90 days]
from the date of such termination, but in no event beyond the expiration
of the stated term of such Stock Option or Stock Appreciation Right.
(v) TERMINATION WITHOUT GOOD REASON OR VOLUNTARY RESIGNATION. If a
Participant's Termination of Employment or Termination of Consultancy is
voluntary but without Good Reason or is due to a voluntary resignation
and such termination occurs prior to, or more than 90 days after, the
occurrence of an event which would be grounds for Termination of
Employment or Termination of Consultancy by the Company for Cause
(without regard to any notice or cure period requirements), any Stock
Option or Stock Appreciation Right held by such Participant, unless
otherwise determined by the Committee at grant, may be exercised, to the
extent exercisable at termination (or to such greater extent as the
Committee, in its sole discretion, shall determine), by the Participant
at any time within a period of [30 days] from the date of such
termination, but in no event beyond the expiration of the stated term of
such Stock Option or Stock Appreciation Right.
(vi) TERMINATION FOR CAUSE. Unless otherwise determined by the
Committee at grant or, if no rights of the Participant are reduced,
thereafter, if a Participant's Termination of Employment or Termination
of Consultancy is for Cause for any reason, any Stock Option or Stock
Appreciation Right held by such Participant shall thereupon terminate
and expire as of the date of termination. In the event the termination
is an involuntary termination without Cause or is a voluntary
termination with or without Good Reason within 90 days after occurrence
of an event which would be grounds for Termination of Employment or
Termination of Consultancy by the Company for Cause (without regard to
any notice or cure period requirement), any Stock Option or Stock
Appreciation Right held by the Participant at the time of occurrence of
the event which would be grounds for Termination of Employment or
Termination of Consultancy by the Company for Cause shall be deemed to
have terminated and expired upon occurrence of the event which would be
grounds for Termination of Employment or Termination of Consultancy by
the Company for Cause.
(b) TERMINATION OF EMPLOYMENT OR TERMINATION OF CONSULTANCY FOR
RESTRICTED STOCK. Subject to the applicable provisions of the Restricted
Stock Award agreement and this Plan, upon a Participant's Termination of
Employment or Termination of Consultancy for any reason during the relevant
Restriction Period, all Restricted Stock still subject to restriction will
vest or be forfeited in accordance with the terms and conditions
established by the Committee at grant or thereafter.
(c) TERMINATION OF EMPLOYMENT OR TERMINATION OF CONSULTANCY FOR
PERFORMANCE SHARES AND PERFORMANCE UNITS. Subject to the applicable
provisions of the Award agreement and this Plan, upon a Participant's
Termination of Employment or Termination of Consultancy for any reason
during the Performance Period, the Performance Cycle or other period or
restriction as may be applicable for a given Award, the Performance Shares
or Performance Units in question will vest (to the extent applicable and to
the extent permissible under Section 162(m) of the Code) or be forfeited in
accordance with the terms and conditions established by the Committee at
grant or thereafter.
(d) TERMINATION OF EMPLOYMENT OR TERMINATION OF CONSULTANCY FOR OTHER
STOCK-BASED AWARDS. Subject to the applicable provisions of the Award
agreement and this Plan, upon a Participant's Termination of Employment or
Termination of Consultancy for any reason during any period or restriction
as may be applicable for a given Award, the Other Stock-Based Awards in
question will vest or be forfeited in accordance with the terms and
conditions established by the Committee at grant or thereafter.
ARTICLE XIV.
CHANGE IN CONTROL PROVISIONS
14.1. BENEFITS. In the event of a Change in Control of the Company, the
Participant shall be entitled to the following benefits:
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(a) Subject to Section 14.1(c), all outstanding Stock Options (other
than Stock Options granted to Non-Employee Directors pursuant to Article
XII) and any related Tandem Stock Appreciation Rights and Non-Tandem Stock
Appreciation Rights granted prior to the Change in Control shall be fully
vested and immediately exercisable in their entirety. The Committee, in its
sole discretion, may provide for the purchase of any such Stock Options by
the Company or Designated Subsidiary for an amount of cash equal to the
excess of the Change in Control Price of the shares of Common Stock covered
by such Stock Options, over the aggregate exercise price of such Stock
Options. For purposes of this Section 14.1, "Change in Control Price" shall
mean the higher of (i) the highest price per share of Common Stock paid in
any transaction related to a Change in Control of the Company, or (ii) the
highest Fair Market Value per share of Common Stock at any time during the
60-day period preceding a Change in Control.
(b) The restrictions to which any shares of Restricted Stock granted
prior to the Change in Control are subject shall lapse as if the applicable
Restriction Period had ended upon such Change in Control. Furthermore, the
conditions required for vesting of any invested Performance Units,
Performance Shares and/or Other Stock-Based Awards shall be deemed to be
satisfied in full upon such Change in Control.
(c) Notwithstanding anything to the contrary herein, unless the
Committee provides otherwise at grant, no acceleration of exercisability
shall occur with respect to an Option if the Committee reasonably
determines in good faith, prior to the occurrence of the Change in Control,
that the Options shall be honored or assumed, or new rights substituted
therefor (each such honored, assumed or substituted option hereinafter
called an "Alternative Option"), by a Participant's employer (or the parent
or a subsidiary of such employer) immediately following the Change in
Control, provided that any such Alternative Option must comply with the
following criteria, such compliance to be determined in the sole discretion
of the Committee prior to the date of Change of Control:
(i) the Alternative Option must be based on stock which is traded
on an established securities market, or which will be so traded within
30 days following the Change in Control;
(ii) the Alternative Option must provide such Participant with
rights and entitlements substantially equivalent to or better than the
rights, terms and conditions applicable under such Option, including,
but not limited to, an identical or better exercise schedule; and
(iii) the Alternative Option must have economic value substantially
equivalent to the value of such Option (determined at the time of the
Change in Control).
For purposes of Incentive Stock Options, any assumed or substituted
Option shall comply with the requirements of Treasury regulation ss.
1.425-1 (and any amendments thereto).
In no event shall this Section 14.1(c) apply to Stock Options granted
to Non-Employee Directors.
14.2. CHANGE IN CONTROL. A "Change in Control" shall be deemed to have
occurred:
(a) upon any "person" as such term is used in Sections 13(d) and 14(d)
of the Exchange Act (other than the Company, any trustee or other fiduciary
holding securities under any employee benefit plan of the Company, or any
company owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of Common Stock),
becoming the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 25%
or more of the combined voting power of the Company's then outstanding
securities;
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors, and any new
director (other than a director designated by a person who has entered into
an agreement with the Company to effect a transaction described in Section
14.2(a), (c), or (d) or a director whose initial assumption of office
occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board) whose election
by the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the two-year period or
whose election or nomination for election was previously so approved, cease
for any reason to constitute at least a majority of the Board;
(c) upon the merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than
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50% of the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets other than
the sale of all or substantially all of the assets of the Company to a
person or persons who beneficially own, directly or indirectly, at least
50% or more of the combined voting power of the outstanding voting
securities of the Company at the time of the sale.
ARTICLE XV.
TERMINATION OR AMENDMENT OF THE PLAN
15.1. TERMINATION OR AMENDMENT. Notwithstanding any other provision of this
Plan, the Board may at any time, and from time to time, amend, in whole or in
part, any or all of the provisions of the Plan (including any amendment deemed
necessary to ensure that the Company may comply with any regulatory requirement
referred to in this Article XV), or suspend or terminate it entirely,
retroactively or otherwise; provided, however, that, unless otherwise required
by law or specifically provided herein, the rights of a Participant with respect
to Awards granted prior to such amendment, suspension or termination, may not be
impaired without the consent of such Participant and, provided further, without
the approval of the stockholders of the Company in accordance with the laws of
the State of Delaware, to the extent required by the applicable provisions of
Section 162(m) of the Code, or with respect to Incentive Stock Options, Section
422 of the Code, no amendment may be made which would (i) increase the aggregate
number of shares of Common Stock that may be issued under this Plan; (ii)
increase the maximum individual Participant limitations for a fiscal year under
Section 4.1(b); (iii) change the classification of employees, consultants and
non-employee directors eligible to receive Awards under this Plan; (iv) decrease
the minimum option price of any Stock Option; (v) extend the maximum option
period under Section 6.3; (vi) change any rights under this Plan with regard to
Non-Employee Directors; or (vii) materially alter the performance criteria for
the Award of Restricted Stock, Performance Shares or Performance Units as set
forth in Exhibit A; or (viii), require stockholder approval in order for this
Plan to continue to comply with the applicable provisions of Section 162(m) of
the Code or, with respect to Incentive Stock Options, Section 422 of the Code.
In no event may this Plan be amended without the approval of the stockholders of
the Company in accordance with the applicable laws of the State of Delaware to
increase the aggregate number of shares of Common Stock that may be issued under
the Plan (subject to Section 4.2), decrease the minimum option price of any
Stock Option, or to make any other amendment that would require stockholder
approval under the rules of any exchange or system on which the Company's
securities are listed or traded at the request of the Company.
Except with respect to any Non-Employee Director's election to receive
Common Stock [or Stock Options] in lieu of Retainer Fees or Total Director Fees
payable in cash pursuant to Article XII, which award shall be final when made,
the Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Article IV or as otherwise
specifically provided herein, no such amendment or other action by the Committee
shall impair the rights of any holder without the holder's consent.
ARTICLE XVI.
UNFUNDED PLAN
16.1. UNFUNDED STATUS OF PLAN. This Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments as to which a Participant has a fixed and vested interest but which are
not yet made to a Participant by the Company, nothing contained herein shall
give any such Participant any rights that are greater than those of a general
creditor of the Company.
ARTICLE XVII.
GENERAL PROVISIONS
17.1. LEGEND. The Committee may require each person receiving shares
pursuant to an Award under the Plan to represent to and agree with the Company
in writing that the Participant is acquiring the shares without a view to
distribution thereof. In addition to any legend required by this Plan, the
certificates for such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on Transfer.
All certificates for shares of Common Stock delivered under the Plan shall
be subject to such stock transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations and other requirements of the
Securities
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and Exchange Commission, any stock exchange upon which the Stock is then listed
or any national securities association system upon whose system the Common Stock
is then quoted, any applicable Federal or state securities law, and any
applicable corporate law, and the Committee may cause a legend or legends to be
put on any such certificates to make appropriate reference to such restrictions.
17.2. OTHER PLANS. Nothing contained in this Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
17.3. NO RIGHT TO EMPLOYMENT/CONSULTANCY/DIRECTORSHIP. Neither this Plan
nor the grant of any Award hereunder shall give any Participant or other
employee or Consultant any right with respect to continuance of employment or
consultancy by the Company or any subsidiary, nor shall they be a limitation in
any way on the right of the Company or any subsidiary by which an employee is
employed or consultant retained to terminate his employment or consultancy, as
applicable, at any time. Neither this Plan nor the grant of any Award hereunder
shall impose any obligations on the Company to retain any Participant as a
director nor shall it impose on the part of any Participant any obligation to
remain as a director of the Company.
17.4. WITHHOLDING OF TAXES. The Company shall have the right to deduct from
any payment to be made to a Participant, or to otherwise require, prior to the
issuance or delivery of any shares of Common Stock or the payment of any cash
hereunder, payment by the Participant of, any Federal, state or local taxes
required by law to be withheld. Upon the vesting of Restricted Stock, or upon
making an election under Section 83(b) of the Code, a Participant shall pay to
the Company all amounts required by law to be withheld.
The Committee may, in its sole discretion, permit any such withholding
obligation with regard to any Eligible Employee or Consultant to be satisfied by
reducing the number of shares of Common Stock otherwise deliverable or by
delivering shares of Common Stock already owned. Subject to the advance approval
of the Committee, an Eligible Employee required to file reports under Section
16(a) of the Exchange Act with respect to securities of the Company may elect to
have a sufficient number of shares of Common Stock withheld to fulfill such tax
obligations only if the election complies with such conditions, if any, as are
necessary to prevent the withholding of such shares from being subject to the
applicable provisions of Section 16(b) of the Exchange Act. Any fraction of a
share of Common Stock required to satisfy such tax obligations shall be
disregarded and the amount due shall be paid instead in cash by the Participant.
17.5. LISTING AND OTHER CONDITIONS.
(a) As long as the Common Stock is listed on a national securities
exchange or system sponsored by a national securities association, the
issue of any shares of Common Stock pursuant to an Award shall be
conditioned upon such shares being listed on such exchange or system. The
Company shall have no obligation to issue such shares unless and until such
shares are so listed, and the right to exercise any Option with respect to
such shares shall be suspended until such listing has been effected.
(b) If at any time counsel to the Company shall be of the opinion that
any sale or delivery of shares of Common Stock pursuant to an Award is or
may in the circumstances be unlawful or result in the imposition of excise
taxes on the Company under the statutes, rules or regulations of any
applicable jurisdiction, the Company shall have no obligation to make such
sale or delivery, or to make any application or to effect or to maintain
any qualification or registration under the Securities Act of 1933, as
amended, or otherwise with respect to shares of Common Stock or Awards, and
the right to exercise any Option shall be suspended until, in the opinion
of said counsel, such sale or delivery shall be lawful or will not result
in the imposition of excise taxes on the Company.
(c) Upon termination of any period of suspension under this Section
17.5, any Award affected by such suspension which shall not then have
expired or terminated shall be reinstated as to all shares available before
such suspension and as to shares which would otherwise have become
available during the period of such suspension, but no such suspension
shall extend the term of any Option.
17.6. GOVERNING LAW. This Plan shall be governed and construed in
accordance with the laws of the State of Delaware (regardless of the law that
might otherwise govern under applicable Delaware principles of conflict of
laws).
17.7. CONSTRUCTION. Wherever any words are used in this Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
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17.8. OTHER BENEFITS. No Award payment under this Plan shall be deemed
compensation for purposes of computing benefits under any retirement plan of the
Company or its subsidiaries nor affect any benefits under any other benefit plan
now or subsequently in effect under which the availability or amount of benefits
is related to the level of compensation.
17.9. COSTS. The Company shall bear all expenses included in administering
this Plan, including expenses of issuing Common Stock pursuant to any Awards
hereunder.
17.10. NO RIGHT TO SAME BENEFITS. The provisions of Awards need not be the
same with respect to each Participant, and such Awards to individual
Participants need not be the same in subsequent years.
17.11. DEATH/DISABILITY. The Committee may in its discretion require the
transferee of a Participant's Award to supply the Company with written notice of
the Participant's death or Disability and to supply the Company with a copy of
the will (in the case of the Participant's death) or such other evidence as the
Committee deems necessary to establish the validity of the Transfer of an Award.
The Committee may also require that the transferee agree in writing to be bound
by all of the terms and conditions of this Plan.
17.12. SECTION 16(B) OF THE EXCHANGE ACT. All elections and transactions
under the Plan by persons subject to Section 16 of the Exchange Act involving
shares of Common Stock are intended to comply with any applicable exemptive
condition under Rule 16b-3. The Committee may establish and adopt written
administrative guidelines, designed to facilitate compliance with Section 16(b)
of the Exchange Act, as it may deem necessary or proper for the administration
and operation of this Plan thereunder.
17.13. SEVERABILITY OF PROVISIONS. If any provision of this Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and the Plan shall be construed and enforced
as if such provisions had not been included.
17.14. HEADINGS AND CAPTIONS. The headings and captions herein are provided
for reference and convenience only, shall not be considered part of this Plan,
and shall not be employed in the construction of the Plan.
ARTICLE XVIII.
EFFECTIVE DATE OF PLAN
The Plan shall become effective upon adoption by the Board and approval of
the Plan by the stockholders in accordance with the requirements of the laws of
the State of Delaware or such later date as provided in the adopting resolution.
ARTICLE XIX.
TERM OF PLAN
No Award shall be granted pursuant to the Plan on or after the tenth
anniversary of the earlier of the date the Plan is adopted or the date of
stockholder approval, but Awards granted prior to such tenth anniversary may
extend beyond that date.
ARTICLE XX.
NAME OF PLAN
This Plan shall be known as the Rose's Stores, Inc. Long Term Stock
Incentive Plan.
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EXHIBIT A TO LONG TERM STOCK INCENTIVE PLAN
The Performance Goals in respect of the applicable Awards referred to in
the Plan granted to Participants, shall be based on one or more of the following
criteria: (i) the attainment of certain target levels of, or percentage increase
in, pre-tax profit of the Company (or a subsidiary, division or other
operational unit of the Company); (ii) the attainment of certain target levels
of, or a percentage increase in, after-tax profits of the Company (or a
subsidiary, division or other operational unit of the Company); (iii) the
attainment of certain target levels of, or a specified increase in, operational
cash flow of the Company (or a subsidiary, division or other operational unit of
the Company); (iv) the achievement of a certain level of, reduction of, or other
specified objectives with regard to limiting the level of increase in all or a
portion of the Company's bank debt or other long-term or short-term public or
private debt or other similar financial obligations of the Company, if any,
which may be calculated net of such cash balances and/or other offsets and
adjustments as may be established by the Company; (v) the attainment of a
specified percentage increase in earnings per share or earnings per share from
continuing operation of the Company (or a subsidiary, division or other
operational unit of the Company); (vi) the attainment of certain target levels
of, or a specified percentages increase in, revenues, net income, earnings
before (A) interest, (B) taxes, (C) depreciation and/or (D) amortization, of the
Company (or a subsidiary, division or other operational unit of the Company);
(vii) the attainment of certain target levels of, or a specified increase in,
return on invested capital or return on investment; (viii) the attainment of
certain target levels of, or a percentage increase in, after-tax or pre-tax
return on stockholders' equity of the Company (or any subsidiary, division or
other operational unit of the Company; and (ix) the attainment of a certain
target level of, or reduction in, selling, general and administrative expense as
a percentage of revenue of the Company (or any subsidiary, division or other
operational unit of the Company). The criteria listed above for the Company (or
any subsidiary, division or other operational unit of the Company) shall be
determined in accordance with generally accepted accounting principles
consistently applied by the Company, but before consideration of payments to be
made pursuant to this Plan.
22
<PAGE>
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APPENDIX
ROSE'S STORES, INC.
PROXY
The undersigned appoints R. Edward Anderson and G. Templeton Blackburn, II,
and either of them, with power of substitution, to represent and to vote on
behalf of the undersigned all of the shares of Rose's Stores, Inc. (the
"Corporation") which the undersigned is entitled to vote at the annual meeting
of stockholders to be held at the offices of Proskauer Rose Goetz & Mendelsohn
LLP, 1585 Broadway, 25th Floor, New York, New York 10036 on Thursday, June 26,
1997 at 9:00 a.m., and at any adjournment or adjournments thereof, hereby
revoking all proxies heretofore given with respect to such stock, upon the
following proposals more fully described in the notice of, and proxy statement
relating to, the meeting (receipt whereof is hereby acknowledged).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 and 4.
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
except as marked to the contrary below for all nominees listed below
</TABLE>
R. Edward Anderson and J. David Rosenberg
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
2. PROPOSAL TO AMEND THE CORPORATION'S CERTIFICATE OF INCORPORATION to
restrict certain transfers of the Corporation's securities in order to
help assure that the Corporation's substantial tax benefits (in the form
of net operating loss carryforwards) will continue to be available to
offset future taxable income.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO APPROVE THE CORPORATION'S LONG TERM STOCK INCENTIVE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
<PAGE>
4. PROPOSAL TO CONFIRM THE APPOINTMENT OF
KPMG PEAT MARWICK LLP AS THE INDEPENDENT
AUDITORS OF THE CORPORATION.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
Please sign exactly as your name appears on your stock certificate(s). When
shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee, or guardian, please give full title as such.
If a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Signature
Signature if held jointly
Dated: , 1997
Please return in the enclosed
postage paid envelope.
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS.
