SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Rose's Holdings, Inc.
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|_| $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2).
|_| $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
|_| Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
1) Amount previously paid: _________________________________________________
2) Form, Schedule or Registration No. ______________________________________
3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
___________
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
(032796DTI)
<PAGE>
Rose's Holdings, Inc.
150 East 52nd Street
New York, New York 10022
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of stockholders of Rose's Holdings, Inc. (the
"Corporation") will be held at the Corporation's principal executive offices at
150 East 52nd Street, New York, New York 10022, on Wednesday, November 4, 1998
at 10:00 a.m. (local time) for the following purposes:
1. to elect three directors of the Corporation to the class whose
term expires in 2001;
2. to consider and act upon a proposal to amend the Corporation's
Restated Certificate of Incorporation to (i) change the par value
of the Corporation's capital stock from no par value to $.001 par
value per share and (ii) delete therefrom certain unnecessary
provisions relating to the bankruptcy of the Corporation's former
operating subsidiary;
3. to consider and act upon a proposal to amend the Corporation's
Restated Certificate of Incorporation to effect a reverse stock
split followed by a forward stock split of the Corporation's
common stock;
4. to consider and act upon a proposal to amend the Corporation's
Restated Certificate of Incorporation to (i) eliminate the
Corporation's staggered Board of Directors and (ii) reduce the
required number of Board members;
5. to consider and act upon a proposal to approve the performance
bonus award to the president and chief executive officer of a
subsidiary of the Corporation to qualify such award under Section
162(m) of the Internal Revenue Code of 1986, as amended;
6. to consider and act upon a proposal to approve the merger of the
Corporation's New Equity Compensation Plan with the Long Term
Stock Incentive Plan, together with certain amendments to the
Long Term Stock Incentive Plan;
7. to ratify the appointment of KPMG Peat Marwick LLP, independent
accountants, to audit the books and accounts of the Corporation;
and
8. to transact such other business as may properly come before the
meeting or any adjournments thereof.
<PAGE>
The Board of Directors has fixed the close of business on
September 11, 1998 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,
Jack L. Howard
Secretary
October 1, 1998
=======================================================
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 Holdings, Inc.
150 East 52nd Street
New York, New York 10022
--------------------
This Proxy Statement is furnished to the stockholders of Rose's
Holdings, 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 November 4, 1998 and
any adjournment or adjournments thereof (the "Annual Meeting"). 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 October 5, 1998.
Only holders of securities entitled to vote at the Annual Meeting
at the close of business on September 11, 1998, the record date for the Annual
Meeting, will be entitled to notice of and to vote at the Annual Meeting. On the
record date the Corporation had issued and outstanding 8,655,383 shares of
common stock, no par value (the "Common Stock"), entitled to vote at the Annual
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 Annual Meeting will not have the effect of
revoking a proxy unless the stockholder so attending, in writing, so notifies
the Secretary of the Annual Meeting at any time prior to the voting of the
proxy.
The presence, in person or by proxy, of the holders of at least a
majority of the shares of Common Stock outstanding on the record date is
necessary to have a quorum for the Annual Meeting. Abstentions and broker
"non-votes" are counted as present for purposes of determining a quorum. A
broker "non-vote" occurs when a nominee holding shares of Common Stock for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power with respect to that item and has not
received instructions from the beneficial owner.
The Board of Directors does not know of any matter that is
expected to be presented for consideration at the Annual Meeting, other than
those matters described on the attached Notice and herein. However, if other
matters properly come before the Annual 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 Annual 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. The Corporation has also retained
MacKenzie Partners, Inc. ("MacKenzie") to assist in the solicitation of proxies.
MacKenzie will receive a fee for such services of approximately $7,500, plus
reasonable out-of-pocket expenses, which will be paid by the Corporation.
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.
<PAGE>
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 and for
those matters described on the attached Notice and herein. With regard to the
election of directors, votes cast may be withheld from each nominee; votes that
are withheld will be excluded entirely from the vote and will have no effect.
Abstentions may be specified on all proposals except the election of directors
and will have the same effect as a vote against a proposal. Abstentions and
broker non-votes are not counted as votes cast on any matter to which they
relate.
PRINCIPAL STOCKHOLDERS
The only persons known by the Corporation to be the beneficial
owners of more than 5% of the outstanding shares of Common Stock, as of August
31, 1998, are indicated below:
Amount and
Nature of
Beneficial
Name and Address Ownership Percentage of Class
- ---------------- --------- -------------------
Warren G. Lichtenstein 2,158,979(1) 24.9%
150 East 52nd Street
New York, New York 10022
Steel Partners II, L.P. 1,961,559(2) 22.7%
150 East 52nd Street
New York, New York 10022
Earle C. May 1,474,207(3) 17.0%
4550 Kruse Way #345
Lake Oswego, Oregon 97035
May Management, Inc. 1,430,975 16.5%
4550 Kruse Way #345
Lake Oswego, Oregon 97035
- ----------
(1) Includes: (a) 5,000 shares of Common Stock owned by Mr. Lichtenstein;
(b) 192,420 shares of Common Stock issuable upon the exercise of options
owned by Mr. Lichtenstein; (c) 1,918,190 shares of Common Stock owned by
Steel Partners II, L.P.; and (d) 43,369 shares of Common Stock issuable
upon the exercise of warrants owned by Steel Partners II, L.P. Mr.
Lichtenstein is the chief executive officer of the general partner of
Steel Partners II, L.P. Mr. Lichtenstein disclaims beneficial ownership
of the shares of Common Stock owned by Steel Partners II, L.P. except to
the extent of his pecuniary interest in such shares of Common Stock,
which is less than the amount disclosed.
2
<PAGE>
(2) Represents 1,918,190 shares of Common Stock and 43,369 shares of Common
Stock issuable upon exercise of warrants.
(3) Includes: (a) 11,730 shares of Common Stock owned by Mr. May; (b) 31,507
shares of Common Stock issuable upon the exercise of options owned by
Mr. May; (c) 100,595 shares of Common Stock owned by May Management,
Inc.; and (d) 1,330,375 shares of Common Stock held in customer accounts
as to which May Management, Inc. has shared dispositive power. Mr. May
is the chief executive officer and a principal stockholder of May
Management, Inc. and may be deemed to be the beneficial owner of shares
owned by May Management, Inc. or as to which May Management, Inc. has
shared dispositive power.
--------------------
Except as noted in the footnotes above, (i) none of such shares
is known by the Corporation to be shares with respect to which the beneficial
owner has the right to acquire beneficial ownership and (ii) 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 August 31, 1998 by (a) the Corporation's
directors, (b) the executive officers named in the Summary Compensation Table
below, and (c) all current directors and executive officers as a group.
Amount and
Name of Nature of
Beneficial Beneficial
Owner Ownership (1) Percent of Class
- ----------- ------------- ----------------
R. Edward Anderson 67,284 *
Jack L. Howard 139,368 1.6%
Warren G. Lichtenstein 2,158,979(2) 24.9%
Earle C. May 1,474,207(3) 17.0%
Joseph L. Mullen 31,507 *
J. David Rosenberg 156,490 1.8%
Harold Smith 31,507 *
N. Hunter Wyche, Jr. 31,507 *
Robert Greenwald 0 *
Bobby L. Sasser 0 *
All current directors and executive
officers as a group (seven persons) 4,090,849(4) 47.3%
- ----------
* Less than 1% of the outstanding Common Stock.
3
<PAGE>
(1) Includes shares subject to warrants and options that are exercisable
within 60 days, as follows: Mr. Howard - 82,068 shares; Mr. Lichtenstein
- 192,420 shares; Mr. May - 31,507 shares; Mr. Mullen - 31,507 shares;
Mr. Rosenberg - 120,990 shares; Mr. Smith - 31,507 shares; Mr. Wyche -
31,507 shares; and all directors and executive officers as a group -
521,506 shares.
(2) Includes 1,918,190 shares of Common Stock and 43,369 shares subject to
warrants that are exercisable within 60 days that are owned by Steel
Partners II, L.P. Mr. Lichtenstein is chief executive officer of the
general partner of Steel Partners II, L.P. Mr. Lichtenstein disclaims
beneficial ownership of the shares of Common Stock owned by Steel
Partners II, L.P., except to the extent of his pecuniary interest in
such shares of Common Stock, which is less than the amount disclosed.
(3) Includes 100,595 shares of Common Stock owned by May Management, Inc.
and 1,330,375 shares of Common Stock held in customer accounts as to
which May Management, Inc. has shared dispositive power. Mr. May is the
chief executive officer and a principal stockholder of May Management,
Inc. and may be deemed to be the beneficial owner of shares owned by May
Management, Inc. or as to which May Management, Inc. has shared
dispositive power.
(4) Messrs. Anderson, Greenwald, and Sasser resigned as officers of the
Corporation on December 2, 1997 upon the sale by the Corporation of its
operating subsidiary. Accordingly, the shares owned by them are not
included in the aggregate number of shares of Common Stock owned by all
current directors and executive officers as a group.
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 31, 1998
("Fiscal 1997") were filed on a timely basis except that each of Messrs. Howard,
Lichtenstein, May, and Rosenberg inadvertently did not file a report on a timely
basis relating to stock options or stock granted in lieu of cash payment of
director fees. Upon discovery, the reports were filed. 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 1997 by persons
known to be subject to Section 16 of the Exchange Act.
Board Committees and Membership
The members of the Compensation Committee of the Board of
Directors are Messrs. Wyche (Chairman), Rosenberg, and Smith. The Compensation
Committee held three meetings during Fiscal 1997. 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 members of the Audit Committee of the Board of Directors are
Messrs. Rosenberg (Chairman), Mullen, and Smith. The Audit Committee held three
meetings during Fiscal 1997. Duties
4
<PAGE>
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 auditors and management's response; and reviewing the
internal audit and control functions.
The members of the Special Transactions Committee of the Board of
Directors are Messrs. Lichtenstein (Chairman) and Smith. The Special
Transactions Committee held two meetings during Fiscal 1997. Duties of the
Special Transactions Committee include: the exploration of alternatives for the
possible divestiture of the assets of the Corporation's operating subsidiary and
the exploration of potential acquisitions by the Corporation. The Special
Transactions Committee was disbanded at the end of Fiscal 1997, following the
sale of the Corporation's operating subsidiary to Variety Wholesalers Inc. on
December 2, 1997.
The members of the Transition Committee of the Board of Directors
are Messrs. Lichtenstein (Chairman) and Rosenberg. The Transition Committee held
one meeting during Fiscal 1997. Duties of the Transition Committee include:
determining, on a going-forward basis following the sale of the Corporation's
operating subsidiary, the responsibilities of the Corporation's management. The
Transition Committee was disbanded at the end of Fiscal 1997.
The Board does not have a nominating committee or an executive
committee. In Fiscal 1997, the Board of Directors held 16 meetings and
committees of the Board held a total of nine meetings. During Fiscal 1997, all
of the directors attended at least 75% of the aggregate of all meetings of the
Board of Directors and the committees of the Board of Directors on which such
director served, except Mr. May.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Cash and Other Compensation
The following table sets forth all the compensation earned for
services rendered in all capacities, during the fiscal years indicated, by the
two persons who served as chief executive officer of the Corporation during
Fiscal 1997 and the two other highest paid executive officers who were not with
the Corporation at the end of Fiscal 1997, but whose compensation would have
been included in the following table if they had been employed by the
Corporation at the end of Fiscal 1997 (collectively, the "Named Executives").
5
<PAGE>
<TABLE>
<CAPTION>
Long-Term Compensation
------------------------------
Annual Compensation Awards Payouts
--------------------------------- -------------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted
Annual Stock Options/ LTIP All Other
Name and Bonus Compen- Awards SARs Payouts Compen-
Principal Position Year Salary ($) ($)(1) sation (2) ($) (#) (3) ($) sation(4)
- ------------------ ---- ---------- ------ ---------- --- ---------- --- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Warren G. 1997 -- -- -- 32,629 -- --
Lichtenstein (5)
President and chief
executive officer
R. Edward 1997 375,962 88,600 8,956 -- -- -- 1,005,464
Anderson 1996 424,523 -- 5,094 -- -- -- 6,198
President and chief 1995 407,692 -- 4,518 -- 137,500 -- 6,198
executive officer
Bobby L. Sasser 1997 180,000 -- 13,342 -- -- -- 6,089
Senior Vice 1996 15,385(6) 20,000 -- -- -- -- --
President 1995 -- -- -- -- -- -- --
Merchandising
& Marketing
Robert Greenwald 1997 144,615 15,000 7,485 -- -- -- 5,345
Vice President 1996 -- -- 1,641 -- -- -- 5,528
GMM Softlines 1995 -- -- 2,097 -- 50,000 -- 5,528
</TABLE>
- ----------------------
(1) The 1997 bonus for Mr. Anderson represents the value of Common Stock
awarded upon the successful emergence of the Corporation from Chapter 11
reorganization in 1995. All restrictions on the use and enjoyment of
such Common Stock lapsed during 1997.
(2) "Other Annual Compensation" consists of tax gross-ups on medical and
moving expense reimbursements.
(3) Messrs. Anderson, Sasser, and Greenwald resigned as officers of the
Corporation on December 2, 1997 upon the sale of the Corporation's
operating subsidiary, and all Options/SARs listed in column (g), other
than those granted to Mr. Lichtenstein, expired on such date.
(4) "All Other Compensation" consists of automobile allowance and severance
payments ($1,000,100 in the case of Mr. Anderson, and $100 in the case
of each of the other officers) relating to their resignation of the
Corporation upon the sale by the Corporation of its operating subsidiary
on December 2, 1997.
(5) Mr. Lichtenstein was elected President and chief executive officer of
the Corporation on December 2, 1997. Mr. Lichtenstein received in Fiscal
1997 no compensation for acting as such,
6
<PAGE>
although, for his services as a director, Mr. Lichtenstein received the
same compensation as other directors until his election. See "Director
Compensation" below.
(6) Represents Mr. Sasser's compensation from December 16, 1996, the date of
commencement of his employment with the Corporation.
Stock Options
The following table sets forth information with respect to
options granted to the Named Executives during Fiscal 1997. No stock
appreciation rights were granted to the Named Executives during Fiscal 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term (2)
----------------- -------------------
Number of Percent of
Securities Total Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted(1) Fiscal Year ($/Sh) Date 5%($) 10%($)
- ---- ----------- ----------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Warren G. Lichtenstein 8,450 25.9% 1.875 1/26/02 4,337 9,673
8,219 25.2% 1.9375 4/27/02 4,399 9,722
8,333 25.5% 1.4375 7/27/02 3,310 7,313
7,627 23.3% 1.5625 10/26/02 3,292 7,275
</TABLE>
(1) All of the options were granted as a result of Mr. Lichtenstein's
service as a non-employee director of the Corporation in lieu of
director's fees otherwise payable in cash. See "Director Compensation"
below.
(2) In accordance with rules promulgated by the Securities and Exchange
Commission, the potential realizable value of these grants (on a pre-tax
basis) assumes that the Common Stock gains 5% or 10% in value per year,
compounded over the five-year life of the options. These are assumed
rates of appreciation and are not intended to forecast future
appreciation of the Common Stock.
The following table sets forth information with respect to
options held as of January 29, 1998 by the Named Executives. No options were
exercised by the Named Executives of the Company during Fiscal 1997.
7
<PAGE>
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Options Value of Unexercised In-the-Money
at Fiscal Year-End(#) Options at Fiscal Year-End($)(1)
--------------------- --------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Warren G. Lichtenstein 32,629 0 $781.22 0
</TABLE>
(1) The value of in-the-money options assumes the closing sales price of the
Common Stock underlying the options as of January 29, 1998 ($1.53125).
Employment Contracts, Termination of Employment and Change-In-Control
Arrangements
Effective May 29, 1995, the Board of Directors approved a new
employment agreement with R. Edward Anderson, then President and chief executive
officer of the Corporation, which provided for his employment for an initial
three-year term. In contemplation of the sale of Rose's Stores, Inc., the
Corporation's operating subsidiary ("Stores"), and in order to facilitate such
sale, Mr. Anderson agreed to amendments to the employment agreement at the
request of the Board of Directors. Under the terms of the employment agreement
as amended, Mr. Anderson received a base salary of $425,000 and was 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 as amended also included a change
of control allowance under which Mr. Anderson had the right to terminate the
employment agreement and to be paid a severance payment of $1.0 million. Upon
the consummation of the sale of Stores to Variety Wholesalers, Inc. on December
2, 1997, Mr. Anderson terminated the agreement and his employment with the
Corporation and resigned from the Board of Directors of the Corporation, and the
Corporation paid Mr. Anderson such $1.0 million severance payment.
Prior to consummation of the sale of Stores, the Corporation
maintained a severance program for employees of Stores 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. By reason of the sale of Stores, the Corporation's
obligations under the severance program were terminated. No benefits were paid
under the severance program prior to or incident to the sale of Stores.
Compensation Committee Interlocks and Insider Participation
During Fiscal 1997, the Compensation Committee consisted of
Messrs. Wyche (Chairman), Rosenberg and Smith and, until the meeting of the
Board of Directors on December 2, 1997, Mr. Howard. None of such members were
officers or employees of the Corporation during Fiscal 1997 or in prior fiscal
years, with the exception of Mr. Howard, who resigned from the committee upon
being appointed an officer of the Company at the December 2, 1997 meeting of the
Board. None of the members of the Compensation Committee served as a member of
the compensation committee of another entity during Fiscal 1997.
8
<PAGE>
Director Compensation
Effective July 22, 1997, the compensation of the non-employee
directors of the Corporation was reduced by the Board of Directors by 25% to
provide for an annual retainer fee (the "Retainer Fee") of $18,000 per year,
plus a meeting fee (a "Meeting Fee") for each meeting (i) of the Board of
Directors (in the amount of $1,125 per meeting for attendance in person or
$562.50 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 $1,125 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 $375 per meeting). Pursuant to the 1997 Long-Term Incentive Stock
Plan, approved by the stockholders at the 1997 annual meeting of stockholders,
beginning with Fiscal 1997 the Retainer Fee and Meeting Fees were payable, at
the election of each director, in the form of cash, grants ("Stock Awards") of
Common Stock, and options to purchase Common Stock ("Options"), provided that a
director electing to receive Stock Awards or Options had to elect to receive his
Retainer Fee in such forms and could elect to receive his Meeting Fees in such
forms.
On January 15, 1998, the compensation of the non-employee
directors of the Corporation for the fiscal year ending January 30, 1999 was set
as follows: a Retainer Fee of $24,000 per year which is paid in the form of
Options pursuant to the 1997 Long-Term Incentive Stock Plan; plus Meeting Fees,
in the form of cash, for each meeting (i) of the Board of Directors (in the
amount of $1,125 per meeting, regardless of attendance in person or 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 $1,125 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 $375 per meeting).
Directors are reimbursed for their actual travel and other expenses.
Pursuant to the 1997 Long-Term Incentive Stock Plan: (i) Options
are valued using the Black-Scholes option pricing model and such assumptions as
the Corporation, in its sole discretion, deems reasonable; (ii) 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; (iii) a director's entitlement to receive Options will vest,
and will be granted or issued, or deemed to be granted or issued, on the first
day of the quarter as to which the Retainer Fee is payable; and (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.
Certain Relationships and Related Transactions
As of March 31, 1998, the Corporation sub-sub-leased from Gateway
Industries, Inc. office space on a non-exclusive basis for use as corporate
headquarters or for other corporate uses. Under terms of this sub-sub-lease, the
Corporation is obligated to pay one-third of all amounts payable, as billed to
Gateway under the master sub-lease. Gateway Industries, Inc.'s sub-lease for the
space is with Steel Partners II, L.P. ("Steel"), as sub-landlord. Warren
Lichtenstein, a director and the President and chief executive officer of the
Corporation, beneficially owns more than 10% of the outstanding voting stock of
Gateway Industries, Inc. and is the chief executive officer of the general
partner of Steel. The rent payable by the Corporation is approximately $2,700
per month. The sub-sub-lease runs through March 30, 2001, but may be terminated
by either party on 30 days' notice.
9
<PAGE>
In July 1997, in connection with the proposed acquisition by
Steel of more than 15% of the outstanding Common Stock, the Corporation agreed
to waive the provisions of Section 203 of the Delaware General Corporation Law,
which restricts the ability of an "interested stockholder" from engaging in a
"business combination" (as defined in Section 203) with a publicly-held Delaware
corporation for three years following the date such person became an interested
stockholder. In consideration for such waiver, Steel agreed to the imposition of
certain restrictions on its ability to enter into certain business combination
transactions with the Corporation.
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 three
times during Fiscal 1997, and at all such meetings the Compensation Committee
was comprised solely of outside directors.
Compensation Policies
Set forth below is a description of the executive compensation
policies of the Compensation Committee prior to the sale by the Corporation in
December 1997 of its operating subsidiary, Stores. It is expected that the
Compensation Committee will continue these policies as the Corporation continues
to attempt to locate, purchase, and operate other businesses.
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 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.
Fiscal 1997 Executive Compensation
Subject to the terms of an existing employment agreement, the
base salaries of the Named Executives were approved by the Compensation
Committee. No stock options were granted to any of the Named Executives, other
than to Mr. Lichtenstein in lieu of director's fees. Although a bonus program
providing for an annual bonus award based on the achievement of certain
financial objectives or as approved by the Compensation Committee in 1996, no
awards were made with respect to Fiscal 1997. The Corporation maintained a
severance program for employees of Stores, the Corporation's former operating
subsidiary. See "Employment Agreements, Termination of Employment and Change-In-
Control Agreements."
10
<PAGE>
Chief Executive Officer Compensation
In 1997, in order to facilitate the sale of the Corporation's
subsidiary, at the request of the Board of Directors, R. Edward Anderson, then
President and chief executive officer of the Corporation, agreed to certain
amendments to his employment agreement, including a severance payment in the
amount of $1.0 million in the event of a change of control. See "Employment
Agreements, Termination of Employment and Change-in-Control Agreement." Upon the
consummation of the sale of Stores on December 2, 1997, Mr. Anderson terminated
the agreement and his employment with the Corporation, and resigned from the
Board of Directors. Mr. Anderson received only the amounts provided for under
the amended employment agreement, including such $1.0 million severance payment,
and was not granted a bonus or other additional perquisites.
Upon the resignation of Mr. Anderson on December 2, 1997, Warren
G. Lichtenstein was elected President and chief executive officer of the
Corporation. Although Mr. Lichtenstein received no compensation in Fiscal 1997
for acting as such, on February 2, 1998 he was granted non-qualified stock
options for 11,765 shares at an exercise price of $1.56 per share and on May 1,
1998 he was granted non-qualified stock options for 10,526 shares at an exercise
price of $1.75 per share. Then, at the meeting of the Compensation Committee on
June 25, 1998, options for a total of 300,000 shares were granted to Mr.
Lichtenstein in respect of his service as chief executive officer for the
two-year period beginning August 1, 1998. The options vest evenly over the
two-year period, with 37,500 shares vesting upon the first business day of each
quarter commencing August 1, 1998, and terminate on June 25, 2003. Of the total,
100,000 options were granted as incentive stock options under the Corporation's
Long Term Stock Incentive Plan, with an exercise price of $1.97 per share, and
the remaining 200,000 options were granted as non-qualified stock options under
the Corporation's New Equity Compensation Plan (actually an older plan) with an
exercise price of $1.79 per share. At the meeting of the Compensation Committee
on August 25, 1998, non-qualified stock options for an additional 100,000 shares
at an exercise price of $2.30 per share were granted to Mr. Lichtenstein under
the Corporation's New Equity Compensation Plan. The Board of Directors, upon the
recommendation of the Compensation Committee, has approved the merger of the
Corporation's two compensation plans. See Proposal 6, below.
Compensation Committee Members
N. Hunter Wyche (Chairman)
J. David Rosenberg
Harold Smith
Performance Graph
The following graph shows a comparison of the cumulative total
returns for the Corporation, the NASDAQ Composite index, and an index of peer
companies (prior to the disposition of Stores in December 1997) selected by the
Corporation for the period commencing on May 3, 1995 (the initial listing date
of Rose's Stores, Inc., the Corporation's predecessor, after its reorganization
under Chapter 11 of the Bankruptcy Code), and ending on January 31, 1998. The
graph assumes that the value of the investment in the Corporation (or its
predecessor) and each index was $100 on May 3, 1995 and that all dividends were
reinvested.
11
<PAGE>
GRAPH
DESCRIPTION: COMPARATIVE TOTAL
- ------------ RETURN GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
COMPANY/INDEX/MARKET 1995 1996 1997 1998
<S> <C> <C> <C> <C>
Roses Holdings Inc. 100 50.89 58.28 58.28
SIC Code Index 100 87.77 117.49 192.33
NASDAQ Market Index 100 118.12 152.3 178.73
</TABLE>
The above graph compares the performance of the Corporation with
the NASDAQ Composite, 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.,
Coles Myer Ltd., Consolidated Stores Corp., Cost Plus Inc., Costco Companies
Inc., Dayton Hudson Corp., Dollar General Corp., Dollar Tree Stores Inc., Family
Dollar Stores Inc., Fred's Inc., Garden Ridge Corp., Hills Stores Co., K-Mart
Corp., Pamida Holdings Corp., Shopko Stores Inc., TJX Companies Inc., Venator
Group Inc., Venture Stores Inc., and Wal-Mart Stores Inc.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board of Directors of the Corporation is currently comprised
of seven members. Pursuant to the Certificate of Incorporation and the By-laws
of the Corporation, the Board of Directors shall consist of from seven to 13
members and shall be 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, the terms of Messrs. Lichtenstein, May, and Mullen expire in 2001. The
terms of Messrs. Howard, Smith, and Wyche expire in 1999. The term of Mr.
Rosenberg expires in 2000. The Corporation is also proposing at the Annual
Meeting an amendment to the Corporation's Restated Certificate of Incorporation
(the "Charter") and By-laws, which would (i) eliminate the staggered terms of
members of the Board of Directors and (ii) provide that the Board of Directors
shall consist of from five to nine members. See "PROPOSAL FOUR." However, the
approval of such proposal will not affect the terms of any of the current
directors, including the nominees.
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<PAGE>
Subject to the foregoing, at each annual meeting of stockholders,
the successors to the class of directors whose term is then expiring will 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 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 1999 and 2000, 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>
Warren G. Lichtenstein (33) Mr. Lichtenstein has served as a director of the
Corporation since 1996 and President and chief
executive officer of the Corporation since December
1997. Mr. Lichtenstein has been chief executive officer
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 1994 through
September 1995. Mr. Lichtenstein is a director of
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
United States Bankruptcy Code shortly following
Gateway's disposition of Marsel.
Earle C. May (80) Mr. May was elected a director of the Corporation
by the Board of Directors on July 22, 1997. Mr. May
has been Chairman and an executive officer of May
Management, Inc., an investment management firm,
since prior to 1993.
13
<PAGE>
NAME AND AGE OCCUPATION AND OTHER DIRECTORSHIPS
------------ ----------------------------------
Joseph L. Mullen (52) Mr. Mullen has served as a director of the
Corporation since 1995. Since January 1994,
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 of the United States Bankruptcy Code on
February 4, 1991, while Mr. Mullen was employed by
Hills.
CONTINUING DIRECTORS
Jack L. Howard (36) Mr. Howard has served as a director of the
(term expires 1999) Corporation since 1996 and Vice President, Secretary,
and Treasurer of the Corporation since December 1997.
Mr. Howard has been a registered principal of Mutual
Securities, Inc., a stock brokerage firm, since prior to
1993. He is a director of Gateway Industries, Inc.
Harold Smith (74) Mr. Smith has served as a director of the
(term expires 1999) Corporation since 1995. Since 1990, Mr. Smith 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. (46) Mr. Wyche has served as a director of the Corporation
(term expires 1999) since 1995. Mr. Wyche is a founding partner of Wyche
& Story, a law firm.
J. David Rosenberg (49) Mr. Rosenberg has served as a director of the
(term expires 2000) Corporation since 1995. Mr. Rosenberg has been a
partner of Keating, Muething & Klekamp, a law firm,
since prior to 1993. Mr. Rosenberg is a director of
Local Financial Corporation.
</TABLE>
14
<PAGE>
PROPOSAL TWO
PROPOSAL TO AMEND THE CORPORATION'S
CHARTER TO (I) CHANGE THE PAR VALUE OF THE
CORPORATION'S CAPITAL STOCK FROM NO PAR VALUE
TO $.001 PAR VALUE PER SHARE AND (II) DELETE PROVISIONS
RELATING TO THE BANKRUPTCY OF THE CORPORATION'S
FORMER OPERATING SUBSIDIARY
The Board of Directors of the Corporation has unanimously adopted
resolutions declaring the advisability of, and submits to the stockholders for
approval, an amendment to amend the Charter to (i) change the par value of the
Corporation's capital stock from no par value to $.001 par value per share and
(ii) delete provisions relating to the bankruptcy of the Corporation's former
subsidiary, as described below.
The Board of Directors has determined that it is advisable to
amend Article FOURTH of the Charter to provide that all shares of the capital
stock of the Corporation have a par value of $.001 per share (the "Par
Amendment"). At present, the capital stock has no par value per share. The
change from "no par value" to "$.001 par value" capital stock will have no
impact on the value of the Corporation's stock or the rights of its
stockholders. If the proposed amendment is approved by the stockholders, the
change in par value will, however, enable the Corporation to realize significant
reductions in the amount of the franchise taxes payable annually to the State of
Delaware and filing fees charged by the State of Delaware in connection with any
future increase in the number of authorized shares of capital stock. The text of
the Par Amendment is attached as Appendix A-1 hereto.
In addition, the Board of Directors has determined that the
Charter contains a number of unnecessary provisions relating to the emergence of
Stores, the Company's predecessor, from bankruptcy in 1995 and that it should
therefore be amended to delete such provisions (the "Bankruptcy Amendment").
Pursuant to orders of the United States Bankruptcy Court for the Eastern
District of North Carolina, in connection with the Modified and Restated Joint
Plan of Reorganization of Stores (the "Plan of Reorganization"), certain
provisions (the "Bankruptcy Provisions") were added to the Charter. The first
such provision is Article FIFTH, which sets forth the definition of the Plan of
Reorganization. The second is subsection (c) of Article SIXTH, which, for a
certain period mandated by the bankruptcy laws, placed certain restrictions upon
the ability of the Board of Directions to allocate powers, preferences and
rights with respect to the Corporation's capital stock. On August 7, 1997,
Stores underwent a reorganization in which it became a wholly owned subsidiary
of the Corporation. Pursuant to the provisions of the Delaware General
Corporation Law ("DGCL"), the Charter and By-laws of the Corporation are
substantially identical to the Certificate of Incorporation and By-laws of
Stores immediately prior to the reorganization. Stores was subsequently sold to
Variety Wholesalers, Inc. on December 2, 1997. As a result, the Bankruptcy
Provisions contained in the Charter are unnecessary. The text of the Bankruptcy
Amendment is attached as Appendix A-2 hereto.
Accordingly, at its meeting held on June 25, 1998, the Board of
Directors adopted resolutions proposing that the Par Amendment and the
Bankruptcy Amendment be presented to the stockholders at the Annual Meeting for
their approval.
15
<PAGE>
The affirmative vote of the holders of a majority of the Common
Stock present, or represented, and entitled to vote at the Annual Meeting, at
which a quorum is present, is required to approve these amendments to the
Charter.
If the amendments is approved by the stockholders at the Annual
Meeting, they will become effective upon the filing of a Certificate of
Amendment in accordance with the DGCL.
THE BOARD OF DIRECTORS RECOMMENDS THE STOCKHOLDERS VOTE IN FAVOR OF THE PROPOSAL
APPROVING THE PAR AMENDMENT AND THE BANKRUPTCY AMENDMENT.
PROPOSAL THREE
PROPOSAL TO AMEND THE CORPORATION'S CERTIFICATE
OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT
FOLLOWED BY A FORWARD STOCK SPLIT OF THE COMMON STOCK
General
The Board of Directors has unanimously adopted resolutions
declaring the advisability of, and submits to the stockholders for approval, an
amendment (the "Split Amendment") to the Charter effecting (a) a reverse stock
split of the outstanding Common Stock as of 6:00 p.m. (Eastern Time) on the date
the Split Amendment is filed with the Secretary of State of the State of
Delaware (the "Effective Date") pursuant to which each 500 shares of Common
Stock then outstanding will be converted into one share of Common Stock (the
"Reverse Split") and (b) a forward split of the Common Stock as of 7:00 p.m.
(Eastern Time) on the Effective Date pursuant to which each share (or fraction
thereof, excluding holdings of less than one share resulting from the Reverse
Split) of Common Stock then outstanding will be converted into a number of
shares of Common Stock at a rate of 250-for-1 (the "Forward Split"). In lieu of
issuing the fractional shares that will result from (i) the Reverse Split to
stockholders of record of less than 500 shares immediately prior to the Reverse
Split or (ii) the Reverse Split and the Forward Split to stockholders of record
of an odd number of shares greater than 500 shares immediately prior to the
Reverse Split, the Corporation will make a cash payment based on the average
daily closing price per share of the Common Stock on the NASD OTC Bulletin Board
(the "Bulletin Board") for the 10 trading days immediately preceding the
Effective Date, as discussed below. The Reverse Split and the Forward Split,
however, will take effect only in the event that the Purchase Price (as defined
below) is $2.25 or less. The Effective Date, which determines the amount of the
Purchase Price, shall in no event occur later than 30 days following the date of
the Annual Meeting. The text of the Split Amendment is attached as Appendix A
hereto. The filing of the Split Amendment and the consummation of the Reverse
Split and the Forward Split, including the making of cash payments to
stockholders whose shares of Common Stock are converted into less than a whole
share of Common Stock in the Reverse Split, are collectively referred to herein
as the "Transaction."
The effect of the Transaction on the holders of Common Stock will
be as follows:
(a) The shares of Common Stock of each holder of record of less
than 500 shares of Common Stock immediately prior to the Reverse Split will be
converted in the Reverse Split into the
16
<PAGE>
right to receive cash according to the formula set forth below. See "Cash
Payment in Lieu of Shares" below.
(b) The shares of Common Stock of each holder of record of 500 or
more shares of Common Stock immediately prior to the Reverse Split will first be
converted in the Reverse Split into a number of shares of Common Stock equal to
the number of shares held immediately prior to the Reverse Split divided by 500.
One hour after the Reverse Split, the number of shares of Common Stock of each
holder (other than the fractional shares held of record by persons who held less
than 500 shares immediately prior to the Reverse Split) will be converted in the
Forward Split into multiple shares of Common Stock on the basis of 250 shares of
Common Stock for each share or fraction thereof then held. As a result, the
number of shares held by each holder of record of 500 or more shares immediately
prior to the Reverse Split will be reduced by half upon completion of the
Transaction. With respect to stockholders of record of an odd number of shares
greater than 500 shares immediately prior to the Reverse Split, the Corporation
will make a cash payment in lieu of issuing any fractional shares. See "Cash
Payment in Lieu of Shares" below.
The effect of the Transaction on the holders of the Company's
outstanding warrants will be that the number of shares purchasable upon the
exercise of each outstanding warrant and the exercise price thereof will be
adjusted in accordance with the provisions of the Warrant Agreement, dated as of
April 28, 1995, between Rose's Stores, Inc. and First Union National Bank of
North Carolina, as Warrant Agent (the "Warrant Agreement").
The effect of the Transaction on the holders of the Company's
outstanding stock options will be that the number of shares issuable upon the
exercise of outstanding stock options awarded under the Corporation's New Equity
Compensation Plan (the "Old Plan") and the Corporation's Long Term Stock
Incentive Plan (the "New Plan"; together with the Old Plan, the "Plans") and the
purchase price thereof will be adjusted in accordance with the provisions of the
respective Plans. In addition, the aggregate number of shares that may be
awarded under the Plans shall be subject to adjustment pursuant to the
provisions of the respective Plans.
ANY HOLDER OF RECORD OF LESS THAN 500 SHARES OF COMMON STOCK WHO
DESIRES TO RETAIN AN EQUITY INTEREST IN THE CORPORATION AFTER THE EFFECTIVE DATE
MAY DO SO BY PURCHASING, PRIOR TO THE EFFECTIVE DATE, A SUFFICIENT NUMBER OF
SHARES OF COMMON STOCK IN THE OPEN MARKET SUCH THAT THE TOTAL NUMBER OF SHARES
HELD OF RECORD IN HIS NAME IMMEDIATELY PRIOR TO THE REVERSE SPLIT IS EQUAL TO OR
GREATER THAN 500. ANY BENEFICIAL OWNER OF LESS THAN 500 SHARES WHO IS NOT A
HOLDER OF RECORD AND WHO DESIRES TO HAVE HIS SHARES EXCHANGED FOR CASH PURSUANT
TO THE TRANSACTION SHOULD INSTRUCT HIS BROKER TO TRANSFER HIS SHARES INTO HIS
NAME IN A TIMELY MANNER SUCH THAT SUCH BENEFICIAL OWNER WILL BE DEEMED A HOLDER
OF RECORD IMMEDIATELY PRIOR TO THE REVERSE SPLIT.
Cash Payment in Lieu of Shares
In lieu of issuing the fraction of a share of Common Stock that
will result from (i) the Reverse Split to each holder of record of less than 500
shares or (ii) the Reverse Split and the Forward Split to each holder of record
of an odd number of shares greater than 500 shares, the Corporation will
17
<PAGE>
value each outstanding share of Common Stock held at the close of business on
the Effective Date at the average daily closing price per share of the Common
Stock on the Bulletin Board for the 10 trading days immediately preceding the
Effective Date. Such per share price is hereinafter referred to as the "Purchase
Price." In no event shall the Effective Date be later than 30 days following the
date of the Annual Meeting, although the Effective Date may be less than 30 days
following the date of the Annual Meeting, provided that appropriate notice of
the Transaction is sent to the Corporation's warrant holders and option holders
pursuant to the Warrant Agreement and the Plans, respectively. The Transaction
shall be effected only if the Purchase Price is $2.25 or less. If the Purchase
Price is more than $2.25, even if the stockholders have approved the Split
Amendment at the Annual Meeting, the Split Amendment will not be filed with the
Secretary of State of the State of Delaware and the Transaction will not occur.
If the Transaction does take place, each stockholder who holds of
record less than 500 shares immediately prior to the Reverse Split will be
entitled to receive, in lieu of the fraction of a share resulting from the
Reverse Split, cash in the amount of the Purchase Price multiplied by the number
of shares of Common Stock held by such stockholder immediately prior to the
Reverse Split. Each stockholder who holds of record an odd number of shares
greater than 500 shares immediately prior to the Reverse Split will be entitled
to receive, in lieu of the fraction of a share resulting from the Reverse Split
and the Forward Split, cash in the amount of the Purchase Price multiplied by
the fraction of a share of Common Stock that would otherwise be issuable to such
stockholder after giving effect to the Reverse Split and the Forward Split. All
amounts payable to stockholders will be subject to applicable state laws
relating to abandoned property. No service charges or brokerage commissions will
be payable by stockholders in connection with the Transaction. The Corporation
will pay no interest on cash sums due any such stockholder pursuant to the
Transaction.
Assuming the consummation of the Transaction, as soon as
practical after the Effective Date, the Corporation will mail a letter of
transmittal to each holder of record of less than 500 shares of Common Stock
immediately prior to the Reverse Split. The letter of transmittal will contain
instructions for the surrender of such certificate or certificates to the
Corporation's exchange agent in exchange for a cash payment in lieu of the
fractional share into which each such holder's shares of Common Stock were
converted in the Reverse Split. No cash payment will be made to any such
stockholder until he has surrendered his outstanding certificate(s), together
with the letter of transmittal, to the Corporation's exchange agent. See
"Exchange of Stock Certificates" below. The Corporation's exchange agent is
First Union National Bank.
Effect of the Proposed Reverse Split and Forward Split
Upon consummation of the Reverse Split at 6:00 p.m. (Eastern
Time) on the Effective Date, each stockholder who owned of record less than 500
shares of Common Stock immediately prior to the Reverse Split will have only the
right to receive cash based upon the Purchase Price in lieu of receiving a
fractional share resulting from the Reverse Split. The interest of each such
stockholder in the Corporation will be terminated thereby, and each such
stockholder will have no right to vote as a stockholder or share in the
Corporation's assets, earnings, or profits following the Reverse Split.
Upon consummation of the Reverse Split at 6:00 p.m. (Eastern
Time) on the Effective Date, each stockholder who owned of record 500 or more
shares of Common Stock immediately prior to the Reverse Split will continue as a
stockholder with respect to the share or shares of Common Stock resulting from
the Reverse Split. As of 7:00 p.m. (Eastern Time) on the Effective Date, each
such share,
18
<PAGE>
including any fraction thereof held by such record holder immediately after the
Reverse Split, will be converted into multiple shares of Common Stock on the
basis of 250 shares of Common Stock for each share or fraction thereof then
held. Each such stockholder will continue to share in the Corporation's assets,
earnings or profits, if any, to the extent of each such stockholder's ownership
of Common Stock following the Transaction.
For stockholders of record who hold 500 or more shares of Common
Stock immediately prior to the Reverse Split, the net effect of the Transaction
will be a one-for-two reverse split of the Common Stock. Except for the payment
of cash in lieu of fractional shares to holders of an odd number of shares
greater than 500 shares, after the Transaction such stockholders will hold half
as many shares of Common Stock as such stockholders held immediately prior to
the Reverse Split. In addition, excluding the reduction in outstanding shares of
Common Stock due to the payment of cash for fractional shares (as described in
the preceding sentence) and due to the payment of cash to record holders of less
than 500 shares in lieu of fractional shares resulting from the Reverse Split,
the total number of outstanding shares of Common Stock will decrease by half.
The Charter currently authorizes the issuance of 50,000,000
shares of Common Stock and 10,000,000 shares of Preferred Stock, for an
aggregate of 60,000,000 shares. As of September 11, 1998, the number of
outstanding shares of Common Stock was 8,655,383 and no shares of Preferred
Stock were issued or outstanding. Based upon the Corporation's best estimates
(without giving effect to the halving of the number of shares resulting from the
net one-for-two reverse stock split), if the Transaction had been consummated as
of such date, the number of outstanding shares of Common Stock would have been
reduced by the Transaction from 8,655,383 to approximately 8,488,312 or by
approximately 167,071 shares, and the number of holders of record of Common
stock would have been reduced from approximately 3,145 to approximately 986 or
by approximately 2,159 stockholders.
The Common Stock is currently registered under Section 12(g) of
the Exchange Act and, as a result, the Corporation is subject to the periodic
reporting and other requirements of the Exchange Act. The Transaction will not
affect the registration of the Common Stock under the Exchange Act, and the
Corporation has no current intention of terminating its registration under the
Exchange Act to become a "private" corporation. In addition, consummation of the
Transaction is not expected to affect adversely the eligibility of the Common
Stock to be traded on the Bulletin Board.
Based on the aggregate number of shares owned by holders of
record of less than 500 shares as of September 11, 1998 and the average daily
closing price per share of the Common Stock on the Bulletin Board for the 10
trading days immediately preceding such date, the Corporation estimates that
payments of cash in lieu of the issuance of fractional shares to persons who
held less than 500 shares of Common Stock immediately prior to the Reverse Split
will total approximately $326,055.76 in the aggregate (167,071 shares multiplied
by an assumed Purchase Price of $1.9516 per share).
The par value of the Common Stock (assuming the passage of the
proposal to change the par value of the Corporation's capital stock from no par
value to $.001 par value per share) will remain at $.001 per share following
consummation of the Transaction, and although the total number of shares of
Common Stock will be reduced by half following the consummation of the
Transaction, the ratio of the number of shares authorized but unissued to the
total number of shares authorized will be increased. This increase in the
relative number of authorized but unissued shares of Common Stock resulting from
the Transaction could have an anti-takeover effect. Shares of Common Stock
could, within the limits imposed by applicable law, be issued by the Corporation
in one or more transactions that would make
19
<PAGE>
more difficult, and therefore less likely, a takeover of the Corporation. Any
such issuance of additional shares of Common Stock could have the effect of
diluting the earnings per share and book value per share of outstanding shares
of Common Stock, and such additional shares could be used to dilute the stock
ownership or voting rights of persons seeking to obtain control of the
Corporation. Because the number of shares subject to redemption pursuant to the
Transaction represents only approximately 1.93% of the total number of shares
outstanding as of the record date, the dilutive effect of re-issuing any of such
redeemed shares could be expected to be correspondingly small.
Purpose of the Reverse Split and Forward Split
As of September 11, 1998, each of approximately 2,159 record
holders of Common Stock, or approximately 68.65% of the total number of record
holders, owned less than 500 shares of Common Stock. In addition, such
stockholders owning less than 500 shares own in the aggregate approximately
1.93% of the outstanding shares of Common Stock. Based on the average daily
closing price per share of the Common Stock on the Bulletin Board for the 10
trading days immediately preceding September 11, 1998 of $1.9516, ownership of
499 shares of Common Stock has a market value of approximately $973.85.
The cost of administering each stockholder's account and the
amount of time spent by management of the Corporation in responding to
stockholder requests is the same regardless of the number of shares held in the
account. Accordingly, the cost to the Corporation of maintaining many small
accounts is disproportionately high when compared with the total number of
shares involved. In view of the disproportionate cost to the Corporation of
maintaining small stockholder accounts, management of the Corporation believes
that it would be beneficial to the Corporation and its stockholders as a whole
to eliminate the administrative burden and cost associated with the
approximately 2,159 accounts containing less than 500 shares of Common Stock. It
is expected that the direct cost of administering stockholder accounts will be
reduced by up to approximately $12,198 per year if the Transaction is
consummated.
In addition, since the Corporation is unable to locate certain of
its stockholders with small holdings, the Corporation believes it would be
unable to acquire the shares of Common Stock of such stockholders, and realize
the savings described above, by making a tender offer to acquire such shares.
Accordingly, if the Corporation is to acquire these shares, the Corporation
believes it must do so by means of the Reverse Split. Funds otherwise payable
pursuant to the Transaction to a stockholder who cannot be located will be held
until proper claim therefor is made, subject to applicable escheat laws.
Further, the Reverse Split will enable holders of record of less
than 500 shares to dispose of their investment at market value and, in effect,
avoid brokerage fees on the transaction. Stockholders owning a small number of
shares would, if they chose to sell their shares otherwise, likely incur
brokerage fees disproportionately high relative to the market value of their
shares. In some cases, stockholders might encounter difficulty in finding a
broker willing to handle such small transactions.
The number of shares of Common Stock held by the Corporation as
treasury shares and available for subsequent issuance would, due solely to the
redemption of fractional shares in the Transaction, increase by approximately
83,535 shares (on a post-split basis), based on record ownership of Common Stock
as of September 11, 1998. While the Corporation has no current specific plans to
20
<PAGE>
issue Common Stock other than pursuant to the Corporation's existing stock
option plans, the additional treasury shares would provide the Board with
flexibility in the management of the Corporation's capitalization and the
provision of incentives to the Corporation's officers and other employees. The
additional Common Stock could be used by the Corporation in connection with (i)
the establishment of director or employee stock compensation plans, (ii) future
acquisitions by the Corporation, (iii) future capital raising by the
Corporation, and (iv) other corporate purposes. Unless required by law or
regulatory authorities, no further authorization by vote of stockholders will be
sought for any future Common Stock issuances. No stockholder will have any
preemptive or other preferential right to purchase any Common Stock that may be
issued and sold by the Corporation in the future.
The Board of Directors believes that the decrease in outstanding
shares as a result of the Transaction is in the best interests of the
Corporation, and that the high number of outstanding shares of Common Stock and
the low trading price thereof impairs the acceptability of the stock by the
financial community and the investing public. The Corporation believes that the
Split Amendment, by reducing the number of outstanding shares, should increase
the per share market price accordingly. It is possible, however, that any
increase in per share market price may be proportionately less than the decrease
in the number of outstanding shares.
Exchange of Stock Certificates
As soon as practicable after the Effective Date, assuming the
consummation of the Transaction, the Corporation will send letters of
transmittal, for use in transmitting stock certificates to the Corporation's
designated exchange agent, to all stockholders of record who held less than 500
shares of Common Stock immediately prior to the Reverse Split. Upon proper
completion and execution of a letter of transmittal and return thereof to the
exchange agent, together with certificates, each such stockholder will receive
cash in the amount to which the holder is entitled, as described above, in lieu
of the fractional share into which such stockholder's shares were converted in
the Reverse Split. After the Reverse Split and until surrendered, each
outstanding certificate held by a stockholder of record who held less than 500
shares immediately prior to the Reverse Split will be deemed for all purposes to
represent only the right to receive the amount of cash to which the holder is
entitled pursuant to the Transaction.
In connection with the Transaction, the Common Stock will be
identified by a new CUSIP number, which will appear on all certificates
representing shares of Common Stock issued after the Effective Date. After the
Effective Date, each certificate representing shares of Common Stock that was
outstanding prior to the Effective Date and that was held by a stockholder of
record of 500 or more shares immediately prior to the Reverse Split, until
surrendered and exchanged for a new certificate, will be deemed for all
corporate purposes to evidence ownership of one-half the number of shares as is
set forth on the face of the certificate, rounded down to the next whole number,
with a stockholder entitled to receive cash in lieu of any fractional share
resulting from the Transaction. Any stockholder desiring to receive a new
certificate bearing the new CUSIP number can do so at any time by contacting the
exchange agent at the address set forth above for instructions for surrendering
his old certificates. After the Effective Date, an old certificate presented to
the exchange agent in settlement of a trade will be exchanged for a new
certificate bearing the new CUSIP number.
All amounts payable to stockholders will be subject to applicable
state laws relating to abandoned property. No service charges or brokerage
commissions will be payable by stockholders in
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connection with the Transaction. The Corporation will pay no interest on cash
sums due any stockholder pursuant to the Transaction. See "Cash Payment in Lieu
of Shares" above.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain Federal income tax
consequences to stockholders who receive cash pursuant to the Transaction and/or
continue to hold Common Stock immediately after the consummation of the
Transaction. This summary is based on existing Federal income tax law, which is
subject to change, possibly retroactively. This summary does not discuss all
aspects of Federal income taxation which may be important to a particular
stockholder in light of his individual investment circumstances, such as a
stockholder who is subject to special tax rules (e.g., financial institutions,
insurance companies, broker-dealers, tax-exempt organizations, and foreign
persons), a stockholder who received his Common Stock as compensation for
services rendered or pursuant to the exercise of an employee stock option, or a
stockholder who has held, or will hold, his Common Stock as part of a straddle,
hedging, or conversion transaction for Federal income tax purposes, all of whom
may be subject to tax rules that differ significantly from those discussed
below. In addition, this summary does not discuss any state, local, foreign, or
other tax considerations. This summary assumes that stockholders have held, and
will hold, their shares of Common Stock as "capital assets" (generally, property
held for investment) under the Internal Revenue Code of 1986, as amended. Each
stockholder is urged to consult his tax advisor as to the particular Federal,
state, local, foreign, and other tax consequences, in light of his specific tax
circumstances, of receiving cash pursuant to the Transaction and/or continuing
to hold Common Stock immediately after the consummation of the Transaction.
Consequences to Stockholders Who Exchange All of Their Common Stock for Cash
Pursuant to the Transaction
A stockholder who receives cash in exchange for a fractional
share pursuant to the Reverse Split, and who does not continue to hold any
Common Stock immediately thereafter, will recognize capital gain or loss in an
amount equal to the difference between the cash received in the Transaction and
his aggregate adjusted tax basis in shares of Common Stock disposed of, provided
that the receipt of cash by the stockholder (i) results in a "complete
termination" of such stockholder's equity interest in the Corporation, (ii) is
"not essentially equivalent to a dividend" with respect to such stockholder, or
(iii) is "substantially disproportionate" with respect to such stockholder, each
as discussed below. If such gain is not treated as capital gain under any of
these three tests, such gain will be treated as ordinary dividend income to the
extent of the stockholder's ratable share of the Corporation's undistributed
earnings and profits, then as a tax-free return of capital to the extent of such
stockholder's aggregate adjusted tax basis in his shares, and thereafter as
capital gain. See "-- Maximum Tax Rates Applicable to Capital Gain" below.
In applying these tests, a stockholder will be treated as owning
shares actually or constructively owned by certain individuals and entities
related to such stockholder.
A stockholder who disposes of all of his Common Stock in the
Transaction and who is not a party related to any other person who continues to
hold Common Stock immediately after the consummation of the Transaction, will
generally be treated as having completely terminated his equity interest in the
Corporation.
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A stockholder will satisfy the "not essentially equivalent to a
dividend" test if the reduction in such stockholder's proportionate interest in
the Corporation resulting from the Transaction constitutes a "meaningful
reduction" given such stockholder's particular facts and circumstances.
The receipt of cash in the Transaction will be "substantially
disproportionate" for a stockholder if the percentage of the then outstanding
shares of Common Stock actually and constructively owned by such stockholder
immediately after the consummation of the Transaction is less than 80% of the
percentage of the shares of Common Stock actually and constructively owned by
such stockholder immediately before the consummation of the Transaction.
Consequences to Stockholders Who Continue to Hold Common Stock Immediately After
the Consummation of the Transaction
The Corporation believes that the Transaction will be treated,
for Federal income tax purposes, as a "tax-free recapitalization." Accordingly,
a stockholder who continues to hold Common Stock immediately after the
consummation of the Transaction and who receives no cash pursuant to the
Transaction will, for Federal income tax purposes, (i) not recognize any gain or
loss in the Transaction and (ii) have the same adjusted tax basis and holding
period in the Common Stock as he had in such Common Stock immediately prior to
consummating the Transaction.
A stockholder who is the holder of record of less than 500 shares
of Common Stock in at least one account and is the beneficial owner (but not a
record holder) of shares of Common Stock in at least one other account, and thus
will both hold Common Stock immediately after the consummation of the
Transaction and be entitled to receive cash pursuant to the Transaction, will
generally recognize gain, but not loss, in the Transaction in an amount equal to
the lesser of (A) the excess of the aggregate fair market value of such shares
of Common Stock over the holder's adjusted tax basis in such shares or (B) the
amount of cash received in the Transaction. A stockholder's aggregate adjusted
tax basis in his shares of Common Stock held immediately after the consummation
of the Transaction will be equal to the aggregate adjusted tax basis in his
shares of Common Stock held immediately prior to the consummation of the
Transaction, increased by any gain recognized in the Transaction, and decreased
by the amount of cash received in the Transaction.
Any gain recognized in the Transaction will be treated, for
Federal income tax purposes, as capital gain, provided that the receipt of cash
by the stockholder (i) results in a "complete termination" of such stockholder's
equity interest in the Corporation, (ii) is "not essentially equivalent to a
dividend" with respect to such stockholder, or (iii) is "substantially
disproportionate" with respect to such stockholder, each as discussed above
under the heading "-- Consequences to Stockholders Who Exchange All of Their
Common Stock for Cash Pursuant to the Transaction." In applying these three
tests, a stockholder may possibly take into account sales of shares of Common
Stock that occur substantially contemporaneously with the consummation of the
Transaction. If such gain is not treated as capital gain under any of these
three tests, the gain will be treated as ordinary dividend income to the extent
of the stockholder's ratable share of the Corporation's undistributed earnings
and profits and thereafter as capital gain.
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Maximum Tax Rates Applicable to Capital Gain
Under the Internal Revenue Service Restructuring and Reform Act
of 1998, which the President signed into law on July 22, 1998, net capital gain
(i.e., generally, capital gain in excess of capital loss) recognized by an
individual upon the sale of a capital asset that has been held for more than 12
months will generally be subject to tax at a rate not to exceed 20% for sales
occurring in taxable years ending after December 31, 1997. Capital gain
recognized from the sale of a capital asset that has been held for 12 months or
less will continue to be subject to tax at ordinary income tax rates. In
addition, capital gain recognized by a corporate taxpayer will continue to be
subject to tax at the ordinary income tax rates applicable to corporations.
APPRAISAL RIGHTS
Under the DGCL, holders of Common Stock would ordinarily not be
entitled to appraisal rights in connection with the Transaction. Pursuant to
Section 262(c) of the DGCL, however, the Board has included in the Split
Amendment a provision conferring appraisal rights upon certain holders of Common
Stock in connection with the Transaction.
If the proposal to approve the Split Amendment is approved at the
Annual Meeting and the Transaction is consummated, holders of record of less
than 500 shares of Common Stock immediately prior to the Reverse Split who do
not vote in favor of the proposal to approve the Split Amendment and who
otherwise comply with the applicable statutory procedures summarized herein will
be entitled to appraisal rights under Section 262 of the DGCL ("Section 262"). A
person having a beneficial interest in shares of Common Stock held of record in
the name of another person, such as a broker or nominee, must act promptly to
cause the record holder to follow the steps summarized below properly and in a
timely manner in order to perfect such appraisal rights.
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW
PERTAINING TO APPRAISAL RIGHTS UNDER THE DGCL AND IS QUALIFIED IN ITS ENTIRETY
BY THE FULL TEXT OF SECTION 262 WHICH IS REPRINTED IN ITS ENTIRETY AS APPENDIX
B. ALL REFERENCES IN SECTION 262 AND IN THIS SUMMARY TO A "STOCKHOLDER" OR
"HOLDER" ARE TO THE RECORD HOLDER OF THE SHARES OF COMMON STOCK AS TO WHICH
APPRAISAL RIGHTS ARE ASSERTED.
If the proposal to approve the Split Amendment is approved at the
Annual Meeting and the Purchase Price is less than or equal to $2.25 and the
Transaction is consummated, holders of record of less than 500 shares of Common
Stock immediately prior to the Reverse Split ("Appraisal Shares") who follow the
procedures set forth in Section 262 will be entitled to have their Appraisal
Shares appraised by the Delaware Chancery Court and to receive payment in cash
of the "fair value" of such Appraisal Shares, exclusive of any element of value
arising from the accomplishment or expectation of the Transaction, together with
a fair rate of interest, if any, as determined by such court.
Under Section 262, where a proposal that (if approved) would give
rise to appraisal rights is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, must
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available, that appraisal
rights are so available, and must include in such notice a copy of Section 262.
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This Proxy Statement constitutes such notice to the holders of
Appraisal Shares and the applicable statutory provisions of the DGCL are
attached to this Proxy Statement as Appendix C. Any stockholder who wishes to
exercise such appraisal rights or who wishes to preserve his right to do so
should review the following discussion and Appendix C carefully because failure
to timely and properly comply with the procedures specified will result in the
loss of appraisal rights under the DGCL.
A HOLDER OF APPRAISAL SHARES WISHING TO EXERCISE SUCH HOLDER'S
APPRAISAL RIGHTS (A) MUST NOT VOTE IN FAVOR OF THE PROPOSAL AND (B) MUST DELIVER
TO THE CORPORATION PRIOR TO THE VOTE ON THE PROPOSAL AT THE ANNUAL MEETING A
WRITTEN DEMAND FOR APPRAISAL OF SUCH HOLDER'S APPRAISAL SHARES. A HOLDER OF
APPRAISAL SHARES WISHING TO EXERCISE SUCH HOLDER'S APPRAISAL RIGHTS MUST BE THE
RECORD HOLDER OF SUCH APPRAISAL SHARES ON THE DATE THE WRITTEN DEMAND FOR
APPRAISAL IS MADE AND MUST CONTINUE TO HOLD SUCH APPRAISAL SHARES OF RECORD
UNTIL THE CONSUMMATION OF THE TRANSACTION. ACCORDINGLY, A HOLDER OF APPRAISAL
SHARES WHO IS THE RECORD HOLDER OF APPRAISAL SHARES ON THE DATE THE WRITTEN
DEMAND FOR APPRAISAL IS MADE, BUT WHO THEREAFTER TRANSFERS SUCH APPRAISAL SHARES
PRIOR TO THE CONSUMMATION OF THE TRANSACTION, WILL LOSE ANY RIGHT TO APPRAISAL
IN RESPECT OF SUCH APPRAISAL SHARES.
Only a holder of record of Appraisal Shares is entitled to assert
appraisal rights for the Appraisal Shares registered in that holder's name. A
demand for appraisal should be executed by or on behalf of the holder of record,
fully and correctly, as such holder's name appears on such holder's stock
certificates. If the Appraisal Shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of the demand
should be made in that capacity, and if the Appraisal Shares are owned of record
by more than one person, as in a joint tenancy or tenancy in common, the demand
should be executed by or on behalf of all joint owners. An authorized agent,
including one or more joint owners, may execute a demand for appraisal on behalf
of a holder of record; however, the agent must identify the record owner or
owners and expressly disclose the fact that, in executing the demand, the agent
is agent for such owner or owners. A record holder such as a broker who holds
Appraisal Shares as nominee for several beneficial owners may exercise appraisal
rights with respect to the Appraisal Shares held for one or more beneficial
owners while not exercising such rights with respect to the Appraisal Shares
held for other beneficial owners; in such case, the written demand should set
forth the number of Appraisal Shares as to which appraisal is sought. When no
number of Appraisal Shares is expressly mentioned, the demand will be presumed
to cover all Appraisal Shares held in the name of the record owner. Stockholders
who hold their Appraisal Shares in brokerage accounts or other nominee forms and
who wish to exercise appraisal rights are urged to consult with their brokers to
determine the appropriate procedures for the making of a demand for appraisal by
such a nominee.
ALL WRITTEN DEMANDS FOR APPRAISAL SHOULD BE SENT OR DELIVERED TO
ROSE'S HOLDINGS, INC., 150 EAST 52ND STREET, NEW YORK, NEW YORK 10022.
Within 10 days after the consummation of the Transaction, the
Company will notify each stockholder, who has properly asserted appraisal rights
under Section 262 and has not voted in favor of the proposal to approve the
Split Amendment, of the date the Transaction became effective.
Within 120 days after the consummation of the Transaction, but
not thereafter, the Corporation or any stockholder who has complied with the
statutory requirements summarized above
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may file a petition in the Delaware Chancery Court demanding a determination of
the fair value of the Appraisal Shares. The Corporation is under no obligation
to, and has no present intention to, file a petition with respect to the
appraisal of the fair value of the Appraisal Shares. Accordingly, it is the
obligation of the holders of Appraisal Shares to initiate all necessary action
to perfect their appraisal rights within the time prescribed in Section 262.
Within 120 days after the consummation of the Transaction, any
stockholder who has complied with the requirements for exercise of appraisal
rights will be entitled, upon written request, to receive from the Corporation a
statement setting forth the aggregate number of Appraisal Shares not voted in
favor of adoption of the proposal to approve the Split Amendment and with
respect to which demands for appraisal have been received and the aggregate
number of holders of such Appraisal Shares. Such statement must be mailed within
10 days after a written request therefor has been received by the Corporation.
If a petition for an appraisal is timely filed, after a hearing
on such petition, the Delaware Chancery Court will determine the stockholders
entitled to appraisal rights and will appraise the "fair value" of their
Appraisal Shares, exclusive of any element of value arising from the
accomplishment or expectation of the Transaction, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
Stockholders considering seeking appraisal should be aware that the fair value
of their Appraisal Shares, as determined under Section 262, could be more than,
the same as or less than the value of the consideration they would otherwise
receive for their Appraisal Shares in the Transaction if they did not seek
appraisal of their Appraisal Shares. The Delaware Supreme Court has stated that
"proof of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered in the appraisal proceedings.
The Delaware Chancery Court will determine the amount of
interest, if any, to be paid upon the amounts to be received by persons whose
Appraisal Shares have been appraised. The costs of the action may be determined
by the Delaware Chancery Court and taxed upon the parties as the Delaware
Chancery Court deems equitable. The Delaware Chancery Court may also order that
all or a portion of the expenses incurred by any stockholder in connection with
an appraisal, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts utilized in the appraisal proceeding, be charged
pro rata against the value of all of the Appraisal Shares entitled to appraisal.
Any holder of Appraisal Shares who has duly demanded an appraisal
in compliance with Section 262 will not, after the consummation of the
Transaction, be entitled to vote the Appraisal Shares subject to such demand for
any purpose or be entitled to the payment of dividends or other distributions on
those Appraisal Shares, except for dividends or other distributions payable to
holders of record of Appraisal Shares as of a record date prior to the
consummation of the Transaction.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS, IN WHICH
EVENT A STOCKHOLDER WILL BE ENTITLED TO RECEIVE THE CONSIDERATION RECEIVABLE
WITH RESPECT TO SUCH APPRAISAL SHARES IN THE TRANSACTION.
If any stockholder who properly demands appraisal of his
Appraisal Shares under Section 262 fails to perfect, or effectively withdraws or
loses, his rights to appraisal, as provided in the DGCL, the Appraisal Shares of
such stockholder will be converted into the right to receive the
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consideration receivable with respect to such Appraisal Shares in the
Transaction. A stockholder will fail to perfect, or effectively lose or
withdraw, his appraisal rights if, among other things, no petition for appraisal
is filed by the stockholder within 120 days after the consummation of the
Transaction, or if the stockholder has delivered to the Corporation a written
withdrawal of his demand for appraisal. Any such attempt to withdraw an
appraisal demand more than 60 days after the consummation of the Transaction
will require the written approval of the Corporation.
The receipt of cash in exchange for all of a stockholder's shares
of Common Stock pursuant to the exercise of appraisal rights will generally be
treated as a taxable sale of such shares for Federal income tax purposes. See
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES -- Consequences to Stockholders Who
Exchange All of Their Common Stock for Cash Pursuant to the Transaction" above.
The affirmative vote of the holders of a majority of the Common
Stock present, or represented, and entitled to vote at the Annual Meeting, at
which a quorum is present, is required to approve the Split Amendment.
If the Split Amendment is approved by the stockholders, it will
become effective upon the filing of a Certificate of Amendment in accordance
with the DGCL.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE IN
FAVOR OF THE PROPOSAL APPROVING THE SPLIT AMENDMENT.
PROPOSAL FOUR
PROPOSAL TO (I) ELIMINATE THE CORPORATION'S
STAGGERED BOARD AND (II) REDUCE THE REQUIRED
NUMBER OF BOARD MEMBERS
The Board of Directors has adopted resolutions declaring the
advisability of, and submits to the stockholders for approval, amendments to the
Corporation's Charter and By-Laws to (i) terminate the Corporation's staggered
board system in order to elect all directors annually and (ii) reduce the
required number of Board members, as described below.
The Board of Directors has determined that it is advisable to
amend Article SEVENTH of the Charter to provide for the annual election of
directors. At present, the Board is divided into three classes, each class
consisting of one-third of the total number of directors or as close an
approximation as possible. The Charter further provides that all of the
Corporation's directors are elected for staggered terms: one-third of the
directors is elected each year and each now serves a three-year term. Annual
elections are permitted to be held only for directors elected exclusively by
holders of Preferred Stock, none of which is currently outstanding. Electing
corporate directors is a primary avenue for stockholders to influence corporate
affairs and exert accountability on management. Many observers believe that
financial performance is closely linked to corporate governance procedures and
the level of management accountability they impose. Staggering directors' terms
prevents stockholders from annually registering their views on the performance
of the board collectively and each director individually, insulating directors
and senior executives from the consequence of poor performance by denying
stockholders an opportunity to replace an entire board if it pursues
questionable or failed policies. The Board of
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Directors therefore believes that it is advantageous to have directors elected
annually. If the proposed amendments are approved by the stockholders, each of
the current members of the Board of Directors will continue to serve the
remainder of his term (currently up to three years, see "ELECTION OF
DIRECTORS"), and thereupon and thereafter, will be subject to annual nomination
and election. This proposal is not being presented in response to any
stockholder demand.
In addition, the Board of Directors has determined that its
ability to adjust the size of the Board from a minimum of five to a maximum of
nine directors is in the best interests of the Corporation and its stockholders.
The Charter and By-laws currently provide that the Board of Directors shall have
a minimum of seven and a maximum of 13 directors, with the exact number of
directors to be established from time to time by the Board. The proposal to
authorize the Board of Directors to vary its size from a minimum of five to a
maximum of nine directors will afford the Board additional flexibility to adjust
the size of its membership as appropriate in different circumstances in the
future. The Board of Directors believes that, under certain circumstances, a
smaller Board can facilitate communications among the directors and increase
efficiency, providing for greater speed and flexibility in decision-making.
Moreover, a smaller Board will reduce the costs commonly associated with the
Board of Directors, including meeting and conferencing costs and directors'
fees. The exact number of directors initially to be established by the Board of
Directors will be seven, the number of current members of the Board. The text of
these proposed amendments to the Charter and By-laws (the "Board Amendments") is
attached as Appendix D hereto.
Accordingly, at its meetings held on June 25 and July 20, 1998,
the Board of Directors adopted resolutions proposing that the Board Amendments
be presented to the stockholders at the Annual Meeting for their approval.
The affirmative vote of the holders of two-thirds of the
outstanding shares of Common Stock is required to approve the Board Amendments.
The approval of this proposal will not affect the terms of any of the current
directors, including the nominees.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE IN
FAVOR OF THE PROPOSAL TO APPROVE THE BOARD AMENDMENTS.
PROPOSAL FIVE
APPROVAL OF THE PERFORMANCE BONUS AWARD
On July 20, 1998, the Board of Directors and the Compensation
Subcommittee approved the terms of an employment agreement (the "Employment
Agreement") containing a performance bonus award for Andrew Winokur, the
President and chief executive officer of Praxis Investment Advisors, Inc.
("Praxis"), a 90%-owned subsidiary of the Corporation (the "Performance Bonus
Award"), subject to approval by the Corporation's stockholders in accordance
with the provisions of Section 162(m) of the Internal Revenue of 1986, as
amended (the "Code"). Section 162(m) generally authorizes the deduction of
compensation in excess of $1,000,000 per taxable year payable to a chief
executive officer (and certain other officers) only where such compensation is
based on performance and satisfies certain other requirements and is approved by
stockholders.
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On August 31, 1998, the Corporation, through Rose's
International, Inc. ("Rose's"), a newly formed, wholly owned Delaware
subsidiary, consummated the acquisition of 90% of the outstanding common stock
of WebBank Corporation, a Utah industrial loan corporation (the "Bank"),
pursuant to an assignment from Praxis Investment Advisers, a Nevada limited
liability company. In addition, pursuant to a subscription and stockholders
agreement, dated as of August 31, 1998, between Roses's and Mr. Winokur, the
owner of the other 10% of the outstanding common stock of the Bank, Rose's
agreed to purchase 90%, and Mr. Winokur agreed to purchase 10%, of the
outstanding common stock of Praxis.
If the Performance Bonus Award is approved by the affirmative
vote of the holders of at least a majority of the shares of Common Stock present
and entitled to vote at the meeting and certain other requirements set forth in
Section 162(m) of the Code are satisfied, performance bonus payments to Mr.
Winokur pursuant to the Performance Bonus Award will qualify for deduction under
Section 162(m) of the Code. Warren Lichtenstein and Steel Partners II, L.P. have
agreed to vote their shares of Common Stock, an aggregate of 24.9% of the
outstanding Common Stock, in favor of this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE IN FAVOR OF THE PROPOSAL TO APPROVE THE PERFORMANCE BONUS
AWARD FOR THE CHIEF EXECUTIVE OFFICER OF THE CORPORATION'S SUBSIDIARY.
Summary of the Performance Bonus Award
The following description of the Performance Bonus Award is
intended only as a summary and is qualified in its entirety by reference to the
text of the Employment Agreement containing the Performance Bonus Award, a copy
of which is attached hereto as Appendix E.
Rose's, a wholly-owned subsidiary of the Corporation, owns 90%,
and Mr. Winokur owns 10% of the common stock of Praxis and of the Bank (together
with Praxis, the "Companies"). Praxis and Rose's are parties to a management
agreement (the "Management Agreement"), under which Praxis has agreed to provide
Rose's and the other stockholders of the Bank with management services in
connection with the ownership and operation of the Bank. The Management
Agreement provides that Praxis may make recommendations to, and consult with,
the management and board of directors of the Bank with respect to the deployment
of the Bank's capital, the development of the Bank's business lines, the Bank's
acquisition of assets and the Bank's distributions to its stockholders.
Under the Employment Agreement, Mr. Winokur agrees to serve as
President and chief executive officer of Praxis for a term commencing on the
date of the approval of the Employment Agreement by the stockholders of the
Corporation and terminating on July 15, 2003, subject to earlier termination in
accordance with the terms of the Employment Agreement (the "Employment Term").
Under the Employment Agreement, Mr. Winokur is granted the authority to
formulate the recommendations to the Bank on behalf of Praxis pursuant to the
Management Agreement.
The Employment Agreement provides that Praxis will pay to Mr.
Winokur an amount (the "Compensation") to be measured by reference to the
receipt by stockholders of Praxis and the Bank (the "Stockholders") of cash
("Cash") as a result of distributions ("Dividends") by the Companies to their
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respective stockholders and as a result of the sale of the Bank (the "Sale" and,
together with Dividends, the "Measuring Event") during the Employment Term, as
follows:
(1) After the Stockholders have received Cash in an aggregate
amount (i) equal to the capital invested by them in the Companies and (ii)
providing them with a Cumulative Rate of Return (as hereinafter defined) of 10%,
Mr. Winokur will be paid an amount equal to 29.03% of the cumulative amount
received by the Stockholders under the preceding clause (ii); provided, however,
that if Praxis does not have sufficient liquidity to make the foregoing payment
to Mr. Winokur and the amount payable to Mr. Winokur arises as a result of a
Dividend, such amount will be accrued and will be paid to Mr. Winokur out of
subsequent available liquid resources, if any, before the Stockholders are
entitled to receive any further Cash. If such amount otherwise payable to Mr.
Winokur arises from a Sale and the amount of the purchase price does not allow
Praxis to make such payment in full, Mr. Winokur will be entitled to no further
payment.
(2) Of the remaining Cash (after deducting all amounts described
in (1) above), until such time as the Stockholders have received aggregate Cash
providing them with a Cumulative Rate of Return of 25%, Mr. Winokur will be paid
an amount equal to 22.5% of the amount of the Cash.
(3) Once the Stockholders have received aggregate Cash providing
them with a Cumulative Rate of Return of 25%, Mr. Winokur will be paid an amount
equal to 50% of the amount of the remaining Cash (after deducting all amounts
described in (1) and (2) above).
As defined in the Employment Agreement, the Stockholders'
"Cumulative Rate of Return" of 10% or 25%, as the case may be, as of any
particular time, means an amount equal to the aggregate Cash that would be
required to be received by the Stockholders at that time (including, without
limitation, the return of the amount of the capital invested in the Companies)
in order to provide the Stockholders with the following rate of return of 10% or
25%, as the case may be: the rate of return which (i) the total amount that has
been received by the Stockholders, and retained by them after the payment of any
Compensation to Mr. Winokur, as of that time, represents to (ii) the total
amount of capital invested by them in the Companies as of that time. The
Cumulative Rate of Return is an annual rate and is to be calculated with
compounding on an annual basis, taking into account the period of time from the
date or dates that capital was invested by the Stockholders in the Companies to
the dates of the receipt of Cash by the Stockholders.
The Employment Agreement provides that no Compensation will be
paid to Mr. Winokur until the Compensation Committee of the Corporation
certifies in writing that the foregoing performance goals have been satisfied.
If the proceeds of a Measuring Event involve property other than
cash, the Employment Agreement provides that the fair market value of such
property will be determined by the Board, acting in its reasonable discretion,
for purposes of applying the performance goals. The Employment Agreement further
provides that if Mr. Winokur is entitled to the payment of Compensation, the
payment of such property will be equitably apportioned between Mr. Winokur and
the Stockholders based on the respective amounts they are entitled to receive.
The Employment Agreement provides that Mr. Winokur's employment
will terminate upon the earliest to occur of the following: (a) the termination
or expiration of the Management
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Agreement provided that the ability of Praxis to make recommendations thereunder
is terminated; (b) July 15, 2003; (c) the termination of employment by Praxis
without Cause (as defined); (d) the termination of employment by Praxis as a
result of Mr. Winokur's disability; (e) the termination by Mr. Winokur for Good
Reason (as defined); (f) the termination of employment by Praxis for Cause; (g)
Mr. Winokur's death; or (h) the termination by Mr. Winokur other than for Good
Reason.
If Mr. Winokur's employment is terminated upon the occurrence of
any of the events described in (a), (b), (c), (d), or (e) above, then Mr.
Winokur will be entitled to receive payments as described in the following
paragraph. If Mr. Winokur's employment is terminated upon the occurrence of any
of the events described in (f), (g), or (h) above, then Mr. Winokur will be
entitled to no further payments of any kind.
If Mr. Winokur's employment is terminated under circumstances
entitling him to further payments (as described above), the Employment Agreement
provides that the Bank will be valued by a nationally recognized or regionally
recognized investment bank that has experience in valuing financial institutions
(the "Valuation"), and Rose's will have 90 days from the date of the completion
of the Valuation (the "Valuation Date") to accept or reject the Valuation. If
Rose's accepts the Valuation, the Compensation Committee will determine in
writing the amount Mr. Winokur would have been entitled to receive (see
discussion of Mr. Winokur's compensation in the context of a Sale or other
Measuring Event, contained in the foregoing paragraphs numbered one through
three and the three paragraphs following the numbered paragraphs, above) if the
Bank had been sold (as of the date of cessation of employment) for an amount
equal to the Valuation after taking into account transaction expenses, and any
amounts due to Mr. Winokur will be paid as follows:
(1) To the extent that cash available to the Companies allows,
and, in the case of the Bank, it is permitted to make a distribution to its
stockholders under applicable law, Mr. Winokur will be paid in full within 90
days (the "Payment Date") after the Valuation Date.
(2) To the extent that the chief financial officer of each of
Praxis and the Bank certifies to Mr. Winokur that the Companies do not have
sufficient liquidity to permit them to prudently pay all amounts due to Mr.
Winokur, or, in the case of the Bank, it is not permitted to make a distribution
under applicable law, such amounts will not be immediately due but will be
deferred until a date which is not more than three years following the Valuation
Date; provided, however, that if the Companies do not have sufficient liquidity
on that date to pay to Mr. Winokur all amounts due him, or, in the case of the
Bank, it is not permitted to make a distribution under applicable law, the
remaining unpaid amount will be paid, with interest, during the succeeding nine
years in 36 equal payments. Any amounts not paid will be paid in full upon the
sale of the Bank and the receipt by the Stockholders thereof of the net proceeds
thereof. The Employment Agreement provides that the Companies will use
reasonable commercial efforts to achieve sufficient liquidity to allow such
unpaid amounts to be paid as soon as practicable. Any amounts not paid on the
Payment Date will bear interest from the Valuation Date.
The Employment Agreement provides that if Rose's rejects the
Valuation, the Bank will promptly be put up for sale and Mr. Winokur will
receive Compensation in accordance with the description above. If the purchase
price of the Bank consists of property other than cash, in addition to or in
lieu of cash, then the amount due to Mr. Winokur will be paid in the form of his
pro rata portion of each element of such consideration.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE IN FAVOR OF THE PROPOSAL TO APPROVE THE PERFORMANCE BONUS
AWARD FOR THE CHIEF EXECUTIVE OFFICER OF THE CORPORATION'S SUBSIDIARY.
PROPOSAL SIX
APPROVAL OF THE MERGER OF
THE NEW EQUITY COMPENSATION PLAN
INTO THE LONG TERM STOCK INCENTIVE PLAN AND
CERTAIN AMENDMENTS TO THE LONG TERM
STOCK INCENTIVE PLAN
Merger of the Plans and Amendment to the Long Term Stock Incentive Plan
The Board of Directors, at its meeting on September 2, 1998, approved,
subject to the approval of stockholders, the merger of the Old Plan into the New
Plan and certain amendments to the New Plan to provide (i) that the 700,000
shares of Common Stock subject to options or awards under the Old Plan be merged
into the New Plan and an additional 800,000 shares of Common Stock added to the
New Plan, thereby increasing the aggregate number of shares of Common Stock
subject to options or awards under the New Plan from 500,000 to 2,000,000 (the
"Plan Merger"); (ii) that the maximum number of shares of Common Stock with
respect to which options, restricted shares (as defined below) subject to the
attainment of performance goals, stock appreciation rights, performance shares
or other stock based awards that could be granted to any individual could not
exceed 500,000 shares of Common Stock in any fiscal year during the term of the
New Plan; and (iii) that the eligibility of the New Plan be extended to include
grants of Non-Qualified Stock Options to employees of limited liability
companies, partnerships and other non-corporate entities that are at least 50%
owned by the Corporation. The maximum aggregate and individual number of shares
of Common Stock subject to the limits described above are subject to adjustment
to reflect certain corporate events and transactions.
The effective date of the Plan Merger will be the date of stockholder
approval of this proposal (the "Plan Merger Date"). Any options that remain
outstanding under the Old Plan immediately prior to the Plan Merger Date will
continue to be governed by the terms and provisions of the Old Plan. The
affirmative vote of the holders of at least a majority of the shares of Common
stock present and entitled to vote at the Annual Meeting is required to approve
the merger of the Old Plan into the New Plan and the amendments to the New Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF
THE PROPOSAL TO APPROVE THE MERGER OF THE NEW EQUITY COMPENSATION PLAN INTO THE
LONG TERM STOCK INCENTIVE PLAN AND THE AMENDMENTS TO THE LONG TERM STOCK
INCENTIVE PLAN.
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Summary of the Long Term Stock Incentive Plan (as amended)
The following description of the New Plan, giving effect to the proposed
amendments, is a summary and is qualified in its entirety by reference to the
text of the New Plan, which is available from the Corporation at 150 East 52nd
Street, New York, New York 10022, Attention: Investor Relations. Other than the
changes described above, the New Plan is substantially the same as when it was
previously adopted by the stockholders.
Purpose
In June 1997, the Board of Directors and the stockholders of the
Corporation adopted the New Plan for the benefit of certain key employees and
consultants of the Corporation and its subsidiaries and non-employee directors
of the Corporation. The purpose of the New Plan is to enhance the profitability
and value of the Corporation for the benefit of stockholders by enabling the
Corporation to offer such individuals stock-based incentives and other equity
interests in the Corporation 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 consisting of two or more non-employee directors, each of
whom is intended to 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 that has the authority to
administer the New 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 New 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 New 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 New Plan. All non-employee directors of the Corporation are
only eligible to receive a grant of Common Stock or non-qualified stock options
under the New Plan in lieu of retainer fees or total director fees (as defined
in the Plan).
Available Shares
A maximum of 2,000,000 shares of Common Stock may be issued under the
New Plan; however, the Committee may make appropriate adjustments to the number
of shares available for Awards and the terms of outstanding awards under the New
Plan to reflect any change in the Corporation's capital
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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 with respect to which
options, restricted stock for which the lapse of restrictions is subject to the
attainment of performance goals, stock appreciation rights, performance shares
or other stock-based awards that may be granted to any individual under the New
Plan is 500,000 for each 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 shall 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 New Plan.
The maximum value of performance units which may be granted under the
New Plan during each fiscal year of the Corporation will be $50,000.
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 New 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 New 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 New 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 (which may only be granted to employees) and non-qualified 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 New 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.
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Stock Options
Under the New 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 non-qualified stock options.
Non-qualified stock options also may be granted to employees of affiliates that
are at least 50% owned by the Corporation and that are limited liability
companies, partnerships or other non-corporate entities. 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 10% stockholder of the Corporation, 110%
of fair market value).
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 applicable 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.
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 generally has all rights of a stockholder with respect to the shares
including the right to receive dividends, the right to vote such shares and,
subject to full vesting, the right to tender such shares, unless otherwise
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.
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. These 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
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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 New 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 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.
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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 New 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 non-qualified 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 New 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 such non-employee director under the terms of the
New 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
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issuance or deemed date of grant or issuance; and (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.
Change in Control
Unless determined otherwise by the Committee at the time of grant, upon
a Change in Control (as defined in the New 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% 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 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 are generally nontransferable except that
the Committee may, in its sole discretion, permit the transfer of non-qualified
stock options (other than those granted to non-employee directors) at the time
of grant or thereafter. Awards 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. Capital gains rates may
further reduced in the case of an extended holding period. 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
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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
non-qualified 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 applicable tax law) at the time of grant. Upon
exercise of a non-qualified 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.
PROPOSAL SEVEN
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.
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STOCKHOLDER 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 1999 must submit the same in writing so as to be received at the
executive offices of the Corporation on or before August 21, 1999. 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,
Jack L. Howard
Secretary
October 1, 1998
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APPENDIX A-1
PROPOSED AMENDMENT TO ARTICLE FOURTH OF
THE RESTATED CERTIFICATE OF INCORPORATION
TO CHANGE THE PAR VALUE OF THE
CORPORATION'S CAPITAL STOCK TO $.001 PER SHARE
RESOLVED, that Article FOURTH of the Restated Certificate of
Incorporation of the Corporation is hereby amended to read in its entirety as
follows:
FOURTH: The Corporation shall have the authority to issue an aggregate
of Sixty Million (60,000,000) shares of capital stock. The authorized
capital shall be divided into common stock (the "Common Stock") and
preferred stock (the "Preferred Stock"). The Common Stock of the
Corporation shall consist of Fifty Million (50,000,000) shares, par
value $.001 per share. The Preferred Stock of the Corporation shall
consist of Ten Million (10,000,000) shares, par value $.001 per share.
A-1
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APPENDIX A-2
PROPOSED AMENDMENT TO THE
RESTATED CERTIFICATE OF INCORPORATION
TO DELETE THE BANKRUPTCY PROVISIONS
RESOLVED, that Article FIFTH of the Restated Certificate of
Incorporation of the Corporation is hereby deleted in its entirety and Article
SIXTH is hereby amended to read in its entirety as follows:
SIXTH: The Common Stock and Preferred Stock shall each have the powers,
preferences, rights, qualifications, limitations and restrictions set forth
below.
(a) Common Stock.
(i) Powers. The Board of Directors is authorized, subject to
limitations prescribed by law and the provisions of
Article FOURTH, to provide for the issuance of the
shares of Common Stock in one or more classes or series,
and by filing a certificate pursuant to the applicable
law of the State of Delaware, to establish from time to
time the number of shares to be included in each such
series, and subject to the provisions of this Article
SIXTH, to fix the designation, powers, preferences and
rights of the shares of each such class or series and
the qualifications, limitations or restrictions thereof.
(ii) Voting Rights. The holders of shares of Common Stock
shall be entitled to one vote for each share so held
with respect to all matters voted on by the stockholders
of the Corporation.
(iii) Dividends. Dividends may be paid on the Common Stock as
and when declared by the Board of Directors.
(iv) Liquidation Rights. Subject to the prior and superior
right of the Preferred Stock, upon any voluntary or
involuntary liquidation, dissolution or winding up of
affairs of the Corporation, the holders of Common Stock
shall be entitled to receive of the funds to be
distributed such amount as remains after distribution of
all amounts, if any, required to be distributed to
holders of any Preferred Stock. Such funds shall be paid
to the holders of Common Stock on the basis of the
number of shares of Common stock held by each of them.
(v) Reserve Powers. The holders of shares of Common Stock
shall have all other powers, preferences and rights
conferred upon owners of shares of capital stock under
the laws of the State of Delaware, except insofar as
such powers, preferences and rights are expressly
restricted by the provisions of Paragraph (b) of this
Article SIXTH.
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(b) Preferred Stock.
(i) Powers. The Board of Directors is authorized, subject to
limitations prescribed by law and the provisions of
Article FOURTH, to provide for the issuance of the
shares of Preferred Stock in one or more classes or
series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish
from time to time the number of shares to be included in
each such series, and to fix the designation, powers,
preferences and rights of the shares of each such class
or series and the qualifications, limitations or
restrictions thereof.
(ii) Liquidation Rights. If upon any voluntary or involuntary
liquidation, dissolution or winding up of the
Corporation, the assets available for distribution to
holders of shares of Preferred Stock of all classes or
series shall be insufficient to pay such holders the
full preferential amount to which they are entitled,
then such assets shall be distributed ratably among the
shares of all classes or series of Preferred Stock in
accordance with the respective liquidation preferences
(including unpaid cumulative dividends, if any) payable
with respect thereto.
(c) No stockholder of the Corporation shall by reason of his holding
of shares of any class or series have any preemptive or
preferential right to purchase or subscribe to any shares of any
class or series of stock of the Corporation, now or hereafter
authorized, or any securities convertible into or carrying
options or warrants to purchase any shares of any class or series
of stock of the Corporation, now or hereafter authorized, other
than such rights, if any, as the Board of Directors, in its
discretion from time to time may grant and at such price as the
Board of Directors may fix.
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APPENDIX B
PROPOSED AMENDMENT TO ARTICLE FOURTH OF
THE RESTATED CERTIFICATE OF INCORPORATION
TO EFFECT THE PROPOSED REVERSE STOCK SPLIT
AND FORWARD STOCK SPLIT
RESOLVED, that Article FOURTH of the Restated Certificate of
Incorporation of the Corporation is hereby amended by adding as Sections (a) and
(b) after the last sentence of Article FOURTH the following provisions:
(a) At 6:00 p.m. (Eastern Time) on the effective date of the
amendment adding this Section (a) to Article FOURTH (the "Effective
Date"), each share of Common Stock held of record as of 6:00 p.m.
(Eastern Time) on the Effective Date shall be automatically reclassified
and converted, without further action on the part of the holder thereof,
into one five-hundredth (1/500) of one share of Common Stock. No
fractional share of Common Stock shall be issued to any Fractional
Holder (as defined below) upon such reclassification and conversion.
Except as set forth in the immediately following sentence, from and
after 6:00 p.m. on the Effective Date, each Fractional Holder shall have
no further interest as a stockholder in respect of any such fractional
share and, in lieu of receiving such fractional share, shall be entitled
to receive, upon surrender of the certificate or certificates
representing such fractional share, the cash value of such fractional
share based on the average daily closing price per share of the Common
Stock on the NASD OTC Bulletin Board for the 10 trading days immediately
preceding the Effective Date, without interest (the "Cash Value").
Appraisal rights under Section 262 of the GCL shall be available for
each such fractional share of a Fractional Holder who has complied with
the provisions of said Section 262. As used herein, the term "Fractional
Holder" shall mean a holder of record of less than 500 shares of Common
Stock as of 6:00 p.m. (Eastern Time) on the Effective Date, who would be
entitled to less than one whole share of Common Stock in respect of such
shares as a result of the reclassification and conversion provided for
herein.
(b) At 7:00 p.m. (Eastern Time) on the Effective Date, each share
of Common Stock and any fraction thereof (excluding any interest in the
Company held by a Fractional Holder converted into cash pursuant to the
immediately preceding paragraph) held by a holder of record of one or
more shares of Common Stock as of 7:00 p.m. (Eastern Time) on the
Effective Date shall be automatically reclassified and converted,
without further action on the part of the holder thereof, into multiple
shares of Common Stock on the basis of 250 shares of Common Stock for
each share of Common Stock then held. Each stockholder who holds a
record an odd number of shares of Common Stock greater than 500 shares
immediately prior to the Effective Date shall be entitled to receive, in
lieu of the fraction of a share resulting from the foregoing conversion,
cash in the amount of the last value multiplied by the fraction of a
share of Common Stock that would otherwise be issuable to such
stockholder after giving effect to the foregoing conversion.
(c) However, the reclassifications and conversions contained in
subsections (a) and (b) of this Article shall be effected only in the
event the average daily closing price per share of the Common Stock on
the NASD OTC Bulletin Board for the 10 trading days immediately
preceding the Effective Date, is $2.25 or less.
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APPENDIX C
SECTION 262 OF THE
GENERAL CORPORATION LAW OF THE
STATE OF DELAWARE
262 APPRAISAL RIGHTS. -- (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to SECTION 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to SECTION 251 (other than a merger effected pursuant to
SECTION 251(g) of this title), SECTION 252, SECTION 254, SECTION 257, SECTION
258, SECTION 263 or SECTION 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of SECTION 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to SECTIONS 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
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security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b.
and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under SECTION 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to SECTION 228
or SECTION 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective
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date of the merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation the appraisal of
such holder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such notice
did not notify stockholders of the effective date of the merger or
consolidation,'either (i) each such constituent corporation shall send a second
notice before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constituent corporation
that are entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send such a
second notice to all such holders on or within 10 days after such effective
date; provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be sent
to each stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer agent of
the corporation that is required to give either notice that such notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the notice is given;
provided, that if the notice is given on or after the effective date of the
merger or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day on
which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein
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stated. Such notice shall also be given by 1 or more publications at least 1
week before the day of the hearing, in a newspaper of general circulation
published in the City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by publication shall be
approved by the Court, and the costs thereof shall be borne by the surviving or
resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance
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of the merger or consolidation, either within 60 days after the effective date
of the merger or consolidation as provided in subsection (e) of this section or
thereafter with the written approval of the corporation, then the right of such
stockholder to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(1) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation. (Last amended by Ch.
229, L96, eff. 2-1-96 and Ch. 349, L. '96, eff. 7-1-96.)
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APPENDIX D
PROPOSED AMENDMENT TO THE RESTATED CERTIFICATE
OF INCORPORATION AND BY-LAWS TO (I) ELIMINATE THE
CORPORATION'S STAGGERED BOARD AND (II) REDUCE THE
REQUIRED NUMBER OF BOARD MEMBERS
RESOLVED, that Article SEVENTH of the Restated Certificate of
Incorporation of the Corporation is hereby amended to read in its entirety as
follows:
SEVENTH:
(a) The number of directors constituting the entire Board of
Directors shall be not less than five nor more than nine, the
exact number to be fixed from time to time by vote of a majority
of the entire Board of Directors; provided, however, that the
number of directors shall not be reduced so as to shorten the
term of any director at the time in office.
(b) The Board of Directors, excluding directors elected by the
holders of shares of any class or series of stock having a
preference over the Common Stock of the Corporation as to
dividends or upon liquidation as provided in Article SIXTH
hereto, shall be divided into three classes, as nearly equal in
number as the then total number of directors constituting the
entire Board of Directors permits, with the term of office of
one class expiring each year, and each director shall hold
office for a term expiring at the third annual meeting of
stockholders following his or her election and, in each case,
until his or her successor shall have been duly elected and
qualified; provided, however, that commencing at the annual
meeting of stockholders to be held in fiscal year 1999, with
respect to directors whose terms expire at the annual meeting of
stockholders held in fiscal year 1999, 2000 and 2001, each such
director shall, upon the expiration of his or her term, be
elected to serve until the annual meeting of stockholders held
in the following fiscal year and, in each case, until his or her
successor shall have been duly elected and qualified.
(c) Except as otherwise provided in this Article SEVENTH, any
vacancies in the Board of Directors for any reason, and any
directorships resulting from any increase in the number of
directors, may be filled by the Board of Directors, acting by a
majority of the directors then in office, although less than a
quorum. Any director chosen to fill a vacancy shall hold office
until the next election of the class for which such director
shall have been chosen and until his or her successor shall have
been elected and qualified.
RESOLVED, that Article III, Section 1 of the Corporation's By-Laws is
hereby amended to read in its entirety as follows:
Section 1. Number and Term. Except as provided in the certificate of
incorporation or by applicable law, the number of directors which shall
constitute the entire board shall be no less than five or more than nine, the
exact number to be determined from time to time by a vote of the majority of the
entire board of directors.
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APPENDIX E
EMPLOYMENT AGREEMENT
Agreement made as of the ___th day of July, 1998, by and between
Praxis Investment Advisors, Inc. ("Praxis"), a Delaware corporation, with its
principal place of business at 1308 Main Street, Suite 112, Saint Helena,
California 94574, and Andrew Winokur, whose address is P. O. Box 383, Calistoga,
California 94515 ("Executive").
W I T N E S S E T H :
WHEREAS, it is anticipated that Rose's International, Inc.
("Rose's"), a Delaware corporation and a wholly-owned subsidiary of Rose's
Holdings, Inc. ("Holdings"), and Executive will enter into a Subscription and
Stockholders Agreement, pursuant to which Rose's will purchase and own 90
percent, and Executive will purchase and own 10 percent, of the common stock of
Praxis and of WebBank Corporation, a Utah industrial loan corporation (the
"Bank" and, together with Praxis, the "Companies");
WHEREAS, it is anticipated that Praxis will enter into a
management agreement (the "Management Agreement") under which Praxis will agree
to provide Rose's and the other stockholders of the Bank management services in
connection with the ownership and operation of the Bank;
WHEREAS, Praxis desires to employ Executive as President and
chief executive officer and Executive is willing to serve in such capacity; and
WHEREAS, Praxis and Executive desire to set forth the terms and
conditions of such employment;
NOW, THEREFORE, in consideration of the promises and of the
mutual covenants and agreements herein contained, Praxis and Executive agree as
follows:
4. Employment.
(a) Praxis hereby agrees to employ Executive, and
Executive agrees to be employed by Praxis, on the terms and conditions herein
contained as President and chief executive officer. Executive shall report to
the Board of Directors of Praxis (the "Board") and the Chairman of the Board.
Executive agrees that in such office he shall perform such duties and functions
as are commensurate with his status
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as President and chief executive officer as may from time to time be determined
by the Board in accordance with reasonable and customary practice, including,
but not limited to, the ability to hire and discharge employees and to set their
compensation and other customary duties and functions of presidents and chief
executive officers of companies. The Executive shall promptly follow all legal
directions of the Board. The Executive shall devote substantially all of his
business time, energy, skill and efforts to the performance of his duties
hereunder and shall faithfully and diligently serve Praxis.
(b) The Management Agreement provides that Praxis may
make recommendations to, and consult with, the management and Board of Directors
of the Bank with respect to the deployment of the Bank's capital, the
development of the Bank's business lines, the Bank's acquisition of assets and
the Bank's distributions to its stockholders (the "Recommendations"). Executive
shall have the authority to formulate the Recommendations on behalf of Praxis.
(c) Each of the parties hereto agrees to execute and
deliver on the Effective Date (as hereinafter defined), and to use its best
efforts to cause its affiliates (including the Bank) to execute and deliver on
the Effective Date, the Subscription and Stockholders Agreement and the
Management Agreement, substantially in the forms annexed hereto as Exhibits 1
and 2, respectively.
5. Term of Employment.
(a) Executive's employment under this Agreement (the
"Employment") shall be for a term commencing on the date of the purchase by
Rose's and Executive of the stock of the Bank (the "Effective Date") and
terminating on the fifth anniversary of the Effective Date, or such earlier date
as is provided in Section 6 hereof, subject to the Employment being extended
pursuant to the renewal provisions described in Sections 2(b) and 2(c) hereof
(the "Employment Term"). Notwithstanding anything to the contrary herein, the
provisions of Sections 12 and 13 hereof shall survive and remain in effect
notwithstanding the termination of Employment or a breach by Praxis or Executive
of this Agreement.
(b) The Employment Term shall be extended to the sixth
anniversary of the Effective Date if Praxis and the Executive shall agree, in
writing during the 30-day period beginning 48 months after the Effective Date,
to renew this Agreement on the same terms as described herein.
(c) If the Employment Term shall be extended as described
in Section 2(b), this Agreement shall be renewed, on the same terms as described
herein, by Praxis and the Executive for one or more 12-month periods by agreeing
in writing
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to renew the Agreement during the applicable 30-day period preceding the
anniversary of the Effective Date.
6. Compensation.
(a) Subject to Sections 3(d) and 14 hereof, as
compensation for his services under this Agreement, Praxis shall pay to the
Executive an amount (the "Compensation") which shall be measured by reference to
the receipt by stockholders (the "Stockholders") of cash ("Cash") as a result of
distributions ("Dividends") by the Companies to their respective Stockholders
and as a result of the sale of the Bank or Praxis (the "Sale" and, together with
Dividends, the "Measuring Event") during the Employment Term, as follows:
(1) After the Stockholders have received Cash in an
aggregate amount (i) equal to the capital invested by them in the Companies and
(ii) providing them with a Cumulative Rate of Return (as defined in Section
3(b)) of 10 percent, Executive shall be paid an amount equal to 29.03 percent of
the cumulative amount received by the Stockholders under clause (ii); provided,
however, that if Praxis does not have sufficient liquidity to make the foregoing
payment to Executive and the amount payable to Executive arises as a result of a
Dividend, such amount shall be accrued and shall be paid to Executive out of
subsequent available liquid resources, if any, before the Stockholders are
entitled to receive any further Cash. If such amount otherwise payable to
Executive arises from a Sale (of the Bank) and the amount of the purchase price
and the amount of Praxis' assets does not allow Praxis to make such payment in
full, Executive shall be entitled to no further payment after the utilization of
Praxis' assets to satisfy the amount due to Executive.
(2) Of the remaining Cash (after deducting all
amounts described in Section 3(a)(1)), until such time as the Stockholders have
received aggregate Cash providing them with a Cumulative Rate of Return of 25
percent, Executive shall be paid an amount equal to 22.5 percent of the amount
of the Cash.
(3) Once the Stockholders have received aggregate
Cash providing them with a Cumulative Rate of Return of 25 percent, Executive
shall be paid an amount equal to 50 percent of the amount of the remaining Cash
(after deducting all amounts described in Sections 3(a)(1) and (a)(2)).
Examples illustrating the application of this Section 3(a)
are attached hereto as Exhibit A.
(b) For purposes of Section 3(a), the Stockholders'
"Cumulative Rate of Return" of 10 percent or 25 percent, as the case may be, as
of any particular time, means an amount equal to the aggregate Cash that would
be required to be
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received by the Stockholders at that time (including, without limitation, the
return of the amount of the capital invested in the Companies) in order to
provide the Stockholders with the following rate of return of 10 percent or 25
percent, as the case may be: the rate of return (calculated as provided in
Section 3(c)) which (i) the total amount that has been received by the
Stockholders, and retained by them after the payment of any Compensation to
Executive, as of that time, represents on (ii) the total amount of capital
invested by them in the Companies as of that time.
(c) The rate of return referred to in Section 3(b) is an
annual rate and shall be calculated with compounding on an annual basis, taking
into account the period of time from the date or dates that capital was invested
by the Stockholders in the Companies to the dates of the receipt of Cash by the
Stockholders.
(d) No Compensation shall be paid to Executive under this
Agreement until the Compensation Committee of Holdings (the "Compensation
Committee") shall certify in writing that the performance goals specified in
Section 3(a) have been satisfied. At least three business days prior to a
proposed occurrence of a Measuring Event, the Compensation Committee shall
determine whether, following such Measuring Event, Executive is entitled to any
payment of Compensation, and, if so, the amount of such payment. If the
Compensation Committee shall determine that Executive is entitled to the payment
of Compensation, such payment shall be made promptly following the Measuring
Event.
(e) If the proceeds of a Measuring Event involve property
other than cash, the fair market value of such property shall be determined by
the Board, acting in its reasonable discretion, for purposes of applying the
performance goals described in Section 3(a). If Executive shall be entitled to
the payment of Compensation, the payment of such property shall be equitably
apportioned between Executive and the Stockholders based on the respective
amounts they are entitled to receive.
7. Insurance.
Praxis shall purchase, at its expense of up to $6,000 per
year, a term life insurance policy for Executive in the amount of the lesser of
(i) $5,000,000 or (ii) the maximum amount of term insurance that may be
purchased for an annual
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premium of $6,000. The proceeds of such policy shall be payable to the estate of
Executive or as he otherwise directs.
8. Expenses.
Praxis shall reimburse Executive in accordance with its
expense reimbursement policy as in effect from time to time for all reasonable
expenses incurred by Executive in connection with the performance of his duties
under this Agreement upon the presentation by Executive of an itemized account
of such expenses and appropriate receipts.
9. Termination Events.
The Employment shall terminate upon the earliest to occur
of the following:
(a) The termination or expiration of the Management
Agreement unless (i) the ability of Praxis to make Recommendations is not
terminated or (ii) such termination is due to the sale of the Bank and the
Executive's Employment has not been terminated or, if terminated, Section 7(a)
hereof does not apply;
(b) The expiration of the Employment Term, as it may be
extended under Section 2(b) or 2(c);
(c) The termination of Employment by Praxis without Cause
(as defined in Section 10);
(d) The termination of Employment by Praxis for disability
in accordance with Section 9;
(e) The termination of Employment by the Executive for
Good Reason (as defined in Section 11);
(f) The termination of Employment by Praxis for Cause (as
defined in Section 10);
(g) The Executive's death; or
(h) The termination of Employment by the Executive other
than for Good Reason (as defined in Section 11).
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10. Termination.
(a) If the Employment shall terminate upon the occurrence
of any of the events described in Sections 6(a), 6(b), 6(c), 6(d) or 6(e), then
Executive shall be entitled to receive payments as described in Section 8 below.
(b) If the Employment shall terminate upon the occurrence
of any of the events described in Sections 6(f), 6(g) or 6(h), then Executive
shall be entitled to no further payments of any kind.
11. Termination Payments.
(a) Pursuant to Section 7(a), the Bank shall be valued, as
provided in Section 8(b) (the "Valuation"), and Rose's shall have 90 days from
the date of the completion of the Valuation (the "Valuation Date") to accept or
reject the Valuation. If Rose's shall accept the Valuation, then such amount due
to Executive shall be payable on the terms set forth in Section 8(c). If Rose's
shall reject the Valuation, then Section 8(e) shall apply.
(b) Praxis and Executive shall mutually engage a
nationally recognized or regionally recognized investment bank that has
experience in valuing financial institutions in order to determine the Valuation
as of the date of the cessation of employment. If Praxis and Executive are
unable to agree mutually on such investment bank to determine the Valuation,
Praxis and Executive shall each select an investment bank having the
qualifications described in the first sentence of this Section 8(b), and such
investment banks shall select a third investment bank with such qualifications
to determine the Valuation.
(c) If Rose's shall accept the Valuation, the Compensation
Committee shall determine in writing the amount the Executive would have been
entitled to receive under Section 3 if the Bank had been sold (as of the date of
cessation of employment) for an amount equal to the Valuation after taking into
account transaction expenses, and any amounts due to Executive shall be paid as
follows:
(1) To the extent that cash available to the
Companies allows, and, in the case of the Bank, it is permitted to make a
distribution to its Stockholders under applicable law, Executive shall be paid
in full within 90 days (the "Payment Date") after the Valuation Date.
(2) To the extent that (i) the Chief Financial
Officer of each of Praxis and the Bank shall certify to Executive on or before
the Payment Date, and on each of the first three anniversaries of the Valuation
Date ("Valuation Date
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Anniversaries"), that the Companies do not have sufficient liquidity to permit
them to prudently pay all amounts due to Executive, or (ii) in the case of the
Bank, it is not permitted to make a distribution under applicable law, then,
subject to clause (ii), that portion of the amount due to Executive that the
liquidity of the Companies allows to be paid shall be paid on the Payment Date
and on the date which is 15 days after each of the Valuation Date Anniversaries,
and any remaining unpaid amounts shall not be immediately due but shall be
deferred until a date which is not more than three years following the Valuation
Date (the "Third Valuation Date Anniversary"). Notwithstanding the foregoing, if
the Companies do not have sufficient liquidity on the Third Valuation Date
Anniversary to pay to Executive all amounts due him, or, in the case of the
Bank, it is not permitted to make a distribution under applicable law, the
remaining unpaid amount (the "Unpaid Claim") shall be paid as provided in
Section 8(c)(3). Any amounts not paid shall be paid prior to any payments of any
kind by the Companies to their respective Stockholders and in any case in full
upon the sale of the Bank and the receipt by the Stockholders thereof of the net
proceeds thereof. The Companies shall use reasonable commercial efforts to
achieve sufficient liquidity to allow such unpaid amounts to be paid as soon as
practicable. Any amounts not paid on the Payment Date shall bear interest from
the Valuation Date at the following rates:
For the first six months after the Valuation Date:
LIBOR
From six to 12 months after the Valuation Date:
LIBOR+2%
From 12 to 18 months after the Valuation Date:
LIBOR+4%
From 18 to 36 months after the Valuation Date:
LIBOR+6%
(3) The Unpaid Claim shall have a term of nine
years and shall bear interest, payable quarterly, at LIBOR plus 6% (with LIBOR
being determined and reset every 12 months). The principal of the Unpaid Claim
shall be paid in 36 equal installments.
(d) Upon the acceptance by Rose's of the Valuation, the
amount due to Executive may be assignable by him.
(e) If Rose's shall reject the Valuation, the Bank shall
promptly be put up for sale and Section 3 shall apply. If the purchase price of
the Bank consists of property other than cash, in addition to or in lieu of
cash, then the amount due to
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Executive shall be paid in the form of his pro rata portion of each element of
such consideration.
(f) Praxis shall promptly identify the projects which have
been completed by Praxis as of the date of the termination of Employment (the
"Termination Date") and provide or will provide Praxis with revenue (the
"Project Revenue"). Following his termination of Employment, in addition to any
Compensation payable to Executive pursuant to Section 3(a) and Section 8(c) or
8(e), Dividends (whenever paid) by Praxis and consisting of Project Revenue
received by Praxis within five years of the Termination Date, plus any cash and
receivables on hand on the Termination Date, less allocable costs and expenses
("Net Project Revenue"), shall be taken into account in computing the
Compensation payable to Executive pursuant to Section 3(a). Praxis hereby agrees
to exercise its best efforts to timely pay Dividends of Net Project Revenue to
its Stockholders. Notwithstanding the foregoing, if Praxis shall owe any amount
to Executive pursuant to Section 8(c)(2), the amount that would otherwise be
paid by Praxis as a Dividend of Net Project Revenue to its Stockholders shall be
applied against Executive's claim, but shall still be taken into account in
computing the Compensation payable to Executive.
12. Disability.
If the Executive becomes unable to perform his duties and
responsibilities as provided in Section 1 of this Agreement for a period of at
least 180 consecutive days by reason of disability, Praxis shall terminate the
Employment hereunder. In such event, Praxis shall have no other obligation to
the Executive other than the termination payments as set forth in Section 8.
13. Cause.
Cause shall mean any of the following:
(a) Any act by Executive involving willful misconduct or
gross negligence, which is materially injurious to either of the Companies;
(b) The commission of any act by Executive constituting
fraud on either of the Companies (excluding any good faith expense account
disputes);
(c) The conviction of Executive of (or the pleading by
Executive nolo contendere to) a felony or any other crime which would materially
interfere with Executive's ability to perform his responsibilities and duties,
other than felonies or other crimes related to the operation of a motor vehicle;
or
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(d) The breach by Executive of any material obligations
under this Agreement and his failure to remedy such breach after having been
given notice of the breach and a reasonable opportunity to cure it.
14. Good Reason.
Good Reason shall mean any of the following:
(a) The repeated failure to implement the Recommendations
made by Executive as a result of the action or inaction of Praxis or Rose's,
provided that:
(1) The Recommendations have been accepted by the
Bank's Board of Directors and management and have not been opposed by the
government agencies responsible for regulating the Bank;
(2) The Recommendations do not require additional
capital contributions by Rose's;
(3) The Recommendations would not limit, in any
material respect, the purchase, ownership or operation by Rose's or Holdings,
directly or through any subsidiary, of other businesses under laws and
regulations regulating the activities that may be conducted by stockholders of
the Bank; and
(4) The Recommendations do not involve a financing
by the Bank outside of the ordinary course of its business or a sale of the
Bank.
(b) Any material diminution of the role, responsibilities
or authority of Executive as an employee of Praxis, which the parties agree will
be deemed to have occurred upon the sale of the Bank.
15. Covenant not to Compete.
(a) Executive agrees that during the Employment Term he
will not, directly or indirectly, for his own benefit or for, with or through
any other person, firm or corporation, (i) manage, operate, control or
participate in the management, operation or control of, or be connected as a
director, officer, employee, partner, consultant, agent, independent contractor
or otherwise with, or permit his name to actively be used in connection with,
the operation of any business or organization or (ii) invest in or loan money to
any business or organization competing with, or of a nature similar to, the
business of Praxis or the Bank; provided, however, Executive may purchase or
hold not more than five percent of any class of equity securities of any
publicly traded company without restriction.
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(b) If (i) Executive shall resign voluntarily from his
Employment other than for Good Reason or (ii) his Employment shall be terminated
for Cause, then during the period commencing on the Termination Date and for a
period of two years thereafter, Executive will not directly or indirectly, for
his own benefit or for, with or through any other person, firm or corporation,
manage, operate, control or participate in the management, operation or control
of, or be connected as a director, officer, employee, partner, consultant,
agent, independent contractor or otherwise with, or permit his name to actively
be used in connection with, or invest in or loan money to (collectively,
"Participate In"), any business or organization which is then competing with or
of a similar nature to the business of the Bank or Praxis; provided, however,
Executive may purchase or hold not more than five percent of any class of equity
securities of any publicly traded company without restriction. If Executive's
Employment shall terminate under any other circumstances, then during the period
commencing on the Termination Date and for a period of two years thereafter, he
will not Participate In or with respect to any other Utah industrial loan
corporation.
(c) Notwithstanding the provisions of subsections (a) and
(b) above, Executive shall be entitled to own, and to receive revenues or
payments with respect to, nominal investments held by Executive as of the date
of the signing of this Agreement as to which Executive's role is passive.
Executive shall make reasonable efforts to disclose the nature of such
investments to Rose's, but shall not be required to make any disclosure where
such disclosure would conflict with a confidentiality obligation of Executive
with respect to such investment. In addition, (i) Executive may continue to hold
his current investment (approximately nine percent of the outstanding equity on
a fully diluted basis) in Goodrich & Pennington Mortgage Fund Inc. (the "Fund"),
a mortgage and loan origination company operating primarily in the western
United States, (ii) Executive may serve as a member of the board of directors of
the Fund, and (iii) Executive may continue to provide, in his capacity as a
member of the board of directors, limited consulting services to the Fund,
provided that the performance of such services does not interfere with the
performance of services by Executive under this Agreement.
(d) If any restriction set forth with regard to this
Section 12 is found by any court of competent jurisdiction or an arbitrator to
be unenforceable because it extends for too long a period of time or over too
great a range of activities or in too broad a geographic area, it shall be
interpreted to extend over the maximum period of time, range of activities or
geographic area as to which it may be enforce able.
16. Confidential Information
(a) During and after the Employment Term, Executive shall
not use for his own benefit or any other person or entity other than the
Companies and its
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<PAGE>
affiliates any secret or confidential information, knowledge or data relating to
the Company and its affiliates, and their respective businesses, including any
confidential information as to customers of the Bank or its affiliates: (i)
obtained by Executive during his employment by Praxis, and (ii) not otherwise
public knowledge or known within the Bank's or its affiliates' industry.
Executive shall not, without prior written consent of Praxis, unless compelled
pursuant to the order of a court or other governmental or legal body having
jurisdiction over such matter, communicate or divulge any such information,
knowledge or data to anyone.
(b) Upon termination of Employment, Executive shall
promptly deliver to Praxis all documents (whether prepared by Praxis, the Bank,
an affiliated entity, Executive or a third party) relating to Praxis, the Bank
or an affiliate of either or any of their businesses or property which Executive
may possess or have under his direction or control.
17. Stockholder Approval.
This Agreement shall be effective only if it is approved
by the stockholders of a majority of the outstanding shares of common stock of
Holdings, and if such stockholders do not approve this Agreement on or prior to
October 31, 1998, it shall become null and void. Holdings agrees to call and
convene a stockholders meeting as soon as practicable and to use its reasonable
best efforts to obtain the required stockholder approval of this Agreement.
18. Withholding.
Praxis shall withhold from any and all amounts payable
under this Agreement such federal, state and local taxes as may be required to
be withheld pursuant to any applicable law or regulation. Accordingly, all
dollar amounts referenced herein are "gross" amounts as opposed to "net"
amounts.
19. Executive Representation.
Executive represents and warrants that he is under no
contractual or other limitation that prevents him from entering into this
Agreement and performing his obligations hereunder.
20. Guarantee by Rose's.
Rose's shall guarantee the obligations of Praxis to make
payments to Executive pursuant to Sections 3 and 8(c)(3) and if the Bank has
sufficient liquidity available to pay Dividends, subject to applicable law,
Rose's shall exercise its reasonable best efforts to cause the Bank to pay
Dividends and thereby allow Rose's
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<PAGE>
to make payments to Praxis under the Management Agreement in order to enable
Praxis to make payments that may be due to Executive pursuant to Section 8(c)(1)
or 8(c)(2); provided, however, that Holdings shall have no liability hereunder.
21. Entire Agreement; Modification.
This Agreement constitutes the full and complete
understanding of the parties hereto and supersedes all prior agreements and
understandings, oral or written, with respect to the subject matter hereof. Each
party to this Agreement acknowledges that no representations, inducements,
promises or agreements, oral or otherwise, have been made by either party, or
anyone acting on behalf of either party, which are not embodied herein and that
no other agreement, statement or promise not contained in this Agreement shall
be valid or binding. This Agreement may not be modified or amended except by an
instrument in writing signed by the party against whom or which enforcement may
be sought.
22. Severability.
Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms of
provisions of this Agreement in any other jurisdiction.
23. Waiver of Breach.
The waiver by any party of a breach of any provisions of
this Agreement, which waiver must be in writing to be effective, shall not
operate as or be construed as a waiver of any subsequent breach.
24. Notices.
All notices hereunder shall be in writing and shall be
deemed to have been duly given when delivered by hand, or one day after sending
by express mail or other "overnight mail service," or three days after sending
by certified or registered mail, postage prepaid, return receipt requested.
Notice shall be sent as follows: if to Executive, to the address as listed in
the records of Praxis; and if to Praxis, to Praxis at its office as set forth at
the head of this Agreement, to the attention of the Chairman. Either party may
change the notice address by notice given as aforesaid.
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<PAGE>
25. Assignability.
This Agreement, and the rights and benefits conferred upon
Executive hereunder, may not be sold, transferred, pledged or otherwise assigned
by Executive.
26. Governing Law.
All issues pertaining to the validity, construction,
execution and performance of this Agreement shall be construed and governed in
accordance with the laws of the State of New York, without giving effect to the
conflict or choice of law provisions thereof.
27. Headings.
The headings in this Agreement are intended solely for
convenience or reference and shall be given no effect in the construction or
interpretation of this Agreement.
28. Counterparts.
This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
29. Availability of Equitable Remedies.
Since a breach of the provisions of Section 12 or 13 of
this Agreement could not adequately be compensated by money damages, Praxis
shall be entitled, in addition to any other right or remedy available to it, to
an injunction restraining such breach or a threatened breach and to specific
performance of any such provision of this Agreement, and in either case no bond
or other security shall be required in connection therewith, and the parties
hereby consent to the issuance of such injunction and to the ordering of
specific performance.
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<PAGE>
IN WITNESS WHEREOF, Praxis has caused this Agreement to be duly
executed and Executive has hereunto set his hand as of the date first set forth
above.
PRAXIS INVESTMENT ADVISORS, INC.
By:
------------------------------------
Name:
Title:
------------------------------------
Andrew Winokur
Agreement and Consent
to Section 14:
ROSE'S HOLDINGS, INC.
By:
------------------------------------
Name:
Title:
Agreement and Consent to Sections 8 and 17:
ROSE'S INTERNATIONAL, INC.
By:
------------------------------------
Name:
Title:
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<PAGE>
ROSE'S HOLDINGS, INC.
PROXY
The undersigned appoints Warren G. Lichtenstein and Jack L. Howard, 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 Holdings, Inc. (the
"Corporation") that the undersigned is entitled to vote at the annual meeting of
stockholders to be held at the Corporation's principal executive offices at 150
East 52nd Street, New York, New York 10022, on Wednesday, November 4, 1998 at
10:00 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 (1), (2), (3), (4), (5), (6) and
(7)
1. ELECTION OF DIRECTORS
FOR all nominees listed WITHHOLD AUTHORITY to
below except as marked vote for all nominees
to the contrary below [ ] listed below [ ]
Warren G. Lichtenstein, Earle C. May and Joseph L. Mullen
(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 RESTATED CERTIFICATE OF
INCORPORATION TO (I) CHANGE THE PAR VALUE OF THE CORPORATION'S CAPITAL
STOCK FROM NO PAR VALUE TO $.001 PAR VALUE PER SHARE AND (II) DELETE
REFERENCES TO THE PLAN OF REORGANIZATION
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO EFFECT A REVERSE STOCK SPLIT FOLLOWED BY A FORWARD STOCK SPLIT
OF THE COMMON STOCK
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL TO AMEND THE CORPORATION'S RESTATED CERTIFICATE OF INCORPORATION
AND BYLAWS TO (I) ELIMINATE THE STAGGERED BOARD AND (II) REDUCE THE REQUIRED
NUMBER OF BOARD MEMBERS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
5. PROPOSAL TO APPROVE THE PERFORMANCE BONUS AWARD TO THE PRESIDENT AND
CHIEF EXECUTIVE OFFICER OF A SUBSIDIARY OF THE CORPORATION TO QUALIFY
SUCH AWARD UNDER SECTION 162(m) OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. PROPOSAL TO APPROVE THE MERGER OF THE CORPORATION'S NEW EQUITY
COMPENSATION PLAN WITH THE LONG TERM STOCK INCENTIVE PLAN, TOGETHER
WITH CERTAIN AMENDMENTS TO THE LONG TERM STOCK INCENTIVE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE
INDEPENDENT AUDITORS OF THE CORPORATION
[ ] FOR [ ] AGAINST [ ] ABSTAIN
8. 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, 4, 5, 6, AND 7.
Please sign exactly as your name appears on your stock certificates.
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: ___________________, 1998
Please return in the enclosed postage paid envelope.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
<PAGE>
APPENDIX
[NOT PROVIDED TO SECURITY HOLDERS]
ROSE'S HOLDINGS, INC.
LONG TERM STOCK INCENTIVE PLAN
(Formerly known as the Rose's Stores, Inc. Long Term Stock Incentive Plan)
As amended and restated effective as of November 4, 1998.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. PURPOSE...................................................... 1
ARTICLE II. DEFINITIONS.................................................. 1
ARTICLE III. ADMINISTRATION............................................... 7
ARTICLE IV. SHARE AND OTHER LIMITATIONS.................................. 10
ARTICLE V. ELIGIBILITY.................................................. 13
ARTICLE VI. STOCK OPTION GRANTS.......................................... 13
ARTICLE VII. RESTRICTED STOCK AWARDS...................................... 16
ARTICLE VIII. STOCK APPRECIATION RIGHTS.................................... 19
ARTICLE IX. PERFORMANCE SHARES........................................... 21
ARTICLE X. PERFORMANCE UNITS............................................ 23
ARTICLE XI. OTHER STOCK-BASED AWARDS..................................... 25
ARTICLE XII. NON-EMPLOYEE DIRECTOR AWARDS................................. 26
ARTICLE XIII. NON-TRANSFERABILITY AND TERMINATION OF
EMPLOYMENT/CONSULTANCY PROVISIONS............................ 27
ARTICLE XIV. CHANGE IN CONTROL PROVISIONS................................. 31
ARTICLE XV. TERMINATION OR AMENDMENT OF THIS PLAN........................ 33
ARTICLE XVI. UNFUNDED PLAN................................................ 34
ARTICLE XVII. GENERAL PROVISIONS........................................... 34
ARTICLE XVIII. EFFECTIVE DATE OF PLAN....................................... 37
ARTICLE XIX. TERM OF PLAN................................................. 37
ARTICLE XX. NAME OF PLAN................................................. 37
EXHIBIT A PERFORMANCE GOALS............................................ 38
i
<PAGE>
Rose's Holdings, Inc.
Long Term Stock Incentive Plan
ARTICLE I.
PURPOSE
The purpose of this Rose's Holdings, Inc. Long Term Stock Incentive Plan
(this "Plan") is to enhance the profitability and value of Rose's Holdings, Inc.
(the "Company") for the benefit of their stockholders by enabling the Company:
(i) to offer employees and Consultants of the Company and its Affiliates, 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.
This Plan was formerly known as the Rose's Stores, Inc. Long Term Stock
Incentive Plan and was amended and restated, effective as of November 4, 1998 to
reflect the restructuring of Rose's Stores, Inc. ("Rose's") whereby Rose's
became a wholly-owned subsidiary of the Company, and to further provide for (ii)
the merger of the Rose's Stores, Inc. New Equity Compensation Plan with and into
the Plan, thereby increasing by 700,000 shares the number of shares of Common
Stock subject to Awards under the Plan, (iii) the further increase by 800,000
shares the number of shares of Common Stock subject to Awards under the Plan,
bringing the total to 2,000,000 shares, (iv) an increase in the maximum number
of shares of Common Stock with respect to which Awards can be granted to any
individual from 100,000 shares to 500,000 shares of Common Stock in any fiscal
year, and (v) certain other amendments, subject to the approval of the Company's
stockholders as provided under applicable law or under the rules of the
applicable stock exchange.
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. "Affiliate" means each of the following: (i) any Designated
Subsidiary; (ii) any Parent; (iii) any corporation, trade or business
(including, without limitation, a
<PAGE>
partnership or limited liability company) which is directly or indirectly
controlled 50% or more (whether by ownership of stock, assets or an
equivalent ownership interest or voting interest) by the Company or one of
its Affiliates; and (iv) any other entity in which the Company or any of
its Affiliates has a material equity interest and which is designated as
an "Affiliate" by resolution of the Committee.
2.3. "Alternative Option" shall have the meaning set forth in
Section 14.1(c).
2.4. "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 elected under Article XII, shall be
confirmed by, and subject to the terms of, a written agreement executed by
the Company and the Participant.
2.5. "Board" shall mean the Board of Directors of the Company.
2.6. "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 an
Affiliate 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 an Affiliate; 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 an
Affiliate 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.
2.7. "Change in Control" and "Change in Control Price" shall have
the meanings set forth in Article XIV.
2.8. "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
<PAGE>
2.9. "Committee" shall mean a committee or subcommittee of the
Board appointed from time to time by the Board, which shall consist of two
or more non-employee directors, each of whom is intended to be, to the
extent required by Rule 16b-3 of the Code, a "non-employee director" as
defined in Rule 16b-3 and, to the extent required by Section 162(m) of the
Code and the regulations thereunder, an "outside director" as defined
under Section 162(m) of the Code.
2.10. "Common Stock" shall mean the Common Stock, $.01 par value per
share, of the Company.
2.11. "Company" shall mean Rose's Holdings, Inc. and successors by
operation of law.
2.12. "Consultant" shall mean any national person who is adviser or
consultant to the Company or an Affiliate who is eligible pursuant to
Section 5.1 to be granted Awards under this Plan.
2.13. "Designated Subsidiary" shall mean any subsidiary corporation
of the Company within the meaning of Section 424(f) of the Code.
2.14. "Disability" shall mean total and permanent disability, as
defined in Section 22(e)(3) of the Code.
2.15. "Effective Date" shall mean the effective date of this Plan as
defined in Article XVIII.
2.16. "Eligible Employees" shall mean the employees of the Company
and the Affiliates who are eligible pursuant to Section 5.1 to be granted
Awards under this Plan.
2.17. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
2.18. "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 trade or the NASDAQ Stock Market, Inc., or (ii) if the
Common Stock is not then traded on any such national securities exchange
or the NASDAQ Stock Market, Inc., 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
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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.
2.19. "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 an Affiliate 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 an
Affiliate 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.
2.20. "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.
2.21. "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.
2.22. "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.
2.23. "Non-Employee Director" shall mean any non-employee director
of the Company who is not an employee of the Company or any Designated
Subsidiary and
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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.
2.24. "Non-Qualified Stock Option" shall mean any Stock Option
awarded under this Plan that is not an Incentive Stock Option.
2.25. "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.
2.26. "Other Stock-Based Award" shall have the meaning set forth in
Article XI.
2.27. "Parent" shall mean any parent corporation of the Company
within the meaning of Section 424(e) of the Code.
2.28. "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 Affiliates 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.
2.29. "Performance Cycle" shall have the meaning set forth in
Section 10.1.
2.30. "Performance Period" shall have the meaning set forth in
Section 9.1.
2.31. "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.
2.32. "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.
2.33. "Reloads" shall have the meaning set forth in Section 6.3(h).
2.34. "Restricted Stock" shall mean an award of shares of Common
Stock under this Plan that is subject to restrictions under Article VII.
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2.35. "Restriction Period" shall have the meaning set forth in
Section 7.3(a) with respect to Restricted Stock for Eligible Employees and
Consultants.
2.36. "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.
2.37. "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 an Affiliate 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 an
Affiliate; or (iii) such earlier date after age 55 as approved by the
Committee with regard to such Participant.
2.38. "Rule 16b-3" shall mean Rule 16b-3 under Section 16(b) of the
Exchange Act as then in effect or any successor provisions.
2.39. "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.
2.40. "Stock Appreciation Right" shall mean the right pursuant to an
Award granted under Article VIII.
2.41. "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.
2.42. "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).
2.43. "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, any Parent or Designated Subsidiary.
2.44. "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 Affiliates. In the event an entity shall cease to be an
Affiliate, there shall be deemed a
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Termination of Consultancy of any individual who is not otherwise a
Consultant of the Company or another Affiliate at the time the entity
ceases to be a Affiliate.
2.45. "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
Affiliates; or (ii) when an entity which is employing a Participant ceases
to be an Affiliate, unless the Participant thereupon becomes employed by
the Company or another Affiliate.
2.46. "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.
2.47. "Transfer" or "Transferred" shall mean anticipate, alienate,
attach, sell, assign, pledge, encumber, charge or otherwise transfer.
ARTICLE III.
ADMINISTRATION
3.1. The Committee. This 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 this 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;
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(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 this Plan;
(g) to determine whether a Stock Appreciation Right shall be a
Tandem Stock Appreciation Right or Non-Tandem Stock Appreciation Right;
and
(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.
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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
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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 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 2,000,000 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. In determining the number of shares
of Common Stock available for Awards other than Awards of Incentive Stock
Options, if Common Stock has been exchanged by a Participant as full or
partial payment to the Company, or for withholding, in connection with the
exercise of a Stock Option or the number
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shares of Common Stock otherwise deliverable has been reduced for
withholding, the number of shares of Common Stock exchanged as payment in
connection with the exercise or for withholding or reduced shall again be
available for purposes of Awards 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 500,000 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 500,000 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 500,000 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 500,000 shares (subject to any
increase or decrease pursuant to Section 4.2).
(vi) The maximum number shares of Common Stock subject to any
Other Stock-Based Awards which may be granted under this Plan during any
fiscal year of the Company to each Eligible Employee or Consultant shall
be 500,000 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
any Affiliate, 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 any Affiliate, 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
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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.
ARTICLE V.
ELIGIBILITY
5.1. All employees and Consultants of the Company and its Affiliates 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.
Employees of the Company, its Designated Subsidiaries and its Parent (if any)
are eligible to be granted Incentive Stock Options; employees of any Affiliate
that is not a Designated Subsidiary or a Parent are not eligible to receive
Incentive Stock Options.
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 this Plan.
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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 or to any Eligible Employee of an Affiliate (other than any Affiliate
which is a Parent or Designated Subsidiary).
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
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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 at or
after grant. 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 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, any
Designated Subsidiary or Parent 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
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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 this 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 this 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, including established Performance Goals under Exhibit A in
accordance with Section 162(m) of the Code 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:
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(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.
(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 Holdings, 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
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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.
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
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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 and Eligible Employees of an Affiliate
(other than a Designated Subsidiary or Parent) 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.
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(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 this Plan on the number of shares of Common Stock to be
issued under this 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.
(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
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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.
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(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 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.
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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
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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.
(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.
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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 or
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 30 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
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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.
(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.
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(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. Notwithstanding the foregoing, the Committee may determine at the
time of grant or thereafter, that a NonQualified Stock Option (other than a
Non-Qualified Stock Option granted to a Non-Employee Director) that is otherwise
not transferable pursuant to this Article XIII is transferable in whole or part
and in such circumstances, and under such conditions, as specified by the
Committee.
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.
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(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, 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.
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(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.
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(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:
(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 unvested
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
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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 2 consecutive years, individuals who at the
beginning of such period constitute the Board, 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 2 year
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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 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 THIS 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 this 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; (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
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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 this 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 this 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 this 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 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.
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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.
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(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.
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
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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 this 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 this 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 this Plan.
ARTICLE XVIII.
EFFECTIVE DATE OF PLAN
On September 2, 1998, the Board adopted this Plan, as amended and
restated, effective as of the date of approval thereof by the stockholders of
the Company at their annual meeting in accordance with the requirements of the
laws of the State of Delaware.
ARTICLE XIX.
TERM OF PLAN
No Award shall be granted pursuant to this Plan on or after November 4,
2008, but Awards granted prior to such tenth anniversary may extend beyond that
date.
ARTICLE XX.
NAME OF PLAN
This Plan, as amended and restated, shall be known as the Rose's Holdings,
Inc. Long Term Stock Incentive Plan. This Plan was formerly known as the Rose's
Stores, Inc. Long Term Stock Incentive Plan.
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EXHIBIT A
The Performance Goals in respect of the applicable Awards referred to in
the Rose's Holdings, Inc. Long Term Stock Incentive Plan (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.
