FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6905
RUDDICK CORPORATION
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0905940
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2000 Two First Union Center
Charlotte, North Carolina 28282
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (704) 372-5404
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding Shares
Class As of February 6, 1998
Common Stock 46,710,771 shares
RUDDICK CORPORATION
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS -
DECEMBER 28, 1997 AND SEPTEMBER 28, 1997 2
CONSOLIDATED CONDENSED STATEMENTS OF
INCOME - THREE MONTHS ENDED
DECEMBER 28, 1997 AND DECEMBER 29, 1996 3
CONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS - THREE MONTHS ENDED
DECEMBER 28, 1997 AND DECEMBER 29, 1996 4
NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 6-9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 10
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RUDDICK CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
December 28, September 28,
ASSETS 1997 1997
(Unaudited) (Unaudited)
------------- --------------
CURRENT ASSETS:
Cash and Temporary Cash
Investments $11,371 $17,150
Accounts Receivable, Net 74,303 77,852
Inventories 209,940 196,049
Other 29,686 32,249
------------- ---------------
Total Current Assets 325,300 323,300
PROPERTY, NET 485,544 466,559
INVESTMENTS AND OTHER ASSETS 88,773 95,384
------------- ---------------
Total $899,617 $885,243
============= ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable $7,677 $8,100
Current Portion of
Long-Term Debt 592 575
Accounts Payable 133,665 142,812
Income Taxes Payable 7,841 5,758
Other Accrued Liabilities 52,334 77,162
------------ --------------
Total Current Liabilities 202,109 234,407
LONG-TERM DEBT 227,508 189,919
DEFERRED LIABILITIES 75,905 75,823
MINORITY INTEREST 4,737 4,587
SHAREHOLDERS' EQUITY:
Capital Stock - Common 57,640 56,779
Retained Earnings 334,745 326,488
Cumulative Translation
Adjustments (3,027) (2,760)
----------- ------------
Shareholders' Equity 389,358 380,507
----------- -----------
Total $899,617 $885,243
=========== ===========
2
RUDDICK CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except share and per share data)
THREE MONTHS ENDED
December 28, December 29,
1997 1996
--------------- --------------
(Unaudited) (Unaudited)
NET SALES
American & Efird 87,725 87,409
Harris Teeter 529,877 486,704
--------------- --------------
Total 617,602 574,113
OPERATING PROFIT
American & Efird 10,621 10,087
Harris Teeter 13,425 12,954
-------------- --------------
Total 24,046 23,041
OTHER COSTS AND DEDUCTIONS
Interest expense, net 4,105 3,194
Other expense, net 1,824 2,434
Minority interest 150 -
-------------- --------------
Total 6,079 5,628
Income before income taxes 17,967 17,413
Income taxes 5,975 5,834
-------------- --------------
Net income 11,992 11,579
============== ==============
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING:
Basic 46,646,481 46,497,009
Diluted 46,981,727 46,711,192
NET INCOME PER SHARE -
BASIC AND DILUTED $.26 $.25
DIVIDENDS DECLARED PER SHARE -
Common $.08 $.08
3
RUDDICK CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
THREE MONTHS ENDED
December 28, December 29,
1997 1996
(Unaudited) (Unaudited)
------------ ---------------
CASH FLOW FROM OPERATING
ACTIVITIES
Net Income 11,992 11,579
Non-Cash Items Included
in Net Income
Depreciation and
Amortization 15,701 14,318
Other, Net (983) 1,551
Decrease (Increase) in
Current Assets (8,204) (12,469)
Increase (Decrease) in
Current Liabilities (32,315) (17,296)
------------ ---------------
NET CASH USED IN OPERATING
ACTIVITIES (13,809) (2,317)
INVESTING ACTIVITIES
Purchase of Assets (36,005) (31,257)
Cash Proceeds from Sale
of Assets 304 42
Company Owned Life
Insurance, Net 9,575 6,610
Other, Net (547) (4,867)
------------ ---------------
NET CASH USED IN INVESTING
ACTIVITIES (26,673) (29,472)
FINANCING ACTIVITIES
Proceeds of Long-Term
Borrowings 37,800 29,400
Payment of Principal on
Long-Term Debt (124) (1,272)
Dividends (3,735) (3,722)
Other, Net 762 477
----------- ---------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 34,703 24,883
INCREASE (DECREASE) IN
BALANCE SHEET CASH (5,779) (6,906)
BALANCE SHEET CASH AT
BEGINNING OF PERIOD 17,150 21,033
----------- -------------
BALANCE SHEET CASH AT
END OF PERIOD 11,371 14,127
=========== ==============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash Paid During the Period for:
Interest 3,902 3,101
Income Taxes 3,412 212
4
RUDDICK CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
IN THE OPINION OF MANAGEMENT, THE INFORMATION FURNISHED
REFLECTS ALL ADJUSTMENTS (CONSISTING ONLY OF NORMAL RECURRING ACCRUALS)
NECESSARY TO PRESENT FAIRLY THE RESULTS FOR THE INTERIM PERIODS PRESENTED.
5
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
The following table shows net sales and operating profit for each of
Ruddick Corporation's operating subsidiaries for the quarters ended December
28, 1997 and December 29, 1996:
(In Thousands) Quarter Ended
December 28, December 29,
1997 1996
--------- -----------
Net Sales
American & Efird $ 87,725 $ 87,409
Harris Teeter 529,877 486,704
--------- ----------
Total $ 617,602 $ 574,113
---------- -----------
Operating Profit
American & Efird $ 10,621 $ 10,087
Harris Teeter 13,425 12,954
---------- ----------
Total $ 24,046 $ 23,041
Consolidated sales of $618 million in the first quarter of fiscal
1998 increased 7.6% over the $574 million reported in the comparable quarter
of last year. Total operating profit of $24 million increased 4.4% over the
prior year period. Net income of $12.0 million was 3.6% higher than the
$11.6 million reported last year.
On both the basic and diluted basis, net income per share was $.26,
as compared to $.25 per share reported in the first quarter of last year.
The adoption during the current fiscal period of Statement of Financial
Accounting Standards No. 128, "Earnings per Share," had no effect on the net
income per share presented for the respective periods.
American & Efird sales in the first quarter of fiscal 1998 of $87.7
million were marginally higher than the comparable quarter last year, having
been impacted somewhat by the sluggish retail environment for apparel during
the current quarter, and which may be expected to continue during the
next fiscal quarter. Operating profit of $10.6 million was 5.3% higher than
in the prior year's first quarter, reflecting improved manufacturing
productivity due to the nearly completed integration of Threads USA, certain
assets of which were acquired in June 1996, and further reflecting increased
demand for higher value-added products. Further, although foreign sales and
profits are not material to the Company's consolidated results, NAFTA
continued to create a shift of A&E's sales toward Latin America due to the
growth of apparel manufacturing in those regions. Led by substantial sales
growth in Mexico and Costa Rica in the first quarter, international sales
overall increased strongly over the same period last year. Operating profit,
6
however, was negatively impacted by losses in the operations in Korea and
Malaysia, which aggregated $1.2 million in pre-tax losses, primarily the
results of bad debt write-offs and currency translation losses precipitated
by currency devaluation. While the turbulence in the Southeast Asian economy
may continue for some time, future losses are not anticipated to be material
to the Company's consolidated results of operations or financial condition.
Lastly, A&E has announced its intention to form a joint venture in India.
Harris Teeter sales in the first quarter of fiscal 1998 increased
by 8.9%, to $529.9 million from $486.7 million in the comparable period in
fiscal 1997. Net sales for stores in operation during both periods increased
by 2.7%, a strong performance considering the still highly competitive
supermarket environment and that Harris Teeter's same store sales in the
fourth fiscal quarter of 1997 were negative. The sales improvement was
largely due to the success of Harris Teeter's advertising and promotional
activities, and greater use of its customer loyalty card. Operating profit of
$13.4 million increased by 3.6% over the $13.0 million reported for the
comparable period in 1997. The increase in operating profit, and slight
reduction in its margin to sales, were primarily the net results of higher
sales, increased productivity and decreased waste, higher advertising and
promotional costs, and higher fixed expenses associated with new stores. At
December 28, 1997, 139 stores were in operation compared to 133 in operation
at December 29, 1996. During the quarter, three new stores were opened and
two stores were closed.
Capital Resources and Liquidity
Ruddick Corporation is a holding company which, through its
wholly-owned subsidiaries, American & Efird, Inc. and Harris Teeter, Inc.,
is engaged in the primary businesses of industrial sewing thread manufacture
and distribution, and regional supermarket operations, respectively. Ruddick
has no material independent operations, nor material assets, other than the
investments in its operating subsidiaries. Ruddick provides a variety of
services to its subsidiaries and is dependent upon income and upstream
dividends from its subsidiaries. There exist no material restrictions on
such dividends, which are determined as a percentage of net income of each
subsidiary.
The Company seeks to limit long-term debt such that it constitutes no
more than 40% of capital employed, which includes long-term debt and
shareholders' equity. As of December 28, 1997, this percentage was 36.7%,
as compared to 33.1% at September 28, 1997.
The Company's principal source of liquidity has been revenues from
operations. The Company also has the ability to borrow up to an aggregate
of $100 million under established revolving lines of credit with three banks.
The maximum amount outstanding under these credit facilities during the
quarter ended December 28, 1997 was $86.7 million, and $71.7 million was
outstanding at quarter end, compared to $33.9 million at September 28, 1997.
The additional borrowings under Ruddick's revolving credit facilities were
primarily used for capital expenditures. Borrowings and repayments
under these revolving credit facilities are of the same nature as short-term
credit lines; however,
7
due to the nature and terms of the agreements allowing
up to five years for repayment, all borrowings under these facilities are
classified as long-term debt. In addition, the Company has available a
non-committed $50 million Private Shelf Facility with a major life insurance
company. No borrowings under this facility had been undertaken as of
December 28, 1997.
Working capital of $123.2 million at December 28, 1997 increased $34.3
million from September 28, 1997, primarily due to increases in inventory to
support sales activity at Harris Teeter and A&E, including new store and
seasonal grocery activity and international thread sales, respectively, and
reductions in accounts payable and other accrued liabilities. The current
ratio was 1.6 at December 28, 1997 and 1.4 at September 28, 1997.
Covenants in certain of the Company's long-term debt agreements
limit the total indebtedness that the Company may incur. The Company
remained well within such covenants. Management believes that the limit on
indebtedness does not significantly restrict the Company's liquidity and
that such liquidity is adequate to meet foreseeable requirements.
In the first fiscal quarter, capital expenditures totaled $34.4
million. A&E spent $4.8 million of the $34 million it expects to spend in
fiscal year 1998, and Harris Teeter spent $29.6 million of an expected $88
million. These expenditures are for modernization and expansion. Management
expects that internally generated funds, supplemented by available borrowing
capacity, will be adequate to finance such expenditures.
Other Matters
The Company is in the process of the modification or conversion of
Company computer systems to provide for proper functioning beyond calendar
year 1999. It is anticipated that substantially all of these Year 2000
costs will be incurred during fiscal 1998 and 1999. The Company expects to
complete its Year 2000 cost estimates by mid-1998. Maintenance or
modification costs will be expensed as incurred, while the costs of new
software will be capitalized and amortized over the software's useful life.
Management believes that resources are available to complete the modification
and conversion and that its costs will not materially affect the Company's
operating results or financial condition. Management believes that the Year
2000 compliance will be completed well before the end of fiscal year 1999.
It must be recognized, however, that failure to do so could have a material
adverse effect on the Company's future results of operations.
The Company expects that its effective income tax rates will increase
toward the statutory rates domestically as the favorable tax attributes of
Company owned life insurance ("COLI") were significantly diminished as of
January 1, 1996, as a result of federal legislation which will phase out
interest deductions on policy loans by January 1, 1999. In addition, the
Internal Revenue Service, on a comprehensive national level, is
8
evaluating their position regarding the deductibility of COLI policy loan
interest for years prior to January 1, 1999. This outcome could result in
a material impact upon future income taxes and results of operations.
The foregoing discussion contains some forward-looking statements
about the Company's financial condition and results of operations, which are
subject to certain risks and uncertainties that could cause actual results
to differ materially from those reflected in the forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's judgment only as of the date hereof.
The Company undertakes no obligation to publicly revise these forward-looking
statements to reflect events and circumstances that arise after the date
hereof.
Factors that might cause the Company's actual results to differ
materially from those anticipated in forward-looking statements include the
following:
-generally adverse economic and industry conditions, including a
decline in consumer demand for apparel products or significant changes in
consumer food preferences or eating habits,
-changes in the competitive environment, including increased
competition in the Company's primary geographic markets, the entry of new
competitors and consolidation in the supermarket industry,
-economic or political changes in the countries in which the Company
operates or adverse trade regulations,
-the passage of future tax legislation, or regulatory interpretations
or pronouncements, if any, that could have an adverse impact on the tax
benefits of the ESOP dividends and COLI,
-management's ability to accurately predict the adequacy of the
Company's present liquidity to meet future requirements,
-changes in the Company's capital expenditures, new store openings and
store closings, and
-non-availability of resources for the Company, or its suppliers and
customers, to complete their respective Year 2000 compliance effectively.
9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit No. Description of Exhibit
10.1 Ruddick Corporation 1997 Comprehensive Stock
Option and Award Plan
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K - None
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
RUDDICK CORPORATION
DATE: February 11, 1998 /s/ R. N. Brigden
R. N. BRIGDEN
VICE PRESIDENT - FINANCE
(PRINCIPAL FINANCIAL OFFICER)
10
RUDDICK CORPORATION 1997
COMPREHENSIVE STOCK OPTION AND AWARD PLAN
ARTICLE I -- PREAMBLE
1.1. The Ruddick Corporation 1997 Comprehensive Stock Option
and Award Plan is intended to secure for the Corporation, its
Subsidiaries and its shareholders the benefits arising from
ownership of the Corporation's Common Stock by the employees of
the Corporation and its Subsidiaries and by the directors of the
Corporation, all of whom are and will be responsible for the
Corporation's future growth. The Plan is designed to help
attract and retain for the Corporation and its Subsidiaries
personnel of superior ability for positions of exceptional
responsibility, to reward employees and directors for past
services and to motivate such individuals through added
incentives to further contribute to the success of the
Corporation. With respect to persons subject to Section 16 of
the Act, transactions under this Plan are intended to satisfy the
requirements of Rule 16b-3 of the Act.
1.2. Awards under the Plan may be made to Eligible Persons
in the form of (i) Incentive Stock Options (to Eligible Employees
only); (ii) Nonqualified Stock Options; (iii) Restricted Stock;
(iv) Stock Awards; (v) Performance Shares; or (vi) any
combination of the foregoing.
1.3. The Plan shall be effective November 20, 1997 (the
"Effective Date"), subject to approval by the shareholders of the
Corporation to the extent necessary to satisfy the requirements
of the Code, the New York Stock Exchange, Inc., or other
applicable federal or state law.
ARTICLE II -- DEFINITIONS
Definitions. Except where the context otherwise indicates,
the following definitions apply:
2.1. "Act" means the Securities Exchange Act of 1934, as now
in effect or as hereafter amended.
2.2. "Award" means an award granted to a Participant in
accordance with the provisions of the Plan, including, but not
limited to, Stock Options, Restricted Stock, Stock Awards,
Performance Shares, or any combination of the foregoing.
2.3. "Award Agreement" means the separate written agreement
evidencing each Award granted to a Participant under the Plan.
2.4. "Board of Directors" means the Board of Directors of
the Corporation.
2.5. "Change of Control" means (i) the adoption of a plan of
merger or consolidation of the Corporation with any other
corporation or association as a result of which the holders of
the voting capital stock of the Corporation as a group would
receive less than 50% of the voting capital stock of the
surviving or resulting corporation; (ii) the approval by the
Board of Directors of an agreement providing for the sale or
transfer (other than as security for obligations of the
Corporation) of substantially all the assets of the Corporation;
or (iii) in the absence of a prior expression of approval by the
Board of Directors, the acquisition of more than 20% of the
Corporation's voting capital stock by any person within the
meaning of Section 13(d)(3) of the Act, other than a person, or
group including a person, who beneficially owned, as of the
Effective Date, more than 6.5% of the Corporation's voting
capital stock.
2.6. "Code" means the Internal Revenue Code of 1986, as now
in effect or as hereafter amended. (All citations to sections of
the Code are to such sections as they may from time to time be
amended or renumbered.)
2.7. "Committee" means a committee of the Board of Directors
established for the administration of the Plan pursuant to
Article III and consisting of two or more Directors. To the
extent necessary to comply with Rule 16b-3 under the Act, the
Committee shall consist solely of two or more Non-Employee
Directors. The Compensation and Special Stock Option Committee
of the Board of Directors shall constitute the Committee until
otherwise determined by the Board of Directors.
2.8. "Common Stock" means the common stock of the
Corporation to be issued pursuant to the Plan.
2.9. "Corporation" means Ruddick Corporation, a North
Carolina corporation, and its successors and assigns.
2.10. "Director" means a member of the Board of
Directors of the Corporation.
2.11. "Disability" means disability as determined under
procedures established by the Committee or in any Award, as set
forth in a Participant's Award Agreement.
2.12. "Effective Date" shall be the date set forth in
Section 1.3 of the Plan.
2.13. "Eligible Employee" means an Eligible Person who
is an employee of the Corporation or any Subsidiary.
2.14. "Eligible Person" means any employee of the
Corporation or any Subsidiary or any Director, as well as any
other person whose participation the Committee determines is in
the best interest of the Corporation, subject to limitations as
may be provided by the Code, the Act or the Committee.
2.15. "ERISA" means the Employee Retirement Income
Security Act of 1974, as now in effect or as hereafter amended.
2
2.16. "Fair Market Value" means, as of a given date and
for so long as shares of the Common Stock are listed on a
national securities exchange or reported on The Nasdaq Stock
Market as a Nasdaq National Market security, the mean between the
high and low sales prices for the Common Stock on such date, or,
if no such shares were sold on such date, the most recent date on
which shares of such Common Stock were sold, as reported in The
Wall Street Journal. If the Common Stock is not listed on a
national securities exchange or reported on The Nasdaq Stock
Market as a Nasdaq National Market security, Fair Market Value
shall mean the average of the closing bid and asked prices for
such stock in the over-the-counter market as reported by The
Nasdaq Stock Market. If the Common Stock is not listed on a
national securities exchange or reported on The Nasdaq Stock
Market as a Nasdaq National Market security, or the
over-the-counter market, Fair Market Value shall be the fair
value thereof determined in good faith by the Board of Directors.
2.17. "Grant Date" means, as to any Award, the latest
of:
(a) the date on which the Committee authorizes the
grant of the Award; or
(b) the date the Participant receiving the Award
becomes an employee or a director of the Corporation or its
Subsidiaries, to the extent employment status is a condition
of the grant or a requirement of the Code or the Act; or
(c) such other date (later than the dates described in
(a) and (b) above) as the Committee may designate and as set
forth in the Participant's Award Agreement.
2.18. "Immediate Family" means any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law and shall include adoptive
relationships.
2.19. "Incentive Stock Option" means a Stock Option that
meets the requirements of Section 422 of the Code and is granted
under Article IV of the Plan and designated as an Incentive Stock
Option in a Participant's Award Agreement.
2.20. "Non-Employee Director" shall have the meaning set
forth in Rule 16b-3 under the Act.
2.21. "Nonqualified Stock Option" means a Stock Option
that does not meet the requirements of Section 422 of the Code
and is granted under Article V of the Plan, or, even if meeting
the requirements of Section 422 of the Code, is not intended to
be an Incentive Stock Option and is not so designated in the
Participant's Award Agreement.
2.22. "Option Period" means the period during which a
Stock Option may be exercised from time to time, as established
by the Committee and set forth in the Award Agreement for each
Participant who is granted a Stock Option.
3
2.23. "Option Price" means the purchase price for a
share of Common Stock subject to purchase pursuant to a Stock
Option, as established by the Committee and set forth in the
Award Agreement for each Participant who is granted a Stock
Option.
2.24. "Participant" means an Eligible Person to whom an
Award has been granted and who has entered into an Award
Agreement evidencing the Award.
2.25. "Performance Objectives" shall have the meaning
set forth in Article IX of the Plan.
2.26. "Performance Period" shall have the meaning set
forth in Article IX of the Plan.
2.27. "Performance Share" means an Award under Article
IX of the Plan of a unit valued by reference to the Common Stock,
the payout of which is subject to achievement of such Performance
Objectives, measured during one or more Performance Periods, as
the Committee, in its sole discretion, shall establish at the
time of such Award and set forth in a Participant's Award
Agreement.
2.28. "Plan" means the Ruddick Corporation 1997
Comprehensive Stock Option and Award Plan, as amended from time
to time.
2.29. "Restricted Stock" means an Award under Article
VII of the Plan of shares of Common Stock that are at the time of
the Award subject to restrictions or limitations as to the
Participant's ability to sell, transfer, pledge or assign such
shares, which restrictions or limitations may lapse separately or
in combination at such time or times, in installments or
otherwise, as the Committee, in its sole discretion, shall
determine at the time of such Award and set forth in a
Participant's Award Agreement.
2.30. "Restriction Period" means the period commencing
on the Grant Date with respect to such shares of Restricted Stock
and ending on such date as the Committee, in its sole discretion,
shall establish and set forth in a Participant's Award Agreement.
2.31. "Retirement" means retirement as determined under
procedures established by the Committee or in any Award, as set
forth in a Participant's Award Agreement.
2.32. "Stock Award" means an Award of shares of Common
Stock under Article VIII of the Plan.
2.33. "Stock Option" means an Award under Article IV or
Article V of the Plan of an option to purchase Common Stock. A
Stock Option may be either an Incentive Stock Option or a
Nonqualified Stock Option.
2.34. "Subsidiary" means a subsidiary corporation of the
Corporation as that term is defined in Code section 424(f).
"Subsidiaries" means more than one Subsidiary.
4
2.35. "Termination of Service" means (i) in the case of
an Eligible Employee, the discontinuance of employment of such
Participant with the Corporation or its Subsidiaries for any
reason other than a transfer to another member of the group
consisting of the Corporation and its Subsidiaries and (ii) in
the case of a Director who is not an employee of the Corporation
or any Subsidiary, the date such Participant ceases to serve as a
Director. The determination of whether a Participant has
discontinued service shall be made by the Committee in its sole
discretion. In determining whether a Termination of Service has
occurred, the Committee may provide that service as a consultant
or service with a business enterprise in which the Corporation
has a significant ownership interest shall be treated as
employment with the Corporation.
ARTICLE III -- ADMINISTRATION
3.1. The Plan shall be administered by the Committee.
Except as otherwise required by Rule 16b-3 under the Act, the
Committee, in its discretion, may delegate to one or more of its
members such of its powers as it deems appropriate. The
Committee also may limit the power of any member to the extent
necessary to comply with Rule 16b-3 under the Act or any other
law, rule or regulation. The Board of Directors may serve as the
Committee, if by the terms of the Plan all members of the Board
of Directors are otherwise eligible to serve on the Committee.
3.2. The Committee shall meet at such times and places as it
determines. The Committee shall at all times operate and be
governed, and Committee meetings shall be conducted and action
taken, in accordance with the provisions of the Corporation's
Bylaws or resolutions or policies adopted by the Board of
Directors from time to time regarding the operation of committees
of the Corporation.
3.3. Except as set forth in Section 3.15 regarding grants of
Awards by the Board of Directors, the Committee shall have the
exclusive right to interpret, construe and administer the Plan,
to select the Eligible Persons who shall receive an Award, and to
act in all matters pertaining to the grant of an Award and the
determination and interpretation of the provisions of the related
Award Agreement, including, without limitation, the determination
of the number of shares subject to Stock Options and the Option
Period(s) and Option Price(s) thereof, the number of shares of
Restricted Stock or shares subject to Stock Awards or Performance
Shares subject to an Award, the vesting periods (if any) and the
form, terms, conditions and duration of each Award, and any
amendment thereof consistent with the provisions of the Plan.
All acts, determinations and decisions of the Committee made or
taken pursuant to the Plan or with respect to any questions
arising in connection with the administration and interpretation
of the Plan or any Award Agreement, including the severability of
any and all of the provisions thereof, shall be conclusive, final
and binding upon all Participants, Eligible Persons and their
beneficiaries.
3.4. The Committee may adopt such rules, regulations and
procedures of general application for the administration of this
Plan as it deems appropriate.
3.5. Without limiting the provisions of this Article III,
and subject to the provisions of Article X, the Committee is
authorized to take such action as it determines to be necessary
or
5
advisable, and fair and equitable to Participants and to the
Corporation, with respect to an outstanding Award in the event of
a Change of Control as described in Article X or other similar
event. Such action may include, but shall not be limited to,
establishing, amending or waiving the form, terms, conditions and
duration of an Award and the related Award Agreement, so as to
provide for earlier, later, extended or additional times for
exercise or payments, differing methods for calculating payments,
alternate forms and amounts of payment, an accelerated release of
restrictions or other modifications. The Committee may take such
actions pursuant to this Section 3.5 by adopting rules and
regulations of general applicability to all Participants or to
certain categories of Participants, by including, amending or
waiving terms and conditions in an Award and the related Award
Agreement, or by taking action with respect to individual
Participants from time to time.
3.6. Subject to the provisions of Section 3.11, the
aggregate number of shares of Common Stock which may be issued
pursuant to Awards under the Plan shall be seven hundred thousand
(700,000) shares. Such shares of Common Stock shall be made
available from authorized and unissued shares of the Corporation.
(a) For all purposes under the Plan, each Performance
Share awarded shall be counted as one share of Common Stock
subject to an Award.
(b) If, for any reason, any shares of Common Stock
(including shares of Common Stock subject to Performance
Shares) that have been awarded or are subject to issuance or
purchase pursuant to Awards outstanding under the Plan are
not delivered or purchased, or are reacquired by the
Corporation, for any reason, including but not limited to a
forfeiture of Restricted Stock or failure to earn
Performance Shares or the termination, expiration or
cancellation of a Stock Option, or any other termination of
an Award without payment being made in the form of shares of
Common Stock (whether or not Restricted Stock), such shares
of Common Stock shall not be charged against the aggregate
number of shares of Common Stock available for Award under
the Plan and shall again be available for Awards under the
Plan. In no event, however, may Common Stock that is
surrendered or withheld to pay the exercise price of a Stock
Option or to satisfy tax withholding requirements be
available for future grants under the Plan.
(c) The foregoing subsections (a) and (b) of this
Section 3.6 shall be subject to any limitations provided by
the Code or by Rule 16b-3 under the Act or by any other
applicable law, rule or regulation.
3.7. Each Award granted under the Plan shall be evidenced by
a written Award Agreement, which shall be subject to and shall
incorporate (by reference or otherwise) the applicable terms and
conditions of the Plan and shall include any other terms and
conditions (not inconsistent with the Plan) required by the
Committee.
3.8. The Corporation shall not be required to issue or
deliver any certificates for shares of Common Stock under the
Plan prior to:
(a) any required approval of the Plan by the
shareholders of the Corporation; and
6
(b) the completion of any registration or
qualification of such shares of Common Stock under any
federal or state law, or any ruling or regulation of any
governmental body that the Corporation shall, in its sole
discretion, determine to be necessary or advisable.
3.9. The Committee may require any Participant acquiring
shares of Common Stock pursuant to any Award under the Plan to
represent to and agree with the Corporation in writing that such
person is acquiring the shares of Common Stock for investment
purposes and without a view to resale or distribution thereof.
Shares of Common Stock issued and delivered under the Plan shall
also be subject to such stop-transfer orders and other
restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Common Stock is
then listed and any applicable federal or state laws, and the
Committee may cause a legend or legends to be placed on the
certificate or certificates representing any such shares to make
appropriate reference to any such restrictions. In making such
determination, the Committee may rely upon an opinion of counsel
for the Corporation.
3.10. Except as otherwise expressly provided in the Plan
or in an Award Agreement with respect to an Award, no Participant
shall have any right as a shareholder of the Corporation with
respect to any shares of Common Stock subject to such
Participant's Award except to the extent that, and until, one or
more certificates representing such shares of Common Stock shall
have been delivered to the Participant. No shares shall be
required to be issued, and no certificates shall be required to
be delivered, under the Plan unless and until all of the terms
and conditions applicable to such Award shall have, in the sole
discretion of the Committee, been satisfied in full and any
restrictions shall have lapsed in full, and unless and until all
of the requirements of law and of all regulatory bodies having
jurisdiction over the offer and sale, or issuance and delivery,
of the shares shall have been fully complied with.
3.11. The total amount of shares with respect to which
Awards may be granted under the Plan and rights of outstanding
Awards (both as to the number of shares subject to the
outstanding Awards and the Option Price(s) or other purchase
price(s) of such shares, as applicable) shall be appropriately
adjusted for any increase or decrease in the number of
outstanding shares of Common Stock of the Corporation resulting
from payment of a stock dividend on the Common Stock, a stock
split or subdivision or combination of shares of the Common
Stock, or a reorganization or reclassification of the Common
Stock, or any other change in the structure of shares of the
Common Stock. The foregoing adjustments and the manner of
application of the foregoing provisions shall be determined by
the Committee in its sole discretion. Any such adjustment may
provide for the elimination of any fractional shares which might
otherwise become subject to an Award. All adjustments made as
the result of the foregoing in respect of each Incentive Stock
Option shall be made so that such Incentive Stock Option shall
continue to be an Incentive Stock Option, as defined in Section
422 of the Code.
3.12. The members of the Committee shall be entitled to
indemnification by the Corporation in the manner and to the
extent set forth in the Corporation's Bylaws or as otherwise
provided from time to time regarding indemnification of
Directors.
7
3.13. The Committee shall be authorized to make
adjustments in any performance based criterium or in the other
terms and conditions of outstanding Awards in recognition of
unusual or nonrecurring events affecting the Corporation (or any
Subsidiary, if applicable) or its financial statements or changes
in applicable laws, regulations or accounting principles. The
Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Award Agreement in
the manner and to the extent it shall deem necessary or desirable
to reflect any such adjustment. In the event the Corporation (or
any Subsidiary, if applicable) shall assume outstanding employee
benefit awards or the right or obligation to make future such
awards in connection with the acquisition of another corporation
or business entity, the Committee may, in its sole discretion,
make such adjustments in the terms of outstanding Awards under
the Plan as it shall deem appropriate.
3.14. Subject to the express provisions of the Plan, the
Committee shall have full power and authority to determine
whether, to what extent and under what circumstances any
outstanding Award shall be terminated, canceled, forfeited or
suspended. Notwithstanding the foregoing or any other provision
of the Plan or an Award Agreement, all Awards to any Participant
that are subject to any restriction or have not been earned or
exercised in full by the Participant shall be terminated and
canceled if the Participant is terminated for cause, as
determined by the Committee in its sole discretion.
3.15. In addition to, and not in limitation of, the
right of the Committee to grant Awards to Eligible Persons under
this Plan, the full Board of Directors may from time to time
grant Awards to Eligible Persons pursuant to the terms and
conditions of this Plan, subject to the requirements of the Code,
Rule 16b-3 under the Act or any other applicable law, rule or
regulation. In connection with any such grants, the Board of
Directors shall have all of the power and authority of the
Committee to determine the Eligible Persons to whom such Awards
shall be granted and the other terms and conditions of such
Awards.
ARTICLE IV -- INCENTIVE STOCK OPTIONS
4.1. The Committee, in its sole discretion, may from time to
time on or after the Effective Date grant Incentive Stock Options
to Eligible Employees, subject to the provisions of this Article
IV and Articles III and VI and subject to the following
conditions:
(a) Incentive Stock Options shall be granted only to
Eligible Employees, each of whom may be granted one or more
of such Incentive Stock Options at such time or times
determined by the Committee; provided, however, that
Incentive Stock Options shall be granted only to an Eligible
Employee who, at the time of the Grant Date, does not own
stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the
Corporation.
(b) The Option Price per share of Common Stock for an
Incentive Stock Option shall be set in the Award Agreement,
but shall not be less than one hundred percent (100%) of the
Fair Market Value of the Common Stock at the Grant Date.
8
(c) An Incentive Stock Option may be exercised in full
or in part from time to time within ten (10) years from the
Grant Date, or such shorter period as may be specified by
the Committee as the Option Period and set forth in the
Award Agreement; provided, however, that, in any event, the
Incentive Stock Option shall lapse and cease to be
exercisable upon a Termination of Service or within such
period following a Termination of Service as shall have been
determined by the Committee and set forth in the related
Award Agreement; and provided, further, that such period
following a Termination of Service shall not exceed three
(3) months unless employment shall have terminated:
(i) as a result of Disability, in which event
such period shall not exceed one year after the date of
Disability; or
(ii) as a result of death, or if death shall have
occurred following a Termination of Service (other than
as a result of Disability) and during the period that
the Incentive Stock Option was still exercisable, in
which event such period may not exceed one year after
the date of death; and
provided, further, that such period following a Termination
of Service shall in no event extend beyond the original
Option Period of the Incentive Stock Option.
(d) The aggregate Fair Market Value of the shares of
Common Stock with respect to which any incentive stock
options (whether under this Plan or any other plan
established by the Corporation) are first exercisable during
any calendar year by any Eligible Employee shall not exceed
one hundred thousand dollars ($100,000), determined based on
the Fair Market Value(s) of such shares as of their
respective grant dates; provided, however, that to the
extent permitted under Section 422 of the Code:
(i) if the aggregate Fair Market Values of the
shares of Common Stock with respect to which incentive
stock options are first exercisable during any calendar
year (whether such Incentive Stock Options are granted
under this Plan or any other plan established by the
Corporation) exceeds one hundred thousand dollars
($100,000), such excess shall be treated as a
Nonqualified Stock Option;
(ii) if a Participant's employment is terminated
by reason of death, Disability or Retirement and the
portion of any incentive stock option that is otherwise
exercisable during the post-termination period applied
without regard to the one hundred thousand dollar
($100,000) limitation contained in Section 422 of the
Code is greater than the portion of such option that is
immediately exercisable as an Incentive Stock Option
during such post-termination period under Section 422,
such excess shall be treated as a Nonqualified Stock
Option; and
(iii) if the exercise of an Incentive Stock Option
is accelerated by reason of a Change of Control, any
portion of such Award that is not exercisable as an
incentive stock option by reason of the one hundred
thousand dollar ($100,000)
9
limitation contained in Section 422 of the Code shall be
treated as a Nonqualified Stock Option.
(e) No Incentive Stock Options may be granted more
than ten (10) years from the Effective Date.
(f) The Award Agreement for each Incentive Stock
Option shall provide that the Participant shall notify the
Corporation if such Participant sells or otherwise transfers
any shares of Common Stock acquired upon exercise of the
Incentive Stock Option within two (2) years of the Grant
Date of such Incentive Stock Option or within one (1) year
of the date such shares were acquired upon the exercise of
such Incentive Stock Option.
4.2. Subject to the limitations of Section 3.6, the maximum
number of shares of Common Stock subject to Incentive Stock
Option Awards shall be the maximum number of shares available for
Awards under the Plan.
4.3. The Committee may provide for any other terms and
conditions which it determines should be imposed for an Incentive
Stock Option to qualify under Section 422 of the Code, as well as
any other terms and conditions not inconsistent with this Article
IV or Articles III or VI, as determined in its sole discretion
and set forth in the Award Agreement for such Incentive Stock
Option.
4.4. Each provision of this Article IV and of each Incentive
Stock Option granted hereunder shall be construed in accordance
with the provisions of Section 422 of the Code, and any provision
hereof that cannot be so construed shall be disregarded.
ARTICLE V -- NONQUALIFIED STOCK OPTIONS
5.1. The Committee, in its sole discretion, may from time to
time on or after the Effective Date grant Nonqualified Stock
Options to Eligible Persons, subject to the provisions of this
Article V and Articles III and VI and subject to the following
conditions:
(a) Nonqualified Stock Options may be granted to any
Eligible Persons, each of whom may be granted one or more of
such Nonqualified Stock Options, at such time or times
determined by the Committee.
(b) The Option Price per share of Common Stock for a
Nonqualified Stock Option shall be set in the Award
Agreement and may be less than one hundred percent (100%) of
the Fair Market Value of the Common Stock at the Grant Date.
(c) A Nonqualified Stock Option may be exercised in
full or in part from time to time within the Option Period
specified by the Committee and set forth in the Award
Agreement; provided, however, that, in any event, the
Nonqualified Stock Option shall lapse and cease to be
exercisable upon a Termination of Service or within such
period following
10
a Termination of Service as shall have been
determined by the Committee and set forth in the related
Award Agreement.
5.2. The Committee may provide for any other terms and
conditions for a Nonqualified Stock Option not inconsistent with
this Article V or Articles III or VI, as determined in its sole
discretion and set forth in the Award Agreement for such
Nonqualified Stock Option.
ARTICLE VI -- INCIDENTS OF STOCK OPTIONS
6.1. Each Stock Option shall be granted subject to such
terms and conditions, if any, not inconsistent with this Plan, as
shall be determined by the Committee and set forth in the related
Award Agreement, including any provisions as to continued
employment as consideration for the grant or exercise of such
Stock Option and any provisions which may be advisable to comply
with applicable laws, regulations or rulings of any governmental
authority.
6.2. Except as hereinafter described, a Stock Option shall
not be transferable by the Participant other than by will or by
the laws of descent and distribution, and shall be exercisable
during the lifetime of the Participant only by the Participant or
the Participant's guardian or legal representative. In the event
of the death of a Participant, any unexercised Stock Options may
be exercised to the extent otherwise provided herein or in such
Participant's Award Agreement by the executor or personal
representative of such Participant's estate or by any person who
acquired the right to exercise such Stock Options by bequest
under the Participant's will or by inheritance. The Committee,
in its sole discretion, may at any time permit a Participant to
transfer a Nonqualified Stock Option for no consideration to or
for the benefit of one or more members of the Participant's
Immediate Family (including, without limitation, to a trust for
the benefit of the Participant and/or one or more members of such
Participant's Immediate Family or a corporation, partnership or
limited liability company established and controlled by the
Participant and/or one or more members of such Participant's
Immediate Family), subject to such limits as the Committee may
establish. The transferee of such Nonqualified Stock Option
shall remain subject to all terms and conditions applicable to
such Nonqualified Stock Option prior to such transfer. The
foregoing right to transfer the Nonqualified Stock Option, if
granted by the Committee, shall apply to the right to consent to
amendments to the Award Agreement.
6.3. Shares of Common Stock purchased upon exercise of a
Stock Option shall be paid for in such amounts, at such times and
upon such terms as shall be determined by the Committee, subject
to limitations set forth in the Stock Option Award Agreement.
The Committee may, in its sole discretion, permit the exercise of
a Stock Option by payment in cash or by tendering shares of
Common Stock (either by actual delivery of such shares or by
attestation), or any combination thereof, as determined by the
Committee. In the sole discretion of the Committee, payment in
shares of Common Stock also may be made with shares received upon
the exercise or partial exercise of the Stock Option, whether or
not involving a series of exercises or partial exercises and
whether or not share certificates for such shares surrendered
have been delivered to the Participant. The Committee also may,
in its sole discretion, permit the payment of the exercise price
of a Stock Option by the voluntary surrender of all or a portion
of the Stock Option. Shares of Common Stock previously held
11
by the Participant and surrendered in payment of the Option Price of
a Stock Option shall be valued for such purpose at the Fair
Market Value thereof on the date the Stock Option is exercised.
6.4. No cash dividends shall be paid on shares of Common
Stock subject to unexercised Stock Options.
6.5. The Committee may permit the voluntary surrender of all
or a portion of any Stock Option granted under the Plan to be
conditioned upon the granting to the Participant of a new Stock
Option for the same or a different number of shares of Common
Stock as the Stock Option surrendered, or may require such
voluntary surrender as a condition precedent to a grant of a new
Stock Option to such Participant. Subject to the provisions of
the Plan, such new Stock Option shall be exercisable at such
Option Price, during such Option Period and on such other terms
and conditions as are specified by the Committee at the time the
new Stock Option is granted. Upon surrender, the Stock Options
surrendered shall be canceled and the shares of Common Stock
previously subject to them shall be available for the grant of
other Stock Options.
6.6. The Committee may at any time offer to purchase a
Participant's outstanding Stock Option for a payment equal to the
value of such Stock Option payable in cash, shares of Common
Stock or Restricted Stock or other property upon surrender of the
Participant's Stock Option, based on such terms and conditions as
the Committee shall establish and communicate to the Participant
at the time that such offer is made.
6.7. The Committee shall have the discretion, exercisable
either at the time the Award is granted or at the time the
Participant discontinues employment, to establish as a provision
applicable to the exercise of one or more Stock Options that,
during a limited period of exercisability following a Termination
of Service, the Stock Option may be exercised not only with
respect to the number of shares of Common Stock for which it is
exercisable at the time of the Termination of Service but also
with respect to one or more subsequent installments for which the
Stock Option would have become exercisable had the Termination of
Service not occurred.
ARTICLE VII -- RESTRICTED STOCK
7.1. The Committee, in its sole discretion, may from time to
time on or after the Effective Date award shares of Restricted
Stock to Eligible Persons as a reward for past service and an
incentive for the performance of future services that will
contribute materially to the successful operation of the
Corporation and its Subsidiaries, subject to the terms and
conditions set forth in this Article VII.
7.2. The Committee shall determine the terms and conditions
of any Award of Restricted Stock, which shall be set forth in the
related Award Agreement, including without limitation:
(a) the purchase price, if any, to be paid for such
Restricted Stock, which may be zero, subject to such minimum
consideration as may be required by applicable law;
12
(b) the duration of the Restriction Period or
Restriction Periods with respect to such Restricted Stock
and whether any events may accelerate or delay the end of
such Restriction Period(s);
(c) the circumstances upon which the restrictions or
limitations shall lapse, and whether such restrictions or
limitations shall lapse as to all shares of Restricted Stock
at the end of the Restriction Period or as to a portion of
the shares of Restricted Stock in installments during the
Restriction Period by means of one or more vesting
schedules;
(d) whether such Restricted Stock is subject to
repurchase by the Corporation or to a right of first refusal
at a predetermined price or if the Restricted Stock may be
forfeited entirely under certain conditions;
(e) whether any performance goals may apply to a
Restriction Period to shorten or lengthen such period; and
(f) whether dividends and other distributions with
respect to such Restricted Stock are to be paid currently to
the Participant or withheld by the Corporation for the
account of the Participant.
7.3. Awards of Restricted Stock must be accepted within a
period of thirty (30) days after the Grant Date (or such shorter
or longer period as the Committee may specify at such time) by
executing an Award Agreement with respect to such Restricted
Stock and tendering the purchase price, if any. A prospective
recipient of an Award of Restricted Stock shall not have any
rights with respect to such Award, unless such recipient has
executed an Award Agreement with respect to such Restricted
Stock, has delivered a fully executed copy thereof to the
Committee and has otherwise complied with the applicable terms
and conditions of such Award.
7.4. In the sole discretion of the Committee and as set
forth in the Award Agreement for an Award of Restricted Stock,
all shares of Restricted Stock held by a Participant and still
subject to restrictions shall be forfeited by the Participant
upon the Participant's Termination of Service and shall be
reacquired, cancelled and retired by the Corporation.
Notwithstanding the foregoing, unless otherwise provided in an
Award Agreement with respect to an Award of Restricted Stock, in
the event of the death, Disability or Retirement of a Participant
during the Restriction Period, or in other cases of special
circumstances (including hardship or other special circumstances
of a Participant whose employment is involuntarily terminated),
the Committee may elect to waive in whole or in part any
remaining restrictions with respect to all or any part of such
Participant's Restricted Stock, if it finds that a waiver would
be appropriate.
7.5. Except as otherwise provided in this Article VII, no
shares of Restricted Stock received by a Participant shall be
sold, exchanged, transferred, pledged, hypothecated or otherwise
disposed of during the Restriction Period.
13
7.6. Upon an Award of Restricted Stock to a Participant, a
certificate or certificates representing the shares of such
Restricted Stock will be issued to and registered in the name of
the Participant. Unless otherwise determined by the Committee,
such certificate or certificates will be held in custody by the
Corporation until (i) the Restriction Period expires and the
restrictions or limitations lapse, in which case one or more
certificates representing such shares of Restricted Stock that do
not bear a restrictive legend (other than any legend as required
under applicable federal or state securities laws) shall be
delivered to the Participant, or (ii) a prior forfeiture by the
Participant of the shares of Restricted Stock subject to such
Restriction Period, in which case the Corporation shall cause
such certificate or certificates to be cancelled and the shares
represented thereby to be retired, all as set forth in the
Participant's Award Agreement. It shall be a condition of an
Award of Restricted Stock that the Participant deliver to the
Corporation a stock power endorsed in blank relating to the
shares of Restricted Stock to be held in custody by the
Corporation.
7.7. Except as provided in this Article VII or in the
related Award Agreement, a Participant receiving an Award of
shares of Restricted Stock Award shall have, with respect to such
shares, all rights of a shareholder of the Corporation, including
the right to vote the shares and the right to receive any
distributions, unless and until such shares are otherwise
forfeited by such Participant; provided, however, the Committee
may require that any cash dividends with respect to such shares
of Restricted Stock be automatically reinvested in additional
shares of Restricted Stock subject to the same restrictions as
the underlying Award, or may require that cash dividends and
other distributions on Restricted Stock be withheld by the
Corporation or its Subsidiaries for the account of the
Participant. The Committee shall determine whether interest
shall be paid on amounts withheld, the rate of any such interest,
and the other terms applicable to such withheld amounts.
ARTICLE VIII -- STOCK AWARDS
8.1. The Committee, in its sole discretion, may from time to
time on or after the Effective Date grant Stock Awards to
Eligible Persons in payment of compensation that has been earned
or as compensation to be earned, including without limitation
compensation awarded or earned concurrently with or prior to the
grant of the Stock Award, subject to the terms and conditions set
forth in this Article VIII.
8.2. For the purposes of this Plan, in determining the value
of a Stock Award, all shares of Common Stock subject to such
Stock Award shall be valued at not less than one hundred percent
(100%) of the Fair Market Value of such shares of Common Stock on
the Grant Date of such Stock Award, regardless of when such
shares of Common Stock are issued and certificates representing
such shares are delivered to the Participant.
8.3. Unless otherwise determined by the Committee and set
forth in the related Award Agreement, shares of Common Stock
subject to a Stock Award will be issued, and one or more
certificates representing such shares will be delivered, to the
Participant as soon as practicable following the Grant Date of
such Stock Award. Upon the issuance of such shares and the
delivery of one or more certificates representing such shares to
the Participant, such Participant shall be and become a
shareholder of the Corporation fully entitled to receive
dividends, to vote and to exercise
14
all other rights of a shareholder of the Corporation. Notwithstanding any
other provision of this Plan, unless the Committee expressly provides
otherwise with respect to a Stock Award, as set forth in the
related Award Agreement, no Stock Award shall be deemed to be an
outstanding Award for purposes of the Plan.
ARTICLE IX -- PERFORMANCE SHARES
9.1. The Committee, in its sole discretion, may from time to
time on or after the Effective Date award Performance Shares to
Eligible Persons as an incentive for the performance of future
services that will contribute materially to the successful
operation of the Corporation and its Subsidiaries, subject to the
terms and conditions set forth in this Article IX.
9.2. The Committee shall determine the terms and conditions
of any Award of Performance Shares, which shall be set forth in
the related Award Agreement, including without limitation:
(a) the purchase price, if any, to be paid for such
Performance Shares, which may be zero, subject to such
minimum consideration as may be required by applicable law;
(b) the performance period (the "Performance Period")
and/or performance objectives (the "Performance Objectives")
applicable to such Awards;
(c) the number of Performance Shares that shall be
paid to the Participant if the applicable Performance
Objectives are exceeded or met in whole or in part; and
(d) the form of settlement of a Performance Share.
9.3. At any date, each Performance Share shall have a value
equal to the Fair Market Value of a share of Common Stock.
9.4. Performance Periods may overlap, and Participants may
participate simultaneously with respect to Performance Shares for
which different Performance Periods are prescribed.
9.5. Performance Objectives may vary from Participant to
Participant and between Awards and shall be based upon such
performance criteria or combination of factors as the Committee
may deem appropriate, including, but not limited to, minimum
earnings per share or return on equity. If during the course of
a Performance Period there shall occur significant events which
the Committee expects to have a substantial effect on the
applicable Performance Objectives during such period, the
Committee may revise such Performance Objectives.
9.6. In the sole discretion of the Committee and as set
forth in the Award Agreement for an Award of Performance Shares,
all Performance Shares held by a Participant and not earned shall
be forfeited by the Participant upon the Participant's
Termination of Service. Notwithstanding the foregoing, unless
otherwise provided in an Award Agreement with respect to an Award
of Performance Shares, in the event of the death, Disability or
Retirement of a Participant during the
15
applicable Performance Period, or in other cases of special circumstances
(including hardship or other special circumstances of a Participant whose
employment is involuntarily terminated), the Committee may
determine to make a payment in settlement of such Performance
Shares at the end of the Performance Period, based upon the
extent to which the Performance Objectives were satisfied at the
end of such period and pro rated for the portion of the
Performance Period during which the Participant was employed by
the Corporation or a Subsidiary; provided, however, that the
Committee may provide for an earlier payment in settlement of
such Performance Shares in such amount and under such terms and
conditions as the Committee deems appropriate or desirable.
9.7. The settlement of a Performance Share shall be made in
cash, whole shares of Common Stock or a combination thereof and
shall be made as soon as practicable after the end of the
applicable Performance Period. Notwithstanding the foregoing,
the Committee in its sole discretion may allow a Participant to
defer payment in settlement of Performance Shares on terms and
conditions approved by the Committee and set forth in the related
Award Agreement entered into in advance of the time of receipt or
constructive receipt of payment by the Participant.
9.8. Performance Shares shall not be transferable by the
Participant. The Committee shall have the authority to place
additional restrictions on the Performance Shares including, but
not limited to, restrictions on transfer of any shares of Common
Stock that are delivered to a Participant in settlement of any
Performance Shares.
ARTICLE X -- CHANGES OF CONTROL OR OTHER FUNDAMENTAL CHANGES
10.1. Upon the occurrence of a Change of Control and
unless otherwise provided in the Award Agreement with respect to
a particular Award:
(a) all outstanding Stock Options shall become
immediately exercisable in full, subject to any appropriate
adjustments in the number of shares subject to the Stock
Option and the Option Price, and shall remain exercisable
for the remaining term of such Stock Option, regardless of
any provision in the related Award Agreement limiting the
exercisability of such Stock Option or any portion thereof
for any length of time;
(b) all outstanding Performance Shares with respect to
which the applicable Performance Period has not been
completed shall be paid out as soon as practicable as
follows:
(i) all Performance Objectives applicable to the
Award of Performance Shares shall be deemed to have
been satisfied to the extent necessary to earn one
hundred percent (100%) of the Performance Shares
covered by the Award;
(ii) the applicable Performance Period shall be
deemed to have been completed upon occurrence of the
Change of Control;
16
(iii) the payment to the Participant in settlement
of the Performance Shares shall be the amount
determined by the Committee, in its sole discretion, or
in the manner stated in the Award Agreement, as
multiplied by a fraction, the numerator of which is the
number of full calendar months of the applicable
Performance Period that have elapsed prior to
occurrence of the Change of Control, and the
denominator of which is the total number of months in
the original Performance Period; and
(iv) upon the making of any such payment, the
Award Agreement as to which it relates shall be deemed
terminated and of no further force and effect.
(c) all outstanding shares of Restricted Stock with
respect to which the restrictions have not lapsed shall be
deemed vested, and all such restrictions shall be deemed
lapsed and the Restriction Period ended.
10.2. Anything contained herein to the contrary
notwithstanding, upon the dissolution or liquidation of the
Corporation, each Award granted under the Plan and then
outstanding shall terminate; provided, however, that following
the adoption of a plan of dissolution or liquidation, and in any
event prior to the effective date of such dissolution or
liquidation, each such outstanding Award granted hereunder shall
be exercisable in full and all restrictions shall lapse, to the
extent set forth in Section 10.1(a), (b) and (c) above.
10.3. After the merger of one or more corporations into
the Corporation or any Subsidiary, any merger of the Corporation
into another corporation, any consolidation of the Corporation or
any Subsidiary of the Corporation and one or more corporations,
or any other corporate reorganization of any form involving the
Corporation as a party thereto and involving any exchange,
conversion, adjustment or other modification of the outstanding
shares of the Common Stock, each Participant shall, at no
additional cost, be entitled, upon any exercise of such
Participant's Stock Option, to receive, in lieu of the number of
shares as to which such Stock Option shall then be so exercised,
the number and class of shares of stock or other securities or
such other property to which such Participant would have been
entitled to pursuant to the terms of the agreement of merger or
consolidation or reorganization, if at the time of such merger or
consolidation or reorganization, such Participant had been a
holder of record of a number of shares of Common Stock equal to
the number of shares as to which such Stock Option shall then be
so exercised. Comparable rights shall accrue to each Participant
in the event of successive mergers, consolidations or
reorganizations of the character described above. The Committee
may, in its sole discretion, provide for similar adjustments upon
the occurrence of such events with regard to other outstanding
Awards under this Plan. The foregoing adjustments and the manner
of application of the foregoing provisions shall be determined by
the Committee in its sole discretion. Any such adjustment may
provide for the elimination of any fractional shares which might
otherwise become subject to an Award. All adjustments made as
the result of the foregoing in respect of each Incentive Stock
Option shall be made so that such Incentive Stock Option shall
continue to be an Incentive Stock Option, as defined in Section
422 of the Code.
17
ARTICLE XI -- AMENDMENT AND TERMINATION
11.1. Subject to the provisions of Section 11.2, the
Board of Directors, upon recommendation of the Committee or
otherwise, at any time and from time to time may amend or
terminate the Plan as may be necessary or desirable to implement
or discontinue the Plan or any provision hereof. To the extent
required by the Act or the Code, however, no amendment, without
approval by the Corporation's shareholders, shall:
(a) materially alter the group of persons eligible to
participate in the Plan;
(b) except as provided in Section 3.6, increase the
maximum number of shares of Common Stock that are available
for Awards under the Plan;
(c) extend the period during which Incentive Stock
Option Awards may be granted beyond November 20, 2007; or
(d) alter the class of individuals eligible to receive
an Incentive Stock Option or increase the limit on Incentive
Stock Options set forth in Section 4.1(d) or the value of
shares of Common Stock for which an Eligible Employee may be
granted an Incentive Stock Option.
11.2. No amendment to or discontinuance of the Plan or
any provision hereof by the Board of Directors or the
shareholders of the Corporation shall, without the written
consent of the Participant, adversely affect (in the sole
discretion of the Committee) any Award theretofore granted to
such Participant under this Plan; provided, however, that the
Committee retains the right and power to:
(a) annul any Award if the Participant is terminated
for cause as determined by the Committee; and
(b) convert any outstanding Incentive Stock Option to
a Nonqualified Stock Option.
11.3. If a Change of Control has occurred, no amendment
or termination shall impair the rights of any person with respect
to an outstanding Award as provided in Article X.
ARTICLE XII -- MISCELLANEOUS PROVISIONS
12.1. Nothing in the Plan or any Award granted hereunder
shall confer upon any Participant any right to continue in the
employ of the Corporation or its Subsidiaries or to serve as a
Director or shall interfere in any way with the right of the
Corporation or its Subsidiaries or the shareholders of the
Corporation, as applicable, to terminate the employment of a
Participant or to release or remove a Director at any time.
Unless specifically provided otherwise, no Award granted under
the Plan shall be deemed salary or compensation for the purpose
of computing benefits under any
18
employee benefit plan or other arrangement of the Corporation or its
Subsidiaries for the benefit of their respective employees unless the
Corporation shall determine otherwise. No Participant shall have any claim
to an Award until it is actually granted under the Plan and an
Award Agreement has been executed and delivered to the
Corporation. To the extent that any person acquires a right to
receive payments from the Corporation under the Plan, such right
shall, except as otherwise provided by the Committee, be no
greater than the right of an unsecured general creditor of the
Corporation. All payments to be made hereunder shall be paid
from the general funds of the Corporation, and no special or
separate fund shall be established and no segregation of assets
shall be made to assure payment of such amounts, except as
provided in Article VII with respect to Restricted Stock and
except as otherwise provided by the Committee.
12.2. The Plan and the grant of Awards shall be subject
to all applicable federal and state laws, rules, and regulations
and to such approvals by any government or regulatory agency as
may be required. Any provision herein relating to compliance
with Rule 16b-3 under the Act shall not be applicable with
respect to participation in the Plan by Participants who are not
subject to Section 16 of the Act.
12.3. The terms of the Plan shall be binding upon the
Corporation, its successors and assigns.
12.4. Neither a Stock Option nor any other type of
equity-based compensation provided for hereunder shall be
transferable except as provided for in Section 6.2. In addition
to the transfer restrictions otherwise contained herein,
additional transfer restrictions shall apply to the extent
required by federal or state securities laws. If any Participant
makes such a transfer in violation hereof, any obligation
hereunder of the Corporation to such Participant shall terminate
immediately.
12.5. This Plan and all actions taken hereunder shall be
governed by the laws of the State of North Carolina.
12.6. Each Participant exercising an Award hereunder
agrees to give the Committee prompt written notice of any
election made by such Participant under Section 83(b) of the
Code, or any similar provision thereof.
12.7. If any provision of this Plan or an Award
Agreement is or becomes or is deemed invalid, illegal or
unenforceable in any jurisdiction, or would disqualify the Plan
or any Award Agreement under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to
conform to applicable laws, or if it cannot be construed or
deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Award
Agreement, it shall be stricken, and the remainder of the Plan or
the Award Agreement shall remain in full force and effect.
12.8. The grant of an Award pursuant to this Plan shall
not affect in any way the right or power of the Corporation or
any of its Subsidiaries to make adjustments, reclassification,
reorganizations, or changes of its capital or business structure,
or to merge or consolidate, or to dissolve, liquidate or sell, or
to transfer all or part of its business or assets.
19
12.9. The Plan is not subject to the provisions of ERISA
or qualified under Section 401(a) of the Code.
12.10. If a Participant is required to pay to the
Corporation an amount with respect to income and employment tax
withholding obligations in connection with (i) the exercise of a
Nonqualified Stock Option, (ii) certain dispositions of Common
Stock acquired upon the exercise of an Incentive Stock Option, or
(iii) the receipt of Common Stock pursuant to any other Award,
then the issuance of Common Stock to such Participant shall not
be made (or the transfer of shares by such Participant shall not
be required to be effected, as applicable) unless such
withholding tax or other withholding liabilities shall have been
satisfied in a manner acceptable to the Corporation. The
Committee, in its sole discretion and subject to such rules as it
may adopt, may permit the Participant to satisfy such obligation,
in whole or in part, by making an irrevocable election that a
portion of the total Fair Market Value of the shares of Common
Stock be paid in the form of cash in lieu of the issuance of
Common Stock and that such cash payment be applied to the
satisfaction of the withholding obligations. The amount to be
withheld shall not exceed the statutory minimum federal and state
income and employment tax liability arising from the transfer of
the Common Stock to the Participant. Notwithstanding any other
provision of the Plan, any election under this Section 12.10 is
required to satisfy the applicable requirements of Rule 16b-3
under the Act.
20
RUDDICK CORPORATION
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED
December 28, December 29,
1997 1996
------------- --------------
NET INCOME PER SHARE COMPUTED AS FOLLOWS:
BASIC:
1. Net income available to
common shareholders 11,992,000 11,579,000
============= =============
2. Weighted average common
shares outstanding - Basic 46,646,481 46,497,009
============= ==============
3. Basic net income per share
(Item 1 divided by Item 2) .26 .25
============= ==============
DILUTED:
1. Net income available to
common shareholders 11,992,000 11,579,000
============= ==============
2. Weighted average common
shares outstanding - Basic 46,646,481 46,497,009
3. Weighted potential shares
under stock options computed
for the periods using the
Treasury Stock Method. 335,246 214,183
------------- -------------
4. Weighted average common
shares outstanding -
Diluted 46,981,727 46,711,192
============= =============
5. Net Income Per Share
(Item 1 divided by Item 4) .26 .25
============= =============
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RUDDICK CORPORATION
FINANCIAL DATA SCHEDULE FOR THE THREE MONTHS ENDED 12/28/97
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-28-1997
<PERIOD-END> DEC-28-1997
<CASH> 11,371,000
<SECURITIES> 0
<RECEIVABLES> 77,214,000
<ALLOWANCES> 2,911,000
<INVENTORY> 209,940,000
<CURRENT-ASSETS> 325,300,000
<PP&E> 811,430,000
<DEPRECIATION> 325,886,000
<TOTAL-ASSETS> 899,617,000
<CURRENT-LIABILITIES> 202,109,000
<BONDS> 227,508,000
0
0
<COMMON> 57,640,000
<OTHER-SE> 331,718,000
<TOTAL-LIABILITY-AND-EQUITY> 899,617,000
<SALES> 617,602,000
<TOTAL-REVENUES> 617,602,000
<CGS> 449,217,000
<TOTAL-COSTS> 593,556,000
<OTHER-EXPENSES> 1,974,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,105,000
<INCOME-PRETAX> 17,967,000
<INCOME-TAX> 5,975,000
<INCOME-CONTINUING> 11,992,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,992,000
<EPS-PRIMARY> $.26
<EPS-DILUTED> $.26
</TABLE>
