Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934.
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11 (c) or Section 240.14a-12
PAMIDA HOLDINGS CORPORATION
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person (s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee Computed on table below per Exchange Act Rules 14a-6 (i) (l) 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:
...................................................................
(5) Total fee paid:
...................................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
...................................................................
(2) Form, Schedule or Registration Statement No.:
...................................................................
(3) Filing Party:
...................................................................
(4) Date Filed:
...................................................................
<PAGE>
PAMIDA HOLDINGS CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 21, 1998
The Annual Meeting of Stockholders of Pamida Holdings Corporation, a
Delaware corporation, will be held on Thursday, May 21, 1998, at 8:30 a.m. at
the office of the Corporation, 8800 "F" Street, Omaha, Nebraska, for the
following purposes:
1. To elect a Board of Directors.
2. To approve the Pamida Holdings Corporation 1998 Stock Incentive Plan.
3. To transact such other business as properly may come before the
meeting and any adjournments thereof.
The stock transfer books of the Corporation will not be closed. The Board
of Directors of the Corporation has fixed the close of business on March 23,
1998, as the record date for determining the stockholders of the Corporation
entitled to notice of and to vote at the meeting.
Dated March 25, 1998 BY ORDER OF THE BOARD OF DIRECTORS,
FRANK A. WASHBURN, Secretary
PLEASE MARK, SIGN, AND DATE THE ACCOMPANYING PROXY AND RETURN IT
PROMPTLY IN THE ENVELOPE ENCLOSED FOR YOUR USE. THE PROXY WILL NOT BE
USED IF YOU ATTEND THE MEETING IN PERSON AND SO REQUEST.
PAMIDA HOLDINGS CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1998
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board of Directors") of Pamida Holdings Corporation
(the "Corporation") of proxies from holders of the Corporation's $.01 par value
Common Stock ("Common Stock") for use at the 1998 annual meeting of stockholders
of the Corporation to be held on May 21, 1998, at 8:30 a.m. at the office of the
Corporation, 8800 "F" Street, Omaha, Nebraska, and at any adjournments thereof
(the "Annual Meeting"), for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders. Holders of record of Common Stock at the close
of business on March 23, 1998, will be entitled to vote at the Annual Meeting.
The mailing address of the principal executive offices of the Corporation
is 8800 "F" Street, Omaha, Nebraska 68127. This Proxy Statement and the
accompanying form of Proxy are first being sent to the holders of Common Stock
on or about April 17, 1998.
OUTSTANDING SECURITIES AND VOTING RIGHTS
The Board of Directors of the Corporation has fixed the close of business
on March 23, 1998, as the record date for determining the stockholders of the
Corporation entitled to notice of and to vote at the Annual Meeting.
The accompanying Proxy may be revoked by the person giving it at any time
prior to its being voted; such revocation may be accomplished by a letter, or by
a duly executed Proxy bearing a later date, filed with the Secretary of the
Corporation prior to the Annual Meeting. If a stockholder who has given a Proxy
is present at the Annual Meeting and wishes to vote in person, such stockholder
may withdraw the Proxy at that time.
On March 23, 1998, the Corporation had issued and outstanding 5,645,306
shares of Common Stock, each such share entitling the holder thereof to one vote
upon each matter to be voted upon at the Annual Meeting. An additional 325,133
shares of Common Stock in the aggregate are issuable to certain holders of
previously outstanding notes and preferred stock of the Corporation who have not
yet delivered such securities to the Corporation in exchange for the Common
Stock certificates to which they have become entitled; such shares will not be
entitled to vote at the Annual Meeting or thereafter until such certificates are
issued. Stockholders entitled to vote in the election of directors at the Annual
Meeting have cumulative voting rights in such election, and there are no
conditions precedent to the exercise of such rights. The existence of cumulative
voting rights means that a stockholder may cast a total number of votes in the
election for directors which is equal to the number of directors to be elected
multiplied by the number of such stockholder's shares; such votes may be cast
entirely for one candidate or may be distributed equally or unequally among as
many candidates as the stockholder may consider appropriate.
The presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum at the Annual Meeting. Assuming that a quorum
is present at the Annual Meeting, under Delaware law and the Restated
Certificate of Incorporation of the Corporation (the "Restated Certificate"),
(i) the six nominees for election as directors who receive the greatest number
of votes cast in the election of directors will be elected as directors and (ii)
the 1998 Stock Incentive Plan of the Corporation will require for its approval
the affirmative vote of a majority of the shares of Common Stock present or
represented by proxy at the Annual Meeting and entitled to vote.
In the election of directors, any action other than a vote for a nominee
will have the practical effect of a vote against such nominee, but only votes
cast in favor of a nominee will directly affect the outcome of the election
since the six nominees receiving the greatest number of votes will be elected.
Abstentions and broker "non-votes" are not deemed to be "votes cast" for any
purpose, but the shares involved will be counted as present and entitled to vote
for purposes of determining whether a quorum is present at the Annual Meeting. A
broker "non-vote" occurs when a nominee holding shares for a beneficial owner
does not vote on a particular matter because the nominee does not have
discretionary authority to vote on such matter and has not received
<PAGE> 1
voting instructions from the beneficial owner of the shares involved.
Abstentions and broker "non-votes" on the proposed approval of the 1998 Stock
Incentive Plan of the Corporation will have the practical effect of votes
against such proposal.
The Restated Certificate provides that all proxies, ballots, votes, and
tabulations that identify the particular vote of holders of Common Stock shall
be confidential and shall not be disclosed except (i) to independent election
inspectors appointed by the Corporation who shall not be directors, officers, or
employees of the Corporation, (ii) as required by law, or (iii) when expressly
requested by the voting stockholder.
The following table sets forth information as to the beneficial ownership
of Common Stock of each person or group who, as of March 6, 1998, to the
knowledge of the Corporation, beneficially owned more than 5% of the Common
Stock:
Number of
Name and Shares of
Address of Common Stock Percent
Beneficial Beneficially of
Owner Owned Class
------------------------------ ------------ -------
399 Venture Partners, Inc. (1) 907,387 15.20%
399 Park Avenue
New York, NY 10043
Natasha Partnership (2) 574,000 9.61%
Nathalie P. Comfort
63 South Beach Road
Hobe Sound, FL 33475
- -----------------------
(1) 399 Venture Partners, Inc. is an indirect wholly owned subsidiary of
Citicorp. Information relating to the stockholdings of 399 Venture
Partners, Inc. is based upon a Schedule 13G filed by Citicorp as of
December 31, 1997. M. Saleem Muqaddam, a director of the Corporation, is a
Vice President of 399 Venture Partners, Inc. 399 Venture Partners, Inc.
also owns 3,050,473 shares of Nonvoting Common Stock of the Corporation,
which represent 100% of the outstanding shares of such class. Such shares
of Nonvoting Common Stock have no voting rights at the Annual Meeting.
(2) According to a Schedule 13D, amended through January 21, 1994, filed on
behalf of Natasha Partnership ("Natasha"), Nathalie P. Comfort is the sole
general partner of Natasha with sole voting and sole dispositive power over
the shares of Common Stock owned by Natasha and therefore also may be
deemed to be the beneficial owner of such shares.
The following table sets forth information as to each class of equity
securities of the Corporation beneficially owned as of March 6, 1998, by each
director of the Corporation, by each nominee for election as a director of the
Corporation, by the executive officers of the Corporation, and by all directors
and executive officers of the Corporation as a group:
Number of
Shares of
Common Stock Percent
Beneficial Beneficially of
Owner Owned(1) Class
-------------------------- ------------------------- -------
L. David Callaway, III 16,500 (2) 0.28%
Stuyvesant P. Comfort 204,067 3.42%
Steven S. Fishman 163,522 (3) 2.69%
George R. Mihalko 14,375 (4) 0.24%
M. Saleem Muqaddam 20,000 0.33%
Peter J. Sodini 1,000 0.02%
Frank A. Washburn 28,233 (5) 0.47%
All directors and
executive officers as a
group (7 persons) 447,697 (2)(3)(4)(5) 7.33%
- -----------------------
<PAGE> 2
(1) Each person named in the table above has sole voting power and sole
investment power with respect to the shares set forth after his name,
except for the shares referred to in notes (2) and (3) as being owned or
held by the person's spouse.
(2) Mr. Callaway disclaims beneficial ownership of these shares, which are
owned by his wife.
(3) Mr. Fishman disclaims beneficial ownership of 40,000 of these shares, which
are held by his wife as custodian for their children. Mr. Fishman has the
right to acquire beneficial ownership of 113,522 of these shares pursuant
to currently exercisable options.
(4) Mr. Mihalko has the right to acquire beneficial ownership of 6,200 of these
shares pursuant to currently exercisable options.
(5) Mr. Washburn has the right to acquire beneficial ownership of 15,133 of
these shares pursuant to currently exercisable options.
ELECTION OF DIRECTORS
At the Annual Meeting, the stockholders will elect a board of six directors
for a term extending until the 1999 annual meeting of stockholders of the
Corporation and until their respective successors have been elected and qualify.
Proxies in the accompanying form which are received by the Board of Directors in
response to this solicitation will, unless contrary instructions are given
therein, be voted by the persons named therein as proxies in favor of the six
nominees for directors listed below. The persons named as proxies reserve the
right, however, to vote such proxies cumulatively and for the election of fewer
than all of the nominees for directors but do not intend to do so unless
nominees other than those listed below are nominated at the Annual Meeting. The
Board of Directors believes that all of the six nominees listed below will be
available to serve and will serve as directors if elected; however, if any of
such nominees is not so available at the time of the election, the proxies may
be voted in the discretion of the persons named therein for the election of a
substitute nominee. The six nominees receiving the greatest number of votes at
the Annual Meeting will be elected as directors.
Set forth below is certain information as of March 6, 1998, with respect to
the nominees for election as directors of the Corporation. The information
relating to their respective business experience was furnished to the
Corporation by such persons. All of the nominees presently are serving as
directors of the Corporation, and all of the nominees have been nominated for
reelection by the Board of Directors.
Positions and
Offices with Director
Nominee Age the Corporation Since
- ------------------------- --- -------------------------- --------
L. David Callaway, III(2) 58 Director 1994
Stuyvesant P. Comfort(1) 27 Director 1994
Steven S. Fishman 47 Chairman of the Board, 1993
President, Chief Executive
Officer, and Director
M. Saleem Muqaddam(1)(2) 51 Director 1993
Peter J. Sodini(1)(2) 57 Director 1990
Frank A. Washburn 49 Executive Vice President, 1995
Chief Operating Officer,
and Director
- -------------------------
(1) Member of Compensation and Stock Option Committees.
(2) Member of Audit Committee.
Mr. Callaway is Chairman of the Board and Chief Executive Officer of
Express Messenger Systems, Inc. Previously, Mr. Callaway spent approximately 30
years with Citicorp and various of its affiliates (most recently, from 1986 to
1993, as a Vice President of Citicorp Venture Capital, Ltd.) in a variety of
corporate and investment banking assignments. An affiliate of 399 Venture
Partners, Inc., a substantial stockholder of the Corporation, is a substantial
stockholder of Express Messenger Systems, Inc.
<PAGE> 3
Mr. Comfort has been employed since March 1996 by Microsoft Corporation as
a business development and investment analyst. He is a graduate of the
University of Pennsylvania Wharton School and the New York University School of
Law and was a private investor for several years prior to his current
employment.
Mr. Fishman has served as President and Chief Executive Officer of the
Corporation and Pamida, Inc. ("Pamida") since April 1993 and as Chairman of the
Board of the Corporation and Pamida since August 1993. From 1988 to March 1993,
Mr. Fishman was employed by Caldor, Inc. as Senior Vice President and General
Merchandise Manager-Homelines. Mr. Fishman is a director of Pamida.
Mr. Muqaddam has served as a Vice President of Citicorp Venture Capital,
Ltd. and its affiliated investment companies since 1989. Previously, Mr.
Muqaddam spent 15 years with Citicorp and Citibank, N.A. in senior managerial
positions in the international corporate banking area, primarily in Europe, and
at the corporate headquarters in New York. Mr. Muqaddam is a director of
Chromcraft Revington, Inc. and Plantronics Inc.
Mr. Sodini has been employed since April 1996 as President and Chief
Executive Officer of The Pantry, Inc., an operator of convenience stores; from
February to April 1996 he was Chief Operating Officer of such company. From 1992
through 1995, Mr. Sodini served as Chief Executive Officer of Purity Supreme,
Inc., an operator of grocery supermarkets. From 1990 to early 1993, he served as
Chairman of the Board of Buttrey Food & Drug, Inc. Mr. Sodini has been
associated with the investment firm of Freeman Spogli & Co. Incorporated as a
consultant since 1988. Mr. Sodini is a director of Transamerica Income Shares
and Buttrey Food & Drug, Inc.
Mr. Washburn has served as Chief Operating Officer of the Corporation and
Pamida since March 6, 1997, Executive Vice President of the Corporation since
September 1995, and Executive Vice President of Pamida since February 1995,
having previously served as Senior Vice President - Human Resources of Pamida
since 1993 and as Vice President - Human Resources of Pamida since 1987. Mr.
Washburn also serves as Secretary of the Corporation and Pamida. Mr. Washburn
joined Pamida's predecessor in 1965. He is a director of Pamida.
The Board of Directors met seven times during the fiscal year ended
February 1, 1998.
The Compensation Committee of the Board of Directors met one time during
the fiscal year ended February 1, 1998. The Committee's functions are to provide
oversight with respect to the compensation and benefit policies, plans, and
programs of the Corporation for the executive officers of the Corporation and,
to the extent not otherwise determined by contract or formal plan, to review and
recommend to the Board of Directors salaries, bonuses, and other employee
benefits and compensation for the executive officers of the Corporation. The
members of the Compensation Committee also are the members of the Stock Option
Committee of the Board of Directors; the latter Committee is responsible for the
administration of the Corporation's 1992 Stock Option Plan, including the
granting of stock options thereunder, and met once during the fiscal year ended
February 1, 1998.
The Audit Committee of the Board of Directors met two times during the
fiscal year ended February 1, 1998. The Committee's functions are to recommend
to the Board of Directors the firm to be appointed as the Corporation's
independent accountants, to review and approve the scope of the Corporation's
annual audit, to review the audit findings and recommendations of the
Corporation's independent accountants, to consult with the Corporation's
independent accountants and internal auditors concerning the Corporation's
financial controls, accounting procedures, and internal auditing function, and
to consider and review such other matters relating to the financial and
accounting affairs of the Corporation as the Committee may deem appropriate.
The Board of Directors has no Nominating Committee.
During the fiscal year ended February 1, 1998, Mr. Sodini attended fewer
than 75% of the aggregate number of meetings of the Board of Directors and the
Committees on which he serves.
<PAGE> 4
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
ANNUAL EXECUTIVE COMPENSATION. The following table shows the annual
compensation paid by the Corporation and Pamida for services rendered during the
fiscal years ended February 1, 1998, February 2, 1997, and January 28, 1996, to
the Chief Executive Officer of the Corporation during fiscal 1998 and to each of
the persons who were executive officers of the Corporation at February 1, 1998:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
<S> <C> <C> <C> <C> <C> <C>
Long-Term
Compensation
Annual Compensation Awards
----------------------------------------------- -------------
Name and Other Stock Options
Principal Fiscal Annual (Number of All Other
Position Year Salary Bonus Compensation (1) Shares) Compensation (2)
- ------------------- ------ -------- -------- ---------------- ------------- ----------------
Steven S. Fishman, 1998 $500,050 $234,242 $ -- 6,200 $40,099
Chairman of the 1997 $506,973 $ -- $ -- 25,800 $34,427
Board, President, 1996 $444,088 $ -- $ -- 2,778 $24,310
and Chief Executive
Officer
Frank A. Washburn, 1998 $270,185 $128,833 $ -- 3,000 $21,037
Executive Vice 1997 $223,127 $ -- $ -- 13,000 $16,013
President (3) 1996 $194,281 $ 25,000 $ -- 14,667 $12,877
George R. Mihalko, 1998 $207,396 $ 55,873 $ -- 1,500 $18,665
Senior Vice 1997 $182,935 $ 15,000 $ -- 6,500 $11,515
President and 1996 $ 58,385 $ 35,000 $29,836 (5) 10,000 $ 2,856
Chief Financial
Officer (4)
- ------------------------------
</TABLE>
(1) Except as otherwise indicated in this column, perquisites and other
benefits, securities, or property for any of the named persons did not
exceed the lesser of $50,000 or 10% of the total amount of annual salary
and bonus.
(2) All Other Compensation for fiscal 1998 consists of contributions by Pamida
to its 401(k) plan and 1995 Deferred Compensation Plan ($4,000 and $36,099
for Mr. Fishman, $4,000 and $17,037 for Mr. Washburn, and $3,481 and
$13,623 for Mr. Mihalko) and $1,561 of imputed interest on an interest-free
loan of $50,000 made to Mr. Mihalko during fiscal 1998. Pamida's Deferred
Compensation Plan provides for elective salary deferrals by participants
(not less than 2% and not more than 10% of base salary); Pamida matches a
participant's deferral quarterly up to 5% of base salary and credits a
participant's deferral account quarterly with an interest equivalent at the
rate of 7% per annum.
(3) Mr. Washburn became an executive officer of the Corporation in September
1995. Information concerning his prior employment by Pamida appears on a
previous page of this Proxy Statement.
(4) Mr. Mihalko became an executive officer of the Corporation in September
1995. Prior to that time he was not employed by the Corporation or Pamida.
(5) $16,849 of this amount was a sign-on bonus in connection with Mr. Mihalko's
initial employment by the Corporation, and $11,873 of this amount was
reimbursement of various moving and relocation expenses.
STOCK OPTIONS AND LONG-TERM INCENTIVE AWARDS. The following tables contain
information concerning stock options granted to the executive officers of the
Corporation during fiscal 1998, options held by such executive officers at the
end of fiscal 1998, and long-term incentive awards made to such executive
officers during fiscal 1998:
<PAGE> 5
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants (1) for Option Term (2)
- --------------------------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
% of Total
Options
Options Granted to
Granted (3) Employees Exercise
(Number of in Fiscal Price Expiration
Name Shares) Year ($/Sh) Date 5% 10%
- ----------------- ----------- ---------- ---------- ---------- ------- -------
Steven S. Fishman 6,200 15.2% $3.0625 3-6-07 $11,941 $30,261
Frank A. Washburn 3,000 7.4% $3.0625 3-6-07 $ 5,778 $14,642
George R. Mihalko 1,500 3.7% $3.0625 3-6-07 $ 2,889 $ 7,321
- -----------------
</TABLE>
(1) The options granted during fiscal 1998 were granted under the Corporation's
1992 Stock Option Plan (the "Plan") by the Stock Option Committee of the
Board of Directors; the members of such committee also are the members of
the Compensation Committee of the Board of Directors. Such options relate
to shares of the Common Stock, were granted at prices equal to the average
of the high and low prices of the Common Stock on the American Stock
Exchange on the date of the grants, and are intended to be incentive stock
options for federal income tax purposes to the extent permitted by the
Internal Revenue Code of 1986.
(2) The calculations are made at the 5% and 10% rates prescribed by Securities
and Exchange Commission regulation and are not intended to forecast
possible future appreciation of the Common Stock. The calculations assume
the indicated annual rates of appreciation of the exercise price for ten
years on a compounded basis for all of the shares covered by the option,
minus the aggregate exercise price.
(3) These options become exercisable in five equal annual installments
beginning March 6, 1998, subject to the terms of the Plan and the
applicable stock option agreement.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL-YEAR-END OPTION VALUES
<S> <C> <C> <C> <C>
Number of
Shares Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
2-1-98 (1) 2-1-98 (2)
Number of ------------- -------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
- ----------------- --------------- -------- ------------- -------------
Steven S. Fishman -- -- 109,882 $79,675
56,840 $51,098
Frank A. Washburn -- -- 10,533 $ 8,926
21,800 $30,263
George R. Mihalko -- -- 5,300 $ 5,900
12,700 $19,256
- -----------------
</TABLE>
(1) All options relate to shares of the Common Stock and were granted under the
Corporation's 1992 Stock Option Plan.
(2) Based upon the $4.75 market value of the underlying Common Stock on January
30, 1998, the last day of the fiscal year on which trading in the Common
Stock occurred, minus the option exercise price for the shares covered by
the option.
<PAGE> 6
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR (1)
Performance or Other Period
Name Number of Units Until Maturation or Payout
- ----------------- --------------- ---------------------------
Steven S. Fishman 125,000 3-6-97 to 3-5-00
Frank A. Washburn 68,750 3-6-97 to 3-5-00
George R. Mihalko 42,000 3-6-97 to 3-5-00
(1) Under separate Long-Term Incentive Award Agreements between Pamida and each
executive officer named in the table above, if such executive officer is a
regular full-time employee of Pamida at the close of business on March 5,
2000, and at such time has been continuously employed by Pamida on a
regular full-time basis since March 6, 1997, then Pamida will pay such
executive officer in cash on or before April 15, 2000, an amount equal to
the product of the number of units set forth after such executive officer's
name in the table above multiplied by the positive difference, if any,
resulting from the subtraction of (a) $3.0625 from (b) the lesser of (i)
the Average Price or (ii) $9.0625. "Average Price" means the average of the
closing prices of the Common Stock on the American Stock Exchange on the
first 20 trading days subsequent to March 5, 2000, on which the Common
Stock is traded on such Exchange. Each Long-Term Incentive Award Agreement
also provides for a payment at the discretion of the Board of Directors if
the executive officer's employment by Pamida terminates prior to March 5,
2000, by reason of his death or disability and for certain payments based
on the Common Stock price appreciation to the date of the event in the case
of a change of control of the Corporation or Pamida or a termination of the
executive officer's employment without cause.
EMPLOYMENT AND OTHER AGREEMENTS. Mr. Fishman was employed by Pamida as its
President and Chief Executive Officer, effective April 19, 1993, pursuant to an
employment agreement having a three-year term ending on April 18, 1996. On
September 22, 1995, the Corporation and Pamida entered into a new employment
agreement with Mr. Fishman which superseded the 1993 agreement except as
otherwise described in this paragraph. The term of the 1995 agreement extends
through April 18, 2001. Through April 18, 1996, Mr. Fishman was entitled to
receive a base salary at an annual rate of $450,000 (the rate for such period
provided for in the 1993 agreement); thereafter, Mr. Fishman is entitled to
receive a base salary at an annual rate of not less than $500,000 for the
remaining term of the 1995 agreement. Under the 1995 agreement, Mr. Fishman was
entitled to and did receive an incentive bonus for fiscal 1998 based upon the
financial performance of the Corporation and its subsidiaries on a consolidated
basis and the comparable store sales performance of Pamida's stores. The 1995
agreement requires the Board of Directors and Mr. Fishman to agree periodically
upon incentive bonus programs for Mr. Fishman for fiscal 1999 through 2001. Mr.
Fishman's fiscal 1999 incentive bonus program provides for a potential incentive
bonus based upon the financial performance of the Corporation and its
subsidiaries on a consolidated basis and the comparable store sales performance
of Pamida's stores. Mr. Fishman also is entitled to customary fringe benefits
under the 1995 agreement. In the event of Mr. Fishman's death, his base salary
would continue for 90 days, and his estate would be entitled to a pro rata
portion of his incentive bonus (if any) for the fiscal year in which his death
occurs. If Mr. Fishman's employment terminates for cause or by reason of his
disability for a continuous period of six months, then he would be entitled to
his base salary to the termination date, a pro rata portion of his incentive
bonus (if any) for the fiscal year in which such termination occurs, and (only
in the case of his disability) the continuation of certain fringe benefits until
not later than his attainment of age 65. If Mr. Fishman's employment is
terminated by the Corporation or Pamida without cause prior to a Significant
Corporate Event (as defined in the 1995 agreement), then he would be entitled to
the continuation of his base salary through April 18, 2001 (less amounts which
Mr. Fishman might receive from other employment), a pro rata portion of his
incentive bonus (if any) for the fiscal year in which such termination occurs,
the continuation of certain fringe benefits until the earlier of April 18, 2001,
or his receipt of such benefits from another employer, and the equivalent of
certain deferred compensation and 401(k) plan benefits which Mr. Fishman would
lose as a result of his termination without cause. If the termination without
cause occurs after a Significant Corporate Event, then Mr. Fishman also would be
entitled to receive an incentive bonus for each of the next two 12-month periods
(but not beyond April 18, 2001) in an amount equal to the average amount of the
incentive bonuses (if any) which he received for the three fiscal years prior to
the fiscal year during which such termination occurs. Significant Corporate
Events are the Corporation's ceasing to own all of the capital stock of Pamida,
the merger of Pamida into a corporation of which the Corporation does not own a
majority of the voting shares,
<PAGE> 7
the merger of the Corporation into another corporation a majority of whose
voting shares are owned by persons other than the previous majority owners of
the Corporation, the acquisition by a person or group (other than 399 Venture
Partners, Inc. or its affiliates) of 30% or more of the voting shares of the
Corporation, and a stockholder vote to dissolve Pamida or dispose of all of its
property and assets. The 1995 agreement also provides that Mr. Fishman is
entitled to at least 12 months advance notice if the Corporation and Pamida do
not intend to continue his employment after April 18, 2001, with at least the
same base salary as then in effect and with a substantially similar incentive
bonus program and fringe benefits; in the absence of such notice prior to April
18, 2000, Mr. Fishman would be entitled to certain compensation through the end
of a 12-month period beginning when such notice actually is given. In March 1998
Mr. Fishman's annual base salary was increased to $525,000.
Mr. Washburn has an employment agreement with the Corporation and Pamida,
providing for his employment as Executive Vice President and Chief Operating
Officer, which became effective on March 6, 1997, and has a term of three years.
The agreement provides for a base salary at an annual rate of not less than
$275,000 and in other material respects is substantially identical to Mr.
Fishman's 1995 agreement described above. In March 1998 Mr. Washburn's annual
base salary was increased to $325,000.
Mr. Mihalko has an employment agreement with the Corporation and Pamida,
providing for his employment as Senior Vice President and Chief Financial
Officer, which became effective on March 6, 1997, and has a term of three years.
The agreement provides for a base salary at an annual rate of not less than
$210,000. In most other material respects, Mr. Mihalko's agreement is
substantially similar to Mr. Fishman's 1995 agreement described above; however,
Mr. Mihalko's agreement does not include provisions for certain bonus payments
or certain continued salary payments and benefits in the event of the
termination of Mr. Mihalko's employment for various reasons prior to the
expiration of the three-year term or without at least 12 months' advance notice.
In March 1998 Mr. Mihalko's annual base salary was increased to $230,000.
REPORT OF COMPENSATION COMMITTEE.
(a) CHIEF EXECUTIVE OFFICER. Mr. Fishman became Chief Executive Officer of
the Corporation upon his employment by the Corporation in April 1993. At that
time, the terms of Mr. Fishman's employment, including his compensation, were
negotiated with him by a committee of outside directors of the Corporation
appointed by the Board of Directors. The committee was aided in such
negotiations by an executive search firm engaged by the Corporation at the
committee's direction, and the committee considered among other things
information provided by such firm with respect to the compensation of other
executives holding comparable positions in the retail industry. In September
1995, the Compensation Committee of the Board of Directors negotiated a new
employment agreement with Mr. Fishman and, in doing so, considered information
gathered by the corporation's human resources department from published sources
showing the compensation of other executives holding comparable positions in the
retail industry and the various elements of such compensation. The Committee
also considered the operating results and financial condition of the Corporation
and its subsidiaries on a consolidated basis and various accomplishments of Mr.
Fishman during his tenure as Chief Executive Officer.
Mr. Fishman's salary for fiscal 1998 was established by the employment
agreement between Mr. Fishman described above. Mr. Fishman's current employment
agreement also provided by a 1997 amendment for a potential incentive bonus for
Mr. Fishman for fiscal 1998 based upon the financial performance of the
Corporation and its subsidiaries on a consolidated basis and the comparable
store sales performance of Pamida's stores. The exact bonus amount was to be
determined by a matrix involving both the Corporation's consolidated earnings
before interest, taxes, depreciation, and amortization and the percentage growth
in comparable store sales of Pamida's stores. Because the threshold financial
performance requirement was satisfied for fiscal 1998, Mr. Fishman received a
bonus based upon the terms of the amended employment agreement and such matrix.
The Stock Option Committee of the Board of Directors (composed of the same
persons who constitute the Compensation Committee) granted an option to Mr.
Fishman during fiscal 1998 with the expectation that the low option price
(market value of the Common Stock on the date of the grant) will provide an
additional incentive to Mr. Fishman to improve the earnings and overall
financial performance of the Corporation, which should lead to an increase in
the market price of the Common Stock for the benefit of all stockholders.
<PAGE> 8
In March 1997 the Compensation Committee also recommended and the Board of
Directors approved a new long-term incentive plan for Mr. Fishman and certain
other senior executives of Pamida which, as is the case with the stock option
grants, is intended to provide further incentive to Mr. Fishman and the other
plan participants to improve the earnings and overall financial performance of
the Corporation. The potential cash payout under the long-term incentive plan
(which is described in the table on page 7) is based upon the increase in the
market price of the Common Stock over the three-year period from March 1997 to
March 2000.
The Stock Option and Compensation Committees and the Board of Directors
also sought, through the option grant and long-term incentive award, to provide
further motivation for Mr. Fishman and the Corporation's other executive
officers to find creative means of improving the Corporation's highly leveraged
capital structure, with the primary goals of reducing such leverage and the
Corporation's interest expense and increasing the market price of the Common
Stock.
(b) OTHER EXECUTIVE OFFICERS. The base salaries of Messrs. Washburn and
Mihalko for fiscal 1998 (effective in March 1997) were established by their
employment agreements described above and were determined for purposes of such
agreements by reference to information gathered by the Corporation's human
resources department from published sources showing compensation levels of
executives holding comparable positions in the retail industry (and the various
elements of such compensation), the scope of their respective responsibilities,
and their accomplishment of particular assignments within their respective areas
of responsibility. The bonus programs for Messrs. Washburn and Mihalko for
fiscal 1998 were similar to Mr. Fishman's, and bonuses were paid to Mr. Washburn
and Mr. Mihalko for such fiscal year because the applicable threshold financial
performance test was met. Stock options were granted and long-term incentive
compensation awards were made to Messrs. Washburn and Mihalko during fiscal 1998
for the reasons discussed in the preceding paragraphs relating to the option
granted and long-term incentive compensation award made to Mr. Fishman.
(c) GENERAL. While the Compensation and Stock Option Committees and the
Board of Directors recognize that Mr. Fishman and the other executive officers
of the Corporation have no direct control over the market price of the Common
Stock, such Committees and the Board of Directors have sought to assure, by
approving certain compensation arrangements which derive value either directly
from an increase in the market price of the Common Stock or from financial and
operating results which may reasonably be expected to have a positive effect on
such market price, that the interests of the Corporation's senior management are
closely aligned with the interests of the Corporation's stockholders.
M. Saleem Muqaddam (Chairman),
Stuyvesant P. Comfort, and Peter J. Sodini
Compensation Committee of the Board of Directors
<PAGE> 9
PERFORMANCE GRAPH. The following performance graph compares the yearly
percentage change in the cumulative total stockholder's return on the Common
Stock with the yearly percentage change in the similar return of the S&P 500
Index and an index of a peer group of comparable general merchandise discount
store operators, assuming the reinvestment of dividends. The peer group is
composed of the following companies: Ames Department Stores, Inc., Duckwall-Alco
Stores, Inc., Fred's Inc., Hills Stores Company, Kmart Corporation, and Shopko
Stores, Inc. The Corporation paid no dividends on the Common Stock during the
periods reflected in the graph.
[Performance Graph comparing the five-year cumulative total returns
of Pamida, S & P 500 and Peer Group.]
1993 1994 1995 1996 1997 1998
------- ------- ------- ------- ------- -------
Pamida $100.00 $ 96.00 $220.00 $ 89.98 $ 72.00 $152.00
S & P 500 $100.00 $112.88 $113.48 $157.35 $198.80 $252.30
Peer Group $100.00 $ 87.62 $ 65.53 $ 32.77 $ 58.73 $ 64.30
COMPENSATION OF DIRECTORS. Directors who are not employees of the
Corporation receive a monthly fee of $1,000 for serving on the Board of
Directors, $500 for each Board meeting which they attend, and $500 for each
meeting of a Board committee which they attend on a day other than the day of a
Board meeting. Directors who also are employees of the Corporation or Pamida do
not receive any additional compensation for serving as a director. All directors
are reimbursed for their out-of-pocket travel and related expenses incurred in
attending meetings of the Board of Directors and its committees.
<PAGE> 10
PROPOSAL TO APPROVE 1998 STOCK INCENTIVE PLAN
PROPOSED PLAN AND PURPOSES
At the Annual Meeting, the stockholders will be asked to approve the
Corporation's 1998 Stock Incentive Plan (the "1998 Plan"), as adopted by the
Board on March 5, 1998. The 1998 Plan authorizes 500,000 shares of Common Stock
for option grants or other awards to eligible officers and other key employees
of the Corporation. No grants or other awards have been made under the 1998
Plan, and it is not possible to state the terms or types of any options or other
awards that may be granted to executive officers of the Corporation or other
persons under the 1998 Plan at a future time or to identify the persons to whom
such future grants may be made.
The 1998 Plan is intended to foster and promote the long-term financial
success of the Corporation and its subsidiaries and thereby increase stockholder
value by providing incentives to those officers and other key employees who are
likely to be responsible for achieving such success. The Corporation anticipates
that the 1998 Plan will assist Pamida in recruiting and retaining key employees
in the highly competitive retail industry. The Corporation also believes that
participation in the 1998 Plan by officers and other key employees will
strengthen their commitment to the Corporation and more closely align the
interests of such persons with the interests of the Corporation's stockholders.
REQUIRED VOTE
Approval of the 1998 Plan requires the affirmative vote of the holders of a
majority of the shares of Common Stock present or represented by proxy at the
Annual Meeting and entitled to vote.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE 1998 PLAN.
DESCRIPTION OF THE 1998 PLAN
The following summary of the 1998 Plan does not purport to be complete and
is subject to and qualified in its entirety by the full terms of the 1998 Plan,
which appears as Exhibit 1 to this Proxy Statement.
The 1998 Plan authorizes the grant of (i) incentive stock options under the
Internal Revenue Code of 1986 (the "Code"), (ii) non-qualified stock options,
(iii) stock appreciation rights, (iv) performance unit awards, (v) restricted
stock awards, and (vi) stock bonus awards to officers and other key employees of
the Corporation or any subsidiary of the Corporation who are responsible for or
contribute to, or are likely to be responsible for or contribute to, the
management, growth, and success of the Corporation or such subsidiary. The
Corporation and its subsidiaries currently have approximately 200 employees who
potentially are eligible to receive such a grant, but the Corporation expects
that most of such employees will not receive a grant under the 1998 Plan.
The aggregate number of shares of Common Stock available for issuance
pursuant to the 1998 Plan is 500,000, which may be authorized and unissued
shares or treasury shares. The aggregate number of shares of Common Stock
subject to or issuable in payment of a grant or award to any one person in any
calendar year may not exceed 150,000. If there is a stock dividend, stock split,
or other relevant change in the outstanding shares of Common Stock, then the
Stock Option Committee (the "Committee") of the Board will make appropriate
adjustments in (a) the aggregate number of shares of Common Stock (i) reserved
for issuance under the 1998 Plan, (ii) for which grants or awards may be made to
an individual grantee, and (iii) covered by outstanding awards or grants, (b)
the exercise or other applicable price relating to outstanding awards or grants,
and (c) the appropriate fair market value and other price determinations
relevant to outstanding awards or grants. Any shares subject to an option or
right which expires or terminates unexercised as to such shares will again be
available for the grant of awards or options under the 1998 Plan. If any shares
of Common Stock which have been pledged as collateral for indebtedness incurred
by an optionee in connection with an option exercise are returned to the
Corporation in satisfaction of such indebtedness, then such shares will again be
available for the grant of awards or options under the 1998 Plan.
No award or grant under the 1998 Plan may be assigned or transferred by the
recipient except by will, the laws of descent and distribution, or, in the case
of awards or grants other than incentive stock options, pursuant to a qualified
domestic relations order or by such other means as the Committee may approve.
<PAGE> 11
ADMINISTRATION OF PLAN
The 1998 Plan is administered by the Committee, which is composed of three
directors of the Corporation who are not employees of the Corporation or any of
its subsidiaries. The Committee has authority to interpret the 1998 Plan, to
select the officers and other key employees to whom awards or options will be
granted, to determine whether and to what extent awards and options will be
granted under the 1998 Plan, to determine the types of awards and options to be
granted and the amount, size, terms, and conditions of each award or grant, and
to make other relevant determinations and administrative decisions. In general,
all decisions and determinations made by the Committee pursuant to the 1998 Plan
are final and binding on all persons.
The Committee may delegate to any officer or officers of the Corporation
any of the Committee's duties, powers, and authorities under the 1998 Plan upon
such conditions and with such limitations as the Committee may determine;
provided, that only the Committee may select for awards or options under the
1998 Plan, and make grants of awards or options under the 1998 Plan to, officers
and other key employees of the Corporation or any subsidiary of the Corporation
who are subject to Section 16 of the Securities Exchange Act of 1934 at the time
of such selection or the making of such a grant.
TYPES OF AWARDS AND GRANTS
STOCK OPTIONS. The Committee may grant incentive stock options under the
Internal Revenue Code of 1986, as amended from time to time, or any successor
thereto (the "Code") and non-qualified stock options. The option price per share
may not be less than the fair market value (as defined in the Plan) of the
Common Stock on the date of the grant. The Committee will fix the term of each
option at the time of its grant, but such term may not be more than ten years
after the date of the grant. The Committee may determine when an option becomes
exercisable and may accelerate previously established exercise rights. The
Committee may permit payment of the option exercise price in cash or in shares
of Common Stock valued at their fair market value on the exercise date. The
Committee also may permit the exercise price to be paid by the optionee's
delivery of a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Corporation the amount of
the applicable sale or loan proceeds required to pay the exercise price.
If an optionee's employment terminates for any reason other than death or
disability, then the optionee generally may exercise an option to the extent it
was exercisable at the time of the termination for a period of one month after
the termination (but not after the expiration date of the option). However, the
Committee has the power to terminate an optionee's rights under an outstanding
option if the Committee determines that the optionee's employment was terminated
for cause. If an optionee's employment terminates by reason of disability, then
the optionee's options generally will be exercisable for six months after the
termination to the extent that the exercise was permitted prior to the
termination (but not after the expiration date of the option). If an optionee
dies while in the employ of the Corporation or a subsidiary, then the optionee's
options generally will be exercisable by the optionee's personal representative
or other successor for 12 months after the date of death to the extent that the
exercise was permitted prior to the optionee's death (but not after the
expiration date of the option).
STOCK APPRECIATION RIGHTS. The Committee may grant stock appreciation
rights ("SAR's") which entitle the grantee to receive, upon the exercise of an
SAR, an award equal to all or a portion of the excess of (i) the fair market
value of a specified number of shares of Common Stock at the time of the
exercise over (ii) a specified price not less than the fair market value of the
Common Stock at the time the SAR was granted. An SAR may be granted
independently or in connection with a stock option grant. Upon the exercise of
an SAR, the applicable award may be paid in cash or in shares of Common Stock
(or a combination thereof) as the Committee may determine. The Committee will
fix the term of an SAR at the time of its grant, but such term may not be more
than ten years after the date of the grant. The Committee may determine when an
SAR becomes exercisable and may accelerate previously established exercise
rights.
The provisions of the 1998 Plan relating to exercisability of SAR's upon
the termination of a grantee's employment are similar to those discussed above
in connection with stock options.
PERFORMANCE UNIT AWARDS. The Committee may grant performance unit awards
which entitle the grantees to receive future payments based upon and subject to
the achievement of preestablished long-term performance targets. In connection
with such awards, the Committee is required to establish (i) performance periods
of not less than two nor more than five years, (ii) the value of each
performance unit, and (iii) maximum and minimum performance targets to be
achieved during the performance period. The Committee may adjust previously
established performance targets or other terms and conditions of a performance
unit award to reflect
<PAGE> 12
major unforeseen events, but such adjustments may not increase the payment due
upon attainment of the previously established performance targets. Performance
unit awards, to the extent earned, may be paid in cash or shares of Common Stock
(or a combination thereof) as the Committee may determine.
If the employment of a grantee of a performance unit award terminates prior
to the end of an applicable performance period other than by reason of
disability or death, then the award generally terminates. However, the 1998 Plan
permits the Committee to make partial payments of performance unit awards if the
Committee determines such action to be equitable. If the employment of a grantee
of a performance unit award terminates as a result of the grantee's disability
or death prior to the end of an applicable performance period, then the
Committee may authorize the payment of all or a portion of the performance unit
award (to the extent earned in the case of disability) to the grantee or the
grantee's legal representative.
RESTRICTED STOCK AWARDS. The Committee may grant restricted stock awards
consisting of shares of Common Stock restricted against transfer, subject to a
substantial risk of forfeiture and to other terms and conditions established by
the Committee. The Committee must determine the restriction period applicable to
a restricted stock award and the amount, form, and time of payment (if any)
required from the grantee of a restricted stock award in consideration of the
issuance of the shares covered by such award. The Committee in its discretion
may provide for the lapse in installments of the restrictions applicable to
restricted stock awards and may waive the restrictions in whole or in part.
If the employment of a grantee of a restricted stock award terminates for
any reason while some or all of the shares covered by such award are still
restricted, the grantee's rights with respect to the restricted shares generally
terminate. However, the Committee has the discretion to provide for complete or
partial exemptions to such employment requirement.
STOCK BONUS AWARDS. The Committee may grant a stock bonus award based upon
the performance of the Corporation, a subsidiary, or a segment thereof in terms
of preestablished objective financial criteria or performance goals or, in
appropriate cases, such other measures or standards of performance (including
but not limited to performance already accomplished) as the Committee may
determine. The Committee may adjust preestablished financial criteria or
performance goals to take into account unforeseen events or changes in
circumstances, but such adjustments may not increase the amount of a stock bonus
award. The Committee, in its discretion, may impose additional restrictions upon
the shares of Common Stock which are the subject of a stock bonus award.
MISCELLANEOUS PROVISIONS
Unless the 1998 Plan is sooner terminated by the Board, the 1998 Plan will
terminate on December 31, 2007. Awards or options outstanding at the time of the
termination of the 1998 Plan will remain in effect in accordance with their
terms. The Board may amend the 1998 Plan at any time; however, stockholder
approval must be obtained for any amendment for which such approval is required
by Rule 16b-3 under the Securities Exchange Act of 1934 or Sections 162(m) or
422 of the Code. The Corporation's obligation to deliver shares of Common Stock
or make cash payments under the 1998 Plan is subject to applicable tax
withholding requirements; in the discretion of the Committee, required tax
withholding amounts may be paid by the grantee in cash or shares of Common Stock
having a fair market value equal to the required tax withholding amount.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following brief description of certain federal income tax consequences
is based upon present federal income tax laws and regulations and does not
purport to be a complete description of the federal income tax consequences of
the 1998 Plan.
INCENTIVE STOCK OPTIONS. The grant of an incentive stock option under the
1998 Plan will not result in taxable income to the grantee or a tax deduction
for the Corporation. If the grantee holds the shares purchased upon the exercise
of an incentive stock option for at least one year after the purchase of the
shares and until at least two years after the option was granted, then the
grantee's sale of the shares will result in a long-term or mid-term gain or loss
(depending upon the grantee's holding period), and the Corporation will not be
entitled to any tax deduction. If the grantee sells or otherwise transfers the
shares before such holding periods have elapsed, then the grantee generally will
recognize ordinary income and the Corporation would be entitled to a tax
deduction in an amount equal to the lesser of (i) the fair market value of the
shares on the exercise date minus the option price or (ii) the amount realized
upon the disposition minus the option price. Any gain in excess of such ordinary
income portion would be taxable as long-term, mid-term, or short-term capital
gain depending upon the grantee's holding period for the shares. The excess of
the fair market value of the shares received on the option exercise date over
the option price is an item of tax preference, potentially subject to the
alternative minimum tax.
<PAGE> 13
NON-QUALIFIED STOCK OPTIONS. The grant of a non-qualified stock option
under the 1998 Plan will not result in taxable income to the grantee or a tax
deduction for the Corporation. Upon the exercise of a non-qualified stock
option, the grantee will be taxed at ordinary income rates on the excess of the
fair market value of the shares received over the option exercise price, and the
Corporation generally will be entitled to a tax deduction in the same amount.
The exercise price of the non-qualified stock option plus the amount included in
the grantee's income as a result of the option exercise will be treated as the
grantee's basis in the shares received, and any gain or loss on the subsequent
sale of the shares will be treated as long-term, mid-term, or short-term capital
gain or loss depending upon the grantee's holding period for the shares. The
grantee's sale of shares acquired upon the exercise of a non-qualified stock
option will have no tax consequences to the Corporation.
STOCK APPRECIATION RIGHTS AND PERFORMANCE UNIT AWARDS. The grant of an SAR
or a performance unit award under the 1998 Plan will not result in taxable
income to the grantee or a tax deduction for the Corporation. Upon the exercise
of an SAR or the receipt of cash or shares of Common Stock upon the payment of a
performance unit award, the grantee will recognize ordinary income and the
Corporation generally will be entitled to a tax deduction in an amount equal to
the fair market value of the shares plus any cash received.
RESTRICTED STOCK AWARDS. The grant of a restricted stock award should not
result in taxable income for the grantee or a tax deduction for the Corporation
if the shares of Common Stock transferred to the grantee are subject to
restrictions which create a substantial risk of forfeiture of the shares by the
grantee if certain conditions prescribed at the time of the grant are not
subsequently satisfied. However, the grantee may elect within 30 days after the
acquisition of the shares to recognize ordinary income on the date of the
acquisition in an amount equal to the excess (if any) of the fair market of the
shares on the date of the grant, determined without regard to the restrictions
imposed on such shares (other than restrictions which by their terms will never
lapse), over the amount (if any) paid for the shares. If the grantee does not
make the election referred to in the preceding sentence, then, when the
restrictions imposed upon the shares lapse or otherwise terminate, the grantee
of the shares will recognize ordinary income in an amount equal to the excess
(if any) of the fair market value of the shares on the date of such lapse or
other termination over the amount (if any) paid for the shares. If and when the
grantee of a restricted stock award recognizes ordinary income with respect to
the shares covered by such award, the Corporation generally will be entitled to
a tax deduction in the same amount. The amount paid by the grantee for
restricted shares plus any amount recognized by the grantee as ordinary income
under the rules described above will be treated as the grantee's basis in the
shares; when the grantee sells the shares covered by a restricted share award
following the lapse or other termination of the restrictions, any gain or loss
on such sale will be treated as long-term, mid-term, or short-term capital gain
or loss depending upon the grantee's holding period. Any dividends paid to the
grantee of restricted shares while the shares are still subject to the
restrictions would be treated as compensation for federal income tax purposes.
STOCK BONUS AWARDS. When a stock bonus award is paid to a grantee by the
delivery of shares of Common Stock, the grantee will recognize ordinary income
and the Corporation generally will be entitled to a tax deduction in an amount
equal to the fair market value of such shares at the time of such delivery. If,
however, such shares are subject to any restrictions which create a substantial
risk of forfeiture, then the tax rules described above with respect to
restricted stock awards would be applicable.
MARKET PRICE
The closing price of the Common Stock on the American Stock Exchange on
March 23, 1998, was $5.25 per share.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP served as the Corporation's independent
public accountants for the fiscal year ended February 1, 1998, and has been
selected by the Board of Directors to serve in such capacity for the current
fiscal year.
The Corporation expects that a representative of Deloitte & Touche LLP will
be present at the Annual Meeting, with the opportunity to make a statement if he
or she desires to do so, and that such representative will be available to
respond to appropriate questions.
<PAGE> 14
On October 16, 1996, upon the recommendation of its Audit Committee, the
Board of Directors rescinded its previous selection of Coopers & Lybrand L.L.P.
as the Corporation's principal independent accountant to audit the Corporation's
financial statements for the fiscal year ending February 2, 1997, and selected
Deloitte & Touche LLP to serve in such capacity and for such purpose. For the
fiscal year ended January 28, 1996, Coopers & Lybrand L.L.P. had audited the
Corporation's financial statements. The report of Coopers & Lybrand L.L.P. on
the Corporation's financial statements for the fiscal year ended January 28,
1996, did not contain an adverse opinion or a disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope, or accounting principles,
except that the report of Coopers & Lybrand L.L.P. for the fiscal year ended
January 28, 1996, noted that for such year the Corporation adopted Statement of
Financial Accounting Standards No. 121. During the fiscal year ended January 28,
1996, and thereafter through October 16, 1996, there were no disagreements
between the Corporation and Coopers & Lybrand L.L.P. on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure and no reportable event, as described in the applicable regulations of
the Securities and Exchange Commission.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors knows of no
other business which will be presented for consideration at the Annual Meeting.
As to other business, if any, that properly may come before the Annual Meeting,
the Board of Directors intends that proxies in the accompanying form will be
voted in respect thereof in accordance with the judgment of the person or
persons voting the proxies.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1999 annual meeting
of stockholders of the Corporation must be received by the Corporation not later
than November 25, 1998, for inclusion in the Corporation's proxy statement and
form of proxy relating to that meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers (as defined in the applicable regulations) and directors,
and persons who own more than 10% of a class of the Corporation's equity
securities registered under such Act, to file certain reports of ownership and
changes of ownership of the Corporation's equity securities with the SEC and the
American Stock Exchange. Officers, directors, and more than 10% stockholders are
required by SEC regulation to furnish to the Corporation copies of all Section
16(a) forms which they file.
Based solely on its review of the copies of such forms submitted to it, or
written representations from certain reporting persons that no Form 5 was
required for those persons, the Corporation believes that all filing
requirements applicable to its officers and directors were complied with for the
fiscal year ended February 1, 1998. The Corporation received a Form 5 from 399
Venture Partners, Inc. which reflected a late reporting of the acquisition on a
single occasion of shares of Nonvoting Common Stock of the Corporation in
payment of promissory notes of the Corporation previously held by 399 Venture
Partners, Inc. The Corporation did not receive a Form 5 from Natasha Partnership
(or Nathalie P. Comfort, its general partner), which was a more than 10%
stockholder of the Corporation until November 18, 1997, but became a less than
10% stockholder by reason of the Corporation's issuance of additional shares of
Common Stock on that date.
<PAGE> 15
ADDITIONAL INFORMATION
The annual report of the Corporation for the fiscal year ended February 1,
1998, including financial statements, is being mailed to stockholders of the
Corporation with this Proxy Statement. Such report is not to be regarded as
proxy soliciting material or as a part of this Proxy Statement.
The cost of soliciting proxies in the accompanying form will be borne by
the Corporation. Officers and directors of the Corporation, without compensation
other than their regular compensation, also may solicit proxies either by mail,
personal conversation, telephone, or other means of communication. Upon request,
the Corporation will reimburse brokerage firms, nominees, and others for their
reasonable expenses of forwarding solicitation material to the beneficial owners
of Common Stock.
Dated March 25, 1998 BY ORDER OF THE BOARD OF DIRECTORS,
FRANK A. WASHBURN, Secretary
<PAGE> 16
PAMIDA HOLDINGS CORPORATION
1998 STOCK INCENTIVE PLAN
1. PURPOSE. The purpose of the Pamida Holdings Corporation 1998 Stock
Incentive Plan (the "Plan") is to foster and promote the long-term financial
success of the Company and its Subsidiaries and thereby increase stockholder
value by providing incentives to those officers and other key employees who are
likely to be responsible for achieving such success.
2. CERTAIN DEFINITIONS.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto. References to a particular section of the Code
shall include any regulations issued under such section.
"COMMITTEE" shall have the meaning provided in Section 3 of the Plan.
"COMMON STOCK" means the Common Stock, $.01 par value per share, of the
Company.
"COMPANY" means Pamida Holdings Corporation, a Delaware corporation.
"DISABILITY" means (i) with respect to the exercise of an Incentive Stock
Option after termination of employment, a disability within the meaning of
Section 22(e)(3) of the Code and (ii) for all other purposes, a mental or
physical condition which, in the opinion of the Committee, renders a grantee
unable or incompetent to carry out the job responsibilities which such grantee
held or the tasks to which such grantee was assigned at the time the disability
was incurred and which is expected to be permanent or for an indefinite duration
exceeding one year.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
"FAIR MARKET VALUE" means, as determined by the Committee, the last
reported sale price on the principal national securities exchange on which the
Common Stock is listed or admitted to trading on the trading day for which the
determination is being made, or, if no such reported sale takes place on such
day, the average of the closing bid and asked prices on such day on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or, if the Common Stock is not admitted to trading on a
national securities exchange, the average of the closing bid and asked prices in
the over-the-counter market on the day for which the determination is being made
as reported through Nasdaq, or, if bid and asked prices for the Common Stock on
such day are not reported through Nasdaq, the average of the bid and asked
prices for such day as furnished by any New York Stock Exchange member firm
regularly making a market in the Common Stock selected for such purpose by the
Committee, or, if none of the foregoing is applicable, then the fair market
value of the Common Stock as determined in good faith by the Committee in its
sole discretion.
"INCENTIVE STOCK OPTION" means any stock option intended to qualify as an
"incentive stock option" within the meaning of Section 422 of the Code.
"NON-QUALIFIED STOCK OPTION" means any stock option that is not intended to
be an Incentive Stock Option, including any stock option that provides (as of
the time such option is granted) that it will not be treated as an Incentive
Stock Option.
"PARENT CORPORATION" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of the
granting of the option, each of the corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
"PERFORMANCE UNIT AWARD" means an award granted pursuant to Section 8.
<PAGE> 17
"PLAN YEAR" means the twelve-month period beginning on January 1 and ending
on December 31; provided, that the first Plan Year shall be a short Plan Year
beginning on March 5, 1998, and ending on December 31, 1998.
"RESTRICTED STOCK AWARD" means an award of Common Stock granted pursuant to
Section 9.
"RULE 16b-3" means Rule 16b-3 under the Exchange Act, as in effect from
time to time.
"STOCK APPRECIATION RIGHT" means an award granted pursuant to Section 7.
"STOCK BONUS AWARD" means an award of Common Stock granted pursuant to
Section 10.
"STOCK OPTION" means any option to purchase Common Stock granted pursuant
to Section
"SUBSIDIARY" means (i) as it relates to Incentive Stock Options, any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if, at the time of the granting of the option, each
of the corporations (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain and (ii) for all other
purposes, a corporation, domestic or foreign, of which not less than 50% of the
voting shares are held by the Company or by a Subsidiary, whether or not such
corporation now exists or hereafter is organized or acquired by the Company or
by a Subsidiary.
3. ADMINISTRATION. The Plan shall be administered by a committee of two or
more members of the Board (the "Committee") selected by the Board, each of whom
shall qualify as a "Non-Employee Director" within the meaning of Rule 16b-3 and
as an "outside director" within the meaning of Section 162(m) of the Code.
The Committee shall have authority to grant to eligible employees of the
Company or its Subsidiaries, pursuant to the terms of the Plan, (a) Stock
Options, (b) Stock Appreciation Rights, (c) Restricted Stock Awards, (d)
Performance Unit Awards, (e) Stock Bonus Awards, or (f) any combination of the
foregoing.
Subject to the applicable provisions of the Plan, the Committee shall have
authority to interpret the provisions of the Plan and to decide all questions of
fact arising in the application of such provisions; to select the officers and
other key employees to whom awards or options shall be granted under the Plan;
to determine whether and to what extent awards or options shall be granted under
the Plan; to determine the types of awards and options to be granted under the
Plan and the amount, size, terms and conditions of each such award or option; to
determine the time when awards or options shall be granted under the Plan; to
determine whether, to what extent and under what circumstances the payment of
Common Stock and other amounts payable with respect to an award granted under
the Plan shall be deferred either automatically or at the election of the
grantee; to determine the Fair Market Value of the Common Stock from time to
time; to authorize persons to execute on behalf of the Company any agreement
required to be entered into under the Plan; to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as the
Committee from time to time shall deem advisable; and to make all other
determinations necessary or advisable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all decisions and
determinations made by the Committee pursuant to the provisions of the Plan
shall be made in the sole discretion of the Committee and shall be final and
binding on all persons, including but not limited to the Company and its
Subsidiaries, the officers and other key employees to whom awards and options
are granted under the Plan, the heirs and legal representatives of such officers
and key employees, and the personal representatives and beneficiaries of the
estates of such officers and key employees.
The Committee may delegate to any officer or officers of the Company any of
the Committee's duties, powers, and authorities under the Plan upon such
conditions and with such limitations as the Committee may determine; provided,
that only the Committee may select for awards or options under the Plan, and
make grants of awards or options under the Plan to, officers and other key
employees of the Company or any Subsidiary who are subject to Section 16 of the
Exchange Act at the time of such selection or the making of such a grant.
<PAGE> 18
4. COMMON STOCK SUBJECT TO THE PLAN. The Company shall reserve and keep
available for issuance under the Plan 500,000 shares of Common Stock, subject to
adjustment pursuant to Section 19. Such shares may consist in whole or in part
of authorized and unissued shares or treasury shares or any combination thereof.
The aggregate number of shares of Common Stock subject to or issuable in payment
of (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Stock Bonus Awards,
(iv) Restricted Stock Awards or (v) Performance Unit Awards granted under the
Plan in any Plan Year to any individual may not exceed 150,000, subject to
adjustment pursuant to Section 19. Except as otherwise provided in the Plan, any
shares subject to an option or right which expires for any reason or terminates
unexercised as to such shares shall again be available for the grant of awards
or options under the Plan. If any shares of Common Stock have been pledged as
collateral for indebtedness incurred by an optionee in connection with the
exercise of a Stock Option and such shares are returned to the Company in
satisfaction of such indebtedness, then such shares shall again be available for
the grant of awards or options under the Plan.
5. ELIGIBILITY TO RECEIVE AWARDS AND OPTIONS. Awards and options may be
granted under the Plan to those officers and other key employees of the Company
or any Subsidiary who are responsible for or contribute to, or are likely to be
responsible for or contribute to, the management, growth and success of the
Company or any Subsidiary. The granting of an award or option under the Plan to
an officer or other key employee of the Company or any Subsidiary shall
conclusively evidence the Committee's determination that such grantee meets one
or more of the criteria referred to in the preceding sentence. Directors of the
Company or of any Subsidiary who are not employees of the Company or any
Subsidiary shall not be eligible to participate in the Plan.
6. STOCK OPTIONS. A Stock Option may be an Incentive Stock Option or a
Non-Qualified Stock Option. To the extent that any Stock Option does not qualify
as an Incentive Stock Option, it shall constitute a separate Non-Qualified Stock
Option. Stock Options may be granted alone or in addition to other awards made
under the Plan. Stock Options shall be evidenced by agreements in such form as
the Committee shall approve from time to time. The agreements shall contain in
substance the following terms and conditions and may contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem appropriate:
(a) TYPE OF OPTION. Each option agreement shall identify the Stock
Option represented thereby as an Incentive Stock Option or a Non-Qualified
Stock Option, as the case may be.
(b) OPTION PRICE. The option exercise price per share shall not be
less than the Fair Market Value of the Common Stock on the date the Stock
Option is granted and in no event shall be less than the par value of the
Common Stock.
(c) TERM. Each option agreement shall state the period or periods of
time within which the Stock Option may be exercised, in whole or in part,
which shall be such period or periods of time as the Committee may
determine at the time of the Stock Option grant; provided, that no Stock
Option granted under the Plan shall be exercisable more than ten years
after the date of its grant; and provided further, that each Stock Option
granted under the Plan shall become exercisable one year after the date of
its grant, unless the option agreement specifically provides otherwise. The
Committee shall have authority to accelerate previously established
exercise rights, subject to the requirements set forth in the Plan, under
such circumstances and upon such terms and conditions as the Committee
shall deem appropriate.
(d) PAYMENT FOR SHARES. The Committee may permit all or part of the
payment of the option exercise price to be made (i) in cash, by check or by
wire transfer or (ii) in shares of Common Stock (A) which already are owned
by the optionee and which are surrendered to the Company in good form for
transfer or (B) which are retained by the Company from the shares of the
Common Stock which would otherwise be issued to the optionee upon the
optionee's exercise of the Stock Option. Such shares shall be valued at
their Fair Market Value on the date of exercise of the Stock Option. In
lieu of payment in fractions of shares, payment of any fractional share
amount shall be made in cash or check payable to the Company. The Committee
also may provide that the exercise price may be paid by delivering a
properly executed exercise notice in a form approved by the Committee
together with irrevocable instructions to a broker to promptly deliver to
the Company the amount of the applicable sale or loan proceeds required to
pay the exercise price. No shares of Common Stock shall be issued to any
optionee upon the exercise of a Stock Option until the Company receives
full payment therefor as described above.
<PAGE> 19
(e) RIGHTS UPON TERMINATION OF EMPLOYMENT. In the event that an
optionee ceases to be employed by the Company and all of its Subsidiaries
for any reason other than such optionee's death or Disability, any rights
of the optionee under any Stock Option then in effect immediately shall
terminate; provided, that the optionee (or the optionee's legal
representative) shall have the right to exercise the Stock Option during
its term within a period of one (1) month after such termination of
employment to the extent that the Stock Option was exercisable at the time
of such termination or within such other period and subject to such other
terms and conditions as may be specified by the Committee. Notwithstanding
the foregoing provisions of this Section 6(e), the optionee (and the
optionee's legal representative) shall not have any rights under any Stock
Option, and the Company shall not be obligated to sell or deliver shares of
Common Stock (or have any other obligation or liability) under any Stock
Option, if the Committee shall determine that the employment of the
optionee with the Company or any Subsidiary has been terminated for cause.
In the event of such determination, the optionee (and the optionee's legal
representative) shall have no right under any Stock Option to purchase any
shares of Common Stock regardless of whether the optionee (or the
optionee's legal representative) shall have delivered a notice of exercise
prior to the Committee's making of such determination. Any Stock Option may
be terminated entirely by the Committee at the time of or at any time
subsequent to a determination by the Committee under this Section 6(e)
which has the effect of eliminating the Company's obligation to sell or
deliver shares of Common Stock under such Stock Option.
In the event that an optionee ceases to be employed by the Company and
all of its Subsidiaries by reason of such optionee's Disability, prior to
the expiration of a Stock Option and without such optionee's having fully
exercised such Stock Option, such optionee or such optionee's legal
representative shall have the right to exercise such Stock Option during
its term within a period of six (6) months after such termination of
employment to the extent that such Stock Option was exercisable at the time
of such termination or within such other period and subject to such other
terms and conditions as may be specified by the Committee.
In the event that an optionee ceases to be employed by the Company and
all of its Subsidiaries by reason of such optionee's death, prior to the
expiration of a Stock Option and without such optionee's having fully
exercised such Stock Option, the personal representative of such optionee's
estate or the person who acquired the right to exercise such Stock Option
by bequest or inheritance from such optionee shall have the right to
exercise such Stock Option during its term within a period of twelve (12)
months after the date of such optionee's death to the extent that such
Stock Option was exercisable at the time of such death or within such other
period and subject to such other terms and conditions as may be specified
by the Committee.
To the extent that the aggregate Fair Market Value (determined as of the
time the option is granted) of the Common Stock with respect to which Incentive
Stock Options granted under the Plan (and all other plans of the Company and its
Subsidiaries) become exercisable for the first time by any individual in any
calendar year exceeds $100,000, such Stock Options shall be treated as
Non-Qualified Stock Options. No Incentive Stock Option shall be granted to any
employee if, at the time the option is granted, the employee (in his or her own
right or by reason of the attribution rules applicable under Section 424(d) of
the Code) owns more than 10% of the total combined voting power of all classes
of stock of the Company or any Parent Corporation or Subsidiary unless at the
time such option is granted the option price is at least 110% of the Fair Market
Value of the stock subject to such Stock Option and such Stock Option by its
terms is not exercisable after the expiration of five years from the date of its
grant.
7. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights shall enable the
grantees thereof to benefit from increases in the Fair Market Value of shares of
Common Stock and shall be evidenced by agreements in such form as the Committee
shall approve from time to time. The agreements shall contain in substance the
following terms and conditions and may contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem appropriate:
(a) AWARD. A Stock Appreciation Right shall entitle the grantee,
subject to such terms and conditions as the Committee may prescribe, to
receive upon the exercise thereof an award equal to all or a portion of the
excess of (i) the Fair Market Value of a specified number of shares of
Common Stock at the time of the exercise of such right over (ii) a
specified price which shall not be less than the Fair Market Value of the
Common Stock at the time the right is granted or, if connected with a
previously granted Stock Option, not less than the Fair Market Value of the
Common Stock at the time such Stock Option was granted. Subject to the
limitations set forth in Section 4, such award may be paid by the Company
in cash, shares of Common Stock (valued at their then Fair Market Value) or
any combination thereof, as the
<PAGE> 20
Committee may determine. Stock Appreciation Rights may be, but are not
required to be, granted in connection with a previously or
contemporaneously granted Stock Option. In the event of the exercise of a
Stock Appreciation Right, the number of shares reserved for issuance under
the Plan shall be reduced by the number of shares covered by the Stock
Appreciation Right as to which such exercise occurs.
(b) TERM. Each agreement shall state the period or periods of time
within which the Stock Appreciation Right may be exercised, in whole or in
part, subject to such terms and conditions prescribed for such purpose by
the Committee; provided, that no Stock Appreciation Right shall be
exercisable more than ten years after the date of its grant; and provided
further, that each Stock Appreciation Right granted under the Plan shall
become exercisable one year after the date of its grant, unless the
agreement specifically provides otherwise. The Committee shall have
authority to accelerate previously established exercise rights, subject to
the requirements set forth in the Plan, under such circumstances and upon
such terms and conditions as the Committee shall deem appropriate.
(c) RIGHTS UPON TERMINATION OF EMPLOYMENT. In the event that a grantee
of a Stock Appreciation Right ceases to be employed by the Company and all
of its Subsidiaries for any reason other than such grantee's death or
Disability, any rights of the grantee under any Stock Appreciation Right
then in effect immediately shall terminate; provided, that the grantee (or
the grantee's legal representative) shall have the right to exercise the
Stock Appreciation Right during its term within a period of one (1) month
after such termination of employment to the extent that the Stock
Appreciation Right was exercisable at the time of such termination or
within such other period and subject to such other terms and conditions as
may be specified by the Committee. Notwithstanding the foregoing provisions
of this Section 7(c), the grantee (and the grantee's legal representative)
shall not have any rights under any Stock Appreciation Right, and the
Company shall not be obligated to pay or deliver any cash, Common Stock or
any combination thereof (or have any other obligation or liability) under
any Stock Appreciation Right, if the Committee shall determine that the
employment of the grantee with the Company or any Subsidiary has been
terminated for cause. In the event of such determination, the grantee (and
the grantee's legal representative) shall have no right under any Stock
Appreciation Right regardless of whether the grantee (or the grantee's
legal representative) shall have delivered a notice of exercise prior to
the Committee's making of such determination. Any Stock Appreciation Right
may be terminated entirely by the Committee at the time of or at any time
subsequent to a determination by the Committee under this Section 7(c)
which has the effect of eliminating the Company's obligations under such
Stock Appreciation Right.
In the event that a grantee of a Stock Appreciation Right ceases to be
employed by the Company and all of its Subsidiaries by reason of such
grantee's Disability, prior to the expiration of a Stock Appreciation Right
and without such grantee's having fully exercised such Stock Appreciation
Right, such grantee or such grantee's legal representative shall have the
right to exercise such Stock Appreciation Right during its term within a
period of six (6) months after such termination of employment to the extent
that such Stock Appreciation Right was exercisable at the time of such
termination or within such other period and subject to such other terms and
conditions as may be specified by the Committee.
In the event that a grantee ceases to be employed by the Company and
all of its Subsidiaries by reason of such grantee's death, prior to the
expiration of a Stock Appreciation Right and without such grantee's having
fully exercised such Stock Appreciation Right, the personal representative
of the grantee's estate or the person who acquired the right to exercise
such Stock Appreciation Right by bequest or inheritance from such grantee
shall have the right to exercise such Stock Appreciate Right during its
term within a period of twelve (12) months after the date of such grantee's
death to the extent that such Stock Appreciation Right was exercisable at
the time of such death or within such other period and subject to such
other terms and conditions as may be specified by the Committee.
8. PERFORMANCE UNIT AWARDS. Performance Unit Awards shall entitle the
grantees thereof to receive future payments based upon and subject to the
achievement of preestablished long-term performance targets and shall be
evidenced by agreements in such form as the Committee shall approve from time to
time. The agreements shall contain in substance the following terms and
conditions and may contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem
appropriate:
<PAGE> 21
(a) PERFORMANCE PERIOD. The Committee shall establish with respect to each
Performance Unit Award a performance period of not fewer than two years nor more
than five years.
(b) UNIT VALUE. The Committee shall establish with respect to each
Performance Unit Award a value for each unit which shall not change thereafter
or which may vary thereafter on the basis of criteria specified by the
Committee.
(c) PERFORMANCE TARGETS. The Committee shall establish with respect to each
Performance Unit Award maximum and minimum performance targets to be achieved
during the applicable performance period. The achievement of the maximum targets
shall entitle a grantee to payment with respect to the full value of a
Performance Unit Award. The achievement of less than the maximum targets, but in
excess of the minimum targets, shall entitle a grantee to payment with respect
to a portion of a Performance Unit Award according to the level of achievement
of the applicable targets as specified by the Committee. To the extent the
Committee deems necessary or appropriate to protect against the loss of
deductibility pursuant to Section 162(m) of the Code, such targets shall be
established in conformity with the requirements of Section 162(m) of the Code.
(d) PERFORMANCE MEASURES. Performance targets established by the Committee
shall relate to corporate, division, subsidiary, group or unit performance in
terms of objective financial criteria or performance goals which satisfy the
requirements of Section 162(m) of the Code or, with respect to grantees not
subject to Section 162(m) of the Code, such other measures or standards of
performance as the Committee may determine. Multiple targets may be used and may
have the same or different weighting, and the targets may relate to absolute
performance or relative performance measured against other companies, businesses
or indexes.
(e) ADJUSTMENTS. At any time prior to the payment of a Performance Unit
Award, the Committee may adjust previously established performance targets or
other terms and conditions of such Performance Unit Award, including the
Company's or another company's financial performance for Plan purposes, in order
to reduce or eliminate, but not to increase, the payment with respect to a
Performance Unit Award that otherwise would be due upon the attainment of such
previously established performance targets. Such adjustments shall be made to
reflect major unforeseen events such as changes in laws, regulations or
accounting practices, mergers, acquisitions or divestitures or other
extraordinary, unusual or nonrecurring items or events.
(f) PAYMENT OF PERFORMANCE UNIT AWARDS. Upon the conclusion of each
performance period, the Committee shall determine the extent to which the
applicable performance targets have been attained and any other terms and
conditions have been satisfied for such period and shall provide such
certification thereof as may be necessary to satisfy the requirements of Section
162(m) of the Code. The Committee shall determine what, if any, payment is due
on a Performance Unit Award and, subject to the limitations set forth in Section
4, whether such payment shall be made in cash, shares of Common Stock (valued at
their then Fair Market Value) or a combination thereof. Payment of a Performance
Unit Award shall be made in a lump sum or in installments, as determined by the
Committee, commencing as promptly as practicable after the end of the
performance period unless such payment is deferred upon such terms and
conditions as may be specified by the Committee.
(g) TERMINATION OF EMPLOYMENT. In the event that a grantee of a Performance
Unit Award ceases to be employed by the Company and all of its Subsidiaries for
any reason other than such grantee's death or Disability, any rights of such
grantee under any Performance Unit Award then in effect whose performance period
has not ended shall terminate immediately; provided, that the Committee may
authorize the partial payment of any such Performance Unit Award if the
Committee determines such action to be equitable.
In the event that a grantee of a Performance Unit Award ceases to be
employed by the Company and all of its Subsidiaries by reason of such grantee's
death or Disability, any rights of such grantee under any Performance Unit Award
then in effect whose performance period has not ended shall terminate
immediately; provided, that the Committee may authorize the payment to such
grantee or such grantee's legal representative of all or any portion of such
Performance Unit Award to the extent earned under the applicable performance
targets, even though the applicable performance period has not ended, upon such
terms and conditions as may be specified by the Committee.
<PAGE> 22
9. RESTRICTED STOCK AWARDS. Restricted Stock Awards shall consist of shares
of Common Stock restricted against transfer, subject to a substantial risk of
forfeiture and to other terms and conditions intended to further the purpose of
the Plan as the Committee may determine, and shall be evidenced by agreements in
such form as the Committee shall approve from time to time. The agreements shall
contain in substance the following terms and conditions and may contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Committee shall deem appropriate:
(a) RESTRICTION PERIOD. The Common Stock covered by Restricted Stock
Awards shall be subject to the applicable restrictions established by the
Committee over such period as the Committee shall determine. To the extent
the Committee deems necessary or appropriate to protect against the loss of
deductibility pursuant to Section 162(m) of the Code, Restricted Stock
Awards also may be subject to the attainment of one or more preestablished
performance objectives which relate to corporate, subsidiary, division,
group or unit performance in terms of objective financial criteria or
performance goals which satisfy the requirements of Section 162(m) of the
Code; provided, that any such preestablished financial criteria or
performance goals subsequently may be adjusted by the Committee to reduce
or eliminate, but not to increase, a Restricted Stock Award in order to
take into account unforeseen events or changes in circumstances.
(b) RESTRICTION UPON TRANSFER. Shares of Common Stock covered by
Restricted Stock Awards may not be sold, assigned, transferred, exchanged,
pledged, hypothecated or otherwise encumbered, except as provided in the
Plan or in any Restricted Stock Award agreement entered into between the
Company and a grantee, during the restriction period applicable to such
shares. Notwithstanding the foregoing provisions of this Section 9(b), and
except as otherwise provided in the Plan or the applicable Restricted Stock
Award agreement, a grantee of a Restricted Stock Award shall have all of
the other rights of a holder of Common Stock including but not limited to
the right to receive dividends and the right to vote such shares.
(c) PAYMENT. The Committee shall determine the amount, form and time
of payment, if any, that shall be required from the grantee of a Restricted
Stock Award in consideration of the issuance and delivery of the shares of
Common Stock covered by such Restricted Stock Award.
(d) CERTIFICATES. Each certificate issued in respect of shares of
Common Stock covered by a Restricted Stock Award shall be registered in the
name of the grantee and shall bear the following legend (in addition to any
other legends which may be appropriate):
"This certificate and the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture provisions
and restrictions against transfer) contained in the Pamida Holdings
Corporation 1998 Stock Incentive Plan and a Restricted Stock Award
Agreement entered into between the registered owner and Pamida
Holdings Corporation. Release from such terms and conditions may be
obtained only in accordance with the provisions of such Plan and
Agreement, a copy of each of which is on file in the office of the
Secretary of Pamida Holdings Corporation."
The Committee may require the grantee of a Restricted Stock Award to enter
into an escrow agreement providing that the certificates representing the
shares covered by such Restricted Stock Award will remain in the physical
custody of an escrow agent until all restrictions are removed or expire.
The Committee also may require that the certificates held in such escrow be
accompanied by a stock power, endorsed in blank by the grantee, relating to
the Common Stock covered by such certificates.
(e) LAPSE OF RESTRICTIONS. Except for preestablished performance
objectives established with respect to Restricted Stock Awards to grantees
subject to Section 162(m) of the Code, the Committee may provide for the
lapse of restrictions applicable to Common Stock subject to Restricted
Stock Awards in installments and may waive such restrictions in whole or in
part based upon such factors and such circumstances as the Committee shall
determine. Upon the lapse of such restrictions, certificates for shares of
Common Stock, free of the restrictive legend set forth in Section 9(c),
shall be issued to the grantee or the grantee's legal representative. The
Committee shall have authority to accelerate the expiration of the
applicable restriction period with respect to all or any portion of the
shares of Common
<PAGE> 23
Stock covered by a Restricted Stock Award except, with respect to grantees
subject to Section 162(m) of the Code, to the extent such acceleration
would result in the loss of the deductibility of such Restricted Stock
Award pursuant to Section 162(m) of the Code.
(f) TERMINATION OF EMPLOYMENT. In the event that a grantee of a
Restricted Stock Award ceases to be employed by the Company and all of its
Subsidiaries for any reason, any rights of such grantee with respect to
shares of Common Stock that remain subject to restrictions under such
Restricted Stock Award shall terminate immediately, and any shares of
Common Stock covered by a Restricted Stock Award with unlapsed restrictions
shall be subject to reacquisition by the Company upon the terms set forth
in the applicable agreement with such grantee. The Committee may provide
for complete or partial exceptions to such employment requirement if the
Committee determines such action to be equitable.
10. STOCK BONUS AWARDS. The Committee may grant a Stock Bonus Award to an
eligible grantee under the Plan based upon corporate, division, subsidiary,
group or unit performance in terms of preestablished objective financial
criteria or performance goals or, with respect to participants not subject to
Section 162(m) of the Code, such other measures or standards of performance
(including but not limited to performance already accomplished) as the Committee
may determine; provided, that any such preestablished financial criteria or
performance goals subsequently may be adjusted to reduce or eliminate, but not
to increase, a Stock Bonus Award in order to take into account unforeseen events
or changes in circumstances.
If appropriate in the sole discretion of the Committee, Stock Bonus Awards
shall be evidenced by agreements in such form as the Committee shall approve
from time to time. In addition to any applicable performance goals or standards
and subject to the terms of the Plan, shares of Common Stock which are the
subject of a Stock Bonus Award may be (i) subject to additional restrictions
(including but not limited to restrictions on transfer) or (ii) granted directly
to a grantee free of any restrictions, as the Committee shall deem appropriate.
11. GENERAL RESTRICTIONS. Each award or grant under the Plan shall be
subject to the requirement that if at any time the Committee shall determine
that (i) the listing, registration or qualification of the shares of Common
Stock subject or related thereto upon any securities exchange or under any state
or federal law, (ii) the consent or approval of any governmental regulatory
body, or (iii) an agreement by the grantee of an award or grant with respect to
the disposition of the shares of Common Stock subject or related thereto is
necessary or desirable as a condition of, or in connection with, such award or
grant or the issuance or purchase of shares of Common Stock thereunder, then
such award or grant may not be consummated and any rights thereunder may not be
exercised in whole or in part unless such listing, registration, qualification,
consent, approval or agreement shall have been effected or obtained upon
conditions acceptable to the Committee. Awards or grants under the Plan shall be
subject to such additional terms and conditions, not inconsistent with the Plan,
as the Committee in its sole discretion deems necessary or desirable, including
but not limited to such terms and conditions as are necessary to enable a
grantee to avoid any short-swing profit recapture liability under Section 16 of
the Exchange Act.
12. SINGLE OR MULTIPLE AGREEMENTS. Multiple forms of awards or grants or
combinations thereof may be evidenced either by a single agreement or by
multiple agreements, as determined by the Committee.
13. RIGHTS OF A STOCKHOLDER. Unless otherwise provided by the Plan, the
grantee of any award or grant under the Plan shall have no rights as a
stockholder of the Company with respect to the shares of Common Stock subject or
related to such award or grant unless and until certificates for such shares of
Common Stock are issued to such grantee.
14. NO RIGHT TO CONTINUE EMPLOYMENT. Nothing in the Plan or in any
agreement entered into pursuant to the Plan shall confer upon any grantee the
right to continue in the employment of the Company or any Subsidiary or affect
any right which the Company or any Subsidiary may have to terminate the
employment of any grantee with or without cause.
15. WITHHOLDING. The Company's obligation to (i) deliver shares of Common
Stock or pay cash upon the exercise of any Stock Option or Stock Appreciation
Right, (ii) deliver shares of Common Stock or pay cash in payment of any
Performance Unit Award, (iii) deliver stock certificates upon the vesting of any
Restricted Stock Award, and (iv) deliver shares of Common Stock upon the grant
of any Stock Bonus Award shall be subject to applicable federal, state and local
tax withholding requirements. In the discretion of the Committee, amounts
required to be withheld for taxes may be paid by the grantee in cash or shares
of
<PAGE> 24
Common Stock (either through the surrender of previously held shares of Common
Stock or the withholding of shares of Common Stock otherwise issuable upon the
exercise or payment of such award or grant) having a Fair Market Value equal to
the required tax withholding amount and upon such other terms and conditions as
the Committee shall determine; provided, that any election by a grantee subject
to Section 16(b) of the Exchange Act to pay any tax withholding in shares of
Common Stock shall be subject to and must comply with Rule 16b-3(e) under the
Exchange Act.
16. INDEMNIFICATION. No member of the Board or the Committee, nor any
officer or employee of the Company or a Subsidiary acting on behalf of the Board
or the Committee, shall be personally liable for any action, determination or
interpretation taken or made in good faith with respect to the Plan; and all
members of the Board or the Committee and each and any officer or employee of
the Company or any Subsidiary acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company in respect
of any such action, determination or interpretation.
17. NON-ASSIGNABILITY. No award or grant under the Plan shall be assignable
or transferable by the recipient thereof except by will, by the laws of descent
and distribution or, in the case of awards or grants other than Incentive Stock
Options, pursuant to a qualified domestic relations order or by such other means
(if any) as the Committee may approve from time to time with respect to holders
whose transactions in the Common Stock are not subject to Section 16(b) of the
Exchange Act. No right or benefit under the Plan shall in any manner be subject
to the debts, contracts, liabilities or torts of the person entitled to such
right or benefit.
18. NONUNIFORM DETERMINATIONS. The Committee's determinations under the
Plan (including but not limited to determinations of the persons to receive
awards or grants, the form, amount and timing of such awards or grants, the
terms and provisions of such awards or grants and the agreements evidencing them
and the establishment of values and performance targets) need not be uniform and
may be made by the Committee selectively among the persons who receive, or are
eligible to receive, awards or grants under the Plan, whether or not such
persons are similarly situated.
19. ADJUSTMENTS. In the event of any change in the outstanding shares of
Common Stock, by reason of a stock dividend or distribution, stock split,
recapitalization, merger, reorganization, consolidation, split-up, spin-off,
combination of shares, exchange of shares or other change in corporate structure
affecting the Common Stock, the Committee shall make appropriate adjustments in
(a) the aggregate number of shares of Common Stock (i) reserved for issuance
under the Plan, (ii) for which grants or awards may be made to an individual
grantee and (iii) covered by outstanding awards and grants denominated in shares
or units of Common Stock, (b) the exercise or other applicable price related to
outstanding awards or grants and (c) the appropriate Fair Market Value and other
price determinations relevant to outstanding awards or grants and shall make
such other adjustments as may be equitable under the circumstances; provided,
that the number of shares subject to any award or grant always shall be a whole
number.
20. TERMS OF PAYMENT. Subject to any other applicable provisions of the
Plan and to any applicable laws, whenever payment by a grantee is required with
respect to shares of Common Stock which are the subject of an award or grant
under the Plan, the Committee shall determine the time, form and manner of such
payment, including but not limited to lump-sum payments and installment payments
upon such terms and conditions as the Committee may prescribe. Installment
payment obligations of a grantee may be evidenced by full-recourse,
limited-recourse or non-recourse promissory notes or other instruments, with or
without interest and with or without collateral or other security as the
Committee may determine.
21. TERMINATION AND AMENDMENT. The Board may terminate or amend the Plan or
any portion thereof at any time, including but not limited to amendments to the
Plan necessary to comply with the requirements of Section 16(b) of the Exchange
Act. The termination or any modification or amendment of the Plan shall not,
without the consent of a grantee, adversely affect such grantee's rights under
an award or grant previously made to such grantee under the Plan. The Committee
may amend the terms of any award or grant theretofore granted, prospectively or
retroactively; but, except as otherwise expressly permitted by the Plan and
subject to Section 19, no such amendment shall adversely affect the rights of
the grantee of such award or grant without such grantee's consent.
Notwithstanding the foregoing provisions of this Section 21, stockholder
approval of any action referred to in this Section 21 shall be required whenever
necessary to satisfy the applicable requirements of Rule 16b-3, Section 162(m)
of the Code or Section 422 of the Code.
<PAGE> 25
22. SEVERABILITY. With respect to participants subject to Section 16 of the
Exchange Act, (i) the Plan is intended to comply with all applicable conditions
of Rule 16b-3 or any successor to such rule, (ii) all transactions involving
grantees who are subject to Section 16(b) of the Exchange Act are subject to
such conditions, regardless of whether the conditions are expressly set forth in
the Plan and (iii) any provision of the Plan that is contrary to a condition of
Rule 16b-3 shall not apply to grantees who are subject to Section 16(b) of the
Exchange Act. If any of the terms or provisions of the Plan, or awards or grants
made under the Plan, conflict with the requirements of Section 162(m) or Section
422 of the Code with respect to awards or grants subject to or governed by
Section 162(m) or Section 422 of the Code, as the case may be, then such terms
or provisions shall be deemed inoperative to the extent they so conflict with
the requirements of Section 162(m) or Section 422 of the Code, as the case may
be. With respect to an Incentive Stock Option, if the Plan does not contain any
provision required to be included in the Plan under Section 422 of the Code (as
amended from time to time) or any successor to such section, then such provision
shall be deemed to be incorporated in the Plan with the same force and effect as
if such provision had been expressly set out in the Plan.
23. EFFECT ON OTHER PLANS. Participation in the Plan shall not affect an
employee's eligibility to participate in any other benefit or incentive plan of
the Company or any Subsidiary. Any grants or awards made pursuant to the Plan
shall not be taken into account in determining the benefits provided or to be
provided under any other plan of the Company or any Subsidiary unless otherwise
specifically provided in such other plan.
24. TERM OF PLAN. Subject to approval of the Plan by the stockholders of
the Company not later than December 31, 1998, the Plan shall become effective on
March 5, 1998, and shall terminate for purposes of further grants on the first
to occur of (i) December 31, 2007, or (ii) the effective date of the termination
of the Plan by the Board pursuant to Section 21. No awards or options may be
granted under the Plan after the termination of the Plan, but such termination
shall not affect any awards or options outstanding at the time of such
termination or the authority of the Committee to continue to administer the Plan
apart from the making of further grants.
25. GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the laws of Delaware.
<PAGE> 26
PAMIDA HOLDINGS CORPORATION
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 21, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Steven S. Fishman and Frank
A. Washburn, and each or either of them, attorneys and proxies of the
undersigned, with full power of substitution to each of them, to vote all stock
of Pamida Holdings Corporation (the "Corporation") standing in the name of the
undersigned at the annual meeting of stockholders of the Corporation to be held
at the office of the Corporation, 8800 'F' Street, Omaha, Nebraska, at 8:30 a.m.
on May 21, 1998, and at any adjournments thereof, on the matters set forth on
the reverse side hereof and on any other matters that properly may come before
the meeting or any adjournments thereof.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS.
ION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR
APPROVAL OF THE 1998 STOCK INCENTIVE PLAN.
The undersigned hereby ratifies and confirms all that either of such
attorneys and proxies, or their substitutes, may do or cause to be done by
virtue hereof and acknowledges receipt of the Notice of Annual Meeting of
Stockholders of the Corporation to be held on May 21, 1998, the Proxy Statement
for such meeting, and the Annual Report of the Corporation for the fiscal year
ended February 1, 1998.
(To be Signed on Reverse Side)
[X] Please mark your votes as in this example
AUTHORITY
FOR TO VOTE
ALL NOMINEES WITHHELD Nominees: L. David Callaway, III
1. ELECTION Stuyvesant P. Comfort
OF Steven S. Fishman
DIRECTORS [ ] [ ] M. Saleem Muqaddam
For, except authority to vote is withheld Peter J. Sodini
for the following nominee(s): Frank A. Washburn
________________________
2. APPROVAL
OF 1998 FOR AGAINST ABSTAIN
STOCK
INCENTIVE
PLAN [ ] [ ] [ ]
________________________ _________________________ DATE_________________
SIGNATURE OF SHAREHOLDER SIGNATURE IF HELD JOINTLY
NOTE:Please sign exactly as name appears above. 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 a
partner. If a limited liability company, please sign in company name by a
member or manager.
