SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
R&B, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
- -------------------------------------------
R & B, Inc.
Notice of Annual Meeting of Shareholders
May 14, 1997
- -------------------------------------------
Dear Shareholder:
The Annual Meeting of Shareholders of R & B, Inc. (the "Company"), a
Pennsylvania corporation, has been called and will be held at the Talamore
Country Club, 1144 Welsh Road, Ambler, Pennsylvania on Wednesday May 14, 1997 at
9:00 a.m., Eastern Daylight Savings Time, to consider and act upon the following
matters:
I. Election of six directors for the ensuing year.
II. Approval of the Amended and Restated Incentive Stock Plan.
III. Any other business as may lawfully come before the Annual Meeting.
The Board of Directors has fixed the close of business on March 11,
1997, as the record date for determining the Shareholders of the Company
entitled to notice of and to vote at such meeting and any adjournment thereof.
Whether or not you intend to be present at the Annual Meeting, please
date, sign and mail the enclosed proxy card in the envelope provided as promptly
as possible. You are cordially invited to attend the Annual Meeting and your
proxy will not be used if you are present and prefer to vote in person.
By Order of the Board of Directors
BARRY D. MYERS
Vice President, General Counsel and
Assistant Secretary
Colmar, Pennsylvania
April 18, 1997
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE COMPLETED AND PROMPTLY RETURNED.
YOUR COOPERATION WILL BE HELPFUL IN REDUCING PROXY SOLICITATION EXPENSES.
<PAGE>
R & B, Inc.
3400 East Walnut Street
Colmar, Pennsylvania 18915
-----------------------------------
Proxy Statement
----------------------------------
This Proxy Statement and accompanying proxy card are for the
solicitation of proxies by the Board of Directors (the "Board") of R&B, Inc., a
Pennsylvania corporation (the "Company"), for its use at the Annual Meeting of
Shareholders of the Company (the "Annual Meeting") to be held on Wednesday May
14, 1997 at 9:00 a.m., Eastern Daylight Savings Time, and any adjournments of
the Annual Meeting. The Annual Meeting will be held at the Talamore Country
Club, 1144 Welsh Road, Ambler, Pennsylvania. This Proxy Statement and proxy card
are being mailed to shareholders of the Company on or about April 18, 1997.
At the Annual Meeting, the holders of record on March 11, 1997 (the
"Shareholders") of the Company's Common Stock, par value $.01, will act upon the
following matters:
I. Election of six directors for the ensuing year.
II. Approval of the Amended and Restated Incentive Stock Plan.
III. Any other business as may properly come before the Annual Meeting.
All proxies which are validly completed, signed and returned to the
Company prior to the Annual Meeting will be voted in the manner designated.
Proxies may be revoked at any time prior to being voted by written notice to the
Secretary or by attending the Annual Meeting and voting in person. If no
instructions are given, the persons named in the proxy solicited by the Board
intend to vote in favor of the election of the nominees named herein. If any
other matters properly come before the Annual Meeting, the persons named in the
accompanying proxy card will vote on these matters in accordance with their best
judgment.
The Board has fixed the close of business on March 11, 1997 as the
record date (the "Record Date") for the determination of shareholders entitled
to receive notice and to vote at the Annual Meeting and any adjournments of the
Annual Meeting. As of the close of business on the Record Date, there were
8,026,254 shares of Common Stock, issued and outstanding, each of which is
entitled to one vote.
The election of directors will be determined by a plurality vote and the
six nominees receiving the most "for" votes will be elected. Approval of any
other proposal will require the affirmative vote of a majority of the shares
cast on the proposal. An abstention, withholding of authority to vote or broker
non-votes will not have the same legal effect as an "against" vote and will not
be counted in determining whether any nominee or any proposal has received the
required shareholder vote.
Election of Directors
The Bylaws of the Company provide that the business of the Company shall
be managed by or under the direction of a Board of Directors of not less than
two nor more than seven directors, which number shall be fixed from time to time
by the Board of Directors. Each director shall be elected at the Annual Meeting
of Shareholders for a term that expires at the next regular shareholder's
meeting and shall hold office for the term for which he was elected and until a
successor is elected and has qualified. The Board of Directors has fixed the
number of directors to be elected for the ensuing year at six and has nominated
the six persons named below for election as directors. Proxies solicited by the
Board of Directors will, unless otherwise directed, be voted to elect the six
nominees named below to constitute the entire Board of Directors.
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<PAGE>
All of the nominees named below are current directors of the Company.
Each nominee has indicated a willingness to serve as a director for the ensuing
year, but in case any nominee is not a candidate at the meeting for any reason,
the proxy holders named in the enclosed form of Proxy may vote for a substitute
nominee in their discretion.
The following table set forth certain information as to each nominee for
the office of director:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Richard N. Berman 40 Chairman of the Board of Directors,
President and Chief Executive Officer
Steven L. Berman 37 Executive Vice President, Secretary-Treasurer,
and Director
George L. Bernstein 65 Director
John F. Creamer, Jr. 66 Director
Edgar W. Levin 64 Director
Jack A. Robinson 66 Director
</TABLE>
Richard Berman has been Chairman of the Board of Directors, President
and Chief Executive Officer of the Company since its inception in October 1978.
Steven Berman has been Executive Vice President, Secretary-Treasurer and
a Director of the Company since its inception.
George Bernstein has served as a Director since May 1991. Mr. Bernstein
is currently Chief Financial and Administrative Officer of Howard Fischer
Associates, Inc, an executive search and consulting firm in Philadelphia,
Pennsylvania which he joined in 1994. Prior to that he was Chief Operating
Officer at Dilworth, Paxson, Kalish and Kauffman, a law firm in Philadelphia,
Pennsylvania which he joined in 1991. During 1991 he was also engaged as a
management consultant. Prior to 1991, he was a partner and the Chief Executive
Officer of Laventhol & Horwath, a national public accounting firm, which in
November of 1990, filed for protection under the Federal bankruptcy laws. He is
also a Director of Cencor, Inc., a company engaged in consumer financing.
John F. Creamer, Jr. has served as a Director since May 1995. Mr.Creamer
is currently President of Distribution Marketing Services, a marketing and con-
sulting firm for the automotive aftermarket located in Stamford, Connecticut. He
is also a director of Echlin Inc., a manufacturer of automotive parts for the
automotive aftermarket.
Edgar Levin has served as a Director since October 1991. Mr. Levin is
currently President of Ed Levin Associates, Inc., a management consulting firm.
Prior thereto, from 1984 to 1988, he was Senior Vice President of Paramount
Communications, Inc. (Gulf & Western, Inc.), a media and entertainment company.
Jack A. Robinson has served as a Director since July 1995. Mr. Robinson
is currently Chairman of the Board and President of JAE Group, LLC, a real
estate investment firm. Mr. Robinson is the founder, past Chairman of the Board
and Chief Executive Officer of Perry Drug Stores, Inc., a chain of retail drug
stores that was acquired by Rite Aide Corporation in early 1995.
None of the above nominees, except for Richard and Steven Berman who are
brothers, are related to any other nominee or to any executive officer of the
Company.
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<PAGE>
Board and Committees
During the fiscal year ended December 28, 1996, the Board held five
meetings; each director has attended at least 75% of the meetings of the Board
and Committees of which they were a member. The Board of Directors does not have
a nominating committee.
The Executive Committee has general authority over the supervision and
direction of the finances and business of the Company and has the power and
authority of the Board in the management of the business and affairs of the
Company between meetings of the Board. Currently Richard Berman and Steven
Berman serve on the Executive Committee. No meetings were held during the fiscal
year ended December 28, 1996.
The Audit Committee is responsible for general financial oversight,
recommends independent accountants for selection by the Board, reviews the
results and scope of the audit and the services provided by and the fees paid to
the independent public accountants. Currently George Bernstein, John Creamer,
Edgar Levin and Jack Robinson serve on the Audit Committee. The Audit Committee
held two meetings in the fiscal year ended December 28, 1996.
The Compensation Committee is responsible for executive compensation and
implementation of the Employee Stock Purchase Plan and the 401(k) Retirement
Plan. Currently George Bernstein, John Creamer, Edgar Levin and Jack Robinson
serve on the Compensation Committee. The Compensation Committee held one meeting
during fiscal year ended December 28, 1996.
Each director of the Company, who is not also an employee of the
Company, receives an annual retainer of $6,000 plus $1,000 for attendance at
each meeting of the Board and $500 for any Committee meetings. Directors are
also eligible for participation in the Incentive Stock Plan.
The Board Recommends a Vote "For" the Election of the Directors.
Approval of the Amended and Restated Incentive Stock Plan
On December 10, 1996 the Board of Directors amended and restated the
Company's 1990 Incentive Stock Plan (the "Plan") that increased the maximum
number of shares issuable under the Plan by 100,000 shares to a total of 422,500
shares, and changed the termination provisions to permit optionees thirty days
to exercise their options after cessation of employment, subject to approval by
the shareholders of the Company.
Increase in Authorized Shares
Currently, options for a total of 322,500 shares may be issued under the
Plan. Of these shares, approximately 85,000 shares remain currently available
for future options. The amendment increases the maximum number of shares
issuable under the Employee Plan by 100,000 to a total of 422,500 shares. If the
shareholders do not approve the increase, then the maximum number of shares
issuable under the Employee Plan will remain at 322,500.
The purpose of the proposed increase is to provide sufficient shares for
future option grants to officers, key employees, consultants and advisors of the
Company. The Board of Directors believes that the Company should have shares
available under the Plan to provide options to certain of its officers, key
employees, consultants and advisors. The Board of Directors believes that the
Company and its shareholders significantly benefit from having the Company's key
management employees receive options to purchase the Company's Common Stock, and
that the opportunity thus afforded these employees to acquire Common Stock is an
essential element of an effective management incentive program. The Board of
Directors also believes that stock options, particularly incentive stock
options, are very valuable in attracting and retaining
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<PAGE>
highly qualified management personnel and in providing additional motivation to
management to use their best efforts on behalf of the Company and its
shareholders.
Set forth below is a summary of certain significant provisions of the
Plan.
General
Pursuant to the Plan, stock options may be granted which are intended to
qualify as incentive stock options ("Incentive Options") under Section 422 of
the Internal Revenue Code of 1986, as amended ( the "Code"), as well as stock
options not intended to so qualify ("Non-Qualified Options"). The primary
purpose of the Plan is to provide additional incentive to key employees and
officers of the company by encouraging them to invest in the Company's Common
Stock and thereby acquire a proprietary interest in the Company and an increased
personal interest in the Company's continued success and progress.
Eligibility and Administration
All officers and employees of, and consultants and advisors to, the
Company or any current or future subsidiary ("Subsidiary") (currently in excess
of 1,000 people) are eligible to receive options under the Plan. The Plan is
administered by the Board of Directors, or by a committee designated by the
Board of Directors (the "Committee"). Subject to the provisions of the Plan, the
Committee determines, among other things, which officers, directors, employees,
consultants and advisors of the Company and any subsidiary will be granted
options under the Plan, whether options granted will be Incentive Options of
Non-Qualified Options, the number of shares subject to an option, the time at
which an option is granted, the rate of option exercisability, the duration of
an option and the exercise price of an option. The Committee has the exclusive
right to adopt or rescind rules for the administration of the Plan, correct
defects and omissions in, reconcile inconsistencies in, and construe the Plan.
The Committee also has the right to modify, suspend or terminate the Plan,
subject to certain conditions.
Number of Shares Adjustment
The aggregate number of shares which may be issued upon the exercise of
options granted under the Plan will be increased as a result of the proposed
amendment from 322,500 to 422,500 shares of the Company's Common Stock. The
aggregate number and kind of shares issuable under the Plan is subject to
appropriate adjustment to reflect changes in the capitalization of the Company,
such as by stock dividend, stock split or other circumstances deemed by the
Committee to be similar. Any shares of Common Stock subject to options that
terminate unexercised will be available for future options granted under the
Plan.
Exercise Price and Terms
The exercise price for Incentive Options granted under the Plan must be
equal to at least 100% of the fair market value of the Company's Common Stock as
of the date of the grant of the option, except that the option exercise price of
the Incentive Options granted to an individual owning shares of the company
possessing more than 10% of the total combined voting power of all classes of
stock of the Company must not be less than 110% of the fair market value as of
the date of the grant of the option. The option price for Non-Qualified Options
must equal at least 100% of the fair market value of the Common Stock on the
date of the grant.
Unless terminated earlier by the option's terms, Non-Qualified Options
and Incentive Options granted under the Plan will expire ten years after the
date they are granted except that if Incentive Options are granted to an
individual owning shares of the Company possessing more than 10% of the total
combined voting power of all classes of stock of the Company on the date of the
grant, such options will expire five years after the date they are granted.
Payment of the option price on exercise of Incentive Options and
Non-Qualified Options may be made in cash, shares of Common Stock of the Company
or a combination of both. Under the terms of the Plan, the Committee could
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<PAGE>
interpret the provision of the plan which allows payment of the option price in
shares of Common Stock of the Company to permit the "pyramiding" of shares in
successive, simultaneous exercises. As a result, an optionee could initially
exercise an option in part, acquiring a small number of shares of Common Stock
and immediately thereafter effect further exercises of the option, using the
shares of Common Stock acquired upon earlier exercises to pay for an
increasingly greater number of shares received on each successive exercise. This
procedure could permit an optionee to pay the option price by using a single
share of Common Stock or a small number of shares of Common Stock and to acquire
a number of shares of common Stock having an aggregate fair market value equal
to the excess of (a) the fair market value of all shares to which the option
relates over (b) the aggregate exercise price under the option.
Termination of Service, Death and Disability
All unexercised options will terminate thirty days following the date an
optionee ceases to be employed by the company or any Subsidiary, other than by
reason of disability or death (but in no event later than the expiration date).
An optionee who ceases to be an employee because of a disability must exercise
the option within one year after he ceases to be an employee (but in no event
later than the expiration date). The heirs or personal representative of a
deceased optionee who could have exercised an option while alive may exercise
such option within one year following the optionee's death (but in no event
later than the expiration date). No option granted under the Plan is
transferable except by the laws of descent and distribution in the event of
death.
Federal Income Tax Consequences
Non-Qualified Options. Generally, there will be no federal income tax
consequences to either the optionee or the Company on the grant of a
Non-Qualified Option. On the exercise of a Non-Qualified Option, the optionee
(except as described below) has taxable ordinary income equal to the excess of
the fair market value of the shares acquired on the exercise date over the
option price of the shares. The Company will be entitled to a federal income tax
deduction in the amount equal to such excess provided that the Company (i)
complies with applicable withholding rules and (ii) either the deduction
limitation imposed by Section 162(m) of the Internal revenue Code of 1986, as
amended ("Code") is not exceeded or the Non-Qualified Options are excepted from
the limitation imposed by Section 162(m) by reason of qualifying under the
performance based compensation exception contained in Section 162(m). See
"Section 162(m)" below.
Upon the sale of stock acquired by exercise of a Non-Qualified Option,
optionees will realize long-term or short-term capital gain or loss depending
upon their holding period for such stock. Under current law, net capital gain
(net long term capital gain less net short term capital loss) is subject to a
maximum tax rate of 28%. Capital losses are deductible only to the extent of
capital gains for the year plus $3,000 for individuals.
An optionee who surrenders shares in payment of the exercise price of a
Non-Qualified Option will not recognize gain or loss with respect to the shares
so delivered unless such shares were acquired pursuant to the exercise of an
Incentive Stock Option and the delivery of such shares is a disqualifying
disposition. See "Incentive Stock Options" below. The optionee will recognize
ordinary income on the exercise of the Non-Qualified Option as described above.
Of the shares received in such an exchange, the number of shares equal to the
number of shares surrendered will have the same tax basis and capital gains
holding period as the shares surrendered. The balance of the shares received
will have a tax basis equal to their fair market value on the date of exercise
and the capital gains holding period will begin on the date of exercise.
Incentive Stock Options. Generally, under the Code, an optionee will not
realize taxable income by reason of the grant or the exercise of an Incentive
Option (see, however, the discussion of alternative minimum tax below). If an
optionee exercises an Incentive Option and does not dispose of the shares until
the later of (i) two years from the date of the option was granted and (ii) one
year from the date of exercise, the entire gain, if any, realized upon
disposition of such shares will be taxable to the optionee as long-term capital
gain, and the Company will not be entitled to any deduction. If an optionee
disposes of the shares within the period of two years from the date of grant or
one year from the date of exercise (a "disqualifying disposition"), the optionee
generally will realize ordinary income in the year of disposition and the
Company will receive a corresponding deduction, in an amount equal to the excess
of (1) the lessor of (a) the amount, if any, realized on the disposition and (b)
the fair market value of the shares on the date the option was exercised over
(2) the option price,
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provided that the deduction limit of Section 162(m) is not exceeded or the
Incentive Option qualifies for the performance-based compensation exception
provided for in Section 162(m). See "Section 162(m)" below. Any additional gain
realized on the disposition will be long-term capital gain and any loss will be
long-term or short-term capital loss. The optionee will be considered to have
disposed of a share if he sells, exchanges, makes a gifr of or transfers legal
title to the share (except transfers, among others, by pledge, on death or to
spouses). If the disposition is by sale or exchange, the optionee's tax basis
will equal the amount paid for the share plus any ordinary income realized as a
result of the disqualifying disposition.
The exercise of an Incentive Option may subject the optionee to the
alternative minimum tax. The amount by which the fair market value of the shares
purchased at the time of the exercise exceeds the option exercise price in an
adjustment for purposes of computing the so-called alternative minimum tax. In
the event of a disqualifying disposition of the shares in the same taxable year
as exercise of the Incentive Option, no adjustment is then required for purposes
of the alternative minimum tax, but regular income tax, as described above, may
result from such disqualifying disposition.
An optionee who surrenders shares as payment of the exercise price of
his Incentive Option generally will not recognize gain or loss on his surrender
of such shares. The surrender of shares previously acquired upon exercise of an
Incentive Option in payment of the exercise price of another Incentive Option,
is, however, a "disposition" of such shares. If the incentive stock option
holding period requirements described above have not been satisfied with respect
to such shares, such disposition will be a disqualifying disposition that may
cause the optionee to recognize ordinary income as discussed above.
Under the Code, all of the shares received by an optionee upon exercise
of an Incentive Option by surrendering shares will be subject to the incentive
stock option holding period requirements. Of those shares, a number of shares
(the "Exchange Shares") equal to the number of shares surrendered by the
optionee will have the same tax basis for capital gains purposes (increased by
an ordinary income recognized as a result of any disqualifying disposition of
the surrendered shares if they were incentive stock option shares) and the same
capital gains holding period as the shares surrendered. For purposes of
determining ordinary income upon a subsequent disqualifying disposition of the
Exchange shares, the amount paid for such shares will be deemed to be the fair
market value of the shares surrendered. The balance of the shares received by
the optionee will have a tax basis ( and a deemed purchase price) of zero and a
capital gains holding period beginning on the date of exercise. The Incentive
Stock Option holding period for all shares will be the same as if the option had
been exercised for cash.
Section 162(m). Generally, Section 162(m), denies a deduction to any
publicly held corporation, such as the Company, for certain compensation
exceeding $1,000,000 paid to the chief executive officer and the other four
highest paid executive officers during any taxable year. Although ordinary
income that is realized upon the exercise of an Incentive Option is potentially
subject to the limitation imposed under Section 162(m), Section 162(m) and the
regulations thereunder provided that compensation attributable to the stock
options granted under the Plan may qualify for the performance-based exclusion
in Section 162(m). If the stock options qualify for the performance-based
exclusion, the compensation received upon their exercise would not be subject to
the deduction limit set forth in Section 162(m). The Company believes that,
assuming satisfaction of certain conditions set forth in Section 162(m), the
compensation attributable to the stock options granted under the Plan will meet
the performance-bases exclusion under Section 162(m) and therefore the deduction
limitation will be inapplicable to options to be issued under the Employee Plan.
As of December 28, 1996 options, net of cancellations, have been
granted to forty-seven persons to purchase up to an aggregate of 238,625 shares
of common stock (29,625 shares are presently exercisable) at prices ranging from
$5.75 to $8.875 and 3,625 shares have been exercised.
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<PAGE>
Executive Compensation and Transactions
The following table sets forth certain information regarding the annual
and long-term compensation for the fiscal years ended December 28, 1996,
December 30, 1995 and December 31, 1994, to the Chief Executive Officer and to
the four most highly compensated executive officers of the Company serving on
December 28, 1996.
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term
Annual Compensation (1) Compensation
Securities
Name and Principal Underlying All Other
Position Year Salary Bonus (2) Options Compensation (3)
- -------- ---- ------ ----- --- ------- ------------ ---
<S> <C> <C> <C> <C> <C>
Richard N. Berman 1996 $350,000 $0 0 $6,000
Chairman of the Board, 1995 350,000 0 0 6,000
President and Chief 1994 350,000 0 0 6,000
Executive Officer
Steven L. Berman 1996 350,000 0 0 6,000
Executive Vice President, 1995 350,000 0 0 6,000
Secretary-Treasurer and 1994 350,000 0 0 6,000
Director
James F. Koleszar (4) 1996 137,434 0 7,500 5,257
Vice President, Sales 1995 125,616 0 1,000 5,026
1994 110,694 0 0 4,491
Malcolm S. Walter (5) 1996 120,193 14,000 17,500 0
Chief Financial Officer
Donald W. Jacobs(6) 1996 120,000 0 7,500 0
Vice President, Marketing 1995 64,285 0 1,000 0
and Engineering
</TABLE>
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(1) The Company provides certain perquisites and other personal benefits to its
executive officers which are not included in the table since the total to each
of the individuals named above did not exceed the lesser of $50,000 or 10% of
their respective cash compensation, except for Mr. Jacobs who received
compensation to cover the cost of relocation of $25,885 and $7,900 in 1996 and
1995, respectively.
(2) Annual bonuses received are reported in the year earned, whether paid in
that year or in the following year.
(3) "All Other Compensation" includes the estimated contribution to the
Company's 401(k) Plan on behalf of each of the named executives which will be
funded one half in cash and one half in Company common stock.
(4)Mr.Koleszar's "salary" is comprised of commission with no guaranteed minimum.
(5) Mr. Walter was named Chief Financial Officer on January 8, 1996.
(6) Mr. Jacobs was named Vice President, Marketing and Engineering on July 10,
1995.
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Option Grants in 1996
The following table contains information about the stock options granted
in 1996 to the executive officers named in the Summary Compensation Table. No
stock appreciation rights were granted in 1996.
<TABLE>
Individual Grants
<CAPTION>
Potential Realizable
Value at Assumed
Number of Secu- % of Total Op- Annual Rates of Stock
rities Underlying tions Granted to Exercise or Price Appreciation for
Options Employees Base Price Expiration Option Term (2)
------ ---- ---
Name Granted (#) in 1996 ($/Share) (1) Date (1) 5%($) 10%($)
- ---- ------- --- -- ---- --------- --- ---- --- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Mr. Koleszar 7,500 3.6% 7.00 12/18/2006 33,017 83,671
Mr. Walter 17,500 8.3% 6.86 12/18/2006 75,467 191,249
Mr. Jacobs 7,500 3.6% 5.75 12/18/2006 33,017 83,671
</TABLE>
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(1) The exercise price is equal to the fair market value of the stock on the
date of grant of the option. All options shown were granted on December 18,
1996, except options to purchase 10,000 which were granted to Mr. Walter on
January 24, 1996 and will expire on January 24, 2006. All options shown are
exercisable in installments of 20% per year beginning one year after the date of
grant.
(2) These amounts represent assumed rates of appreciation for the market value
of the Company's stock from the date of grant until the end of the option period
at rates arbitrarily set by the Securities and Exchange Commission. They are not
intended to forecast possible future appreciation in the Company's stock and any
actual gains on exercise of options are dependent on the future performance of
the Company's stock.
Aggregated Option Exercises in 1996 and Year-End Option Values
The following table shows information with respect to the exercise of
stock options during 1996 by each of the named executive officers and the value
of the exercisable options on December 28, 1996.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-
Shares Ac- Value Underlying unexercised the-Money Options
quired on Realized Options at Year-End at Year-End ($) (1)
Name Exercise ($) Exercisable Unexercisable Exercisable Unexercisable)
- ---- -------- --- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Koleszar 0 0 2,000 7,500 (1,249) 473
Mr. Walter 0 0 0 17,500 0 3,603
Mr. Jacobs 0 0 1,000 7,500 (687) 473
</TABLE>
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(1) The "Value of Unexercised In-the-Money Options at Year-End" is equal to the
difference between the option exercise price and the Common Stock's December 28,
1996 closing price of $7.063 per share as reported on the NASDAQ National Market
System.
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<PAGE>
Employee Stock Purchase Plan
The Board of Directors has adopted, and the Company's shareholders have
approved, the 1992 Employee Stock Purchase Plan (the "1992 Plan") the purpose of
which is to advance the interests of the Company, its shareholders and employees
by encouraging its employees to acquire a vested interest in the growth and
earnings of the Company.
Under the 1992 Plan, a committee appointed by the Board consisting
initially of a minimum of two and a maximum of seven members of the Board will
administer the 1992 Plan (the "Committee"). The aggregate maximum number of
shares of Common Stock available for grants under the 1992 Plan is 300,000
shares, (with suitable adjustments to reflect changes in the Company's
capitalization). Grants under the 1992 Plan may be made to all employees of the
Company, although no employee may receive such a grant if immediately after the
grant he would own more than 5% of the Company's Common Stock or which, at the
date the option is granted, would permit such person's rights to purchase stock
under the 1992 Plan and all other employee stock purchase or option plans of the
Company, or its parent or subsidiaries, if any, to accrue at a rate exceeding
$25,000 of the fair market value of such stock (determined at the time such
option is granted) for each year such option is outstanding.
If the Committee decides to issue options pursuant to the 1992 Plan,
options must be granted to all employees of the Company who have been employed
for at least one year, other than those employees whose customary employment is
20 hours or less per week and those employees whose customary employment is for
not more than five months in any calendar year. All options will expire on the
last day of the fiscal year during which the option was granted. The option
price will equal 85% of the fair market value of the shares on the date of
exercise.
The 1992 Plan is intended to qualify as an "employee stock purchase
plan" within the meaning of Section 423 of the Code. Under the Code, an employee
who is granted an option under the 1992 Plan will not realize income at either
the time of grant of the option, or upon exercise of the option. If an employee
disposes of shares acquired upon exercise of an option after two years from the
date of grant of such option and after one year from the date of exercise of
such option, the employee will be required to include in income, as compensation
for the year in which such disposition occurs, an amount equal to the lesser of
(i) the excess of the fair market value of such shares at the time of
disposition over the exercise price or (ii) the excess of the fair market value
of such shares at the time the option was granted over the exercise price. The
employee's basis in the shares disposed of will be increased by an amount equal
to the amount so includible in his or her income as compensation, and any gain
or loss computed with reference to such adjusted basis which is recognized at
the time of disposition will be long-term capital gain or loss. In such event,
the Company (or the subsidiary by which the employee is employed) will not be
entitled to any deduction from income.
If any employee disposes of the shares purchased under the 1992 Plan
within such two year and one year period, the employee will be required to
include in income, as compensation for the year in which such disposition
occurs, an amount equal to the excess of the fair market value of such shares on
the date of purchase over the exercise price. The employee's basis in such
shares disposed of will be increased by an amount equal to the amount includible
in his or her income as compensation, and any gain or loss computed with
reference to such adjusted basis which is recognized at the time of disposition
will be capital gain or loss, either short-term or long-term, depending on the
holding period for such shares. In the event of a disposition within such two
year or one year period, the Company (or the subsidiary by which the employee is
employed) will be entitled to a deduction from income equal to the amount the
employee is required to include in income as compensation as a result of such
disposition.
The Board of Directors may modify or amend the 1992 Plan in any way
which will not destroy the status of the 1992 Plan as a qualified employee stock
purchase plan as defined in Section 423 of the Code, but no such amendment or
modification may affect options granted under the 1992 Plan prior to the date of
such amendment or modification.
As of December 28, 1996, no options were outstanding but optionees had
exercised rights during 1996 to purchase 604 shares at prices ranging from $4.89
to $7.12 for total net proceeds of $3,400.
9
<PAGE>
401(k) Retirement Plan
On January 1, 1992, the Company adopted the amended and restated R&B,
Inc. 401(k) Retirement Plan and Trust (the "401(k) Plan"), a defined
contribution discretionary profit-sharing plan. The 401(k) Plan is administered
by the Company and is available to all employees once they have met certain age
and service requirements. Individual accounts are maintained for the cash
contributions made on behalf of each eligible employee and each eligible
employee has a choice of investment options from among a variety of mutual funds
and professionally managed accounts as to the contributions to his account.
There are two types of contributions to the 401(k) Plan: (1) an employee can
make a voluntary contribution of the employee's compensation which is deducted
by the Company from the employees normal compensation (legal limitations may
restrict the maximum voluntary contribution by an employee in any given year);
and (2) the Company may make discretionary contributions, in cash, common stock
or a combination thereof, which is allocated among the participants based on the
employee's annual compensation compared to the total annual compensation of all
eligible employees.
Benefits are payable at age 65 (normal retirement), total disability,
death, or upon early employment termination. There are vesting requirements for
the Company's contributions, but not for the employee's voluntary contributions.
The vesting schedule provides for twenty percent vesting each year after one
year of service, with one hundred percent vesting at six years or more.
For the fiscal year ended December 28, 1996, the Company contributed an
amount equal to four percent of each eligible employee's annual compensation
(with certain limitations to highly compensated employees). The Company's
contribution will be funded one half in cash and one half in Company common
stock.
Certain Transactions
For information concerning certain transactions as required by Item 404
of Regulation S-K of the Securities Exchange Act of 1934, as amended, see the
section below entitled Compensation Committee Interlocks and Insider
Transactions.
Management Compensation Policy Committee Report on Executive Compensation
This report is not deemed to be "soliciting material" or to be "filed"
with the Securities and Exchange Commission (the "SEC") or subject to the SEC's
proxy rules or to the liabilities of Section 18 of the Securities Exchange Act
of 1934 (the "1934 Act"), and the report shall not be deemed to be incorporated
by reference into any prior or subsequent filing by the Company under the
Securities Act of 1933 or the 1934 Act.
The Compensation Committee is composed of four directors, George L.
Bernstein, John F. Creamer, Edgar W. Levin and Jack A. Robinson. The committee
is responsible for setting and administering executive officer salaries, bonuses
and other employee benefits. The Company's compensation philosophy reflects a
commitment to compensate executives competitively with other companies in the
industry while rewarding specific executives for achieving levels of operational
excellence and financial returns which insure positive short and long-term
business performance and continual growth in shareholder value. The Board of
Directors believes that the Company's overall compensation program must be
competitive in order to attract and retain the qualified individuals necessary
to manage the Company and address the significant challenges facing the Company
and the industry.
The compensation program for executives, except for James Koleszar,
consists of a base salary. At the end of each fiscal year, the Committee reviews
annual salary recommendations made under the direction of the Chief Executive
Officer for all executive officers. The Committee makes an independent,
subjective determination of the appropriateness of each recommendation and may
accept such recommendation as made or may increase or decrease such
recommendation as the Committee deems appropriate. The Committee desires that
overall compensation reflect the performance of each individual
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<PAGE>
executive over time. Base salaries are set at levels subjectively determined by
the Committee to adequately reward and retain capable executive, including the
Chief Executive Officer. The Committee considers the importance of and skills
required in a particular executive position in establishing base salary. Neither
the Company in making recommendations, nor the Committee in approving base
salary uses any mechanical formulations or weighting of any of the factors
considered.
With respect to Mr. Koleszar, his salary is calculated on a
predetermined formula based on sales to certain of the Company's customers.
Additionally, Mr. Koleszar receives an annual allowance of $6,000 paid to him in
cash to defray travel expenses. The compensation committee believes that tying
Mr. Koleszar's salary to actual sales performance is in the best interest of the
Company, while still providing appropriate incentives and rewards to Mr.
Koleszar.
Richard Berman and Steven Berman received a base salary of $350,000 each
in 1996 which represents no increase over 1994, while the Company's net income
increased 28% in 1996 over 1995 net income
The foregoing report has been furnished by:
George L. Bernstein
John F. Creamer
Edgar W. Levin
Jack A. Robinson
Compensation Committee Interlocks and Insider Transactions
Richard Berman and Steven Berman receive a salary set by the Compensation
Committee of the Board of Directors and also serve as directors. However, they
do not participate in deliberations regarding their own salary. Richard Berman
and Steven Berman are partners in the Berman Real Estate Partnership.
Leases of Real Property: The Company leases its Colmar, Pennsylvania and
Carrollton, Georgia facilities from two partnerships of which Richard Berman,
Steven Berman, their father, Jordan Berman, and their brothers, Marc Berman and
Fred Berman, are partners. Under the lease for the Pennsylvania property, the
Company paid rent of $2.87 per square foot ($1.0 million per year) in 1996.
Under the lease for the Georgia property, the Company paid rent of $2.41 per
square foot ($0.2 million per year) in 1996. The rents payable on both the
Pennsylvania and Georgia properties are adjusted on January 1 of each year to
reflect annual changes in the Consumer Price Index for All Urban Consumers -
U.S. City Average, All Items. In addition, the Company's lease for its
Pennsylvania property grants the lessor the right, exercisable at its option on
January 1, 2000, to increase the rent to an amount determined by an independent
appraiser to be the then fair market rent. The Pennsylvania lease provides that,
after giving effect to the foregoing adjustments, the rent payable for a given
year will be reduced if, and to the extent that, it exceeds the Company's
pre-tax income (before actual rent expense under the lease) for the preceding
fiscal year; provided that the rent will not be reduced below $0.6 million
($1.62 per square foot). The leases for the Pennsylvania and Georgia properties
are "net" leases, under which the Company is responsible for all expenses
attributable to the leased properties (including maintenance and repair) and for
the conduct of its operations in compliance with all applicable laws and
regulations. The Company's lease for its Pennsylvania property provides that, as
between the Company and the related partnership lessor, the lessor and its
partners will bear any environmental liability and all related expenses,
including legal expenses, incurred by the Company or the lessor as a result of
matters which arose other than from activities of the Company (although for any
environmental liability arising from the Company's activities, the Company will
bear all such liability and any related expenses, including legal expenses,
incurred by the Company or the lessor). The Pennsylvania lease will expire on
December 28, 2002, and the Georgia lease will expire on January 2, 2005. In the
opinion of management, the terms of these leases are no less favorable than
those which could have been obtained from an unaffiliated party.
Transactions with Twincor, Inc.: Twincor, Inc. has purchased certain products
from the Company at prices which are at least as favorable as those the Company
would receive in arm's-length transactions with unaffiliated parties. To date,
the Company has not had any material purchases from Twincor, Inc.
11
<PAGE>
The Company provides certain accounting, legal and other administrative
services to Twincor, Inc. pursuant to an oral agreement, which is terminable at
will. Twincor, Inc. paid the Company $575 per month for these services in 1996.
The Company believes these amounts approximate their reasonable value.
Affiliate Loans and Guaranties: The Pennsylvania property referred to above is
being purchased by the partnership from the Montgomery County Industrial
Development Corporation ("MCIDC") under an installment sale agreement. MCIDC
has, in turn, borrowed approximately $2.0 million from CoreStates Bank N.A.
("CoreStates") and approximately $1.2 million from the Pennsylvania Industrial
Development Authority ("PIDA") to fund in full its purchase and development of
the Pennsylvania property. The partnership's payments to MCIDC under the
installment sale agreement are required to be at least equal to the principal
and interest payable by MCIDC under these two loans, and the Company's rental
payments on the Pennsylvania property are required to be at least equal to the
partnership's payments under the installment sale agreement with MCIDC. The
Company has guaranteed the obligations of the partnership and MCIDC to
CoresStates and of MCIDC to PIDA. Under the provisions of the agreement pursuant
to which the partnership acquired the Colmar property, the partnership may be
required to indemnify the seller of that property for environmental liabilities
which existed at the time of the sale. With respect to the Georgia property
referred to above, the Company has guaranteed the obligations of the other
partnership.
Beneficial Ownership of Common Stock
The following table sets forth the beneficial ownership of the Company's
Common Stock as of March 11, 1997 by (i) each director, (ii) each person known
by the Company to be the beneficial owner of five percent or more of the Common
Stock, (iii) each executive officer named in the summary compensation table
below, and (iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
Name of Beneficial Owner Amount and Nature of Percentage of
or Identity of Group Beneficial Ownership (1) Outstanding Shares
--------------------- ------------------------ -------------------
<S> <C> <C> <C> <C>
Steven L. Berman (2)(3)(4)(5) 1,139,893 14.2%
Richard N. Berman (2)(3)(4)(5) 1,112,253 13.9%
Jordan S. Berman (2)(6) 859,124 10.6%
Dimensional Fund Advisors, Inc.(7) 433,500 5.4%
Fred B. Berman (2)(8) 372,644 4.7%
Marc H. Berman (2)(8) 372,644 4.7%
Malcolm S. Walter 17,500 *
Edgar W. Levin 14,500 *
James F. Koleszar (4) 11,441 *
George L. Bernstein 10,500 *
John F. Creamer, Jr. 10,000 *
Donald W.. Jacobs 8,500 *
Jack A. Robinson 8,000 *
Executive officers and directors as a
group (14 persons)(4) 2,410,596 30.0%
</TABLE>
- ----------------------------
* Less than 1%
(1) The securities "beneficially owned" by a person are determined in accordance
with the definition of "beneficial ownership" set forth in the regulations of
the Securities and Exchange Commission (the "Commission") and accordingly, may
include securities owned by or for, among others, the spouse, children or
certain other relatives of such person as well as other
12
<PAGE>
securities as to which the person has or shares voting or investment power or
has the right to acquire within 60 days of March 11, 1997. The same shares may
be beneficially owned by more than one person. Beneficial ownership may be
disclaimed as to certain of the securities. Fractional shares are rounded to the
closest whole number.
(2) Pursuant to an agreement among Richard Berman and Steven Berman, their
father Jordan Berman, and their brothers, Fred Berman and Marc Berman, each of
them has granted the others rights of first refusal, exercisable on a pro rata
basis or in such other proportions as the exercising shareholders may agree, to
purchase shares of Common Stock of the Company which any of them, or upon their
deaths their respective estates, proposes to sell to third parties. The Company
has agreed with these shareholders that, upon their deaths, to the extent that
any of their shares are not purchase by any of these surviving shareholders and
may not be sold without registration under the 1933 Act, the Company will use
its best efforts to cause those shares to be registered under the 1933 Act. The
expenses of any such registration will be borne by the estate of the deceased
shareholder.
(3) Does not reflect 92,500 shares of common stock held by the R&B, Inc. 401(k)
Retirement Plan for which Richard Berman and Steven Berman are trustees.
(4) Does not reflect approximately 39,400 shares of common stock to be issued as
part of the 1996 contribution for all eligible employees under the R&B, Inc.
401(k) Retirement Plan for which Richard Berman and Steven Berman are trustees.
The shares will be allocated to all eligible employees in proportion to their
annual income. The number of shares to be allocated to Richard Berman, Steven
Berman, James Koleszar and all officers and directors as a group are
approximately 425 shares, 425 shares, 372 shares and 2,138 shares, respectively.
(5) Address of this shareholder is c/o R&B, Inc. P.O. Box 1800, Colmar,
Pennsylvania 18915.
(6)Address of this shareholder is P.O. Box 474, Springhouse, Pennsylvania 19477.
(7) Based upon a Schedule 13G filed on February 13, 1997 by Dimensional Fund
Advisors, Inc. ("Dimensional"). The principal address of Dimensional is 1299
Ocean Avenue, 11th Floor, Santa Monica, California 90401
(8) Address of this shareholder is c/o Twincor, Inc. 180 New Britain Blvd.,
Chalfont, Pennsylvania 18914.
Filing Disclosure
Section 16(a) of the Securities Exchange Act of 1934, as amended, and
the rules thereunder require the Company's officers and directors and persons
who own more than 10% of the Company's common stock to file reports of ownership
and changes in ownership with the Securities and Exchange Commission and the
National Association of Securities Dealers and to furnish the Company copies.
Based on its review of the copies of such forms received by it, or
written representation from certain reporting persons, the Company believes
that, during the last fiscal year all filing requirements applicable to its
officers, directors and greater than 10% beneficial owners were complied with,
except for Jordan S. Berman, who was late to report a single purchase of Common
Stock.
Shareholder Return Performance Presentation
Set forth below is a line graph comparing, for the period from December
27, 1991 to December 28, 1996, the cumulative total shareholder return on the
Company's Common Stock with the cumulative total shareholder return on the
13
<PAGE>
NASDAQ Market Index and an index of a group of peer companies selected by the
Company. The graph assumes $100 invested on December 27, 1991 in the Company's
Common Stock and each of the indices, and that the dividends were reinvested
when and as paid. The companies in the Peer Group are Echlin, Inc., Edelbrock
Corporation, Federal-Mogul Corporation, Motor Car Parts and Accessories, Inc.
and Standard Motor Products, Inc. The Company is not included in the Peer Group.
In calculating the cumulative total shareholder return of the peer group index,
the shareholder returns of the companies included are weighted according to the
stock market capitalization of such companies.
Comparison of Total Return
R&B, Inc. Common, NASDAQ Market Index and Peer Group Index
MEASUREMENT PERIOD
R&B, INC. NASDAQ TOTAL RETURN PEER GROUP
12/27/91 100.00 100.00 100.00
12/24/92 112.00 119.00 152.15
12/24/93 140.00 132.94 207.75
12/31/94 100.00 136.61 189.55
12/30/95 112.00 193.04 206.33
12/27/96 113.00 237.59 192.02
Shareholder Proposals
Proposals by shareholders to be presented at the Company's meeting to be
held in 1998 must be received by the Company no later than December 27, 1997 in
order to be considered for inclusion in the Company's proxy statement and form
of proxy for that meeting.
Annual Report
A copy of the Company's Annual Report to Shareholders for the fiscal
year ended December 28, 1996 is being furnished concurrently with this Proxy
Statement to all persons who were Shareholders on the Record Date. The Annual
Report should not be regarded as proxy soliciting material.
14
<PAGE>
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 28, 1996 CAN BE OBTAINED WITHOUT CHARGE BY WRITING TO R&B, INC. 3400
EAST WALNUT STREET, COLMAR, PENNSYLVANIA 18915, ATT: BARRY D. MYERS, ASSISTANT
SECRETARY.
Solicitation of Proxies
All expenses incurred in connection with the solicitation of the
enclosed proxy card will be paid by the Company. In addition to solicitation by
mail, officers, directors and regular employees of the Company, who will receive
no additional compensation for their services, may solicit proxies by mail,
telephone, telegraph or personal call if proxies are not received in a timely
fashion. The Company has requested that brokers and nominees who hold stock in
their names furnish this proxy material to their customers; the Company will
reimburse these brokers and nominees for their out-of-pocket and reasonable
expenses.
Although it is not anticipated, the Company reserves the right to retain
a professional firm of proxy solicitors to assist in solicitation of proxies.
The Company estimates that it would be required to pay such firm fees ranging
from $5,000 to $10,000 plus out-of-pocket expenses.
Independent Public Accountants
The accounting firm of Arthur Andersen LLP acted as the Company's
independent public accountants for the fiscal year ended December 28, 1996 and
has been selected by the Board of Directors to serve as the Company's
independent public accountants for the fiscal year ending December 27, 1997. A
representative of Arthur Andersen LLP is expected to be present at the Annual
Meeting and to have the opportunity to make a statement, if he desires to do so,
and is expected to be available to respond to appropriate questions.
Other Matters
As of the date of this Proxy Statement, no other matter is known which
will be brought before the Annual Meeting. However, the enclosed proxy confers
discretionary authority to vote with respect to any and all of the following
matters that may come before the meeting: (i) matters that the Company's Board
of Directors does not know, a reasonable time before proxy solicitation, are to
be presented for approval at the meeting (ii) approval of the minutes of a prior
meeting of shareholders, if such approval does not constitute ratification of
the action at the meeting; (iii) the election of any person to any office for
which a bona fide nominee is unable to serve or for good cause will not serve;
(iv) any proposal omitted from this Proxy Statement and the form of proxy
pursuant to Rule 14a-8 under the Exchange Act, as amended; and (v) matters
incidental to the conduct of the meeting. If any such matters come before the
meeting, the proxy agents named in the accompanying proxy card will vote in
accordance with their best judgment and discretion.
By Order of the Board of Directors
BARRY D. MYERS
Vice President, General Counsel and
Assistant Secretary
Colmar, Pennsylvania
April 18, 1997
15
<PAGE>
EXHIBIT A
R&B, INC. AMENDED AND RESTATED INCENTIVE STOCK PLAN
1. Purpose of Plan
The Plan is intended as an additional incentive to employees'
directors, consultants and advisors to enter into or remain in the employ or
service of R&B, Inc., a Pennsylvania Corporation (the "Company"), or its
Affiliates (as defined below) and to devote themselves to the Company's success
by providing them with an opportunity to acquire or increase their proprietary
interest in the Company through the receipt of Options.
2. Definitions
(a) "Affiliate" means any corporation which is a parent corporation of the
Company within the meaning of section 425(e) of the Code or a subsidiary
corporation of the Company within the meaning of section 425(f) of the Code.
(b) "Board" means the board of directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended
(d) "Committee" means the committee described in Paragraph 5(a).
(e) "Date of Grant" means the date on which an Option is granted.
(f) "Eligible Persons" means the persons described in Paragraph 7 as being
eligible to receive Options.
(g) "Fair Market Value" per Share means, on any given date, the last sale price
of Shares as reported on a national securities exchange or, if Shares are not
listed on a national securities exchange, as reported on the NASDAQ National
Market System or, if not included on the NASDAQ National Market System but
otherwise included in NASDAQ or, if not included in NASDAQ but subject to
quotations included on the "pink sheets" otherwise disseminated, then the fair
market value per Share hall be the mean between the closing "bid" and "asked"
prices thereof, as applicable and as the Committee determines, or if the Shares
are not so reported, the fair market value of Shares determined by the Committee
in good faith.
(h) "Incentive Stock Option" means an Option granted under the Plan, intended to
be an "incentive stock option" within the meaning of section 422A(b) of the
Code, designated by the Committee at the time of such grant as an Incentive
stock Option and containing the terms specified herein for Incentive Stock
Options.
(i) "Non-Qualified Option" means an Option granted under the Plan, designated by
the Committee at the time of such grant as a Non-Qualified Option and containing
the terms specified herein for Non-Qualified Options, or any Option granted
under the Plan which fails to qualify as an Incentive Stock Option.
(j) "Option" means any stock option granted under the Plan and described in
either Paragraph 3(a) or Paragraph 3(b).
(k) "Optionee" means a person to whom an Option has been granted under the Plan,
which Option has not been exercised and has not expired or terminated.
(l) "Plan" means the R & B. Inc. 1990 Incentive Stock
(m) "Rule 16b-3" means Rule 16b-3 (or any similar rule) promulgated by the
Securities and Exchange Commission.
A1
<PAGE>
(n) "Share" or "Shares" means a share or shares of common stock, $0.01 par
value, of the Company.
(o) "Ten Percent Shareholder" means a person who, on the Date of Grant, owns,
either directly or within the meaning of the attribution rules of section 425(d)
of the Code, stock possessing more than 10% of the total combined voting power
of all classes of stock of his or her employer corporation or of Its parent or
subsidiary corporations, as defined respectively in sections 425(e) and (f) of
the Code, provided that the employer corporation is the Company or an Affiliate
3. Rights To Be Granted
Rights that may be granted under the Plan are:
(a) Incentive Stock Options, which give the Optionee one right for
a specified time period to purchase a specified number of Shares for a price not
less than the Fair Market Value on the Date of Grant: and
(b) Non-Qualified Options, which give the Optionee the right for a
specified time period to purchase a specified umber of Shares for a price not
less than the Fair Market Value on the Date of Grant.
4. Stock Subject to Plan
The maximum number of Shares that may be issued pursuant to the
Plan upon exercise of Options is 422,500, subject to adjustment as provided in
Paragraph 12. The Shares so delivered may, at the Company's option, be either
treasury Shares or Shares originally issued for such purpose. If an option
covering Shares terminates or expires without having been exercised in whole or
in part, additional Options may be granted covering the Shares as to which the
Option was not exercised.
5. Administration of Plan
(a) The Plan shall be administered by the Board, without
participation by any director on any matter pertaining to him. However, the
Board may designate a Committee composed of three or more of its members to
operate and administer the Plan in its stead.
(b) The Committee shall hold meetings at such times and places as
it may determine. A majority of the members of the Committee shall constitute a
quorum. Acts approved at a meeting by a majority of the members of the Committee
or acts approved in writing by the unanimous consent of the members of the
Committee shall be the valid acts of the Committee.
(c) The Committee shall, from time to time at its discretion, grant
Options to Eligible Persons pursuant to the terms of the Plan. The Committee
shall have plenary authority to determine the Eligible Persons to whom, and the
times at which, Options shall be granted, the number of Options to be granted
and the price and other terms and conditions thereof, subject, however, to the
express provisions of the Plan. In making such determinations, the Committee may
take into account the nature of each Eligible Person's services and
responsibilities' such Eligible Person's present and potential Contribution to
the Company's success and such other factors as It may deem relevant. The
interpretation and construction by the Committee of any provision of the Plan or
of any Option granted under it shall be final, binding and conclusive.
(d) Each member of the Committee shall be entitled, without further
act on his or her part, to indemnity from the Company and limitation of
liability to the fullest extent provided by applicable law and the Company's
Articles of Incorporation and/or By-laws in connection with or arising out of
any action, suit or proceeding with respect to the administration of the Plan or
the granting of Options thereunder in which he or she may be involved by reason
of his or her being or having been a member of the Committee, whether or not he
or she continues to be a member of the Committee at e time of the action, suit
or proceeding.
A2
<PAGE>
6. Grant of Rights
(a) The Committee may grant Options to Eligible Persons.
(b) The grant of an Option pursuant to the Plan shall not be
construed to imply or to constitute evidence of any agreement, express or
implied, on the part of the Company or any Affiliate to retain the Optionee as
an employee, director, consultant or advisor of the Company or any Affiliate.
7. Eligibility
(a) All employees, directors, consultants and advisors of the
Company or its Affiliates shall be Eligible Persons, eligible to receive grants
of Options. An Eligible Person may receive more than one Option but only on the
terms and conditions, and subject to the restrictions of the Plan. No Optionee
shall be granted Options to receive, in the aggregate, more than 10% of the
Shares that may be issued pursuant to the Plan.
(b) An Incentive Stock Option shall not be granted to a Ten
Percent Shareholder except on such terms as are provided in Paragraphs 8(b) and
8(f) with respect to such a person. An Incentive Stock Option shall not be
granted to an Eligible Person who is not an employee of the Company.
8. Option Agreements and Terms
All Options shall be evidenced by Option agreements that shall be
executed on behalf of the Company and by the respective Optionees. The terms of
Option agreements need not e identical as between Optionees, or for Options
granted at any particular time, and shall be determined from time to time y the
Committee, consistent, however, with the following:
(a) Time of Grant. All Options shall be grantedwithin 10 years of
the date of adoption of the Plan.
(b) Option Price. The option price per Share shall determined by the
Committee but shall not be less than 100% 8' the Fair Market Value of a Share on
the Date of Grant; Provided, however, that with respect to any Incentive Stock
Options granted to a Ten Percent Shareholder, the option price Or Share shall
not be less than 110% of the Fair Market Value a Share on the Date of Grant.
(c) Restrictions on Transferability. No Option shall transferable
otherwise than by will or the laws of descent and distribution and, during the
lifetime of the Optionee, shall be exercisable only by such Optionee. Upon the
death of Optionee, the person to whom the rights shall have passed by will or by
the laws of descent and distribution may exercise any Options only in accordance
with the provisions of Paragraph 8(f).
(d) Payment Upon Exercise of Options. Full payment for Shares
purchased upon the exercise of an Option shall be made in cash or, at the
election of the Optionee and as the Committee may, in its sole discretion,
approve in the Option agreement' by surrendering Shares with an aggregate Fair
Market Value (determined on the date of the delivery of the Shares) equal to the
aggregate option price, or by delivering such combination of Shares and cash as
the Committee may, in its sole discretion, approve in the Option agreement.
(e) Issuance of Certificate upon Exercise of Options; Payment of
Cash. Only whole Shares shall be issuable upon exercise of Options. Any right
to a fractional Share shall be satisfied in cash by multiplying the fractional
Share by the Fair Market Value of a Share on the date the Option is exercised.
Subject to Paragraph 14, upon payment of the option price, a certificate for
the number of whole Shares and a check for the Fair Market Value on the date of
exercise of any fractional Share to which the Optionee is entitled shall be
delivered to such Optionee by the Company.
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(f) Termination of Options. No Option shall be exercisable after the
first to occur of the following:
(i) Expiration of the Option term specified in the Option agreement,
which in no event shall exceed (A) ten years from the Date of Grant, or (B) five
years from the Date of Grant in the case of an Optionee who is a Ten Percent
Shareholder;
(ii) Expiration of thirty days from the date of the termination or
cessation of employment under Paragraph 9 of the Plan of an Optionee who is a
director or employee of the Company or an Affiliate, for any reason other than
disability (within the meaning of section 22(e)(3) of the Code) or death;
(iii) Expiration of one year from the date of termination or
cessation of employment under Paragraph 9 of the Plan of an Optionee who is a
director or employee of the Company or an Affiliate due to the Optionee's
disability (within the meaning of section 22(e)(3) of the Code) or death,
provided that no Option that was not exercisable at such termination or
cessation of employment shall become exercisable following such termination or
cessation of employ ment; or
(iv) The date, if any, set by the Committee to be an accelerated
expiration date in the event of the occurrence of a transaction or series of
related transactions as set forth in Paragraph 13 of the Plan.
(g) Date of Exercise. The date of exercise of an option shall be the
date on which written notice of exercise and payment in full of the option price
shall be received by the Company in accordance with the provisions of the Option
agreement. Each such exercise shall be irrevocable when given. Each notice of
exercise must (i) specify the Incentive stock option, Non-Qualified Option, or
combination thereof, being exercised; and (ii) include a statement of preference
(which shall not be binding on the Committee) as to the manner in which payment
to the Company shall be made (Shares, cash or combination of Shares and cash).
Notwithstanding the above, should the Company be advised by counsel that
issuance of Shares should be delayed pending (A) registration under federal or
state securities laws or (B) the receipt of an opinion that ban appropriate
exemption therefrom is available, the Company may defer exercise of any Option
granted hereunder until either such event in (A) or (B) has occurred.
(h) Multiple Grants of Incentive Stock Options and Non-Qualified
Options. The grant, exercise, termination or expiration of any Incentive Stock
Option or Non-Qualified Option shall, by itself, have no effect upon any other
Incentive Stock Option or Non-Qualified Option held by the same Optionee.
9. Termination or Cessation of Employment
For purposes of the Plan:
(a) a transfer of an employee between two employers, each of which
is the Company or an Affiliate, shall not be deemed a termination or cessation
of employment; and
(b) the end of the term of office of an Optionee or Participant who
is a director of the Company or an Affiliate but who is not an employee,
consultant or advisor of the Company or an Affiliate and who is not reselected
as a director of the Company or an Affiliate shall be deemed a termination or
cessation of employment.
10. Limitation on Exercise of Incentive Stock Options
The aggregate Fair Market Value (determined as of the time Options
are granted) of the Shares with respect to which Incentive Stock Options may
first become exercisable by an Optionee in any one calendar year under the Plan
and under any Other plan of the Company and its Affiliates, shall not exceed
$100,000. The limitations imposed by this Paragraph 10 shall apply only to
Incentive Stock Options granted under the Plan, and not to any other Options. In
the
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event an individual receives an Option intended to be an Incentive Stock Option
which is subsequently determined to have exceeded the limitation set forth
above, or if an individual is granted options that first become exercisable in a
calendar year that have an aggregate Fair Market Value (determined as of the
time the options are granted) that exceeds the limitation set forth above, the
Options in excess of the limitation shall be treated as Non-Qualified Options.
11. Rights as Stockholders
No Optionee shall have any right as a stockholder with respect to
any Shares subject to his Options until the date of the issuance of a stock
certificates to him or her for such Shares.
12. Changes in Capitalization
In the event of a stock dividend, stock split, recapitalization,
combination, subdivision, issuance of rights, or other similar corporate change,
the Board shall make full anti-dilution adjustments in the aggregate number of
Shares that may be covered by Options agreements issued pursuant to the Plan,
the number of Shares that may be the subject of any individual grant of Options,
and the number of Shares subject to, and the option price of, each
then-outstanding Option.
13. Mergers, Dispositions and Certain Other Transactions
If, during the term of any Option agreement, the Company or any
Affiliate shall be merged into or consolidated with or otherwise combined with
or acquired by another person or entity, or there is a divisive reorganiza tion
or a liquidation or partial liquidation of the Company, the Committee may choose
to take no action with regard to some or all of the Options outstanding or,
notwithstanding any other provision of the Plan, to take any of the following
courses of action:
(a) Not less than 15 days nor more than 60 days prior to any such
transaction, to notify all Optionees that their Options shall expire on the 15th
day after the date of such notice' in which event all Optionees shall have the
right to exercise any or all of their Options prior to such new expiration date;
or
(b) The Company may provide in any agreement with respect to any
such merger, consolidation, combination or acquisition that the surviving, new
or acquiring corporation shall grant options to the Optionees to acquire shares
in such Corporation with respect to which:
(i) the excess of the fair-market value of the shares of such
corporation immediately after the consummation of such merger, consolidation,
combination or acquisition over the option price, shall be as nearly equal to,
but not greater than, the excess of the Fair Market Value of the Shares over the
option price of Options immediately prior to the consummation of such merger,
consolidation, combination or acquisition; and
(ii) on a share-by-share basis, the ratio of the option price
to the fair market value of the shares of the surviving, new, or acquiring
corporation immediately after such merger, consolidation, combination or
acquisition is no more favorable to the Optionee than the ratio of the option
price to the Fair Market Value of the Shares immediately before such merger,
consolidation, combination or acquisition; or
(c) The Company shall take such other action as the Board shall
determine to be reasonable under the circumstances in order to permit Optionees
or Participants to realize the value of rights granted to them under the Plan.
14. Delivery of Certificates for Shares; Tax Withholding
The Company shall not be obligated to deliver any stock
certificates for Shares issuable on the exercise of Options until such Shares
have been listed (or authorized for listing upon official notice of issuance)
upon each stock exchange upon which outstanding Shares of such class at the time
of the award are listed nor until there has been
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compliance with such laws or regulations as the Company may deem applicable,
including without limitation, registration or qualification of such Shares under
any federal or state law. If the Optionee is an employee of the Company or its
Affiliates' the Optionee shall make available to the Company an amount
sufficient to satisfy all Federal, state and local Withholding tax requirements
prior to the delivery or transfer of any certificate or certificates for Shares
issuable on the exercise of an Option. The Committee may, in its sole
discretion, provide in the Option agreement that the Company may retain from the
Shares which are otherwise issuable or deliverable to the Optionee a number of
Shares which have a Pair Market Value (determined on the date of delivery of the
shares) equal to such tax liability. Notwithstanding the above, the Company's
obligation to make any delivery or transfer of Shares shall be conditioned on
the Optionee's Compliance to the Company's satisfaction with any withholding
requirement imposed by Federal, state or local law.
15. Interpretation
The Committee shall have the power to interpret the Plan and to
make and amend rules for putting it into effect and administering it. It is
intended that the Incentive Stock options granted under the Plan shall
constitute incentive stock options within the meaning of section 422A of the
Code, that Shares transferred pursuant to the exercise of Non-Qualified options
shall constitute property subject to federal income tax pursuant to the
provisions of section 83 of the Code and, if section 16(b) of the Securities
Exchange Act of 1934, as amended, applies to any Optionee, that the Plan shall
qualify for the exemption available under Rule 16b-3. The provisions of the Plan
shall be interpreted and applied insofar as possible to carry out such intent.
16. Amendments
The Plan may be amended by the Board, but any amendment that
increases the aggregate number of Shares that may be issued pursuant to the Plan
upon exercise of Incentive Stock Options (otherwise than pursuant to Paragraph
12), that changes the class of individuals eligible to receive Incentive Stock
Options, or that otherwise requires the approval of the stockholders of the
Company in order to comply with the requirements of Rule 16b-3 shall require
such approval as is necessary to satisfy the requirements of the Rule 16b-3 and
as is required by applicable state law, as then in effect, to make the amendment
effective. No outstanding Option shall be affected by any such amendment without
the written consent of the Optionee, or other person then entitled to exercise
such Option.
17. Securities Law
The Committee shall have the power to make each grant under the
Plan subject to such conditions as it deems necessary or appropriate to comply
with the then-existing requirements of the Securities Act of 1933 or the
Securities Exchange Act of 1934, including Rule 16b-3.
18. Effective Date and Term of Plan
The Plan shall become effective on the date of adoption of the
Plan, and shall expire on the day before the tenth anniversary of the date of
adoption of the Plan, unless sooner terminated by the Board. The Board shall
submit this Plan to the stockholders of the Company for their approval at the
first annual meeting of stockholders held after the adoption of the Plan by the
Board. Any Option granted before the approval of the Plan by the Company's
Stockholders shall be expressly conditioned upon, and shall not be exercisable
until, approval. If such stockholder approval is not received n one year from
the date of the adoption of the Plan by the Board, all Options granted under the
Plan shall expire.
19. Restrictions on Share Transferability and Repurchase Rights
The Committee, in its discretion, may include in an option
agreement (i) restrictions on the transferability of Shares acquired under the
Plan and (ii) circumstances under which the Company shall have repurchase rights
in
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Shares at a price determined under the Option agreement. Shares shall bear an
appropriate legend-evidencing any such transfer restrictions or repurchase
rights.
20. General
Each Option agreement shall contain such terms and conditions not
inconsistent with the Plan as the Committee may determine. The issuance of
Shares on the exercise of an Option shall be subject to all of the applicable
requirements of the Pennsylvania Business Corporation Law of 1988, as amended
from lime to time, and other applicable laws, including federal or ate
securities laws, and all Shares issued under the Plan shall be subject to the
terms and restrictions contained in the Articles of Incorporation of the
Company, as amended from time to time. Among other things, the Optionee may be
required to deliver an investment representation to the Company in connection
with any exercise of such Option or to agree to Refrain from selling or
otherwise disposing of the Shares acquired for a specified period of time or on
specified terms.
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