CALLOWAY'S NURSERY, INC.
4200 Airport Freeway
Fort Worth, Texas 76117
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 11, 1998
TO THE SHAREHOLDERS:
The Annual Meeting of the Shareholders of CALLOWAY'S NURSERY,
INC. will be held at the Fort Worth Botanic Garden, 3220 Botanic
Garden Blvd., Fort Worth, Texas, on February 11, 1998, at 10:00 a.m.
(C.S.T.) for the following purposes:
1. To elect directors.
2. To consider approval of the Company's 1997 Stock Option
Plan.
3. To consider ratification of the appointment of Coopers
& Lybrand L.L.P. as independent auditors of the Company for its
fiscal year ending September 30, 1998.
4. To transact such other business as may properly come before
the Meeting or any adjournment(s) thereof.
Only Shareholders of record as of the close of business on
December 19, 1997, will be entitled to notice of or to vote at this
Meeting or any adjournment or adjournments thereof. A copy of the
Annual Report to Shareholders for the Fiscal Year Ended September 30,
1996 is enclosed with this Notice and Proxy Statement.
WE HOPE YOU WILL BE ABLE TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING
ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
James C. Estill
Chairman of the Board
Fort Worth, Texas
Dated: January 12, 1998
-1-
CALLOWAY'S NURSERY, INC.
4200 Airport Freeway
Fort Worth, Texas 76117
PROXY STATEMENT
For the
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 11, 1998
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of CALLOWAY'S
NURSERY, INC. (the "Company") or use at the Annual Meeting of the
Shareholders of the Company to be held at the Fort Worth Botanic
Garden, 3220 Botanic Garden Blvd., Fort Worth, Texas, on February 11,
1998, at 10:00 a.m. (C.S.T.) or at any adjournment thereof. This
Proxy Statement and Proxy are being mailed to Shareholders on or about
January 12, 1998.
The cost of soliciting proxies is being paid by CALLOWAY'S
NURSERY, INC. In addition to the mails, the Company's officers,
directors and other regular employees, without additional
compensation, may solicit Proxies personally or by other appropriate
means.
If the enclosed Proxy is properly executed and returned, the
shares represented thereby will be voted in the manner specified. If
no specification is made by the Proxy, then the shares shall be voted
in favor of the recommendations of the Board of Directors. A Proxy
may be revoked by a Shareholder at any time prior to the actual
exercise thereof by written notice to the Secretary of the Company, by
submission of another proxy bearing a later date or by attending the
Meeting and voting in person.
Discretionary authority is provided in the Proxy as to any
matters not specifically referred to therein. The management is not
aware of any other matters which are likely to be brought before the
Meeting, however, if any such matters properly come before the
Meeting, it is understood that the Proxy holder or holders are fully
authorized to vote thereon in accordance with the Proxy holder's or
holders' judgment and discretion.
RECORD DATE AND VOTING SECURITIES
Only holders of the Company's $.01 par value common stock
("Common Stock") of record as of the close of business on December 19,
1997, will be entitled to vote on matters presented at the Meeting.
On December 19, 1997, there were outstanding 5,376,733 shares of
Common Stock which constituted all of the outstanding voting
securities of the Company. Each share of Common Stock will be
entitled to one vote on all matters presented at the Meeting. There
will be no cumulative voting for members of the Board of Directors.
Directors are elected by plurality vote.
-2-
All shares represented at the Meeting in person or by proxy shall
be counted in determining the presence of a quorum. Abstentions and
broker non-votes will not be considered part of the voting power
present with respect to any matter on which such shares abstain or do
not vote, which will have the effect of reducing the number of shares
voting affirmatively that will be required to approve a matter
requiring a majority vote. Approval of the Company's 1997 Stock
Option Plan and notification of the appointment of Coopers and Lybrand
L.L.P. each will be approved if an affirmative vote is cast for them
by a majority of the shares of the Company present and voting in
person or voting by proxy at the Meeting.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as to the
number of shares of Common Stock of the Company beneficially owned as
of December 1, 1997, by (i) each director, (ii) each Named Executive
(as defined under EXECUTIVE COMPENSATION), and (iii) all of the
executive officers and directors of the Company as a group.
Except as otherwise indicated, each of the persons named below
has sole voting and investment power with respect to the shares of
Common Stock beneficially owned by that person. All persons listed, other
than Mr. Weger, are current directors.
<TABLE>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
<CAPTION>
Number of Shares
----------------------------------
Percent of
Name of Beneficial Owner Number Outstanding
- - ------------------------ ------ -----------
<S> <C> <C>
Dr. Stanley Block 19,485(1) *
John T. Cosby 390,901(2) 7.1%
James C. Estill 920,896(3) 16.4%
Robert E. Glaze 99,922(4) 1.9%
John S. Peters 126,193(5) 2.3%
David S. Weger 97,918(6) 1.8%
All Directors and Executive Officers
as a group (7 persons) 1,732,010 29.2%
- - --------------------------
*Less than 1%
<FN>
<F1>
Includes 3,500 shares that could be acquired through options
granted under the 1991 Stock Option Plan which are currently
exercisable at $6.125 per share, 4,000 shares that could be
acquired through options granted under the 1995 Stock Option Plan
for Independent Directors which are currently exercisable at
$1.00 per share, 10,000 shares that could be acquired through
options granted on an individual grant basis in 1997 which are
currently exercisable at $1.125 per share and 1,204 shares that
were acquired and are beneficially owned through the Stock
Purchase Plan.
<F2>
Includes 120,000 shares that could be acquired through options
granted under the 1991 Stock Option Plan which are currently
exercisable at $1.00 per share, and 7,920 shares that were
acquired and are beneficially owned through the Stock Purchase
Plan.
<F3>
Includes 260,000 shares that could be acquired through options
granted under the 1991 Stock Option Plan which are currently
exercisable at $1.00 per share, and 73,995 shares that were
acquired and are beneficially owned through the Stock Purchase
Plan.
<F4>
Includes 3,500 shares that could be acquired through options
granted under the 1991 Stock Option Plan which are currently
exercisable at $6.125 per share, 4,000 shares that could be
acquired through options granted under the 1995 Stock Option Plan
for Independent Directors which are currently exercisable at
$1.00 per share, 10,000 shares that could be acquired through
options granted on an individual grant basis in 1997 which are
currently exercisable at $1.125 per share and 76,422 shares that
were acquired and are beneficially owned through the Stock
Purchase Plan.
<F5>
Includes 45,000 shares that could be acquired through options
granted under the 1991 Stock Option Plan which are currently
exercisable at $1.00 per share, 25,000 shares that could be
acquired through options granted under the 1996 Stock Option Plan
which are currently exercisable at $1.125 per share and 28,492
shares that were acquired and are beneficially owned through the
Stock Purchase Plan.
<F6>
Includes 25,000 shares and 10,000 shares that could be acquired
through options granted under the 1991 Stock Option Plan which
are currently exercisable at $1.00 per share and $.9375 per share,
respectively, and 15,000 shares that could be acquired through
options granted under the 1996 Stock Option Plan which are
currently exercisable at $1.13 per share.
</FN>
</TABLE>
-3-
Five Percent Shareholders. Messrs. James C. Estill and John T.
Cosby, both of 4200 Airport Freeway, Fort Worth, Texas, are beneficial
owners of over 5% of the Company's outstanding shares of Common Stock.
The information with regard to their beneficial ownership is provided
in the preceding table. The following table (2) sets forth, as of
December 1, 1997, information with respect to the only other person
known by the Company to own beneficially more than 5% of the Common
Stock of the Company:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
--------------------- -------------------- ---------
<S> <C> <C>
Stuart E. Wilkening 288,700(1) 54
348 Ancora Drive W.
Litchfield Park, AZ 85340
<FN>
<F1>
Sole power to vote or direct the vote.
<F2>
The information in this table was taken from a Schedule 13G
filling with the Securities and Exchange Commission.
</FN>
</TABLE>
<TABLE>
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
<CAPTION>
Name Age Position with Company
---- --- ---------------------
<S> <C> <C>
James C. Estill 50 Chairman of the Board,
President, Chief Executive
Officer, and Director
John T. Cosby 54 Vice President-Corporate
Development, Secretary and
Director
John S. Peters 46 Vice President-Operations and
Director
Robert E. Glaze(1) 77 Director
Dr. Stanley Block(1) 57 Director
<FN>
<F1>
Member of the Audit Committee and of the Compensation Committee.
</FN>
</TABLE>
Directors are elected annually by the Shareholders of the Company
for one year and hold office until their successors are elected and
have qualified. During the fiscal year ended September 30, 1997,
there were five meetings of the Board of Directors. Additionally, the
Board of Directors took action by unanimous written consent on two
occasions.
The Company has an Audit Committee and a Compensation Committee.
Mr. Glaze and Dr. Block are the members of these committees. The
Audit Committee monitors the activities of the Company's auditors and
reports on such activities to the full Board of Directors. During the
Fiscal Year ended September 30, 1997, there were four meetings of the
Audit Committee. The Compensation Committee approves the compensation
of officers of the Company, administers the benefit plans of the
Company and has overall responsibility for the compensation policies
of the Company. During the Fiscal Year ended September 30, 1997,
there were four meetings of the Compensation Committee.
Each director of the Company who is not an employee of the
Company receives fees of $7200 per year and $250.00 for each Board of
Directors or committee meeting attended. Directors who are also
employees of the Company are not separately compensated for their
services as directors. Stock options which have been granted to each
independent director as compensation for his service as a director are
described in the footnotes to the BENEFICIAL OWNERSHIP table on page two.
In addition, each director of the Company may participate in the
Company's Stock Purchase Plan. Messrs. Glaze and Block have elected
to participate in the Stock Purchase Plan. For the Fiscal Year ended
September 30, 1997, the aggregate amounts contributed by the Company
under the Stock Purchase Plan to Messrs. Glaze and Block were: Robert
E. Glaze-$10,450; and Dr. Stanley Block-$40. The aggregate number
of shares of Common Stock acquired by Messrs. Glaze and Block through
the Stock Purchase Plan are included in the footnotes to the BENEFICIAL
OWNERSHIP table on page two. Messrs. Estill, Cosby and Peters have also
elected to participate in the Stock Purchase Plan, with such participation
being described in the EXECUTIVE COMPENSATION section of this Proxy.
-4-
The principal occupations of the directors of the Company, and
time served as such, are described below:
Mr. Estill has been President and a director of the Company since
its inception in March 1986.
Mr. Cosby has been Vice President-Corporate Development of the
Company since its inception in March 1986 and previously served as a
director of the Company from March 1986 to August 1988. He resumed
service as a director of the Company upon completion of its initial
public offering in June of 1991.
Mr. Peters has been Vice President-Operations of the Company
since April 1986 and previously served as a director of the Company
from April 1986 to August 1988. He resumed service as a director of
the Company upon completion of its initial public offering in June of
1991.
Mr. Glaze has principally been involved in managing his personal
investments since 1976. Prior to 1976, Mr. Glaze was the Chief
Financial Officer of Trammell Crow Company, a real estate company
headquartered in Dallas, Texas. Mr. Glaze currently serves as a
member of the Board of Directors of Justin Industries, Inc. He has
served as a member of the Board of Directors of the Company since
completion of its initial public offering in June of 1991.
Dr. Block, a chartered financial analyst, has been a Professor of
Finance at Texas Christian University in Fort Worth, Texas since 1967.
Dr. Block is also an author, consultant and lecturer in the area of
finance. He has served as a member of the Board of Directors of the
Company since completion of its initial public offering in June of
1991.
Section 16(a) Beneficial Ownership Reporting Compliance. Section
16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to
file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of the Common Stock of
the Company. Officers, directors and greater than ten-percent
Shareholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. To the Company's
knowledge, based solely on review of the copies of such reports
furnished to the Company with respect to the Fiscal Year ended
September 30, 1997, all Section 16(a) filing requirements applicable
to its officers, directors and greater than ten-percent beneficial
owners were filed on a timely basis.
<PAGE> -5-
ELECTION OF DIRECTORS
(Proposal No. 1)
The Board of Directors presently consists of five (5) members.
Management has nominated the persons now serving on the Board of
Directors for election to serve as directors until the next Annual
Meeting of the Shareholders and until their successors are elected and
qualified. All of the nominees have expressed their willingness to
serve, but if because of circumstances not contemplated, one or more
of the nominees is not available for election, the Proxy holders named
in the enclosed Proxy form intend to vote for such other person or
persons as management may nominate. No family relationship exists
among the directors, executive officers or nominees of the Company.
Information with respect to each nominee is set forth in the section
entitled "BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD."
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THE ELECTION AS DIRECTORS OF THE FIVE PERSONS NOMINATED BY MANAGEMENT.
EXECUTIVE COMPENSATION
Summary Compensation Table. The individuals named below (the
"Named Executives") include the Company's chief executive officer and
three other executive officers. Information is provided for the
fiscal years ending on September 30, for the three years shown.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation
---------------------------------------------------------
Other (1)
Annual All Other
Name and Principal Compensation Compensation
Position Year Salary $ Bonus $ ($) (0-$)
- - ------------------ ---- ------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C>
James C. Estill 1997 175,000 26,247 - 23,404
Chairman, President 1996 221,664 6,348 - 25,567
and Chief Executive 1995 135,000 7,125 - 17,256
Officer
John T. Cosby 1997 130,000 19,498 - 8,760
Vice President- 1996 165,000 4,716 - 8,660
Corporate 1995 100,000 5,278 - 6,546
Development
and Secretary
John S. Peters 1997 130,000 19,498 - 5,535
Vice President- 1996 165,000 4,716 - 5,035
Operations 1995 100,000 5,278 - 1,907
David S. Weger 1997 95,030 14,253 - 11,240
Vice President-
Merchandising
<FN>
<F1>
Amounts included under All Other Compensation represent amounts
contributed to or accrued for 1997, 1996 and 1995 for the Named
Executives under the Company's Stock Purchase Plan and amounts
paid for life insurance on the lives of the Named Executives.
</FN>
</TABLE>
-6-
In August 1994, the Named Executives voluntarily took substantial
reductions in their salary, reducing them below the levels called for
by employment contracts that each of them had with the Company. In
October 1995, the Compensation Committee reinstated the contractual
salaries of the Named Executives and authorized repayment of amounts
equivalent to the salary reductions. Those repayments are included in
the table above under the "Salary" heading for fiscal year 1996.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable
Value At Assumed
Annual Rates of Stock
Price Appreciation For
Individual Grants Option Term (3)
- - ---------------------------------------------------------------------- ----------------------
Percent
Number of of Total
Securities Options
Underlying Granted Exercise
Options to Emloy- of Base Expira-
Granted ees In Price tion
Name (#)(1) Fiscal Yr. ($/Sh) (2) 5%($) 10%($)
- - ---------------------------------------------------------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
John S. Peters 25,000 7.7% 1.125 08-20-07 $17,688 $44,824
David S. Weger 10,000 .9375 11-13-06 $ 5,896 $14,941
15,000 7.7% 1.125 08-20-97 $10,613 $26,894
<FN>
<F1>
All of the options were immediately exercisable.
<F2>
The exercise Price was equal to the market value of the underlying Common Stock
on the date of grant.
<F3>
These amounts represent assumed rates of appreciation in the price of the
Company's Common Stock during the terms of the options. Actual gains, if any,
on exercise will depend on the value of the Common Stock on the date of
exercise. There can be no assurance that the values shown will be realized.
</FN>
</TABLE>
Aggregate Option Exercises in the Last Fiscal Year and Fiscal Year End Option
Values
The following table summarizes for each of the Named Executives
the number of stock options, if any, exercised during the fiscal year
ended September 30, 1997, the aggregate dollar value, if any, realized
upon exercise, the total number of unexercised stock options held at
September 30, 1997, and the aggregate dollar value of the unexercised
-7-
options held at September 30, 1997. Value realized upon exercise is
the difference between the fair market value of the underlying stock
on the exercise date and the exercise price of the option. Value of
unexercised options at fiscal year-end is the difference between the
exercise price of the stock options and the fair market value of the
underlying stock at September 30, 1997, which was $1.31 per share.
These values, unlike the amounts set forth in the column headed "Value
Realized," have not been, and may never be, realized. The underlying
options have not been, and may not be, exercised. Actual gains, if
any, on exercise will depend on the value of the Company's stock on
the date of exercise. There can be no assurance that the values shown
will be realized.
<TABLE>
Aggregated Option Exercises In The Last
Fiscal Year And FY-End Option Values
<CAPTION>
Shares
Acquired Value Number of Value of
On Exercise Realized Unexercised Unexercised
Name (#) ($) Options at FY-End Options at FY-End($)
- - --------------- ----------- -------- ----------------- --------------------
Exer- Unexer- Exer- Unexer-
cisable cisable cisable cisable
------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
James C. Estill - - 260,000 -0- 73,125 -0-
Chairman, President
and Chief Executive
Officer
John T. Cosby - - 120,000 -0- 33,750 -0-
Vice President-
Corporate
Development
John S. Peters - - 70,000 -0- 16,563 -0-
Vice President-
Operations
David S. Weger - - 50,000 -0- 12,813 -0-
Vice President-
Merchandising
</TABLE>
Employment Contracts and Change-in-Control Agreements. The
Company's employment agreements with Messrs. Estill, Cosby and Peters
extend through July 2, 2001. Mr. Estill's agreement provides (i) for
a minimum annual base salary of $175,000, (ii) that the Company will
continue to maintain life insurance for Mr. Estill in the amount of
$1,500,000, the beneficiary of which may be designated by Mr. Estill,
(iii) that the Company will purchase disability insurance for Mr.
Estill sufficient to provide three years' compensation should he
become disabled and (iv) that, if Mr. Estill's employment is
terminated for any reason other than just cause or is constructively
terminated, Mr. Estill (a) will be entitled to receive, within 15 days
after such termination, a cash payment in an amount equal to three
-8-
times the sum of (X) Mr. Estill's then current annual base salary and
(Y) the amount of the bonus, if any, earned by Mr. Estill in respect
of the previous Fiscal Year (the "Severance Payment") and (b) will be
entitled to participate in all benefit programs of the Company for a
period of one year following such termination. The Company will be
deemed to have terminated the agreement without "just cause" unless
such termination resulted from (i) Mr. Estill's willful and
intentional failure to substantially perform his duties, (ii) the
commission by Mr. Estill of an illegal act in connection with his
employment or (iii) the death or disability of Mr. Estill. Mr.
Estill's employment will be deemed to have been "constructively
terminated" (i) if his responsibilities or authority have been
significantly reduced, (ii) if Mr. Estill is required to relocate
outside of the Dallas-Fort Worth area or his salary is reduced in
violation of his employment agreement or (iii) if a change in control
of the Company occurs, as defined in the employment agreement.
Mr. Cosby's employment agreement is identical to Mr. Estill's
except that Mr. Cosby is Vice President-Corporate Development and his
minimum annual base salary is $130,000.
Mr. Peters' employment agreement is also identical to Mr.
Estill's except that Mr. Peters is Vice President-Operations, his
minimum annual base salary is $130,000 and his life insurance is the
in amount of $500,000.
Report of Compensation Committee. The Compensation Committee
(the "Committee") is made up of Mr. Robert E. Glaze and Dr. Stanley
Block, the two Company Directors who are independent of management.
Scope of Authority. The Committee is responsible for determining
and administering the compensation to be paid to the "executive
officers" of the Company, as that term is defined in the rules and
regulations under the Securities Exchange Act of 1934. The Committee
has been directed to establish annually an incentive plan as part of
the compensation of the executive officers. Additionally, the
Committee is charged with responsibility for the formation and
administration of any plan involving the capital stock of the Company
regardless of the level of employees for whose benefit the plan is or
was created.
Objectives. All policies, plans and actions of the Committee are
formulated or taken with the goal of maximizing shareholder value by
aligning the financial interests of the executive officers with those
of the Company's shareholders. This is done through a combination of
salary, short-term incentive compensation and long-term incentive
compensation such as the granting of options to acquire additional
equity in the Company.
Compensation of Executive Officers for Fiscal 1997. The salaries
of each of the Named Executives other than David S. Weger were
established under five year employment agreements which expire on July
2, 2001. The salaries called for by those agreements as well as the
salary of Mr. Weger and of the other executive officers of the Company
were determined through an evaluation of the responsibilities of the
position held, the experience of the particular executive, the
performance of that individual and by reference to surveys reflecting
the compensation of persons holding similar offices with comparable
companies.
-9-
In accordance with the Committee's policy of providing a form of
short-term incentive compensation tied to current year performance,
the Committee approved a Management Profit Sharing Plan for the fiscal
year ending September 30, 1997. The plan provides cash incentives for
the Company's executive officers, tied to sale and earnings for that
fiscal year.
The executive officers of the Company are provided incentives to
maximize growth and increase productivity over the long-term through
their substantial share ownership and stock options. The Committee
reviews its stock option policy and the status of the Company's stock
option program annually. As a result, additional stock options were
issued during the year to two of the Named Executives in recognition
of their increasing responsibilities and outstanding performance.
The Committee is of the opinion that the compensation package
being provided to its chief executive officer, the three other Named
Executives and all other executive officers reflects its goal of
offering compensation that is fair to these officers and the Company's
shareholders alike by providing adequate base salaries together with
substantial opportunity for personal financial growth which parallels
management's ability to increase shareholder value. Compensation
plans are established to provide additional compensation for superior
performance in terms of net profits earned for the benefit of all
shareholders. It is intended that the total economic advantages and
opportunities provided to the executive officers will be at least
equivalent to that provided by comparable corporations.
Compensation Committee: Robert E. Glaze and Dr. Stanley Block
-10-
Performance Graph. The following graph compares the yearly
change during the Company's last five fiscal years in total
shareholders' return on the Company's Common Stock, with the
cumulative total return on the S&P 500 Index and an index of peer
companies (weighted by market capitalization) selected by the Company.
Companies in the peer group are Sunbelt Nursery Group, Inc. ("Sunbelt")
and General Host Corporation ("General Host"). The comparison assumes
$100.00 was invested at the beginning of the period in the Company's
Common Stock and in each of the foregoing indices and assumes
reinvestment of dividends.
<TABLE>
<CAPTION>
Cumulative Total Return
-------------------------------------------
9/92 9/93 9/94 9/95 9/96 9/97
<S> <C> <C> <C> <C> <C> <C> <C>
Calloways Nursery, Inc. CLWY 100 52 25 19 16 21
PEER GROUP PPEER1 100 90 51 71 34 43
S & P 500 I500 100 113 117 152 183 257
</TABLE>
The above performance graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this
Proxy Statement into any filing under the Securities Act of 1933 or
the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such Acts.
-11-
PROPOSAL FOR APPROVAL OF THE CALLOWAY'S NURSERY, INC.
1997 STOCK OPTION PLAN
(Proposal No. 2)
On August 14, 1997, the Board of Directors unanimously adopted
the Calloway's Nursery, Inc. 1997 Stock Option Plan (the "1997 Plan").
The 1997 Plan is subject to approval by the shareholders and will be
voted on at the Meeting. The purpose of the 1997 Plan is to promote
the growth and general prosperity of the Company by facilitating its
ability to attract and retain superior personnel for positions of
substantial responsibility and providing full-time employees with an
additional incentive to contribute to the success of the Company. As
of the date of this Proxy Statement, no options have been granted
under the 1997 Plan. The following summary of the 1997 Plan is
qualified in its entirety by reference to the full text of that Plan
which is attached as Exhibit A.
Summary Description of the 1997 Plan
The 1997 Plan provides incentive stock options and nonstatutory
stock options exercisable for shares of Common Stock that may be
granted to employees of the Company. Non-employee directors of the
Company will not be eligible to be granted options under the 1997
Plan.
The Company will reserve 268,000 shares of Common Stock for
issuance under the 1997 Plan. Shares issuable upon the exercise of
options granted under the 1997 Stock Option Plan may be either
authorized and unissued shares of Common Stock, or issued shares of
Common Stock reacquired by the Company and held in treasury. The 1997
Plan will be administered by the Compensation Committee of the Board
of Directors.
The term of any incentive or nonstatutory stock option granted
under the Plan may not exceed 10 years. The option exercise price
cannot be less than 100% of the fair market value of the Common Stock
on the date of grant. "Fair market value" is, as of the date of grant,
a value determined by the Compensation Committee on the basis of the
last reported sales price for the Common Stock on the date for which
such determination is relevant. The aggregate fair market value of
the Common Stock (determined at the date of grant) with respect to
which incentive stock options granted under the 1997 Plan, and all
other plans of the Company, are first exercisable by an Optionee in
any one calendar year may not exceed $100,000. Payment for Common
Stock issuable upon exercise of an option may be made in the form of
cash, Common Stock at fair market value at the date of payment, by
note to the extent permissible under the corporate law of the state of
Texas, or any combination thereof.
The option will be exercisable as determined by the Compensation
Committee. If a person to whom options have been granted (an
"Optionee") ceases to be employed by the Company for any reason other
than termination for cause, retirement, death or disability, his
option generally may be exercised (to the extent exercisable on the
date of termination of employment) at any time within three months
after the date of termination of employment. If an Optionee's
employment with the Company is terminated for cause, the option
automatically expires. If an Optionee becomes disabled while employed
by the Company, any options held become fully exercisable and expire
twelve months after the date of termination of employment. If an
Optionee dies while employed by the Company or within three months
after ceasing to be an employee, the option expires twelve months
after the date of death, unless by its terms it expires sooner.
-12-
Incentive stock options may not be transferred by the Optionee in
any manner otherwise than at death or pursuant to a qualified
domestic relations order. Nonstatutory stock options are similarly
restricted but, the Compensation Committee, in its discretion, may
allow for transferability by the Optionee to immediate family members.
In the event of an agreement to dispose of all or substantially
all of the assets of the Company by means of a sale, merger or other
reorganization or liquidation or otherwise in a transaction in which
the Company is not the surviving corporation or in the event of a
change or threatened change in control of the Company, all outstanding
options become immediately exercisable.
The Compensation Committee may amend the terms of the plan,
provided that no amendment shall increase the aggregate number of
shares subject to the plan, change the minimum purchase price for
shares, increase the maximum permitted option term or permit the
granting of an option to anyone other than an employee of the Company.
No options may be granted under the 1997 Plan after the tenth
anniversary of shareholder approval, but options that are outstanding
on such date shall continue to be exercisable under their terms.
Federal Income Tax Consequences to the Company and the Optionees
Incentive Stock Options. Some of the options granted under the
1997 Plan may constitute "Incentive Stock Options" ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). Under present Federal income tax regulations, there
will be no Federal income tax consequences to either the Company or an
optionee upon the grant of an ISO, nor will an Optionee's exercise of
an ISO result in Federal income tax consequences to the Company.
Although an Optionee will not realize ordinary income upon exercise of
an ISO, the excess of the fair market value of the Common Stock
acquired at the time of exercise over the option price may constitute
an adjustment in computing alternative minimum taxable income under
Section 56 of the Code and, thus, may result in the imposition on the
Optionee of the "alternative minimum tax" pursuant to Section 55 of the
Code. If an Optionee does not dispose of Common Stock acquired
through an ISO within one year of the ISO's date of exercise or within
two years of the ISO's date of grant, any gain realized upon a
subsequent disposition of Common Stock will constitute long-term
capital gain to the Optionee, and the Company will not be entitled to
any Federal tax deduction. If an Optionee disposes of the Common
Stock within such one-year period, an amount equal to the lesser of
(i) the excess of the fair market value of the Common Stock on the
date of exercise over the option price or (ii) the actual gain
realized upon such disposition will constitute ordinary income to the
Optionee in the year of the disposition. Any additional gain upon
such disposition will be taxed as short-term capital gain. The
company will receive a deduction in an amount equal to the amount
constituting ordinary income to an Optionee.
Nonstatutory Stock Options. Stock options granted under the 1997
Plan which do not constitute ISOs will be nonstatutory stock options
("Nonstatutory Stock Options"). Under present Federal income tax
regulations, there will be no Federal income tax consequences to
either the Company or the Optionee upon the grant of a Nonstatutory
Stock Option at fair market value. However, the Optionee will realize
-13-
ordinary income upon the exercise of a nonstatutory option in an
amount equal to the excess of the fair market value of the Common
Stock acquired upon the exercise of such option over the option price,
and the Company will receive a corresponding deduction. The gain, if
any, realized upon a subsequent disposition of such Common Stock will
constitute short-term or long-term capital gain to the Optionee,
depending on the Optionee's holding period. In addition, the Taxpayer
Relief Act of 1997 (the "Act") made significant changes to the taxation
of long-term capital gains. In general, the Act reduces the maximum
rate of tax on an individual's net capital gain (i.e., the excess of
the net long-term capital gain for the taxable year over the net
short-term capital loss for the year) from 28% to 20%. The rate is
reduced to 10% for net capital gains that would otherwise be taxed at
a 15% rate. These rates apply for both the regular tax and the
minimum tax.
For taxable years beginning after December 31, 2000, the maximum
capital gains rates for assets which are held more than five years are
8% and 18% (rather than 10% and 20%). The 18% rate only applies to
assets with holding periods that begin after December 31, 2000.
Finally, the Act provides that the lower capital gains rates do not
apply to the sale or exchange of assets held for 18 months or less,
effective for amounts properly taken into account after July 28, 1997.
The 28% maximum rate will continue to apply to the sale or exchange of
capital assets held more than one year but not more than 18 months.
However, the 20% maximum rate applies to otherwise qualifying sales or
exchanges occurring after May 6, 1997, and before July 29, 1997, if
the assets were held for more than one year.
The Federal income tax consequences described in this section are
based on laws and regulations in effect on December 1, 1997, and there
are no assurances that the laws and regulations will not change in the
future and affect the tax consequences of the matters discussed in
this section.
Market Price of the Company's Common Stock
The closing market price of the Company's Common Stock as
reported on the Nasdaq National Market for December 1, 1997 was $1.97
per share.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE
PROPOSAL TO APPROVE THE CALLOWAY'S NURSERY, INC. 1997 STOCK OPTION
PLAN. PROXIES RECEIVED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR
APPROVAL UNLESS SHAREHOLDERS SPECIFY OTHERWISE IN THEIR PROXY.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(Proposal No. 3)
The Board of Directors, upon the recommendation of its Audit
Committee, has appointed Coopers & Lybrand L.L.P. as independent
auditors of the Company for its fiscal year ending September 30, 1998,
and recommends that the shareholders ratify this selection. The Board
of Directors has been advised that Coopers & Lybrand L.L.P. has no
-14-
relationship with the Company other than that arising from the firm's
employment as auditors. A representative of Coopers & Lybrand L.L.P.
is expected to be present at the Meeting and will be given an
opportunity to make a statement, if such representative so desires,
and to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE RATIFICATION OF APPOINTMENT OF THE INDEPENDENT AUDITORS.
ACTION TO BE TAKEN UNDER THE PROXY
The accompanying Proxy will be voted "FOR" the election of the
five (5) persons recommended by the Board of Directors and named under
"BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD" as nominees for
directors of the Company, "FOR" approval of the Company's 1997 Stock
Option Plan, and "FOR" ratification of the appointment of Coopers &
Lybrand L.L.P. as the Company's independent auditors, unless the Proxy
is marked in such a manner as to withhold authority to so vote. The
accompanying Proxy will also be voted in connection with the
transaction of such other business as may properly come before the
Meeting or any adjournment or adjournments thereof. Management knows
of no other matters to be considered at the Meeting. If, however, any
other matters properly come before the Meeting or any adjournment or
adjournments thereof, the persons named in the accompanying Proxy will
vote such Proxy in accordance with their best judgment on any such
matter. The persons named in the accompanying Proxy will also, if in
their judgment it is deemed to be advisable, vote to adjourn the
Meeting from time to time.
DATE OF RECEIPT OF SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in the Proxy Statement for
the 1998 Annual Meeting of Shareholders must be received at the
principal executive offices of the Company on or before September 14,
1998.
ANNUAL REPORTS
Form 10-K. The Company will furnish upon request to each person
whose Proxy is being solicited, without charge, a copy of the Annual
Report of the Company on Form 10-K for the Fiscal Year ended September
30, 1997, as filed with the Securities and Exchange Commission,
including the financial statements and schedules thereto. Such report
was filed with the Securities and Exchange Commission on December 19,
1997. Requests for copies of such report should be directed to
Investor Relations, 4200 Airport Freeway, Fort Worth, Texas 76117,
(817) 222-1122.
1997 Annual Report to Shareholders. The Annual Report to
Shareholders of the Company for the Fiscal Year ended September 30,
1997, is enclosed herewith. The Annual Report, which includes audited
financial statements, does not form any part of the material for the
solicitation of Proxies.
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR
MAILING IN THE UNITED STATES. A PROMPT RETURN OF YOUR PROXY WILL BE
APPRECIATED, AS IT WILL SAVE THE EXPENSE OF FURTHER MAILING.
-15-
EXHIBIT A
CALLOWAY'S NURSERY, INC.
1997 STOCK OPTION PLAN
TABLE OF CONTENTS
ARTICLE I................................................................1
THE PLAN..............................................................1
1.1 Name.........................................................1
1.2 Purpose......................................................1
1.3 Effective Date...............................................1
1.4 Eligibility to Participate...................................1
1.5 Shares Subject to the Plan...................................1
1.6 Maximum Number of Plan Shares................................1
1.7 Options and Stock Granted Under Plan.........................1
1.8 Conditions Precedent.........................................1
1.9 Reservation of Shares of Common Stock........................2
1.10 Tax Withhholding.............................................2
1.11 Exercise of Options..........................................2
1.12 Acceleration of Right to Exercise Options....................3
1.13 Written Notice Required......................................4
1.14 Compliance with Securities Laws..............................4
1.15 Emplooyment of Optionee......................................4
1.16 Option Upon Termination of Employment........................4
1.17 Termination of Employment for Cause..........................4
1.18 Option Upon Disability of Optionee...........................5
1.19 Option Upon Death of Optionee................................5
1.20 Options Not Transferable.....................................5
1.21 Information to Optionees.....................................5
ARTICLE II...............................................................6
ADMINISTRATION........................................................6
2.1 Committee....................................................6
2.2 Appointment of Committee.....................................6
2.3 Majority Rule; Unanimous Written Consent.....................6
2.4 Company Assistance...........................................6
ARTICLE III..............................................................6
INCENTIVE STOCK OPTIONS...............................................6
3.1 Option Terms and Conditions..................................6
3.2 Duration of Options..........................................6
3.3 Purchase Price...............................................6
3.4 Maximum Amount of Options First Exercisable in
Any Calendar Year............................................7
3.5 Requirements as to Certain Options...........................7
3.6 Individual Option Agreements.................................7
- i -
ARTICLE IV...............................................................7
NONQUALIFIED STOCK OPTIOSN............................................7
4.1 Option Temrs and Conditions..................................7
4.2 Duration of Options..........................................7
4.3 Purchase Price...............................................7
4.4 Individual Option Agreements.................................7
ARTICLE V................................................................8
5.1 Termination and Amendment....................................8
5.2 Adjustments..................................................8
ARTICLE VI...............................................................8
MISCELLANEOUS.........................................................8
6.1 Other Option Plans...........................................8
6.2 Plan Binding on Successors...................................8
6.3 Number and Gender............................................8
6.4 Headings.....................................................9
6.5 Conditions...................................................9
ARTICLE VII..............................................................9
DEFINITIONS...........................................................9
- ii -
CALLOWAY'S NURSERY, INC.
1997 STOCK OPTION PLAN
ARTICLE I
THE PLAN
1.1 Name. This Plan shall be known as the "Calloway's
Nursery, Inc. 1997 Stock Option Plan."
1.2 Purpose. the purpose of the Plan is to promote the
growth and general prosperity of the Company by permitting the
Company to grant to its full-time employees Options to purchase
Common Stock of the Company. This Plan is designed to help the
Company and its subsidiaries and affiliates attract and retain
superior personnel for positions of substantial responsibility
and to provide employees with an additional incentive to
contribute to the success of the Company. The Company intends
that Incentive Stock Options granted pursuant to Article III will
qualify as "incentive stock options" within the meaning of
Section 422(b) of the Internal Revenue Code of 1986, as amended
(the "Code"). Any option granted pursuant to Article IV shall be
clearly and specifically designated as not being an incentive
stock option as defined in Section 422(b) of the Code.
1.3 Effective Date. The Plan shall become effective upon
the Effective Date.
1.4 Eligibility to Participate. Any Employee shall be
eligible to participate in the Plan. The Committee may grant
Options to an Employee in accordance with such determinations as
the Committee from time to time in its sole discretion shall
make.
1.5 Shares Subject to the Plan. The Plan Shares shall be
shares of Common Stock.
1.6 Maximum Number of Plan Shares. Subject to adjustment
pursuant to the provisions of Section 5.2, and subject to any
additional restrictions elsewhere in the Plan, the number of Plan
shares that may be issued and sold hereunder shall not exceed
268,000 shares. Plan Shares may be either authorized and
unissued shares or shares issued and thereafter acquired by the
Company.
1.7 Options and Stock Granted Under Plan. Plan Shares with
respect to which an Option shall have been exercised shall not
again be available for grant hereunder. If Options terminate
for any reason without being wholly exercised, new Options may be
granted hereunder covering the number of Plan Shares to which
such Option termination relates.
1.8 Conditions Precedent. the Company shall not issue or
deliver any Option Agreement or any certificate for Plan Shares
pursuant to the Plan prior to fulfillment of all of the following
conditions:
(a) The admission of the Plan Shares to listing on all
stock exchanges or qualification with any national quotation
system on which the Common Stock is then listed or qualified for trading,
unless the Committee determines in its sole discretion that such listing or
qualification is necessary or advisable;
-1-
(b) The completion of any registration or other
qualification of the sale of Plan Shares under any federal or state law or
under the rulings or regulations of the Securities and Exchange Commission or
any other governmental regulatory body that the committee shall in its sole
discretion deem necessary or advisable; and
(c) The obtaining of any approval or other clearance
from any federal or state governmental agency that the Committee shall in its
sole discretion determine to be necessary or advisable.
1.9 Reservation of Shares of Common Stock. During the term
of the Plan, the Company will at all times reserve and keep
available such number of shares of Common Stock as shall be
necessary to satisfy the requirements of the Plan as to the
number of Plan Shares. In addition, the Company will from time
to time, as is necessary to accomplish the purposes of the Plan,
use its best efforts to obtain from any regulatory agency having
jurisdiction any requisite authority necessary to issue Plan
Shares hereunder. The inability of the Company to obtain from
any regulatory agency having jurisdiction the authority deemed by
the Company's counsel to be necessary for the lawful issuance of
any Plan Shares shall relieve the Company of any liability in
respect of the nonissuance of Plan Shares as to which the
requisite authority shall not have been obtained.
1.10 Tax Withholding.
(a) Condition Precedent. The issuance, delivery or
exercise of any Options under the Plan is subject to the
condition that if at any time the Committee shall determine, in
its discretion, that the satisfaction of withholding tax or other
withholding liabilities under any state or federal law is
necessary or desirable as a condition of, or in connection with,
the issuance, delivery or exercise of the Options, then the
issuance, delivery or exercise of the Options shall not be
effective unless the withholding shall have been effected or
obtained in a manner acceptable to the Committee.
(b) Manner of Satisfying Withholding Obligation. When an
Optionee participating in the Plan is required to pay to the
Company an amount required to be withheld under applicable income
tax laws in connection with the exercise of an Option, the
Optionee may satisfy the obligation, in whole or in part, by
electing to (i) have the Company withhold a portion of the Plan
Shares acquired upon the exercise of the Option and having an
aggregate Fair Market Value on the date the amount of tax to be
withheld is to be determined (the "Tax Date") equal to the amount
required to be withheld or (ii) deliver to the Company shares of
Common Stock already owned by the Optionee and having an
aggregate Fair Market Value on the Tax Date equal to the amount
required to be withheld.
1.11 Exercise of Options.
(a) Method of Exercise. Each Option shall be exercisable
in accordance with the terms of the Option Agreement pursuant to
which the Option was granted. No Option may be exercised for a
fraction of a Plan Share.
- 2 -
(b) Payment of Purchase Price. The purchase price of any
Plan shares purchased shall be paid at the time of exercise of
the Option either (i) in cash, (ii) by certified or cashier's
check, (iii) by shares of Common Stock, if permitted by the
Committee, (iv) if then permitted under the laws of the State of
Texas, by cash or certified or cashier's check for the par value
of the Plan Shares plus a promissory note for the balance of the
purchase price, which note shall (A) provide for full personal
liability of the maker, (B) bear interest at the lowest rate then
possible without causing the maker thereof to have income imputed
in connection therewith, (C) be due and payable both as to
principal and interest five years from the date such note is
made, (D) be secured by the Plan Shares issued in connection
therewith, (E) be payable in advance in whole or in part (with
the Plan Shares pledged in connection therewith released in the
same proportion as such prepayment) and (F) contain such other
terms and provisions as the Committee may determine, including
without limitation the right to repay the note partially or
wholly with Common Stock or (v) by delivery of a copy of
irrevocable instructions from the Optionee to a broker or dealer,
reasonably acceptable to the Company, to sell certain of the Plan
Shares purchased upon exercise of the Option or to pledge them as
collateral for a loan and promptly deliver to the Company the
amount of sale or loan proceeds necessary to pay such purchase
price. If any portion of the purchase price or a note given at
the time of exercise is paid in shares of Common Stock, those
shares shall be valued at the then Fair Market Value.
1.12 Acceleration of Right to Exercise Options.
Notwithstanding the provisions of any Option Agreement regarding
the time for exercise of an Option, the following provisions
shall apply:
(a) Mergers and Reorganizations. If the Company or
its shareholders enter into an agreement to dispose of all or
substantially all of the assets of the Company by means of a
sale, merger or other reorganization or liquidation, or otherwise
in a transaction in which the Company is not the surviving
corporation, any Option shall become immediately exercisable with
respect to the full number of shares subject to that Option
during the period commencing as of the date of the agreement to
dispose of all or substantially all of the assets of the Company
and ending when the disposition of assets contemplated by that
agreement is consummated or the Option is otherwise terminated in
accordance with its provisions or the provisions of the Article
pursuant to which was granted, whichever occurs first. The Option shall not
become immediately exercisable, however, if the transaction contemplated in
the agreement is a merger or reorganization in which the Company will survive.
(b) Change in Control. In the event of a change in
control or threatened change in control of the Company, all
Options granted prior to the change in control shall become
immediately exercisable. The term "change in control" for
purposes of this Section shall refer to the acquisition of 20
percent or more of the voting securities of the Company by any
person or by persons acting as a group within the meaning of
Section 13(d)(3) of the Exchange Act; provided that no change in
control or threatened change in control shall be deemed to have
occurred if prior to the acquisition of, or offer to acquire, 20
percent or more of the voting securities of the Company, the full
Board shall have adopted by not less than two-thirds vote a
resolution specifically approving such acquisition or offer. The
term "person" for purposes of this Section refers to an
individual or a corporation, partnership, trust, association,
joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not
specifically listed herein. Whether a change in control is
threatened shall be determined solely by the Committee.
- 3 -
1.13 Written Notice Required. Any Option shall be deemed to
be exercised for purposes of the Plan when written notice of
exercise has been received by the Company at its principal office
from the person entitled to exercise the Option and payment for
the Plan Shares with respect to which the Option is exercised has
been received by the Company in accordance with Section 1.11.
1.14 Compliance with Securities Laws. Plan Shares shall not
be issued with respect to any Option unless the exercise of the
Option and the issuance and delivery of the Plan Shares shall
comply with all relevant provisions of federal and state law,
including without limitation the Securities Act, the rules and
regulations promulgated thereunder and the requirements of any
stock exchange upon which the Plan shares may then be listed or
any national quotation system on which they may be traded, and
shall be further subject to the approval of counsel for the
Company with respect to such compliance, which approval shall not
be unreasonably withheld. The Committee may also require an
Optionee to furnish evidence satisfactory to the Company,
including a written and signed representation letter and consent
to be bound by any transfer restrictions imposed by law, legend,
condition or otherwise, that the Plan Shares are being acquired
only for investment and without any present intention to sell or
distribute the shares in violation of any federal or state law,
rule or regulation. Further each Optionee shall consent to the
imposition of a legend on the certificate representing the Plan
Shares issued upon the exercise of the Option restricting their
transferability as required by law or by this Section.
1.15 Employment of Optionee. Nothing in the Plan or in any
Option granted hereunder shall confer upon any Optionee any right
to continued employment by the Company or any of its subsidiaries
or affiliates or limit in any way the right of the Company or any
subsidiary or affiliate at any time to terminate or alter the
terms of that employment.
1.16 Option Upon Termination of Employment. If an Optionee
ceases to be employed by the Company or any of its subsidiaries
or affiliates for any reason other than for cause, retirement,
death or disability, his Option may be exercised (to the extent
exercisable on the date of termination of employment) at any time
within three months after the date of termination of employment,
unless either the Option or the Article pursuant to which it was
granted otherwise provides for earlier termination. If an
Optionee ceases to be employed by the Company or any of its
subsidiaries or affiliates because the Optionee has retired under
a qualified retirement plan of the Company, as determined by the
Committee, his Option shall be exercisable (to the extent
exercisable on the effective date of such retirement) at any time
within 12 months after the effective date of such retirement
unless by its terms the Option expires sooner.
1.17 Termination of Employment for Cause. If an Optionee
ceases to be employed by the Company or any of its subsidiaries
or affiliates because the Optionee is terminated for cause, the
Option shall automatically expire. For purposes of this Section,
"cause" shall mean an act or acts involving a felony, fraud,
willful misconduct, the commission of any act that causes or
reasonably may be expected to cause substantial injury to the
Company or other good cause. The term "other good cause" as used
in this Section shall include, but shall not be limited to,
habitual impertinence, a pattern of conduct that tends to hold
the Company up to ridicule in the community, conduct disloyal to
the Company, conviction of any crime of moral turpitude and
substantial dependence, as judged by the Committee, on alcohol or
any controlled substance. "Controlled substance" means a drug,
immediate precursor, or other substance listed in Schedules I-V
or Penalty Groups 1-4 of the Texas Controlled Substances Act, as
amended, or a drug, immediate precursor, or other substance
listed in Schedules I-V of the Federal Comprehensive Drug Abuse
Prevention and Control Act of 1970, as amended. Notwithstanding
the foregoing, if an Optionee is an Employee employed pursuant to
a written employment agreement, Employee shall be deemed to be
terminated for "cause" for purposes of the Plan only if Employee
is considered under the circumstances to have been terminated for
cause for purposes of such employment agreement.
- 4 -
1.18 Option Upon Disability of Optionee. If an Optionee
becomes disabled within the meaning of Section 22(e)(3) of the
Code while employed by the Company or any of its subsidiaries or
affiliates, his Option shall become fully exercisable and shall
expire 12 months after the date of such termination, unless
either the Option or the Article pursuant to which it was issued
otherwise provides for earlier termination.
1.19 Option Upon Death of Optionee. Except as otherwise
limited by the Committee at the time of the grant of an Option,
if an Optionee dies while employed by the Company or any of its
subsidiaries or affiliates, or within three months after ceasing
to be an Employee for reason other than termination for cause,
his Option shall expire 12 months after the date of death, unless
by its terms it expires sooner. During this twelve-month or
shorter period, the Option may be fully exercised, to the extent
that it remains unexercised on the date of death, by the
Optionee's personal representative or by the distributees to whom
the Optionee's rights under the Option shall pass by will or by
the laws of descent and distribution.
1.20 Options Not Transferable. Options granted under
Article III may not be sold, pledged, assigned or transferred in
any manner otherwise than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order
as defined by the Code and may be exercised during the lifetime
of an Optionee only by that Optionee or by his legally authorized
representative. Options granted under Article IV may not be
sold, pledged, assigned or transferred in any manner otherwise
than by will or the laws of descent and distribution or pursuant
to a qualified domestic relations order as defined by the Code,
and may be exercised during the lifetime of an Optionee only by
that Optionee or by his legally authorized representative;
provided, however, that the Committee, in its discretion, may
allow for transferability of such Options by the Optionee to
"Immediate Family Members."
1.21 Information to Optionees. The Company shall furnish to
each Optionee a copy of the annual report, proxy statements and
all other reports sent to the Company's shareholders. Upon
written request, the Company shall furnish to each Optionee a
copy of its most recent Annual Report on Form 10-K and each
quarterly report to shareholders issued since the end of the
Company's most recent fiscal year.
- 5 -
ARTICLE II
ADMINISTRATION
2.1 Committee. The Plan shall be administered by a
Committee of not fewer than two members, who shall be nonemployee
members of the Board. No member of the Committee shall be
eligible to receive Options under the Plan (since they shall not
be employees) and each such member shall be a Non-Employee
Director. Subject to the express provisions of the Plan, the
Committee shall have the sole discretion and authority to
determine the Employees to whom and the time or times at which
Options may be granted and the number of Plan Shares subject to
each Option.
2.2 Appointment of Committee. The Committee shall be
appointed by the Board and shall consist solely of nonemployee
members of the Board; provided that the Board may remove any
Committee member for cause.
2.3 Majority Rule; Unanimous Written Consent. A majority
of the members of the Committee shall constitute a quorum, and
any action taken by a majority present at a meeting at which a
quorum is present or any action taken without a meeting evidenced
by a writing executed by all members of the Committee shall
constitute the action of the Committee. Meetings of the
Committee may take place by telephone conference call.
2.4 Company Assistance. The Company shall supply full and
timely information to the Committee on all matters relating to
Employees, their employment, death, retirement, disability or
other termination of employment, and such other pertinent facts
as the Committee may require. The company shall furnish the
Committee with such clerical and other assistance as is necessary
to the performance of its duties.
ARTICLE III
INCENTIVE STOCK OPTIONS
3.1 Option Terms and Conditions. The terms and conditions
of Options granted under this Article may differ from one another
as the Committee shall, in its discretion, determine, as long as
all Options granted under this Article satisfy the requirements
of this Article.
3.2 Duration of Options. Each Option granted pursuant to
this Article and all rights granted hereunder shall expire on the
date determined by the Committee, but in no event shall any
Option granted under this Article expire earlier than one year or
later than ten years after the date on which the Option is
granted. In addition, each Option shall be subject to early
termination as provided elsewhere in the Plan.
3.3 Purchase Price. The purchase price for each of the
Plan Shares acquired pursuant to the exercise, in whole or in
part, of any Option granted under this Article shall not be less
than the Fair Market Value of each of the Plan Shares at the time
the grant of the Option becomes effective.
- 6 -
3.4 Maximum Amount of Options First Exercisable in Any
Calendar Year. The maximum aggregate Fair Market Value of Plan
shares (determined at the time the Option is granted) with
respect to which Options issued under this Article are
exercisable for the first time by any Employee during any
calendar year under all incentive stock option plans of the
Company and its subsidiaries and affiliates shall not exceed
$100,000. Any Option granted under the Plan and first
exercisable in excess of the foregoing limitation shall be
considered granted pursuant to Article IV and shall be clearly
and specifically designated as not being an incentive stock
option.
3.5 Requirements as to Certain Options. In the event of
the grant of any Option under this Article to an individual who,
at the time the Option is granted, owns shares of stock
possessing more than ten percent of the total combined voting
power of all classes of stock of the Company or any of its
subsidiaries or affiliates within the meaning of Section
422(b)(6) of the code, the purchase price for each of the Plan
Shares subject to that Option must be at least 110% of the Fair
Market Value of those Plan Shares at the time the Option is
granted and the Option must not be exercisable after the
expiration of five years from the date of its grant.
3.6 Individual Option Agreements. Each Optionee receiving
Options pursuant to this Article shall be required to enter into
a written Option Agreement with the Company as a precondition to
receiving an Option under this Article. In such Option
Agreement, the Optionee shall agree to be bound by the terms and
conditions of the Plan and such other matters as the Committee
deems appropriate.
ARTICLE IV
NONQUALIFIED STOCK OPTIONS
4.1 Option Terms and Conditions. The terms and conditions
of Options granted under this Article may differ from one another
as the Committee shall in its discretion determine, as long as
all Options granted under this Article satisfy the requirements
of this Article.
4.2 Duration of Options. Each Option granted pursuant to
this Article and all rights thereunder shall expire on the date
determined by the Committee, but in no event shall any Option
granted under this Article expire later than ten years after the
date on which the Option is granted. In addition, each Option
shall be subject to early termination as provided elsewhere in
the Plan.
4.3 Purchase Price. The purchase price for each of the
Plan Shares acquired pursuant to the exercise, in whole or in
part, of any Option granted under this Article shall not be less
than the Fair Market Value of each of the Plan Shares at the time
the grant of the Option becomes effective.
4.4 Individual Option Agreements. Each Optionee receiving
Options pursuant to this Article shall be required to enter into
a written Option Agreement with the Company as a precondition to
receiving an Option under this Article. In such Option
Agreement, the Optionee shall agree to be bound by the terms and
conditions of the Plan and such other matters as the Committee
deems appropriate.
- 7 -
ARTICLE V
TERMINATION, AMENDMENT AND ADJUSTMENT
5.1 Termination and Amendment. The Plan shall terminate
ten years after the Effective Date. No Options shall be granted
under the Plan after that date of termination. Subject to the
limitation contained in this Section, the Committee may at any
time amend or revise the terms of the Plan, including the form
and substance of the Option Agreements to be used in connection
herewith; provided that no amendment or revision shall (i)
increase the maximum aggregate number of Plan Shares, except as
permitted under Section 5.2, (ii) increase the maximum term
established under the Plan for any Option or (iii) permit the
granting of an Option to anyone other than as provided in the
Plan. No amendment, suspension or termination of the Plan shall,
without the consent of the Employee who has received an Option
hereunder, alter or impair any of that Employee's rights or
obligations under any Option granted under the Plan prior to that
amendment, suspension or termination.
5.2 Adjustments. If the outstanding Common Stock is
increased, decreased, changed into or exchanged for a different
number or kind of shares or securities through merger,
consolidation, combination, exchange of shares, other
reorganization, recapitalization, reclassification, stock
dividend, stock split or reverse stock split, an appropriate and
proportionate adjustment shall be made in the maximum number and
kind of Plan Shares as to which Options may be granted under the
Plan. A corresponding adjustment changing the number and kind of
shares allocated to unexercised Options or portions thereof,
which shall have been granted prior to any such change, shall
likewise be made. Any such adjustment in outstanding Options
shall be made without change in the aggregate purchase price
applicable to the unexercised portion of the Option, but with a
corresponding adjustment in the price for each share covered by
the Option. The foregoing adjustments and the manner of
application of the foregoing provisions shall be determined
solely by the Committee, and any such adjustment may provide for
the elimination of factional share interests.
ARTICLE VI
MISCELLANEOUS
6.1 Other Option Plans. The adoption of the Plan shall
not affect any other stock option or incentive or other
compensation plan in effect for the Company or any of its
subsidiaries or affiliates, nor shall the Plan preclude the
Company or any of its subsidiaries or affiliates from
establishing any other form of incentive or other compensation
for Employees.
6.2 Plan Binding on Successors. The Plan shall be binding
upon the successors and assigns of the Company and any of its
subsidiaries or affiliates that adopt the Plan.
6.3 Number and Gender. Whenever used herein, nouns in the
singular shall include the plural where appropriate, and the
masculine pronoun shall include the feminine gender.
- 8 -
6.4 Headings. Headings of articles and sections hereof are
inserted for convenience of reference and constitute no part of
the Plan.
6.5 Conditions. No Options granted under the Plan shall
become effective until and unless the Plan has been presented to
and approved by the shareholders of the Company within twelve
months before or after the date the Plan is adopted by the Board.
ARTICLE VII
DEFINITIONS
As used herein with initial capital letters, the following
terms have the meanings hereinafter set forth unless the context
clearly indicates to the contrary:
7.1 "Board" shall mean the Board of Directors of the
Company.
7.2 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
7.3 "Committee" shall mean the Committee appointed in
accordance with Section 2.2.
7.4 "Common Stock" shall mean the Common Stock, par value
$0.01 per share, of the Company or, in the event that the
outstanding shares of such Common Stock are hereafter changed
into or exchanged for shares of a different stock or security of
the Company or some other corporation, such other stock or
security.
7.5. "Company" shall mean Calloway's Nursery, Inc. a Texas
Corporation.
7.6. "Effective Date" shall mean the date of the shareholder
approval required by Section 6.5 of the Plan.
7.7 "Employee(s)" shall mean employee(s) of the Company or
of any of its subsidiaries or affiliates that adopt the Plan and
shall not include members of the Board who are not otherwise
employed by the Company.
7.8 "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
7.9 "Fair Market Value" shall mean such value as determined
by the Committee on the basis of such factors as it deems
appropriate; provided that if the Common Stock is traded on a
national securities exchange or transactions in the Common stock
are quoted on a national quotation system, such value shall be
determined by the Committee on the basis of the last reported
sales price for the Common Stock on the date for which such
determination is relevant, as reported on the national securities
exchange or the national quotation system. If the Common Stock
is not listed and traded upon a recognized securities exchange or
on a national quotation systems, the Committee shall make a
determination of Fair Market Value on the basis of the mean
between the closing bid and asked quotations for such stock on
the date for which such determination is relevant (as reported by
a recognized stock quotation service) or, in the event that there
shall be no bid or asked quotations on the date for which such
determination is relevant, then on the basis of the mean between
the closing bid and asked quotations on the date nearest
preceding the date for which such determination is relevant for
which such bid and asked quotations were available.
- 9 -
7.10 "Immediate Family Members" means children,
grandchildren, spouse, siblings or parents of the Optionee or
bona fide trusts, partnerships or other entities controlled by,
and of which the beneficiaries are, Immediate Family members of
the Optionee. Any option grants that are transferable are
further conditioned on the Optionee and Immediate Family Members
agreeing to abide by the Company's then current stock option
transfer guidelines.
7.ll "Incentive Stock Option" shall mean an Option granted
pursuant to Article III.
7.12 "Non-Employee Director" shall mean a director who:
(i) Is not currently an officer (as defined
in Rule 16a-1(f)) of the Exchange Act of the issuer or a parent
or subsidiary of the issuer, or otherwise currently employed by
the issuer or a parent or subsidiary of the issuer;
(ii) Does not receive compensation,
either directly or indirectly, from the issuer or a parent or
subsidiary of the issuer, for services rendered as a
consultant or in any capacity other than as a director, except
for an amount that does not exceed the dollar amount for which
disclosure would be required pursuant to Item 404(a) of Reg. S-K
of the Exchange Act ("Reg. S-K");
(iii) Does not possess an interest in
any other transaction for which disclosure would be required
pursuant to 404() of Reg. S-K; and
(iv) Is not engaged in a business
relationship for which disclosure would be required pursuant to
Item 404(b) of Reg. S-K.
7.13 "Nonqualified Stock Option" shall mean an Option
granted pursuant to Article IV.
7.14 "Option" shall mean an Incentive Stock Option or a
Nonqualified Stock Option.
7.15 "Optionee" shall mean an Employee to whom an Option has
been granted hereunder.
7.16 "Option Agreement" shall mean an agreement between the
Company and an Optionee with respect to one or more Options.
7.17 "Plan" shall mean the Calloway's Nursery, Inc. 1997
Stock Option Plan, the terms of which are set forth herein.
7.18 "Plan Shares" shall mean shares of Common Stock
issuable pursuant to the Plan.
7.19 "Securities Act" shall mean the Securities Act of 1933,
as amended.
- 10 -
<PAGE>
- - -----------------------------------------------------------------------------
P R O X Y
CALLOWAY'S NURSERY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
For The Annual Meeting of Shareholders -- February 11, 1998
The undersigned hereby appoints James C. Estill and John T. Cosby, and each
of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all
the shares of common stock of Calloway's Nursery, Inc. held of record by
the undersigned on December 19, 1997 at the Annual Meeting of Shareholders
to be held in Fort Worth, Texas on February 11, 1998 or any adjournment
thereof, and in their discretion to vote upon such other business as may
properly come before the meeting.
This Proxy will be voted as specified or, if no choice is specified, will
be voted FOR the election of the nominees named and FOR each of the other
proposals specified herein.
(change of address)
__________________________________ _______________________________
__________________________________ _______________________________
(Please vote, sign and date on reverse side and return promptly.)
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
CALLOWAY'S NURSERY, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
<TABLE>
<S> <C> <C> <C> <C> <C>
1. Election of the following nominees For All
as directors: Messrs. Estill, Cosby, For Withheld Except _________________
Peters, Glaze and Block. The [ ] [ ] [ ] Nominee Exception
nominees will serve for a term of
one year, as indicated in the proxy
statement.
2. Approval of the Calloway's Nursery, Inc. For Withheld Abstain
1997 Stock Option Plan. [ ] [ ] [ ]
3. Ratification of appointment of For Withheld Abstain
Coopers & Lybrand L.L.P. as [ ] [ ] [ ]
independent certified public
accountants for the Company.
</TABLE>
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY POSTPONEMENTS OR
ADJOURNMENTS THEREOF FOR A VOTE OF THE COMMON STOCK.
Sign exactly as your name appears on this proxy card. Joint owners should
each sign personally. If acting as attorney, executor, trustee, or in a
representative capacity, sign name and indicate title.
Dated:___________________, 1998
Signature______________________________________________
Dated:___________________, 1998
Signature______________________________________________
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
- - --------------------------------------------------------------------------
