<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 2, 1996
---------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------------------- -----------------------
Commission file number 0-19149
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Filene's Basement Corp.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-3016733
------------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
40 Walnut Street, Wellesley, MA 02181
-------------------------------------
(Address of principal executive offices)
(Zip Code)
(617) 348-7000
--------------
(Registrant's telephone number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicated by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicated by check mark whether the registrant has filed all documents and
reports required to be filed by Section 2, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date: 20,637,087 shares of Common
Stock as of December 6, 1996.
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FILENE'S BASEMENT CORP.
INDEX
PART I FINANCIAL INFORMATION Page No.
--------
Item 1 - Financial Statements
Consolidated Balance Sheets 3
November 2, 1996, February 3, 1996
and October 28, 1995
Consolidated Statements of Operations 4
Thirty-nine and Thirteen weeks ended
November 2, 1996 and October 28, 1995
Consolidated Statements of Cash Flows 5
Thirty-nine weeks ended November 2, 1996
and October 28, 1995
Notes to Consolidated Financial Statements 6 - 7
Item 2 - Management's Discussion and Analysis of 8 - 11
Financial Condition and Results of Operations
PART II OTHER INFORMATION
Item 4 - Submission of Matters to a Vote
of Security Holders 12
Item 6 - Exhibits and Reports on Form 8-K 12
Signatures 13
Exhibit 11 - Computation of Net Income per 14
Common Share
Page 2
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FILENE'S BASEMENT CORP.
(and its Wholly-Owned Subsidiaries)
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands)
- ------------------------------------------------------------------------------------------------------
<CAPTION>
November 2, February 3, October 28,
1996 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents $ 296 $ 464 $ 122
Inventories 112,512 85,777 129,671
Other current assets 14,237 26,534 17,330
Deferred income taxes -- -- 9,154
-------- -------- --------
Total current assets 127,045 112,775 156,277
Property, plant and equipment, net 61,783 67,278 69,098
Beneficial operating lease rights, net 15,140 16,125 16,454
Deferred income taxes 3,128 3,128 2,500
Intangible assets, net & other 8,319 10,746 7,044
-------- -------- --------
Total assets $215,415 $210,052 $251,373
======== ======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------
Current liabilities:
Accounts payable 52,415 36,645 42,145
Accrued expenses 30,301 33,402 26,562
Short term debt 26,000 13,200 29,300
Obligations under capital leases, due
within one year 466 490 476
-------- -------- --------
Total current liabilities 109,182 83,737 98,483
Reserve for store closings 4,663 4,663 158
Deferred revenue 2,041 2,166 2,208
Long-term debt 10,000 35,000 35,000
Obligations under capital leases, less
portion due within one year 3,289 3,627 3,754
Stockholders' equity
Common stock, $.01 par value; authorized
70,000,000 shares; 20,661,113, 20,575,464
and 20,541,410 shares issued 206 206 205
Cost of 75,000 common shares in treasury (16) (16) (16)
Unamortized restricted stock compensation 0 (12) (19)
Additional paid-in capital 86,126 86,048 85,849
Retained earnings (deficit) (76) (5,367) 25,751
-------- -------- --------
Total stockholders' equity 86,240 80,859 111,770
-------- -------- --------
Total liabilities and stockholders' equity $215,415 $210,052 $251,373
======== ======== ========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
PAGE 3
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FILENE'S BASEMENT CORP.
(and its Wholly-Owned Subsidiaries)
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands, except per share amounts)
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
39 Weeks Ended - 39 Weeks Ended - 13 Weeks Ended - 13 Weeks Ended -
November 2, 1996 October 28, 1995 November 2, 1996 October 28, 1995
----------------- ----------------- ----------------- ----------------
$ % $ % $ % $ %
-------- ----- -------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $391,336 100.0% $412,187 100.0% $147,203 100.0% $154,244 100.0%
-------- ----- -------- ----- -------- ----- -------- -----
Cost of sales, including buying, receiving and
occupancy costs: 293,345 75.0% 315,403 76.5% 109,051 74.1% 116,924 75.8%
-------- ----- -------- ----- -------- ----- -------- -----
Gross profit 97,991 25.0% 96,784 23.5% 38,152 25.9% 37,320 24.2%
Selling, general and administrative expenses 85,169 21.8% 93,266 22.6% 31,111 21.1% 33,011 21.4%
Amortization of intangible assets and
beneficial operating lease rights 1,100 0.3% 1,014 0.2% 366 0.2% 338 0.2%
-------- ----- -------- ----- -------- ----- -------- -----
Operating income 11,722 2.9% 2,504 0.7% 6,675 4.6% 3,971 2.6%
Interest expense, net 3,186 0.8% 3,556 0.9% 1,008 0.7% 1,458 0.9%
-------- ----- -------- ----- -------- ----- -------- -----
Income (loss) before income taxes 8,536 2.1% (1,052) -0.2% 5,667 3.9% 2,513 1.7%
Income tax provision (benefit) 3,244 0.8% (379) -0.1% 2,154 1.5% 908 0.6%
-------- ----- -------- ----- -------- ----- -------- -----
Net income (loss) $ 5,292 1.3% $ (673) -0.1% $ 3,513 2.4% $ 1,605 1.1%
======== ===== ======== ===== ======== ===== ======== =====
Primary and fully diluted income (loss)
per common share:
Net income (loss) $0.26 $(0.03) $0.17 $0.08
===== ====== ===== =====
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
PAGE 4
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FILENE'S BASEMENT CORP.
(and its Wholly-Owned Subsidiaries)
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
- -----------------------------------------------------------------------------------------------
<CAPTION>
39 Weeks Ended - 39 Weeks Ended -
November 2, 1996 October 28, 1995
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 5,292 $ (673)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operations:
Depreciation and amortization 9,273 9,935
Amortization related to restricted stock compensation 12 18
Deferred income taxes 0 107
Changes in operating assets and liabilities:
Inventory (26,735) (12,167)
Other current assets 14,069 (7,012)
Accounts payable 15,770 (6,663)
Accrued expenses (282) (6,381)
-------- --------
Total adjustments 12,107 (22,163)
Net cash provided by (used in) operating activities 17,399 (22,836)
Cash flows from investing activities:
Purchase of property, plant and equipment & other (5,811) (11,335)
Proceeds from sale of leasehold interest 728 434
-------- --------
Net cash used in investing activities (5,083) (10,901)
Cash flows from financing activities:
Proceeds from short-term borrowings 101,174 94,600
Payments on short-term borrowings (88,374) (65,300)
Principal payments of capital lease obligations (362) (337)
Long-term debt (25,000) 0
Proceeds from sale of common stock to employees 78 254
-------- --------
Net cash provided by (used in) financing activities (12,484) 29,217
Net decrease in cash and cash equivalents (168) (4,520)
Cash and cash equivalents at beginning of period 464 4,642
-------- --------
Cash and cash equivalents at end of period $ 296 $ 122
======== ========
Supplemental disclosures of cash flow information:
Interest paid $ 2,599 $ 2,804
Taxes paid 257 164
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
Page 5
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FILENE'S BASEMENT CORP.
(and its Wholly-Owned Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The results of the periods ended November 2, 1996 and October 28, 1995 are
not necessarily indicative of the results for a full fiscal year because the
Company's business, in common with the businesses of retailers generally, is
subject to seasonal influences, with higher levels of sales and income
generally realized in the fall season.
2. The preceding data is unaudited but, in the opinion of management, includes
all adjustments (consisting of normally occurring accruals and deferrals)
necessary for a fair presentation of the results of operations for the
periods reported, in accordance with generally accepted accounting principles
and practices consistently applied.
3. On May 23, 1996, the Company entered into a Revolving Credit and Term Loan
Agreement (the "Agreement") as amended June 28, 1996, which replaced the
Amended and Restated Credit and Override Agreement dated October 13, 1995 and
as amended on October 31, 1995, December 8, 1995 and February 3, 1996. The
Agreement expires, and all loans outstanding thereunder mature, on June 30,
1999 and includes a $65.0 million revolving credit facility and a $10.0
million term loan, which replaced a $50.0 million revolving credit facility
and $35.0 million of fixed rate debt.
Although the aggregate facility under the Agreement is $10.0 million less
than the previous arrangement, the Company's borrowing capacity under the
Agreement has actually been enhanced as a result of a broader borrowing base
formula and lower overall debt levels. In May, 1996, the Company received
federal tax refunds totalling $9.6 million related to net operating losses
carried back to offset prior years' taxable income, which was applied to
reduce outstanding debt. Availability under the Agreement is determined based
on a higher advance rate against eligible inventory than under the previous
arrangement and also provides for advances against eligible receivables and
domestic letters of credit, which previously were not included in the
borrowing base. Further, under the previous arrangement, the $35 million of
fixed rate debt was a standing use of availability, while under the
Agreement, the $10 million term loan is not considered in the determination
of availability.
Advances against eligible inventory and receivables bear interest at either
prime plus 0.50% or LIBOR plus 2.50%. The term loan bears interest at either
prime plus 0.75% or LIBOR plus 2.75%. In the event the Company achieves a
predetermined financial target for the current fiscal year, the interest
Page 6
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FILENE'S BASEMENT CORP.
(and its Wholly-Owned Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
rate on all loans will be decreased by 0.50%.
Mandatory payments of the term loan principal are required upon the
occurrence of certain events preceding the first anniversary of the loan and,
thereafter, based on the outstanding principal balance at that date, in eight
equal quarterly installments commencing September 30, 1997. In the event the
outstanding principal of the term loan on the first anniversary is greater
than $4.0 million, the interest rate, on the term loan only, will be
permanently increased by 1.0%.
The Agreement contains new financial covenants which are less restrictive
than the previous requirements, thereby providing the Company with greater
operating flexibility. The most restrictive covenant of the Agreement
mandates cumulative minimum earnings before interest, taxes, depreciation and
amortization for specified periods during the term of the Agreement. During
the thirty-nine week period ended November 2, 1996 and as of November 2,
1996, the Company was in compliance with all covenants of the previous and
new arrangements.
4. In the fourth quarter of Fiscal 1995, the Company recorded a charge of $10.6
million in connection with the planned closure of eight stores, one of which
was closed in Fiscal 1995 and four of which were closed in the first quarter
of Fiscal 1996. The Company has used, through the third quarter of Fiscal
1996, $7.2 million of this reserve, primarily in connection with ongoing
lease obligations and the write-off of abandoned fixtures. The Company
believes the remaining reserve of $3.4 million is adequate to cover future
costs associated with these store closings.
Page 7
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MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE THIRTY-NINE WEEKS ENDED NOVEMBER 2, 1996
RESULTS OF OPERATIONS
- ---------------------
For the quarter ended November 2, 1996 net sales were $147.2 million, down 5
percent from last year's third quarter sales of $154.2 million. Comparable store
sales for the thirteen week third quarter were down 2 percent versus the
comparable thirteen week period last year. Net sales for the thirty-nine week
period of $391.3 million were down 5 percent from last year's sales of $412.2
million. Comparable store sales for the nine month period ended November 2, 1996
were approximately the same as those for the comparable period last year. For
the twelve month period ended November 2, 1996, no new stores were opened and
five stores were closed. The total number of stores in operation on November 2,
1996 and October 28, 1995 were 43 and 48, respectively.
Cost of goods sold as a percentage of sales was 74.1 percent and 75.0 percent
for the thirteen and thirty-nine week periods ended November 2, 1996,
respectively, compared to 75.8 percent and 76.5 percent for the same periods in
the prior year. The decrease in cost of goods sold as a percentage of sales was
attributable to a decrease in markdowns and increase in markup on cost of sales
as a result of the elimination of a number of promotional events and a reduction
in the penetration of low margin retail stocks.
Selling, general and administrative expenses for the third quarter of Fiscal
1996 were $31.1 million, or 21.1 percent of sales, compared to $33.0 million, or
21.4 percent of sales, for the same period last year. For the nine month period
ended November 2, 1996, selling, general and administrative expenses were $85.2
million, or 21.8 percent of sales, compared to $93.3 million, or 22.6 percent of
sales, last year. The decreases in selling, general and administrative expenses
for the thirteen and thirty-nine week periods were primarily related to
reductions in payroll and payroll related expenses as a result of store closings
and a decrease in advertising expenditures.
In the fourth quarter of Fiscal 1995, the Company recorded a charge of $10.6
million in connection with the planned closure of eight stores, one of which was
closed in Fiscal 1995 and four of which were closed in the first quarter of
Fiscal 1996. The Company has used, through the third quarter of Fiscal 1996,
$7.2 million of this reserve, primarily in connection with ongoing lease
obligations and the write-off of abandoned fixtures.
In the fourth quarter of Fiscal 1994, the Company recorded a charge of $4.9
million associated with the closing of seven stores. Five stores were closed in
the first quarter of Fiscal 1995 and the remaining stores were closed in the
quarter ended July 29, 1995.
Page 8
<PAGE> 9
MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE THIRTY-NINE WEEKS ENDED NOVEMBER 2, 1996
The Company has used, through the third quarter of 1996, $4.7 million of this
reserve. The Company believes the remaining reserves of $3.4 and $0.2 million
related to the Fiscal 1995 and Fiscal 1994 charges, respectively, are adequate
to cover future costs associated with these store closings.
Net income for the quarter ended November 2, 1996 was $3.5 million, or 17 cents
per share, on 21.0 million weighted average shares outstanding, compared to net
income for the quarter ended October 28, 1995 of $1.6 million, or 8 cents per
share, on 21.1 million weighted average shares outstanding. For the nine month
period ended November 2, 1996, net income was $5.3 million, or 26 cents per
share, on 20.7 million weighted average shares outstanding compared to a net
loss of $0.7 million, or 3 cents per share, on 20.4 million weighted average
shares outstanding for the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
On May 23, 1996, the Company entered into a Revolving Credit and Term Loan
Agreement (the "Agreement") as amended June 28, 1996, which replaced the Amended
and Restated Credit and Override Agreement dated October 13, 1995 and as amended
on October 31, 1995, December 8, 1995 and February 3, 1996. The Agreement
expires, and all loans outstanding thereunder mature, on June 30, 1999 and
includes a $65.0 million revolving credit facility and a $10.0 million term
loan, which replaced a $50.0 million revolving credit facility and $35.0 million
of fixed rate debt.
Although the aggregate facility under the Agreement is $10.0 million less than
the previous arrangement, the Company's borrowing capacity under the Agreement
has actually been enhanced as a result of a broader borrowing base formula and
lower overall debt levels. In May, 1996, the Company received federal tax
refunds totalling $9.6 million related to net operating losses carried back to
offset prior years' taxable income, which was applied to reduce outstanding
debt. Availability under the Agreement is determined based on a higher advance
rate against eligible inventory than under the previous arrangement and also
provides for advances against eligible receivables and domestic letters of
credit, which previously were not included in the borrowing base. Further, under
the previous arrangement, the $35 million of fixed rate debt was a standing use
of availability, while under the Agreement, the $10 million term loan is not
considered in the determination of availability.
Advances against eligible inventory and receivables bear interest
Page 9
<PAGE> 10
MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE THIRTY-NINE WEEKS ENDED NOVEMBER 2, 1996
at either prime plus 0.50% or LIBOR plus 2.50%. The term loan bears interest at
either prime plus 0.75% or LIBOR plus 2.75%. In the event the Company achieves a
predetermined financial target for the current fiscal year, the interest rate on
all loans will be decreased by 0.50%.
Mandatory payments of the term loan principal are required upon the occurrence
of certain events preceding the first anniversary of the loan and, thereafter,
based on the outstanding principal balance at that date, in eight equal
quarterly installments commencing September 30, 1997. In the event the
outstanding principal of the term loan on the first anniversary is greater than
$4.0 million, the interest rate, on the term loan only, will be permanently
increased by 1.0%.
The Agreement contains new financial covenants which are less restrictive than
the previous requirements, thereby providing the Company with greater operating
flexibility. The most restrictive covenant of the Agreement mandates cumulative
minimum earnings before interest, taxes, depreciation and amortization for
specified periods during the term of the Agreement. During the thirty-nine week
period ended November 2, 1996 and as of November 2, 1996, the Company was in
compliance with all covenants of the previous and new arrangements.
As of November 2, 1996, the Company had $17.9 million of working capital and
$20.6 million of remaining credit availability. As of that date, outstanding
obligations under the Agreement were $36.0 million, including the $10.0 million
term loan, and the Company had $18.4 million in letter of credit commitments.
Short term trade credit represents a significant source of financing for
inventory purchases and arises from the willingness of vendors to grant extended
payment terms. Merchandise inventories are financed either by the vendors or
third party factors.
The Company believes that internally generated working capital, existing vendor
and third party factor arrangements and funds available under the Agreement will
be adequate to meet its merchandise inventory and normal operating expense
needs, as well as presently anticipated capital expenditure requirements for the
remainder of the fiscal year. However, the Company's operating results and the
adequacy of its working capital could be adversely affected if, for any reason,
the Company's borrowing base was to become impaired, or otherwise be deemed
ineligible, thereby diminishing the level of available funds.
The Company has never paid a cash dividend and has no plans to pay
Page 10
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MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE THIRTY-NINE WEEKS ENDED NOVEMBER 2, 1996
dividends on its common stock.
The Company's business is seasonal, reflecting increased consumer demand in the
fall season. The second half of each fiscal year provides a greater portion of
the Company's annual sales and operating profit.
This Quarterly Report on Form 10-Q contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forwardlooking statements. Without limiting the
foregoing, the words "believes", "anticipates", "plans", "expects" and similar
expressions are intended to identify forward-looking statements. Factors which
may cause actual results to differ materially from those indicated by such
forward-looking statements include: (i) economic and weather conditions which
affect the buying patterns of the Company's customers, (ii) actions of the
Company's competitors and the Company's ability to respond to such actions (iii)
the continued support of the Company's numerous vendors and third party factors
in the form of short term trade credit through extended payment terms and
letters of credit and (iv) the continued success of the Company's efforts to
implement planned strategic initiatives.
Page 11
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ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1....... 1988 Filene's Basement Corp. Stock Option Plan, as amended. Dated
as of October 3, 1996.
10.2....... 1990 Equity Incentive Plan, as amended. Dated as of October 3,
1996.
10.3....... 1993 Stock Option Plan For Non-Employee Directors, as amended.
Dated as of October 3, 1996.
11......... Computation of Net Income per Common Share.
27......... Financial Data Schedule
- --------------------------------------------------------------------------------
(b) No reports on Form 8-K were filed during the quarter ended November 2, 1996
for which this report is filed.
Page 12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, being also its principal financial
officer.
FILENE'S BASEMENT CORP.
/s/ Steven Siegel
-----------------------------
Steven Siegel
Executive Vice President
and Chief Financial Officer
DATE: December 13, 1996
Page 13
<PAGE> 1
Exhibit 10.1
------------
THE 1988 FILENE'S BASEMENT CORP. STOCK OPTION PLAN
(As Amended October 3, 1996)
1. PURPOSE
-------
The purpose of the 1988 Filene's Basement Corp. Stock Option Plan (the
("Plan") is to advance the interests of Filene's Basement Corp. (the "Company")
by enhancing the ability of the Company (a) to attract and retain employees who
are in a position to make significant contributions to the success of the
Company; (b) to reward employees for such contributions; and (c) to encourage
employees to take into account the long-term interests of the Company through
ownership of shares of the Company's common stock (the "Stock").
Options granted pursuant to the Plan may be incentive stock options as
defined in section 422 of the Internal Revenue Code of 1986 (as from time to
time amended, the "Code") (any option that is intended so to qualify as an
incentive stock option being referred to herein as an "incentive option"), or
options that are not incentive options, or both.
2. ADMINISTRATION
--------------
The Plan shall be administered by the Board of Directors (the "Board") of the
Company. The Board shall have authority, not inconsistent with the express
provisions of the Plan, (a) to grant options to such eligible employees as the
Board may select; (b) to determine the time or times when options shall be
granted and the number of shares of Stock subject to each option; (c) to
determine which options are, and which options are not, incentive options; (d)
to determine the terms and conditions of each option; (e) to prescribe the form
or forms of instruments evidencing options and any other instruments required
under the Plan and to change such forms from time to time; (f) to adopt, amend
and rescind rules and regulations for the administration of the Plan; and (g) to
interpret the Plan and to decide any questions and settle all controversies and
disputes that may arise in connection with the Plan. Such determinations of the
Board shall be conclusive and shall bind all parties. Subject to Section 8 the
Board shall also have the authority, both generally and in particular instances,
to waive compliance by an employee with any obligation to be performed by him
under an option and to waive any condition or provision of an option, except
that the Board may not, in the case of an incentive option, other than in
accordance with Section 4(c), (i) increase the total number of shares covered by
the option, (ii) extend the term of the option to more than ten years (five
years, in the case of an incentive option granted to a "ten-percent shareholder"
as defined in
<PAGE> 2
section 6(b) below), or (iii) unless the optionee consents, reduce the option
exercise price per share or otherwise cause a modification, extension or renewal
(within the meaning of section 424(h) of the Code) of the option.
The Board may, in its discretion, delegate its powers with respect to the
Plan to a committee (the "Committee"), in which event all references to the
Board hereunder shall be deemed to refer to the Committee. The Committee shall
consist of at least two directors. A majority of the members of the Committee
shall constitute a quorum, and all determinations of the Committee shall be made
by a majority of its members. Any determination of the Committee under the Plan
may be made without notice or meeting of the Committee by a writing signed by a
majority of the Committee members. Following registration of the Stock under the
Securities Exchange Act of 1934, the Committee shall consist of the minimum
number of directors required under Rule 16b-3 under the Act, all of whom shall
be "disinterested persons" within the meaning of that Rule.
3. EFFECTIVE DATE AND TERM OF PLAN
-------------------------------
The Plan shall become effective on the date on which the Plan is approved by
the shareholders of the Company. Grants of options under the Plan may be made
prior to that date (but after Board adoption of the Plan), subject to approval
of the Plan by such shareholders.
No option shall be granted under the Plan after the completion of ten years
from the date on which the Plan was adopted by the Board, but options previously
granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
--------------------------
(a) NUMBER OF SHARES. Subject to adjustment as provided in section 4(c), the
aggregate number of shares of Stock that may be delivered upon the exercise of
options granted under the Plan shall be 2,106,786. (1) If any option granted
under the Plan terminates without having been exercised in full, the number
of shares of Stock as to which such option was not exercised shall be available
for future grants within the limits set forth in this Section 4(a).
(b) SHARES TO BE DELIVERED. Shares delivered under the Plan shall be
authorized but unissued Stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in
treasury. No fractional shares of Stock shall be delivered under the Plan.
- ----------
(1) Reflects stock splits through April 1991.
-2-
<PAGE> 3
(c) CHANGES IN STOCK. In the event of a stock dividend, stock split or
combination of shares, recapitalization or other change in the Company's capital
stock, the number and kind of shares of stock or securities of the Company
subject to options then outstanding or subsequently granted under the Plan, the
maximum number of shares or securities that may be delivered under the Plan, the
exercise price, and other relevant provisions shall be appropriately adjusted by
the Board, whose determination shall be binding on all persons.
The Board may also adjust the number of shares subject to outstanding
options, the exercise price of outstanding options and the terms of outstanding
options, to take into consideration material changes in accounting practices or
principles, consolidations or mergers (except those described in Section 6(i)),
acquisitions or dispositions of stock or property or any other event if it is
determined by the Board that such adjustment is appropriate to avoid distortion
in the operation of the Plan, provided that no such adjustment shall be made in
the case of an incentive option if it would constitute a modification, extension
or renewal of the option within the meaning of section 424(h) of the Code.
5. ELIGIBILITY FOR OPTIONS
-----------------------
Employees eligible to receive options under the Plan shall be those employees
of the Company and its subsidiaries who, in the opinion of the Board, are in a
position to make a significant contribution to the success of the Company or
such subsidiaries. A subsidiary for purposes of the Plan shall be a corporation
in which the Company owns, directly or indirectly, stock possessing 50% or more
of the total combined voting power of all classes of stock.
Directors who are not employees shall not be eligible to participate in the
Plan. Incentive options shall be granted only to "employees" as defined in the
provisions of the Code or regulations thereunder applicable to incentive stock
options. Receipt of options under the Plan or of awards under any other employee
benefit plan of the Company or any of its subsidiaries shall not preclude an
employee from receiving options or additional options under the Plan.
6. TERMS AND CONDITIONS OF OPTIONS
-------------------------------
(a) SPECIAL RULE FOR INCENTIVE OPTIONS. Consistent with section 422 of the
Code and any associated regulations, notices or other official pronouncements of
general applicability, to the extent the aggregate fair market value (determined
as of the time the option is granted) of the shares of Stock with respect to
which incentive options are exercisable for the first time by the
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<PAGE> 4
optionee during any calendar year (under all plans of his employer corporation
and its parent and subsidiary corporations) exceeds $100,000, such options shall
not be treated as incentive options. Nothing in this special rule shall be
construed as limiting the exercisability of any option, unless the Board
expressly provides for such a limitation at time of grant.
(b) EXERCISE PRICE. The exercise price of each option shall be determined by
the Board but shall not be less, in the case of an incentive option, than 100%
(110%, in the case of an incentive option granted to a ten-percent shareholder)
of the fair market value per share of the Stock at the time the option is
granted, nor less than 50% of such fair market value in the case of an option
other than an incentive option; nor shall the exercise price be less, in the
case of an original issue of authorized stock, than par value per share. For
this purpose, "fair market value" in the case of incentive options shall have
the same meaning as it does in the provisions of the Code and the regulations
thereunder applicable to incentive options; and "ten-percent shareholder" shall
mean any employee who at the time of grant owns directly, or is deemed to own by
reason of the attribution rules set forth in section 424(d) of the Code, stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or of any of its parent or subsidiary corporations.
(c) DURATION OF OPTIONS. An option shall be exercisable during such period or
periods as the Board may specify. The latest date on which an option may be
exercised (the "Final Exercise Date") shall be the date which is ten years (five
years, in the case of an incentive option granted to a "ten-percent shareholder"
as defined in (b) above) from the date the option was granted or such earlier
date as may be specified by the Board at the time the option is granted.
(d) Exercise of Options.
-------------------
(1) Unless the Board at the time of grant otherwise specifies in the case of
a particular option or options, each option shall become exercisable in
the following installments, which shall be cumulative:
(a) Beginning with the second anniversary of the date of grant of the
option, the option will be exercisable as to 25% of the shares.
(b) Upon each of the third, fourth and fifth anniversaries of the date of
grant, the option will be exercisable for an additional 25% of the
shares.
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<PAGE> 5
In the case of an option not immediately exercisable in full, the Board
may at any time accelerate the time at which all or any part of the
option may be exercised.
(2) The award forms or other instruments evidencing incentive options shall
contain such provisions relating to exercise and other matters as are
required of incentive options under the applicable provisions of the Code
and the regulations thereunder, as from time to time in effect.
(3) Any exercise of an option shall be in writing, signed by the proper
person and delivered or mailed to the Company, accompanied by (a) the
option certificate and any other documents required by the Board and (b)
payment in full for the number of shares for which the option is
exercised.
(4) In the case of an option that is not an incentive option, the Board shall
have the right to require that the individual exercising the option remit
to the Company an amount sufficient to satisfy any federal, state, or
local withholding tax requirements (or make other arrangements
satisfactory to the Company with regard to such taxes) prior to the
delivery of any Stock pursuant to the exercise of the option. In the case
of an incentive option, if at the time the option is exercised the Board
determines that under applicable law and regulations the Company could be
liable for the withholding of any federal or state tax with respect to a
disposition of the Stock received upon exercise, the Board may require as
a condition of exercise that the individual exercising the option agree
(i) to inform the Company promptly of any disposition (within the meaning
of section 424(c) of the Code and the regulations thereunder) of Stock
received upon exercise, and (ii) to give such security as the Board deems
adequate to meet the potential liability of the Company for the
withholding of tax, and to augment such security from time to time in any
amount reasonably deemed necessary by the Board to preserve the adequacy
of such security.
(5) If an option is exercised by the executor or administrator of a deceased
employee, or by the person or persons to whom the option has been
transferred by the employee's will or the applicable laws of descent and
distribution, the Company shall be under no obligation to deliver Stock
pursuant to such exercise until the Company is satisfied as to the
authority of the person or persons exercising the option.
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<PAGE> 6
(e) PAYMENT FOR AND DELIVERY OF STOCK. Stock purchased under the Plan shall
be paid for as follows: (i) in cash or by certified check, bank draft or money
order payable to the order of the Company or (ii) if so permitted by the Board
(not later than the time of grant, in the case of an incentive option), (A)
through the delivery of shares of Stock having a fair market value on the last
business day preceding the date of exercise equal to the purchase price or (B)
by a combination of cash and Stock as provided in clauses (i) and (ii) (A) above
or (C) by delivery of a promissory note of the option holder to the Company,
such note to be payable, in the case of an incentive option, on such terms as
are specified in the option (except that, in lieu of a stated rate of interest,
an incentive option may provide that the rate of interest on the note will be
such rate as is sufficient, at the time the note is given, to avoid the
imputation of interest under the applicable provisions of the Code), or by a
combination of cash (or cash and Stock) and the option holder's promissory note;
PROVIDED, that if the Stock delivered upon exercise of the option is an original
issue of authorized Stock, at least so much of the exercise price as represents
the par value of such Stock shall be paid in cash or by a combination of cash
and Stock.
An option holder shall not have the rights of a shareholder with regard to
awards under the Plan except as to Stock actually received by him under the
Plan.
The Company shall not be obligated to deliver any shares of Stock (a) until,
in the opinion of the Company's counsel, all applicable federal and state laws
and regulations have been complied with, and (b) if the outstanding Stock is at
the time listed on any stock exchange, until the shares to be delivered have
been listed or authorized to be listed on such exchange upon official notice of
issuance, and (c) until all other legal matters in connection with the issuance
and delivery of such shares have been approved by the Company's counsel. If the
sale of Stock has not been registered under the Securities Act of 1933, as
amended, the Company may require, as a condition to exercise of the option, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such Act and may require that the certificates
evidencing such Stock bear an appropriate legend restricting-transfer.
(f) NONTRANSFERABILITY OF OPTIONS. No option may be transferred other than by
will or by the laws of descent and distribution, and during an employee's
lifetime an option may be exercised only by him.
(g) DEATH. If an employee's employment with the Company and its subsidiaries
terminates by reason of death, each option held by the employee immediately
prior to death may be exercised,
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<PAGE> 7
to the extent the option was exercisable immediately prior to death or, if
greater, to the extent of one-half the shares for which the option was granted,
by his executor or administrator, or by the person or persons to whom the option
is transferred by will or the applicable laws of descent and distribution, at
any time within the twenty-four month period beginning on the day of death
(subject, however, to the limitations of Section 6(c) regarding the maximum
exercise period for such option). Other than as provided above, upon the death
of any person granted options under this Plan all options then held by such
person shall terminate.
(h) OTHER TERMINATION OF EMPLOYMENT. If an employee's employment with the
Company and its subsidiaries terminates for any reason other than death, all
options held by the employee that are not then exercisable shall terminate.
Options that are exercisable on the date of termination shall continue to be
exercisable for a period of thirty days (subject to Section 6(c) and the last
sentence of Section 6(g)) unless the employee was discharged for cause which in
the opinion of the Board casts such discredit on him as to justify termination
of his options. After completion of that thirty-day period such options shall
terminate to the extent not previously exercised, expired or terminated. For
purposes of this Section 6(h), employment shall not be considered terminated (i)
in the case of sick leave or other bona fide leave of absence approved for
purposes of the Plan by the Board, so long as the employee's right to
reemployment is guaranteed either by statute or by contract, or (ii) in the case
of a transfer of employment between the Company and a subsidiary or between
subsidiaries, or to the employment of a corporation (or a parent or subsidiary
corporation of such corporation) issuing or assuming an option in a transaction
to which section 424(a) of the Code applies.
(i) MERGERS, ETC. OTHER CHANGES IN CONTROL. In the event of a consolidation
or merger in which the Company is not the surviving corporation or which results
in the acquisition of substantially all the Company's outstanding Stock by a
single person or entity or by a group of persons and/or entities acting in
concert, or in the event of the sale or transfer of substantially all the
Company's assets, all outstanding options shall thereupon terminate, provided
that each option then outstanding, to the extent not already exercisable, shall
become exercisable in full 20 days prior to the effective date of any such
merger, consolidation or sale of assets; and provided further, that if there is
a surviving or acquiring corporation, the Board shall use its best efforts to
arrange, subject to consummation of the merger, consolidation or sale of assets,
to have the surviving or acquiring corporation or an affiliate thereof grant to
employees replacement options which in the case of incentive options satisfy, in
the determination of the Board, the requirements of section 424(a) of the Code.
In the event of
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<PAGE> 8
any other event which constitutes a change in control (as defined in Exhibit A)
of the Company, all outstanding options then held by an individual who has held
such options (or any other options under this Plan or any other stock option
plan of the Company) for at least one year shall become exercisable in full.
The Board may grant options under the Plan in substitution for options held
by employees of another corporation who concurrently become employees of the
Company or a subsidiary of the Company as the result of a merger or
consolidation of the employing corporation with the Company or a subsidiary of
the Company, or as the result of the acquisition by the Company or one of its
subsidiaries of property or stock of the employing corporation. The Company may
direct that substitute awards be granted on such terms and conditions as the
Board considers appropriate in the circumstances.
(j) RESTRICTIONS ON STOCK. The Board may provide that shares of Stock
purchased through the exercise of options under the Plan be subject to such
restrictions on resale, including restrictions requiring resale to the Company
at or below fair market value, or such other restrictions, as the Board in its
sole discretion shall determine, and shall take such steps as it deems necessary
or appropriate to carry out the purposes of any such restriction.
7. PAYMENT RIGHTS
--------------
Neither the adoption of the Plan nor the grant of options shall confer upon
any employee any right to continued employment with the company or any parent or
subsidiary or affect in any way the right of the Company or parent or subsidiary
to terminate the employment of an employee at any time. Except as specifically
provided by the Board in any particular case, the loss of existing or potential
profit in options granted under this Plan shall not constitute an element of
damages in the event of termination of the employment of an employee even if the
termination is in violation of an obligation of the Company to the employee by
contract or otherwise.
8. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
---------------------------------------------------------------
Neither adoption of the Plan nor the grant of options to an employee shall
affect the Company's right to grant to such employee options that are not
subject to the Plan, to issue to such employees Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
employees.
The Board may at any time discontinue granting options under the plan. With
the consent of the employee, the Board may at any
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<PAGE> 9
time cancel an existing option in whole or in part and grant the employee
another option for such number of shares as the Board specifies. The Board may
at any time or times amend the Plan or any outstanding option for the purpose of
satisfying the requirement of section 422 of the Code or of any changes in
applicable laws or regulations or for any other purpose which may at the time be
permitted by law, or day at any time terminate the Plan as to any further grants
of options, provided that (except to the extent expressly required or permitted
herein above) no such amendment shall, without the approval of the shareholders
of the Company, (a) increase the maximum number of shares available under the
Plan, (b) change the group of employees eligible to receive options under the
Plan, (c) reduce the price at which incentive options may be granted (d) extend
the time within which options may be granted, (e) alter the Plan in such a way
that incentive options already granted hereunder would not be considered
incentive stock options under section 422 of the Code, or (f) amend the
provisions of this Section 8, and no such amendment shall adversely affect the
rights of any employee (without his consent) under any option previously
granted.
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<PAGE> 10
EXHIBIT A
---------
Definition of Change in Control
-------------------------------
"Change in Control" shall mean the occurrence of any one of the following
events:
(a) any 'person' as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act") (other than (i)
the Company, (ii) any subsidiary of the Company, (iii) any trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
of any subsidiary of the Company, or (iv) any company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), becomes the
'beneficial owner' (as defined in Section 13(d) of the 1934 Act), together
with all Affiliates and Associates (as such terms are used in Rule 12b-2 of
the General Rules and Regulations under the 1934 Act) of such person,
directly or indirectly, of securities of the Company representing 35% or more
of the combined voting power of the Company's then outstanding securities;
(b) the stockholders of the Company approve a merger or consolidation of
the Company with any other company, other than (1) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity), in combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any
subsidiary of the Company, at least 65% of the combined voting securities of
the Company or such surviving entity outstanding immediately after such
merger or consolidation or (2) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which
no 'person' (with the exception given and the method of determining
'beneficial ownership' used in clause (a) of this definition) acquires more
than 50% of the combined voting power of the Company's then outstanding
securities;
(c) during any period of two consecutive years (not including any period
prior to the execution of this Agreement), individuals who at the beginning
of such period constitute the Board, and any new director (other than a
director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (a), (b) or (d) of this
definition) whose election
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<PAGE> 11
by the Company's stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved cease for any reason to constitute at least a majority
thereof; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
In no event shall a Change in Control be deemed to have occurred if prior
thereto the Board by unanimous vote of its members present and voting, including
at least two (2) such members who are employees of the Company (whose assent
shall not be unreasonably withheld), so determine; PROVIDED, that no such
determination shall be effective after an initial public offering of the
Company's Stock. No Change in Control shall be deemed to have occurred solely by
reason of an initial public offering of the Company's Stock.
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<PAGE> 12
FILENE'S BASEMENT CORP.
AMENDMENT TO 1988 FILENE'S BASEMENT CORP.
STOCK OPITON PLAN
Pursuant to a vote of the Board of Directors of Filene's Basement Corp.
(the "Company") on October 3, 1996, the 1988 Filene's Basement Corp. Stock
Option Plan (the "Plan") has been amended as follows:
1. Paragraph 2 of Section 2 of the Plan is amended and restated in its
entirety to read as follows:
"The Board may, in its discretion, delegate its powers with respect to the
Plan to a Committee (the "Committee"), in which event all references to the
Board hereunder shall be deemed to refer to the Committee. The Committee
shall be composed solely of at least two individuals who are Non-Employee
Directors, as such term is defined in Rule 16b-3, and Outside Directors, as
such term is defined in the Internal Revenue Code of 1986, as amended. A
majority of the members of the Committee shall constitute a quorum, and all
determinations of the Committee shall be made by a majority of its members.
Any determination of the Committee under the Plan may be made without
notice or meeting of the Committee by a writing signed by a majority of the
Committee members."
<PAGE> 1
Exhibit 10.2
------------
FILENE'S BASEMENT CORP.
1990 EQUITY INCENTIVE PLAN
AS AMENDED OCTOBER 3, 1996
1. PURPOSE
- ----------
The purpose of this Equity Incentive Plan (the "Plan") is to advance the
interests of Filene's Basement Corp. (the "Company") by enhancing its ability to
(a) attract and retain employees who are in a position to make significant
contributions to the success of the Company and its subsidiaries, if any; (b)
reward employees for such contributions; and (c) encourage employees to take
into account the long-term interests of the Company through ownership of shares
of the Company's common stock ("Stock").
The Plan is intended to accomplish these goals by enabling the Company to
grant Awards to eligible employees. Awards may be in the form of Options (as
described in section 6.1), which may include Stock Appreciation Rights (as
described in Section 6.2), Restricted Stock or Unrestricted Stock Awards (as
described in Section 6.3), Deferred Stock Awards (as described in Section 6.4),
Performance Awards (as described in Section 6.5), or loans or supplemental
grants (as described in Section 6.6), or combinations thereof.
2. ADMINISTRATION
- -----------------
The Plan will be administered by the Board of Directors of the Company (the
"Board") or a committee (the "Committee") appointed by the Board. The Committee
shall consist of at least two directors of the Board. A majority of the members
of the Committee shall constitute a quorum, and all determinations of the
Committee shall be made by a majority of its members. Following registration of
the Stock under the Securities Exchange Act of 1934, the Committee shall consist
of the minimum number of directors required under rule 16b-3 under the Act, all
of whom shall be "disinterested persons" within the meaning of that Rule.
References herein to "Committee" shall include the Board where the Board is
administering the Plan.
The Committee will have authority, not inconsistent with the express
provisions of the Plan and in addition to other authority granted under the
Plan, to (a) grant Awards at such time or times as it may choose; (b) determine
the size of each Award, including the number of shares of Stock subject to the
Award; (c) determine the type or types of Awards; (d) determine the terms and
conditions of each Award; (e) waive compliance by a Participant with any
obligation to be performed by him or her under an Award and waive any term or
condition of an Award; (f) with the consent of the Participant, cancel an
existing Award in whole or in part; (g) grant the
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<PAGE> 2
Participant another Award to replace an Award or portion thereof that has been
canceled; (h) prescribe the form or forms of instruments that are required under
the Plan, including any written notices and elections required of Participants,
or are deemed appropriate by the Committee, and change such forms from time to
time; (i) adopt, amend and rescind rules and regulations for the administration
of the Plan; and (j) interpret the Plan and decide any questions and settle all
controversies and disputes that may arise in connection with the Plan. Such
determinations and actions of the Committee, and all other determinations and
actions of the Committee made or taken under authority granted by any provision
of the Plan, will be conclusive and will being all parties.
3. EFFECTIVE DATE AND TERM OF PLAN
- ----------------------------------
The Plan will become effective on the date on which it is approved by the
stockholders of the Company. Grants of Awards under the Plan may be made prior
to that date (but after Board adoption of the Plan), subject to stockholder
approval of the Plan.
No Award may be granted under the Plan after the tenth anniversary of the
date on which the Plan was adopted by the Board, but Awards previously granted
may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
- -----------------------------
Subject to adjustment as provided in Section 8.6 below, the aggregate
number of shares of Stock that may be delivered under the Plan will be 400,000.
If any Award requiring exercise by the Participant for delivery of Stock
terminates without having been exercised in full, or if any Award payable in
Stock or cash is satisfied in cash rather than Stock, the number of shares of
Stock as to which such Award was not exercised or for which cash was substituted
will be available for future grants.
Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock shall be delivered under the Plan.
5. ELIGIBILITY AND PARTICIPATION
- --------------------------------
Those eligible to receive Awards under the Plan will be persons in the
employ of the Company or any of its subsidiaries ("Employees") who, in the
opinion of the Committee, are in a position to make a significant contribution
to the success of the Company or its subsidiaries. For purposes of this Plan, a
"subsidiary" will be a corporation in which the Company owns,
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<PAGE> 3
directly or indirectly, stock possessing 50% or more of the total combined
voting power of all classes of stock. The Committee will from time to time
select the eligible Employees who are to be granted Awards ("Participants").
6. TYPES OF AWARDS
6.1 Options
-------
(a) NATURE OF OPTIONS. An option is an Award entitling the recipient on
exercise thereof to purchase Stock at a specified exercise price. Stock acquired
pursuant to exercise of an Option granted hereunder shall be subject to such
restrictions on transferability and such rights of repurchase by the Company, if
any, as the Committee shall determine.
Both "incentive stock options", as defined in section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), and Options that are not
incentive stock options, may be granted under the Plan. Any Option intended to
qualify as an incentive stock option will be referred to in the Plan as an
"ISO". Instruments evidencing ISO's must contain such provisions as are required
under applicable provisions of the Code. Once an ISO has been granted, no action
by the Committee that would cause the Option to lose its status under the Code
as an incentive stock option will be effective without the consent of the Option
holder.
(b) EXERCISE PRICE. The exercise price of an Option will be determined by
the Committee subject to the following:
(1) The exercise price of an Option which is not an ISO may be any amount
which is not less than 50% of the fair market value (as defined in Section 8.8)
per share of the Stock at the time the Option is granted.
(2) The exercise price of an ISO may not be less that 100% (110% in the
case of an ISO granted to a ten-percent shareholder) of the fair market value
per share of the stock at the time the Option is granted. A "ten-percent
shareholder" is any person who at the time of grant owns directly or indirectly,
or is deemed to own by reason of the attribution rules of section 424(d) of the
Code, stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of any of its subsidiaries.
(3) In no case may the exercise price paid for Stock which is part of an
original issue of authorized Stock be less than the par value per share of the
Stock.
(4) The Committee may reduce the exercise price of an Option at any time
after the time of grant, but the Option will be treated as a new Option granted
on the date of the reduction.
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<PAGE> 4
(c) DURATION OF OPTIONS. The latest date on which an Option may be
exercised will be the tenth anniversary (fifth anniversary, in the case of an
ISO granted to a ten-percent shareholder) of the date the Option was granted, or
such earlier date as may have been specified by the Committee at the time the
Option was granted.
(d) EXERCISE OF OPTIONS. An Option will become exercisable at such time or
times, and on such conditions, as the Committee may specify. The Committee may
at any time accelerate the time at which all or any part of the Option may be
exercised.
Any exercise of an Option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any documents
required by the Committee and (2) payment in full in accordance with paragraph
(e) below for the number of shares which the Option is exercised.
(e) PAYMENT FOR STOCK. Stock purchased on exercise of an Option must be
paid for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
instrument evidencing the Option (or, in the case of an Option which is not an
ISO, by the Committee at or after grant of the Option), (i) through the delivery
of shares of Stock which have been outstanding for at least six months (unless
the Committee expressly approves a shorter period) and which have a fair market
value on the last business day preceding the date of exercise equal to the
exercise price, or (ii) by delivery of a promissory note of the Option holder to
the Company, payable on such terms as are specified by the Committee (provided
that, if the Stock delivered upon exercise of the Option is an original issue of
authorized stock, at least so much of the exercise price as represents the par
value of such Stock must be paid in cash), or (iii) by delivery of an
unconditional and irrevocable undertaking by a broker to deliver promptly to the
Company sufficient funds to pay the exercise price, or (iv) by any combination
of the permissible forms of payment.
(f) DISCRETIONARY PAYMENTS. If the market price of shares of Stock subject
to an Option (other than an Option which is in tandem with a Stock Appreciation
Right as described in Section 6.2 below) exceeds the exercise price of the
Option at the time of its exercise, the Committee may cancel the Option and
cause the Company to pay in cash to the person exercising the Option an amount
equal to the difference between the fair market value of the Stock which would
have been purchased pursuant to the exercise (determined on the date the Option
is canceled) and the aggregate exercise price which would have been paid. The
Committee may exercise its discretion to take such action only if it has
received a written request from the person exercising the Option, but such a
request will not be binding on the Committee.
(g) SPECIAL RULE FOR ISO'S. Consistent with section 422 of the Code and any
associated regulations, notices or other official pronouncements of general
applicability, to the extent the
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<PAGE> 5
aggregate fair market value (determined as of the time the Option is granted) of
the shares of Stock with respect to which ISO's are exercisable for the first
time by the Optionee during any calendar year (under all plans of the Company
and its subsidiaries) exceeds $100,000, such Options shall not be treated as
ISO's. Nothing in this special rule shall be construed as limiting the
exercisability of any Option unless the Board provides for such a limitation at
the time of grant.
6.2 Stock Appreciation Rights.
-------------------------
(a) NATURE OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right
entitles the Participant to receive, with respect to each share of Stock as to
which the Right is exercised, the excess of (1) the share's fair market value on
the date of exercise, increased if the Committee so provides by the value of
dividends on the Stock, over (2) its fair market value on the date the right was
granted.
(b) GRANT OF STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be
granted in tandem with, or independently of, Options granted under the Plan. A
Stock Appreciation Right granted in tandem with an Option which is not an ISO
may be granted either at or after the time the Option is granted. A Stock
Appreciation Right granted in tandem with an ISO may be granted only at the time
the Option is granted.
(c) RULES APPLICABLE TO TANDEM AWARDS. When Stock Appreciation Rights are
granted in tandem with Options, the following rules will apply:
(1) The Stock Appreciation Right will be exercisable only at such time or
times as, and to the extent that, the related Option is exercisable and will be
exercisable in accordance with the procedure required for exercise of the
related Option.
(2) The Stock Appreciation Right will terminate and no longer be
exercisable upon the termination or exercise of the related Option, except that
a Stock Appreciation Right granted with respect to less than the full number of
shares covered by an Option will not be reduced until the number of shares as to
which the related Option has been exercised or has terminated exceeds the number
of shares not covered by the Stock Appreciation Right.
(3) The Option will terminate and no longer be exercisable upon the
exercise of the related Stock Appreciation Right.
(4) The Stock Appreciation Right will be transferable only with the related
Option.
(5) A Stock Appreciation Right granted in tandem with an ISO may be
exercised only when the market price of the Stock subject to the Option exceeds
the exercise price of such
-5-
<PAGE> 6
Option.
(d) EXERCISE OF INDEPENDENT STOCK APPRECIATION RIGHTS. A Stock Appreciation
Right not granted in tandem with an Option will become exercisable at such time
or times, and on such conditions, as the Committee may specify. The Committee
may at any time accelerate the time at which all or any part of the Right may be
exercised.
Any exercise of an independent Stock Appreciation Right must be in writing,
signed by the proper person and delivered or mailed to the Company, accompanied
by any other documents required by the Committee.
6.3 Restricted and Unrestricted Stock.
---------------------------------
(a) NATURE OF RESTRICTED STOCK AWARD. A Restricted Stock Award entitles the
recipient to acquire shares of Stock subject to the restrictions described in
paragraph (d) below ("Restricted Stock") for a price which may be either (i) any
amount which is not less than 50% of the fair market value of the Stock at the
time of purchase or (ii) the par value per share of the Stock.
(b) ACCEPTANCE OF AWARD. A Participant who is granted Restricted Stock
Award will have no rights with respect to such Award unless, within 60 days (or
such shorter period as the Committee may specify) following the date of the
Award, the Participant accepts the Award by written instrument delivered or
mailed to the Company accompanied by payment in full of the specified purchase
price, if any, of the shares covered by the Award. Payment may be by certified
or bank check or other instruments acceptable to the Committee.
(c) RIGHTS AS A STOCKHOLDER. A Participant who receives Restricted Stock
will have all the rights of a stockholder with respect to the Stock, including
voting and dividend rights, subject to the restrictions described in paragraph
(d) below and any other conditions imposed by the Committee at the time of
grant. Unless the Committee otherwise determines, certificates evidencing shares
of Restricted Stock will remain in the possession of the Company until such
shares are free of all restrictions under the Plan.
(d) RESTRICTIONS. Except as otherwise specifically provided by the Plan,
until these restrictions lapse, Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of and, if the
Participant ceases to be an Employee, must be resold to the Company for the
amount of cash paid for the Stock, or forfeited to the Company if no cash was
paid. The restrictions will lapse at such time or times, and on such conditions,
as the Committee may specify. The Committee may at any time accelerate the time
at which the restrictions on all or any part of the shares will lapse.
(e) OTHER AWARDS SETTLES WITH RESTRICTED STOCK. The Committee may, at the
time any
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<PAGE> 7
award described in this Section 6 is granted, provide that any or all of the
Stock delivered pursuant to the Award will be Restricted Stock.
(f) UNRESTRICTED STOCK. The Committee may, in its sole discretion, sell to
any Participant shares of stock free of restrictions under the Plan for a price
which may be either (i) any amount which is not less-than 50% of the fair market
value of the Stock at the time of purchase or (ii) the par value per share of
the Stock.
6.4 Deferred Stock.
--------------
(a) NATURE OF DEFERRED STOCK AWARD. A Deferred Stock Award entitles the
recipient to receive shares of Deferred Stock, which is Stock to be delivered in
the future. Delivery of all or any part of the Stock will take place at such
time or times, and on such conditions, as the Committee may specify.
(b) OTHER AWARDS SETTLED WITH DEFERRED STOCK. The Committee may, at the
time any Award described in this Section 6 is granted, provide that, at the time
Stock would otherwise be delivered pursuant to the Award, the Participant will
instead receive an instrument evidencing the right to future delivery of
Deferred Stock. Delivery of all or any of the Stick will take place at such time
or times, and on such conditions, as the Committee may specify.
6.5 Performance Awards: Performance Goals.
-------------------------------------
(a) NATURE OF PERFORMANCE AWARDS. A Performance Award entitles the
recipient to receive, without payment, an amount , in cash or stock or a
combination thereof (such form to be determined by the Committee), following the
attainment of Performance Goals. Performance Goals may be related to personal
performance, corporate performance, departmental performance or any other
category of performance deemed by the Committee to be important to the success
of the Company. The Committee will determine the Performance Goals, the period
or periods during which performance is to be measured and all other terms and
conditions applicable to the Award.
(b) OTHER AWARDS SUBJECT TO PERFORMANCE CONDITIONS. The Committee may, at
the time any Award described in this Section 6 is granted, impose the condition
(in addition to any conditions specified or authorized in this Section 6 or any
other provision of the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award.
6.6 Loans and Supplemental Grants.
------------------------------
The Company may make a loan to a Participant, either on or after the grant
to him or her
-7-
<PAGE> 8
of any Award. Such a loan may be made in connection with either the purchase of
Stock under the Award or the payment of any federal income tax in respect of
income recognized as a result of the Award. The Committee will have full
authority to decide whether to make such a loan and to determine the amount,
terms and conditions of the loan, including the interest rate (which may be
zero), whether the loan is to be secured or unsecured or with or without
recourse against the borrower, the terms on which the loan is to be repaid and
the conditions, if any, under which it may be forgiven. However, no loan may
have a term (including extensions) exceeding ten years in duration.
In conjunction with this Award, the Committee may at the time such Award is
made or at a later date provide for and make a cash payment to the Participant
not to exceed an amount equal to (a) the amount of any federal, state and local
income tax on ordinary income for which the Participant will be liable with
respect to the Award, plus (b) an additional amount on a grossed-up basis
necessary to make him or her whole after tax, discharging all the Participant's
income tax liabilities arising from all payments under this Section 6. Any cash
payments under this Section 6 will be made at the time the Participant incurs
federal income tax liability with respect to the Award.
7. EVENTS AFFECTING OUTSTANDING AWARDS
-----------------------------------
7.1 Retirement, Death and Disability.
---------------------------------
If a Participant ceases to be an Employee after attainment of age 65 (or
retires at such earlier age as may be approved by the Committee, in general or
on an individual basis), or ceases to be an Employee by reason of death or total
and permanent disability (as determined by the Committee, in its sole
discretion) ( the date on which the Participant ceases to be an Employee being
hereinafter referred to as the "Termination Date"), the following rules will
apply:
(a) Subject to paragraph (c) below, each Option and Stock Appreciation
Right held by the Participant on his or her Termination Date will immediately be
exercisable in full and will continue to be exercisable until the earlier of (1)
the third anniversary of the Termination Date, and (2) the date on which the
Award would be terminated had the Participant remained an Employee. If the
Participant has died, his or her Award may be exercised within such limits by
his or her executor or administrator, or by the person or persons to whom the
Award is transferred by will or the applicable laws of descent and distribution
(the Participant's "legal representative").
(b) Subject to paragraph (c) below, each share of Restricted Stock held by
the Participant on his or her Termination Date will immediately become free of
the restrictions.
-8-
<PAGE> 9
(c) If at the Participant's Termination Date exercise of an Option or Stock
Appreciation Right or lapse of restrictions on Restricted Stock was subject to
performance or other conditions (other than conditions relating to the mere
passage of time and continued employment) which had not been satisfied at such
time, the Committee may remove or modify such conditions or provide that the
Participant will receive the benefit of the Award if or when the conditions are
subsequently satisfied. If the Committee does not take such action, however,
such Award will terminate as to the Participant's Termination Date.
(d) Any payment or benefits under a Deferred Stock Award, Performance
Award, or supplemental grant to which the Participant has not become irrevocably
entitled will be forfeited and the Award canceled as of the Participant's
Termination date (but any loan will continue to be payable according to its
terms), unless otherwise provided in the instrument evidencing the Award or
otherwise agreed to by the Committee.
If a Participant dies after his or her Termination Date but while an Award
held by him or her is still exercisable, his or her legal representative will be
entitled to exercise such Award until the earlier of (1) the third anniversary
of his or her death and (2) the date on which the Award would have terminated
had the Participant remained an Employee.
7.2 Other Termination of Employment.
-------------------------------
If a Participant ceases to be an Employee for any reason other than those
specified in Section 7.1 above, the following rules will apply:
(a) All Options and Stock Appreciation Rights held by the Participant that
were not exercisable on the date his or her employment ended will terminate. Any
Awards that were so exercisable will continue to be exercisable until the
earlier of (1) the date which is three months after the date his or her
employment ended and (2) the date on which the Award would have terminated had
the participant remained an Employee.
(b) All Restricted Stock held by the Participant must be transferred to the
Company in accordance with Section 6.3 above.
(c) Any payment or benefit under a Deferred Stock Award, Performance Award,
or supplemental grant to which the Participant has not become irrevocably
entitled will be forfeited and the Award canceled, and any loan will become due
and payable, unless otherwise provided in the instrument evidencing the Award or
otherwise agreed to by the Committee.
For purposes of this Section 7.2, an Employee's employment will not be
considered to have ended (1) in the case of sick leave or other leave of absence
approved for purposes of the Plan by the Committee, so long as his or her right
to reemployment is guaranteed either by statute
-9-
<PAGE> 10
or by contract or under the policy pursuant to which the leave of absence was
granted or if the Committee otherwise so provides in writing, or (2) in the case
of a transfer of employment between affiliated companies, or to the employment
of a corporation (or a parent or subsidiary corporation of such corporation)
issuing or assuming an Award in a transaction to which section 424(a) of the
Code applies.
7.3 Change in Control
-----------------
Not withstanding any other provision of the Plan or of any Award, in the
event of a Change in Control as defined in Exhibit A the following will apply:
(a) Each outstanding Option and Stock Appreciation Right held by an
individual who has held such Option (or any other option under this Plan or any
other stock option plan of the Company) of Stock Appreciation Right for at least
one year will immediately become exercisable in full.
(b) Each outstanding share of Restricted Stock held by an individual who
has held such shares (or any other award of Restricted Stock hereunder) for at
least one year will immediately become free of all restrictions and conditions.
(c) Conditions on Deferred Stock Awards, Performance Awards, and
supplemental grants which relate to the mere passage of time and continued
employment will be removed if the holder of such Award or grant has held them
(or any comparable Award or grant) for at least one year. Performance or other
conditions (other than conditions relating to the mere passage of time and
continued employment) will continue to apply unless otherwise provided in the
instrument evidencing the Awards or in any other agreement between the
Participant and the Company or unless otherwise agreed to by the Committee.
(d) During the 60-day period following the Change in Control; a Participant
holding an Option or a Stock Appreciation Right will have the right (by giving
written notice to the Company) to surrender all or part of his or her Award to
the Company and receive a cash payment equal to (1) the excess of the value per
share of Stock (as defined below) on the date of exercise over the exercise
price per share, multiplied by (2) the number of shares subject to the
surrendered Award. Such right will not apply to any Option as to which the
Committee expressly excludes such rights at the date of grant. As used in this
paragraph with respect to an election by a Participant to receive cash in
respect of an Award which is not an ISO the term "value per share" will mean the
higher of (i) the highest reported sales price, regular way, of a share of Stock
on the principal stock exchange on which the Stock is traded during the 60-day
period ending on the date of the Change of Control and (ii) if the Change of
Control is the result of an acquisition of Stock by a "person" (as defined in
Exhibit A), the highest price per share of the Stock paid by such a person. In
the case of an election by a Participant to receive cash in respect of an ISO
will
-10-
<PAGE> 11
mean the fair market value (As defined in Section 8.8) unless otherwise agreed
to by the Participant.
8. GENERAL PROVISIONS
------------------
8.1 Documentation of Awards.
-----------------------
Awards will be evidenced by written instruments prescribed by the Company
from time to time. Such instruments may be in the form of agreements, to be
executed by both the Participant and the Company, or certificates, letters or
similar instruments, which need not be executed by the Participant but
acceptance of which will evidence agreement to the terms thereof.
8.2 Rights as a Stockholder: Dividend Equivalents.
---------------------------------------------
Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a stockholder; the Participant will obtain such
rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, upon actual receipt of the Stock. The Committee may,
however, on such conditions as it deems appropriate, provide that a participant
will receive a benefit in lieu of cash dividends that would have been payable on
any or all Stock subject to the Participant's Award had such Stock been
outstanding. Without limitation, the Committee may provide for payment to the
Participant of amounts representing such dividends, either currently or in the
future, or for the investment of such amounts on behalf of the Participant.
8.3 Conditions on Delivery of Stock.
-------------------------------
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove restriction from shares previously delivered under the
Plan (a) until all conditions of the Award have been satisfied or removed, (b)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, (c) if the outstanding stock is at
the time listed on any stock exchange, until the shares to be delivered have
been listed or authorized to be listed on such exchange upon official notice of
issuance, and (d) until all other legal matters in connection with the issuance
and delivery of such shares have been approved by the Company's counsel. If the
sale of Stock has not been registered under the Securities Exchange Act of 1933,
as amended, the Company may require, as a condition to exercise of the Award,
such representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such Act and may require that the certificate
evidencing the Stock bear an appropriate legend restricting transfer. If an
Award is exercised by the Participant's legal representative, the Company will
be under no obligation to deliver Stock pursuant to such exercise until the
Company is satisfied as to the authority of such representative.
-11-
<PAGE> 12
8.4 Tax Withholding.
---------------
The Company will withhold from any cash payment made pursuant to an Award
an amount sufficient to satisfy all federal, state and local withholding
requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regards to such requirements, prior to the delivery of any Stock.
If and to the extend that such withholding is required, the Committee may permit
the Participant or such other person to elect at such time and in such manner as
the Committee provides to have the Company hold back from the shares to be
delivered, or to deliver to the Company, Stock having a value calculated to
satisfy the withholding requirements.
If at the time an ISO is exercised the Committee determines that the
Company could be liable for withholding requirements with respect to a
disposition of the Stock received upon exercise, the Committee may require as a
condition of exercise that the person exercising the ISO agree (a) to inform the
Company promptly of any disposition (within the meaning of section 424(c) of the
Code) of Stock received upon exercise, and (b) to give such security as the
Committee deems adequate to meet the potential liability of the Company for the
withholding requirements and to augment such security from time to time in any
amount reasonably deemed necessary by the Committee to preserve the adequacy of
such security.
8.5 Nontransferability of Awards.
----------------------------
Except as otherwise specifically provided by the Committee, no Award (other
than an Award in the form of an outright transfer of cash or unrestricted stock)
may be transferred other than by will or by the laws of descent and
distribution, and during an Employee's lifetime an Award requiring exercise may
be exercised only by him or her (or in the event of incapacity, the person or
persons properly appointed to act on his or her behalf).
8.6 Adjustments in the Event of Certain Transactions.
------------------------------------------------
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization, or other
distribution with respect to common stockholders other than normal cash
dividends, the Committee will make any appropriate adjustments to the maximum
number of shares that may be delivered under the Plan under Section 4 above.
(b) In the event referred to in paragraph (a) the Committee will also make
any appropriate
-12-
<PAGE> 13
adjustments to the number and kind of shares of Stock or securities subject to
Awards then outstanding or subsequently granted, any exercise prices relating to
Awards and any other provisions of Awards affected by such change. The Committee
may also make such adjustments to take into account material changes in law or
in accounting practices or principles, mergers, consolidations, acquisitions,
dispositions or similar corporate transactions, or any other event, if it is
determined by the Committee that adjustments are appropriate to avoid distortion
in the operation of the Plan, but no such adjustments other than those required
by law may adversely affect the rights of any Participant (without the
Participant's consent) under any Award previously granted.
8.7 Employment Rights.
-----------------
Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued employment with the Company or any affiliated
company or affect in any way the right of the Company or any affiliated company
to terminate an employment relationship at any time. Except as specifically
provided by the Committee in any particular case, the loss of existing or
potential profits in Awards granted under the Plan will not constitute an
element of damages in the event of termination of an employment relationship,
even if the termination is in violation of an obligation of the Company to the
Employee.
8.8 Fair Market Value.
-----------------
For purposes of the Plan, fair market value of a share of Stock on any date
shall be the Closing Price of the Stock. The "Closing Price" of Stock on any
business day shall be the last sale price as reported on the principal market on
which the Stock is traded or, if no last sale is reported, then the mean between
the highest bid and the lowest asked prices on that day. If the Stock is not
publicly traded and in such other circumstances as the Committee deems
appropriate, the value of a share of Stock shall be determined by the Committee,
whose determination shall be final and binding.
8.9 Deferral of Payments.
--------------------
The Committee may agreed at any time, upon the request of the Participant,
to defer the date on which any payment under an Award will be made.
8.10 Past Services as Consideration.
------------------------------
Where a Participant purchases Stock under an Award for a price equal to the
par value of the Stock, the Committee may determine that such price has been
satisfied by past services rendered by the Participant.
-13-
<PAGE> 14
9. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
---------------------------------------------------------------
Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant Awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
Employees.
The Committee may at any time discontinue granting Awards under the Plan.
The Board may at any time or times amend the Plan or any outstanding Award for
any purpose which may at any time be permitted by law, or may at any time
terminate the Plan as to any further grants of Awards, provided that (except to
the extent expressly required or permitted by the Plan) no such amendment will,
without the approval of the stockholders of the Company, (a) increase the
maximum number of shares available under the Plan, (b) change the group of
persons eligible to receive Awards under the Plan, (c) extend the time within
which Awards may be granted, or (d) amend the provisions of this Section 9, and
no amendment or termination of the Plan may adversely affect the rights of any
Participant (without his or her consent) under any Award previously granted.
-14-
<PAGE> 15
EXHIBIT A
---------
Definition of Change of Control
-------------------------------
"Change of Control" shall mean the occurrence of any one of the following
events:
(a) any 'person' as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "1934 Act") (other than (i) the Company,
(ii) any subsidiary of the Company, (iii) any trustee or fiduciary holding
securities under an employee benefit plan of the Company or of any subsidiary of
the Company, or (iv) any company owned directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company), becomes the 'beneficial owner' (as defined
in Section 13(d) of the 1934 Act), together with all Affiliates and Associates
(as such terms are used in Rule 12b-2 of the General Rules and Regulations under
the 1934 Act) of such person, directly or indirectly, of securities of the
Company representing 35% or more of the combined voting power of the Company's
then outstanding securities;
(b) the stockholders of the Company approve a merger or consolidation of
the Company with any other company, other than (1) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity), in combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any
subsidiary of the Company, at least 65% of the combined voting securities of the
Company or such surviving entity outstanding immediately after such merger or
consolidation or (2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no 'person'
(with the exception given and the method of determining 'beneficial ownership'
used in clause (a) of this definition) acquires mare than 50% of the combined
voting power of the Company's then outstanding securities;
(c) during any period of two consecutive years (not including any period
prior to the execution of this Agreement), individuals who at the beginning of
such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (a), (b), or (d) of this definition)
whose election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved cease for any reason to constitute at least a majority
thereof; or
(d) the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of all
or substantially all
-15-
<PAGE> 16
of the Company's assets.
In no event shall a Change in Control be deemed to have occurred if prior
thereto the Board by unanimous vote of its members present and voting, including
at least two (2) such members who are employees of the Company (whose assent
shall not be unreasonably withheld), so determine; PROVIDED, that no such
determination shall be effective after an initial public offering of the
Company's Stock. No Change in Control shall be deemed to have occurred solely by
reason of an initial public offering of the Company's Stock.
-16-
<PAGE> 17
FILENE'S BASEMENT CORP.
AMENDMENT TO 1990 EQUITY INCENTIVE PLAN
Pursuant to a vote of the Board of Directors of Filene's Basement Corp.
(the "Company") on October 3, 1996, the Company's 1990 Equity Incentive Plan
(the "Plan") has been amended as follows:
1. Paragraph 1 of Section 2 of the Plan is amended and restated in its
entirety to read as follows:
"The Plan will be administered by the Board of Directors of the Company
(the "Board") or a Committee (the "Committee") appointed by the Board. The
Committee shall be composed solely of at least two individuals who are
Non-Employee Directors, as such term is defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Act"), and Outside
Directors, as such term is defined in the Internal Revenue Code of 1986, as
amended. A majority of the members of the Committee shall constitute a
quorum, and all determinations of the Committee shall be made by a majority
of its members.""
<PAGE> 1
Exhibit 10.3
------------
Exhibit A
- ---------
FILENE'S BASEMENT CORP.
1993 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE
-------
The purpose of this 1993 Stock Option Plan for Non-Employee Directors (the
"Plan") is to advance the interests of Filene's Basement Corp. (the
"Company") by enhancing the ability of the Company to attract and retain
non-employee directors who are in a position to make significant
contributions to the success of the Company and to reward directors for such
contributions through ownership of shares of the Company's common stock (the
"Stock").
2. ADMINISTRATION
--------------
The Plan shall be administered by a committee (the "Committee") of the Board
of Directors (the "Board") of the Company designated by the Board for that
purpose. Unless and until a Committee is appointed, the Plan shall be
administered by the entire Board, and references in the Plan to the
"Committee" shall be deemed references to the Board. The Committee shall have
authority, not inconsistent with the express provisions of the Plan, (a) to
issue options granted in accordance with the formula set forth in this Plan
to such directors as are eligible to receive options; (b) to prescribe the
form or forms of instruments evidencing options and any other instruments
required under the Plan and to change such forms from time to time; (c) to
adopt, amend and rescind rules and regulations for the administration of the
Plan; and (d) to interpret the Plan and to decide any questions and settle
all controversies and disputes that may arise in connection with the Plan.
Such determinations of the Committee shall be conclusive and shall bind all
parties. Transactions under this plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act"). To the extent any
provision of the Plan or action by the Committee fails to so comply, it shall
be deemed null and void, to the extent permitted by law and deemed advisable
by the Committee.
3. EFFECTIVE DATE AND TERM OF PLAN
-------------------------------
The Plan shall become effective on the date on which the Plan is approved by
the Board of Directors of the Company, subject to approval by the
shareholders of the Company. No option shall be granted under the Plan after
the completion of ten years from the date on which the Plan was adopted by
the Board, but options previously granted may extend beyond that date.
1
<PAGE> 2
4. SHARES SUBJECT TO THE PLAN
--------------------------
(a) NUMBER OF SHARES: Subject to adjustments as provided in Section 4(c), the
aggregate number of shares of Stock that may be delivered upon the exercise
of options granted under the Plan shall be 250,000. If any option granted
under the Plan terminates without having been exercised in full, the number
of shares of Stock as to which such option was not exercised shall be
available for future grants within the limits set forth in this Section 4(a).
(b) SHARES TO BE DELIVERED: Shares delivered under the Plan shall be
authorized but unissued stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in
treasury. No fractional shares of Stock shall be delivered under the Plan.
(c) CHANGES IN STOCK: In the event of a stock dividend, stock split or
combination of shares, recapitalization or other change in the Company's
capital stock, after the effective date of the Plan, the number and kind of
shares of stock or securities of the Company subject to options then
outstanding or subsequently granted under the Plan, the maximum number of
shares or securities that may be delivered under the Plan, the exercise
price, and other relevant provisions shall be appropriately adjusted by the
Committee, whose determination shall be binding on all persons.
5. ELIGIBILITY FOR OPTIONS
-----------------------
Directors eligible to receive options under the Plan ("Eligible Directors")
shall be those directors who are not employees of the Company or of any
subsidiary of the Company.
6. TERMS AND CONDITIONS OF OPTIONS
-------------------------------
(a) NUMBER OF OPTIONS: On the date of the annual meeting of stockholders at
which this plan is approved by stockholders each Eligible Director continuing
in office shall be awarded an option covering 12,500 shares of Stock;
thereafter, on the date of each subsequent annual meeting, each Eligible
Director who is elected to the Board for the first time at such meeting, or
who was elected to office by the Board since the last preceding meeting,
shall likewise be awarded an option covering 12,500 shares. In addition, each
Eligible Director who has been awarded an option pursuant to the preceding
sentence (an "initial grant") shall, on the date of the annual meeting of
stockholders which follows by five (5) years the date of such initial grant,
be awarded an option covering an additional 12,500 shares, provided such
Eligible Director is continuing in office and provided further that such
annual meeting occurs prior to
2
<PAGE> 3
expiration of the Plan pursuant to Section 3 above. If as of any date the
number of shares available for option awards under the Plan is insufficient
for the awards required to be made as of such date, the number of shares for
which options are awarded on such date shall be proportionately reduced.
(b) EXERCISE PRICE: The exercise price of each option shall be 100% of the
fair market value per share of the Stock at the time the option is granted.
In no event, however, shall the option price be less, in the case of an
original issue of authorized stock, than par value per share. For purposes of
this paragraph, (A) the fair market value of a share of Stock on any date
shall be the Closing Price on such day or, if there was no Closing Price on
such date, the latest day prior thereto on which there was a Closing Price;
and (B) the "Closing Price" of the Stock on any business day will be the last
sale price as reported on the principal market on which the Stock is traded
or, if no last sale is reported, then the mean between the highest bid and
lowest asked prices on that day.
(c) DURATION OF OPTIONS: The latest date on which an option may be exercised
(the "Final Exercise Date") shall be the date which is ten years from the
date the option was granted.
(d) Exercise of Options:
-------------------
1. Each option shall become exercisable on a cumulative basis as to
one-fifth of the shares subject to the option on each of the first,
second, third, fourth and fifth anniversaries of the date of grant.
2. Any exercise of an option shall be in writing signed by the proper
person and delivered or mailed to the Company, accompanied by (i) any
documentation required by the Committee and (ii) payment in full for
the number of shares for which the option is exercised.
3. The Committee shall have the right to require that the individual
exercising the option remit to the Company an amount sufficient to
satisfy any federal, state, or local withholding tax requirements (or
make other arrangements satisfactory to the Company with regard to
such taxes) prior to the delivery of any Stock pursuant to the
exercise of the option.
4. If an option is exercised by the executor or administrator of a
deceased director, or by the person or persons to whom the option has
been transferred by the director's will or the applicable laws of
descent and distribution, the Company shall be under no obligation to
deliver Stock pursuant to such exercise until the Company is satisfied
as to the authority of the person or persons exercising the option.
3
<PAGE> 4
(e) PAYMENT FOR AND DELIVERY OF STOCK: Stock purchased under the Plan shall
be paid for as follows: (i) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company, (ii) through the delivery of
shares of Stock (which, in the case of shares of Stock acquired from the
Company, have been outstanding for at least six months) having a fair market
value on the last business day preceding the date of exercise equal to the
purchase price, (iii) by delivery of an unconditional and irrevocable
undertaking by a broker to deliver promptly to the Company sufficient funds
to pay the exercise price or (iv) by any combination of the permissible forms
of payment, PROVIDED, that if the Stock delivered upon exercise of the option
is an original issue of authorized Stock, at least so much of the exercise
price as represents the par value of such Stock, shall be paid other than
with a personal check or promissory note of the option holder.
An option holder shall not have the rights of a shareholder with regard to
awards under the Plan except as to Stock actually received by him or her
under the Plan.
The Company shall not be obligated to deliver any shares of Stock (a) until,
in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, and (b) if the outstanding
Stock is at the time listed on any stock exchange, until the shares to be
delivered have been listed or authorized to be listed on such exchange upon
official notice of issuance, and (c) until all other legal matters in
connection with the issuance, and delivery of such shares have been approved
by the Company's counsel. If the sale of Stock has not been registered under
the Securities Act of 1933, as amended, the Company may require as a
condition to exercise of the option, such representations or agreements as
counsel for the Company may consider appropriate to avoid violation of such
Act and may require that the certificates evidencing such Stock bear an
appropriate legend restricting transfer.
(f) NONTRANSFERABILITY OF OPTIONS: No option may be transferred other than by
will or by the laws of descent and distribution, and during a director's
lifetime, an option may be exercised only by him or her.
(g) DEATH: Upon the death of any Eligible Director granted options under this
Plan, all options not then exercisable shall terminate. All options held by
the director that are exercisable immediately prior to death may be exercised
by his or her executor or administrator, or by the person or persons to whom
the option is transferred by will or the applicable laws of descent and
distribution, at any time within one year after the director's death
(subject, however, to the limitations of Section 6(c) regarding the maximum
exercise period for such option). After completion of that one-year period,
such options shall terminate to the extent not previously exercised.
(h) OTHER TERMINATION OF STATUS OF DIRECTOR: If a director's service with the
Company terminates for any reason other than death, all options held by the
director that
4
<PAGE> 5
are not then exercisable shall terminate. Options that are exercisable on that
date of termination shall continue to be exercisable for a period of three
months (subject to Section 6(c)). After completion of that three-month period,
such options shall terminate to the extent not previously exercised, expired or
terminated.
(i) MERGERS, ETC.: In the event of a consolidation or merger in which the
Company is not the surviving corporation or which results in the acquisition of
substantially all the Company's outstanding Stock by a single person or entity
or by a group of persons and/or entitles acting in concert, or in the event of a
sale or transfer of substantially all of the Company's assets or a dissolution,
or liquidation of the Company, all options hereunder will terminate, PROVIDED
that 20 days prior to the effective date of any such merger, consolidation sale,
dissolution, or liquidation of the Company, all options outstanding hereunder
that are not otherwise exercisable shall become immediately exercisable.
7. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT, TERMINATION, AND
-----------------------------------------------------------------
EFFECTIVENESS
-------------
Neither adoption of the plan nor the grant of options to a director shall affect
the company's right to grant to such director options that are not subject to
the Plan, to issue to such directors Stock as a bonus or otherwise, or to adopt
other plans or arrangements under which Stock may be issued to directors.
The Committee may, at any time, terminate the Plan as to any further grants of
options. The Committee may, at any time or times, amend the Plan for any purpose
which may at the time be permitted by law, PROVIDED that except to the extent
expressly required or permitted by the Plan, no such amendment will, without the
approval of the stockholders of the Company, effectuate a change for which
stockholder approval is required in order for the Plan to continue to qualify
under Rule 16b-3 promulgated under Section 16 of the Exchange Act.
5
<PAGE> 6
FILENE'S BASEMENT CORP.
AMENDMENT TO 1993 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
Pursuant to a vote of the Board of Directors of Filene's Basement Corp. (the
"Company") on October 3, 1996, the Company's 1993 Stock Option Plan for
Non-Employee Directors (the "Plan") has been amended as follows:
1. The first sentence of Section 2 "Administration" of the Plan is amended and
restated in its entirety to read as follows:
"The Plan shall be administered by a committee (the "Committee") of the Board
of Directors (the "Board") designated by the Board for that purpose, composed
solely of at least two individuals who are Non-Employee Directors, as such
term is defined in Rule 16b-3 under the Securities Exchange Act of 1934, as
amended, and Outside Directors, as such term is defined in the Internal
Revenue Code of 1986, as amended."
2. Section 6(a) of the Plan is amended and restated in its entirety to read as
follows:
"(a) NUMBER OF OPTIONS: On the date of the annual meeting of stockholders at
which this plan is approved by stockholders each Eligible Director continuing
in office shall be awarded an option covering 12,500 shares of Stock;
thereafter upon his or her initial election or appointment to the Board, such
Eligible Director shall likewise be awarded an option covering 12,500 shares.
In addition, each Eligible Director who has been awarded an option pursuant
to the preceding sentence (an "initial grant") shall, on the date of the
annual meeting of stockholders which follows by five (5) years the date of
such initial grant, be awarded an option covering an additional 12,500
shares, provided such Eligible Director is continuing in office and provided
further that such annual meeting occurs prior to expiration of the Plan
pursuant to Section 3 above. If as of any date the number of shares available
for option awards under the Plan is insufficient for the awards required to
be made as of such date, the number of shares for which options are awarded
on such date shall be proportionately reduced."
3. The first sentence of Section 6(f) of the Plan is amended and restated in its
entirety to read as follows:
"Except as otherwise provided in the option agreement evidencing such option
grant, no option may be transferred other than by will or by the laws of
descent and distribution, and during a director's lifetime, an option may be
exercised only by him or her."
1
<PAGE> 1
EXHIBIT 11
FILENE'S BASEMENT CORP.
<TABLE>
Computation of Net Income per Common Share
(dollars in thousands)
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
Thirty-Nine Weeks Thirty-Nine Weeks Quarter Quarter
Ended Ended Ended Ended
Novemebr 2, 1996 October 28, 1995 Novemebr 2, 1996 October 28, 1995
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
The computation of net in-
come available and adjusted
shares outstanding follows:
Net income (loss) as
reported ..................... $ 5,292 $ (673) $ 3,513 $ 1,605
=========== =========== =========== ===========
Net income (loss) used for
primary and fully diluted
computations ...................... $ 5,292 $ (673) $ 3,513 $ 1,605
=========== =========== =========== ===========
Weighted average number
of common shares
outstanding ....................... 20,530,131 20,374,477 20,576,153 20,452,459
Add (where dilutive):
Assumed exercise of those
options that are common
stock equivalents net of
treasury shares deemed to
have been repurchased at
average market price for
the period ................... 205,690 -- 453,750 680,046
----------- ----------- ----------- -----------
Weighted average number of
common and common equivalent
shares outstanding used for
primary computations .............. 20,735,821 20,374,477 21,029,903 21,132,505
=========== =========== =========== ===========
Add: Additional dilution assuming
exercise of options net of
treasury shares deemed to have
been repurchased at the end of
the period market price -- -- -- --
Weighted average number of
common and common equivalent
shares outstanding used for fully
diluted computations .............. 20,735,821 20,374,477 21,029,903 21,132,505
=========== =========== =========== ===========
</TABLE>
Page 14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> FEB-01-1997 FEB-01-1997
<PERIOD-END> NOV-02-1996 NOV-02-1996
<CASH> 296 296
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 112,512 112,512
<CURRENT-ASSETS> 127,045 127,045
<PP&E> 127,032 127,032
<DEPRECIATION> 65,249 65,249
<TOTAL-ASSETS> 215,415 215,415
<CURRENT-LIABILITIES> 109,182 109,182
<BONDS> 10,000 10,000
0 0
0 0
<COMMON> 206 206
<OTHER-SE> 86,034 86,034
<TOTAL-LIABILITY-AND-EQUITY> 215,415 215,415
<SALES> 147,203 391,336
<TOTAL-REVENUES> 147,203 391,336
<CGS> 109,051 293,345
<TOTAL-COSTS> 109,051 293,345
<OTHER-EXPENSES> 31,477 86,269
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,008 3,186
<INCOME-PRETAX> 5,667 8,536
<INCOME-TAX> 2,154 3,244
<INCOME-CONTINUING> 3,513 5,292
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,513 5,292
<EPS-PRIMARY> 0.17 0.26
<EPS-DILUTED> 0.17 0.26
</TABLE>
