SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 10, 1998
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 0-549
SCHULTZ SAV-O STORES, INC.
(Exact Name of Registrant as Specified in its Charter)
WISCONSIN 39-0600405
(State or other jurisdiction I.R.S. Employer
of incorporation of organization) Identification No.)
2215 UNION AVENUE 53081
SHEBOYGAN, WISCONSIN (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number
including area code 920-457-4433
---------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark |X| 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 (of for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark |X| whether the registrant has filed all
reports required to be filed by Section 12, 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.
As of November 17, 1998, 6,577,779 shares of Common Stock, $0.05 par
value, were issued and outstanding.
<PAGE>
SCHULTZ SAV-O STORES, INC.
FORM 10-Q INDEX
PAGE
NUMBER
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
Unaudited Consolidated Statements of Earnings 4
Unaudited Consolidated Statements of Cash Flows 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 12
2
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
SCHULTZ SAV-O STORES, INC.
CONSOLIDATED BALANCE SHEETS
Unaudited Audited
October 10, January 3,
Assets 1998 1998
------ -------------- ------------
Current assets:
Cash and equivalents $ 30,828,000 $ 23,124,000
Receivables 9,309,000 9,718,000
Inventories 20,996,000 21,741,000
Other current assets 2,267,000 3,635,000
Deferred income taxes 4,496,000 4,131,000
------------- -------------
Total current assets 67,896,000 62,349,000
Noncurrent receivable under
capital subleases 6,885,000 7,270,000
Property under capital leases, net 2,565,000 2,786,000
Other noncurrent assets 3,554,000 3,782,000
Property and equipment, net 21,682,000 22,679,000
------------- -------------
Total Assets $ 102,582,000 $ 98,866,000
============= =============
Liabilities and Shareholders' Investment
----------------------------------------
Current liabilities:
Accounts payable $ 23,919,000 $ 21,305,000
Accrued salaries and benefits 5,161,000 4,395,000
Accrued insurance 3,630,000 3,095,000
Retail repositioning reserve 710,000 610,000
Other accrued liabilities 2,902,000 2,861,000
Current obligations under capital leases 731,000 665,000
Current maturities of long-term debt 105,000 201,000
------------- -------------
Total current liabilities 37,158,000 33,132,000
Long-term obligations under capital leases 10,600,000 11,177,000
Long-term debt 3,078,000 3,165,000
Deferred income taxes 880,000 1,008,000
Shareholders' investment:
Common stock 438,000 438,000
Additional paid-in capital 14,164,000 13,940,000
Retained earnings 55,530,000 51,299,000
Treasury stock (19,266,000) (15,293,000)
------------- -------------
Total shareholders' investment 50,866,000 50,384,000
------------- -------------
Total Liabilities and Shareholders' Investment $ 102,582,000 $ 98,866,000
============= =============
3
<PAGE>
<TABLE>
SCHULTZ SAV-O STORES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
<CAPTION>
For the 12-weeks ended For the 40-weeks ended
October 10, October 4, October 10, October 4,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales $ 112,550,000 $ 105,826,000 $ 368,760,000 $ 354,496,000
Costs and expenses:
Cost of products sold 94,459,000 89,409,000 309,156,000 298,805,000
Operating and administrative
expenses 15,019,000 13,763,000 50,564,000 47,627,000
---------------- ---------------- ---------------- ---------------
Operating income 3,072,000 2,654,000 9,040,000 8,064,000
Interest income 366,000 362,000 956,000 902,000
Interest expense (181,000) (195,000) (634,000) (653,000)
---------------- ---------------- ---------------- ----------------
Earnings before income taxes 3,257,000 2,821,000 9,362,000 8,313,000
Provision for income taxes 1,263,000 1,087,000 3,632,000 3,201,000
---------------- ---------------- ---------------- ---------------
Net earnings $ 1,994,000 $ 1,734,000 $ 5,730,000 $ 5,112,000
================ ================ ================ ===============
Basic earnings per share $ 0.29 $ 0.25 $ 0.84 $ 0.74
================ ================ ================ ===============
Diluted earnings per share $ 0.29 $ 0.25 $ 0.82 $ 0.73
================ ================ ================ ===============
Cash dividends paid per share $ 0.08 $ 0.07 $ 0.22 $ 0.20
================ ================ ================ ===============
Average common and equivalent shares 6,937,000 7,026,000 6,978,000 7,042,000
================ ================ ================ ===============
</TABLE>
4
<PAGE>
SCHULTZ SAV-O STORES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the 40-weeks ended
October 10, October 4,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 5,730,000 $5,112,000
Adjustments to reconcile net
earnings to net cash flows
from operating activities
Depreciation and amortization 3,900,000 3,326,000
Changes in assets and liabilities
Receivables 409,000 (6,452,000)
Inventories 745,000 2,901,000
Other current assets 1,290,000 (2,304,000)
Accounts payable 2,614,000 4,406,000
Accrued liabilities 1,173,000 (373,000)
------------ -----------
Net cash flows from operating activities 15,861,000 6,616,000
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment (2,431,000) (1,325,000)
Receipt of principal amounts under capital
sublease agreements 341,000 388,000
Proceeds from asset sales 99,000 120,000
------------ ----------
Net cash flows from investing activities (1,991,000) (817,000)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment for acquisition of treasury stock (4,585,000) (3,727,000)
Payment of cash dividends (1,499,000) (1,401,000)
Proceeds from exercise of stock options 612,000 817,000
Principal payments under capital lease
obligations (511,000) (540,000)
Principal payments on long-term debt (183,000) (274,000)
------------ -----------
Net cash flows from financing activities (6,166,000) (5,125,000)
----------- -----------
CASH AND EQUIVALENTS:
Net increase 7,704,000 674,000
Balance, beginning of period 23,124,000 27,763,000
-------------- -----------
Balance, end of period $ 30,828,000 $ 28,437,000
============== ============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 640,000 $ 686,000
Income taxes paid 4,147,000 4,582,000
5
<PAGE>
SCHULTZ SAV-O STORES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The financial statements included herein have been prepared by the Company,
without audit. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted, although the Company believes that
the disclosures are adequate to make the information presented not misleading.
The interim financial statements furnished with this report reflect all
adjustments of a normal recurring nature, which are, in the opinion of
management, necessary for a fair statement of the results for the interim
periods presented. It is suggested that these financial statements be read in
conjunction with the audited financial statements and the notes thereto included
in the Company's 1997 annual report to shareholders, as incorporated by
reference in the Company's Form 10-K for the fiscal year ended January 3, 1998.
(2) Interest Expense
For the 12-weeks ended For the 40-weeks ended
October 10, October 4, October 10, October 4,
1998 1997 1998 1997
-------- -------- -------- --------
Imputed - capital leases $109,000 $115,000 $363,000 $383,000
Long-term debt 72,000 80,000 245,000 270,000
Other - - 26,000 -
-------- -------- -------- --------
Interest expense $181,000 $195,000 $634,000 $653,000
======== ======== ======== ========
(3) Other Current Assets
October 10, January 3,
1998 1998
Prepaid expenses $ 1,174,000 $1,209,000
Receivable under capital
subleases 487,000 443,000
Property held for resale 313,000 1,663,000
Other assets 293,000 320,000
----------- ----------
Other current assets $ 2,267,000 $3,635,000
=========== ==========
6
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Selected costs and results as a percent of net sales:
- --------------------------------------------------------------------------------
For the 12-weeks ended For the 40-weeks ended
October 10, October 4, October 10, October 4,
1998 1997 1998 1997
------- -------- ------- ------
Cost of products sold 83.9% 84.5% 83.8% 84.3%
Operating and administrative
expenses 13.3 13.0 13.7 13.4
Earnings before income taxes 2.9 2.7 2.5 2.3
Net earnings 1.8 1.6 1.6 1.4
- --------------------------------------------------------------------------------
Net Sales
Net sales for the 12- and 40-week periods ended October 10, 1998 were
$112,550,000 and $368,760,000, respectively, compared to $105,826,000 and
$354,496,000 for the same periods ended October 4, 1997, respectively. The
increases of $6,724,000 and $14,264,000, or 6.4% and 4.0%, were due primarily to
increased wholesale business volume resulting from the Company's continued
additions and enhancements to its "virtual chain" of franchised and corporate
retail supermarkets. Since October 4, 1997, the Company has completed five
franchise facility projects. These franchise projects include one new market
store, one replacement store, and three additions to existing stores.
Collectively, these completed projects, located in Poynette, Lomira, Waterloo,
Howards Grove, and Waupaca, Wisconsin added approximately 60,000 square feet of
store selling space. On an aggregate basis, these stores contributed in excess
of $3,500,000 in additional sales for the first 40 weeks of 1998 compared to the
same period in 1997. Additionally, during the third quarter of 1998, the Company
completed its renovation of the second supermarket it purchased from Nash Finch
last October. With the opening of this replacement supermarket, the Company
closed its older, noncompetitive corporate store in Appleton, Wisconsin.
Also in conjunction with its "virtual chain" marketing concept, the Company
continues to provide a number of ongoing customer savings, incentives,
promotions and rewards to its top shoppers as part of its Piggly Wiggly
Preferred Club(R) electronic card marketing program. These card marketing
promotions and rewards continue to positively impact net sales.
In addition to improved wholesale business volume, corporate retail sales also
continued to increase despite the absence of food price inflation. Corporate
stores open more than one year continued to show improved sales volume compared
to the prior year. Retail sales also increased due to additional and more
competitive corporate stores in Appleton and Oshkosh, Wisconsin since October 4,
1997. As of October 10, 1998, the Company had 69 franchised and 18 corporate
supermarkets compared to 69 franchised and 16 corporate supermarkets at October
4, 1997.
The Company currently expects that its positive trends in sales throughout the
first three quarters will continue into the fourth quarter; however, the Company
expects the level of its fourth quarter sales will be difficult to match those
of last year's fourth quarter due principally to the following: (i) the fourth
quarter of 1998 will be a 12-week quarter compared to 13 weeks for the fourth
quarter of 1997; (ii) in 1998, some of the Company's competitors opened a number
of large supermarkets competing directly with some of the Company's stores in
certain market areas; (iii) during the fourth quarter of 1997, the Company had
two corporate store grand openings in the greater Appleton, Wisconsin market
resulting in higher sales volume; and (iv) the Company closed down one
franchised unit in early November 1998 as part of a two-store consolidation.
7
<PAGE>
The Company intends to attempt to continue its positive revenue trends by
pursuing expansion or renovation projects at six franchise retail operations.
These projects are in various phases of planning or construction, with
completions scheduled throughout the first six months of 1999. They involve one
new market franchise store in Cottage Grove, Wisconsin, one replacement
franchise store in Fort Atkinson, Wisconsin, and four franchise expansion stores
in Beaver Dam, Kiel, Crivitz, and Randolph, Wisconsin. On an aggregate basis,
these four expansion projects are expected to increase selling square footage by
approximately 40% at these stores.
Cost of Products Sold
Cost of products sold, as a percent of sales, decreased to 83.9% and 83.8% for
the 12-and 40-week periods ended October 10, 1998, compared to the 84.5% and
84.3%, respectively, for the same periods in 1997. This decrease was a direct
result of an increase in higher margin retail sales from additional corporate
stores in Appleton and Oshkosh, Wisconsin opened since October 4, 1997. With
these additional corporate stores, the Company's percentage of higher margin
retail sales volume continued to increase relative to the lower margin wholesale
sales. The Company expects this trend to continue through the end of 1998.
Operating and Administrative Expenses
Operating and administrative expenses, as a percent of sales, increased to 13.3%
and 13.7% for the 12- and 40-week periods ended October 10, 1998, compared to
13.0% and 13.4% for the same periods in 1997. Total operating and administrative
expenses increased primarily because of increased wages, benefits and other
general operating costs for the new corporate supermarkets in Appleton and
Oshkosh, Wisconsin. With these additional stores, the Company expects this trend
to continue through the end of 1998.
Due to the ongoing highly competitive nature of the industry, certain Company
franchise operators and corporate retail supermarkets continue to experience
operational difficulties in their respective marketplaces. The Company continues
to evaluate various business alternatives relating to its underperforming
operations. The Company's business alternatives include, but are not limited to,
the sale and subsequent conversion of corporate stores to franchise units,
closing stores, or implementing other operational changes. Similar to certain
prior years, implementation of these alternatives may result in the Company
incurring certain repositioning or restructuring charges for replaced, closed or
sold stores. These actions can negatively impact net earnings in the short-term,
but the Company believes that such actions will help improve the Company's
long-term profitability.
Net Earnings
Net earnings for the 12- and 40-week periods ended October 10, 1998, compared to
the same periods in 1997, increased 15.0% and 12.1% to $1,994,000 and
$5,730,000, respectively. Diluted earnings per share for the 12-and 40-week
periods ended October 10, 1998 increased 16.0% to $0.29 compared with $0.25 in
1997, and 12.3% to $0.82 compared with $0.73 in 1997. The Company's number of
consecutive quarters showing increases in net earnings over the prior year's
quarter has been extended to 23. With continuing improvements in sales and
productivity, the Company's net earnings-to-sales ratio for the 12- and 40-week
periods ended October 10, 1998 improved to 1.8% and 1.6%, respectively, compared
to 1.6% and 1.4% for the same periods in 1997.
8
<PAGE>
Liquidity and Capital Resources
The Company's favorable 1998 year to date operating results continued to enhance
its strong financial position. As has been the case in recent years, the primary
source of liquidity for the 40-week period ended October 10, 1998 was cash
generated from operating activities. Cash provided by operating activities was
$15,861,000, an increase of $9,245,000 over the prior year 40-week period ended
October 4, 1997 cash inflow of $6,616,000. The increase in cash flows from
operations was due primarily to the timing of cash receipts, cash payments and
changes in short-term financing to its wholesale customers for the purchase of
new equipment.
Net cash outflows from investing activities for the 40-week period ended October
10, 1998 totaled $1,991,000, compared to $817,000 during the same period in
1997. The change was due in large part to an increase in capital expenditures
compared to the same period in 1997. A significant portion of the current year
capital expenditure related to corporate business system technology improvements
and equipment purchases for the Appleton store that was renovated and opened in
August 1998. The Company has a 1998 capital budget of $4,300,000, of which
approximately $1,900,000 remains available for future expenditures. The Company
anticipates financing these needs from internally generated capital.
Net cash outflows from financing activities for the 40-week period ended October
10, 1998 was $6,166,000, compared to $5,125,000 during the same period in 1997.
The additional cash outflows was due principally to increased common stock
repurchases during the 40-weeks ended October 10, 1998 compared to the same
period in 1997. On September 22, 1998, the Company completed its existing
$5,000,000 stock repurchase program that commenced in January 1997 after having
repurchased 235,000 shares of its common stock at $14.50 per share. As a result
of the completion of its existing stock repurchase plan, the Company's Board of
Directors has instituted a new stock repurchase program which will allow the
Company to repurchase up to an additional $5,000,000 of its common stock from
time to time in the open market, pursuant to privately negotiated transactions,
or otherwise, not including the repurchase of common stock issuable upon the
exercise of stock options granted under the Company's stock option plans. This
was the fourth announced stock repurchase program over the past seven years that
have been fully completed by the Company. Since the first stock repurchase
program commenced in January 1992, the Company has repurchased over 2,200,000
shares of its common stock.
The Company maintains a revolving credit facility agreement with two lending
institutions to provide up to $16 million of borrowings at rates not to exceed
the bank's prime rates. At October 10, 1998 and October 4, 1997, the Company had
no borrowings outstanding under these agreements.
The Company's Board of Directors declared a fourth quarter cash dividend on its
common stock of $0.08 per share. The dividend will be payable on November 27,
1998 to shareholders of record as of November 13, 1998.
In summary, cash and equivalents increased $7,704,000 during the first 40 weeks
of 1998, compared to an increase of $674,000 during the same period in 1997. Due
to the Company's significant cash and other liquid assets, its consistent
ability to generate cash flows from operations and availability of external
financing, the Company foresees no difficulty in providing financing necessary
to fund its capital commitments and working capital needs for the foreseeable
future.
9
<PAGE>
Year 2000 Issues
The Company is dependent on computer hardware, software and other business
systems ("IT systems") and non-information technology systems such as
communication equipment, tractors and trailers, refrigeration controllers,
scales, and other equipment containing embedded microprocessor technology
("non-IT systems"). The Company uses these IT and non-IT systems in several
critical operating areas including product procurement and merchandising, retail
store and warehouse distribution operations, inventory order entry and labor
management, and accounting, administrative and maintenance systems.
In 1997, the Company began evaluating its IT and non-IT systems in order to
identify and adjust date sensitive systems for year 2000 compliance. As part of
this undertaking, the Company established a team, headed by the Company's Vice
President of Business Systems Support Group. The team is staffed primarily with
internal professionals within the business systems group and some outside
consultants on an as-needed basis. The team leader reports periodically on the
year 2000 status to the Executive Committee and to the Company's Board of
Directors.
The team developed a plan to assess its IT and non-IT systems for year 2000
compliance requirements. The plan consisted of three main project phases: (1) to
make an inventory listing of all IT and non-IT systems that may be subject to
the year 2000 issue along with an assessment as to the scope of the issue as it
related to these systems; (2) to remediate any and all year 2000 compliance
problems; and (3) to test, validate and implement systems subsequent to
remediation.
At the end of the first quarter of 1998, the Company had substantially completed
the first phase of the project. An inventory list of all systems have been
identified and documented. Nearly half of all IT and non-IT systems previously
identified have also been remediated at this time. The Company believes it will
complete all remaining remediation efforts for existing systems over the next
six months. Insofar as testing, validation and implementation are concerned, the
Company has tested some of the core IT systems and has determined that they are
projected to be year 2000 compliant by mid-1999. With regard to non-IT systems,
the Company also expects these systems to be year 2000 compliant in 1999. The
Company estimates it will cost $500,000 to become year 2000 compliant, all of
which will be charged to operations.
As part of the year 2000 project, the Company has identified business
relationships with third parties, including suppliers, vendors, financial
institutions and other service providers, which the Company believes is critical
to its business operations. In connection with this, the Company has been
communicating with these third parties through correspondence and/or interviews
to ascertain the extent to which they are addressing their year 2000 compliance
issues. The Company will continue to assess and monitor the progress of these
third parties in resolving year 2000 issues. The Company undertakes a certain
amount of risk by relying on the third parties' own year 2000 assessment.
Because of this, the Company believes that a key vendor's failure to resolve its
year 2000 issues is the most likely worst case scenario for the Company. Such
failure could result in the Company not being able to procure products from a
key vendor on a timely basis. The Company does not expect this most likely worst
case scenario to have a material adverse impact on its core retail and wholesale
businesses due principally to the Company's network of suppliers and vendors.
The Company will, however, develop contingency plans to work with these key
third parties in 1999.
The projections and project completion dates cited above are based on
management's best estimates and may be updated from time to time as additional
information becomes available.
10
<PAGE>
Special Note Regarding Forward-Looking Statements
Certain matters discussed in this Form 10-Q are "forward-looking statements"
intended to qualify for the safe harbors from liability established by the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements can generally be identified as such because the context of the
statement will include words such as the Company "believes," "anticipates,"
"expects" or words of similar import. Similarly, statements that describe the
Company's future plans, objectives, strategies or goals are also forward-looking
statements. Such forward-looking statements are subject to certain risks and
uncertainties including, but not limited, to the following: (i) presence of
intense competitive market activity in the Company's market areas; (ii) ability
to identify and develop new market locations for expansion purposes; (iii)
continuing ability to obtain reasonable vendor marketing funds for promotional
purposes; (iv) ongoing advancing information technology requirements; (v)
ongoing absence of food price inflation; (vi) the Company's ability to continue
to recruit, train and retain quality franchise and corporate retail store
operators; and (vii) the potential recognition of repositioning charges
resulting from potential closures, conversions and consolidations of retail
stores due principally to the competitive nature of the industry and to the
quality of the Company's retail store operators. Shareholders, potential
investors and other readers are urged to consider these factors carefully in
evaluating the forward-looking statements and are cautioned not to place undue
reliance on such forward-looking statements. The forward-looking statements made
herein are only made as of the date of this report and the Company undertakes no
obligation to publicly update such forward-looking statements to reflect
subsequent events or circumstances.
11
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.16 1990 Stock Option Plan, as amended as of October 15, 1998.
Exhibit 10.17 1995 Equity Incentive Plan, as amended as of October 15,
1998.
Exhibit 10.18 Form of Nonqualified Stock Option Agreement under 1995
Equity Incentive Plan.
Exhibit 10.19 Schultz Sav-O Stores, Inc. Officer Annual Incentive Plan,
as amended as of October 15, 1998.
Exhibit 10.20 Form of Global Amendment to Nonqualified Stock Option
Agreement(s) to be entered into with existing option
grantees. Such amendments are materially different only as
to the name of the grantee and the date of execution.
Exhibit 27 Financial Data Schedule.
(b) No reports of Form 8-K were filed by the Company during the first 40 weeks
of fiscal 1998.
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.
SCHULTZ SAV-O STORES, INC.
--------------------------
(Registrant)
November 20, 1998 /S/Armand C. Go
- ------------------------------- -----------------------------
(Date) Armand C. Go, Treasurer and
Chief Accounting Officer
13
ADOPTED March 20, 1990
As Amended Through October 15, 1998
SCHULTZ SAV-O STORES, INC.
1990 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Schultz Sav-O Stores, Inc. 1990 Stock
Option Plan (the "Plan") is to promote the best interests of Schultz Sav-O
Stores, Inc. (the "Company") and its shareholders by providing key employees of
the Company and its Subsidiaries (as defined in Section 3) with an opportunity
to acquire a, or increase their, proprietary interest in the Company and thereby
develop a stronger incentive to put forth maximum effort for the continued
success and growth of the Company. In addition, the opportunity to acquire a
proprietary interest in the Company will aid in attracting and retaining key
personnel of outstanding ability. It is intended that certain of the options
granted pursuant to the Plan will constitute incentive stock options within the
meaning of Section 422A of the Internal Revenue Code ("Incentive Stock Options")
and the remainder of the options granted hereunder will constitute nonqualified
stock options ("Nonqualified Options"), as determined by the Committee (as
defined in Section 2).
2. ADMINISTRATION.
(a) The Plan shall be administered by the Compensation and Stock Option
Committee (the "Committee") of the Board of Directors of the Company (the
"Board"). The Committee shall consist of not less than three members of the
Board who shall qualify as "disinterested administrators" and/or "disinterested
persons" as either or both of such terms are defined in the then existing rules
and/or regulations promulgated under Section 16 ("Section 16 Rules") of the
Securities Exchange Act of 1934, as amended ("Exchange Act"). A majority of the
members of the Committee shall constitute a quorum. All determinations of the
Committee shall be made by at least a majority of its members. Any decision or
determination reduced to writing and signed by all of the members of the
Committee shall be fully as effective as if it had been made by a unanimous vote
at a meeting duly called and held.
(b) In accordance with the provisions of the Plan, the Committee shall
determine: (i) the key employees to whom options shall be granted hereunder;
(ii) the number of shares of Stock (as defined in Section 4) to be subject to
each option; (iii) the time at which the option is to be granted; (iv) the
option period; (v) the option price; (vi) the manner in which options become
exercisable and when such options terminate; (vii) whether the options shall be
Incentive Stock Options or Nonqualified Options; (viii) whether to grant tax
offset bonuses in connection with Nonqualified Options; and (ix) such other
provisions of the option granted as the Committee may deem necessary or
desirable.
(c) The Committee has authority to adopt such rules and regulations for
carrying out the Plan as it may deem proper and in the best interests of the
Company. The Committee shall have complete authority to resolve all questions
regarding interpretation, administration and application of this Plan, any
related option agreements or instruments and
-1-
<PAGE>
the value of shares of Stock subject to options for any purpose hereunder, and
any such determination shall be final.
3. ELIGIBILITY. Any key employee ("Employee") of the Company or its
future subsidiaries, as defined in Section 425(f) of the Internal Revenue Code
("Subsidiaries"), including any such Employee who is also an officer or director
of the Company or its Subsidiaries, whose judgment, initiative and efforts, in
the opinion of the Committee, contribute materially to the successful
performance of the Company or its Subsidiaries, shall be eligible to receive
options under the Plan. No option may be granted under the Plan to any director
of the Company who is not also an Employee or to any current or former member of
the Committee if such eligibility would then violate the disinterested
administration requirements of the Section 16 Rules.
4. SHARES SUBJECT TO THE PLAN. The shares to be subject to options
granted under the Plan shall be shares of the Company's Common Stock, $.05
current par value per share ("Stock"), and may be either authorized and unissued
or treasury shares. The total number of shares of Stock for which options may be
granted and which may be purchased pursuant to the exercise of options granted
under the Plan shall not exceed an aggregate of 450,000 shares, subject to
adjustment as provided in Section 10; provided, however, that in the event an
option granted under the Plan expires, is cancelled or is terminated unexercised
as to any shares of Stock covered thereby, such shares shall thereafter become
available for the granting of additional options under the Plan.
5. OPTION PRICE. The option price per share of Stock shall be fixed by
the Committee, but shall not be less than 100% of the fair market value of the
Stock on the date the option is granted, as determined by the Committee.
6. GRANT OF OPTIONS. Subject to the terms and conditions of the Plan,
the Committee may, from time to time, grant to selected Employees options to
purchase such number of shares of Stock and on such terms and conditions as the
Committee may determine. More than one option may be granted to the same
Employee. The day on which the Committee approves the granting of an option
shall be considered as the date on which such option is granted. Options granted
to Employees may be either Incentive Stock Options or Nonqualified Options, as
determined by the Committee. The granting of an option to an Employee shall give
such Employee no rights as a shareholder of the Company, except as to shares
actually issued to him upon exercise in accordance with the Plan.
7. OPTION PERIOD; INCENTIVE STOCK OPTION MAXIMUM.
(a) The Committee shall determine the expiration date of each option,
but such expiration date shall not be later than seven years after the date such
option is granted.
(b) The aggregate fair market value (determined at the time the option
is granted) of the Stock with respect to which any Incentive Stock Options are
exercisable for the first time by an Employee during any calendar year under the
Plan or any other plan of the Company or any Subsidiary shall not exceed
$100,000.
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8. EXERCISE OF OPTIONS.
(a) An Employee entitled to exercise an option may, subject to its
terms and conditions and the terms and conditions of the Plan, exercise the
option in full at any time or in part from time to time by delivery to the
Company at its principal office in Sheboygan, Wisconsin, of a written notice of
exercise specifying the number of shares of Stock with respect to which the
option is being exercised; provided, however, that, if then required by the
Section 16 Rules, no option shall be exercisable until at least six months has
elapsed from the date of grant of such option, except in the case of the death
or disability of the Employee holding such option as set forth in the Employee's
option agreement, or as otherwise allowed under the Section 16 Rules.
(b) Any notice of exercise shall be accompanied by full payment of the
option price of the shares of Stock being purchased (i) in cash or its
equivalent; (ii) with the consent of the Committee as set forth in the option
agreement, by tendering previously acquired shares of Stock (valued at their
fair market value as of the date of exercise, as determined by the Committee);
or (iii) with the consent of the Committee as set forth in the option agreement,
by any combination of (i) and (ii). For purposes of (ii) and (iii) above, the
term "previously acquired shares of Stock" shall only include Stock owned by the
Employee prior to the exercise of the option for which payment is being made and
shall not include shares of Stock which are being acquired pursuant to the
exercise of such option.
(c) Except as may be provided in the option agreement, an option
granted under the Plan may be exercised only while the Employee is an employee
of the Company or its Subsidiaries and only if he has been continuously so
employed since the date the option was granted. Options may be exercised during
the life of the Employee only by the Employee (or his legal representative). No
shares of Stock shall be issued upon exercise until full payment therefor has
been made.
9. TAX OFFSET BONUS; TAX WITHHOLDING.
(a) A tax offset bonus may be granted in conjunction with all or part
of any Nonqualified Option granted under the Plan, either at the time of the
grant or at any time during the term of the Nonqualified Option by making
provision therefor in the option agreement or an amendment to the option
agreement. Upon exercise of a Nonqualified Option with respect to which a tax
offset bonus has been granted, the Employee shall be entitled to receive from
the Company an amount in cash determined by multiplying the excess of the fair
market value of the shares of Stock for which the Nonqualified Option is
exercised over the aggregate option price for such Stock by the Bonus Factor (as
defined in Section 9(b)). The fair market value of such shares of Stock shall be
determined by the Committee as of the date of exercise; provided, however, that,
if the Employee is an officer, director or 10% or more shareholder of the
Company and if then determined appropriate by the Committee, such fair market
value shall be determined as of the date which is six months after the date of
such exercise. The day on which the Employee exercises his Nonqualified Option
pursuant to Section 8 shall be considered the date on which such Nonqualified
Option was exercised.
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(b) The "Bonus Factor" shall be the fraction calculated by dividing the
Applicable Tax Rate, as hereinafter described, by an amount equal to one minus
the Applicable Tax Rate. The Committee shall from time to time determine the
Applicable Tax Rate or Rates to be used in determining the amount of tax offset
bonuses (which may, but need not, be the same for each Employee), taking into
account such factors as it may deem necessary, including without limitation, the
maximum income tax rates applicable to individuals and the salary rates and
grades of Employees; provided, however, that the Applicable Tax Rate(s) shall
not exceed the maximum income tax rate imposed on corporations. The tax offset
bonus shall be payable to the Employee within 15 days following exercise of a
Nonqualified Option with respect to which such bonus relates; provided, however,
that, in the case of an Employee who is an officer, director or 10% or more
shareholder of the Company, such bonus shall be payable within 15 days following
the date as of which the fair market value of the Stock purchased upon exercise
of the Nonqualified Option is determined. All determinations by the Committee
pursuant to this Section 9 shall be final.
(c) The Company may deduct and withhold from any cash otherwise payable
under this Section 9 such amount as may be required for the purpose of
satisfying the Company's obligation to withhold federal, state or local taxes.
Further, in the event the amount so withheld is insufficient for such purpose,
the Company may require that the Employee pay to the Company upon its demand or
otherwise make arrangements satisfactory to the Company for payment of, such
amount as may be requested by the Company in order to satisfy its obligation to
withhold any such taxes.
(d) With the consent of the Committee as set forth in the option
agreement, an Employee may be permitted to satisfy the Company's withholding
requirements upon exercise of a Nonqualified Option by electing to have the
Company withhold shares of Stock otherwise issuable to the Employee or to
deliver to the Company shares of Stock having a fair market value (as determined
by the Committee) on the date income is recognized pursuant to the exercise of a
Nonqualified Option equal to the minimum amount required to be withheld. The
election shall be made in writing and shall be made according to such rules and
in such form as the Committee shall determine.
10. CAPITAL ADJUSTMENTS AFFECTING STOCK. In the event of a capital
adjustment resulting from a stock dividend (other than a stock dividend in lieu
of an ordinary cash dividend), stock split, spin-off, split-up, reorganization,
recapitalization, merger, consolidation, combination or exchange of shares or
the like, the number of shares of Stock subject to the Plan and the number of
shares subject to outstanding options shall be adjusted in a manner consistent
with such capital adjustment; provided, however, that no such adjustment shall
require the Company to sell or issue any fractional shares and the adjustment
shall be limited accordingly in a manner determined by the Committee.
Additionally, the per share option price of any shares of Stock subject to
outstanding options shall be adjusted so that there will be no change in the
aggregate option price payable upon exercise of any such option. The
determination of the Committee as to any adjustment hereunder shall be final.
11. POWERS OF COMPANY NOT AFFECTED. The existence of the Plan or any
options granted under the Plan (including the option agreements or instruments
evidencing such options) shall not affect in any way the right or power of the
Company or its shareholders
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to make or authorize any or all adjustments, recapitalizations, reorganizations
or other changes in the Company's capital structure or its business, or any
merger, consolidation or business combination of the Company, or any issuance of
bonds, debentures, preferred or prior preference stock ahead of or affecting the
Stock or the rights of the holders thereof, or dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business or
any other corporate act or proceeding, whether of a similar character or
otherwise.
12. CORPORATE MERGERS AND OTHER CONSOLIDATIONS. The Committee may also
grant options having terms and provisions which vary from those specified in the
Plan, provided that any options granted pursuant to this Section 12 are granted
in substitution for, or in connection with the assumption of, existing options
or similar rights granted by another corporation and assumed or otherwise agreed
to be provided for by the Company pursuant to or by reason of a transaction
involving a corporate merger, consolidation, acquisition, business combination
or other reorganization to which the Company or a subsidiary is a party.
13. OPTION AGREEMENTS. All options granted under the Plan shall be
evidenced by written option agreements (which need not be identical) in such
form as the Committee shall determine. Each option agreement shall specify
whether the option granted thereunder is initially intended to constitute an
Incentive Stock Option or Nonqualified Option.
14. TRANSFER RESTRICTIONS.
(a) Except as otherwise provided by the Board or the Committee, options
granted under the Plan shall not be transferable other than as designated by the
Employee by will, or by the laws of descent and distribution. In the event that
the Board or the Committee shall permit a transfer of options granted under the
Plan, any permitted transferee shall have all of the rights of the Employee
under the Plan and option agreement(s), as if the Employee had retained such
options.
(b) Shares of Stock purchased pursuant to exercise of options granted
under the Plan may not be sold, offered for sale or otherwise disposed of,
except pursuant to an effective registration statement under the Securities Act
of 1933, as amended (the "Act") or in a transaction that, in the opinion of
legal counsel to the Company, is exempt from registration under the Act.
15. AMENDMENT, SUSPENSION AND TERMINATION OF PLAN. The Board shall
have the right to amend, suspend or terminate the Plan or any portion hereof at
any time; provided, however, that shareholder approval of any amendment to the
Plan shall also be obtained if (a) then required by the (i) Section 16 Rules in
order for the Plan to remain qualified under Rule 16b-3 (or any successor
provision) under the Exchange Act, (ii) Internal Revenue Code in order to allow
for Incentive Stock Options to still be granted under the Plan, or (iii)
quotation or listing requirements of NASDAQ or any principal securities exchange
or market on which the Stock is then traded in order to maintain the Stock's
quotation or listing thereon; (b) such amendment materially modifies the
eligibility requirements as provided in Section 3; (c) such amendment increases
the total number of shares of Stock, except as
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provided in Section 10, which may be purchased pursuant to the exercise of
options granted under the Plan as provided in Section 4; or (d) such amendment
reduces the minimum option price per share at which options may be granted to
less than 100% of the fair market value of the Stock, as determined by the
Committee, as provided in Section 5. No amendment, suspension or termination of
the Plan shall alter, impair or adversely affect any of the rights, benefits or
obligations of any Employee under any outstanding option previously granted
thereto, unless the written consent of such Employee is obtained.
16. EFFECTIVE DATE AND TERM OF PLAN. The effective date of the Plan is
the date of its adoption by the Board, subject to the approval of the Plan
within 12 months of such effective date at a meeting of shareholders, and all
options granted prior to such approval shall be subject to such approval and
shall not be exercisable until after such approval. The Plan shall terminate on
March 20, 1995, or on such earlier date as may be determined by the Board under
Section 15. Termination of the Plan, however, shall not adversely affect the
rights of Employees under options previously granted to them, and all unexpired
options shall continue in force and operation after termination of the Plan
except as they may lapse or be terminated by their own terms and conditions.
17. CHANGE IN CONTROL.
(a) Notwithstanding any other provision of the Plan, upon the
occurrence of a Change in Control (as defined in Section 17(c)) all options then
outstanding under the Plan shall become immediately exercisable in full for the
remainder of their terms and each Employee shall have the right for a period of
30 days following a Change in Control to require the Company to purchase his
outstanding options for cash at the aggregate Acceleration Price (as defined in
Section 17(b)) for all shares of Stock subject to such options held by such
Employee; provided, however, that, if then required by the Section 16 Rules,
Employees shall have the right to exercise outstanding options or require the
Company to purchase such options only if at least six months has elapsed between
the date of grant of such options and the Change in Control date.
(b) The "Acceleration Price" shall be the excess of the highest of the
following over each applicable option price per share (as the same may be
adjusted from time to time pursuant to Section 10) on the Change in Control
date:
(i) the highest reported ask price of the Stock, as reported on
NASDAQ or the principal securities exchange or market upon which the Stock is
then listed or traded, on or within the 60 days prior to and including the
Change in Control date;
(ii) the highest purchase or sale price of the Stock reported in a
Schedule 13D or an amendment thereto as paid or received on or within the 60
days prior to and including the Change in Control date; the highest tender offer
price paid or offered for the Stock on or within the 60 days prior to and
including the Change in Control date; and
(iii) the highest cash merger or similar price paid or offered for
the Stock on or within the 60 days prior to and including the Change of Control
date.
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(c) A "Change in Control" (and the Change in Control date) shall be the
occurrence of any one of the following events (certain defined terms used in
this Section 17(c) are defined in Section 17(d)):
(i) the first day of receipt by the Company of a Schedule 13D, any
amendment thereto or notice of a public announcement confirming that any Person
(other than any employee benefit plan of the Company or of any subsidiary of the
Company or any Person organized, appointed or established pursuant to the terms
of any such benefit plan or any Person who is an Employee), together with his
Affiliates or Associates, is or becomes the Beneficial Owner of securities
representing at least 20% of the combined voting power of the Company;
(ii) the first day on which two or more of the members of the
Board are not Continuing Directors;
(iii) the day on which the shareholders of the Company approve (A)
any business combination, consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of the Stock would be converted into cash, securities or other property,
other than a merger of the Company in which the holders of the Stock immediately
prior to the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (B) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company; or
(iv) the day on which the shareholders of the Company approve any
plan or proposal for the liquidation or dissolution of the Company.
(d) For purposes of this Section 17:
(i) a "Person" shall mean any individual, firm, corporation,
partnership, trust or other entity.
(ii) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Exchange Act.
(iii) a Person shall be a "Beneficial Owner" of securities (A)
which such Person beneficially owns, directly or indirectly, or (B) which such
Person has the right to acquire (whether such right is exercisable immediately
or only with the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of conversion
rights, exchange rights, rights, warrants, options or otherwise, other than if
such Person acquires or has the right to acquire such securities as an
underwriter, broker, dealer or selling group member in connection with the
public or private distribution of such securities pursuant to an underwriting or
similar agreement with the Company or upon exercise of Rights issued under the
Company's Rights Agreement with First Bank (N.A.) dated December 20, 1988, as
amended.
(iv) "Continuing Directors" means any member of the Board who was
a member of the Board on March 20, 1990, and any successor of a Continuing
Director who is recommended or elected to succeed the Continuing Director by a
majority of the remaining Continuing Directors.
(e) The Committee shall not have authority under Section 2 to modify
the time when options may be exercised under this Section 17.
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Adopted 12/20/94
Effective 1/30/95
As Amended Through 10/15/98
SCHULTZ SAV-O STORES, INC.
1995 EQUITY INCENTIVE PLAN
Section 1. Purpose
The purpose of Schultz Sav-O Stores, Inc. 1995 Equity Incentive Plan
(the "Plan") is to promote the best interests of Schultz Sav-O Stores, Inc. (the
"Company") and its shareholders by providing key employees of the Company and
its Affiliates (as defined below) with an opportunity to acquire a, or increase
their, proprietary interest in the Company. It is intended that the Plan will
promote continuity of management and increased incentive and personal interest
in the welfare of the Company by those key employees who are primarily
responsible for shaping and carrying out the long-range plans of the Company and
securing the Company's continued growth and financial success.
Section 2. Definitions
As used in the Plan, the following terms shall have the respective
meanings set forth below:
(a) "Affiliate" shall mean any entity that, directly or through one or
more intermediaries, is controlled by, controls, or is under common control
with, the Company.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock or Performance Share granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract or
other instrument or document evidencing any Award granted under the Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Commission" shall mean the Securities and Exchange Commission.
(f) "Committee" shall mean the Compensation and Stock Option Committee
of the Board of Directors of the Company (or any other committee thereof
designated by such Board to administer the Plan); provided, however, that the
Committee is composed of not less than two directors, each of whom is a
"disinterested person" within the meaning of Rule 16b-3.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
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<PAGE>
(h) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair market
value of such property determined by such methods or procedures as shall be
established from time to time by the Committee.
(i) "Incentive Stock Option" shall mean an option granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422 of the
Code (or any successor provision thereto).
(j) "Key Employee" shall mean any officer or other key employee of the
Company or of any Affiliate who is responsible for or contributes to the
management, growth or profitability of the business of the Company or any
Affiliate as determined by the Committee in its discretion.
(k) "Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.
(l) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
(m) "Participating Key Employee" shall mean a Key Employee designated
to be granted an Award under the Plan.
(n) "Performance Period" shall mean, in relation to Performance Shares,
any period for which a performance goal or goals have been established.
(o) "Performance Share" shall mean any right granted under Section 6(d)
of the Plan that will be paid out as a Share (which, in specified circumstances,
may be a Share of Restricted Stock).
(p) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization or
government or political subdivision thereof.
(q) "Released Securities" shall mean Shares of Restricted Stock with
respect to which all applicable restrictions have expired, lapsed or been
waived.
(r) "Restricted Securities" shall mean Awards of Restricted Stock or
other Awards under which issued and outstanding Shares are held subject to
certain restrictions.
(s) "Restricted Stock" shall mean any Share granted under Section 6(c)
of the Plan or, in specified circumstances, a Share paid in connection with a
Performance Share under Section 6(e) of the Plan.
(t) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the Commission
under the Exchange Act, or any successor rule or regulation thereto.
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(u) "Shares" shall mean shares of common stock of the Company, $0.05
par value (including the associated Common Stock Purchase Rights), and such
other securities or property as may become subject to Awards pursuant to an
adjustment made under Section 4(b) of the Plan.
(v) "Stock Appreciation Right" shall mean any right granted under
Section 6(b) of the Plan.
Section 3. Administration
The Plan shall be administered by the Committee; provided, however,
that if at any time the Committee shall not be in existence, the functions of
the Committee as specified in the Plan shall be exercised by those members of
the Board of Directors of the Company who qualify as "disinterested persons"
under Rule 16b-3. Subject to the terms of the Plan and applicable laws and
without limitation by reason of enumeration, the Committee shall have full
discretionary power and authority to: (i) designate Participating Key Employees;
(ii) determine the type or types of Awards to be granted to each Participating
Key Employee under the Plan; (iii) determine the number of Shares to be covered
by (or with respect to which payments, rights or other matters are to be
calculated in connection with) Awards granted to Participating Key Employees;
(iv) determine the terms and conditions of any Award granted to a Participating
Key Employee; (v) determine whether, to what extent and under what circumstances
Awards granted to Participating Key Employees may be settled or exercised in
cash, Shares, other securities, other Awards or other property, and the method
or methods by which Awards may be settled, exercised, canceled, forfeited or
suspended; (vi) determine whether, to what extent and under what circumstances
cash, Shares, other Awards and other amounts payable with respect to an Award
granted to Participating Key Employees under the Plan shall be deferred either
automatically or at the election of the holder thereof or of the Committee;
(vii) interpret and administer the Plan and any instrument or agreement relating
to, or Award made under, the Plan (including, without limitation, any Award
Agreement); (viii) establish, amend, suspend or waive such rules and regulations
and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (ix) make any other determination and take any
other action that the Committee deems necessary or desirable for the
administration of the Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions under or with
respect to the Plan or any Award shall be within the sole discretion of the
Committee, may be made at any time or from time to time, and shall be final,
conclusive and binding upon all Persons, including the Company, any Affiliate,
any Participating Key Employee, any holder or beneficiary of any Award, any
shareholder and any employee of the Company or of any Affiliate.
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Section 4. Shares Available for Award
(a) Shares Available. Subject to adjustment as provided in Section
4(b):
(i) Number of Shares Available. The number of Shares with respect
to which Awards may be granted under the Plan shall be 750,000, subject to the
limitations set forth in Section 6(c)(i).
(ii) Accounting for Awards. The number of Shares covered by an
Award under the Plan, or to which such Award relates, shall be counted on the
date of grant of such Award against the number of Shares available for granting
Awards under the Plan.
(iii) Sources of Shares Deliverable Under Awards. Any Shares
delivered pursuant to an Award may consist, in whole or in part, of authorized
and unissued Shares or of treasury Shares.
(b) Adjustments. In the event that the Committee shall determine that
any dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the Company,
or other similar corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee may, in such manner as it may
deem equitable, adjust any or all of (i) the number and type of Shares subject
to the Plan and which thereafter may be made the subject of Awards under the
Plan; (ii) the number and type of Shares subject to outstanding Awards; and
(iii) the grant, purchase or exercise price with respect to any Award, or, if
deemed appropriate, make provision for a cash payment to the holder of an
outstanding Award; provided, however, in each case, that with respect to Awards
of Incentive Stock Options no such adjustment shall be authorized to the extent
that such authority would cause the Plan to violate Section 422(b) of the Code
(or any successor provision thereto); and provided further that the number of
Shares subject to any Award payable or denominated in Shares shall always be a
whole number.
Section 5. Eligibility
Any Key Employee, including any executive officer or employee-director
of the Company or of any Affiliate, who is not a member of the Committee shall
be eligible to be designated a Participating Key Employee.
Section 6. Awards
(a) Option Awards. The Committee is hereby authorized to grant Options
to Key Employees with the terms and conditions as set forth below and with such
additional terms and conditions, in either case not inconsistent with the
provisions of the Plan, as the Committee shall determine in its discretion.
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<PAGE>
(i) Exercise Price. The exercise price per Share of an Option
granted pursuant to this Section 6(a) shall be determined by the Committee;
provided, however, that such exercise price shall not be less than 100% of the
Fair Market Value of a Share on the date of grant of such Option.
(ii) Option Term. The term of each Option shall be fixed by the
Committee; provided, however, that in no event shall the term of any Option
exceed a period of seven years from the date of its grant.
(iii) Exercisability and Method of Exercise. An Option shall
become exercisable in such manner and within such period or periods and in such
installments or otherwise as shall be determined by the Committee. The Committee
also shall determine the method or methods by which, and the form or forms,
including, without limitation, cash, Shares, other securities, other Awards,
other property or any combination thereof, having a Fair Market Value on the
exercise date equal to the relevant exercise price, in which payment of the
exercise price with respect to any Option may be made or deemed to have been
made.
(iv) Incentive Stock Options. The terms of any Incentive Stock
Option granted under the Plan shall comply in all respects with the provisions
of Section 422 of the Code (or any successor provision thereto) and any
regulations promulgated thereunder. Notwithstanding any provision in the Plan to
the contrary, no Incentive Stock Option may be granted hereunder after the tenth
anniversary of the adoption of the Plan by the Board of Directors of the
Company.
(b) Stock Appreciation Right Awards. The Committee is hereby authorized
to grant Stock Appreciation Rights to Key Employees. Subject to the terms of the
Plan and any applicable Award Agreement, a Stock Appreciation Right granted
under the Plan shall confer on the holder thereof a right to receive, upon
exercise thereof, the excess of (i) the Fair Market Value of one Share on the
date of exercise over (ii) the grant price of the Stock Appreciation Right as
specified by the Committee, which shall not be less than 100% of the Fair Market
Value of one Share on the date of grant of the Stock Appreciation Right. Subject
to the terms of the Plan, the grant price, term, methods of exercise, methods of
settlement (including whether the Participating Key Employee will be paid in
cash, Shares, other securities, other Awards, or other property or any
combination thereof), and any other terms and conditions of any Stock
Appreciation Right shall be as determined by the Committee in its discretion.
The Committee may impose such conditions or restrictions on the exercise of any
Stock Appreciation Right as it may deem appropriate, including, without
limitation, restricting the time of exercise of the Stock Appreciation Right to
specified periods as may be necessary to satisfy the requirements of Rule 16b-3.
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(c) Restricted Stock Awards
(i) Issuance. The Committee is hereby authorized to grant Awards
of Restricted Stock to Key Employees; provided, however, that the aggregate
number of Shares of Restricted Stock granted under the Plan to all Participating
Key Employees as a group shall not exceed 75,000 Shares (such number of Shares
subject to adjustment in accordance with the terms of Section 4(b) hereof) of
the total number of Shares available for Awards under Section 4(a)(i).
(ii) Restrictions. Shares of Restricted Stock granted to
Participating Key Employees shall be subject to such restrictions as the
Committee may impose in its discretion (including, without limitation, any
limitation on the right to vote a Share of Restricted Stock or the right to
receive any dividend or other right or property), which restrictions may lapse
separately or in combination at such time or times, in such installments or
otherwise, as the Committee may deem appropriate in its discretion.
(iii) Registration. Any Restricted Stock granted under the Plan to
a Participating Key Employee may be evidenced in such manner as the Committee
may deem appropriate in its discretion, including, without limitation,
book-entry registration or issuance of a stock certificate or certificates. In
the event any stock certificate is issued in respect of Shares of Restricted
Stock granted under the Plan to a Participating Key Employee, such certificate
shall be registered in the name of the Participating Key Employee and shall bear
an appropriate legend (as determined by the Committee) referring to the terms,
conditions and restrictions applicable to such Restricted Stock.
(iv) Payment of Restricted Stock. At the end of the applicable
restriction period relating to Restricted Stock granted to a Participating Key
Employee, one or more stock certificates for the appropriate number of Shares,
free of restrictions imposed under the Plan, shall be delivered to the
Participating Key Employee or, if the Participating Key Employee received stock
certificates representing the Restricted Stock at the time of grant, the legends
placed on such certificates shall be removed.
(v) Forfeiture. Except as otherwise determined by the Committee in
its discretion, upon termination of employment of a Participating Key Employee
(as determined under criteria established by the Committee in its discretion)
for any reason during the applicable restriction period, all Shares of
Restricted Stock still subject to restriction shall be forfeited by the
Participating Key Employee; provided, however, that the Committee may, when it
finds that a waiver would be in the best interests of the Company, waive in
whole or in part any or all remaining restrictions with respect to Shares of
Restricted Stock held by a Participating Key Employee.
(d) Performance Share Awards
(i) Issuance. The Committee is hereby authorized to grant Awards
of Performance Shares to Key Employees.
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<PAGE>
(ii) Performance Goals and Other Terms. The Committee shall
determine in its discretion the Performance Period, the performance goal or
goals to be achieved during any Performance Period, the proportion of payments,
if any, to be made for performance between the minimum and full performance
levels, the restrictions applicable to Shares of Restricted Stock received upon
payment of Performance Shares if Performance Shares are paid in such manner, and
any other terms, conditions and rights relating to a grant of Performance
Shares. Performance goals established by the Committee may be based on one or
more measures such as return on shareholders' equity, earnings or any other
standard or standards deemed relevant by the Committee, measured internally or
relative to other organizations and before or after extraordinary items.
(iii) Rights and Benefits During the Performance Period. The
Committee may provide that, during a Performance Period, a Participating Key
Employee shall be paid cash amounts, with respect to each Performance Share held
by such Participating Key Employee, in the same manner, at the same time, and in
the same amount paid, as a cash dividend on a Share. Participating Key Employees
shall have no voting rights with respect to Performance Shares held by them.
(iv) Adjustments with Respect to Performance Shares. Any other
provision of the Plan to the contrary notwithstanding, the Committee may in its
discretion at any time or from time to time adjust performance goals (up or
down) and minimum or full performance levels (and any intermediate levels and
proportion of payments related thereto), adjust the manner in which performance
goals are measured, or shorten any Performance Period or waive in whole or in
part any or all remaining restrictions with respect to Shares of Restricted
Stock issued in payment of Performance Shares, if the Committee determines that
conditions, including but not limited to, changes in the economy, changes in
competitive conditions, changes in laws or governmental regulations, changes in
generally accepted accounting principles, changes in the Company's accounting
policies, acquisitions or dispositions by the Company or its Affiliates, or the
occurrence of other unusual, unforeseen or extraordinary events, so warrant.
(v) Payment of Performance Shares. As soon as is reasonably
practicable following the end of the applicable Performance Period, one or more
certificates representing the number of Shares equal to the number of
Performance Shares payable shall be registered in the name of and delivered to
the Participating Key Employee; provided, however, that any Shares of Restricted
Stock payable in connection with Performance Shares shall, pending the
expiration, lapse, or waiver of the applicable restrictions, be evidenced in the
manner as set forth in Section 6(c)(iii) hereof.
(e) General
(i) No Consideration for Awards. Awards shall be granted to
Participating Key Employees for no cash consideration unless otherwise
determined by the Committee.
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<PAGE>
(ii) Award Agreements. Each Award granted under the Plan shall be
evidenced by an Award Agreement in such form (consistent with the terms of the
Plan) as shall have been approved by the Committee.
(iii) Awards May Be Granted Separately or Together. Awards to
Participating Key Employees under the Plan may be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award or any
award granted under any other plan of the Company or any Affiliate. Awards
granted in addition to, or in tandem with, other Awards, or in addition to, or
in tandem with, awards granted under any other plan of the Company or any
Affiliate, may be granted either at the same time as or at a different time from
the grant of such other Awards or awards.
(iv) Forms of Payment Under Awards. Subject to the terms of the
Plan and of any applicable Award Agreement, payments or transfers to be made by
the Company or an Affiliate upon the grant, exercise or payment of an Award to a
Participating Key Employee may be made in such form or forms as the Committee
shall determine, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case in accordance with rules and
procedures established by the Committee in its discretion. Such rules and
procedures may include, without limitation, provisions for the payment or
crediting of interest on installment or deferred payments.
(v) Limits on Transfer of Options. Except as otherwise provided by
the Board of Directors of the Company or the Committee, Awards granted under the
Plan shall not be transferable other than as designated by the Participating Key
Employee by will, or by the laws of descent and distribution. In the event that
the Board of Directors of the Company or the Committee shall permit a transfer
of an Award, any permitted transferee shall have all of the rights of the
Participating Key Employee under the Plan, as if the Participating Key Employee
had retained such Award.
(vi) Term of Awards. Except as otherwise provided in the Plan, the
term of each Award shall be for such period as may be determined by the
Committee.
(vii) Rule 16b-3 Six-Month Limitations. To the extent required in
order to comply with Rule 16b-3 only, any equity security offered pursuant to
the Plan may not be sold for at least six months after acquisition, except in
the case of death or disability, and any derivative security issued pursuant to
the Plan shall not be exercisable for at least six months, except in case of
death or disability of the holder thereof. Terms used in the preceding sentence
shall, for the purposes of such sentence only, have the meanings, if any,
assigned or attributed to them under Rule 16b-3.
(viii) Share Certificates; Representation. In addition to the
restrictions imposed pursuant to Section 6(c) and Section 6(d) hereof, all
certificates for Shares delivered under the Plan pursuant to any Award or the
exercise thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the rules,
regulations and other requirements of the Commission, Nasdaq Stock Market or any
stock exchange or other market upon which such Shares are then listed or traded,
and any applicable federal or state securities laws, and the Committee may cause
a legend or legends
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<PAGE>
to be put on any such certificates to make appropriate reference to such
restrictions. The Committee may require each Participating Key Employee, or
other Person who acquires Shares under the Plan by means of an Award originally
made to a Participating Key Employee to represent to the Company in writing that
such Participating Key Employee, or other Person is acquiring the Shares without
a view to the distribution thereof.
Section 7. Amendment and Termination of the Plan; Correction of Defects and
Omissions
(a) Amendments to and Termination of the Plan. The Board of Directors
of the Company may at any time amend, alter, suspend, discontinue or terminate
the Plan; provided, however, that shareholder approval of any amendment of the
Plan shall also be obtained if otherwise required by: (i) the rules and/or
regulations promulgated under Section 16 of the Exchange Act (in order for the
Plan to remain qualified under Rule 16b-3); (ii) the Code or any rules
promulgated thereunder (in order to allow for Incentive Stock Options to be
granted under the Plan); or (iii) the quotation or listing requirements of the
Nasdaq National Market or any principal securities exchange or market on which
the Shares are then traded (in order to maintain the quotation or listing of the
Shares thereon). Termination of the Plan shall not affect the rights of
Participating Key Employees with respect to Awards previously granted to them,
and all unexpired Awards shall continue in force and effect after termination of
the Plan except as they may lapse or be terminated by their own terms and
conditions.
(b) Correction of Defects, Omissions and Inconsistencies. The Committee
may in its discretion correct any defect, supply any omission or reconcile any
inconsistency in any Award or Award Agreement in the manner and to the extent it
shall deem desirable to carry the Plan into effect.
Section 8. General Provisions
(a) No Rights to Awards. No Key Employee, Participating Key Employee or
other Person shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of Key Employees,
Participating Key Employees or holders or beneficiaries of Awards under the
Plan. The terms and conditions of Awards need not be the same with respect to
each Participating Key Employee.
(b) Withholding. No later than the date as of which an amount first
becomes includible in the gross income of a Participating Key Employee for
federal income tax purposes with respect to any Award under the Plan, the
Participating Key Employee shall pay to the Company, or make arrangements
satisfactory to the Company regarding the payment of, any federal, state, local
or foreign taxes of any kind required by law to be withheld with respect to such
amount. Unless otherwise determined by the Committee, withholding obligations
arising with respect to Awards to Participating Key Employees under the Plan may
be settled with Shares previously owned by the Participating Key Employee;
provided, however, that the Participating Key Employee may not settle such
obligations with Shares that are part of, or are received upon exercise of, the
Award that gives rise to the withholding requirement. The obligations of the
Company under the Plan shall be conditional on such payment or arrangements, and
the Company and any Affiliate shall, to the extent permitted by
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<PAGE>
law, have the right to deduct any such taxes from any payment otherwise due to
the Participating Key Employee. The Committee may establish such procedures as
it deems appropriate for the settling of withholding obligations with Shares,
including, without limitation, the establishment of such procedures as may be
necessary to satisfy the requirements of Rule 16b-3.
(c) No Limit on Other Compensation Arrangements. Nothing contained in
the Plan shall prevent the Company or any Affiliate from adopting or continuing
in effect other or additional compensation arrangements, and such arrangements
may be either generally applicable or applicable only in specific cases.
(d) Rights and Status of Recipients of Awards. The grant of an Award
shall not be construed as giving a Participating Key Employee the right to be
retained in the employ of the Company or any Affiliate. Further, the Company or
any Affiliate may at any time dismiss a Participating Key Employee from
employment, free from any liability, or any claim under the Plan, unless
otherwise expressly provided in the Plan or in any Award Agreement. Except for
rights accorded under the Plan and under any applicable Award Agreement,
Participating Key Employees shall have no rights as holders of Shares as a
result of the granting of Awards hereunder.
(e) Unfunded Status of the Plan. Unless otherwise determined by the
Committee, the Plan shall be unfunded and shall not create (or be construed to
create) a trust or a separate fund or funds. The Plan shall not establish any
fiduciary relationship between the Company or the Committee and any
Participating Key Employee or other Person. To the extent any Person holds any
right by virtue of a grant under the Plan, such right (unless otherwise
determined by the Committee) shall be no greater than the right of an unsecured
general creditor of the Company.
(f) Governing Law. The validity, construction and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the internal laws of the State of Wisconsin and applicable
federal law.
(g) Severability. If any provision of the Plan or any Award Agreement
or any Award is or becomes or is deemed to be invalid, illegal or unenforceable
in any jurisdiction, or as to any Person or Award, or would disqualify the Plan,
any Award Agreement or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the intent of the Plan,
any Award Agreement or the Award, such provision shall be stricken as to such
jurisdiction, Person or Award, and the remainder of the Plan, any such Award
Agreement and any such Award shall remain in full force and effect.
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<PAGE>
(h) No Fractional Shares. No fractional Shares or other securities
shall be issued or delivered pursuant to the Plan, any Award Agreement or any
Award, and the Committee shall determine (except as otherwise provided in the
Plan) whether cash, other securities or other property shall be paid or
transferred in lieu of any fractional Shares or other securities, or whether
such fractional Shares or other securities or any rights thereto shall be
canceled, terminated or otherwise eliminated.
(i) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
Section 9. Effective Date of the Plan
The Plan shall be effective as of January 30, 1995 subject to
shareholder approval of the Plan within 12 months following the date of adoption
of the Plan by the Board of Directors, and all Awards granted under the Plan
prior to the date of shareholder approval shall be subject to such approval and
the effective date of such Award grants shall be deemed to be the date of such
shareholder approval.
Section 10. Term of the Plan
No Award shall be granted under the Plan following the fifth
anniversary of its effective date. However, unless otherwise expressly provided
in the Plan or in an applicable Award Agreement, any Award theretofore granted
may extend beyond such date and, to the extent set forth in the Plan, the
authority of the Committee to amend, alter, adjust, suspend, discontinue or
terminate any such Award, or to waive any conditions or restrictions with
respect to any such Award, and the authority of the Board of Directors of the
Company to amend the Plan, shall extend beyond such date.
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SCHULTZ SAV-O STORES, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into as of this day of , 199_ (the
"Grant Date"), by and between SCHULTZ SAV-O STORES, INC., a Wisconsin
corporation (the "Company"), and (the "Optionee").
W I T N E S S E T H :
WHEREAS, the terms of the Schultz Sav-O Stores, Inc. 1995 Equity
Incentive Plan (the "Plan"), to the extent not stated herein, are specifically
incorporated by reference in this Agreement and defined terms used herein which
are not otherwise defined shall have the meaning set forth in the Plan;
WHEREAS, the purpose of the Plan is to permit the grant of various
equity-based incentive awards, including options to purchase shares of the
Company's Common Stock, $.05 par value ("Common Stock"), to be granted to
certain key employees of the Company;
WHEREAS, the Optionee is now employed by the Company in a key
capacity and has exhibited judgment, initiative and efforts which have
contributed materially to the successful performance of the Company; and
WHEREAS, the Company desires the Optionee to remain in the Company's
employ and wishes to provide the Optionee with the opportunity to secure or
increase his stock ownership in the Company in order to develop even a stronger
incentive to put forth maximum effort for the continued success and growth of
the Company.
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements herein set forth, the parties hereby mutually covenant and agree
as follows:
1. Grant of Options. Subject to the terms and conditions of the Plan
and this Agreement, and shareholder approval of the Plan at the Company's 1995
annual meeting of shareholders, the Company grants to the Optionee this option
(the "Option") to purchase from the Company all or any part of the aggregate
number of ______ shares of Common Stock (the "Optioned Shares"), subject to
adjustment as provided in Paragraph 7. This Option is intended to constitute a
nonqualified stock option and shall not be treated as an incentive stock option
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended.
2. Option Price. The option price to be paid for the Optioned Shares
shall be $______ per share, subject to adjustment as provided in Paragraph 7.
The per share option price has been determined by the Compensation and Stock
Option Committee (the "Committee") of the Board of Directors of the Company (the
"Board") to be not less than 100% of the fair market value of the Common Stock
on the Grant Date.
<PAGE>
3. Exercise of Option.
(a) Subject to the terms and conditions of the Plan and except as
otherwise provided in this Agreement, this Option may be exercised by the
Optionee while in the employ of the Company, in whole or in part, from time to
time or at any time, beginning on the Grant Date and ending on the seventh
anniversary of the Grant Date (the "Termination Date") in accordance with the
following schedule:
Cumulative Percentage
Elapsed Number of of Optioned Shares
Years After Grant Date Which May be Purchased
Less Than One Year 0%
One Year 33-1/3%
Two Years 66-2/3%
Three Years and After 100%
(b) If the Optionee is discharged or leaves the employ of the Company
for any reason (other than termination by the Company for "cause," the death or
disability of the Optionee or the retirement of the Optionee after reaching the
age of 65), prior to the Termination Date, this Option, to the extent not
theretofore exercised but then permitted to be exercised under the percentage
limitations of Paragraph 3(a), may be exercised by the Optionee or by his legal
representative at any time within three months after the date of termination of
employment upon the tender to the Company in cash or its equivalent of the full
purchase price (and not by the tender of previously acquired Common Stock), but
in no event later than the Termination Date.
(c) If the Optionee dies while he is in the employ of the Company, or
if his employment is terminated by reason of his retirement after reaching the
age of 65 or his disability prior to the Termination Date, this Option, to the
extent not theretofore exercised (regardless of the percentage limitations of
Paragraph 3(a)), may be exercised in whole or in part as follows: (i) by the
legal representative of the Optionee at any time within six months after the
date of the Optionee's death or (ii) by the Optionee or his legal representative
at any time within three months after the termination of the Optionee's
employment by reason of retirement after reaching the age of 65 or disability,
but in no event later than the Termination Date in either case.
(d) If the Optionee's employment is terminated by the Company "for
cause," this Option to the extent not theretofore exercised shall terminate
immediately and shall not be exercisable following such termination of
employment. For purposes of this Paragraph 3, termination by the Company "for
cause" shall mean any termination of the Optionee by reason of any action or
omission on the part of the Optionee which is deemed contrary to the interests
of the Company or not in the interests of the Company, as determined by the
Board in its sole discretion.
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<PAGE>
(e) This Option may be exercised during the life of the Optionee only
by the Optionee (or his legal representative as provided in this Paragraph 3).
4. Manner of Exercise and Payment. This Option may be exercised only
by written notice to the Company by the Optionee (or his legal representative as
provided in Paragraph 3) of the Optionee's (or such legal representative's)
intent to exercise all or part of this Option, served upon the Secretary of the
Company at its office at Sheboygan, Wisconsin, specifying the number of Optioned
Shares in respect to which this Option is being exercised, accompanied by
payment of the aggregate option price for such Optioned Shares, at the
Optionee's (or such legal representative's) election (except as limited in
Paragraph 3): (a) in cash or by certified check or bank draft to the order of
the Company; (b) by delivering previously acquired shares of Common Stock, duly
endorsed in blank or accompanied by stock powers duly endorsed in blank, valued
at their fair market value at the time of exercise as determined by the
Committee; or (c) by any combination of (a) and (b). For purposes of (b) and (c)
above, the term "previously acquired shares of Common Stock" shall only include
Common Stock owned by the Optionee prior to the exercise of this Option and
shall not include shares of Common Stock which are being acquired pursuant to
the exercise of this Option. Upon receipt of the payment of the aggregate option
price for all of the Optioned Shares so purchased, certificates for such
Optioned Shares shall be issued by or on behalf of the Company to the Optionee.
The Optioned Shares so acquired, upon payment in full of the aggregate option
price, shall be fully paid and nonassessable, except as provided by Section
180.0622(2) (b) of the Wisconsin Statutes.
5. Transferability; Limitations. Subject to the limitations of this
Section 5, this Option shall be transferable, in whole or in part, upon the
surrender of this Option by the Optionee to the Company for one or more new
Options of like tenor representing, in the aggregate, the right to purchase the
number of shares of Common Stock purchasable hereunder, each of such new Options
to represent the right to purchase such number of shares of Common Stock as
shall be designated by the Optionee at the time of such surrender, subject to
the terms and conditions of the Plan and this Option. This Option may only be
transferred by will or by the laws of descent or distribution, or to any member
of the Optionee's "immediate family," as such term is defined in Rule 16a-1(e)
under the Securities Exchange Act of 1934 (the "Exchange Act") or to trusts,
partnerships or other entities established solely for the benefit of members of
the Optionee's immediate family; provided, however, that (x) there may be no
consideration for any such transfer, (y) subsequent transfers of any portion of
this Option must also be in compliance with this Section 5 and (z) promptly
after making any such transfer, the Optionee shall provide to the Company the
Notice of Transfer of Option attached as Exhibit 1 hereto. In the event of such
a permitted transfer of this Option, the transferee shall have all of the rights
of the Optionee under the Plan and this Option, as if the Optionee had retained
this Option. The terms of this Option shall be binding upon the permitted
transferees, executors, administrators, heirs and successors of the Optionee.
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<PAGE>
6. Tax Withholding.
(a) The Company may require as a condition precedent to the issuance or
transfer of any shares of Common Stock upon exercise of this Option that the
Optionee pay to the Company, upon its demand, or otherwise make arrangements
satisfactory to the Company for payment of, such amount as may be requested by
the Company for the purpose of satisfying the Company's tax withholding
requirement. If the amount so requested is not so paid or if such arrangements
are not made, the Company may refuse to issue or transfer any Optioned Shares
upon exercise of this Option.
(b) The Optionee shall be permitted to satisfy the Company's tax
withholding requirements by delivering shares of previously owned Common Stock
having a fair market value (as determined by the Committee) on the date income
is recognized by the Optionee (the "Tax Date") pursuant to the exercise of this
Option equal to the minimum amount required to be withheld. If the number of
shares of Common Stock determined pursuant to the preceding sentence shall
include a fractional share, the number of shares delivered shall be reduced to
the next lower whole number and the Optionee shall deliver to the Company cash
in lieu of such fractional share, in an amount equal to the Common Stock's then
fair market value as determined by the Committee, or otherwise make arrangements
satisfactory to the Company for payment of such amount
7. Adjustment to Optioned Shares and Option Price. In the event of a
capital adjustment resulting from a stock dividend (other than a stock dividend
in lieu of an ordinary cash dividend), stock split, reorganization, spin-off,
split-up or distribution of assets to shareholders, recapitalization, merger,
consolidation, combination or exchange of shares or the like, the Optioned
Shares and the per share option price (but not the aggregate option price for
all Optioned Shares, as adjusted) shall be adjusted in a manner consistent with
such capital adjustment and in accordance with the Plan; provided, however, that
no such adjustment shall require the Company to issue any fractional shares and
the adjustment shall be limited accordingly as determined by the Committee. The
determination of the Committee as to any adjustment shall be final.
8. Transfer Restrictions. The Optioned Shares to be acquired upon
exercise of this Option may not be sold or offered for sale except pursuant to
an effective registration statement under the Securities Act of 1933, as amended
("Act"), or in a transaction which, in the opinion of legal counsel for the
Company, is exempt from the registration provisions of the Act.
9. Status of Optionee. The Optionee shall not be deemed for any
purposes to be a shareholder of the Company with respect to any of the Optioned
Shares except to the extent that this Option shall have been exercised, the
aggregate option price for the Optioned Shares purchased shall have been fully
paid and a stock certificate shall have been issued by or on behalf of the
Company therefor.
10. Employment. It is fully understood that nothing contained in this
Agreement or the Plan shall be deemed to confer upon the Optionee any right to
continue in the employ of
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<PAGE>
the Company, nor to interfere in any way with the right of the Company to
terminate the employment of the Optionee at any time.
11. Interpretation by Committee. As a condition of the granting of
this Option, the Optionee agrees, for himself and his legal representatives,
that the Plan and this Agreement shall be subject to discretionary
interpretation by the Committee and that any interpretation by the Committee of
the terms of the Plan and this Agreement shall be final, binding and conclusive
on the Optionee and his legal representatives in all respects and shall not
subject to challenge or dispute by the Optionee or his legal representatives.
12. Change in Control.
(a) Notwithstanding any other provision of this Agreement (including,
without limitation, Paragraph 3) upon the occurrence of a Change in Control (as
hereinafter defined) this Option, to the extent then outstanding and
unexercised, shall become immediately exercisable in full for the remainder of
its term, but prior to the Termination Date, and the Optionee shall have the
right for a period of 30 days following the Change in Control to require the
Company to purchase this Option for cash at the aggregate Acceleration Price (as
hereinafter defined) for all Optioned Shares then subject to issuance upon
exercise of this Option; provided, however, that, if then required by the rules
under Section 16 of the Securities Exchange Act of 1934, as amended ("Section 16
Rules"), the Optionee shall have the right to exercise this Option or require
the Company to purchase this Option only if at least six months has elapsed
between the Grant Date and the Change in Control date.
(b) The "Acceleration Price" shall be the excess of the highest of the
following over the option price per share set forth in Paragraph 2 (as the same
may be adjusted from time to time pursuant to Paragraph 7) on the Change in
Control date:
(i) the highest reported ask price of the Common Stock, as
reported on NASDAQ or the principal securities exchange or market upon which the
Common Stock is then listed or traded, on or within the 60 days prior to and
including the Change in Control date;
(ii) the highest purchase or sale price of the Common Stock
reported in a Schedule 13D or an amendment thereto as paid or received on or
within the 60 days prior to and including the Change in Control date;
(iii) the highest tender offer price paid or offered for the
Common Stock on or within the 60 days prior to and including the Change in
Control date; and
(iv) the highest cash merger or similar price paid or offered for
the Common Stock on or within the 60 days prior to and including the Change of
Control date.
(c) A "Change in Control" (and the Change in Control date) shall be the
occurrence of any one of the following events (certain defined terms used in
this Paragraph 12(c) are defined in Paragraph 12(d)):
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<PAGE>
(i) the first day of receipt by the Company of a Schedule 13D, any
amendment thereto or notice of a public announcement confirming that any Person
(other than any employee benefit plan of the Company or of any subsidiary of the
Company or any Person organized, appointed or established pursuant to the terms
of any such benefit plan or any Person who is a key employee of the Company),
together with his Affiliates or Associates, is or becomes the Beneficial Owner
of securities representing at least 20% of the combined voting power of the
Company;
(ii) the first day on which two or more of the members of the
Board are not Continuing Directors;
(iii) the day on which the shareholders of the Company approve (A)
any business combination, consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of the Common Stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of the Common
Stock immediately prior to the merger have the same proportionate ownership of
common stock of the surviving corporation immediately after the merger, or (B)
any sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Company; or
(iv) the day on which the shareholders of the Company approve any
plan or proposal for the liquidation or dissolution of the Company.
d. For purposes of this Paragraph 12:
(i) a "Person" shall mean any individual, firm, corporation,
partnership, trust or other entity.
(ii) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Securities Exchange Act
of 1934, as amended.
(iii) a Person shall be a "Beneficial Owner" of securities (A)
which such Person beneficially owns, directly or indirectly, or (B) which such
Person has the right to acquire (whether such right is exercisable immediately
or only with the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of conversion
rights, exchange rights, rights, warrants, options or otherwise, other than if
such Person acquires or has the right to acquire such securities as an
underwriter, broker, dealer or selling group member in connection with the
public or private distribution of such securities pursuant to an underwriting or
similar agreement with the Company.
(iv) "Continuing Directors" means any member of the Board who was
a member of the Board on December 20, 1994, and any successor of a Continuing
Director who is recommended or elected to succeed the Continuing Director by a
majority of the remaining Continuing Directors.
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<PAGE>
13. Modification. At any time and from time to time the Committee may
direct execution of an instrument providing for the modification, extension or
renewal of this Option; provided, however, that no such modification, extension
or renewal shall (a) confer on the Optionee any right or benefit which could not
be conferred on him by the grant of a new option under the Plan at such time or
(b) alter, impair or adversely affect this Option or Agreement without the
written consent of the Optionee.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Optionee has hereunto affixed
his signature as of the day and year first above written.
SCHULTZ SAV-O STORES, INC.
By: ___________________________
Title:__________________________
-------------------------------
___________________, Optionee
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<PAGE>
Exhibit 1
SCHULTZ SAV-O STORES, INC.
NOTICE OF TRANSFER OF STOCK OPTION
This Notice is intended to (i) inform Schultz Sav-O Stores, Inc. (the
"Company"), that ________________ ( the "Optionee") has transferred and assigned
to the transferee named below (the "Transferee"), a member of the Optionee's
"immediate family," as such term is defined in Rule 16a-1(e) of the Securities
Exchange Act of 1934, or a trust, partnership or other entity established solely
for the benefit of members of the Optionee's immediate family, all of the
Optionee's right, title and interest in and to a nonqualified stock option (or
portion thereof described below) to purchase ___________ shares of common stock
of the Company at a price of $_____ per share, originally granted to the
Optionee pursuant to the Nonqualified Stock Option Agreement, dated
_____________, 19__, issued by the Company to the undersigned (the "Option") and
(ii) request the Company to issue a new Option in the name of the Transferee. No
consideration has been or will be received by the Optionee in connection with
this transfer.
The Option has been validly transferred and assigned by the Optionee
to the following:
- ------------------- -------------------------------------
Name of Transferee Street Address, City, State, Zip Code
- -------------------------------------------------
If entire Option has not been transferred, number
of shares underlying the portion transferred
- --------------------------------- ------------------
Signature of Optionee Date of Transfer
- ----------------------- -----------------
Signature of Transferee Name
By executing this Notice, the Transferee hereby agrees to comply with
and be subject to the terms and conditions of the Option.
Receipt of this Notice is hereby acknowledged this ___ day of
_________, 19__.
SCHULTZ SAV-O STORES, INC.
By
Name:
Title:
As Amended Through
October 15, 1998
SCHULTZ SAV-O STORES, INC.
OFFICER ANNUAL INCENTIVE PLAN
1. Purpose
The purpose of the Schultz Sav-O Stores, Inc. Officer Annual Incentive
Plan ("Plan") is to (a) reward Participants on an individual and team basis for
the achievement of corporate financial goals and objectives which increase the
economic value of the Company for the benefit of all shareholders; (b) provide
competitive levels of compensation to its executive officers to enable the
Company to attract and retain highly qualified and talented individuals who are
able to exert a significant impact on the economic value of the Company for the
benefit of all shareholders; (c) encourage teamwork and cooperation in the
achievement of corporate financial goals and objectives; and (d) recognize
differences in the performance of individual Participants.
2. Plan Administration
The Compensation and Stock Option Committee of the Board of Directors
(the "Committee") shall have full power, authority and responsibility for the
design, construction, administration and interpretation of the Plan. The
Committee may from time to time or at any time make such decisions and adopt
such rules and regulations for the design, construction, administration and
interpretation of the Plan as it deems appropriate. Any such decision made by
the Committee shall be final, conclusive and binding upon all Participants and
any person claiming under or through them. A majority of the members of the
Committee shall constitute a quorum. All determinations of the Committee shall
be made by at least a majority of a quorum. Any decision or determination
reduced to writing and signed by all of the members of the Committee shall be
fully as effective as if it had been made by a unanimous vote at a meeting of
the Committee duly called and held.
3. Definitions
3.1 "Base Salary" means the dollar amount of a Participant's
annual base salary actually earned during the Plan Year,
without adjustment for bonuses (hereunder or otherwise),
salary deferrals, value of benefits, stock option or other
equity-based incentive award grants or exercises, imputed
income, special payments, amounts contributed to or earned
under the Company's Retirement Savings Plan or its Executive
Benefits Restoration Plan or similar existing or future
plans.
3.2 "Base Salary Percentage" means the percentage arrived at by
dividing a Participant's Base Salary for a specified Plan
Year by the aggregate Base Salaries of all Participants for
the same Plan Year.
<PAGE>
3.3 "Bonus Amount" means a Participant's annual aggregate bonus
amount which is calculated in the manner set forth in
Section 5.1.
3.4 "Bonus Pool" means the dollar amount of the cash award pool
established for the specified Plan Year for the distribution
of Bonus Awards to Participants for such Plan Year,
calculated as follows:
Bonus Pool = 10% of the dollar amount of the Current Year
EVA + 5% of the dollar amount of the Incremental EVA +
$25,000 for each percentage point increase, if any, in net
sales of the Company for the specified Plan Year over net
sales of the Company in the preceding Plan Year, each as
reflected in the Company's audited financial statements for
such Plan Years, subject to adjustment as determined by the
Board to take into account extraordinary, unusual or
nonrecurring events or circumstances (other than the
acquisition of other supermarkets or businesses).
3.5 "Company Performance Bonus Pool" shall be equal to one-half
of the Bonus Pool for the specified Plan Year.
3.6 "Current Year EVA" means the EVA as calculated for the
specified Plan Year.
3.7 "Economic Value Added" or "EVA" means the NOPAT that remains
after subtracting the product of the Threshold Rate of
Return multiplied by the Investment Amount, expressed as
follows:
EVA = NOPAT C [Threshold Rate of Return x Investment Amount]
EVA may be positive or negative.
3.8 "Incremental EVA" means the Current Year EVA minus the EVA
for the prior Plan Year. For purposes of calculating
Incremental EVA for the 1995 Plan Year, the EVA for 1994 was
$1,128,000. Incremental EVA may not be negative.
3.9 "Individual Performance Bonus" shall have the meaning set
forth in Section 5.1.
3.10 "Individual Performance Bonus Pool" shall be equal to
one-half of the Bonus Pool for the specified Plan Year.
3.11 "Individual Performance Factor" shall have the meaning set
forth in Section 5.2.
-2-
<PAGE>
3.12 "Investment Amount" means the dollar amount of the Company's
average investment for the Plan Year, calculated by adding
the investment reflected on the Company's financial
statements as of the end of each fiscal quarter, and then
dividing by four, where investment is determined as follows:
Investment = indebtedness for borrowed money + shareholders'
investment + obligations under capital leases
3.13 "NOPAT" means the Company's net earnings after tax (without
reduction for any Bonus Amounts or Bonus Pool accrued, paid
or payable under the Plan), plus interest expense after tax
for the Plan Year, all as reflected in the Company's audited
financial statements for the Plan Year.
3.14 "Participant" means an eligible executive officer of the
Company under Section 4.1 who has been selected to
participate in the Plan for the Plan Year pursuant to
Section 4.2.
3.15 "Plan Year" means the one-year period coincident with the
Company's applicable fiscal year.
3.16 "Threshold Rate of Return" shall be the target percentage
rate of return on the Investment Amount for the specified
Plan Year established by the Committee at the beginning of
each Plan Year based on the Company's weighted average cost
of capital. For the 1995 Plan Year, the Threshold Rate of
Return has been established by the Committee as 9.1%.
4. Eligibility
4.1 Eligible Executive Officers. In general, all executive
officers of the Company (which generally shall include those
Company officers listed as such in the Company's annual
report to shareholders) at the beginning of a Plan Year will
be eligible for participation in the Plan. However,
nomination of an executive officer by the Chief Executive
Officer and approval by the Committee will be required for
actual participation.
4.2 Nomination and Approval. Each Plan Year, the Company's Chief
Executive Officer will nominate eligible executive officers
to participate in the Plan for the specified Plan Year. The
Committee will have the final authority to select the
Participants for such Plan Year from among the eligible
executive officers nominated by the Company's Chief
Executive Officer. Selection normally will take place, and
will be communicated to each Participant, prior to or
shortly after the beginning of the specified Plan Year.
5. Bonus Amounts; Individual Performance Factors
5.1 Calculation of Bonus Amounts. Each Participant's Bonus
Amount for a specified Plan Year will be equal to his
pro-rata portion of the Company Performance Bonus Pool plus
his Individual Performance Bonus. For any
-3-
<PAGE>
specified Plan Year, a Participant's pro-rata portion of the
Company Performance Bonus Pool shall be equal to the product
of the Participant's Base Salary Percentage multiplied by
the Company Performance Bonus Pool. The Participant's
Individual Performance Bonus shall be equal to the product
of the Participant's Base Salary Percentage multiplied by
the Individual Performance Bonus Pool multiplied by his
Individual Performance Factor; provided, however, that the
aggregate Individual Performance Bonuses for all
Participants for a specified Plan Year may not exceed the
Individual Performance Bonus Pool for such Plan Year. If the
aggregate Individual Performance Bonuses for all
Participants for a specified Plan Year would exceed the
Individual Performance Bonus Pool for such Plan Year, then
the Committee in its discretion shall adjust the
Participants' Individual Performance Bonuses so that such
aggregate Individual Performance Bonuses will not exceed the
Individual Performance Bonus Pool for such Plan Year.
5.2 Individual Performance Factor Calculation. Each
Participant's Individual Performance Factor for a Plan Year
will be based on the Participant's accomplishment of
individual and/or group financial and/or other goals or
objectives established by the Company's Chief Executive
Officer, with the approval and ratification of the Committee
(or as determined solely by the Committee in the case of the
Company's Chief Executive Officer), as of the beginning of
the specified Plan Year. Whenever possible, individual
performance will be evaluated according to quantifiable or
objective benchmarks of success and the level of the
Participant's relative achievement of such quantifiable
benchmarks. An achievement percentage continuum that ranges
from achieving 0% to 150% of the quantifiable benchmark
opportunity will be established and the Participant's
relative level of achievement of such quantifiable
benchmarks will be enumerated accordingly from 0 to 1.5
based on such continuum. After the end of a Plan Year, the
Company's Chief Executive Officer, with the approval and
ratification of the Committee (or solely by the Committee in
the case of the Company's Chief Executive Officer), will
evaluate and rate the Participant's performance over the
Plan Year and the relative contribution of the Participant
to the achievement of the previously established individual
or group financial or other performance goals and
objectives, and this evaluation will result in the
Participant's Individual Performance Factor being determined
according to the following schedule:
Performance Individual
Individual Rating Performance Factor
Very Good 1.5 1.5
Good 1.0
Satisfactory 0.5
Marginal 0.0
-4-
<PAGE>
6. Change in Status During the Plan Year
6.1 New Hire or Promotion
An executive officer who is newly hired or promoted during a
specified Plan Year to an executive officer position which,
if held by the Participant at the beginning of the Plan
Year, would have otherwise allowed the Participant to be
eligible for participation in the Plan will generally not be
eligible to receive a Bonus Amount for such Plan Year;
provided, however, that the Company's Chief Executive
Officer, with the approval and ratification of the Committee
(or solely by the Committee in the case of the Company's
Chief Executive Officer) may waive this policy and allow
such executive officer to receive a pro rata Bonus Amount
for such Plan Year based on the percentage of the Plan Year
the executive officer was employed in such eligible
executive officer position (determined based on the actual
number of full months of employment in such executive
officer position during the Plan Year divided by 12). Any
such waiver of this policy will take into account such
factors as the executive officer's contributions to the
Company's achievement of corporate financial goals and
objectives in such executive officer position and the
portion of the Plan Year the individual actually spent in
such executive officer position.
6.2 Death, Disability or Retirement
If a Participant's employment as an effective officer is
terminated during a Plan Year by reason of death, disability
or normal or early retirement, the Participant (or his or
her heirs or personal representatives in the case of death)
will receive a pro rata Bonus Amount for such Plan Year
based on the percentage of the Plan Year the Participant was
employed in such position (determined based on the actual
number of full months of employment of such Participant
during the Plan Year divided by 12).
6.3 Termination for any Other Reason
If a Participant's employment is terminated during a Plan
Year for any reason other than death, disability or
retirement, such Participant will generally not be eligible
to receive a Bonus Amount for such Plan Year; provided,
however, that the Company's Chief Executive Officer, with
the approval and ratification of the Committee (or solely
the Committee in the case of the Company's Chief Executive
Officer) may waive this policy and allow such Participant to
receive a pro-rata Bonus Amount for such Plan Year based on
the percentage of the Plan Year the executive officer was
employed in such eligible executive officer position
(determined based on the actual number of full months of
employment in such executive officer position during the
Plan Year divided by 12).
-5-
<PAGE>
7. Administrative Provisions
7.1 Amendments and Terminations. The Company's Board of
Directors shall have the right to modify or amend this Plan
in whole or in part from time to time or at any time, or
suspend it or terminate it entirely; provided, however, that
no such modification, amendment, suspension or termination
may, without the consent of any affected Participants (or
beneficiaries of such Participants in the event of death),
reduce the rights of any such Participants (or
beneficiaries, as applicable) to a payment or distribution
of a Bonus Amount already determined and earned under Plan
terms in effect prior to such change. A Participant shall
not be deemed to have earned or have any right to any Bonus
Amount for a Plan Year until completion of that Plan Year
and the determination of Bonus Amounts for such Plan Year by
the Company's Chief Executive Officer and/or the Committee.
7.2 Effect of Award on Other Employee Benefits. By acceptance of
a Bonus Amount, each Participant agrees that such Bonus
Amount is special additional compensation and that it will
not affect adversely any other employee benefit (e.g.,
Retirement Savings Plan, Executive Benefits Restoration
Plan, life insurance, etc.), in which the Participant
participates or to which he is entitled, except as provided
in Section 7.4 below. The existence of the Plan or the grant
of any Bonus Amounts hereunder shall not restrict the
ability of the Committee or the Board to grant any other
discretionary bonuses to any executive officers, employees
or others outside of the Plan.
7.3 Retirement Programs; Severance Agreements. Bonus Amounts
paid under this Plan shall be included in the Participant's
compensation for purposes of the Company's Retirement
Savings Plan, Executive Benefits Restoration Plan, any other
qualified employee benefit plan and any applicable key
executive employment and severance agreement with the
Company.
7.4 No Right to Continued Employment or Additional Bonus
Amounts. A Participant's eligibility for or actual receipt
of a Bonus Amount in any specified Plan Year shall not give
the Participant any right to continued employment with the
Company, and the right and power to dismiss or terminate the
employment of the Participant for any reason whatsoever
(other than as otherwise specified in any applicable
contract of employment between the Participant and the
Company) is specifically reserved to the Company. In
addition, the selection of an eligible executive officer as
a Participant in the Plan for any Plan Year shall not
require or infer the inclusion or selection of such person
as a Participant for any subsequent Plan Year or, if such
person is subsequently so included or selected, shall not
require that the same Bonus Amount provided to the
Participant under the Plan for an earlier Plan Year be
provided to such Participant for the subsequent Plan Year.
-6-
<PAGE>
7.5 Adjustments to Performance Goals. When a performance goal or
objective is based on Economic Value Added or other
quantifiable financial or accounting measures, it may be
appropriate to exclude certain items in order to properly
measure performance. The Committee in its discretion will
decide those items that shall be considered in adjusting
actual results. For example, some types of items that may be
considered for exclusion are:
a. Extraordinary Items. Any gains or losses which
will be treated as extraordinary in the Company's
financial statements under generally accepted
accounting principles.
b. Unanticipated Nonrecurring Non-Ordinary Course
Items. Unanticipated, nonrecurring, nonordinary
course items such as:
(i) Gains or losses from the sale or
disposal of real estate or property.
(ii) Gains resulting from insurance
recoveries when such gains relate to
claims filed in prior years.
(iii) Losses resulting from natural
catastrophes, when the cause of the
catastrophe is beyond the control of the
Company and did not result from any
failure or negligence on the Company's
part.
(iv) Changes in accounting policies or
practices.
7.6 Payment of Bonus Amounts. The Bonus Amounts payable for a Plan Year as
determined by the Chief Executive Officer and/or Committee shall be
distributed by the Company as soon as practicable after the date of
the first public release of the Company's complete audited financial
statements for such Plan Year.
8. Miscellaneous
8.1 Indemnification. Each person who is or who shall have been a member of
the Committee or of the Company's Board of Directors, shall not be
liable for, and shall be indemnified and held harmless by the Company
against and from, any and all loss, cost, liability or expense
(including attorneys' fees and disbursements) that may be imposed upon
or incurred by him or her in connection with any claim, action, suit
or proceeding to which he or she may be a party by reason of any
action taken or failure to act under or pursuant to the Plan. The
foregoing right of indemnification shall not be exclusive of any other
rights of indemnification, advancement of expenses or reimbursement to
which such persons may be entitled under the Company's Articles of
Incorporation, By-Laws, Indemnity Agreements, as a matter of law under
the Wisconsin
-7-
<PAGE>
Business Corporation Law, under applicable insurance policies or
otherwise, or any other power or authority that the Company may have
to indemnify or reimburse them or hold them harmless.
8.2 Expenses of the Plan. The expenses of administering this Plan
shall be borne by the Company.
8.3 Withholding Taxes. The Company shall deduct from all Bonus
Amounts paid or payable under the Plan any federal or state taxes
required by law to be withheld with respect to such payments.
8.4 Non-Transferrable Benefits. Bonus Amounts (or any interests
therein) paid or payable under the Plan are personal to
Participants and are non-transferrable and non-assignable during
the life of a Participant.
8.5 Unsecured Rights. The right of any Participant to receive a Bonus
Amount under the Plan when determined and earned shall be an
unsecured claim against the general assets of the Company and the
Participant shall have no rights in or against any specific
assets of the Company as a result of participation hereunder.
8.6 Powers of Company Not Affected. The existence of the Plan shall
not affect in any way the right or power of the Company, the
Board of Directors or its shareholders to make or authorize any
or all adjustments, recapitalization, reorganizations or other
changes in the Company's capital structure or its business, or
any merger or consolidation of the Company, or dissolution or
liquidation of the Company, or any sale or transfer of all or any
part of its assets or business or any other corporate act or
proceeding, whether of a similar character or otherwise.
8.7 Governing Law. This Plan shall be construed in accordance with
and governed by the laws of the State of Wisconsin.
8.8 Effective Date. The effective date of the Plan is January 1,
1995.
-8-
Name of Optionee: ______________
Date of Amendment: __________, 1998
GLOBAL AMENDMENT TO NONQUALIFIED STOCK OPTION AGREEMENT(S)
THIS GLOBAL AMENDMENT TO NONQUALIFIED STOCK OPTION AGREEMENT(S) (this
"Amendment") is entered into as of the date set forth above, by and between
Schultz Sav-O Stores, Inc. (the "Company") and the optionee named above (the
"Optionee").
WHEREAS, the Company and the Optionee have entered into one or more
Nonqualified Stock Option Agreement(s) (the "Agreements") under the Company's
1990 Stock Option Agreement and/or the Company's 1995 Equity Incentive Plan;
WHEREAS, the Company and the Optionee desire to amend the terms of
each of the Agreements;
NOW THEREFORE, the parties hereto agree as follows:
A. Each of the Agreements is hereby amended so that Section 5 of each
of the Agreements reads in its entirety as follows:
5. Transferability; Limitations. Subject to the limitations of this
Section 5, this Option shall be transferable, in whole or in part, upon the
surrender of this Option by the Optionee to the Company for one or more new
Options of like tenor representing, in the aggregate, the right to purchase the
number of shares of Common Stock purchasable hereunder, each of such new Options
to represent the right to purchase such number of shares of Common Stock as
shall be designated by the Optionee at the time of such surrender, subject to
the terms and conditions of the Plan and this Option. This Option may only be
transferred by will or by the laws of descent or distribution, or to any member
of the Optionee's "immediate family," as such term is defined in Rule 16a-1(e)
under the Securities Exchange Act of 1934 (the "Exchange Act") or to trusts,
partnerships or other entities established solely for the benefit of members of
the Optionee's immediate family; provided, however, that (x) there may be no
consideration for any such transfer, (y) subsequent transfers of any portion of
this Option must also be in compliance with this Section 5 and (z) promptly
after making any such transfer, the Optionee shall provide to the Company the
Notice of Transfer of Option attached as Exhibit 1 hereto. In the event of such
a permitted transfer of this Option, the transferee shall have all of the rights
of the Optionee under the Plan and this Option, as if the Optionee had retained
this Option. The terms of this Option shall be binding upon the permitted
transferees, executors, administrators, heirs and successors of the Optionee.
B. An Exhibit 1, attached to this Amendment, is hereby made an exhibit
to and a part of the Agreements.
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Amendment as of the date first set forth above.
SCHULTZ SAV-O STORES, INC. OPTIONEE
By: ____________________________ ____________________
Name:
Title:
<PAGE>
Exhibit 1
SCHULTZ SAV-O STORES, INC.
NOTICE OF TRANSFER OF STOCK OPTION
This Notice is intended to (i) inform Schultz Sav-O Stores, Inc. (the
"Company"), that ________________ ( the "Optionee") has transferred and assigned
to the transferee named below (the "Transferee"), a member of the Optionee's
"immediate family," as such term is defined in Rule 16a-1(e) of the Securities
Exchange Act of 1934, or a trust, partnership or other entity established solely
for the benefit of members of the Optionee's immediate family, all of the
Optionee's right, title and interest in and to a nonqualified stock option (or
portion thereof described below) to purchase ___________ shares of common stock
of the Company at a price of $_____ per share, originally granted to the
Optionee pursuant to the Nonqualified Stock Option Agreement, dated
_____________, 19__, issued by the Company to the undersigned (the "Option") and
(ii) request the Company to issue a new Option in the name of the Transferee. No
consideration has been or will be received by the Optionee in connection with
this transfer.
The Option has been validly transferred and assigned by the Optionee
to the following:
- -------------------------- -------------------------------------
Name of Transferee Street Address, City, State, Zip Code
- -------------------------------------------------
If entire Option has not been transferred, number
of shares underlying the portion transferred
- --------------------------------- ------------------
Signature of Optionee Date of Transfer
- --------------------------------- ---------------------------
Signature of Transferee Name
By executing this Notice, the Transferee hereby agrees to comply with
and be subject to the terms and conditions of the Option.
Receipt of this Notice is hereby acknowledged this ___ day of
_________, 19__.
SCHULTZ SAV-O STORES, INC.
By____________________________
Name: ____________________
Title:____________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements of Schultz Sav-O Stores, Inc. as of
and for the nine months ended October 10, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JAN-04-1998
<PERIOD-END> OCT-10-1998
<CASH> 30,828,000
<SECURITIES> 0
<RECEIVABLES> 9,309,000 <F1>
<ALLOWANCES> 0 <F1>
<INVENTORY> 20,996,000
<CURRENT-ASSETS> 67,896,000
<PP&E> 58,818,000
<DEPRECIATION> 37,136,000
<TOTAL-ASSETS> 102,582,000
<CURRENT-LIABILITIES> 37,158,000
<BONDS> 3,078,000
0
0
<COMMON> 438,000
<OTHER-SE> 50,428,000
<TOTAL-LIABILITY-AND-EQUITY> 102,582,000
<SALES> 368,760,000
<TOTAL-REVENUES> 368,760,000
<CGS> 309,156,000
<TOTAL-COSTS> 0 <F2>
<OTHER-EXPENSES> 50,564,000 <F2>
<LOSS-PROVISION> 0 <F2>
<INTEREST-EXPENSE> 634,000
<INCOME-PRETAX> 9,362,000
<INCOME-TAX> 3,632,000
<INCOME-CONTINUING> 5,730,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,730,000
<EPS-PRIMARY> 0.84
<EPS-DILUTED> 0.82
<FN>
<F1> Net of "Allowances for doubtful accounts".
<F2> Amounts included in "Othercosts and expenses".
</FN>
</TABLE>
