<PAGE>
Confidential, For Use of The Commission Only
SCHEDULE 14A INFORMATION
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
ORCHARD SUPPLY HARDWARE STORES CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
ORCHARD SUPPLY HARDWARE STORES CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
ORCHARD SUPPLY HARDWARE STORES CORPORATION
6450 VIA DEL ORO
SAN JOSE, CALIFORNIA 95119
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1994
TO THE STOCKHOLDERS OF ORCHARD SUPPLY HARDWARE STORES CORPORATION
The 1994 Annual Meeting of Stockholders (the "1994 Annual Meeting") of
Orchard Supply Hardware Stores Corporation (the "Company") will be held at 2:00
p.m., Pacific Time, on Friday, May 20, 1994 at The Fairmont Hotel, 170 South
Market Street, San Jose, California 95113, for the following purposes:
1. To elect eight Directors of the Company to serve until the next Annual
Meeting of stockholders and until their respective successors are elected
and qualified.
2. To approve an amendment to Article Fourth of the Certificate of
Incorporation of the Company to increase the number of shares of capital
stock and common stock that the Company is authorized to issue to
18,000,000 shares and 16,000,000 shares, respectively.
3. To approve the 1993 Stock Option Plan.
4. To ratify the appointment of Arthur Andersen & Co. as the Company's
independent auditors for the fiscal year ending January 29, 1995.
5. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only the holders of record of shares of the
Company's Common Stock at the close of business on April 7, 1994 will be
entitled to notice of and to vote at the 1994 Annual Meeting or any adjournment
or postponement thereof.
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended January 30, 1994 is being mailed with this Notice but is not to be
considered part of the proxy soliciting material.
By Order of the Board of Directors
MICHAEL SEDA
SECRETARY
April 13, 1994
San Jose, California
YOU ARE URGED TO VOTE UPON THE MATTERS PRESENTED AND TO SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IT IS IMPORTANT FOR
YOU TO BE REPRESENTED AT THE MEETING. PROXIES ARE REVOCABLE AT ANY TIME AND THE
EXECUTION OF YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE
PRESENT AT THE MEETING.
------------------------
REQUESTS FOR ADDITIONAL COPIES OF PROXY MATERIALS SHOULD BE ADDRESSED TO
MICHAEL SEDA, CORPORATE SECRETARY, AT THE OFFICES OF THE COMPANY, 6450 VIA DEL
ORO, SAN JOSE, CALIFORNIA 95119.
<PAGE>
ORCHARD SUPPLY HARDWARE STORES CORPORATION
6450 VIA DEL ORO
SAN JOSE, CALIFORNIA 95119
------------------------
PROXY STATEMENT
1994 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1994
------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Orchard Supply Hardware
Stores Corporation, a Delaware corporation (the "Company"), for use at the 1994
Annual Meeting of Stockholders (the "1994 Annual Meeting") to be held at 2:00
p.m., Pacific Time, on Friday, May 20, 1994 at The Fairmont Hotel, 170 South
Market Street, San Jose, California 95113, and any adjournment or postponement
thereof. This Proxy Statement and the form of proxy to be utilized at the 1994
Annual Meeting were mailed or delivered to the stockholders of the Company on or
about April 13, 1994.
MATTERS TO BE CONSIDERED
The 1994 Annual Meeting has been called to (1) elect eight Directors of the
Company to serve until the next Annual Meeting of stockholders and until their
respective successors are elected and qualified, (2) approve an amendment to
Article Fourth of the Certificate of Incorporation of the Company to increase
the number of shares of capital stock and common stock, $.01 par value per share
("Common Stock"), that the Company is authorized to issue to 18,000,000 shares
and 16,000,000 shares, respectively, (3) approve the adoption of the 1993 Stock
Option Plan, (4) ratify the appointment of Arthur Andersen & Co. as the
Company's independent auditors for the fiscal year ending January 29, 1995
("fiscal 1994") and (5) transact such other business as may properly come before
the meeting or any adjournment or postponement thereof.
RECORD DATE AND VOTING
The Board has fixed the close of business on April 7, 1994 as the record
date (the "Record Date") for the determination of the holders of Common Stock
entitled to vote at the 1994 Annual Meeting and any adjournment or postponement
thereof. As of the Record Date, there were outstanding shares of the
Company's Common Stock.
QUORUM AND VOTING REQUIREMENTS
The holders of record of a majority of the outstanding shares of Common
Stock will constitute a quorum for the transaction of business at the 1994
Annual Meeting. As to all matters, each holder of Common Stock is entitled to
one vote for each share of Common Stock held. Abstentions and broker non-votes
are counted for purposes of determining the presence or absence of a quorum for
the transaction of business. The Director nominees who receive the greatest
number of votes at the 1994 Annual Meeting will be elected to the Board of the
Company. Stockholders are not entitled to cumulate votes. Votes against a
candidate and votes withheld have no legal effect. In matters other than the
election of Directors, abstentions are counted as votes against in tabulations
of the votes cast on proposals presented to stockholders, whereas broker
non-votes are not counted for purposes of determining whether a proposal has
been approved.
All proxies which are properly completed, signed and returned prior to the
1994 Annual Meeting will be voted. Any proxy given by a stockholder may be
revoked at any time before it is exercised, by filing with the Secretary of the
Company an instrument revoking it, by delivering a duly executed proxy bearing a
later date or by the stockholder attending the 1994 Annual Meeting and
expressing a desire to vote his or her shares in person.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's capital stock as of February 28, 1994 by (i) each
person who is known by the Company to be the beneficial owner of more than 5% of
any class of the Company's capital stock, (ii) each Director and nominee for
Director, (iii) the President and Chief Executive Officer and each of the four
other most highly compensated executive officers of the Company and (iv) all
Directors and executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT
TITLE OF CLASS NAME OF BENEFICIAL OWNER(1) OWNED OF CLASS
- ---------------------------------- ------------------------------------------------------ ---------- ------------
<S> <C> <C> <C>
Common Stock Freeman Spogli & Co.(2)(3)............................ 3,979,043 48.2%
Janus Capital Corporation(4).......................... 531,935 7.6%
Maynard Jenkins(5).................................... 44,338 *
Brad R. Tukey......................................... -- --
Stephen M. Hilberg(6)................................. 18,170 *
Robert A. Lewis(6).................................... 32,170 *
Joseph A. DiRocco..................................... 6,000 *
Bradford M. Freeman(2)(3)............................. -- --
Morton Godlas......................................... 500 *
J. Frederick Simmons(2)(3)............................ -- --
Ronald P. Spogli(2)(3)................................ -- --
William E. Walsh...................................... -- --
William M. Wardlaw(2)(3).............................. -- --
Directors and Executive Officers as a Group
(15 persons)(2)(3)(7)................................. 4,108,833 49.6%
6% Cumulative Convertible Freeman Spogli Holdings, Inc.(3)...................... 800,000 100%
Preferred Stock
<FN>
- ------------
* Less than 1%
(1) Except as otherwise indicated below, the persons named have sole voting
power and investment power with respect to all shares of capital stock
shown as beneficially owned by them, subject to community property laws
where applicable.
(2) 2,699,043 shares of Common Stock are held of record by FS Equity Partners
II, L.P. ("FSEP II"). As general partner of FSEP II, Freeman Spogli & Co.
("FS&Co.") has the sole power to vote and dispose of such shares. Messrs.
Freeman, Simmons, Spogli and Wardlaw, each of whom is a Director of the
Company, and John M. Roth are general partners of FS&Co., and as such may
be deemed to be the beneficial owners of the shares of the Company's
capital stock indicated as beneficially owned by FS&Co. The business
address of FS&Co., its general partners and FSEP II is 11100 Santa Monica
Boulevard, Suite 1900, Los Angeles, California 90025.
(3) On February 25, 1994 the Company sold 800,000 shares of 6% Cumulative
Convertible Preferred Stock, $.01 par value per share ("Convertible
Preferred Stock"), to FS Equity Partners III, L.P. ("FSEP III"). The
Convertible Preferred Stock consists of two series: 325,000 shares of
Convertible Preferred Stock, Series 1 (the "Series 1 Preferred Stock") now
convertible into 520,000 shares of Common Stock and 475,000 shares of
Convertible Preferred Stock, Series 2 (the "Series 2 Preferred Stock")
convertible into 760,000 shares of Common Stock upon approval by the
stockholders of an increase in the number of shares of capital stock and
Common Stock that the Company is authorized to issue. See "Proposal 2." As
general partner of FS Capital Partners, L.P. ("FS Capital"), which is
general partner of FSEP III, Freeman Spogli Holdings, Inc. ("FSHI") has the
sole power to vote and dispose of such shares. Messrs. Freeman, Simmons,
Spogli and Wardlaw, each of whom is a Director of the Company, and John M.
Roth are the sole directors, officers and shareholders of FSHI, and as such
may be deemed to be the beneficial owners of the shares of the Company's
capital stock indicated as beneficially owned by FSHI.
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
In addition, FS&Co., an affiliate of FSHI, may be deemed to be the
beneficial owner of such shares. The business address of FSEP III, FS
Capital, FSHI and its sole directors, officers and shareholders is 11100
Santa Monica Boulevard, Suite 1900, Los Angeles, California 90025.
(4) As reported in a Schedule 13G dated February 11, 1994 filed jointly with
the Securities and Exchange Commission (the "Commission") by Janus Capital
Corporation ("Janus"), Kansas City Southern Industries ("KCSI"), and Thomas
H. Bailey, Janus has claimed shared voting and dispositive power and full
beneficial ownership with respect to all such shares. Janus is an
investment advisor registered under Section 203 of the Investment Advisors
Act of 1940.
(5) 35,920 shares of Common Stock are held by Maynard L. Jenkins, Jr. and Susan
M. Jenkins, Co-Trustees under the Living Trust dated November 10, 1988. The
amount stated includes 8,418 shares of Common Stock covered by options
which are exercisable within the next 60 days.
(6) The amount stated includes 4,210 shares of Common Stock covered by options
which are exercisable within the next 60 days.
(7) The amount stated includes 23,012 shares of Common Stock covered by options
which are exercisable within the next 60 days.
</TABLE>
PROPOSAL 1 -- ELECTION OF DIRECTORS
Eight Directors are to be elected at the 1994 Annual Meeting to serve until
the next Annual Meeting of stockholders and until their respective successors
have been elected and qualified. In the absence of instructions to the contrary,
proxies covering shares of Common Stock will be voted in favor of the election
of the persons listed below. In the event that any nominee for election as
Director should become unavailable to serve, it is intended that votes will be
cast, pursuant to the enclosed proxy, for such substitute nominee as may be
nominated by the Company. Management has no present knowledge that any of the
persons named will be unavailable to serve.
No arrangement or understanding exists between any nominee and any other
person or persons pursuant to which any nominee was or is to be selected as a
Director or nominee. None of the nominees has any family relationship to any
other nominee or to any executive officer of the Company.
INFORMATION CONCERNING INCUMBENT DIRECTORS AND NOMINEES TO BOARD OF DIRECTORS
Information is set forth below concerning the incumbent Directors, all of
whom are also nominees for election as Directors, and the year in which each
Director was first elected as a Director of the Company. Each nominee has
furnished the information as to his beneficial ownership of Common Stock and
Convertible Preferred Stock as of February 28, 1994 and, if not employed by the
Company, the nominee's principal occupation. Each nominee has consented to being
named in this Proxy Statement as a nominee for Director and has agreed to serve
as a Director if elected.
3
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION WITH THE COMPANY SINCE
--------------------------- --- ---------------------------------------------------------------------- --------
<S> <C> <C> <C>
Maynard Jenkins 51 President, Chief Executive Officer and Director 1989
Stephen M. Hilberg 50 Vice President-Finance, Chief Financial Officer and Director 1989
Bradford M. Freeman*+ 52 Director 1989
Morton Godlas*+ 71 Director 1993
J. Frederick Simmons* 39 Director 1989
Ronald P. Spogli*+ 46 Director 1989
William E. Walsh 62 Director 1993
William M. Wardlaw+ 47 Director 1989
<FN>
- ------------
* Member of the Compensation Committee.
+ Member of the Audit Committee.
</TABLE>
Mr. Jenkins has served as President and Chief Executive Officer of the
Company since 1986. Before joining the Company, Mr. Jenkins served as the
President and Chief Operating Officer of Pay 'n Save drug stores. Mr. Jenkins
serves on the advisory board of Malsham Group, Inc., a Canadian subsidiary of
Molson Companies, Ltd.
Mr. Hilberg has served as Chief Financial Officer and Vice President-Finance
of the Company since 1981. From 1978 to 1981, Mr. Hilberg served as the
Corporate Controller of Franklin Stores.
Mr. Freeman is a founding partner of FS&Co., which was founded in 1983. Mr.
Freeman is also a member of the Board of Directors of Duff & Phelps Corporation
and Buttrey Food and Drug Stores Company.
Mr. Godlas is a management consultant with more than 45 years of retail
experience. Since 1982, Mr. Godlas has been President and Chief Executive
Officer of M. Godlas, Inc., a retail consulting firm. From 1978 to 1982, Mr.
Godlas was Corporate Senior Vice President-General Merchandise at Lucky Stores,
Inc.
Mr. Simmons joined FS&Co. in 1986 and became a general partner in January
1991. Mr. Simmons is also a member of the Board of Directors of Buttrey Food and
Drug Stores Company, Purity Supreme, Inc. and EnviroSource, Inc.
Mr. Spogli is a founding partner of FS&Co., which was founded in 1983. Mr.
Spogli is the Chairman of the Board and a Director of EnviroSource, Inc. Mr.
Spogli also serves on the Board of Directors of Mac Frugal's Bargains -
Close-Outs Inc., Buttrey Food and Drug Stores Company and Purity Supreme, Inc.
and on the Board of Representatives of Brylane, L.P.
Mr. Walsh has been Head Coach of the Stanford University football team since
1992 and was head coach of the San Francisco 49ers from 1979 to 1989. From 1989
to 1992, Mr. Walsh served as an analyst for NBC television. Mr. Walsh is also a
member of the Board of Directors of American Building Maintenance, Inc.
Mr. Wardlaw joined FS&Co. in March 1988 and became a general partner in
January 1991. Mr. Wardlaw is also a member of the Board of Directors of Buttrey
Food and Drug Stores Company, Purity Supreme, Inc. and EnviroSource, Inc.
4
<PAGE>
THE BOARD OF DIRECTORS
COMMITTEES
The standing committees of the Board are the Audit Committee (the "Audit
Committee") and the Compensation Committee (the "Compensation Committee"). The
Audit Committee, which presently consists of Messrs. Freeman, Godlas, Spogli and
Wardlaw, met once during the fiscal year ended January 30, 1994 ("fiscal 1993").
The Compensation Committee, which presently consists of Messrs. Freeman, Godlas,
Simmons and Spogli, met once during fiscal 1993.
The Audit Committee recommends to the Board the engagement or discharge of
the Company's independent auditors; reviews with the independent auditors the
scope, timing and plan for the annual audit, any non-audit services and the fees
for audit and other services; reviews outstanding accounting and auditing issues
with the independent auditors; and supervises or conducts such additional
projects as may be relevant to its duties. The Audit Committee is also
responsible for reviewing and making recommendations with respect to the
Company's financial condition, its financial controls and accounting practices
and procedures.
The Compensation Committee recommends to the Board compensation policies and
guidelines for the Company's executives and oversees the granting of incentive
compensation, if any, to such persons. The Compensation Committee also
administers the Company's bonus and stock option plans. See "Report of the
Compensation Committee of the Board of Directors."
MEETINGS AND REMUNERATION
During fiscal 1993, the Board held five meetings and took various actions by
written consent. Each incumbent Director attended at least 75% of the aggregate
of (i) the total number of meetings held by the Board during fiscal 1993 and
(ii) the total number of meetings held by all committees of the Board during
that period within which he was a Director or member of such committee of the
Board.
Each Director is elected to hold office until the next Annual Meeting of
stockholders and until his respective successor is elected and qualified. Except
for Messrs. Godlas and Walsh, Directors do not receive compensation for service
on the Board or any committee of the Board. All Directors are reimbursed for
their out-of-pocket expenses in serving on the Board and any committee of the
Board. Messrs. Godlas and Walsh receive $2,500 for each regular Board meeting
attended and $1,500 for each special Board meeting attended. The Company has
adopted a stock option plan for outside directors. See "1993 Non-Employee
Directors Stock Option Plan."
1993 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
Non-employee Directors of the Company, excluding Directors who are
affiliated with FS&Co., are eligible to participate in the 1993 Non-Employee
Directors Stock Option Plan (the "Non-Employee Directors Plan"). Participants in
the Non-Employee Directors Plan may be granted options to purchase shares of the
Company's Common Stock at a purchase price determined by the Compensation
Committee. Options granted under the Non-Employee Directors Plan are not
intended to qualify for treatment as incentive stock options under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"). In no event shall
such purchase price be less than 85% of the fair market value of the underlying
shares at the time the option is granted, or less than 110% of the fair market
value in the case of any participant who owns capital stock possessing more than
10% of the total combined voting power or value of all classes of capital stock
of the Company or its subsidiaries. Up to 10,000 shares of the Company's Common
Stock may be issued under the Non-Employee Directors Plan upon the exercise of
options granted thereunder, which options vest and become exercisable in annual
installments of 20% per year over five years. As of February 28, 1994, options
covering 10,000 shares of Common Stock had been granted under the Non-Employee
Directors Plan, none of which had been exercised.
5
<PAGE>
EXECUTIVE OFFICERS, COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS
Set forth in the table below are the names, ages and current offices held by
all executive officers of the Company.
<TABLE>
<CAPTION>
EXECUTIVE
OFFICER
NAME AGE POSITION WITH THE COMPANY SINCE
--------------------------- --- ------------------------------------------------------------ ---------
<S> <C> <C> <C>
Maynard Jenkins 51 President, Chief Executive Officer and Director 1986
Brad R. Tukey 47 Executive Vice President 1993
Stephen M. Hilberg 50 Vice President-Finance, Chief Financial Officer and Director 1981
William G. Collard 56 Vice President-Distribution 1979
Joseph A. DiRocco 44 Vice President-Marketing 1985
Robert A. Lewis 48 Vice President-Purchasing and General Merchandise Manager 1979
Carolyn J. McInnes 49 Vice President-Human Resources 1986
Lee Nemechek 60 Vice President-Stores 1990
</TABLE>
Executive officers of the Company are elected by and serve at the discretion
of the Board. Other than Mr. Jenkins, no arrangement exists between any
executive officer and any other person or persons pursuant to which any
executive officer was or is to be selected as an executive officer. See
"Employment Agreement." None of the executive officers has any family
relationship to any nominee for Director or to any other executive officer of
the Company. Set forth below is a brief description of the business experience
for the previous five years of all executive officers except Messrs. Jenkins and
Hilberg. See "Information Concerning Incumbent Directors and Nominees to Board
of Directors."
Mr. Tukey has served as Executive Vice President since July 1993. Mr. Tukey
served as Vice President-Marketing, Merchandising and Advertising for Standard
Brands Paint Company from 1992 to 1993, consultant to Price Club and Sol Price
Companies from 1991 to 1992 and as President and Chief Executive Officer of HQ
Office Supplies Warehouse, Inc. from 1988 to 1990. Merchandising, marketing,
real estate and store planning report to Mr. Tukey.
Mr. Collard has served as Vice President-Distribution of the Company since
1986. Mr. Collard joined the Company in 1979 and has over 30 years of
warehousing and distribution experience. Prior to joining the Company, Mr.
Collard served for seven years as the Operations Supervisor for Fleming Foods
and for nine years as the Warehouse Foreman for Louis Stores. Mr. Collard is
currently responsible for the Company's warehouse and distribution activities.
Mr. DiRocco has served as Vice President-Marketing of the Company since
1986. From 1983 to May 1986, Mr. DiRocco worked in the marketing and advertising
departments of the Company. Mr. DiRocco joined the Company in 1983 and has over
15 years of marketing experience in the retail industry.
Mr. Lewis has served as Vice President-Purchasing and General Merchandise
Manager of the Company since 1979. Mr. Lewis began his career at the Company in
1961 and is responsible for all aspects of the Company's merchandising and
buying program.
Ms. McInnes has served as Vice President-Human Resources of the Company
since 1986. Ms. McInnes joined the Company in 1979 as Director of Training. She
is responsible for all of the Company's training, personnel, wage and benefits
related matters.
Mr. Nemechek joined the Company in March 1987 as a Regional Manager and was
promoted to Vice President-Stores in July 1990. Prior to joining the Company,
Mr. Nemechek had over 30 years of experience in grocery and general merchandise
retailing. Mr. Nemechek is responsible for all aspects of store operations.
6
<PAGE>
COMPENSATION
The following table sets forth information concerning the annual and long
term compensation for services in all capacities to the Company paid or accrued
by the Company to the President and Chief Executive Officer and to each of the
four other most highly compensated executive officers of the Company for each of
the fiscal years in the three year period ended January 30, 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------
OTHER ANNUAL
NAME AND SALARY BONUS COMPENSATION
PRINCIPAL POSITIONS YEAR ($) ($)(1)(2) ($)(3)
---------------------------------------- ---- ------- ----------- ------------
<S> <C> <C> <C> <C>
Maynard Jenkins......................... 1993 318,000 330,701 --
President and Chief Executive Officer 1992 299,578 286,747 --
1991 293,000 -- --
Brad R. Tukey(6)........................ 1993 86,442 38,667 --
Executive Vice President 1992 -- -- --
1991 -- -- --
Stephen M. Hilberg...................... 1993 119,054 43,504 --
Vice President-Finance and Chief 1992 117,484 39,287 --
Financial Officer 1991 115,000 -- --
Robert A. Lewis......................... 1993 102,319 37,470 --
Vice President-Purchasing and General 1992 101,923 34,623 --
Merchandise Manager 1991 100,000 -- --
Joseph A. DiRocco....................... 1993 93,692 34,292 --
Vice President-Marketing 1992 92,704 31,860 --
1991 91,000 -- --
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
AWARDS
-----------------------
SECURITIES PAYOUTS
RESTRICTED UNDERLYING -------
STOCK OPTIONS/ LTIP ALL OTHER
NAME AND AWARDS SARS PAYOUTS COMPENSATION
PRINCIPAL POSITIONS ($) (#)(4) ($) ($)(3)(5)
---------------------------------------- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C>
Maynard Jenkins......................... 0 7,500 0 18,795
President and Chief Executive Officer 0 12,045 0 23,597
0 -- 0 --
Brad R. Tukey(6)........................ 0 5,500 0 3,567
Executive Vice President 0 -- 0 --
0 -- 0 --
Stephen M. Hilberg...................... 0 4,500 0 13,353
Vice President-Finance and Chief 0 -- 0 10,741
Financial Officer 0 -- 0 --
Robert A. Lewis......................... 0 3,000 0 10,577
Vice President-Purchasing and General 0 -- 0 8,959
Merchandise Manager 0 -- 0 --
Joseph A. DiRocco....................... 0 3,000 0 14,989
Vice President-Marketing 0 -- 0 12,839
0 -- 0 --
<FN>
- ---------------
(1) Amounts shown include compensation earned and received by executive
officers as well as amounts earned but deferred at the election of those
officers.
(2) Represents payments made to executive officers pursuant to the Company's
Performance Bonus Plan and $100,000 bonuses paid to Maynard Jenkins for
fiscal 1992 and fiscal 1993 pursuant to his employment agreement. See
"Employment Agreement."
(3) In accordance with the transitional provisions of the new executive
compensation disclosure rules adopted by the Commission, amounts of Other
Annual Compensation and All Other Compensation for fiscal 1991 are excluded
from this table.
(4) Represents options granted under the 1993 Plan (as defined below) with the
exception of options to purchase 12,045 shares of Common Stock made outside
any stock option plan to Maynard Jenkins on April 15, 1992 pursuant to a
Nonqualified Stock Option Agreement.
(5) Represents matching contributions to 401(k) retirement plan, profit-sharing
payments, supplemental income bonus, automobile allowance and payments made
toward group life insurance on behalf of executive officers.
(6) Mr. Tukey joined the Company in July 1993.
</TABLE>
EMPLOYMENT AGREEMENT
Mr. Jenkins is party to an employment agreement which provides for a base
annual salary of not less than $275,000 per year and bonuses and fringe benefits
determined from time to time by the Company. In April 1992, Mr. Jenkins'
employment agreement was amended to provide for an additional $100,000 bonus to
be paid to him annually. Except in the event of termination of employment for
cause, death or disability, the current term of Mr. Jenkins' employment
agreement will expire on December 31, 1995. The employment agreement shall
automatically renew for a two year term on each expiration date until notice of
termination
7
<PAGE>
is given by the Company. Upon termination of employment for death or disability,
Mr. Jenkins is entitled to a severance payment equal to six months of his
salary. Upon termination of employment other than for cause, death or
disability, Mr. Jenkins is entitled to a severance payment consisting of two
years' base salary, the target bonus applicable to the earning year in progress
at the date of termination and the $100,000 bonus for the year in progress at
the date of termination. See "Performance Bonus."
AMENDED 1989 NONQUALIFIED STOCK OPTION PLAN
Officers and employees, including Directors who are officers or employees,
of the Company are eligible to participate in the Amended 1989 Nonqualified
Stock Option Plan (the "1989 Plan"). Only officers and employees who do not own
capital stock possessing more than 10% of the total combined voting power or
value of all classes of capital stock of the Company are eligible to receive
grants of options under the 1989 Plan. Under the 1989 Plan, participants may be
granted options to purchase shares of the Company's Common Stock at a purchase
price determined by the Compensation Committee. In no event shall such purchase
price be less than the fair market value of the underlying shares at the time
the option is granted. Options granted under the 1989 Plan are not intended to
qualify for treatment as incentive stock options under Section 422 of the Code.
Up to 60,000 shares of the Company's Common Stock may be issued under the 1989
Plan upon the exercise of options granted thereunder. As of February 28, 1994,
options covering 43,040 shares of Common Stock were outstanding under the 1989
Plan, and options to purchase 7,505 shares of Common Stock had been exercised.
Options granted under the 1989 Plan terminate at the earliest to occur of
(i) 90 days after the participant's termination of employment by the Company
(unless such termination results from the participant's death or disability, or
the participant dies within 90 days after such termination of employment, in
which case, the option shall terminate 180 days after the date of the
participant's termination of employment); (ii) ten years from the date of grant;
or (iii) on the effective date of a dissolution, liquidation or sale of all of
the business, properties and assets of the Company or upon certain
reorganizations, mergers or consolidations.
Options granted under the 1989 Plan vest and become exercisable in annual
installments of 20% per year over five years. Upon the occurrence of certain
mergers, consolidations, business combinations, asset sales, tender offers,
exchange offers or liquidations involving the Company (an "Extraordinary
Corporate Event"), the vesting of any outstanding option will be accelerated and
each outstanding option (and any portion thereof) will become immediately and
fully exercisable. Upon the occurrence of any event other than an Extraordinary
Corporate Event, the Compensation Committee may, in its sole discretion, elect
to accelerate the vesting of all or any portion of the options then outstanding.
Under the 1989 Plan, any time prior to four years after the date of grant of
an option, the Company has the option to repurchase all of the shares of Common
Stock acquired by the participant upon the exercise of such option for a period
of 90 days after the date of termination of the participant due to retirement,
voluntary resignation, or dismissal, with or without cause (but excluding death
or disability). The purchase price for such repurchased shares shall equal the
greater of $8.33 or their fair market value as determined by the Compensation
Committee. In addition, the Company has a right of first refusal in the event a
participant proposes to sell any shares purchased upon exercise of such
participant's options. After the termination of a participant's employment, the
options may be exercised only with respect to that number of shares of Common
Stock which could have been purchased upon exercise of the options at the time
of the termination of such employment.
1993 STOCK OPTION PLAN
Officers and key employees, including Directors who are officers or
employees, of the Company who are chosen by the Compensation Committee are
eligible to participate in the 1993 Stock Option Plan (the "1993 Plan"). A
description of the material terms of the 1993 Plan is provided in "Proposal 3."
8
<PAGE>
The following table sets forth information concerning options granted to the
President and Chief Executive Officer and to each of the four other most highly
compensated executive officers of the Company during fiscal 1993.
OPTION GRANTS TABLE
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK
UNDERLYING OPTIONS/SARS PRICE APPRECIATION
OPTIONS/SARS GRANTED TO EXERCISE OR FOR OPTION TERM
GRANTED(1) EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ----------------------------------- ------------- ----------------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Maynard Jenkins.................... 7,500 7.9 17.10 11/19/03 80,656 204,397
Brad R. Tukey...................... 5,500 5.8 17.10 11/19/03 59,148 149,891
Stephen M. Hilberg................. 4,500 4.7 17.10 11/19/03 48,393 122,638
Robert A. Lewis.................... 3,000 3.1 17.10 11/19/03 32,262 81,759
Joseph A. DiRocco.................. 3,000 3.1 17.10 11/19/03 32,262 81,759
<FN>
- ------------
(1) All of the options set forth in the table above were granted pursuant to
the 1993 Plan. For a discussion of the material terms of these options, see
"Proposal 3."
</TABLE>
The following table sets forth information concerning the aggregate number
of options exercised by the President and Chief Executive Officer and by each of
the four other most highly compensated executive officers of the Company during
fiscal 1993 and the aggregate number of outstanding options held by each such
officer as of January 30, 1994.
OPTION EXERCISES AND YEAR END VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/ IN-THE-MONEY
SARS AT OPTIONS/SARS AT
JANUARY 30, 1994(#) JANUARY 30, 1994($)
-------------------- --------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
- ----------------------------------- --------------- ----------- -------------------- --------------------
<S> <C> <C> <C> <C>
Maynard Jenkins.................... -- -- 8,418/ 18,022 49,835/ 12,456
Brad R. Tukey...................... -- -- --/ 5,500 --/ --
Stephen M. Hilberg................. -- -- 4,210/ 5,552 24,923/ 6,228
Robert A. Lewis.................... -- -- 4,210/ 4,052 24,923/ 6,228
Joseph A. DiRocco.................. 4,210 -- --/ 4,052 --/ 6,228
<FN>
- ------------
(1) Value is determined by subtracting the exercise price from the fair market
value (the closing price for the Company's Common Stock as reported on the
Nasdaq National Market as of January 28, 1994 ($14.25 per share)) and
multiplying the resulting number by the number of underlying shares of
Common Stock.
</TABLE>
EMPLOYEE STOCK SUBSCRIPTION PLAN
In connection with the transaction in May 1989, organized by FS&Co., in
which the Company acquired certain assets and liabilities of its predecessor
company, the Orchard Supply Hardware division of Wickes Companies Inc., the
Board adopted the 1989 Employee Stock Subscription Plan, as amended on August 7,
1989 and June 11, 1991 (as amended, the "Subscription Plan") pursuant to which
an aggregate of 97,200 shares of Series A Preferred Stock, $.01 par value per
share (the "Series A Preferred Stock") and
9
<PAGE>
58,320 shares of Common Stock were issued, at a purchase price of $10.00 and
$8.33 per share, respectively, to management and certain other key employees of
the Company. Immediately after the Company's initial public offering in April
1993, the Company reclassified all of its shares of Series A Preferred Stock
into shares of Common Stock (the "Reclassification"). All of the shares were
purchased pursuant to Subscription Agreements which provide that one-fifth of
the shares of Common Stock purchased were deemed "vested" upon purchase, with
the remainder vesting in four equal annual installments. All of the shares of
Series A Preferred Stock were deemed vested upon purchase. If a purchaser's
employment with the Company is terminated prior to the fourth anniversary of the
date of purchase, the Company retains the right to repurchase all unvested
shares at their original purchase price. Except for certain permitted transfers
to family members, upon death or pursuant to a registered public offering, no
shares may be sold or transferred prior to the fourth anniversary of the date of
purchase. As of February 28, 1994, an aggregate of 145,209 shares of Common
Stock were outstanding under the Subscription Plan.
Members of management and employees may elect to pay a portion of the
purchase price for their shares purchased under the Subscription Plan through
the delivery of full recourse promissory notes, bearing interest at the rate
designated by Bankers Trust Company as its prime rate, as adjusted from time to
time. Accrued interest on the promissory notes is payable quarterly, and the
principal balance of, including all accrued and unpaid interest on, the
promissory notes is payable in full at maturity. For the participants electing
to deliver promissory notes, their shares are pledged to the Company to secure
payment of the notes. As of February 28, 1994, promissory notes in the aggregate
amount of $170,155 remained outstanding to the Company by management and
employees.
After giving effect to the Reclassification, the following executive
officers of the Company have acquired the number of shares of Common Stock set
forth after their names pursuant to the Subscription Plan: Maynard Jenkins,
35,920 shares; Stephen M. Hilberg, 17,960 shares; Joseph A. DiRocco, 17,960
shares; Robert A. Lewis, 17,960 shares; Carolyn J. McInnes, 11,972 shares;
William G. Collard, 11,972 shares; and Lee Nemechek, 2,394 shares. For Messrs.
Hilberg, DiRocco and Nemechek and Ms. McInnes, $50,000, $75,000, $10,000 and
$30,000 of their purchase price, respectively, was financed through the delivery
of promissory notes. All of such notes with the exception of Mr. Nemechek's have
been repaid. After giving effect to the Reclassification, in addition to the
preceding eight executive officers, 83 other employees of the Company acquired
55,880 shares of Common Stock of the Company pursuant to the Subscription Plan.
RETIREMENT AND PROFIT SHARING PLANS
All of the Company's salaried and hourly employees over 21 years of age are
eligible to participate in the Company's Your Employee Savings Plus Plan, or YES
Plus Plan, after one year of employment. The YES Plus Plan allows eligible
employees to invest up to 6% of their pre-tax compensation and an additional 6%
of after-tax compensation. All amounts contributed by the employee are
immediately fully vested. The Company matches 50% of employee contributions to
the YES Plus Plan up to a maximum employee contribution of 3% of the employee's
compensation. In addition, the Company may, in its discretion, contribute
amounts to a profit sharing pool which is then allocated to the accounts of all
eligible employees based on their covered earnings. This contribution is
determined yearly based on the Company's performance and profitability. The
Company's contributions only vest after two years of service at which time such
contributions are 40% vested. Thereafter, the contributions vest at a rate of
20% for each year so that the Company's contributions are fully vested after
five years of service. Notwithstanding the foregoing, the Company's
contributions immediately vest when the employee reaches 55 or upon the death or
permanent disability of the employee while so employed.
PERFORMANCE BONUS
The Company has instituted a bonus plan (the "Performance Bonus Plan")
covering senior management (the President and seven Vice Presidents) which
provides for annual bonus payments based upon the Company's performance against
annually established target levels of "EBDIT" (earnings before depreciation,
amortization of deferred charges, interest and income taxes) and "Free Cash
Flow" (EBDIT minus capital expenditures and plus or minus the change in working
capital). The amounts awarded each year are
10
<PAGE>
based on specified percentages of each person's salary upon the Company's
attaining such target levels. In addition, if performance exceeds the target
levels, senior management receives a percentage of the excess amount.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 25, 1994 the Company sold to FSEP III, an affiliate of FS&Co.,
800,000 shares of Convertible Preferred Stock with an aggregate liquidation
preference of $20.0 million, resulting in gross proceeds to the Company of $19.4
million. See "Security Ownership of Certain Beneficial Owners and Management."
Immediately following consummation of the Company's initial public offering
of 3,800,000 shares of Common Stock (the "Initial Public Offering") in April
1993, borrowings under the Company's revolving credit facility were used to pay
$2.5 million of the accrued and unpaid dividends on its Series A Preferred
Stock, which was owned by FSEP II, an affiliate of FS&Co., and management
(including the executive officers set forth in the table under the caption
"Executive Officers"). The remainder of the accrued and unpaid dividends
totalling $10.8 million were paid in additional shares of Series A Preferred
Stock. After payment of the Series A Preferred Stock dividends, the Company
reclassified its Series A Preferred Stock into shares of Common Stock by
amending its Certificate of Incorporation on the closing date of the Initial
Public Offering.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Bradford M. Freeman, Morton Godlas, Ronald P. Spogli, J. Frederick Simmons
and Maynard Jenkins, the President and Chief Executive Officer of the Company,
served on the Compensation Committee during fiscal 1993. Mr. Jenkins resigned
from the Compensation Committee on February 26, 1993. The Compensation Committee
approved all option grants under the 1993 Plan following Mr. Jenkins'
resignation. See "Proposal 3."
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board is comprised of Messrs. Freeman,
Godlas, Simmons and Spogli. The Compensation Committee establishes the general
compensation policies of the Company, establishes the compensation plans and
specific compensation levels for executive officers, and administers the 1989
Plan, the Non-Employee Directors Plan and the 1993 Plan.
As required by recently adopted rules designated to enhance the disclosure
of the Company's executive compensation policies and practices, the following is
the Compensation Committee's report submitted to the Board addressing the
compensation of the Company's executive officers for fiscal 1993.
COMPENSATION POLICY
The Company's executive compensation policy is designed to establish an
appropriate relationship between executive pay and the Company's annual
performance, its long term growth objectives and its ability to attract and
retain qualified executive officers. The Compensation Committee attempts to
achieve these goals by integrating competitive annual base salaries with (a)
bonuses based on corporate performance and on the achievement of specified
performance objectives through the Performance Bonus Plan and (b) stock options
through the 1989 Plan and the 1993 Plan. The Compensation Committee believes
that cash compensation in the form of salary and bonus provides company
executives with short term rewards for success in operations, and that long term
compensation through the award of stock options encourages growth in management
stock ownership which leads to expansion of management's stake in the long term
performance and success of the Company.
BASE SALARY. For fiscal 1993, the Compensation Committee approved the base
salary of the executive officers. In determining the base salary of each of the
executive officers, the Company relied on information
11
<PAGE>
regarding salaries paid to executive officers with comparable responsibilities
employed by companies with comparable businesses. In fiscal 1993, executive
officers generally received raises in their annual base salary, with the largest
raise of $18,422 going to the President and Chief Executive Officer. Raises in
base salary reflected improved corporate performance and profitability.
BONUSES. Annual incentives under the Performance Bonus Plan for the
President and Chief Executive Officer and the other named executive officers are
intended to reflect the Company's belief that management's contribution to
stockholder returns (via increasing stock price) comes from maximizing earnings
and the quality of those earnings. Awards under the Performance Bonus Plan are
based on the attainment of annually established target levels of EBDIT and Free
Cash Flow, and the target bonus is determined as a percentage of the recipient's
base salary. For fiscal 1993, participants in the Performance Bonus Plan were
assigned target bonus amounts ranging from 20% to 55% of the base salaries paid
to such persons. The President and Chief Executive Officer receives bonuses
under the Performance Bonus Plan based on the maximum of the above percentages.
The varying percentages reflect the Compensation Committee's belief that, as an
executive officer's duties and responsibilities in the Company increase, he or
she will be increasingly responsible for the performance of the Company.
Accordingly, a larger proportion of an executive officer's compensation should
be incentive compensation. In addition, if performance exceeds the target levels
of EBDIT and Free Cash Flow, senior management receives a percentage of the
excess amount and if performance does not meet the specified performance
targets, bonuses are reduced accordingly. For fiscal 1993, both the EBDIT and
Free Cash Flow targets were exceeded, and the President and Chief Executive
Officer and each of the four other most highly compensated executive officers
received bonuses under the Performance Bonus Plan as described in the "Summary
Compensation Table." The Compensation Committee is in the process of reviewing
the targets used to determine bonuses under the Performance Bonus Plan.
STOCK OPTIONS. In November 1993, the executive officers of the Company,
including the President and Chief Executive Officer, as well as 100 other key
employees of the Company were each granted options under the Company's 1993
Plan. The number of options that each executive officer or employee was granted
was based primarily on the executive's or employee's ability to influence the
Company's long term growth and profitability. The Compensation Committee
believes that option grants afford a desirable long term compensation method
because they closely ally the interests of management with stockholder value and
that grants of options are the best way to directly link the financial interests
of management with those of stockholders. The vesting provisions of options
granted under the 1993 Plan are designed to encourage longevity of employment
with the Company. See "Proposal 3."
COMPENSATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
The Compensation Committee believes that the compensation of the President
and Chief Executive Officer should be heavily influenced by Company performance.
Therefore, although there is necessarily some subjectivity in setting the
President and Chief Executive Officer's salary, major elements of the
compensation package are directly tied to Company performance. In fiscal 1993,
the annual base salary of Maynard Jenkins, the Company's President and Chief
Executive Officer, was raised from $299,578 to $318,000, an increase determined
to be appropriate by the Compensation Committee based on comparable chief
executive salaries and improvements in the Company's performance and
profitability. However, the target bonus payable to Mr. Jenkins under the
Performance Bonus Plan was not raised as a percentage of his base salary for
fiscal 1993. Pursuant to the terms of the Performance Bonus Plan, Mr. Jenkins
was paid a bonus of $230,701 for fiscal 1993 and an additional bonus of $100,000
pursuant to his employment agreement with the Company. See "Employment
Agreement." Mr. Jenkins did not participate in the decisions of the Compensation
Committee with respect to the salary paid to him in fiscal 1993.
The Compensation Committee is in the process of considering any revisions to
the Company's executive compensation policy or plans which may be necessary due
to provisions of the Omnibus Budget Reconciliation Act of 1993. This legislation
amended Section 162 of the Code by limiting to $1,000,000 the deductibility of
compensation paid to certain executives. It is the current policy of the
Compensation Committee to
12
<PAGE>
maximize, to the extent reasonably possible, the Company's ability to obtain a
corporate tax deduction for compensation paid to executive officers of the
Company to the extent consistent with the best interests of the Company and its
stockholders.
The foregoing report has been furnished by Messrs. Freeman, Godlas, Simmons
and Spogli.
COMPANY PERFORMANCE
The following graph shows a comparison of cumulative total returns for the
Company, the S&P 500 Stock Index and a Company-constructed Peer Group Index (as
defined below) for the period during which the Company's Common Stock has been
registered under Section 12 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). The Company-constructed Peer Group Index includes the
following companies: Eagle Hardware & Garden, Inc., Grossman's Inc., Hechinger
Company, Home Depot, Inc., Lowe's Companies, Payless Cashways, Inc., and Wolohan
Lumber Company. The Company believes that the companies included in the Peer
Group Index operate businesses comparable to the Company.
COMPARISON OF CUMULATIVE TOTAL RETURN*
[GRAPH]
ASSUMES $100 INVESTED ON MARCH 31, 1993.
*TOTAL RETURNS ASSUMES REINVESTMENT OF DIVIDENDS.
<TABLE>
<CAPTION>
MARCH 31, 1993 JANUARY 30, 1994
-------------- ----------------
<S> <C> <C>
Orchard Supply Hardware................... 100 100
Peer Group Index.......................... 100 93.75
Nasdaq Market Index....................... 100 120.70
</TABLE>
13
<PAGE>
PROPOSAL 2 -- APPROVAL OF AN AMENDMENT TO ARTICLE FOURTH
OF THE COMPANY'S CERTIFICATE OF INCORPORATION
On March 4, 1994, the Board adopted a resolution amending, subject to
stockholder approval at the 1994 Annual Meeting, Article Fourth of the Company's
Certificate of Incorporation to increase the number of shares of capital stock
that the Company is authorized to issue from 10,000,000 to 18,000,000 and of
Common Stock that the Company is authorized to issue from 8,000,000 to
16,000,000 (the "Amendment"). A copy of Article Fourth, as amended, is attached
as Exhibit A to this Proxy Statement. The additional shares of Common Stock
would have the same rights and privileges as the shares of Common Stock
presently outstanding. As of January 30, 1994, (i) 6,982,981 shares of Common
Stock were outstanding, (ii) an aggregate of 424,540 shares of Common Stock were
reserved for issuance upon exercise of options granted under various stock
option agreements and programs, (iii) an aggregate of 27,221 shares of Common
Stock were reserved for issuance pursuant to outstanding Warrants, (iv) an
aggregate of 520,000 shares of Common Stock were reserved for issuance pursuant
to the Series 1 Preferred Stock and (v) 45,258 shares of Common Stock were
authorized, unissued and unreserved.
The Board adopted a resolution approving, and is seeking stockholder
approval of, the Amendment in connection with the issuance and sale of the
Convertible Preferred Stock. At the time the Convertible Preferred Stock was
issued, the entire 1,280,000 shares of Common Stock required by the conversion
feature of the Convertible Preferred Stock was unavailable. The Company
therefore issued two series of Convertible Preferred Stock. The Series 1
Preferred Stock is convertible immediately into Common Stock. Because of the
lack of sufficient authorized, unissued and unreserved shares of Common Stock,
the Series 2 Preferred Stock will not be convertible into Common Stock until the
stockholders approve an amendment to the Company's Certificate of Incorporation
to increase the number of shares of Common Stock that the Company is authorized
to issue. See "Security Ownership of Certain Beneficial Owners and Management."
If an increase in the Company's authorized shares of Common Stock is not
approved by the stockholders by June 15, 1994, the annual cumulative dividend
rate on the Series 2 Preferred Stock will increase, retroactive to the original
issue date, to 12% per annum (with the additional 6% mandatorily payable in
additional shares of Series 2 Preferred Stock), and shall remain at 12% until
such increase in authorized shares is approved. FS&Co. has agreed to cause FSEP
II to vote in favor of amending the Company's Certificate of Incorporation to
increase the authorized shares of Common Stock. The Series 2 Preferred Stock
will be convertible upon the same terms and conditions as the Series 1 Preferred
Stock after the stockholders approve the increase in the Company's authorized
shares of Common Stock.
In addition, the Board believes it is desirable to have additional
authorized shares of Common Stock available for possible future financing
transactions, stock dividends or splits and other general corporate purposes. It
should be noted that any issuance of additional shares of Common Stock could be
disadvantageous to existing stockholders since such issuance might serve to
dilute their percentage interest in the Company. Holders of Common Stock do not
have preemptive rights to purchase any additional shares of Common Stock which
may be issued. The Company would not be required to obtain stockholder approval
to issue authorized but unissued shares of Common Stock, unless required to do
so by applicable law or the rules of the Nasdaq National Market, upon which the
Company's Common Stock is currently traded, or any stock exchange upon which the
Company's shares may be listed.
It should also be noted that the authorized but unissued shares of Common
Stock, if issued, could be used by incumbent management to make more difficult,
and thereby discourage, an attempt to acquire control of the Company even though
stockholders of the Company may deem such an acquisition desirable. For example,
the shares could be privately placed with purchasers who might support the Board
in opposing a hostile takeover bid. The issuance of the new shares could also be
used to dilute the stock ownership and voting power of a third party seeking to
remove Directors, replace incumbent Directors, accomplish certain business
combinations or alter, amend or repeal provisions of the Company's Certificate
of Incorporation. To the extent that it impedes any such attempts, the issuance
of shares following the Amendment may serve to perpetuate existing management.
14
<PAGE>
The Amendment does not alter the Company's present ability to issue up to
2,000,000 shares of preferred stock in such series with such special rights
(including voting rights), preferences, restrictions, qualifications, and
limitations as the Board may designate. As of the date hereof, 800,000 shares of
Convertible Preferred Stock have been issued. The Company would not be required
to obtain stockholder approval to issue the remaining 1,200,000 authorized but
unissued shares of preferred stock, unless required to do so by applicable law
or the rules of the Nasdaq National Market or any stock exchange upon which the
Company's shares may be listed. The Board could use its authority to make such
designations and to issue preferred stock in a manner that would create
impediments or to otherwise discourage persons in attempting to gain control of
the Company.
The affirmative votes of a majority of the outstanding shares of Common
Stock are required for approval of the Amendment. If the proposed Amendment is
approved by the stockholders, the Company intends to promptly effect the
Amendment by filing an appropriate amendment to the Certificate of Incorporation
with the State of Delaware.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
PROPOSED AMENDMENT TO INCREASE THE AUTHORIZED COMMON STOCK OF THE COMPANY.
PROPOSAL 3 -- ADOPTION OF 1993 STOCK OPTION PLAN
On November 19, 1993, the Board approved, subject to stockholder approval,
the adoption of the 1993 Stock Option Plan (the "1993 Plan"). The Board
recommends that the stockholders vote to approve the 1993 Plan for the reasons
indicated below.
The purpose of the 1993 Plan and of granting options to specified persons is
to further the growth, development and financial success of the Company and its
directly or indirectly owned subsidiaries (individually, a "Subsidiary," and
collectively, the "Subsidiaries"), by providing stock-based incentives to
certain officers and key employees. By offering officers and key employees the
opportunity to acquire shares of the Company's Common Stock, the Company can
expand management's stake in the long term development, performance and
financial success of the Company. In this way, the Company can directly link the
interests of management to maximizing stockholder value. In the opinion of the
Compensation Committee and of the Board, it is in the best interests of the
Company and its stockholders to provide, through the 1993 Plan, an incentive
compensation program designed to enable the Company to attract, retain, and
reward key employees.
The following is a brief summary of the material features of the 1993 Plan
and is qualified in its entirety by express reference to the 1993 Plan, a copy
of which is attached as Exhibit B to this Proxy Statement.
SUMMARY OF THE 1993 PLAN
Under the 1993 Plan, officers and key employees of the Company or its
Subsidiaries may be granted options to purchase shares of Common Stock of the
Company. The 1993 Plan permits the granting of both options that qualify for
treatment as incentive stock options ("Incentive Stock Options") under Section
422 of the Code, and options that do not qualify as Incentive Stock Options
("Nonqualified Stock Options").
ELIGIBILITY. The persons who shall be eligible to receive grants of options
under the 1993 Plan shall be, at the time of the grant, the officers and key
employees of the Company and its Subsidiaries, including those Directors of the
Company and the Subsidiaries who are also officers and key employees.
Notwithstanding the foregoing, only officers and key employees who do not own
capital stock possessing more than 10% of the total combined voting power or
value of all classes of capital stock of the Company or any Subsidiary shall be
eligible to receive grants of options. Such option grants under the 1993 Plan
may include an Incentive Stock Option, Nonqualified Stock Option, or any
combination thereof. Any individual optionee may receive grants of options up to
the maximum number of shares of Common Stock in respect of which options may be
granted under the 1993 Plan. See "Shares Subject to the 1993 Plan" below.
15
<PAGE>
ADMINISTRATION. The 1993 Plan shall be administered by the Compensation
Committee established by the Board, which has the power to construe and
interpret the provisions of the 1993 Plan and any option granted thereunder. The
Compensation Committee shall be constituted so as to permit the 1993 Plan to
comply with the provisions of Rule 16b-3 ("Rule 16b-3") under the Exchange Act.
No member of the Compensation Committee shall be liable for any action or
determination made in good faith with respect to the 1993 Plan or any option
granted under it.
SHARES SUBJECT TO THE 1993 PLAN. The number of shares of Common Stock in
respect of which options may be granted under the 1993 Plan shall not initially
exceed 350,000 shares. This amount shall increase by 1% of the total issued and
outstanding shares of Common Stock on the first day of each subsequent calendar
year commencing January 1, 1995. Amounts are subject to adjustment upon certain
changes in the Company's capitalization or structure. Upon the expiration or
termination, in whole or in part, for any reason of an outstanding option or any
portion thereof which shall not have vested or shall not have been exercised in
full, any shares of Common Stock then remaining unissued which shall have been
reserved for issuance upon such exercise shall again become available for the
granting of additional options under the 1993 Plan.
Incentive Stock Options covering 95,000 shares of Common Stock were granted
(subject to stockholder approval) on November 19, 1993 under the 1993 Plan to a
total of 108 employees of the Company. On the date of the grants, the average
closing price of the Company's Common Stock for the five previous trading days
as reported by the Nasdaq National Market was $17.10 per share. As of February
28, 1994 the closing price of the Company's Common Stock as reported by the
Nasdaq National Market was $15.00 per share. The table below provides a summary
of the options granted under the 1993 Plan to (i) the President and Chief
Executive Officer and four other most highly compensated executive officers,
(ii) all executive officers as a group, (iii) all non-executive officer
Directors as a group and (iv) all non-executive officer employees as a group.
1993 PLAN STOCK OPTION GRANTS
<TABLE>
<CAPTION>
MARKET VALUE
OF UNDERLYING
AGGREGATE COMMON STOCK AS
OPTIONS OPTION EXERCISE OF FEBRUARY 28,
GRANTED PRICE EXPIRATION PRICE 1994
NAME AND POSITION (#) ($/SH) DATE ($) ($)
- --------------------------------------------------- ---------- ---------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Maynard Jenkins.................................... 7,500 17.10 11/19/03 128,250 112,500
President and Chief Executive Officer
Brad R. Tukey...................................... 5,500 17.10 11/19/03 94,050 82,500
Executive Vice President
Stephen M. Hilberg................................. 4,500 17.10 11/19/03 76,950 67,500
Vice President-Finance and
Chief Financial Officer
Robert A. Lewis.................................... 3,000 17.10 11/19/03 51,300 45,000
Vice President-Purchasing and
General Merchandise Manager
Joseph A. DiRocco.................................. 3,000 17.10 11/19/03 51,300 45,000
Vice President-Marketing
Executive Officers as a Group...................... 33,500 17.10 11/19/03 572,850 502,500
Non-Executive Officer Directors as a Group......... -- -- -- -- --
Non-Executive Officer Employees as a Group......... 61,500 17.10 11/19/03 1,051,650 922,500
</TABLE>
OPTION PRICE AND VESTING OF OPTIONS. The purchase price per share (the
"Option Price") of the shares of Common Stock underlying each option and vesting
schedule for each option shall be determined by the Compensation Committee.
16
<PAGE>
SPECIAL LIMITATIONS ON INCENTIVE STOCK OPTIONS. To the extent that the
aggregate fair market value (determined at the time the respective Incentive
Stock Option is granted) of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by an optionee during any calendar
year under all incentive stock option plans of the Company and its Subsidiaries
exceeds $100,000, or such other limit as may be required by the Code, such
excess Incentive Stock Options shall be treated as Nonqualified Stock Options.
In no event shall the Option Price of the shares underlying each Incentive Stock
Option be less than the fair market value of such shares at the time the
Incentive Stock Option is granted. The fair market value of such shares shall be
determined in good faith by the Compensation Committee.
EXERCISE OF OPTIONS. Options granted under the 1993 Plan may be exercised,
to the extent vested, by the optionee by giving written notice to the Company
specifying the number of full shares to be purchased and accompanied by payment
of the full purchase price therefor in cash, by check or in such other form of
lawful consideration as the Compensation Committee may approve from time to
time, including, without limitation and in the sole discretion of the
Compensation Committee, the assignment and transfer by the optionee to the
Company of outstanding shares of Common Stock theretofore held by the optionee
in a manner intended to comply with the provisions of Rule 16b-3. Options may
only be exercised by the optionee or, in the event of death of the optionee, by
the person or persons (including the deceased optionee's estate) to whom the
deceased optionee's rights under such option shall have passed by will or the
laws of descent and distribution. Notwithstanding the foregoing in the
immediately preceding sentence, in the event of disability (within the meaning
of Section 22(e)(3) of the Code) of an optionee, a designee, or if the optionee
has no designee, the legal representative, of such optionee may exercise the
option on behalf of such optionee (provided such option would have been
exercisable by such optionee) until the right to exercise such option expires,
as set forth in each particular Option Agreement (defined below). No option
granted to a person subject to Section 16 of the Exchange Act shall be
exercisable during the first six months after the date such option is granted.
NONTRANSFERABILITY. An option may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent or distribution and, except in instances involving death or
disability, may be exercised during the lifetime of the optionee only by such
optionee.
ADJUSTMENTS UPON CAPITALIZATION AND CORPORATE CHANGES. If the outstanding
shares of the Common Stock of the Company are changed into, or exchanged for, a
different number or kind of shares or securities of the Company through
reorganization, merger, recapitalization or reclassification, or if the number
of outstanding shares is changed through a stock split, stock dividend, stock
consolidation or like capital adjustment, or if the Company makes a distribution
in partial liquidation or any other comparable extraordinary distribution with
respect to its Common Stock, an appropriate adjustment shall be made by the
Compensation Committee in the number, kind or Option Price of shares as to which
options may thereafter be granted. An adjustment shall likewise be made in the
number, kind or Option Price of shares covered by unexercised outstanding
options.
OPTION AGREEMENT. Each option granted under the 1993 Plan shall be
evidenced by a written stock option agreement ("Option Agreement") executed by
the Company and the optionee which (a) shall contain each of the provisions and
agreements herein specifically required to be contained therein; and (b) may
contain such other terms and conditions as the Compensation Committee deems
desirable and which are not inconsistent with the 1993 Plan.
TERMINATION OF OPTIONS.
(a) Each option granted under the 1993 Plan shall set forth a termination
date thereof, which shall be not later than 10 years from the date such option
is granted subject to earlier termination or forfeiture as set forth in
"Termination of Employment" below, in subsection (b) below, or as otherwise set
forth in each particular Option Agreement.
(b) Upon the dissolution, liquidation or sale of all or substantially all
of the business, properties and assets of the Company, or upon any
reorganization, merger or consolidation in which the Company does not survive,
or upon any reorganization, merger or consolidation in which the Company does
survive and the
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Company's stockholders have the opportunity to receive cash, securities of
another corporation or other property in exchange for their capital stock of the
Company, the 1993 Plan and each outstanding option granted under the 1993 Plan
shall terminate; provided that in such event (i) each optionee who is not
tendered an option by the surviving corporation in accordance with all of the
terms of clause (ii) immediately below or who does not accept any such
substituted option which is so tendered, shall have the right until 10 days
before the effective date of such dissolution, liquidation, reorganization,
merger or consolidation to exercise, in whole or in part, any unexpired option
or options issued to the optionee to the extent that said option is then vested
and exercisable pursuant to the provisions of said option or options and of the
exercise provisions of the 1993 Plan; or (ii) in its sole and absolute
discretion, the surviving corporation in any reorganization, merger or
consolidation may, but shall not be so obligated to, tender to any optionee an
option or options to purchase shares of the surviving corporation, and such new
option or options shall contain such terms and provisions as shall be required
to substantially preserve the rights and benefits of any option granted under
the 1993 Plan then outstanding and, if accepted by such optionee, such new
option shall replace the option granted under the 1993 Plan.
EFFECTIVENESS AND TERMINATION OF PLAN. Notwithstanding any provision of the
1993 Plan or in any Option Agreement, no option granted under the 1993 Plan
shall be exercisable prior to stockholder approval of the 1993 Plan. The 1993
Plan shall terminate at the earliest of the time when all shares of Common Stock
which may be issued hereunder have been so issued, or at such time as set forth
in "Termination of Options" above; provided, however, that the Board may in its
sole discretion terminate the 1993 Plan at any other time. Unless earlier
terminated by the Board, the 1993 Plan shall terminate on November 19, 2003.
AMENDMENT OF 1993 PLAN. The Compensation Committee may make such amendments
to the 1993 Plan as it shall deem advisable. However, to the extent restricted
by Rule 16b-3, the Compensation Committee may not, without approval of the
stockholders, make any amendment that would (a) increase the aggregate number of
shares of Common Stock that may be issued under the 1993 Plan, (b) materially
modify the requirements as to eligibility for participation in the 1993 Plan or
(c) materially increase the benefits accruing to optionees under the 1993 Plan.
TERMINATION OF EMPLOYMENT. The terms and conditions under which an option
may be exercised after an optionee's termination of employment shall be
determined by the Compensation Committee and shall be specified in the Option
Agreement, except that in the event an optionee's employment with the Company or
a Subsidiary terminates for any reason within six months of the date of grant of
any option held by the optionee, the option shall expire as of the date of such
termination of employment and the optionee and the optionee's designee, legal
representative or beneficiary shall forfeit any and all rights pertaining to
such option. The conditions under which such post-termination exercises shall be
permitted with respect to Incentive Stock Options shall be determined in
accordance with the provisions of Section 422 of the Code.
FEDERAL INCOME TAX CONSEQUENCES
Based on current provisions of the Code, and the existing regulations
thereunder, the anticipated federal income tax consequences with respect to
options granted under the 1993 Plan are as described below.
INCENTIVE STOCK OPTIONS. No taxable income will be recognized by an
optionee upon the grant or exercise of any Incentive Stock Option. Additionally,
the Company will not be entitled to any income tax deduction as the result of
the grant or exercise of an Incentive Stock Option.
Any gain or loss resulting from the subsequent sale of Common Stock acquired
upon exercise of an Incentive Stock Option will be long term capital gain or
loss if such sale is made after two years from the date of the grant of the
option and after one year from the transfer of such stock to the optionee upon
exercise, so long as the optionee is an employee of the Company from the date of
grant until three months before the date of exercise. In the event of the
optionee's death or disability prior to exercise of an Incentive Stock Option,
special rules apply in determining whether gain or loss upon sale of the stock
acquired upon exercise of such option will be taxable as long term capital gain
or loss.
If the subsequent sale of stock is made prior to the expiration of such
two-year and one-year periods, the optionee will recognize ordinary income in
the year of sale in an amount equal to the difference between the
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aggregate Option Price (the "Aggregate Option Price") of the Common Stock and
the fair market value of the Common Stock on the date of exercise, provided that
if such sale is a transaction in which a loss (if sustained) would have been
recognized by the optionee, the amount of ordinary income recognized by the
optionee will not exceed the excess (if any) of the amount realized on the sale
over the Aggregate Option Price. The Company will then be entitled to an income
tax deduction of like amount. Any excess gain recognized by the optionee upon
such sale would then be taxable as capital gain, either long term or short term
depending upon whether the Common Stock had been held for more than one year
prior to sale.
If the sale of Common Stock received upon exercise of an option qualifies
for long term capital gain treatment, any gain from such a sale would be taxed
at the current maximum federal income tax rate of 28% and ordinary income is
currently taxed at a maximum federal income tax rate of 39.6%. The amount by
which the fair market value of Common Stock purchased upon exercise of an
Incentive Stock Option exceeds the Aggregate Option Price of such stock
constitutes an item of tax preference that could then be subject to the
alternative minimum tax in the year that the option is exercised.
NONQUALIFIED STOCK OPTIONS. Generally, at the time of the grant of a
Nonqualified Stock Option, no taxable income will be recognized by the optionee
and the Company will not be entitled to a deduction. Upon the exercise of such
an option, the optionee generally will recognize taxable income, and the Company
will then be entitled to a deduction, in the amount by which the then fair
market value of the shares of Common Stock issued to such optionee exceeds the
Aggregate Option Price. However, if a sale of Common Stock received upon
exercise of such option would subject the optionee to suit under Section 16(b)
of the Exchange Act, the optionee will not recognize income (and the Company
will not be entitled to a deduction) at the time such option is exercised unless
the optionee makes an election to recognize income at that time. If such
election is not made, the optionee will recognize income and the Company will be
entitled to a deduction at the time when Section 16(b) of the Exchange Act would
no longer apply to such sale.
Income recognized by the optionee upon exercise of a Nonqualified Stock
Option will be taxed as ordinary income. Such income constitutes "wages" with
respect to which the Company is required to deduct and withhold federal and
state income tax. Pursuant to the 1993 Plan, the exercise of each Nonqualified
Stock Option shall be subject to the Company's determination that all
withholding taxes and liabilities relating to the option have been satisfied.
Upon the subsequent disposition of shares of Common Stock acquired upon the
exercise of a Nonqualified Stock Option, the optionee will recognize capital
gain or loss in an amount equal to the difference between the proceeds received
upon disposition and the fair market value of such shares at the time of
exercise. If such shares have been held for more than one year at the time of
such disposition the capital gain or loss will be long term.
EXERCISING OPTIONS WITH SHARES OF COMMON STOCK. To the extent an optionee
pays all or part of the Option Price by tendering shares of Common Stock owned
by the optionee, the tax consequences described above generally would apply.
However, the number of shares received (upon exercise) equal to the number of
shares surrendered in payment of the Aggregate Option Price will have the same
basis and tax holding period as the shares surrendered. The additional shares
received upon such exercise will have a tax basis equal to the amount of
ordinary income recognized and any cash paid on such exercise and a holding
period which commences on the date of exercise.
Under proposed Treasury regulations, if an optionee exercises an option by
tendering shares previously acquired on the exercise of an Incentive Stock
Option, a disqualifying disposition will occur if the applicable holding period
requirements have not been satisfied with respect to the surrendered stock. The
consequence of such a disqualifying disposition is that the optionee may
recognize ordinary income at that time.
ACCELERATION OF STOCK OPTIONS UPON TRANSFER OF CONTROL. Pursuant to the
1993 Plan, the exercisability of Nonqualified Stock Options and Incentive Stock
Options may be accelerated. Such acceleration will likely be determined to be,
in whole or in part, a "parachute payment" for federal income tax purposes if it
arises from any events connected with a change of control of the Company. If the
present value of all of the optionee's parachute payments exceeds three times
the optionee's average annual compensation for the past five years,
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the optionee will be subject to a special excise tax of 20% on the "excess
parachute payment." Such tax will be applied to the amount of such parachute
payment which is in excess of the greater of such average annual compensation of
the optionee or an amount which the optionee establishes as reasonable
compensation. In addition, the Company will not be allowed a deduction for such
"excess parachute payment."
Upon exercise, options granted to a "covered employee" with an Option Price
equal to or greater than the fair market value of the Common Stock at the time
of grant should not be subject to the $1.0 million deduction cap for
compensation paid to certain executives of publicly held corporations such as
the Company. The 1993 Plan should satisfy the rules governing exemption from the
deduction cap for "performance based" compensation once stockholders of the
Company approve the 1993 Plan as (1) stockholders should have received adequate
disclosure of the terms of the 1993 Plan in this Proxy Statement and (2) the
1993 Plan has been approved by a compensation committee consisting solely of two
or more Outside Directors of the Company.
Upon exercise, options granted to a covered employee with an Option Price
less than the fair market value of the Common Stock at the time of grant would
be subject to the $1.0 million deduction cap for the Company. A "covered
employee" is an optionee who, on the last day of the taxable year of the
Company, is the Chief Executive Officer or one of the four other most highly
compensated executive officers for proxy disclosure purposes. An "Outside
Director" is a Director who is not (1) a current employee of the Company or
related entity, (2) a former employee who is receiving compensation for prior
services, (3) a former officer or (4) receiving compensation from the Company
for personal services other than regular Directors' compensation.
The foregoing summary of the effects of federal income taxation upon
optionees and the Company with respect to shares of Common Stock issued under
the 1993 Plan does not purport to be complete and reference is made to the
applicable provisions of the Code.
At the 1994 Annual Meeting, stockholders will be asked to approve the
adoption of the 1993 Plan. Such approval will require the affirmative vote of a
majority of the voting power of all outstanding shares of the Company's Common
Stock present or represented and entitled to vote at the 1994 Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ADOPTION OF THE 1993 STOCK OPTION PLAN.
PROPOSAL 4 -- RATIFICATION OF THE APPOINTMENT OF
ARTHUR ANDERSEN & CO. AS INDEPENDENT ACCOUNTANTS
The Audit Committee of the Board has selected Arthur Andersen & Co. as
independent public accountants to audit the consolidated financial statements of
the Company and its consolidated subsidiaries for the year ending January 29,
1995. Arthur Andersen & Co. has audited the Company's financial statements
annually since 1986. A member of that firm is expected to be present at the 1994
Annual Meeting, will have an opportunity to make a statement if so desired, and
will be available to respond to appropriate questions. If the stockholders do
not ratify the selection of Arthur Andersen & Co., if it should decline to act
or otherwise become incapable of acting, or if its employment is discontinued,
the Audit Committee will appoint independent public accountants for the fiscal
year ending January 29, 1995. Proxies solicited by the Board will be voted in
favor of ratification unless stockholders specify otherwise.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN & CO. AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING JANUARY 29, 1995.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
Directors and certain of its officers, and persons who own more than 10% of a
registered class of the Company's equity securities
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(collectively, "Insiders"), to file reports of ownership and changes in
ownership with the Commission. Insiders are required by Commission regulations
to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5s were
required for those persons, the Company believes that its Insiders complied with
all applicable Section 16(a) filing requirements for fiscal 1993.
OTHER BUSINESS
The Company is not aware of any other business to be presented at the 1994
Annual Meeting. All shares represented by Company proxies will be voted in favor
of the proposals of the Company described herein unless otherwise indicated on
the form of proxy. If any other matters properly come before the meeting,
Company proxy holders will vote thereon according to their best judgment.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder who wishes to present a proposal for action at the 1995
Annual Meeting and who wishes to have it set forth in the corresponding proxy
statement and identified in the corresponding form of proxy prepared by
management must notify the Company no later than December 14, 1994 in such form
as required under the rules and regulations promulgated by the Commission.
ANNUAL REPORTS
A copy of the 1994 Annual Report to Stockholders (which includes the
Company's Annual Report on Form 10-K) is being mailed to each stockholder of
record together with this Proxy Statement. The Company has also filed with the
Commission its Annual Report on Form 10-K for the fiscal year ended January 30,
1994. This Report contains information concerning the Company and its
operations. A COPY OF THIS REPORT WILL BE FURNISHED TO STOCKHOLDERS WITHOUT
CHARGE UPON REQUEST IN WRITING TO Kris McMullen at 6450 Via Del Oro, San Jose,
California 95119. Such reports are not a part of the Company's soliciting
material.
PROXIES AND SOLICITATION
Proxies for the 1994 Annual Meeting are being solicited by mail directly and
through brokerage and banking institutions. The Company will pay all expenses in
connection with the solicitation of proxies. In addition to the use of mails,
proxies may be solicited by Directors, officers and regular employees of the
Company personally or by telephone. The Company may reimburse brokers and other
persons holding stock in their names, or in the names of nominees, for their
expenses in sending proxy materials to principals and obtaining their proxies
(plus paying fees of up to $5,000 to Chemical Bank for soliciting such proxies
from brokers and other persons holding stock in their names or in the names of
nominees).
All stockholders are urged to complete, sign and promptly return the
enclosed proxy card.
By Order of the Board of Directors
MICHAEL SEDA
SECRETARY
San Jose, California
April 13, 1994
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EXHIBIT A
AMENDED ARTICLE FOURTH
OF
CERTIFICATE OF INCORPORATION
OF
ORCHARD SUPPLY HARDWARE STORES CORPORATION
Fourth: The total number of shares of stock which the Corporation shall
have authority to issue is eighteen million (18,000,000), consisting of sixteen
million (16,000,000) shares of common stock, $.01 par value per share, and two
million (2,000,000) shares of preferred stock, $.01 par value per share. All
capital stock of the Corporation will be fully paid and nonassessable.
Each holder of shares of common stock shall be entitled to one vote for each
share of common stock held by such holder at the record date for the
determination of the stockholders entitled to vote on any matter coming to a
vote before the stockholders or, if no such record date is established, at the
date such vote is taken.
The Board of Directors is expressly authorized, at any time, and from time
to time, to provide for the issuance of shares of preferred stock in one or more
series, with such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other special
rights, and such qualifications, limitations, or restrictions thereof, as shall
be stated and expressed in the resolution or resolutions providing for the
issuance of such shares of preferred stock adopted by the Board of Directors.
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EXHIBIT B
ORCHARD SUPPLY HARDWARE STORES CORPORATION
1993 STOCK OPTION PLAN
SECTION 1. DESCRIPTION OF PLAN. This is the 1993 Stock Option Plan, dated
November 19, 1993 (the "Plan"), of Orchard Supply Hardware Stores Corporation, a
Delaware corporation (the "Company"). Under the Plan, officers and key employees
of the Company or any of the directly or indirectly owned subsidiaries of the
Company (individually, a "Subsidiary," and collectively, the "Subsidiaries"), to
be selected as set forth below, may be granted options ("Options") to purchase
shares of the common stock of the Company ("Common Stock"). The Plan permits the
granting of both Options that qualify for treatment as incentive stock options
("Incentive Stock Options") under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") and Options that do not qualify as Incentive Stock
Options ("Nonqualified Stock Options").
SECTION 2. PURPOSE OF PLAN. The purpose of the Plan and of granting
Options to specified persons is to further the growth, development and financial
success of the Company and its Subsidiaries by providing additional incentives
to certain officers and key employees. By assisting such persons in acquiring
shares of the Company's Common Stock, the Company can ensure that such persons
will themselves benefit directly from the Company's and the Subsidiaries'
growth, development and financial success.
SECTION 3. ELIGIBILITY. The persons who shall be eligible to receive
grants of Options under the Plan shall be, at the time of the grant, the
officers and key employees of the Company and the Subsidiaries, including those
Directors of the Company and the Subsidiaries who are also officers and key
employees. Notwithstanding the foregoing in this Section 3, only officers and
key employees who do not own capital stock possessing more than ten percent
(10%) of the total combined voting power or value of all classes of capital
stock of the Company or any Subsidiary shall be eligible to receive grants of
Options. A person who holds an Option is herein referred to as a "Participant."
More than one Option may be granted to any Participant, grants of Options may be
made on more than one occasion to any Participant and any individual Participant
may receive grants of Options up to the maximum number of shares of Common Stock
in respect of which Options may be granted under Section 5 hereof. Such grants
of Options under the Plan may include an Incentive Stock Option, Nonqualified
Stock Option, or any combination thereof. Notwithstanding the foregoing, the
Board of Directors of the Company (the "Board") may at any time or from time to
time designate one or more Directors as ineligible for selection as a
Participant under the Plan for any period or periods of time. The designation by
the Board of a Director as ineligible for selection as a Participant under the
Plan shall not affect Options previously granted to such Director under the
Plan.
SECTION 4. ADMINISTRATION. The Plan shall be administered by the
Compensation Committee (the "Committee") established by the Board and composed
of not less than two (2) members of the Board, none of whom shall be eligible
for selection as Participants under the Plan. The Committee shall be constituted
so as to permit the Plan to comply with the provisions of Rule 16b-3 ("Rule
16b-3") under the Securities Exchange Act of 1934 (the "Exchange Act"). The
Committee shall meet at such times and places as it determines and may meet
through a telephone conference call. A majority of its members shall constitute
a quorum, and the decision of a majority of those present at any meeting at
which a quorum is present shall constitute the decision of the Committee. A
memorandum signed by all the members of the Committee shall constitute the
decision of the Committee without necessity, in such event, for holding an
actual meeting. The Committee is authorized and empowered to administer the Plan
and, subject to the Plan (a) to select the Participants, to specify the number
of shares of Common Stock with respect to which Options are granted to each
Participant, to specify the terms of the Options and whether such Options shall
be Incentive Stock Options or Nonqualified Stock Options, and in general to
grant Options; (b) to determine the dates upon which Options shall be granted
and the terms and conditions thereof in a manner consistent with the Plan, which
terms and conditions need not be identical as to the various Options granted;
(c) to interpret the Plan; (d) to prescribe, amend and rescind rules relating to
the Plan; (e) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted by
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the Committee; (f) to determine the rights and obligations of Participants under
the Plan; (g) to specify the Option Price (as hereinafter defined); (h) to
accelerate the time during which an Option may be exercised, including, but not
limited to, upon a change of control of the Company, and to otherwise accelerate
the time during which an Option may be exercised, in each case notwithstanding
the provisions in the Option Agreement (as defined in Section 13) stating the
time during which it may be exercised; and (i) to make all other determinations
deemed necessary or advisable for the administration of the Plan. The
interpretation and construction by the Committee of any provision of the Plan or
of any Option granted under it shall be final, conclusive and binding. No member
of the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any Option granted under it.
SECTION 5. SHARES SUBJECT TO THE PLAN. The number of shares of Common
Stock in respect of which Options may be granted under the Plan shall not
initially exceed 350,000 shares. This amount shall increase by one percent (1%)
of the total issued and outstanding shares of Common Stock on the first day of
each subsequent calendar year commencing January 1, 1995. All of the amounts
stated in this Section 5 are subject to adjustment as provided in Section 12
hereof. Upon the expiration or termination, in whole or in part, for any reason
of an outstanding Option or any portion thereof which shall not have vested or
shall not have been exercised in full, any shares of Common Stock then remaining
unissued which shall have been reserved for issuance upon such exercise shall
again become available for the granting of additional Options under the Plan.
SECTION 6. OPTION PRICE. The purchase price per share (the "Option Price")
of the shares of Common Stock underlying each Option shall be determined by the
Committee, and shall be subject to adjustment as provided in Section 12 hereof.
SECTION 7. RESTRICTIONS ON GRANTS; VESTING OF OPTIONS. Notwithstanding any
other provisions set forth herein or in any Option Agreement, no Options may be
granted under the Plan subsequent to ten (10) years from November 19, 1993. All
Options granted pursuant to the Plan shall be granted pursuant to Option
Agreements, as described in Section 13 hereof. Vesting shall be determined by
the Committee.
SECTION 8. SPECIAL LIMITATIONS ON INCENTIVE STOCK OPTIONS. To the extent
that the aggregate fair market value (determined at the time the respective
Incentive Stock Option is granted) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by a Participant
during any calendar year under all incentive stock option plans of the Company
and its Subsidiaries exceeds $100,000, or such other limit as may be required by
the Code, such excess Incentive Stock Options shall be treated as Nonqualified
Stock Options. The Committee shall determine, in accordance with applicable
provisions of the Code, Treasury Regulations and other administrative
pronouncements, which of a Participant's Incentive Stock Options will not
constitute Incentive Stock Options because of such limitation and shall notify
the Participant of such determination as soon as practicable after such
determination. In no event shall the Option Price of the shares underlying each
Incentive Stock Option be less than the fair market value of such shares at the
time the Incentive Stock Option is granted. The fair market value of such shares
shall be determined in good faith by the Committee.
SECTION 9. EXERCISE OF OPTIONS. Once vested, an Option may be exercised by
the Participant by giving written notice to the Company specifying the number of
full shares to be purchased and accompanied by payment of the full purchase
price therefor in cash, by check or in such other form of lawful consideration
as the Committee may approve from time to time, including, without limitation
and in the sole discretion of the Committee, the assignment and transfer by the
Participant to the Company of outstanding shares of Common Stock theretofore
held by the Participant in a manner intended to comply with the provisions of
Rule 16b-3. In connection with such assignment and transfer, the Company shall
have the right to deduct any fractional shares to be paid to the Participant.
Once vested, an Option may only be exercised by the Participant or in the event
of death of the Participant, by the person or persons (including the deceased
Participant's estate) to whom the deceased Participant's rights under such
Option shall have passed by will or the laws of descent and distribution.
Notwithstanding the foregoing in the immediately preceding sentence, in the
event of disability (within the meaning of Section 22(e)(3) of the Code) of a
Participant, a designee, or if the Participant has no designee, the legal
representative, of such Participant may exercise the Option on
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behalf of such Participant (provided such Option would have been exercisable by
such Participant) until the right to exercise such Option expires, as set forth
in each particular Option Agreement. No Option granted to a person subject to
Section 16 of the Exchange Act shall be exercisable during the first six (6)
months after the date such Option is granted.
SECTION 10. ISSUANCE OF COMMON STOCK. The Company's obligation to issue
shares of its Common Stock upon exercise of an Option is expressly conditioned
upon the compliance by the Company with any registration or other qualification
obligations with respect to such shares under any state or federal law or
rulings and regulations of any government regulatory body and the making of such
investment representations or other representations and undertakings by the
Participant (or the Participant's legal representative, heir or legatee, as the
case may be) in order to comply with the requirements of any exemption from any
such registration or other qualification obligations with respect to such shares
which the Company in its sole discretion shall deem necessary or advisable. Such
required representations and undertakings may include representations and
agreements that such Participant (or the Participant's legal representative,
heir or legatee): (a) is purchasing such shares for investment and not with any
present intention of selling or otherwise disposing of such shares; and (b)
agrees to have a legend placed upon the face and reverse of any certificates
evidencing such shares (or, if applicable, an appropriate data entry made in the
ownership records of the Company) setting forth (i) any representations and
undertakings which such Participant has given to the Company or a reference
thereto, and (ii) that, prior to effecting any sale or other disposition of any
such shares, the Participant must furnish to the Company an opinion of counsel,
satisfactory to the Company and its counsel, to the effect that such sale or
disposition will not violate the applicable requirements of state and federal
laws and regulatory agencies; provided, however, that any such legend or data
entry shall be removed when no longer applicable. The Company, during the term
of the Plan, will at all times reserve and keep available, and will use its
reasonable efforts to obtain from any regulatory body having jurisdiction any
requisite authority in order to issue and sell such number of shares of Common
Stock as shall be sufficient to satisfy the requirements of the Plan. Inability
of the Company to obtain, from any regulatory body having jurisdiction,
authority reasonably deemed by the Company's counsel to be necessary for the
lawful issuance and sale of any shares hereunder shall relieve the Company of
any liability in respect of the nonissuance or sale of such shares as to which
such requisite authority shall not have been obtained.
SECTION 11. NONTRANSFERABILITY. An Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised during the
lifetime of the Participant only by such Participant, subject to the provisions
of Section 9 hereof.
SECTION 12. ADJUSTMENTS UPON CAPITALIZATION AND CORPORATE CHANGES. Subject
to Section 15(b) hereof, if the outstanding shares of the Common Stock of the
Company are changed into, or exchanged for, a different number or kind of shares
or securities of the Company through reorganization, merger, recapitalization or
reclassification, or if the number of outstanding shares is changed through a
stock split, stock dividend, stock consolidation or like capital adjustment, or
if the Company makes a distribution in partial liquidation or any other
comparable extraordinary distribution with respect to its Common Stock, an
appropriate adjustment shall be made by the Committee in the number, kind or
Option Price of shares as to which Options may be granted. A corresponding
adjustment shall likewise be made in the number, kind or Option Price of shares
with respect to which unexercised Options have theretofore been granted. Any
such adjustment in an outstanding Option, however, shall be made without change
in the total price applicable to the unexercised portion of the Option but with
a corresponding adjustment in the price for each share covered by the Option. In
making such adjustments, or in determining that no such adjustments are
necessary, the Committee may rely upon the advice of counsel and accountants to
the Company, and the good faith determination of the Committee shall be final,
conclusive and binding. No fractional shares of stock shall be issued under the
Plan on account of any such adjustment.
SECTION 13. OPTION AGREEMENT. Each Option granted under the Plan shall be
evidenced by a written stock option agreement ("Option Agreement") executed by
the Company and the Participant which (a) shall
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contain each of the provisions and agreements herein specifically required to be
contained therein; and (b) may contain such other terms and conditions as the
Committee deems desirable and which are not inconsistent with the Plan.
SECTION 14. RIGHTS AS A STOCKHOLDER. A Participant shall have no rights as
a stockholder with respect to any shares covered by an Option until the date of
the issuance of a stock certificate to the Participant for such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
expressly provided in Section 12 hereof.
SECTION 15. TERMINATION OF OPTIONS.
(a) Each Option granted under the Plan shall set forth a termination date
thereof, which shall be not later than ten (10) years from the date such Option
is granted subject to earlier termination or forfeiture as set forth in Section
27 hereof, Section 15(b) below, or as otherwise set forth in each particular
Option Agreement.
(b) Upon the dissolution, liquidation or sale of all or substantially all of
the business, properties and assets of the Company, or upon any reorganization,
merger or consolidation in which the Company does not survive, or upon any
reorganization, merger or consolidation in which the Company does survive and
the Company's stockholders have the opportunity to receive cash, securities of
another corporation or other property in exchange for their capital stock of the
Company, the Plan and each outstanding Option shall terminate; provided that in
such event (i) each Participant who is not tendered an option by the surviving
corporation in accordance with all of the terms of clause (ii) immediately below
or who does not accept any such substituted option which is so tendered, shall
have the right until ten (10) days before the effective date of such
dissolution, liquidation, reorganization, merger or consolidation to exercise,
in whole or in part, any unexpired Option or Options issued to the Participant
to the extent that said Option is then vested and exercisable pursuant to the
provisions of said Option or Options and of Section 9 of the Plan; or (ii) in
its sole and absolute discretion, the surviving corporation in any
reorganization, merger or consolidation may, but shall not be so obligated to,
tender to any Participant an option or options to purchase shares of the
surviving corporation, and such new option or options shall contain such terms
and provisions as shall be required to substantially preserve the rights and
benefits of any Option then outstanding under the Plan and, if accepted by such
Participant, such new option shall replace the Option under the Plan.
SECTION 16. WITHHOLDING OF TAXES. The Company, or a Subsidiary, as the
case may be, may deduct and withhold from the wages, salary, bonus and other
income paid by the Company or such Subsidiary to the Participant the requisite
tax upon the amount of taxable income, if any, recognized by the Participant in
connection with the exercise in whole or in part of any Option, or the sale of
Common Stock issued to the Participant upon the exercise of an Option, as may be
required from time to time under any federal or state tax laws and regulations.
This withholding of tax shall be made from the Company's (or such Subsidiary's)
concurrent or next payment of wages, salary, bonus or other income to the
Participant or by payment to the Company (or such Subsidiary) by the Participant
of the required withholding tax, as the Committee may determine. The Company may
permit the Participant to elect to surrender, or authorize the Company to
withhold, shares of Common Stock (valued at their fair market value on the date
of surrender or withholding of such shares) in satisfaction of the Company's
withholding obligation, subject to such restrictions as the Committee deems
necessary to satisfy the requirements of Rule 16b-3. However, no fractional
shares of Common Stock shall be delivered, nor shall any cash in lieu of
fractional shares be paid, by the Company. The Company shall have the right to
deduct fractional shares to be paid to the Participant as a result of such
surrender or withholding of shares.
SECTION 17. EFFECTIVENESS AND TERMINATION OF PLAN. The Plan shall be
effective on the date on which it is adopted by the Board, provided the Plan is
approved by the stockholders of the Company within twelve (12) months of
November 19, 1993 and on or prior to the date of the first annual meeting of
stockholders of the Company held subsequent to the acquisition of an equity
security by a Participant hereunder for which exemption is claimed under Rule
16b-3. Notwithstanding any provision of the Plan or in any Option Agreement, no
Option shall be exercisable prior to such stockholder approval. The Plan shall
terminate at
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the earliest of the time when all shares of Common Stock which may be issued
hereunder have been so issued, or at such time as set forth in Section 15(b)
hereof; provided, however, that the Board may in its sole discretion terminate
the Plan at any other time. Unless earlier terminated by the Board, the Plan
shall terminate on November 19, 2003. Subject to Section 15(b) hereof, no such
termination shall in any way affect any Option then outstanding.
SECTION 18. TIME OF GRANTING OPTIONS. The date of grant of an Option
shall, for all purposes, be the date on which the Committee makes the
determination granting such Option. Notice of the determination shall be given
to each Participant to whom an Option is so granted within a reasonable time
after the date of such grant.
SECTION 19. AMENDMENT OF PLAN. The Committee may make such amendments to
the Plan as it shall deem advisable. However, to the extent restricted by Rule
16b-3, the Committee may not, without approval of the stockholders, make any
amendment that would (a) increase the aggregate number of shares of Common Stock
that may be issued under the Plan (except for adjustments pursuant to Section 12
hereof), (b) materially modify the requirements as to eligibility for
participation in the Plan, or (c) materially increase the benefits accruing to
Participants under the Plan.
SECTION 20. TRANSFERS AND LEAVES OF ABSENCE. For purposes of the Plan, (a)
a transfer of a Participant's employment, without an intervening period, between
the Company and a Subsidiary shall not be deemed a termination of employment and
(b) a Participant who is granted in writing a leave of absence shall be deemed
to have remained in the employ of the Company (or a Subsidiary, whichever is
applicable) during such leave of absence.
SECTION 21. NO OBLIGATION TO EXERCISE OPTION. The granting of an Option
shall impose no obligation on the Participant to exercise such Option.
SECTION 22. INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as Directors, the members of the Board or
Committee shall be indemnified by the Company to the fullest extent permitted by
law against the reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Board or Committee member is liable
for negligence or misconduct in the performance of his or her duties; provided
that within sixty (60) days after institution of any such action, suit or
proceeding such Board or Committee member shall in writing offer the Company the
opportunity, at the Company's expense, to handle and defend the same.
SECTION 23. GOVERNING LAW. The Plan and any Option granted pursuant to the
Plan shall be construed under and governed by the laws of the State of
California without regard to conflict of law provisions thereof except to the
extent that it implicates matters which are the subject of the General
Corporation Law of the State of Delaware which matters shall be governed by the
latter law.
SECTION 24. FINANCIAL INFORMATION. The Company shall provide Participants
whose duties in connection with the Company would not assure access to financial
information of the Company with annual financial information pertaining to the
Company subject to the ability of the Company to exclude line items, such as
research and development expenses, that the Committee determines the disclosure
of which to third parties may have material adverse consequences to the Company.
SECTION 25. NOT AN EMPLOYMENT AGREEMENT. Nothing contained in the Plan or
in any Option Agreement shall confer, intend to confer or imply any rights of
employment or rights to continued employment by the Company or any Subsidiary in
favor of any Participant or limit the ability of the Company or any Subsidiary
to terminate, with or without cause, in its sole and absolute discretion, the
employment of any Participant, subject to the terms of any written employment
agreement to which a Participant is a party.
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SECTION 26. RULE 16B-3. It is intended that the Plan and any grant of an
Option made to a person subject to Section 16 of the Exchange Act meet all of
the requirements of Rule 16b-3. If any provision of the Plan or any such grant
would disqualify the Plan or such grant under, or would not otherwise comply
with, Rule 16b-3, such provision or grant shall be construed or deemed amended
to conform to Rule 16b-3.
SECTION 27. TERMINATION OF EMPLOYMENT. The terms and conditions under
which an Option may be exercised after a Participant's termination of employment
shall be determined by the Committee and shall be specified in the Option
Agreement, except that in the event a Participant's employment with the Company
or a Subsidiary terminates for any reason within six (6) months of the date of
grant of any Option held by the Participant, the Option shall expire as of the
date of such termination of employment and the Participant and the Participant's
designee, legal representative or beneficiary shall forfeit any and all rights
pertaining to such Option. The conditions under which such post-termination
exercises shall be permitted with respect to Incentive Stock Options shall be
determined in accordance with the provisions of Section 422 of the Code.
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COMMON STOCK PROXY BOARD OF DIRECTORS
ORCHARD SUPPLY HARDWARE STORES CORPORATION
The undersigned hereby appoints Maynard Jenkins or Stephen M. Hilberg, or either
of them, the true and lawful attorneys and proxies of the undersigned, with full
power of substitution to vote all shares of the Common Stock, $.01 par value per
share ("Common Stock"), of ORCHARD SUPPLY HARDWARE STORES CORPORATION, which the
undersigned is entitled to vote at the Annual Meeting of the Stockholders of
ORCHARD SUPPLY HARDWARE STORES CORPORATION, to be held at 2:00 P.M., Pacific
Time, on May 20, 1994 at The Fairmont Hotel, 170 South Market Street, San Jose,
California and any and all adjournments thereof, on the proposals set forth
below and any other matters properly brought before the Meeting.
See Reverse Side
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/X/ PLEASE MARK YOUR CHOICES LIKE THIS
THE DIRECTORS RECOMMEND A VOTE FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND
APPROVAL OF PROPOSALS 2, 3 AND 4.
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COMMON
FOR all nominees listed below (except as marked to the contrary below)
WITHHOLD AUTHORITY to vote for all nominees
1. ELECTION OF DIRECTORS
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
a line through the nominee's name below):
Bradford M. Freeman
Maynard Jenkins
William E. Walsh
Morton Godlas
J. Frederick Simmons
William M. Wardlaw
Stephen M. Hilberg
Ronald P. Spogli
FOR AGAINST ABSTAIN
2. Proposal to approve the amendment to Article Fourth of the Certificate of
Incorporation of the Company.
3. Proposal to approve the Company's 1993 Stock Option Plan.
4. Proposal to ratify the appointment of Arthur Andersen & Co. as the Company's
independent auditors for the fiscal year ending January 29, 1995.
5. Such other matters as may properly come before the Meeting.
Unless a contrary direction is indicated, this Proxy will be voted FOR all
nominees listed in Proposal 1 and FOR approval of Proposals 2, 3 and 4; if
specific instructions are indicated, this Proxy will be voted in accordance
therewith.
All Proxies to vote at said Meeting or any adjournment heretofore given by
the undersigned are hereby revoked. Receipt of Notice of Annual Meeting and
Proxy Statement dated April 13, 1994, is hereby acknowledged.
Please mark, sign, date and return this Proxy in the accompanying prepaid
envelope. This Proxy is solicited on behalf of the Board of Directors of ORCHARD
SUPPLY HARDWARE STORES CORPORATION.
Signature(s) Date , 1994
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Please sign exactly as your name appears hereon. When signing as attorney,
executor, administrator, trustee, guardian, or corporate officer, please include
full title.
