<PAGE> 1
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended July 3, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _____ to _____
Commission File Number 0-21768
D.I.Y. Home Warehouse, Inc.
---------------------------
(Exact name of registrant as specified in its charter)
State of Ohio 38-2560752
(State of Incorporation) (I.R.S. Employer I.D. No.)
5811 Canal Road
Valley View, Ohio 44125
(216) 328-5100
(Address of principal executive offices and telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No_____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 3, 1999
- -------------------------- ---------------------------
Common Stock, no par value 7,276,059
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DIY HOME WAREHOUSE, INC.
<TABLE>
<CAPTION>
INDEX PAGE NO.
----- --------
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheet -
July 3, 1999 and
January 2, 1999......................................................................... 3
Condensed Statement of Income -
Three and Six Months Ended July 3, 1999
and July 4, 1998........................................................................ 4
Condensed Statement of Shareholders'
Equity - Six Months Ended
July 3, 1999............................................................................ 5
Condensed Statement of Cash Flows
Six Months Ended July 3, 1999
and July 4, 1998........................................................................ 6
Notes to Condensed Financial Statements................................................. 7-8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations.............................................................................. 9-13
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................................................ 14
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
DIY HOME WAREHOUSE, INC.
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
July 3, 1999 January 2, 1999
------------ ---------------
Assets (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 554,528 $ 128,149
Accounts receivable, sale of inventory 2,332,989 --
Refundable federal income taxes 706,545 706,545
Merchandise inventories 29,881,885 31,261,721
Deferred income taxes 1,542,590 1,542,590
Prepaid expenses and other assets 815,294 780,086
----------- -----------
Total current assets 35,833,831 34,419,091
----------- -----------
Property and equipment, at cost 39,456,264 53,750,759
Less accumulated depreciation and amortization 14,023,382 17,878,455
----------- -----------
Property and equipment, net 25,432,882 35,872,304
Other assets 235,996 385,910
----------- -----------
Total assets $61,502,709 $70,677,305
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Note payable, affiliate $ -- $ 300,000
Current maturities of long-term debt 177,473 1,288,330
Accounts payable 11,203,350 8,462,635
Accrued expenses and other 4,768,496 5,527,386
----------- -----------
Total current liabilities 16,149,319 15,578,351
Revolving credit 7,157,683 10,134,153
Long-term debt 198,148 4,438,867
Deferred income taxes 1,850,658 2,887,269
----------- -----------
Total liabilities 25,355,808 33,038,640
Shareholders' equity:
Preferred stock, authorized 1,000,000 shares,
none issued -- --
Common stock, no par value, authorized
10,000,000 shares, 7,276,059 shares
outstanding as of July 3, 1999 and
January 2, 1999 22,955,462 22,955,462
Retained earnings 13,392,880 14,884,644
----------- ------------
36,348,342 37,840,106
Less common stock in treasury, at cost:
357,800 shares (201,441) (201,441)
----------- ------------
Total shareholders' equity 36,146,901 37,638,665
----------- ------------
Total liabilities and shareholders' equity $61,502,709 $ 70,677,305
=========== ============
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE> 4
DIY HOME WAREHOUSE, INC.
CONDENSED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net sales $ 46,086,969 $ 56,334,029 $75,249,476 $ 93,746,202
Cost of sales 35,813,398 41,875,355 56,565,614 68,603,276
------------ ------------ ----------- ------------
Gross profit 10,273,571 14,458,674 18,683,862 25,142,926
Store operating, general
and administrative expenses 9,917,192 12,418,294 18,978,116 23,689,726
Store closing costs 1,325,326 -- 1,584,982 --
Store development cost -- 99,747 -- 305,517
------------ ------------ ----------- ------------
Operating (loss) income (968,947) 1,940,633 (1,879,236) 1,147,683
Other expense, net 317,059 439,964 649,139 997,943
------------ ------------ ----------- ------------
(Loss) income before income
taxes (1,286,006) 1,500,669 (2,528,375) 149,740
Income taxes (benefit) (527,247) 615,275 (1,036,611) 61,393
------------ ------------ ----------- ------------
Net (loss) income $ (758,759) $ 885,394 $(1,491,764) $ 88,347
============ ============ =========== ============
(Loss) earnings per common
share, basic and diluted $ (0.10) $ 0.12 $ (0.20) $ 0.01
============ ============ =========== ============
Weighted average
common shares outstanding 7,276,059 7,633,859 7,276,059 7,633,859
============ ============ =========== ============
</TABLE>
See accompanying notes to condensed financial statements.
4
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<TABLE>
<CAPTION>
DIY HOME WAREHOUSE, INC.
CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JULY 3, 1999
(Unaudited)
Common Stock Retained Treasury Shareholders'
Shares Amount Earnings Stock Equity
------ ------ -------- ----- ------
<S> <C> <C> <C> <C> <C>
Balances, January 2, 1999 7,276,059 $22,955,462 $14,884,644 $(201,441) $37,638,665
Net loss -- -- (1,491,764) -- (1,491,764)
--------- ----------- ----------- --------- -----------
Balances, July 3, 1999 7,276,059 $22,955,462 $13,392,880 $(201,441) $36,146,901
========= =========== =========== ========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
5
<PAGE> 6
DIY HOME WAREHOUSE, INC.
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited
<TABLE>
<CAPTION>
For the six months ended
July 3, 1999 July 4, 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $(1,491,764) $ 88,347
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization 1,757,325 1,955,051
Net write down of other assets and liabilities from
closed stores (31,691) --
Gain on sale of property from closed stores (1,859,734) --
Gain on sale of property and equipment -- 2,752
Loss on write-off of leasehold improvements
and property and equipment from closed stores 2,619,701 --
Deferred income taxes (1,036,611) (85,925)
Changes in operating assets and liabilities:
Accounts receivable, sale of inventory (2,332,989) --
Accounts receivable, trade (82,776) (16,422)
Refundable federal income taxes -- 365,963
Merchandise inventories 1,379,836 613,543
Prepaid expenses and other assets 86,835 193,597
Accounts payable 2,740,715 4,062,248
Accrued expenses and other current liabilities (616,552) (104,686)
----------- -----------
Net cash provided by operating activities 1,132,295 7,074,468
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (174,611) (1,304,977)
Proceeds from sale of property, net of closing costs 8,096,741 --
----------- -----------
Net cash provided by (used in) investing
activities 7,922,130 (1,304,977)
----------- -----------
Cash flows from financing activities:
Principal payments under capital lease obligations (88,345) (83,116)
Principal payments of note payable, affiliate (300,000) (300,000)
Proceeds from revolving credit 5,367,409 3,625,000
Principal payments of revolving credit (8,343,879) (8,225,000)
Principal payments of long-term debt (5,263,231) (446,999)
----------- -----------
Net cash used in financing activities (8,628,046) (5,430,115)
----------- -----------
Net increase in cash and cash equivalents 426,379 339,376
Cash and cash equivalents, beginning of period 128,149 141,401
----------- -----------
Cash and cash equivalents, end of period $ 554,528 $ 480,777
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
6
<PAGE> 7
D.I.Y. HOME WAREHOUSE, INC.
Notes to Condensed Financial Statements
(Unaudited)
1. Basis of Presentation:
In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position as of
July 3, 1999 and the results of operations for the three and six months ended
July 3, 1999 and July 4, 1998 and cash flows for the six months ended July 3,
1999 and July 4, 1998. The condensed financial statements should be read in
conjunction with the financial statements and notes contained in the Company's
Annual Report filed on Form 10-K. The results of operations for any interim
period should not necessarily be considered indicative of the results of
operations for the full year.
2. Earnings Per Share:
Earnings per share are computed using the weighted average number of
shares of common stock outstanding for the periods. Basic and fully diluted
earnings per common share are identical.
COMPUTATION OF EARNINGS PER COMMON SHARE
(BASIC AND DILUTED)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 3, 1999 July 4, 1998 July 3, 1999 July 4, 1998
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income (loss) applicable to common $ (758,759) $ 885,394 $(1,491,764) $ 88,347
========== ========== =========== ===========
shares
Weighted average common shares
outstanding for the period 7,276,059 7,633,859 7,276,059 7,633,859
Dilutive effect of exercise of stock
options -- -- -- --
---------- ---------- ----------- -----------
Weighted average common shares,
assuming issuance of the above
securities 7,276,059 7,633,859 7,276,059 7,633,859
========== ========== =========== ===========
Earnings per common share:
Basic $ (0.10) $ 0.12 $ (0.20) $ 0.01
Diluted $ (0.10) $ 0.12 $ (0.20) $ 0.01
</TABLE>
7
<PAGE> 8
3. Store Closings and Disposition of Assets
On June 15, 1999, the Company announced the closing of three stores
located in Mansfield, Ohio; Akron, Ohio; and Boardman, Ohio. Concurrent with the
announcement, the Company sold the land and building of its Mansfield store and
its previously closed Canton store for $8,600,000 resulting in a pre-tax gain of
$1,860,000. The Company also assigned its lease in the West Akron location to
the same purchaser of the Canton and Mansfield properties. The Boardman
location, which had a lease commitment through September 2008 for approximately
$600,000 per year, was amended to terminate on September 30, 1999. The Company
paid $463,000 in consideration for the reduced lease term. In addition, the
Company wrote-off leasehold improvements and property and equipment of
$2,620,000 in connection with the store closings. The gain on sale of land and
building, the lease termination fees, the write-off of closed store assets and
other closing costs of $102,000 are included as a net amount in the store
closing costs line item in the condensed statement of income.
The Company also entered into an Agreement (the Agreement) with a third party to
act as its agent to sell the merchandise inventories located at the closed
stores. The Company will receive a guaranteed amount from the inventory
liquidation based on a formula outlined in the Agreement. This Agreement
resulted in inventory markdown costs of $1,773,000 which are included in the
cost of sales line item of the condensed statement of income. Remaining
guaranteed payments from the sale of this merchandise inventories aggregate
$2,333,000 at July 3, 1999.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATIONS - Three Months Ended July 3, 1999
Compared to Three Months Ended July 4, 1998
Net sales for the quarter ended July 3, 1999 were $46,087,000 compared
to $56,334,000 for the quarter ended July 4, 1998. Excluding the closing of the
Company's two stores in the fourth quarter of 1998 and three stores in this
quarter, comparable store sales decreased by $4,037,000 or 8.0%, resulting from
additional warehouse competition in the Company's markets.
Excluding inventory markdown costs of $1,773,000 related to the store
closings, gross profit decreased by $2,412,000, or 16.7%, from $14,459,000 in
the second quarter of fiscal 1998 to $12,047,000 in the second quarter of fiscal
1999. This decrease was primarily attributable to the decrease in net sales.
Excluding the impact of the store closings, gross profit as a percentage of net
sales increased from 25.7% in the second quarter of fiscal 1998 to 26.1% in the
second quarter of fiscal 1999.
Store operating, general and administrative expenses decreased by
$2,501,000, or 20.1%, to $9,917,000 in the quarter ended July 3, 1999 from
$12,418,000 in the quarter ended July 4, 1998. This decrease is due to the
Company's ongoing efforts to reduce operating costs. As a percentage of net
sales, store operating, general and administrative expenses decreased to 21.5%
in the second quarter of fiscal 1999 compared to 22.0% in the comparable quarter
of fiscal 1998.
As previously indicated, the Company announced the closing of three
stores during the second quarter of fiscal 1999. The net store closing costs of
$1,325,000 for the second quarter of fiscal 1999 consists primarily of a
$1,860,000 gain from the sale of the land and building of two closed store
locations offset by lease termination fees of $463,000, the write-off of
leasehold improvements and property and equipment of $2,620,000 and other
closing costs of $102,000.
Other expense, net, was $317,000 for the quarter ended July 3, 1999
compared to $440,000 for the quarter ended July 4,1999. The net decrease of
$123,000 is primarily due to a decrease in interest expense of $128,000
associated with the benefits of reduced debt levels combined with the retirement
of all of the Company's mortgage notes in June 1999.
9
<PAGE> 10
OPERATIONS - Six Months Ended July 3, 1999
Compared to Six Months Ended July 4, 1998
Net sales for the six months ended July 3, 1999 were $75,249,000
compared to $93,746,000 for the six months ended July 4, 1998. Excluding the
closing of the Company's two stores in the fourth quarter of fiscal 1998 and
three stores in the second quarter of fiscal 1999, comparable store sales
decreased by $9,880,000 or 11.7%, resulting from additional national warehouse
competition in the Company's markets.
Excluding inventory markdown costs of $1,773,000 related to the store
closings, gross profit decreased by $4,686,000, or 18.6%, from $25,143,000 in
the first half of fiscal 1998 to $20,457,000 in the first half of fiscal 1999.
This decrease was primarily attributable to the decrease in net sales.
Excluding, the impact of the closings, gross profit as a percentage of net sales
was 27.2% in the first half of fiscal 1999 compared to 27.1% in the first half
of fiscal 1998.
Store operating, general and administrative expenses decreased
$4,712,000, or 19.9% to $18,978,000 in the first half of fiscal 1999 from
$23,690,000 for the first half of fiscal 1998. The decrease is due to the
Company's on-going effort to reduce operating expenses. As a percentage of
sales, operating expenses were 25.2% for the first half of 1999 compared to
25.3% for the first half of 1998.
As previously indicated, the Company announced the closing of three
stores during the second quarter of fiscal 1999. The net store closing costs of
$1,325,000 related to these three store closings consisted primarily of a
$1,860,000 gain from the sale of the land and building of two closed store
locations offset by lease termination fees of $463,000, the write-off of
leasehold improvements and property and equipment of $2,620,000 and other
closing costs of $102,000. Additionally, during the first quarter of fiscal
1999, the Company incurred approximately $260,000 in operating costs related to
the two stores closed in the fourth quarter of fiscal 1998.
The Company incurred $306,000 related to store development costs for
the six months ended July 4, 1998. During fiscal 1997, management assessed the
business strategies and opportunities of the Company to differentiate itself in
the warehouse-format home improvement retail market. This process resulted in
development of new merchandising, marketing and other strategic initiatives to
strengthen the Company's market position.
Other expense, net, decreased by $349,000, to $649,000 for the six
months ended July 3, 1999 from $998,000 for the comparable period of fiscal
1998. This net decrease is primarily due to a decrease in interest expense of
$310,000 associated with the benefits of reduced debt levels combined with the
retirement of all of the Company's mortgage notes in June 1999.
10
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended July 3, 1999 and July 4, 1998, operating
activities provided net cash of approximately $1,132,000 and $7,074,000,
respectively. The primary source of cash from operating activities for the six
months ended July 3, 1999 was $1,757,000 from depreciation and amortization,
$760,000 net of the gain on sale of land and building and write off of leasehold
improvements and property and equipment related to the closed stores, $1,380,000
from inventories due to the closing of the three stores and a $2,741,000
increase in accounts payable. The primary use of cash for the first half of
fiscal 1999 was $1,492,000 from the net loss, a $2,333,000 accounts receivable
due from the liquidator related to the sale of the closed store inventories,
$1,037,000 in deferred taxes and $617,000 in accrued expenses. The primary
source of cash from operating activities for the six months ended July 4, 1998
was $1,955,000 from deprecation and amortization and $614,000 from reducing
inventories, combined with an increase of $4,062,000 in accounts payable.
Net cash provided by investing activities was $7,922,000 for the second
half of fiscal 1999 primarily due to the net proceeds received from the sale of
the land and buildings of two closed store locations. Net cash used in investing
activities was $1,305,000 for the six months ended July 4, 1998 due to store
development capital expenditures associated with the comprehensive renovation of
certain store locations.
Net cash used in financing activities increased by $3,198,000 to
$8,628,000 for the six months ended July 3, 1999 from $5,430,000 for the
comparable period in fiscal 1998. The increase is a result of the net proceeds
received from the sale of land and buildings. The Company used a majority of the
proceeds to retire the remaining balance outstanding on its mortgage loans of
$4,721,000 in June 1999.
Total current and long-term debt was $7,533,000 at July 3, 1999
compared to $16,700,000 at July 4, 1998. Management believes cash on hand, cash
from operations and cash available through the Company's financing agreements
will be sufficient to meet short-term and long-term working capital
requirements.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q may contain statements that are
forward-looking, as that term is defined by the Private Securities Litigation
Reform Act of 1995 or by the Securities and Exchange Commission in its rules,
regulations and releases. The Company intends that such forward-looking
statements be subject to the safe harbors created thereby. All forward-looking
statements are based on current expectations regarding important risk factors.
Accordingly, actual results may differ materially from those expressed in the
forward-looking statements and
11
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the making of such statements should not be regarded as a representation by the
Company or any other person that the results expressed therein will be achieved.
Important risk factors include, but are not limited to, the following: general
economic conditions; consumer spending and debt levels; housing turnover;
weather; impact on sales and margins from both existing and new competition;
changes in operating expenses; changes in product mix; interest rates; changes
in and the application of accounting policies and practices; adverse results in
significant litigation matters; adverse state and federal regulations and
legislation; the occurrence of extraordinary events including events and acts of
nature or accidents; and the risks described from time to time in the Company's
Securities and Exchange Commission filings.
Competition
The home improvement, hardware and garden businesses are all highly
competitive. The Company competes against traditional hardware, plumbing,
electrical and home supply retailers, as well as warehouse-format and discount
retail stores and many of the Company's competitors have substantially greater
resources than the Company. Builders Square and Lowe's Company have had stores
in the Company's markets since 1985 and 1994, respectively. However, Builders
Square exited the marketplace in Northeastern Ohio during the second quarter of
fiscal 1999. Lowe's continued to expand with additional locations in 1996, 1997
and 1998. Beginning in the fourth quarter of 1997 and in 1998, Home Depot began
operations in several of the Company's markets. Home Depot and Lowe's have
announced further expansion plans in 1999 and 2000. In addition, there has been
increasing consolidation within the home improvement industry, which may provide
certain entities increased competitive advantages. Specifically, increased
competition including, but not limited to, additional competitors' store
locations, price reductions, and advertising and marketing campaigns could have
a material adverse effect on the Company's business, recoverability of asset
values, financial condition and operating results.
Year 2000 Issue
BACKGROUND. Some computers, software, and other equipment include
programming code in which calendar year data is abbreviated to only two digits.
As a result of this design decision, some of these systems could fail to operate
or fail to produce correct results if "00" is interpreted to mean 1900, rather
than 2000. These problems are widely expected to increase in frequency and
severity as the year 2000 approaches, and are commonly referred to as the
"Millennium Bug" or "Year 2000 Problem."
ASSESSMENT. The Company has reviewed its internal computer programs and
systems to ensure that the programs and systems will be Year 2000 compliant. The
Company presently believes that its computer systems will be Year 2000 compliant
in a timely manner. The Company has incurred approximately $400,000 and does not
expect to incur additional material costs to complete these efforts.
INTERNAL INFRASTRUCTURE. The Company believes that it has identified
substantially all of the major computers, software applications, and related
equipment used in connection with its internal operations that must be modified,
upgraded, or replaced to minimize the possibility of a material
12
<PAGE> 13
disruption to its business. The Company has commenced the process of modifying,
upgrading, and replacing those systems that have been identified as affected,
and expects to complete this process by the middle of the third quarter of
fiscal 1999.
SYSTEMS OTHER THAN INFORMATION TECHNOLOGY SYSTEMS. In addition to
computers and related systems, the operation of office and facilities equipment,
such as fax machines, photocopiers, telephone switches, security systems, and
other common devices may be affected by the Year 2000 Problem. The Company is
currently assessing the potential effect of, and costs of remediating, the Year
2000 Problem on its office and facilities equipment.
The Company does not expect to incur any material costs to complete
these efforts. Such costs are included in the estimate discussed above under
"Assessments."
SUPPLIERS. The Company has initiated communications with third party
suppliers of the major computers, software, and other equipment used, operated,
or maintained by the Company to identify and, to the extent possible, to resolve
issues involving the Year 2000 Problem. However, the Company has limited or no
control over the actions of these third party suppliers. Thus, while the Company
expects that it will be able to resolve any significant Year 2000 Problems with
these systems, there can be no assurance that these suppliers will resolve any
or all Year 2000 Problems with these systems before the occurrence of a material
disruption to the business of the Company or any of its customers. Any failure
of these third parties to resolve Year 2000 problems with their systems in a
timely manner could have a material adverse effect on the Company's business,
financial condition, and results of operation.
Based on the progress the Company has made in addressing its Year 2000
issues and the Company's plan and timeline to complete its compliance program,
the Company does not foresee significant risks associated with its Year 2000
compliance at this time. As the Company's plan is to address its significant
Year 2000 issues prior to being affected by them, it has not developed a
comprehensive contingency plan. The Company expects to be complete its Year 2000
compliance testing by the middle of the Company's 1999 third quarter. At that
time, the Company will assess the need for a contingency plans as deemed
necessary.
13
<PAGE> 14
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
A list of the exhibits required by Item 601 of Regulation S-K
to be filed as a part of this Form 10-Q is shown on the
"Exhibit Index" filed herewith.
(b) Reports on Form 8-K:
The Company filed one report on Form 8-K dated June 15, 1999
regarding events that occurred during the months included in
the second quarter of fiscal year 1999.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
D.I.Y. HOME WAREHOUSE, INC.
(Registrant)
DATED: July 30, 1999
-------------
By: Eric I. Glassman
----------------------------------
Vice President and Chief Financial
Officer
14
<PAGE> 15
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------ ----------------------
10.13 DIY Home Warehouse, Inc. 1993 Long Term Incentive Plan as
Amended March 17, 1999 and Approved by the Board of Directors
March 17, 1999, filed herewith.
27.1 Financial Data Schedule for the quarter ended July 3, 1999
15
<PAGE> 1
EXHIBIT 10.13
D.I.Y. HOME WAREHOUSE, INC.
1993 LONG TERM INCENTIVE PLAN
AS AMENDED THROUGH MARCH 17, 1999
(APPROVED by STOCKHOLDERS THROUGH MAY 22, 1996
AND BY THE BOARD OF DIRECTORS THROUGH MARCH 17, 1999)
ARTICLE I
PURPOSE AND ADOPTION OF THE PLAN
--------------------------------
1.01 PURPOSE. The purpose of the D.I.Y. Home Warehouse, Inc. Long Term
Incentive Plan is to provide certain key employees of D.I.Y. Home Warehouse,
Inc. (the "Company") with an additional incentive to promote the Company's
financial success and to provide an incentive which the Company may use to
induce able persons to enter into or remain in the employment of the Company or
a Subsidiary.
1.02 ADOPTION AND TERM. The Plan has been approved by the Board and the
Company's shareholders and is effective as of March 24, 1993, as amended
February 23, 1994 and February 21, 1996, and approved by stockholders May 25,
1994, and May 22, 1996, and will remain in effect until all shares authorized
under the terms of the Plan have been issued, unless earlier terminated or
abandoned by action of the Board; provided, however, that no Incentive Stock
Option may be granted after March 24, 2003.
ARTICLE II
DEFINITIONS
-----------
2.01 ADMINISTRATOR means the group of persons having authority to
administer the Plan pursuant to Section 3.01.
2.02 AWARD means any one or combination of Non-Qualified Stock Options,
Incentive Stock Options, Stock Appreciation Rights, or any other award made
under the terms of the Plan.
2.03 AWARD AGREEMENT means a written agreement between the Company and
Participant or a written acknowledgment from the Company specifically setting
forth the terms and conditions of an Award granted under the Plan.
2.04 AWARD PERIOD means, with respect to an Award, the period of time
set forth in the Award Agreement during which specified conditions set forth in
the Award Agreement must be satisfied.
2.05 BENEFICIARY means (a) an individual, trust or estate who or which,
by will or by operation of the laws of descent and distribution, succeeds to the
rights and obligations of the Participant under the Plan and Award Agreement
upon the Participant's death; or (b) an individual, who by designation of the
Participant, succeeds to the rights and obligations of the Participant under the
Plan and Award Agreement upon the Participant's death.
2.06 BOARD means the Board of Directors of the Company.
<PAGE> 2
2.07 CODE means the Internal Revenue Code of 1986, as amended.
References to a section of the Code shall include that section and any
comparable section or sections of any future legislation that amends,
supplements or supersedes that section.
2.08 COMPANY means D.I.Y. Home Warehouse, Inc., an Ohio corporation.
2.09 COMPANY COMMON STOCK means the Common Stock of the Company, no par
value.
2.10 DATE OF GRANT means the date designated by the Administrator as
the date as of which it grants an Award, which shall not be earlier than the
date on which the Administrator approves the granting of such Award.
2.11 DIRECTOR means a member of the Board of Directors of the Company.
2.12 EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
2.13 EXERCISE PRICE means, with respect to a Stock Appreciation Right,
the amount established by the Administrator, in accordance with Section 7.03
hereunder, and set forth in the Award Agreement, which is to be subtracted from
the Fair Market Value on the date of exercise in order to determine the amount
of the Incremental Value to be paid to the Participant.
2.14 EXPIRATION DATE means the date specified in an Award Agreement as
the expiration date of such Award.
2.15 FAIR MARKET VALUE means, on any given date, (a) if the Company
Common Stock is, on the given date, listed on a national securities exchange,
Fair Market Value shall be the average of the highest and lowest selling price
for the given date, or the most recent date upon which sales occurred, (b) if
(a) does not apply, then Fair Market Value shall be the average of the highest
and lowest selling price for the Company Common Stock as reported on the Nasdaq
National Market for the given date, or the most recent date upon which sales
were reported, (c) if neither (a) nor (b) applies. Fair Market Value shall be
the average of the final bid and asked prices for the Company Common Stock as
quoted for the given date in whatever medium then issues such quotes, or the
most recent date upon which such quotes were published, (d) if none of (a), (b)
or (c) applies, then Fair Market Value shall be determined by the Board based on
such valuation methods and/or indicia of value as the Board deems advisable at
the time of such determination. The use by the Board of any method or indicia of
value to determine Fair Market Value on any valuation date will not, of itself,
preclude the Board from use of a different method or indicia on a subsequent
valuation date.
2.16 INCENTIVE STOCK OPTION means a stock option described in Section 422
of the Code.
2.17 INCREMENTAL VALUE has the meaning given such term in
Section 7.01 of the Plan.
2.18 NON-QUALIFIED STOCK OPTION means a stock option which is not an
Incentive Stock Option.
2.19 OFFICER means a president, vice president, treasurer, secretary,
controller, and any other person who performs functions corresponding to the
foregoing officers for the Company, any
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member of the Board of the Company or a Subsidiary of the Company or any person
performing similar functions with respect to the Company, and any other
participant who is deemed to be an officer or director of the Company or a
Subsidiary of the Company for purposes of Section 16 of the Exchange Act and the
rules thereunder, as currently in effect or as amended from time to time.
2.20 OPTIONS means all Non-Qualified Stock Options and Incentive Stock
Options granted at any time under the Plan.
2.21 PARTICIPANT shall have the meaning set forth in Section 5.01.
2.22 PLAN means the D.I.Y. Home Warehouse, Inc. Long Term Incentive
Plan, as described herein and as may be amended from time to time.
2.23 PURCHASE PRICE, with respect to options, shall have the meaning
set forth in Section 6.02.
2.24 RULE 16b-3 means Rule 16b-3 promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act, as currently in effect
and as it may be amended from time to time, and any successor rule.
2.25 STOCK APPRECIATION RIGHT means an Award granted in accordance with
Article VII.
2.26 SUBSIDIARY shall have the meaning set forth in Section 425(f) of
the Code.
2.27 TERMINATION OF EMPLOYMENT means the voluntary or involuntary
termination of a Participant's employment with the Company for any reason,
including death, disability, retirement or as the result of the divestiture of
the Participant's employer or any other similar transaction in which the
Participant's employer ceases to be the Company or a Subsidiary of the Company.
Whether an authorized leave of absence or absence on military or government
service, absence due to disability, or absence for any other reason shall
constitute Termination of Employment shall be determined in each case by the
Administrator in its sole discretion.
ARTICLE III
ADMINISTRATION
--------------
3.01 ADMINISTRATION. The Administrator of the Plan shall be a committee
of two or more Directors with authority to act as provided in Rule I 6b-3 and
shall be elected or appointed by the Board. The members of the committee shall
meet the "disinterested person" requirements of Rule I 6b-3(c)(2)(i). The
Administrator shall administer the Plan in accordance with this provision and
shall have the sole discretionary authority to interpret the Plan, to establish
and modify administrative rules for the Plan, to impose such conditions and
restrictions on Awards as it determines appropriate, to cancel Awards (including
those made pursuant to other plans of the Company) and to substitute new options
(including options granted under other plans of the Company) with the consent of
the recipient, and to take such steps in connection with the Plan and Awards
granted thereunder as it may deem necessary or advisable. The Administrator may.
with respect to Participants who are not Officers, delegate such of its powers
and authority under the Plan as it deems appropriate to designated officers or
employees of the Company.
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3.02 INDEMNIFICATION. Members of the Administrator shall be entitled to
indemnification and reimbursement from the Company for any action or any failure
to act in connection with service as Administrator to the full extent provided
for or permitted by the Company's certificate of incorporation or bylaws or by
any insurance policy or other agreement intended for the benefit of the
Company's officers, directors or employees or by any applicable law.
ARTICLE IV
COMPANY COMMON STOCK ISSUABLE PURSUANT TO THE PLAN
--------------------------------------------------
4.01 SHARES ISSUABLE. Shares to be issued under the Plan may be
authorized and unissued shares or issued shares which have been reacquired by
the Company. Except as provided in Section 4.03, the Awards granted under the
Plan shall be limited so that the sum of the following shall never exceed
1,350,000 shares of Company Common Stock: (i) all shares which shall be issued
upon the exercise of outstanding Options or other Awards granted under the Plan,
(ii) all shares for which payment of Incremental Value shall be made by reason
of the exercise of Stock Appreciation Rights at any time granted under the Plan,
and (iii) the number of shares otherwise issuable under an Award which are
applied by the Company to payment of the withholding or tax liability discussed
in Section 8.10.
4.02 SHARES SUBJECT TO TERMINATED AWARDS. In the event that any Award
at any time granted under the Plan shall be surrendered to the Company, be
terminated or expire before it shall have been fully exercised, or an award of
Stock Appreciation Rights is exercised for cash, then all shares formerly
subject to such Award as to which such Award shall not have been exercised shall
be available for any Award subsequently granted in accordance with the Plan.
Shares of Company Common Stock subject to Options, or portions thereof, which
have been surrendered in connection with the exercise of tandem Stock
Appreciation Rights shall not be available for subsequent Awards under the Plan,
and shares of Company Common Stock issued in payment of such Stock Appreciation
Rights shall be charged against the number of shares of Company Common Stock
available for the grant of Awards. Shares which are reacquired by the Company
pursuant to forfeiture provisions in the Award Agreement shall be available for
subsequently granted Awards only if the forfeiting Participant received no
benefits of ownership other than voting rights (such as dividends actually paid
to the Participant) of the forfeited shares. Any shares of Company Common Stock
issued by the Company pursuant to its assumption or substitution of outstanding
grants from acquired companies shall not reduce the number of shares available
for Awards under this Plan unless issued under this Plan.
4.03 ADJUSTMENTS TO REFLECT CAPITAL CHANGES.
(a) RECAPITALIZATION. The number and kind of shares subject to
outstanding Awards, the Purchase Price or Exercise Price for such
shares, and the number and kind of shares available for Awards
subsequently granted under the Plan shall be appropriately adjusted to
reflect any stock dividend, stock split combination or exchange of
shares, merger, consolidation or other change in capitalization with a
similar substantive effect upon the Plan or the Awards granted under
the Plan. The Administrator shall have the power to determine the
amount of the adjustment to be made in each case.
(b) SALE OR REORGANIZATION. After any reorganization, merger
or consolidation in which the Company is a surviving corporation, each
Participant shall, at no additional cost, be entitled upon exercise of
an Award to receive (subject to any required action by
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stockholders), in lieu of the number of shares of Company Common Stock
receivable or exercisable pursuant to such Award, a number and class of
shares of stock or other securities to which such Participant would
have been entitled pursuant to the terms of the reorganization, merger
or consolidation if, at the time of such reorganization, merger or
consolidation, such Participant had been the holder of record of a
number of shares of stock equal to the number of shares receivable or
exercisable pursuant to such Award. Comparable rights shall accrue to
each Participant in the event of successive reorganizations, mergers or
consolidations of the character described above.
(c) OPTIONS TO PURCHASE STOCK OF ACQUIRED COMPANIES. After
any reorganization, merger or consolidation in which the Company or a
Subsidiary of the Company shall be a surviving corporation, the
Administrator may grant substituted Options under the provisions of the
Plan, pursuant to Section 425 of the Code, replacing old options
granted under a plan of another party to the reorganization, merger or
consolidation, where such party's stock may no longer be issued
following such merger or consolidation. The foregoing adjustments and
manner of application of the foregoing provisions shall be determined
by the Administrator in its sole discretion. Any adjustments may
provide for the elimination of any fractional shares which might
otherwise have become subject to any Awards.
ARTICLE V
PARTICIPATION
-------------
5.01 ELIGIBLE EMPLOYEES. Participants in the Plan shall be the Officers
who are employees of the Company or a Subsidiary of the Company and other
employees of the Company or a Subsidiary having managerial, supervisory or
similar responsibilities or who are key administrative employees or sales
managers, and who are not covered by any collective bargaining agreement binding
on such persons' employer, as the Administrator, in its sole discretion, may
designate from time to time. The Administrator's designation of a Participant in
any year shall not require the Administrator to designate such person to receive
Awards in any other year. The Administrator shall consider such factors as it
deems pertinent in selecting Participants and in determining the type and amount
of their respective Awards.
5.02 SPECIAL PROVISIONS FOR CERTAIN NON-EMPLOYEES. Notwithstanding any
provision contained in this Plan to the contrary, the Administrator may grant
Awards under the Plan to non-employees who, in the judgment of the
Administrator, render significant services to the Company or a Subsidiary, on
such terms and conditions as the Administrator deems appropriate and consistent
with the intent of the Plan.
ARTICLE VI
OPTION AWARDS
-------------
6.01 POWER TO GRANT OPTIONS. The Administrator may grant, to such
Participants as the Administrator may select, Options entitling the Participant
to purchase Company Common Stock from the Company in such quantity, at such
price, and on such terms and subject to such conditions, not inconsistent with
the terms of this Plan, as may be established by the Administrator. The terms of
any Option granted under this Plan shall be set forth in an Award Agreement.
Notwithstanding the foregoing, Options granted to Officers shall not be
exercisable for a period of at least six months from the Date of Grant.
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<PAGE> 6
6.02 PURCHASE PRICE OF OPTIONS. The Purchase Price of each share of
Company Common Stock which may be purchased upon exercise of any Option granted
under the Plan shall be determined by the Administrator, provided that the
Purchase Price for shares of Company Common Stock purchased pursuant to Stock
Options designated by the Administrator as Incentive Stock Options shall be
equal to or greater than the Fair Market Value on the Date of Grant as required
under Section 422 of the Code.
6.03 DESIGNATION OF INCENTIVE STOCK OPTIONS. Except as otherwise
expressly provided in the Plan, the Administrator may designate, at the Date of
Grant of each Option, that the Option is an Incentive Stock Option under Section
422 of the Code.
(a) INCENTIVE STOCK OPTION SHARE LIMITATION. No Participant
may be granted Incentive Stock Options under the Plan (or any other
plans of the Company) which would result in stock with an aggregate
Fair Market Value (measured on the Date of Grant) of more than $100,000
first becoming exercisable in any one calendar year, or which would
entitle such Participant to purchase a number of shares greater than
the maximum number permitted by Section 422 of the Code as in effect on
the Date of Grant.
(b) OTHER INCENTIVE STOCK OPTION TERMS. Whenever possible,
each provision in the Plan and in every Option granted under this Plan
which is designated by the Administrator as an Incentive Stock Option
shall be interpreted in such a manner as to entitle the Option to the
tax treatment afforded by Section 422 of the Code. If any provision of
this Plan or any Option designated by the Administrator as an Incentive
Stock Option shall be held not to comply with requirements necessary to
entitle such Option to such tax treatment, then (i) such provision
shall be deemed to have contained from the outset such language as
shall be necessary to entitle the Option to the tax treatment afforded
under Section 422 of the Code, and (ii) all other provisions of this
Plan and the Award Agreement shall remain in full force and effect. If
any agreement covering an Option designated by the Administrator to be
an Incentive Stock Option under this Plan shall not explicitly include
any terms required to entitle such Incentive Stock Option to the tax
treatment afforded by Section 422 of the Code, all such terms shall be
deemed implicit in the designation of such Option and the Option shall
be deemed to have been granted subject to all such terms.
6.04 RIGHTS AS A STOCKHOLDER. The Participant or any transferee of an
Option pursuant to Section 8.04 or Section 8.11 shall have no rights as a
stockholder with respect to any shares of Company Common Stock covered by an
Option until the Participant or transferee shall have become the holder of
record of any such shares, and no adjustment shall be made for dividends and
cash or other property or distributions or other rights with respect to any such
shares of Company Common Stock for which the record date is prior to the date on
which the Participant or a transferee of the Option shall have become the holder
of record of any such shares covered by the Option.
ARTICLE VII
STOCK APPRECIATION RIGHTS
-------------------------
7.01 POWER TO GRANT STOCK APPRECIATION RIGHTS. The Administrator is
authorized to grant to any Participant, on such terms established by the
Administrator on or prior to the Date of Grant and subject to and not
inconsistent with the provisions of this Plan, the right to receive the payment
from the Company, payable as provided in Section 7.04, of an amount equal to the
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Incremental Value of the Stock Appreciation Rights, which shall be an amount
equal to the remainder derived from subtracting (i) the Exercise Price for the
right established in the Award Agreement from (ii) the Fair Market Value of a
share of Company Common Stock on the date of exercise. The terms of any Stock
Appreciation Right granted under the Plan shall be set forth in an Award
Agreement.
7.02 TANDEM STOCK APPRECIATION RIGHTS. The Administrator may grant to
any Participant a Stock Appreciation Right consistent with the provisions of
this Plan covering any share of Company Common Stock which is, at the Date of
Grant of the Stock Appreciation Right, also covered by an Option granted to the
same Participant, either prior to or simultaneously with the grant to such
Participant of the Stock Appreciation Right, provided: (i) any Option covering
any share of Company Common Stock shall expire and not be exercisable upon the
exercise of any Stock Appreciation Right with respect to the same share; (ii)
any Stock Appreciation Right covering any share of Company Common Stock shall
not be exercisable upon the exercise of any related Option with respect to the
same share; and (iii) an Option and Stock Appreciation Right covering the same
share of Company Common Stock may not be exercised simultaneously.
7.03 EXERCISE PRICE. The Exercise Price established under any Stock
Appreciation Right granted under this Plan shall be determined by the
Administrator and, in the case of a tandem Stock Appreciation Right, shall not
be less than the Purchase Price of the related Option. Upon exercise of the
Stock Appreciation Rights, the number of shares subject to exercise under a
related Option shall automatically be reduced by the number of shares of Company
Common Stock represented by the Option or portion thereof which is surrendered
as a result of the exercise of such Stock Appreciation Rights.
7.04 PAYMENT OF INCREMENTAL VALUE. Any payment which may become due
from the Company by reason of Participant's exercise of a Stock Appreciation
Right may be paid to the Participant as determined by the Administrator (i) all
in cash, (ii) all in Company Common Stock, or (iii) in any combination of cash
and Company Common Stock. In the event that all or a portion of the payment is
made in Company Common Stock, the number of shares of the Company Common Stock
delivered in satisfaction of such payment shall be determined by dividing the
amount of the payment by the Fair Market Value on the date of exercise. The
Administrator may determine whether payment upon exercise of a Stock
Appreciation Right will be made in cash or in stock, or a combination thereof,
upon or at any time prior to the exercise of such Stock Appreciation Right. No
fractional share of Company Common Stock shall be issued to make any payment; if
any fractional shares would be issuable, the mix of cash and Company Common
Stock payable to the Participant shall be adjusted as directed by the
Administrator to avoid the issuance of any fractional share. Payment may be made
in cash to Officers only if the Stock Appreciation Right is exercised during the
"window period" required under Rule 16b-3(e)(3)(iii) and otherwise in accordance
with Rule 16b-3.
ARTICLE VIII
TERMS OF OPTIONS AND STOCK APPRECIATION RIGHTS
----------------------------------------------
8.01 AWARD AGREEMENT. The grant and the terms and conditions of the
Award shall be set forth in an Award Agreement between the Company and the
Participant. No person shall have any rights under any Award granted under the
Plan unless and until the Administrator and the Participant to whom the Award is
granted shall have executed and delivered an Award Agreement expressly granting
the Award to such person and setting forth the terms of the Award.
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<PAGE> 8
8.02 PLAN PROVISIONS CONTROL AWARD TERMS. The terms of the Plan shall
govern all Awards granted under the Plan, and in no event shall the
Administrator have the power to grant any Award under the Plan which is contrary
to any of the provisions of the Plan. In the event any provision of any Award
granted under the Plan shall conflict with any term in the Plan as constituted
on the Date of Grant of such Award, the term in the Plan as constituted on the
Date of Grant of such Award shall control. Except as provided in Section 4.03,
(i) the terms of any Award granted under the Plan may not be changed after the
granting of such Award without the express approval of the Participant and (ii)
no modification may be made to an Award granted to an Officer except in
compliance with Rule 16b-3.
8.03 DURATION OF OPTIONS AND STOCK APPRECIATION RIGHTS. Options and
Stock Appreciation Rights shall terminate after the first to occur of the
following events:
(a) Expiration Date of the Award as provided in the Award
Agreement; or
(b) Termination of the Award as provided in Section 8.04; or
(c) In the case of an Incentive Stock Option, ten years from
the Date of Grant; or
(d) Solely in the case of tandem Stock Appreciation Rights,
upon the Expiration Date of the related Option.
8.04 EXERCISE ON DEATH OR TERMINATION OF EMPLOYMENT.
(a) Unless otherwise provided in the Award Agreement, in the
event of the death of a Participant while an employee of the Company or
a Subsidiary of the Company, the right to exercise all unexpired Awards
shall be accelerated and shall accrue as of the date of death, and the
Participant's Awards may be exercised by his Beneficiary at any time
within one year after the date of the Participant's death.
(b) Unless otherwise provided in the Award Agreement, in the
event of Participant's Termination of Employment at any time for any
reason other than death (including disability or retirement) or for
"cause", as defined in paragraph (d) below, an Award may be exercised,
but only to the extent it was otherwise exercisable, on the date of
Termination of Employment, within ninety days after the date of
Termination of Employment. In the event of the death of the Participant
within the ninety-day period following Termination of Employment, his
Award may be exercised by his Beneficiary within the one year period
provided in subparagraph (a) above.
(c) With respect to an Award which is intended to constitute
an Incentive Stock Option, upon Termination of Employment, such Award
shall be exercisable as provided in Section 422 of the Code.
(d) In the event that a Participant's Termination of
Employment is for "cause", all Awards shall terminate immediately upon
Termination of Employment. A Participant's employment shall be deemed
to have been terminated for "cause" if such termination is determined,
in the sole discretion of the Committee, to have resulted from:
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<PAGE> 9
(i) the breach by Employee of any material provision of
any employment agreement currently in effect between the
Company and the Employee at the time of Termination of
Employment;
(ii) failure by Employee to devote his full time to the
affairs of the Company;
(iii) any unauthorized disclosure by Employee to any
person, firm or corporation other than the Company and its
directors, officers and employees of any confidential
information or trade secret of the Company;
(iv) any action of the Employee (or any failure to act
by Employee) which involves malfeasance, fraud, embezzlement
or moral turpitude, or which, if generally known, would or
might have a material adverse effect on the Company and/or its
reputation;
(v) the consistent failure or refusal of the Employee to
perform according to the reasonable expectations and standards
set by the Board of Directors and/or management consistent
with Employee's title and position; or
(vi) the impairment of Employee's ability to carry out
his or her duties and responsibilities by reason of his or her
use of alcohol and/or legal or illegal drugs or substances.
8.05 ACCELERATION OF EXERCISE TIME. The Administrator, in its sole
discretion, shall have the right (but shall not in any case be obligated) to
permit purchase of shares under any Award prior to the time such Award would
otherwise become exercisable under the terms of the Award Agreement, except for
Awards held by Directors while there is an Interested Administrator.
8.06 EXTENSION OF EXERCISE TIME. The Administrator, in its sole
discretion, shall have the right (but shall not in any case be obligated) to
permit any Award granted under this Plan to be exercised after its Expiration
Date or after the ninety day period following Termination of Employment,
subject, however, to the limitations described in Section 8.03 (c) and (d).
8.07 MODIFICATION OF AWARD AFTER GRANT. Each Award granted under the
Plan to a Participant other than an Officer may be modified after the date of
its grant by express written agreement between the Company and the Participant,
provided that such change (i) shall not be inconsistent with the terms of the
Plan and (ii) shall be approved by the Administrator. No modifications may be
made to any Awards granted to an Officer except in compliance with Rule 16b-3.
8.08 CONDITIONS FOR EXERCISE. An Award Agreement may contain such
waiting periods, exercise dates and restrictions on exercise (including, but not
limited to, periodic installments which may be cumulative) as may be determined
by the Administrator at the Date of Grant. No Stock Appreciation Right may be
exercised prior to six months from the Date of Grant.
8.09 EXERCISE PROCEDURES. Each Option and Stock Appreciation Right
granted under the Plan shall be exercised by written notice to the Company which
must be received by the officer
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<PAGE> 10
of the Company designated in the Award Agreement on or before the Expiration
Date of the Award. The Purchase Price of shares purchased upon exercise of an
Option granted under the Plan shall be paid in full in cash by the Participant
pursuant to the Award Agreement; provided, however, that the Administrator may
(but need not) permit payment to be made by delivery to the Company of either
(a) shares of Company Common Stock (including shares issuable to the Participant
pursuant to the exercise of the Option), or (b) any combination of cash and
shares of Company Common Stock, or (c) such other consideration as the
Administrator deems appropriate and in compliance with applicable law (including
payment in accordance with a cashless exercise program under which, if so
instructed by the Participant, shares of Company Common Stock may be issued
directly to the Participant's broker or dealer upon receipt of the Purchase
Price in cash from the broker or dealer.) In the event that any Company Common
Stock shall be transferred to the Company to satisfy all or any part of the
Purchase Price, the part of the Purchase Price deemed to have been satisfied by
such transfer of Company Common Stock shall be equal to the product derived by
multiplying the Fair Market Value as of the date of exercise times the number of
shares transferred. The Participant may not transfer to the Company in
satisfaction of the Purchase Price (y) a number of shares which when multiplied
times the Fair Market Value as of the date of exercise would result in a product
greater than the Purchase Price or (z) any fractional share of Company Common
Stock. Any part of the Purchase Price paid in cash upon the exercise of any
Option shall be added to the general funds of the Company and used for any
proper corporate purpose. Unless the Administrator shall otherwise determine,
any Company Common Stock transferred to the Company as payment of all or part of
the Purchase Price upon the exercise of any Option shall be held as treasury
shares.
8.10 TAXES. The Company shall be entitled, if the Administrator deems
it necessary or desirable, to withhold (or secure payment from the Participant
in lieu of withholding) the amount of any withholding or other tax required by
law to be withheld or paid by the Company with respect to any amount payable
and/or shares issuable under such Participant's Award, or with respect to any
income recognized upon a disqualifying disposition of shares received pursuant
to the exercise of an Incentive Stock Option, and the Company may defer payment
or issuance of the cash or stock upon exercise or vesting of an Award unless
indemnified to its satisfaction against any liability for such tax. The amount
of such withholding or tax payment shall be determined by the Administrator and,
unless otherwise provided by the Administrator, shall be payable by the
Participant at the time of issuance or payment in accordance with the following
rules:
(a) A Participant, other than an Officer, shall have the right
to elect to meet his or her withholding requirement by: (1) having the
Company withhold from such Award the appropriate number of shares of
Company Common Stock, rounded out to the next whole number, the Fair
Market Value of which is equal to such amount, or, in the case of the
cash payment, the amount of cash, as is determined by the Company to be
sufficient to satisfy applicable tax withholding requirements; or (2)
direct payment to the Company in cash of the amount of any taxes
required to be withheld with respect to such Award.
(b) Unless otherwise provided by the Committee, with respect
to Officers, the Company shall withhold from such Award the appropriate
number of shares of Company Common Stock, rounded up to the next whole
number, the Fair Market Value of which is equal to the amount, as
determined by the Administrator, (or, in the case of a cash payment,
the amount of cash) required to satisfy applicable tax withholding
requirements.
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(c) In the event that an Award or property received upon
exercise of an Award has already been transferred to the Participant on
the date upon which withholding requirements apply, the Participant
shall pay directly to the Company the cash amount determined by the
Company to be sufficient to satisfy applicable federal, state or local
withholding requirements. The Participant shall provide to the Company
such information as the Company shall require to determine the amounts
to be withheld and the time such withholding requirements become
applicable.
(d) If permitted under applicable federal income tax laws, a
Participant may elect to be taxed in the year in which an Award is
exercised or received, even if it would not otherwise have become
taxable to the Participant. If the Participant makes such an election,
the Participant shall promptly notify the Company in writing and shall
provide the Company with a copy of the executed election form as filed
with the Internal Revenue Service no later than thirty days from the
date of exercise or receipt. Promptly following such notification, the
Participant shall pay directly to the Company the cash amount
determined by the Company to be sufficient to satisfy applicable
federal, state or local withholding tax requirements.
8.11 LIMITATIONS ON TRANSFER. A Participants rights and interest under
the Plan may not be assigned or transferred other than by will or the laws of
descent and distribution, or pursuant to the terms of a domestic relations
order, as defined in Section 414(p)(1)(B) of the Code, which satisfies the
requirements of Section 414(p)(1)(A) of the Code (a "Qualified Domestic
Relations Order"). During the lifetime of a Participant, only the Participant
personally (or the Participant's personal representative) or the alternate payee
named in a Qualified Domestic Relations Order may exercise the Participant's
rights under the Plan. The Participant's Beneficiary may exercise a
Participant's rights to the extent they are exercisable under the Plan following
the death of the Participant.
8.12 SURRENDER OF AWARDS. Any Award granted under the Plan may be
surrendered to the Company for cancellation on such terms as the Administrator
and Participant approve, including, but not limited to, terms which provide that
upon such surrender the Company will pay to the Participant cash or Company
Common Stock, or a combination of cash and Company Common Stock.
ARTICLE IX
OTHER STOCK BASED AWARDS
------------------------
9.01 GRANT OF OTHER AWARDS. Other Awards of Company Common Stock or
other securities of the Company and other Awards that are valued in whole or in
part by reference to, or are otherwise based on, Company Common Stock ("Other
Awards") may be granted either alone or in addition to or in conjunction with
Options or Stock Appreciation Rights under the Plan. Subject to the provisions
of the Plan, the Administrator shall have the sole and complete authority to
determine the persons to whom and the time or times at which Other Awards shall
be made, the number of shares of Company Common Stock or other securities, if
any, to be granted pursuant to such Other Awards, and all other conditions of
such Other Awards. Any Other Award shall be confirmed by an Award Agreement
executed by the Administrator and the Participant, which agreement shall contain
such provisions as the Administrator determines to be necessary or appropriate
to carry out the intent of this Plan with respect to the Other Award.
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<PAGE> 12
9.02 TERMS OF OTHER AWARDS. In addition to the terms and conditions
specified in the Award Agreement, Other Awards made pursuant to this Article IX
shall be subject to the following:
(a) Any shares of Company Common Stock subject to such Other
Awards may not be sold, assigned, transferred or otherwise encumbered
prior to the date on which the shares are issued, or, if later, the
date on which any applicable restriction, performance or deferral
period lapses; and
(b) As specified by the Administrator and the Award Agreement,
the recipient of an Other Award shall be entitled to receive, currently
or on a deferred basis, interest or dividends or dividend equivalents
with respect to the Company Common Stock or other securities covered by
the Other Award; and
(c) The Award Agreement with respect to any Other Award shall
contain provisions providing for the disposition of such Other Award in
the event of Termination of Employment prior to the exercise,
realization or payment of such Other Award, with such provisions to
take account of the specific nature and purpose of the Other Award.
ARTICLE X
GENERAL PROVISIONS
------------------
10.01 AMENDMENT AND TERMINATION OF PLAN.
(A) AMENDMENT. The Board shall have complete power and
authority to amend the Plan at any time and to add any other stock
based Award or other incentive compensation programs to the Plan as it
deems necessary or appropriate and no approval by the stockholders of
the Company or by any other person, committee or entity of any kind
shall be required to make any amendment; provided, however, that the
Board shall not, without the requisite affirmative approval of
stockholders of the Company, make any amendment which requires
stockholder approval under any applicable law, including Rule 16b-3 or
the Code, unless such compliance, if discretionary, is no longer
desired. No termination or amendment of the Plan may, without the
consent of the Participant to whom any Award shall theretofore have
been granted under the Plan, adversely affect the right of such
individual under such Award. For the purposes of this section, an
amendment to the Plan shall be deemed to have the affirmative approval
of the stockholders of the Company if such amendment shall have been
submitted for a vote by the stockholders at a duly called meeting of
such stockholders at which a quorum was present and the majority of
votes cast with respect to such amendment at such meeting shall have
been cast in favor of such amendment, or if the holders of outstanding
stock having not less than a majority of the outstanding shares
consent to such amendment in writing in the manner provided under the
Company's bylaws.
(b) TERMINATION. The Board shall have the right and the power
to terminate the Plan at any time. If the Plan is not earlier
terminated, the Plan shall terminate when all shares authorized under
the Plan have been issued. No Award shall be granted under the Plan
after the termination of the Plan, but the termination of the Plan
shall not have any other effect and any Award outstanding at the time
of the termination of the Plan may be exercised after termination of
the Plan at any time prior to the expiration date of such
-12-
<PAGE> 13
Award to the same extent such award would have been exercisable if the
Plan had not been terminated.
10.02 NO RIGHT TO EMPLOYMENT. No employee or other person shall have any
claim or right to be granted an Award under this Plan. Neither the Plan nor any
action taken hereunder shall be construed as giving any employee any right to be
retained in the employ of the Company or a Subsidiary of the Company.
10.03 COMPLIANCE WITH RULE 16b-3. It is intended that the Plan be applied
and administered in compliance with Rule 16b-3. If any provision of the Plan
would be in violation of Rule 1 6b-3 if applied as written, such provision shall
not have effect as written and shall be given effect so as to comply with Rule
16b-3, as determined by the Administrator. The Board is authorized to amend the
Plan and to make any such modifications to Award Agreements to comply with Rule
1 6b-3, as it may be amended from time to time, and to make any other such
amendments or modifications as it deems necessary or appropriate to better
accomplish the purposes of the Plan in light of any amendments made to Rule 1
6b-3.
10.04 SECURITIES LAW RESTRICTIONS. The shares of Company Common Stock
issuable upon the exercise of any Awards granted under the Plan may not be
issued by the Company without registration or qualification of such shares under
the Securities Act of 1933, as amended, or under various state securities laws
or without an exemption from such registration requirements. Unless the shares
to be issued under the Plan have been registered and/or qualified as
appropriate, the Company shall be under no obligation to issue shares of Company
Common Stock upon exercise of an Award unless and until such time as there is an
appropriate exemption available from the registration or qualification
requirements of federal or state law as determined by the Administrator in its
sole discretion. The Administrator may require any person who is granted an
award hereunder to agree with the Company to represent and agree in writing that
if such shares are issuable under an exemption from registration requirements,
the shares will be "restricted" securities which may be resold only in
compliance with applicable securities laws, and that such person is acquiring
the shares issued upon exercise of the Award for investment, and not with the
view toward distribution.
10.05 CAPTIONS. The captions (i.e., all section headings) used in the
Plan are for convenience only, do not constitute a part of the Plan, and shall
not be deemed to limit, characterize or affect in any way any provisions of the
Plan, and all provisions of the Plan shall be construed as if no captions have
been used in the Plan.
10.06 SEVERABILITY. Whenever possible, each provision in the Plan and
every Award at any time granted under the Plan shall be interpreted in such a
manner as to be effective and valid under applicable law, but if any provision
of the Plan or any Award at any time granted under the Plan shall be held to be
prohibited or invalid under applicable law, then (a) such provision shall be
deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law and (b) all other provisions of
the Plan and every other Award at any time granted under the Plan shall remain
in full force and effect.
10.07 NO STRICT CONSTRUCTION. No rule of strict construction shall be
implied against the Company, the Administrator, or any other person in the
interpretation of any of the terms of the Plan, any Award granted under the Plan
or any rule or procedure established by the Administrator.
-13-
<PAGE> 14
10.08 CHOICE OF LAW. All determinations made and actions taken pursuant
to the Plan shall be governed by the laws of the State of Ohio and construed in
accordance therewith.
-14-
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