As filed with the Securities and Exchange Commission on December 10, 1998
Registration No. 333-61139
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
----------------------------
VIRGINIA 54-1387365
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 Volvo Parkway
Chesapeake, VA 23320
(757) 321-5000
(Address and telephone number of
registrant's principal executive offices)
Step Ahead Investments, Inc. Long-Term Incentive Plan;
Dollar Tree Stores, Inc. 1998 Special Stock Option Plan
(Full title of the plans)
H. RAY COMPTON with a copy to:
Dollar Tree Stores, Inc. WILLIAM A. OLD, JR.
500 Volvo Parkway Hofheimer Nusbaum, P.C.
Chesapeake, VA 23320 999 Waterside Drive, Suite 1700
(757) 321-5000 Norfolk, Virginia 23510
(Name, address and telephone number ( 757) 622-3366
of agent for service)
* Filed as a Post-Effective Amendment on Form S-8 to such Registration Statement
pursuant to the procedure described herein. See "Explanatory Note."
<PAGE>
EXPLANATORY NOTE
Dollar Tree Stores, Inc. ("Dollar Tree") hereby amends its Registration
Statement on Form S-4 (No. 333- 61139), effective November 10, 1998 (the "S-4
Registration Statement"), by filing this Post-Effective Amendment on Form S-8
relating to:
(i) 324,000 shares of common stock of Dollar Tree ("Dollar Tree Common
Stock") issuable upon exercise of outstanding stock options ("Assumed
Stock Options") granted under Step Ahead Investments, Inc. Long-Term
Incentive Plan, as amended (the "LTIP"), and
(ii) 165,000 shares of Dollar Tree Common Stock issuable upon exercise of
stock options ("Special Options") granted pursuant to the Dollar Tree
Stores, Inc. 1998 Special Stock Option Plan (the "Special Plan") to
continuing employees of Step Ahead Investments, Inc. ("Step Ahead")
and to a consultant to Dollar Tree.
The Assumed Stock Options and the Special Options are herein collectively
referred to as the "Stock Options." The shares of Dollar Tree Common Stock
issuable upon the exercise of the Stock Options were registered under the S-4
Registration Statement. Dollar Tree is also registering hereby such
indeterminate number of additional shares which may be offered and issued to
prevent dilution from stock splits, stock dividends or similar transactions
pursuant to the terms of the LTIP and the Special Plan.
On December 10, 1998, Dollar Tree West, Inc., a California corporation and a
wholly owned subsidiary of Dollar Tree, merged with and into Step Ahead (the
"Merger"). As a result of the Merger, (i) Step Ahead became a wholly owned
subsidiary of Dollar Tree, (ii) each then outstanding share of common and
preferred stock of Step Ahead ("Step Ahead Common Stock") was converted into the
right to receive 1.1212 shares of Dollar Tree Common Stock, and (iii) each
outstanding Assume Stock Option, whether vested or unvested, was assumed by
Dollar Tree and now constitutes an option to acquire, on the same terms and
conditions as were applicable under such Assumed Stock Option prior to the
Merger, the number (rounded to the nearest whole number) of shares of Dollar
Tree Common Stock as the holder of such Assumed Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised such
Assumed Stock Option in full immediately prior to the effective time of the
Merger. As a result of the Merger, all unvested Assumed Stock Options also
became vested.
Prior to the Merger, the shares of Step Ahead Common Stock issuable upon
exercise of the Assumed Stock Options were not registered.
Also on December 10, 1998, Dollar Tree granted the Special Options,
consisting of options to purchase an aggregate of 165,000 shares of Dollar Tree
Common Stock to four employees of Step Ahead and one former employee of Step
Ahead, pursuant to the terms of stock option agreements between Dollar Tree and
each individual.
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<PAGE>
The designation of this Post-Effective Amendment as Registration No.
333-61139 denotes that this Post- Effective Amendment relates only to shares of
Dollar Tree Common Stock issuable upon exercise of the Assumed Stock Options and
the New Options and that this is the first Post-Effective Amendment to the S-4
Registration Statement. The information called for in Part I of Form S-8 is not
being filed with or included in this Form S-8 (by incorporation by reference or
otherwise) in accordance with the rules and regulations of the Securities and
Exchange Commission (the "Commission").
3
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
The following documents filed with the Commission by the Registrant
pursuant to the Securities Exchange Act of 1934 (the "1934 Act"), (Commission
1934 Act File No. 0-25464) are incorporated by reference herein:
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 (the "1997 Dollar Tree Form 10-K");
(b) The Registrant's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1998, June 30, 1998 and September 30, 1998;
(c) The Registrant's Current Reports on Form 8-K dated June 29, 1998, July
22, 1998, October 5, 1998, October 20, 1998 and December 7, 1998; and
(d) Description of the Registrant's Common Stock contained in the
Registrant's Registration Statement on Form 8-A filed with the
Commission on March 6, 1995.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities offered hereby have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof or of the related prospectus to the extent that a statement
contained herein or in any other subsequently filed document which is also
incorporated or deemed to be incorporated herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
2-1
<PAGE>
Item 4. Description of Securities
(Not Applicable. See Item 3(d).)
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Certain legal matters in connection with the Dollar Tree Common Stock
offered hereby have been passed upon for the Company by Hofheimer Nusbaum, P.C.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The information required by this item is hereby incorporated herein by this
reference to the Registrant's Registration Statement on Form S-1 (Registration
No. 33-88502), as amended, initially filed with the Commission on January 13,
1995.
Item 7. Exemption From Registration Claimed
(Not applicable)
Item 8. Exhibits
EXHIBIT NO. DESCRIPTION
4.1 Step Ahead Investments, Inc. Long Term Incentive Plan,
as amended.
4.2 Form of Step Ahead Investments, Inc. Incentive Stock
Option Agreement.
4.3 Form of Step Ahead Investments, Inc. Nonstatutory Stock
Option Agreement.
4.4 Dollar Tree Stores, Inc. 1998 Special Stock Option
Plan.
4.5 Dollar Tree Stores, Inc. Nonqualified Stock Option
Agreement with Gary Cino.
4.6 Form of Dollar Tree Stores, Inc. Nonqualified Stock
Option Agreement with William Coyle, Eric Stauss,
Eric Leon and Anthony Leon.
5.1* Opinion of Hofheimer Nusbaum, P.C.
23.1* Consent of Hofheimer Nusbaum, P.C. (included in the
opinion filed as Exhibit 5.1).
23.2 Consent of KPMG Peat Marwick LLP.
24.1* Power of Attorney (included on Page II-6 of this
Registration Statement as originally filed).
----------------
* Previously filed.
2-2
<PAGE>
ITEM 9. UNDERTAKINGS
(a) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall
not apply to information contained in periodic reports filed by
the registrant pursuant to Section 13 or Section 15(d) of the
Securities and Exchange Act of 1934 that are incorporated by
reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
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<PAGE>
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this post- effective
amendment to registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chesapeake, Commonwealth
of Virginia, on the 10th day of December, 1998.
DOLLAR TREE STORES, INC.
By /s/ Frederick C. Coble
--------------------------------------------
Frederick C. Coble
Sr. Vice President, Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this post-effective amendment to Registration Statement has been signed by the
following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
* Chairman of the Board; Director December 10, 1998
- -----------------------
J. Douglas Perry
* President and Chief Executive December 10, 1998
- ----------------------- Officer; Director (principal
Macon F. Brock, Jr. executive officer)
* Executive Vice President; December 10, 1998
- ----------------------- Secretary; Treasurer and
H. Ray Compton Director
/s/ Frederick C. Coble Senior Vice President and Chief December 10, 1998
- ----------------------- Financial Officer (principal
Frederick C. Coble financial and accounting
officer)
* Vice Chairman; Director December 10, 1998
- -----------------------
John F. Megrue
* Director December 10, 1998
- -----------------------
Allan W. Karp
* Director December 10, 1998
- -----------------------
Thomas A. Saunders, III
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<PAGE>
* Director December 10, 1998
- -----------------------
Alan L. Wurtzel
* Director December 10, 1998
- -----------------------
Frank Doczi
By:/s/ Frederick C. Coble As attorney in fact December 10, 1998
-----------------------
Frederick C. Coble
2-6
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
4.1 Step Ahead Investments, Inc. Long Term Incentive Plan,
as amended.
4.2 Form of Step Ahead Investments, Inc. Incentive Stock
Option Agreement.
4.3 Form of Step Ahead Investments, Inc. Nonstatutory Stock
Option Agreement.
4.4 Dollar Tree Stores, Inc. 1998 Special Stock Option
Plan.
4.5 Dollar Tree Stores, Inc. Nonqualified Stock Option
Agreement with Gary Cino.
4.6 Form of Dollar Tree Stores, Inc. Nonqualified Stock
Option Agreement with William Coyle, Eric Stauss,
Eric Leon and Anthony Leon.
5.1* Opinion of Hofheimer Nusbaum, P.C.
23.1* Consent of Hofheimer Nusbaum, P.C. (included in the
opinion filed as Exhibit 5.1).
23.2 Consent of KPMG Peat Marwick LLP.
24.1* Power of Attorney (included on Page II-6 of this
Registration Statement as originally filed).
- -----------------
* Previously filed.
2-7
STEP AHEAD INVESTMENTS, INC.
LONG-TERM INCENTIVE PLAN
As Amended July 21, 1998
AMENDED LONG-TERM INCENTIVE PLAN
<PAGE>
ARTICLE I. PURPOSE
1.1 Purpose. The purpose of the Long-Term Incentive Plan ("Plan") is to
provide a means through which STEP AHEAD INVESTMENTS, INC., a California
corporation ("Company"), may attract qualified persons to enter the employ of
the Company. The Plan will provide various means whereby such key employees,
directors and consultants upon whom the responsibilities of the successful
administration and management of the Company rest, and whose present and
potential contributions to the economic welfare of the Company are important,
may acquire and maintain stock ownership, and other forms of incentive
opportunities thereby strengthening both their commitment to the Company and
their desire to remain in its employ or service. So that the appropriate
incentive can be provided, the Plan provides for granting Stock Options, Stock
Appreciation Rights, Restricted Stock and Phantom Shares as such terms are
defined below, or any combination of the foregoing.
1.2 Establishment. The Plan is effective as of December 24, 1992, as
amended on April 25, 1996 and April 30, 1997, and subject to the provisions of
Article XII, herein, awards pursuant to the Plan may be made as provided herein
for a period of ten (10) years after such effective date ("Plan Term").
The Plan shall continue in effect until all matters relating to the
payment of such Awards and administration of the Plan have been settled.
ARTICLE II. DEFINITIONS
2.1 "Award" means, individually or collectively, any grant of a Stock
Option, Stock Appreciation Right, Restricted Stock or Phantom Share.
2.2 "Award Period" means a period as specified in each individual Award and
relates to and is confined to Phantom Share Awards and Stock Appreciation
Rights.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Company" means Step ahead Investments, Inc.
2.5 "Code" means the Internal Revenue Code of 1986, as amended. Reference
in the Plan to any section of the Code shall be deemed to include any amendments
or successor provisions to such section and any regulations under such section.
2.6 "Continuous Employment" means the absence of any interruption or
termination of service as an Employee by the Company. Continuous Employment
shall not be considered interrupted in the case of sick leave, military leave or
any other leave of absence approved by the Board or in the case of transfers
between locations of the Company or between the Company, its Subsidiaries or its
successor.
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<PAGE>
2.7 "Date of Exercise" means the date, during an Award Period or Exercise
Period, on which a Holder delivers effective Notice to the Secretary or Chairman
of the Board of the Company, which complies with Section 14.9 of the Plan, of
his/her desire to exercise his/her rights under any award of Stock Appreciation
Rights, Phantom Shares or Options.
2.8 "Date of Grant" means the date on which the granting of an Award is
authorized by the Board or such later date as may be specified by the Board in
such authorization.
2.9 "Eligible Person" means any person employed full-time by the Company on
a full-time salaried basis or other person who, in the opinion of the Board, is
rendering valuable services to the Company, including without limitation, an
independent contractor, outside consultant, or advisor to the Company who
satisfies all of the requirements of Article V of this Plan.
2.10 "Exercise Period" means the period specified in each Stock Option
award during which such Stock Option may be exercised.
2.11 "Fair Market Value" means either of the following, as is most recently
applicable:
(a) if the Stock of the Company is not listed with an exchange or with
the National Association of Securities Dealers Automated Quotation System
"NASDAQ", either (i) the most recent per-share price to offeree in the most
recent offering of common shares of the Company, plus or minus earnings per
share, since the most recent offering, up to and including the fiscal
quarter preceding exercise, calculated according to Generally Accepted
Accounting Principles (GAAP); or (ii) if there has not been a sale of
common shares of the Company within one year of the Date of Grant, the
value of the Stock as determined by the Board based upon the Company's net
worth, historic and prospective earning power and such other factors as the
Board may deem relevant;
(b) if the Stock of the Company is listed on a securities exchange,
the closing price (or if there is no closing price, then the closing bid
price) of the Stock as reported in the trading reports of the securities
exchange on which the Stock is listed; or
(c) if the Stock is not listed on a securities exchange but is
reported by the NASDAQ, the mean between the dealer closing "bid" and "ask"
prices on the over-the-counter market as reported by NASDAQ.
2.12 "Grant Date" means the date on which an Option is granted.
2.13 "Holder" means an Eligible Person who has been granted a Stock Option,
Stock Appreciation Right, or a Phantom Share Award.
2.14 "Incentive Stock Option" means any option granted under this Plan and
any other option granted to an Employee in accordance with the provisions of
section 422 of the Code, and the regulations promulgated thereunder.
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<PAGE>
2.15 "Nonstatutory Stock Option" means any Option granted under the Plan
that is not an Incentive Stock Option.
2.16 "Option" means a stock option granted pursuant to this Plan.
2.17 "Option Agreement" means the written option agreement granting an
Option to the Holder.
2.18 "Phantom Share" means a unit of benefit Awarded to an Employee and
credited to a Phantom Share Account for his benefit which shall be deemed to
have a value equivalent to one share of Stock of the Company. Such Phantom
Shares shall be exercisable in the sole discretion of the Board, either in the
form of cash or Stock of the Company. A Phantom Share credited to a Holder shall
entitle a Holder to be credited with additional units equivalent to the amount
of cash or Stock dividends paid on a share of Employer Stock as and when such
dividends are paid. Phantom Shares shall not represent an interest in Stock of
the employer.
2.19 "Plan" means this Step Ahead Investments, Inc. Long-Term Incentive
Plan.
2.20 "Restricted Stock" means a direct Award of Stock under Article IX of
the Plan, by the delivery of share certificates, subject to restrictions on
sale, transfer and repurchase to be set forth in a separate Stock Restriction
Agreement, as defined in Article IX, to be entered into at the time of delivery
of such shares.
2.21 "Stock" means Common Stock of the Company.
2.22 "Stock Appreciation Right" ("SAR") means the right of the Holder of
any unexercised Award granted under this Plan to receive, pursuant to the terms
of Article VII of the Plan, (i) Stock, or at the election of the Board, (ii)
cash or (iii) a combination of cash and Stock, equal in value to the increase in
the Fair Market Value of a share of Stock from the Date of Grant, to the Date of
Exercise of such Award shares. A SAR shall not constitute an interest in Stock
of the Company.
2.23 "Termination" means ceasing to be an employee of the Company or any of
its subsidiaries, except by death.
2.24 "Vesting Date" means the date on which an Option becomes wholly or
partially exercisable.
ARTICLE III. ADMINISTRATION
3.1 Administration by Board. The Board shall administer the Plan. A
majority of the Board shall constitute a quorum. The acts of a majority of the
members present at any meeting at which a quorum is present or acts approved in
writing by a majority of the Board shall be deemed the acts of the Board.
Subject to the provisions of the Plan, the Board shall have exclusive
power to effect the following:
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<PAGE>
(a) Select the Eligible Persons to participate in the Plan;
(b) Determine the Awards to be made to each Eligible Person selected;
(c) Determine the time or times when Awards will be made;
(d) Determine the conditions (including performance requirements) to
which the payment of Awards may be subject; and
(e) Prescribe the form or forms of agreements evidencing Awards and
restrictions on Restricted Stock.
3.2 Board to Interpret Plan. The Board shall have the authority to revise
the Plan and to make all such determinations relating to the Plan as it may deem
necessary or advisable for the administration of the Plan. The Board's
interpretation of the Plan or any Awards granted pursuant thereto and all
decisions and determinations by the Board with respect to the Plan shall be
final, binding, and conclusive on all parties.
ARTICLE IV. PLAN LIMIT ON STOCK APPRECIATION
RIGHTS, RESTRICTED STOCK AND
PHANTOM SHARE AWARDS
4.1 Board to Grant Awards. The Board, from time to time, may grant Awards
to one or more persons determined by it to be eligible for participation in the
Plan, in accordance with the provisions of Article V in separate written Award
documents for each Award to each Eligible Person, provided however, that the
following conditions are fulfilled:
(a) Subject to Article XI, the aggregate number of shares of Stock
authorized by this Plan to be subject to Stock Options shall be 400,000;
(b) Subject to Article XI, the aggregate number of Phantom Shares
authorized by this Plan is 40,000;
(c) Subject to Article XI, the aggregate number of SARs authorized by
this Plan is 125,000;
(d) Subject to Article XI, the aggregate number of shares of stock
authorized to be issued by a Restricted Stock Award is 25,000;
(e) Such Phantom Shares or SARs shall be deemed to have been used in
payment whether Stock is ultimately paid or whether the Fair Market Value
equivalent is paid in cash. To the extent that an Award lapses or the
rights of its Holders terminate, any such Phantom Shares or SARs subject to
such Award shall again be available for the grant of an Award; and
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<PAGE>
(f) Stock delivered by the Company in payment under the Plan may be
authorized and unissued Stock, or may be purchased for the Holder by the
Company on the open market or from private parties.
ARTICLE V. ELIGIBILITY
5.1 Officers and Key Employees Eligible. Officers and key employees of the
Company and its subsidiaries (including officers or employees who are members of
the Board, but excluding directors who are not officers or employees) who, in
the opinion of the Board, are mainly responsible for the continued growth and
development and financial success of the business of the Company or one of its
subsidiaries shall be eligible to be granted Awards under the Plan including
Incentive Stock Options.
5.2 Certain Non-employees Eligible. Non-employees including without
limitation, independent contractors, outside consultants, or advisors (including
directors who are not officer or employees) who, in the opinion of the Board,
have a significant role in the continued growth and development and financial
success of the business of the Company or one of its subsidiaries shall be
eligible to be granted options under the Plan excluding Incentive Stock Options.
5.3 Selection for Awards. Subject to the provisions of the Plan, the Board
may, from time to time, select from such Eligible Persons those to whom Awards
shall be granted.
ARTICLE VI. STOCK OPTIONS
6.1 Grant of Stock Options. Grants of Incentive Stock Options or
Nonstatutory Stock Options may be made by the Board to any Eligible Person
during the term of the Plan either alone, or in conjunction with Stock
Appreciation Rights, Phantom Shares or Restricted Stock Awards; provided that an
Incentive Stock Option may be granted only to an eligible employee of the
Company or any parent or subsidiary corporation. Each Option shall be granted by
execution of a separate written Award document ("Option Agreement") for each
Award to each Eligible Person.
6.2 Conditions of Options.
6.2.1. Option Price. Except as set forth in this Section 6.2.1, the
price at which an Option may be exercised ("Option Price") may be less
than, equal to, or greater than, the fair market value of the Stock subject
to such Option at the time the Option is granted, as such fair market value
is determined by the Board, but in no event will such Option Price be less
than fifty percent (50%) of the fair market value of the underlying Stock
at the time the Option is granted. In the case of an Incentive Stock
Option, the Option Price shall not be less than the fair market value of
the Stock subject to such Option at the time the Option is granted. If
granted to an eligible employee who owns stock representing more than ten
percent (10%) of the voting power of all classes of Stock of the Company or
any parent or subsidiary (a "Ten Percent Employee"), the option price of an
Incentive Stock Option shall not be less than 110% of such fair market
value at the time the Option is granted.
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6.2.2. Exercise Period. The Board shall determine the period of time
during which an Option may be exercised but in no event shall such period
be longer than, in the case of any Incentive Stock Option granted to a Ten
Percent Employee, after the expiration of five (5) years from the Grant
Date, and, in the case of any other Option, after the expiration of ten
(10) years from the Grant Date. Any Option may be exercised during such
period only at such time or times and in such installments as the Board may
establish.
6.2.3. Vesting. Any Option granted hereunder shall be exercisable at
such times and under such conditions as determined by the Board and as
shall be permissible under the terms of the Plan. The vesting period or
schedule for each Option shall be specified in the Option Agreement
evidencing the Option. No Option shall be exercisable for fractional
shares.
6.2.4. Exercise Procedures. An Option shall be deemed to be exercised
when written notice of exercise has been given to the Company in accordance
with the terms hereof and payment for the Shares with respect to which the
Option is exercised has been received by the Company. Any Incentive Stock
Option shall be exercisable only by employees who have been in Continuous
Employment by the Company beginning on the Grant Date of the Award and
ending on the day three (3) months before the date of exercise. As soon as
practicable following the exercise of an Option in the manner set forth
above, the Company shall issue or cause its transfer agent to issue stock
certificates representing the Stock purchased. Until the issuance of such
stock certificates (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company), no
right to vote or receive dividends or any other rights as a stockholder
shall exist with respect to the Option Shares despite the valid exercise of
the Option.
6.2.5. Termination of Status as Employee. When an Employee is
terminated or ceases to be an Employee for any reason other than permanent
and total disability or death, such Employee shall have three (3) months
after the termination date within which to exercise the Options to the
extent the right to exercise such Options has vested at the date of such
termination; provided, that no Option shall be exercisable after the
expiration of the Exercise Period, as defined in Section 6.2.2 above.
6.2.6. Death or Disability of Optionee. If an Optionee dies or is
permanently disabled during the Exercise Period for an Option the
Optionee's estate, a person who acquired the right to exercise the Option
by bequest or inheritance, or the Optionee may exercise the Options for
which the right to exercise has accrued at the time of death at any time
until the Exercise Period expires, or, in the event of permanent
disability, within one (1) year following the date of disability, but only
to the extent the right to exercise had accrued at the time of such
disability. This right to exercise is subject to the following
qualifications:
(a) (i) the Optionee must have been in Continuous Employment from
the Grant Date of the Option until the date of death or disability; or
(ii) the Optionee must have been in Continuous Employment
from the Grant Date of the Option until the date of termination and
be within the three (3) month period following termination on the
date of death or disability; and
(b) no Option may be exercised after the expiration of the
Exercise Period, as defined in Section 6.2.2 above.
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<PAGE>
6.2.7. Tax Withholding. When an Optionee is required to pay tax
withholding to the Company in connection with the exercise of an Option
granted under the Plan, the Optionee may elect, prior to the date the
amount of such withholding tax is determined (the "Tax Date"), to make such
payment or an increased payment as the Optionee elects to make up to the
maximum federal, state and local marginal tax rates, including any related
FICA obligation applicable to the Optionee and the particular transaction,
by: (i) delivering cash; (ii) delivering part or all of the payment in
previously owned stock (whether or not acquired through the prior exercise
of a stock option); and/or (iii) irrevocably directing the Company to
withhold from the shares of Stock that would otherwise be issued upon
exercise of the Option that number of whole Shares having a fair market
value equal to the amount of tax required or elected to be withheld (a
"Withholding Election"). If an Optionee's Tax Date is deferred for six (6)
months from the date of exercise and the Optionee makes a Withholding
Election, the Optionee will initially receive the full amount of Shares
otherwise issuable upon exercise of the Option, but will be unconditionally
obligated to surrender to the Company on the Tax Date the number of Shares
necessary to satisfy his or her minimum withholding requirements, or such
higher payment as he or she may have elected to make plus cash for any
fractional share.
Notwithstanding the foregoing, after a registered public offering of
securities by the Company or such other time as the officers and directors
of the Company become subject to the short-term trading liability
provisions of Section 16(b) of the Exchange Act, Optionees who are officers
or directors of the Company may elect to deliver previously-owned stock or
make a Withholding Election only in conformance with the rules promulgated
by the Securities and Exchange Commission under Section 16 of the Exchange
Act.
6.2.8. Non-Transferability of Options. 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 and distribution. During the
lifetime of the Optionee, an Option may be exercised only by the Optionee.
6.2.9. Conditions to Exercise. The Option shall not be exercisable:
(a) Unless payment in full is made for the Stock being acquired
thereunder at the time of exercise, with such payment being made in
cash or by check unless payment in some other manner, including by
promissory note, other shares of the Company's Stock or such other
consideration and method of payment for the issuance of shares of
Stock as may be permitted under sections 408 and 409 of the California
General Corporation Law, is authorized by the Board at the time of the
grant of the Option; and
(b) Unless the person exercising the Option has been, at all
times during the period beginning with the Grant Date of the Option
and ending on the date of such exercise, employed by, a director of or
otherwise performing services for the Company, or a corporation, or a
parent or subsidiary of a corporation, issuing or assuming the Option
in a transaction to which Section 424(a) of the Internal Revenue Code
of 1986, as amended, or any successor statutory provision thereto (the
"Code"), is applicable.
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6.2.10. Nature of Options. It is the intent of the Company that both
Nonqualified Stock Options and Incentive Stock Options may be granted under
the Plan and that any ambiguities in construction shall be interpreted in
order to effectuate such intent.
6.2.11. Limitations on Grant of Incentive Stock Options.
(a) The aggregate Fair Market Value (determined as of the Grant
Date) of the Stock for which Incentive Stock Options may first become
exercisable by any Optionee during any calendar year under this Plan,
together with that of Stock subject to Incentive Stock Options first
exercisable by such Optionee under any other plan of the Company or
any Subsidiary, shall not exceed $100,000.
(b) There shall be imposed in the Option Agreement relating to
Incentive Stock Options such terms and conditions as are required in
order that the Option be an "incentive stock option" as that term is
defined in Section 422 of the Code.
(c) No Incentive Stock Option may be granted to any person who,
at the time the Incentive Stock Option is granted, owns shares of
outstanding Stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company, unless the
exercise price of such Option is at least 110% of the Fair Market
Value of the stock subject to the Option and such Option by its terms
is not exercisable after the expiration of five years from the Grant
Date.
(d) No Incentive Stock Option may be granted to any person who is
not an employee of the Company.
ARTICLE VII. STOCK APPRECIATION RIGHTS
7.1 Grant of SARs. Grants of SARs may be made by the Board to any eligible
employee during the term of the Plan by the execution of a separate written
Award document for each Award to each eligible employee.
7.2 Conditions of SARs. Each Award of SARs shall be subject the following
terms as well as such terms and conditions as the Board shall impose which are
not inconsistent with the Plan.
7.2.1. Right to Exercise. A SAR shall be exercisable at any time
during the Award Period.
7.2.2. Failure to Exercise. If on the last day of the Award Period the
Fair Market Value of the Stock exceeds the Award price, and the Holder has
not exercised the SAR on the last day of the Award Period, such right shall
be deemed to have been exercised by the Holder on such last day of the
Award Period.
7.2.3. Payment. An exercisable SAR shall entitle the Holder to
surrender the SAR, or any portion thereof, and to receive in exchange
therefor an amount equal to the excess of the Fair Market Value of one
share of Stock over the Award price per share specified in such Award times
the number of SARs called for by the Award, or portion thereof, which is so
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surrendered. The Company may elect to pay the Employee the amount arising
out of the exercise of a SAR in cash, or partially in cash and partially by
the delivery of shares of Stock. The Board shall also have the right to
place restrictions on shares issued in payment of SARs as it, in its sole
discretion, deems to be in the best interest of the Company. Issuance of
such shares shall be in compliance with all applicable state and federal
securities laws.
ARTICLE VII. PHANTOM SHARES
8.1 Grant of Phantom Shares. Grants of Phantom Shares may be made by the
Board to any eligible employee during the term of the Plan by the execution of a
separate written Award document for each Award to each eligible employee.
8.2 Conditions of Phantom Share Award. An Award of Phantom Shares shall be
subject to the following terms and conditions:
8.2.1. Phantom Share Account. Phantom Shares shall be credited to a
Phantom Share account maintained on the books and records of the Company
for each Holder. Each Phantom Share shall be deemed to have a value
equivalent to one share of Stock of the Company. The Award of Phantom
Shares under the Plan shall entitle the Holder to the equivalent value of
cash or Stock dividends paid on shares of the Company Stock during the
Award Period to be credited to his Phantom Share Account. Phantom Shares
shall carry no voting, or other rights of a shareholder of the Company. The
value of the Phantom Shares in a Holder's Phantom Share account at the time
of Award or the time of payment shall be the Fair Market Value at any such
time of an equivalent number of shares of Stock, plus the value of dividend
equivalents credited to such account, whether the equivalent of cash or
Stock dividends, (subject to the limitation provided in Section 8.2(b)).
8.2.2. Payment of Award. No payment of Phantom Shares shall be made
prior to the end of an Award Period. The payment to which a Holder shall be
entitled at the end of an Award Period shall be a dollar amount equal to
the Fair Market Value of a number of shares of Stock, equal to the number
of Phantom Shares credited to such Holder's Phantom Stock account, plus
cash and stock dividend equivalents credited to such account in accordance
with Section 8.2(a), herein. Payment shall presumptively be made in cash.
The Board, however, may authorize payment in such other combinations of
case an Stock, or all in Stock, as it deems appropriate. The Board shall
have the right to place restrictions on those shares of Stock issued in
payment for Phantom Shares as it, in its sole discretion, deems to be in
the best interest of the Company. Issuance of such shares of Stock shall be
in compliance with all applicable state and federal securities laws.
The number of shares of Stock to be paid in lieu of cash will be
determined by dividing the amount of the payment due which is not paid in
cash by:
(a) the Fair Market Value of the Stock issued according to
Section 2.11., herein; or
(b) if Stock is purchased by the Company for the account of an
Employee for the payment of a Phantom Share Account, the price paid
per share for such Stock.
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8.3 Termination of Holder During Award Period. In the event a Holder
terminates employment during an Award Period, payout will be as follows:
(a) in the event of resignation or discharge of a Holder, except
related to a Change of Control of the Company, as defined in Article XIII,
the Award will be completely forfeited;
(b) in the event of retirement of a Holder as permitted pursuant to a
retirement plan of the Company then in effect, payout will be at the end of
the Award Period and prorated for service during the Award Period;
(c) in the event of early retirement of a Holder:
(i) if early retirement is effected by Holder, the Award would be
completely forfeited;
(ii) if early retirement is effected by the Company request,
payout will be at the end of the Award Period and prorated for service
during the Award Period;
(d) in the event of the death or disability of a Holder, payout will
be at the end of the Award Period and prorated for service during the Award
Period; and
(e) in the event of the completion of the term of an applicable
employment contract by a Holder without renewal or extension, at the end of
the Award Period.
ARTICLE IX. RESTRICTED STOCK AWARDS
9.1 Grant of Restricted Stock Awards. The Board may grant a Restricted
Stock Award to any eligible employee. Such Award may be in shares of Stock of
the Company. Restrictions on the sale, transfer or repurchase of the Stock shall
be set forth in a separate written Award document for each Award to each
Eligible Employee consistent with the terms of Article XIII, herein. The Board
shall also establish a period of time ("Restriction Period") applicable to such
Award which shall not be less than 3 years in such written Award document.
Except pursuant to Article XIII, the Restriction Period applicable to a
particular Restricted Stock Award shall not be changed.
9.2 Conditions of Restricted Stock Awards. The grant of a Restricted Stock
Award shall be subject to the following:
(a) Certificates: Shareholder's Rights. Stock Awarded pursuant to a
Restricted Stock Award shall be represented by a Stock certificate
registered in the name of the Holder of such Restricted Stock Award. The
Holder shall have the right to enjoy all shareholder rights during the
Restriction Period with the exception of the following:
(i) the Company may issue Stock bearing a restrictive legends
and/or Stock transfer instructions as it deems appropriate referencing
the Stock Restriction Agreement; and
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(ii) Holder may not sell, transfer, pledge, exchange,
hypothecate, or otherwise dispose of the Stock except as permitted in
the Stock Restriction Agreement.
(b) Issuance of Stock. If Stock is issued in connection with a
Restricted Stock Award, the value of the Stock for the Company's record
keeping purposes shall be the Fair Market Value determined according to
Section 2.11, herein.
(c) Payment for Restricted Stock. A Holder shall not be required to
make any payment for Stock received pursuant to a Restricted Stock Award.
ARTICLE X. GENERAL
10.1 Government and Other Regulations. The obligation of the Company to
make payment of Awards in Stock or otherwise shall be subject to all applicable
California and federal securities laws, rules, and regulations, and to such
approvals by government agencies as may be required. The Company shall be under
no obligation to register under the Securities Act of 1933, as amended ("Act"),
any of the shares of Stock issued, delivered or paid in settlement under the
Plan. If the shares paid under the Plan may in certain circumstances be exempt
from registration under the Act, the Company may restrict the transfer of such
shares in such manner as it deems advisable to ensure the availability of any
such exemption.
10.2 Tax Withholding. the Company or a Subsidiary, as appropriate, shall
have the right to deduct from all Awards paid in cash any federal, state or
local taxes as required by law to be withheld with respect to such cash payments
or in the case of Awards paid in Stock, the employee or other person receiving
such Stock may be required to pay to the Company or a subsidiary, as
appropriate, the amount of any such taxes which the Company or subsidiary is
required to withhold with respect to such Stock.
10.3 Claim to Awards and Employment Rights. No employee or other person
shall have any claim or right to be granted an Award under the Plan. Neither
this Plan nor any action taken hereunder shall be construed as giving any
employee any right to be retained in the employ of the Company.
10.4 Beneficiaries. Any payment of Awards due under this Plan to a deceased
Holder shall be paid to the beneficiary designated in writing by the Holder in a
form filed and accepted by the Board. If no such beneficiary has been designated
or survives the Holder, payment shall be made to the Holder's spouse, if any,
and if none, to the Holder's legal representative. A beneficiary designation may
be changed or revoked by a Holder at any time, provided the change or revocation
is filed and accepted by the Board.
10.5 Nontransferability. A person's rights and interests under the Plan,
including amounts payable, may not be assigned, pledged, alienated, encumbered
or transferred, except in the event of an employee's death, to a designated
beneficiary as provided in the Plan, or in the absence of such designation, by
will or the laws of descent and distribution.
10.6 Indemnification. Each person who is or shall have been a member of the
Board shall be indemnified and held harmless by the Company against and from any
loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
11
<PAGE>
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason' of any action or failure to act under the Plan and
against and from any and all amounts paid by him or her in satisfaction of
judgment in any such action, suit, or proceeding against him or her. He or she
shall give the Company an opportunity, at its own expense, to handle and defend
the same before he or she undertakes to handle and defend it on his or her own
behalf. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under the
Company's Articles of Incorporation or Bylaws; as a matter: of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
10.7 Reliance on Reports. Each member of the Board shall be fully justified
in relying or acting in good faith upon any report made by the independent
public accountants of the Company and its subsidiaries and upon any other
information furnished in connection with the Plan by any person or persons other
than himself. In no event shall any person who is or shall have been a member of
the Board be liable for any determination made or other action taken or any
omission to act in reliance upon any such report or information or for any
action taken, including the furnishing of information, or failure to act, if in
good faith.
10.8 Relationship to Other Benefits. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
profit sharing, group insurance or other benefit plan of the Company of any
Subsidiary.
10.9 Expenses. The expenses of administering the Plan shall be borne by the
Company and its subsidiaries.
ARTICLE XI. CHANGES IN CAPITAL STRUCTURE
11.1 Adjustment for Changes in Capital Structure. Stock Options, SARs,
Restricted Stock Awards, Phantom Share Awards, and any agreements evidencing
such Awards shall be adjusted by the Board as to the number and price of shares
of Stock or other consideration subject to such Awards, or by which such Awards
are measured, in the event of changes in the outstanding Stock by reason of
Stock dividends, Stock splits, recapitalization, reorganizations, mergers,
consolidations, combinations, exchanges, or other relevant changes in
capitalization occurring after the Date of Grant of any such Award. In the event
of any such change in the outstanding Stock, the aggregate number of Stock
Options, SARs, Restricted Stock Awards and Phantom Share Awards available under
the Plan shall be proportionally adjusted by the Board, whose determination
shall be conclusive.
ARTICLE XII. AMENDMENTS AND TERMINATION
12.1 Amendment or Termination of Plan by Board. The Board may at any time
terminate the Plan or, with the express written consent of an individual Holder,
cancel or reduce or otherwise alter a Holder's outstanding Awards if, in the
Board's judgment, the tax, accounting, or other effects of the Plan or potential
payments thereunder would not be in the best interest of the Company. The Board
may at any time, or from time to time, amend or suspend and, if suspended,
reinstate, the Plan in whole or in part; provided, however, that without further
shareholder approval the Board shall not effect the following:
12
<PAGE>
(a) increase the maximum number of shares which may be issued on
exercise of SARs, or pursuant to restricted Stock Awards or Phantom Share
Awards, except as provided in Articles VIII and XI;
(b) extend the Termination date of the Plan; or
(c) permit the granting of an Award to a person who is not an Eligible
Person.
ARTICLE XIII. PAYMENTS UPON A CHANGE OF CONTROL
13.1 Definition. For purposes of this Section and Section 8.3, herein, a
"Change of Control" shall be deemed to have occurred if either of the following
events occurs:
(a) Any person (as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended, but excluding the Company and
any of its Subsidiaries), acquires more than 50 percent of the combined
voting power of then outstanding securities of the Company as a result of a
tender or exchange offer, open market purchases, privately-negotiated
purchases or otherwise; or
(b) The shareholders of the Company should approve either of the
following transactions:
(i) Any consolidation or merger of the Company in which the
Company is not the surviving corporation immediately after the merger;
or
(ii) Any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, the assets of the Company.
13.2 Occurrence of Change of Control. Upon the occurrence of a Change of
Control:
(a) Each Optionee shall be given prompt notice of such event and the
vesting and exercisability of each outstanding Option shall be accelerated.
The Optionee may exercise up to the entire unexercised portion of his
Option by cash, cashier's check, or promissory note due in one hundred
twenty (120) days and secured by the stock purchased, such exercise to
occur on or before the expiration of the Option Term specified in each
Optionee's Option Agreement; provided that if any Optionee desires to
exercise his Option by delivering such a promissory note, such exercise
must occur within thirty (30) days after the date of the notice of the
Change in Control.
(b) All SARs shall become immediately exercisable in full for cash for
a period of sixty days following the occurrence of a Change of Control;
provided that SARs held by officers and directors must have been
outstanding for at least six months at the time the employee exercises such
SARs for cash;
(c) All Phantom Shares shall become immediately payable in cash,
notwithstanding that the Change of Control occurs prior to the end of an
Award Period; and
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(d) All restrictions on Restricted Stock shall expire, notwithstanding
that the Change of Control occurs prior to the expiration of otherwise
applicable Restriction Periods.
ARTICLE XIV. MISCELLANEOUS
14.1 Waiver. Any of the terms or conditions of this Plan may be waived at
any time by the party entitled to the benefit thereof, but no such waiver shall
affect or impair the right of the waiving party to require observance,
performance or satisfaction either of that term or condition as it applies on a
subsequent occasion or of any other term or condition.
14.2 Amendment. The provisions of this Plan may be modified at any time by
the Board in its discretion. Any such modification shall be ineffective unless
in writing and signed by the parties against whom enforcement of the
modification or discharge is sought.
14.3 Entire Agreement. This document and the Award documents issued
pursuant to this Plan constitute the entire agreement between the parties, all
oral agreements being merged herein, and supersedes all prior representations.
There are no representations, agreements, arrangements, or understandings, oral
or written, between or among the parties relating to the subject matter of this
Plan that are not fully expressed herein.
14.4 Succession. Subject to the provisions otherwise contained in this
Plan, this Plan shall inure to the benefit of and be binding on the successors
and assigns of the respective parties.
14.5 Captions. All paragraph captions are for reference only and shall not
be considered in construing this Plan.
14.6 Attorneys' Fees; Prejudgment Interest. If the services of an attorney
are required by any party to secure the performance of this Plan or otherwise
upon the breach or default of another party to this Plan, or if any judicial
remedy or arbitration is necessary to enforce or interpret any provision of this
Plan or the rights and duties of any person in relation thereto, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and other expenses,
in addition to any other relief to which such party may be entitled. Any award
of damages following judicial remedy or arbitration as a result of the breach of
this Plan or any of its provisions shall include an award of prejudgment
interest from the date of the breach at the maximum amount of interest allowed
by law.
14.7 Severability. If any provision of this Plan is held by a court of
competent jurisdiction to be invalid or unenforceable, the remainder of the Plan
which can be given effect without the invalid provision shall continue in full
force and effect and shall in no way be impaired or invalidated.
14.8 Construction. Masculine pronouns and other words of masculine gender
shall refer to both men and women. The titles and heading of the sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
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14.9 Notices. Any notice under this Agreement shall be in writing, and any
written notice or other document shall be deemed to have been duly given (i) on
the date of personal service on the parties, (ii) on the third business day
after mailing, if the document is mailed by registered or certified mail, (iii)
one day after being sent by professional or overnight courier or messenger
service guaranteeing one-day delivery, with receipt confirmed by the courier, or
(iv) on the date of transmission if sent by telegram, telex, telecopy or other
means of electronic transmission resulting in written copies, with receipt
confirmed. Any such notice shall be delivered or addressed to the parties at the
addresses set forth below or at the most recent address specified by the
addressee through written notice under this provision. Failure to conform to the
requirement that mailings be done by registered or certified mail shall not
defeat the effectiveness of notice actually received by the addressee.
COMPANY:
STEP AHEAD INVESTMENTS, INC.
By:
Its:
Address: 3222 Winona Way
North Highlands, CA 95660
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LONG-TERM INCENTIVE PLAN
TABLE OF CONTENTS
ARTICLE I. PURPOSE
1.1 Purpose...................................................1
1.2 Establishment.............................................1
ARTICLE II. DEFINITIONS
2.1 Award.....................................................1
2.2 Award Period..............................................1
2.3 Board.....................................................1
2.4 Company...................................................1
2.5 Code......................................................1
2.6 Continuous Employment.....................................1
2.7 Date of Exercise..........................................2
2.8 Date of Grant.............................................2
2.9 Eligible Person...........................................2
2.10 Exercise Period...........................................2
2.11 Fair Market Value.........................................2
2.12 Grant Date................................................2
2.13 Holder....................................................2
2.14 Incentive Stock Option....................................2
2.15 Nonstatutory Stock Option.................................3
2.16 Option....................................................3
2.17 Option Agreement..........................................3
2.18 Phantom Share.............................................3
2.19 Plan......................................................3
2.20 Restricted Stock..........................................3
2.21 Stock.....................................................3
2.22 Stock Appreciation Right (SAR)............................3
2.23 Termination...............................................3
2.24 Vesting Date..............................................3
ARTICLE III. ADMINISTRATION
3.1 Administration by Board...................................3
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3.2 Board to Interpret Plan...................................4
ARTICLE IV. PLAN LIMIT ON STOCK APPRECIATION
RIGHTS, RESTRICTED STOCK AND
PHANTOM SHARE AWARDS
4.1 Board to Grant Awards.....................................4
ARTICLE V. ELIGIBILITY
5.1 Officers and Key Employees Eligible.......................5
5.2 Certain Non-employees Eligible............................5
5.3 Selection for Awards......................................5
ARTICLE VI. STOCK OPTIONS
6.1 Grant of Stock Options....................................5
6.2 Conditions of Options.....................................5
ARTICLE VII. STOCK APPRECIATION RIGHTS
7.1 Grant of SARs.............................................8
7.2 Conditions of SARs........................................8
ARTICLE VII. PHANTOM SHARES
8.1 Grant of Phantom Shares...................................9
8.2 Conditions of Phantom Share Award.........................9
8.3 Termination of Holder During Award Period................10
ARTICLE IX. RESTRICTED STOCK AWARDS
9.1 Grant of Restricted Stock Awards.........................10
9.2 Conditions of Restricted Stock Awards....................10
ARTICLE X. GENERAL
10.1 Government and Other Regulations.........................11
10.2 Tax Withholding..........................................11
10.3 Claim to Awards and Employment Rights....................11
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10.4 Beneficiaries............................................11
10.5 Nontransferability.......................................11
10.6 Indemnification..........................................11
10.7 Reliance on Reports......................................12
10.8 Relationship to Other Benefits...........................12
10.9 Expenses.................................................12
ARTICLE XI. CHANGES IN CAPITAL STRUCTURE
11.1 Adjustment for Changes in Capital Structure..............12
ARTICLE XII. AMENDMENTS AND TERMINATION
12.1 Amendment or Termination of Plan by Board................12
ARTICLE XIII. PAYMENTS UPON A CHANGE OF CONTROL
13.1 Definition...............................................13
13.2 Occurrence of Change of Control..........................13
ARTICLE XIV. MISCELLANEOUS
14.1 Waiver...................................................14
14.2 Amendment................................................14
14.3 Entire Agreement.........................................14
14.4 Succession...............................................14
14.5 Captions.................................................14
14.7 Severability.............................................14
14.8 Construction.............................................14
14.9 Notices..................................................15
STEP AHEAD INVESTMENTS, INC.
INCENTIVE STOCK OPTION AGREEMENT
STEP AHEAD INVESTMENTS, INC., a California corporation (the "Company"),
hereby grants to (the "Optionee"), an option (the "Option") to
purchase_____________ (_____) shares of Common Stock of the Company (the
"Shares"), at the price per Share (the "Option Price") set forth herein, and in
all respects subject to the terms, definitions and provisions of the Company's
amended Long Term Incentive Plan (the "Plan"), which is incorporated herein by
reference.
1. Nature of the Option. The Option is intended to be an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
2. Option Price. The Option Price is ________________________________
Dollars ($_____) for each Share.
3. Vesting and Right to Exercise. The Option shall vest and become
exercisable during its term in accordance with the provisions of Article VI of
the Plan as follows:
(a) Vesting and Right to Exercise.
(i) The Option shall vest as to the Shares indicated on the
following schedule:
Date:_________________ No. of Shares:_______________
Date:_________________ No. of Shares:_______________
Date:_________________ No. of Shares:_______________
Date:_________________ No. of Shares:_______________
Subject to the provisions of subparagraphs (ii) and (iii) below, the Optionee
may exercise this Option as to any portion which has vested until the expiration
of the Option Term as set forth in paragraph 7.
(ii) In the event of the Optionee's death, total and permanent
disability or other termination of employment, the exercisability of the Option
shall be governed by Article 6.2.5 of the Plan applicable to options issued to
Employees.
(iii) The Option may not be exercised for fractional shares.
(b) Method of Exercise. In order to exercise this Option as to any
portion as to which this Option has vested, the Optionee shall notify the
Company in writing of the election to exercise the Option, and the number of
Shares as to which the Option is being exercised by executing and delivering to
the Chief Financial Officer of the Company the Notice of Exercise, a form of
which is attached hereto as Exhibit A. The certificate or certificates for
Shares as to which the Option has been exercised shall be registered in the name
of the Optionee.
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(c) Restrictions on Exercise. This Option may not be exercised if
the issuance of the Shares upon such exercise or the method of payment of
consideration for such Shares would constitute a violation of any applicable
federal or state securities laws or other laws or regulations. As a condition to
the exercise of this Option, the Company may require the Optionee to make any
representation or warranty to the Company at the time of exercise of this Option
as in the opinion of legal counsel for the Company may be required by any
applicable law or regulation, including the execution and delivery of any
appropriate investor representation statement. Accordingly, the stock
certificate for the Shares issued upon exercise of this Option may bear
appropriate legends restricting transfer.
4. Non-Transferability of Option. This option may be exercised during
the lifetime of the Optionee only by the Optionee and, subject to the provisions
of Article 10.5 of the Plan, may not be transferred in any manner other than by
will or by the laws of descent and distribution. The terms of this Option shall
be binding upon the executors, administrators, heirs and successors of the
Optionee.
5. Method of Payment. Payment of the Option Price shall be by cash or
cashier's check.
6. Adjustments Upon Changes in Capitalization or Merger. The number of
Shares covered by this Option shall be adjusted in accordance with the
provisions of Article 11.1 of the Plan in the event of changes in the
capitalization or organization of the Company, or if the Company is a party to a
merger or other corporate reorganization.
7. Option Term. This Option may be exercised after the date of grant
of this Option, as set forth below, through 5:00 p.m., ________________, and may
be exercised during such term only in accordance with the Plan and the terms of
this Option.
8. Not Employment Contract. Nothing in this Agreement or in the Plan
shall confer upon the Optionee any right to continue in the employ of the
Company or shall interfere with or restrict in any way the rights of the
Company, which are hereby expressly reserved, to discharge the Optionee at any
time for any reason whatsoever, with or without cause, subject to the provisions
of applicable law. This is not an employment contract.
9. Income Tax Withholding. The Optionee authorizes the Company to
withhold in accordance with applicable law from any compensation payable to him
or her any taxes required to be withheld by federal, state or local laws as a
result of the exercise of this Option. Furthermore, in the event of any
determination that the Company has failed to withhold a sum sufficient to pay
all withholding taxes due in connection with the exercise of this Option, the
Optionee agrees to pay the Company the amount of any such deficiency in cash
within five (5) days after receiving a written demand from the Company to do so,
whether or not Optionee is an employee of the Company at that time.
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DATE OF GRANT: ___________________
STEP AHEAD INVESTMENTS, INC.
By:_________________________________
Eric R. Stauss, President/COO
The Optionee represents that he or she is familiar with the terms and provisions
of the Plan, and that a copy of the Plan has been made available to the
Optionee, and accepts this Option subject to all of the terms and provisions
thereof. The Optionee agrees to accept as binding, conclusive and final all
decisions or interpretations of the committee appointed by the Company to
administer the Plan (or if no such committee has been appointed, the Board of
Directors of the Company) upon any questions arising under the Plan.
Dated:_____________, 19__
_______________________________
Signature of Optionee
3
STEP AHEAD INVESTMENTS, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
STEP AHEAD INVESTMENTS, INC., a California corporation (the "Company"),
hereby grants to ____________________ (the "Optionee"), an option (the "Option")
to purchase_____________ (_____) shares of Common Stock of the Company (the
"Shares"), at the price per Share (the "Option Price") set forth herein, and in
all respects subject to the terms, definitions and provisions of the Company's
Amended Long Term Incentive Plan (the "Plan"), which is incorporated herein by
reference.
1. Nature of the Option. The Option is intended to be a nonstatutory
stock option and not an incentive stock option within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").
2. Option Price. The Option Price is ________________________ Dollars
($_____) for each Share.
3. Vesting and Right to Exercise.
(i) The Option shall vest immediately upon the Date of Grant and
become exercisable during its term in accordance with the provisions of Article
VI of the Plan. Subject to the provisions of subparagraphs (ii) and (iii) below,
the Optionee may exercise this Option as to any portion which has vested until
the expiration of the Option Term as set forth in paragraph 7.
(ii) In the event of the Optionee's death, total and permanent
disability or other termination of employment, the exercisability of the Option
shall be governed by Article 6.2.5 of the Plan, and, in the absence of specific
provisions to the contrary in the Plan, the Option shall be exercisable until
the expiration of the Option Term as to all Shares as to which the right to
exercise has vested as of the date of termination.
(iii) The Option may not be exercised for fractional shares.
(a) Method of Exercise. In order to exercise this Option as to any
portion as to which this Option has vested, the Optionee shall notify the
Company in writing of the election to exercise the Option, and the number of
Shares as to which the Option is being exercised by executing and delivering to
the Chief Financial Officer of the Company the Notice of Exercise, a form of
which is attached hereto as Exhibit A. The certificate or certificates for
Shares as to which the Option has been exercised shall be registered in the name
of the Optionee.
(b) Restrictions on Exercise. This Option may not be exercised if
the issuance of the Shares upon such exercise or the method of payment of
consideration for such Shares would constitute a violation of any applicable
federal or state securities laws or other laws or regulations. As a condition to
the exercise of this Option, the Company may require the Optionee to make any
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representation or warranty to the Company at the time of exercise of this Option
as in the opinion of legal counsel for the Company may be required by any
applicable law or regulation, including the execution and delivery of any
appropriate investor representation statement. Accordingly, the stock
certificate for the Shares issued upon exercise of this Option may bear
appropriate legends restricting transfer.
4. Non-Transferability of Option. This Option may be exercised during
the lifetime of the Optionee only by the Optionee and, subject to the provisions
of Article 10.5 of the Plan, may not be transferred in any manner other than by
will or by the laws of descent and distribution. The terms of this Option shall
be binding upon the executors, administrators, heirs and successors of the
Optionee.
5. Method of Payment. Payment of the Option Price shall be by any of
the following, or combination thereof, at the election of the Optionee:
(a) cash;
(b) check;
(c) surrender of another outstanding award under the Plan which
has a fair market value equal to the exercise price of the Stock as to which the
Option if being exercised; or
(d) surrender of shares of Stock of the Company with a fair market
value equal to the exercise price of the Stock as to which the Option if being
exercised.
6. Adjustments Upon Changes in Capitalization or Merger. The number
of Shares covered by this Option shall be adjusted in accordance with the
provisions of Article 11.1 of the Plan in the event of changes in the
capitalization or organization of the Company, or if the Company is a party to a
merger or other corporate reorganization.
7. Option Term. This Option may be exercised after the date of grant
of this Option, as set forth below, through 5:00 p.m., ________________, and may
be exercised during such term only in accordance with the Plan and the terms of
this Option. The Option Term shall be extended automatically to the extent the
termination date of the Plan is extended from time to time.
8. Not Employment Contract. Nothing in this Agreement or in the Plan
shall confer upon the Optionee any right to continue in the employ of the
Company or shall interfere with or restrict in any way the rights of the
Company, which are hereby expressly reserved, to discharge the Optionee at any
time for any reason whatsoever, with or without cause, subject to the provisions
of applicable law. This is not an employment contract.
9. Income Tax Withholding. The Optionee authorizes the Company to
withhold in accordance with applicable law from any compensation payable to him
or her any taxes required to be withheld by federal, state or local laws as a
result of the exercise of this Option. Furthermore, in the event of any
determination that the Company has failed to withhold a sum sufficient to pay
all withholding taxes due in connection with the exercise of this Option, the
Optionee agrees to pay the Company the amount of any such deficiency in cash
within five (5) days after receiving a written demand from the Company to do so,
whether or not Optionee is an employee of the Company at that time.
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DATE OF GRANT:___________________
STEP AHEAD INVESTMENTS, INC.
By:________________________________
Eric R. Stauss, President/COO
The Optionee represents that he or she is familiar with the terms and provisions
of the Plan, and that a copy of the Plan has been made available to the
Optionee, and accepts this Option subject to all of the terms and provisions
thereof. The Optionee agrees to accept as binding, conclusive and final all
decisions or interpretations of the committee appointed by the Company to
administer the Plan (or if no such committee has been appointed, the Board of
Directors of the Company) upon any questions arising under the Plan.
Dated:______________________, 19__
__________________________________
Signature of Optionee
CONSENT OF SPOUSE
I, _________________________, spouse of the Optionee who executed the
foregoing Agreement, hereby agree that my spouse's interest in the shares of the
Common Stock subject to such Agreement shall be irrevocably bound by the
Agreement's terms. I further agree that my community property interest in such
shares, if any, shall similarly be bound by the Agreement and that the Agreement
shall be binding upon executors, administrators, heirs and assigns. I agree to
execute and deliver such documents as may be necessary to carry out the intent
of the Agreement and this Consent.
Dated:_______________, 19__
----------------------------------------
Signature of Spouse
----------------------------------------
Print Name of Spouse
3
DOLLAR TREE STORES, INC.
1998 SPECIAL STOCK OPTION PLAN
THIS DOLLAR TREE STORES, INC. 1998 SPECIAL STOCK OPTION PLAN ("Plan"), made
as of the 10th day of December, 1998, by Dollar Tree Stores, Inc. ("Company").
WHEREAS, concurrently herewith and pursuant to the Merger Agreement dated
July 22, 1998, as amended by the Amendment to Merger Agreement dated October 20,
1998 ("Merger Agreement"), Company has acquired Step Ahead Investments, Inc., a
California corporation ("SAI") through a merger (the "Merger") of Dollar Tree
West, Inc., a California corporation and wholly owned subsidiary of Company
("Sub") with and into SAI, with SAI remaining as the surviving corporation;
WHEREAS, Gary L. Cino, Eric Stauss, Eric Leon, Anthony Leon and William
Coyle ("Participants") are former officers of SAI who, upon consummation of the
Merger, are serving as employees or consultants of Company or its subsidiaries;
WHEREAS, in connection with the consummation of the Merger, Company has
entered into a certain agreements with the Participants which, among other
things, restrict the ability of the Participants to compete with the Company or
SAI ("Non-Competition Agreements"); and
WHEREAS, the parties to the Non-Competition Agreements agreed that Company
would grant the Participants an option to purchase shares of common stock of
Dollar Tree ("Common Stock") as consideration for entering into the
Non-Competition Agreements.
NOW, THEREFORE, the Company hereby adopts the 1998 Special Stock Option
Plan upon the following terms and conditions:
1. Number of Shares. Subject to adjustment in the event of any
reorganization, merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of shares, rights
offering, extraordinary dividend or divesture (including a spin-off) or any
other change in the corporate structure or shares of the Company, the maximum
number of shares of Common Stock that shall be authorized and reserved for
issuance under the Plan shall be 165,000 shares of Common Stock.
2. Participants. Participation in the Plan shall be limited to Gary L.
Cino, Eric Stauss, Eric Leon, Anthony Leon and William Coyle.
3. Grant. Each Participant shall be granted an option under the Plan to
purchase shares of Common Stock in the form attached hereto ("Options"). The
terms and conditions of each such Option (including vesting, exercise price,
lapses, and duration) shall be as set forth therein.
4. Duration of the Plan. The Plan shall terminate at midnight on the tenth
anniversary from the effective date. Options outstanding upon termination of the
Plan may continue to be exercised in accordance with their terms.
5. Governing Law. The place of administration of the Plan shall be
conclusively deemed to be within the Commonwealth of Virginia, and the rights
and obligations of any and all persons having or claiming to have had an
interest under the Plan or under any agreements evidencing Options shall be
governed by and construed exclusively and solely in accordance with the laws of
the Commonwealth of Virginia without regard to conflict of laws provisions of
any jurisdictions. All parties agree to submit to the jurisdiction of the state
and federal courts of Virginia with respect to matters relating to the Plan and
agree not to raise or assert the defense that such forum is not convenient for
such party.
6. Successors and Assigns. This Plan shall be binding upon and inure to the
benefit of the successors and permitted assigns of the Company, including,
without limitation, whether by way of merger, consolidation, operation of law,
assignment, purchase or other acquisition of substantially all of the assets or
business of the Company, and any and all such successors and assigns shall
absolutely and unconditionally assume all of the Company's obligations under the
Plan.
IN WITNESS WHEREOF, and as evidence of the adoption of this Plan by Dollar
Tree Stores, Inc., it has caused the same to be signed by its officer, thereunto
duly authorized in writing by the Board of Directors as of July 20, 1998.
DOLLAR TREE STORES, INC.
By: _______________________________
Frederick C. Coble
Senior Vice President,
Chief Financial Officer
DOLLAR TREE STORES, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT ("Agreement"), is effective as
of 5:00 p.m., Eastern Standard Time, on the 10th day of December, 1998, by and
among Gary Cino (the "Holder") and Dollar Tree Stores, Inc., a Virginia
corporation ("Dollar Tree").
W I T N E S S E T H:
WHEREAS, in connection with the merger of Dollar Tree West, Inc., a
California corporation and wholly owned subsidiary of Dollar Tree ("Merger
Sub"), with and into Step Ahead Investments, Inc., a California corporation
("SAI"), the Holder, Merger Sub and Dollar Tree have entered into a Non-
Competition and Consulting Agreement dated December 10, 1998 ("Non-Competition
Agreement"); and
WHEREAS, the parties to the Non-Competition Agreement agreed that the
Holder and certain affiliates as described therein shall not compete with Dollar
Tree and its wholly owned subsidiaries ("Company") because such competition may
cause irreparable damage to Company; and
WHEREAS, the parties to the Non-Competition Agreement agreed that
Dollar Tree would grant the Holder an option to purchase shares of common stock
of Dollar Tree as consideration for entering into the Non-Competition Agreement.
NOW, THEREFORE, in consideration of good and valuable consideration
described above and the covenants hereinafter set forth, the receipt and
sufficiency of which is hereby acknowledged by the Holder, it is agreed as
follows:
GRANT OF OPTION.
Subject to the terms and conditions set forth below, Dollar Tree hereby
grants to the Holder, a nonqualified stock option (meaning not qualified to be
treated as an incentive stock option under Section 422 of the Internal Revenue
Code of 1986, as amended) (the "Option") to purchase an aggregate of one hundred
fifty thousand (150,000) shares of Dollar Tree's common stock, par value, $.01
per share ("Common Stock") for the purchase price of __________ dollars ($_____)
per share (the "Exercise Price").
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MANNER OF EXERCISE.
The Holder may exercise the Option, to the extent vested and before
lapse (as described in Sections 3, 4 and 5 below), in whole or in part during
the term hereof by providing written notice to Dollar Tree which states the
number of shares of Common Stock with respect to which the Option is being
exercised. Such notice shall be delivered in person or through certified or
registered mail to Chief Financial Officer of Dollar Tree, 500 Volvo Parkway,
Chesapeake, Virginia 23320. The exercise of the Option, or any part thereof,
shall be deemed effective upon receipt of notice and payment complying with the
conditions set forth herein. The Option shall only be exercisable with respect
to whole shares.
Notice of exercise shall be accompanied by full payment of the
aggregate Exercise Price of the shares of Common Stock being purchased. Payment
may be made by either (i) delivering cash, check, bank draft, or money order
made payable to Dollar Tree in the amount equal to such aggregate Exercise
Price, (ii) surrendering to the Company shares of Common Stock already owned by
the Holder with an aggregate Fair Market Value (as defined in Section 9) equal
to such aggregate Exercise Price or (iii) electing to have the Company retain
shares of Common Stock subject to the portion of the Option being exercised with
an aggregate Fair Market Value equal to such aggregate Exercise Price
Promptly after Dollar Tree receives the notice of exercise and payment,
it shall deliver to the Holder a certificate evidencing the shares so purchased,
registered in the Holder's name.
VESTING OF OPTION.
Vesting Schedule. The Holder may exercise the Option
granted hereby only during the term hereof and only to the extent the Holder is
vested in such Option. The Holder shall vest in the Option based upon the
following schedule:
Number of Years from Date of Grant Cumulative Percentage Vested
One Year - December 10, 1999 20%
Two Years - December 10, 2000 40%
Three Years - December 10, 2001 60%
Four Years - December 10, 2002 80%
Five Years - December 10, 2003 100%
Acceleration. Anything in Section 3.1 to the contrary
notwithstanding, the Option shall become fully vested immediately upon the
consummation of any merger of Dollar Tree into or with, or sale of all or
substantially all of Dollar Tree's assets to, another person or entity, but only
if the beneficial owners of Dollar Tree immediately prior to the consummation of
such transaction do not constitute, directly or indirectly, a majority of the
beneficial owners of the successor entity.
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<PAGE>
TERM OF OPTION.
Subject to the provisions of this Agreement, the Option granted
hereunder shall automatically lapse if not vested and exercised as permitted
hereby on or before the earliest of (i) the occurrence of any event of lapse
described in Section 5 of this Agreement, (ii) one year after the Holder's
death, or (iii) December 10, 2008.
LAPSE OF OPTION DUE TO COMPETITION, SOLICITATION OF
EMPLOYEES OR DISCLOSURE OF CONFIDENTIAL INFORMATION
Events of Lapse. The Holder acknowledges that Holder
(i) as a founder, director, officer and principal shareholder of SAI, has been
instrumental in the Business (as that term is defined in the Non-Competition
Agreement) of SAI and its success, (ii) has been privy to and had access to the
offices, personnel, technology, confidential and proprietary information of SAI
and (iii) as a consultant to the Company will be privy and have access to
offices, personnel, technology, confidential and proprietary information of the
Company. If Holder conducts or engages in any activities listed below during the
term of this Option, then the entire Option, whether vested or nonvested, shall
immediately lapse:
(a) engaging in Restricted Activities within the
Restricted Area (as defined below); or
(b) operating or promoting within the Restricted
Area a store using (or at least a 500 square foot area within a store dedicated
to) a single price point retail concept selling goods at a single price point at
or below $2.00;
(c) operating any variety, clearance, or close-
out retail store in the same shopping center as any retail location of SAI
existing as of the Effective Time (as defined below) or, in the case of an
existing store of SAI not in a shopping center, within one-quarter mile of such
retail location.
(d) operating any business (i) under the names
or names similar to "98(cent) Clearance Center," "Clearance 98(cent) Centers,"
"Everything 98(cent) ... or less," or "Step Ahead Investments"; (ii) advertising
or promoting outside or within a store using the terms, or terms similar to
"Everything 98(cent)," 98(cent) Clearance Centers," and "Clearance 98(cent)
Centers"; or (iii) under any name containing the words "98(cent)," "Tree," or
"Super Dollar," including their plurals.
(e) directly or indirectly, hiring or attempting
to hire any employee of Company or SAI, or soliciting, inducing, or attempting
to solicit or induce (other than through newspaper classified advertisements)
any employee of Company or SAI to leave his or her job for any reason whatsoever
without the written consent of Dollar Tree. For purposes of this paragraph, an
"employee" shall mean, as of any given date, anyone who has been an employee of
Company or SAI or any affiliate at any time during the four (4) month period
prior to such date.
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(f) intentionally copying, reproducing, disclos-
ing or divulging to any third party or using or permitting others to use any
material confidential information of SAI or the Company (including financial
information, sources of supplies and materials, prospective and existing
expansion programs, joint ventures and affiliate agreements, business systems,
marketing methods, business affairs, trade secrets, details of supplier
contracts, operational methods and marketing plans or strategies).
Notwithstanding the foregoing, use by the Holder of the confidential information
described in this Section 5.1(f) in the operation of or in the leasing of any
real property or in connection with a business not coming within the definition
of Restricted Activities or for other personal use (provided such personal use
does not conflict with any provision of this Agreement or the Non-Competition
Agreement) shall not be deemed an event of lapse. This Section 5.1(f) shall not
apply if (a) such information was already known to others not bound by a duty of
confidentiality or such information is or becomes publicly available through no
fault of Holder or Holder's affiliates, (b) the use of such information is
necessary or appropriate in making any filing or obtaining any consent or
approval required for the consummation of the closing under the Merger
Agreement, or (c) the furnishing or use of such information is required by legal
proceedings.
As used in this Agreement, the following terms have
the following meanings:
(a) "Restricted Area" shall mean each state in
which either Dollar Tree or SAI, as of the Effective Time, has a store or
otherwise carries on the Business.
(b) "Restricted Activities" means the operation
of (i) a wholesale merchandise business that supplies stores of the type
described in clause (ii) hereof, or (ii) any store engaged in the retail sale of
goods (e.g., toys, health and beauty aids, food, books, party goods, stationery,
hardware, housewares, jewelry, hair products, crafts, pet supplies, etc.) where
at least eighty percent (80%) of such goods are sold at or below $2.00.
(c) A "shopping center" means a group of at least
six (6) retail shops organized in a strip or mall configuration (but not
necessarily in attached or adjacent buildings) sharing common parking areas and
having the same landlord or leasing agent.
(d) "Effective Time" shall have the same
definition as contained in the Merger Agreement dated July 22, 1998 among Dollar
Tree, Merger Sub and SAI, as amended.
CERTAIN ADJUSTMENTS.
If the outstanding shares of Common Stock of Dollar Tree hereafter are
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of Dollar Tree by reason of a
recapitalization, reincorporation, reclassification, stock split-up, reverse
stock split, combination of shares, other dividend or other distribution payable
in capital stock or other similar corporation transaction, then the Board shall
make an appropriate adjustment in the number and kind of shares which are
purchasable pursuant to the Option. Any adjustment in the Option shall be made
without change in the total price applicable to the unexercised portion of the
Option, but with a corresponding adjustment in the purchase price per share. In
the event of any merger of Dollar Tree into or with, or sale of all or
substantially all of Dollar Tree's assets to, another person or entity, the
Option shall continue in full force and effect (subject to Section 3.2 hereof)
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and shall thereafter represent the right to receive the kind and amount of
shares of stock and other securities and property (including cash) receivable in
connection with such transaction by a holder of the number of shares of Dollar
Tree Common Stock issuable upon exercise of this Option immediately prior to
such transaction.
COMPLIANCE WITH SECURITIES LAWS.
Representations and Warranties. Holder represents
and warrants as follows:
(a) Holder is experienced in investment and
business matters and understands fully the nature of the risks involved in his
investment in the Option.
(b) Holder is acquiring the Option and upon
exercise thereof will acquire the shares of Common Stock for his own account for
investment and not for distribution or resale to others.
(c) Holder is an "accredited investor" under the
Act. Holder is a natural person whose individual net worth, or joint net worth
with Holder's spouse, exceeds $1,000,000, Holder's individual income was in
excess of $200,000 (or jointly with Holder's spouse was in excess of $300,000)
in each of the two most recent years. Holder reasonably expects an income in
excess of such amount in the current year.
Indemnification. Holder agrees to indemnify the
Company and its agents for any and all losses (including attorneys' fees)
incurred by any of them as a result of their reliance on representations and
warranties contained herein or on information contained in Section 7.1 hereof,
including, but not limited to, claims arising under federal and state securities
laws, as well as common law claims.
LIMITATIONS ON TRANSFER OF OPTION.
The Holder may not transfer or assign the Option granted under this
Agreement except by will or the laws of descent and distribution. Transfer to
the parties identified in the preceding sentence may only be effected upon
written notice to Dollar Tree. The Holder may not pledge or hypothecate the
Option in any way, and such Option shall not be subject to execution,
attachment, or similar process. After the death of Holder, any exercisable
portion of the Option may, prior to the time when the Option lapses under
Section 4, be exercised by a Permitted Transferee, by the Holder's personal
representative or by any person empowered to do so under the Holder's will or
the applicable laws of descent and distribution. Notwithstanding any transfer
permitted by this Section 8, the Option shall be exercisable only during the
term stated in Section 4 hereof.
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FAIR MARKET VALUE. The phrase "Fair Market Value" means, with
respect to the Common Stock, the following:
if the Common Stock is listed or admitted to unlisted
trading privileges on any national securities exchange or is not so listed or
admitted but transactions in the Common Stock are reported on The Nasdaq
National Market, the last sale price of the Common Stock on such exchange or
reported by The Nasdaq National Market as of such date (or if no shares were
traded on such day, as of the next preceding day on which there was such a
trade);
if the Common Stock is not so limited or admitted to
unlisted trading privileges or reported on The Nasdaq National Market, and
bid/asked prices therefor in the over-the-counter market are reported on the
Nasdaq Small-Cap Market or by the National Quotation Bureau, Inc. (or any
comparable reporting service), the average of the closing bid and asked prices
as of such date, as so reported on The Nasdaq Small-Cap Market or, if not so
reported thereon, as reported by the National Quotation Bureau, Inc. (or such
comparable reporting service); or
if the Common Stock is not so listed or admitted to
unlisted trading privileges or reported on The Nasdaq National Market, and such
bid and asked prices are not so reported, such price as the Company's Board of
Directors determines in good faith in the exercise of its reasonable discretion.
RIGHT TO WITHHOLD.
The Company is entitled to (a) withhold and deduct from any amounts
which may be due and owing to the Holder from the Company or make other
arrangements for the collection of all legally required amounts necessary to
satisfy any and all federal, state and local withholding and employment-related
tax requirements attributable to the grant or exercise of the Option or
otherwise incurred with respect to the Option, or (b) require the Holder
promptly to remit the amount of such withholding liability to the Company before
taking any action with respect to the exercise of the Option or issuance of any
stock certificate either to the Holder or any transferee. The Board, in its sole
discretion, may permit a Holder to pay all or any portion of such withholding
liability either (i) by surrendering to the Company shares of Common Stock
already owned by the Holder or (ii) by electing to have the Company retain
shares of Common Stock subject to the portion of the Option being exercised. In
either case, the shares of Common Stock surrendered or retained shall have an
aggregate Fair Market Value that is no less than the amount of such required
withholding.
RIGHTS AS A SHAREHOLDER. The Holder shall have no rights as a
shareholder with respect to any shares of Common Stock covered by the Option
until such person shall have become the holder of record of such shares, and no
adjustments shall be made for dividends or other distributions or other rights
as to which there is a record date preceding the date the such person becomes
the holder of record of such shares, except as the Company may determine
pursuant to Section 6 hereof.
MISCELLANEOUS. This Agreement shall be governed by the
internal laws of the Commonwealth of Virginia. The Circuit Court of the City of
Norfolk and the United States District Court, Eastern District of Virginia,
Norfolk Division shall be the exclusive courts of jurisdiction and venue for any
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litigation, special proceeding or other proceeding as between the parties that
may be brought, or arise out of, in connection with, or by reason of this
Agreement. The parties hereby consent to the jurisdiction of such courts. This
Agreement shall be binding upon and inure to the benefit of each party hereto,
its successors and permitted assigns.
[Remainder of page left intentionally blank.]
7
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IN WITNESS WHEREOF, the undersigned have hereunto affixed their
signatures.
DOLLAR TREE STORES, INC.
By:/s/ Frederick C. Coble
-----------------------------------
Its: Senior Vice President-Chief Financial
Officer
HOLDER:
/s/ Gary Cino
--------------------------------------
Gary Cino
8
DOLLAR TREE STORES, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT ("Agreement"), is effective as
of 5:00 p.m., Eastern Standard Time, on the 10th day of December, 1998, by and
among ___________ (the "Holder") and Dollar Tree Stores, Inc., a Virginia
corporation ("Dollar Tree").
W I T N E S S E T H:
WHEREAS, in connection with the merger of Dollar Tree West, Inc., a
California corporation and wholly owned subsidiary of Dollar Tree ("Merger
Sub"), with and into Step Ahead Investments, Inc., a California corporation
("SAI"), the Holder, Merger Sub and Dollar Tree have entered into a Non-
Competition Agreement dated December 10, 1998 ("Non-Competition Agreement"); and
WHEREAS, the parties to the Non-Competition Agreement agreed that the
Holder and certain affiliates as described therein shall not compete with Dollar
Tree and its wholly owned subsidiaries ("Company") because such competition may
cause irreparable damage to Company; and
WHEREAS, the parties to the Non-Competition Agreement agreed that
Dollar Tree would grant the Holder an option to purchase shares of common stock
of Dollar Tree as consideration for entering into the Non-Competition Agreement.
NOW, THEREFORE, in consideration of good and valuable consideration
described above and the covenants hereinafter set forth, the receipt and
sufficiency of which is hereby acknowledged by the Holder, it is agreed as
follows:
GRANT OF OPTION.
Subject to the terms and conditions set forth below, Dollar Tree hereby
grants to the Holder, a nonqualified stock option (meaning not qualified to be
treated as an incentive stock option under Section 422 of the Internal Revenue
Code of 1986, as amended) (the "Option") to purchase an aggregate of
_____________________ (__________) shares of Dollar Tree's common stock, par
value, $.01 per share ("Common Stock") for the purchase price of __________
dollars ($_____) per share (the "Exercise Price").
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MANNER OF EXERCISE.
The Holder may exercise the Option, to the extent vested and before
lapse (as described in Sections 3, 4 and 5 below), in whole or in part during
the term hereof by providing written notice to Dollar Tree which states the
number of shares of Common Stock with respect to which the Option is being
exercised. Such notice shall be delivered in person or through certified or
registered mail to Chief Financial Officer of Dollar Tree, 500 Volvo Parkway,
Chesapeake, Virginia 23320. The exercise of the Option, or any part thereof,
shall be deemed effective upon receipt of notice and payment complying with the
conditions set forth herein. The Option shall only be exercisable with respect
to whole shares.
Notice of exercise shall be accompanied by full payment of the
aggregate Exercise Price of the shares of Common Stock being purchased. Payment
may be made by either (i) delivering cash, check, bank draft, or money order
made payable to Dollar Tree in the amount equal to such aggregate Exercise
Price, (ii) surrendering to the Company shares of Common Stock already owned by
the Holder with an aggregate Fair Market Value (as defined in Section 9) equal
to such aggregate Exercise Price or (iii) electing to have the Company retain
shares of Common Stock subject to the portion of the Option being exercised with
an aggregate Fair Market Value equal to such aggregate Exercise Price
Promptly after Dollar Tree receives the notice of exercise and payment,
it shall deliver to the Holder a certificate evidencing the shares so purchased,
registered in the Holder's name.
VESTING OF OPTION.
Vesting Schedule. The Holder may exercise the Option
granted hereby only during the term hereof and only to the extent the Holder is
vested in such Option. The Holder shall vest in the Option based upon the
following schedule:
Number of Years from Date of Grant Cumulative Percentage Vested
One Year - December 10, 1999 20%
Two Years - December 10, 2000 40%
Three Years - December 10, 2001 60%
Four Years - December 10, 2002 80%
Five Years - December 10, 2003 100%
Acceleration. Anything in Section 3.1 to the contrary
notwithstanding, the Option shall become fully vested immediately upon the
consummation of any merger of Dollar Tree into or with, or sale of all or
substantially all of Dollar Tree's assets to, another person or entity, but only
if the beneficial owners of Dollar Tree immediately prior to the consummation of
such transaction do not constitute, directly or indirectly, a majority of the
beneficial owners of the successor entity.
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TERM OF OPTION.
Subject to the provisions of this Agreement, the Option granted
hereunder shall automatically lapse if not vested and exercised as permitted
hereby on or before the earliest of (i) the occurrence of any event of lapse
described in Section 5 of this Agreement, (ii) one year after the Holder's
death, or (iii) December 10, 2008.
LAPSE OF OPTION DUE TO COMPETITION, SOLICITATION OF
EMPLOYEES OR DISCLOSURE OF CONFIDENTIAL INFORMATION
Events of Lapse. The Holder acknowledges that Holder
(i) as a founder, director, officer and principal shareholder of SAI, has been
instrumental in the Business (as that term is defined in the Non-Competition
Agreement) of SAI and its success, (ii) has been privy to and had access to the
offices, personnel, technology, confidential and proprietary information of SAI
and (iii) as a consultant to the Company will be privy and have access to
offices, personnel, technology, confidential and proprietary information of the
Company. If Holder conducts or engages in any activities listed below for five
(5) years following the Effective Time (as defined below), then the entire
Option, whether vested or nonvested, shall immediately lapse:
(a) engaging in Restricted Activities within the
Restricted Area (as defined below); or
(b) operating or promoting within the Restricted
Area a store using (or at least a 500 square foot area within a store dedicated
to) a single price point retail concept selling goods at a single price point at
or below $2.00;
(c) operating any variety, clearance, or close-
out retail store in the same shopping center as any retail location of SAI
existing as of the Effective Time (as defined below) or, in the case of an
existing store of SAI not in a shopping center, within one-quarter mile of such
retail location.
(d) operating any business (i) under the names
or names similar to "98(cent) Clearance Center," "Clearance 98(cent) Centers,"
"Everything 98(cent) ... or less," or "Step Ahead Investments"; (ii) advertising
or promoting outside or within a store using the terms, or terms similar to
"Everything 98(cent)," 98(cent) Clearance Centers," and "Clearance 98(cent)
Centers"; or (iii) under any name containing the words "98(cent)," "Tree," or
"Super Dollar," including their plurals.
(e) directly or indirectly, hiring or attempting
to hire any employee of Company or SAI, or soliciting, inducing, or attempting
to solicit or induce (other than through newspaper classified advertisements)
any employee of Company or SAI to leave his or her job for any reason whatsoever
without the written consent of Dollar Tree. For purposes of this paragraph, an
"employee" shall mean, as of any given date, anyone who has been an employee of
Company or SAI or any affiliate at any time during the four (4) month period
prior to such date.
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(f) intentionally copying, reproducing,
disclosing or divulging to any third party or using or permitting others to use
any material confidential information of SAI or the Company (including financial
information, sources of supplies and materials, prospective and existing
expansion programs, joint ventures and affiliate agreements, business systems,
marketing methods, business affairs, trade secrets, details of supplier
contracts, operational methods and marketing plans or strategies).
Notwithstanding the foregoing, use by the Holder of the confidential information
described in this Section 5.1(f) in the operation of or in the leasing of any
real property or in connection with a business not coming within the definition
of Restricted Activities or for other personal use (provided such personal use
does not conflict with any provision of this Agreement or the Non-Competition
Agreement) shall not be deemed an event of lapse. This Section 5.1(f) shall not
apply if (a) such information was already known to others not bound by a duty of
confidentiality or such information is or becomes publicly available through no
fault of Holder or Holder's affiliates, (b) the use of such information is
necessary or appropriate in making any filing or obtaining any consent or
approval required for the consummation of the closing under the Merger
Agreement, or (c) the furnishing or use of such information is required by legal
proceedings.
As used in this Agreement, the following terms have
the following meanings:
(a) "Restricted Area" shall mean each state in
which either Dollar Tree or SAI, as of the Effective Time, has a store or
otherwise carries on the Business.
(b) "Restricted Activities" means the operation
of (i) a wholesale merchandise business that supplies stores of the type
described in clause (ii) hereof, or (ii) any store engaged in the retail sale of
goods (e.g., toys, health and beauty aids, food, books, party goods, stationery,
hardware, housewares, jewelry, hair products, crafts, pet supplies, etc.) where
at least eighty percent (80%) of such goods are sold at or below $2.00.
(c) A "shopping center" means a group of at least
six (6) retail shops organized in a strip or mall configuration (but not
necessarily in attached or adjacent buildings) sharing common parking areas and
having the same landlord or leasing agent.
(d) "Effective Time" shall have the same
definition as contained in the Merger Agreement dated July 22, 1998 among Dollar
Tree, Merger Sub and SAI, as amended.
CERTAIN ADJUSTMENTS.
If the outstanding shares of Common Stock of Dollar Tree hereafter are
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of Dollar Tree by reason of a
recapitalization, reincorporation, reclassification, stock split-up, reverse
stock split, combination of shares, other dividend or other distribution payable
in capital stock or other similar corporation transaction, then the Board shall
make an appropriate adjustment in the number and kind of shares which are
purchasable pursuant to the Option. Any adjustment in the Option shall be made
without change in the total price applicable to the unexercised portion of the
Option, but with a corresponding adjustment in the purchase price per share. In
the event of any merger of Dollar Tree into or with, or sale of all or
substantially all of Dollar Tree's assets to, another person or entity, the
Option shall continue in full force and effect (subject to Section 3.2 hereof)
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and shall thereafter represent the right to receive the kind and amount of
shares of stock and other securities and property (including cash) receivable in
connection with such transaction by a holder of the number of shares of Dollar
Tree Common Stock issuable upon exercise of this Option immediately prior to
such transaction.
COMPLIANCE WITH SECURITIES LAWS.
Representations and Warranties. Holder represents
and warrants as follows:
(a) Holder is experienced in investment and
business matters and understands fully the nature of the risks involved in his
investment in the Option.
(b) Holder is acquiring the Option and upon
exercise thereof will acquire the shares of Common Stock for his own account for
investment and not for distribution or resale to others.
(c) Holder is an "accredited investor" under the
Act. Holder is a natural person whose individual net worth, or joint net worth
with Holder's spouse, exceeds $1,000,000, Holder's individual income was in
excess of $200,000 (or jointly with Holder's spouse was in excess of $300,000)
in each of the two most recent years. Holder reasonably expects an income in
excess of such amount in the current year.
Indemnification. Holder agrees to indemnify the
Company and its agents for any and all losses (including attorneys' fees)
incurred by any of them as a result of their reliance on representations and
warranties contained herein or on information contained in Section 7.1 hereof,
including, but not limited to, claims arising under federal and state securities
laws, as well as common law claims.
LIMITATIONS ON TRANSFER OF OPTION.
The Holder may not transfer or assign the Option granted under this
Agreement except by will or the laws of descent and distribution. Transfer to
the parties identified in the preceding sentence may only be effected upon
written notice to Dollar Tree. The Holder may not pledge or hypothecate the
Option in any way, and such Option shall not be subject to execution,
attachment, or similar process. After the death of Holder, any exercisable
portion of the Option may, prior to the time when the Option lapses under
Section 4, be exercised by a Permitted Transferee, by the Holder's personal
representative or by any person empowered to do so under the Holder's will or
the applicable laws of descent and distribution. Notwithstanding any transfer
permitted by this Section 8, the Option shall be exercisable only during the
term stated in Section 4 hereof.
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FAIR MARKET VALUE. The phrase "Fair Market Value" means, with
respect to the Common Stock, the following:
if the Common Stock is listed or admitted to unlisted
trading privileges on any national securities exchange or is not so listed or
admitted but transactions in the Common Stock are reported on The Nasdaq
National Market, the last sale price of the Common Stock on such exchange or
reported by The Nasdaq National Market as of such date (or if no shares were
traded on such day, as of the next preceding day on which there was such a
trade);
if the Common Stock is not so limited or admitted to
unlisted trading privileges or reported on The Nasdaq National Market, and
bid/asked prices therefor in the over-the-counter market are reported on the
Nasdaq Small-Cap Market or by the National Quotation Bureau, Inc. (or any
comparable reporting service), the average of the closing bid and asked prices
as of such date, as so reported on The Nasdaq Small-Cap Market or, if not so
reported thereon, as reported by the National Quotation Bureau, Inc. (or such
comparable reporting service); or
if the Common Stock is not so listed or admitted to
unlisted trading privileges or reported on The Nasdaq National Market, and such
bid and asked prices are not so reported, such price as the Company's Board of
Directors determines in good faith in the exercise of its reasonable discretion.
RIGHT TO WITHHOLD.
The Company is entitled to (a) withhold and deduct from any amounts
which may be due and owing to the Holder from the Company or make other
arrangements for the collection of all legally required amounts necessary to
satisfy any and all federal, state and local withholding and employment-related
tax requirements attributable to the grant or exercise of the Option or
otherwise incurred with respect to the Option, or (b) require the Holder
promptly to remit the amount of such withholding liability to the Company before
taking any action with respect to the exercise of the Option or issuance of any
stock certificate either to the Holder or any transferee. The Board, in its sole
discretion, may permit a Holder to pay all or any portion of such withholding
liability either (i) by surrendering to the Company shares of Common Stock
already owned by the Holder or (ii) by electing to have the Company retain
shares of Common Stock subject to the portion of the Option being exercised. In
either case, the shares of Common Stock surrendered or retained shall have an
aggregate Fair Market Value that is no less than the amount of such required
withholding.
RIGHTS AS A SHAREHOLDER. The Holder shall have no rights as a
shareholder with respect to any shares of Common Stock covered by the Option
until such person shall have become the holder of record of such shares, and no
adjustments shall be made for dividends or other distributions or other rights
as to which there is a record date preceding the date the such person becomes
the holder of record of such shares, except as the Company may determine
pursuant to Section 6 hereof.
MISCELLANEOUS. This Agreement shall be governed by the
internal laws of the Commonwealth of Virginia. The Circuit Court of the City of
Norfolk and the United States District Court, Eastern District of Virginia,
Norfolk Division shall be the exclusive courts of jurisdiction and
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venue for any litigation, special proceeding or other proceeding as between the
parties that may be brought, or arise out of, in connection with, or by reason
of this Agreement. The parties hereby consent to the jurisdiction of such
courts. This Agreement shall be binding upon and inure to the benefit of each
party hereto, its successors and permitted assigns.
[Remainder of page left intentionally blank.]
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IN WITNESS WHEREOF, the undersigned have hereunto affixed their
signatures.
DOLLAR TREE STORES, INC.
By:______________________________________
Its: Senior Vice President - Chief Financial
Officer
HOLDER:
_________________________________________
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INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Dollar Tree Stores, Inc.
We consent to the use of our report incorporated by reference in the
registration statement (No. 333-61139), Post-Effective Amendment No. 1 to Form
S-4 on Form S-8, of Dollar Tree Stores, Inc. of our report dated January 20,
1998, relating to the consolidated balance sheets of Dollar Tree Stores, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the related consolidated
income statements, and statements of shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1997, which report
appears in the Annual Report on Form 10-K for the year ended December 31, 1997
of Dollar Tree Stores, Inc.
KPMG Peat Marwick LLP
Norfolk, Virginia
December 10, 1998
