EXHIBIT 99.4
CHARMING SHOPPES, INC.
2004 STOCK AWARD AND INCENTIVE PLAN
PERFORMANCE SHARE AGREEMENT
Agreement dated as of February ___, 2005, between CHARMING SHOPPES, INC.
(the "Company") and _____________________________ (the "Employee").
It is agreed as follows:
1. Grant of Performance Shares; Consideration; Employee Acknowledgments.
(a) The Company hereby confirms the grant to Employee, under the Company's
2004 Stock Award and Incentive Plan (the "Plan"), of restricted stock units
("Performance Shares") with respect to ______________ shares of the Company's
common stock, par value $0.10 per share ("Shares"), subject to restrictions as
set forth herein and in the Plan. The Performance Shares are granted as of the
date of this Performance Share Agreement (the "Date of Grant"). The number of
Performance Shares set forth in this Section 1(a) is the target award of
Performance Shares (the "Target Shares"). The actual number of Shares that will
vest and be distributed pursuant to this Performance Share Agreement (the
"Agreement") shall depend on the Company's achievement of the performance goals
described in Section 3(c) below or the satisfaction of other conditions
described in Section 3(b) or 3(d) of this Agreement. The Performance Shares are
granted pursuant to Section 6(e) of the Plan.
(b) Employee shall be required to pay no cash consideration for the grant
of the Performance Shares, but Employee's prior services to the Company and
performance of services to the Company from the date of grant to the date of
issuance of the Shares, and his or her agreement to abide by the terms set forth
in the Plan, this Agreement, and any Rules and Regulations under the Plan, shall
be deemed to be consideration for this grant of Performance Shares. Employee
acknowledges and agrees that (i) the Performance Shares are nontransferable as
provided in Section 3(a) hereof and Section 10(b) of the Plan, (ii) the
Performance Shares are subject to forfeiture in the event of Employee's
termination of employment in certain circumstances, as specified in Section 3(b)
hereof or to the extent that the performance goals specified in Section 3(c)
below are not met, and (iii) sales of Shares following vesting (and, if
deferred, any later settlement) of the Performance Shares will be subject to the
Company's policies regulating trading by employees, including any applicable
"blackout" or other designated periods in which sales of Shares are not
permitted.
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THE DATE OF GRANT OF THESE PERFORMANCE SHARES IS: ________________
GRANT NUMBER: _________
2. Incorporation of Plan by Reference.
The Performance Shares have been granted to Employee under the Plan, a copy
of which is attached hereto. All of the terms, conditions and other provisions
of the Plan are hereby incorporated by reference into this Agreement. Employee
hereby accepts the grant of Performance Shares, acknowledges receipt of the
attached copy of the Plan, and agrees to be bound by all the terms and
provisions hereof and thereof (as presently in effect or hereafter amended), and
by all decisions and determinations of the Board or Committee under the Plan.
The number and type of Performance Shares (including the number and type of
Target Shares) are subject to adjustment pursuant to Section 10(c) of the Plan.
3. Restrictions on Performance Shares.
(a) Restrictions Generally. Until the Shares vest in accordance with
Section 3(b), 3(c), or 3(d), the following restrictions (the "Restrictions")
shall apply to the Performance Shares: (1) Employee shall have no right to sell,
transfer, assign, pledge, or otherwise encumber or dispose of the Performance
Shares (except for transfers and forfeitures to the Company); and (2) the
Performance Shares shall be subject to the risk of forfeiture as set forth in
Section 3(b) and 3(c). Employee shall be entitled to receive dividend and
distribution equivalents with respect to the Performance Shares in accordance
with Section 4. Employee shall not have any rights of a shareholder of the
Company, including the right to vote, with respect to Performance Shares, until
actual Shares are issued to Employee upon vesting of the Shares.
(b) Termination of Employment; Forfeiture. Unless otherwise determined by
the Committee, if Employee's employment terminates and immediately thereafter he
or she is not an employee of the Company or any of its subsidiaries (a
"Termination"), and such Termination is for any reason other than due to death,
permanent disability, Retirement or involuntary termination by the Company for
reasons other than "Cause," the Performance Shares as to which Restrictions have
not lapsed at or before such Termination shall be forfeited at the time of such
Termination. Accordingly, Employee's voluntary Termination (other than due to
Retirement) or Termination by the Company for Cause will result in all
Performance Shares which remain subject to Restrictions being immediately
forfeited. Vesting and forfeiture terms applicable to other Terminations are as
follows:
(i) Death or Disability. In the event of Employee's Termination due to
death or permanent disability, all Restrictions on the Target Shares shall
lapse at the time of such Termination (i.e., none of the Target Shares will
be forfeited); provided, however, that, unless otherwise determined by the
Committee, Employee shall not thereafter earn Performance Shares in excess
of the Target Shares under Section 3(c). For purposes of this Agreement,
the existence of a "permanent disability" shall be determined by, or in
accordance with criteria and standards adopted by, the Committee.
(ii) Termination Not for Cause. In the event of Employee's Termination
due to involuntary termination by the Company for reasons other than
"Cause," at or after the expiration of one year after the Date of Grant,
the Target Shares shall be adjusted pursuant to the Share Formula for the
purpose of determining the number of shares that vest pursuant to Section
3(c) or, after a Change in Control, pursuant to Section 3(d); any
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Target Shares reduced by operation of the Share Formula will be deemed
forfeited, but the opportunity to earn Performance Shares in excess of 100%
of the adjusted number of Target Shares under Section 3(c) will remain in
effect. In the event of Employee's Termination due to involuntary
termination by the Company for reason other than "Cause" before the
expiration of one year after the Date of Grant, all Performance Shares as
to which Restrictions have not lapsed at or before such Termination will
immediately be forfeited.
(iii) Definition of "Cause" and "Share Formula". For purposes of this
Agreement, (a) "Cause" shall mean Employee's chronic neglect, refusal or
failure to fulfill his or her employment duties and responsibilities, other
than for reasons of sickness, accident or other similar causes beyond
Employee's control; with such neglect, refusal or failure to be determined
in the sole and reasonable judgment of the Committee; and (b) "Share
Formula" shall be the product of (x) the total number of Target Shares
times (y) a fraction, the numerator of which shall be the lesser of three
(3) or the number of full and partial years that the Employee has been
employed by the Company or any of its subsidiaries between the Date of
Grant and the date of Termination and the denominator of which shall be the
number three (3).
(iv) Retirement. In the event of Employee's Termination due to
Retirement, Employee's Performance Shares will not be forfeited upon such
Retirement, but instead the Restrictions on Employee's Performance Shares
shall remain in effect until the earlier of the time such Restrictions
lapse under Section 3(c) or 3(d) or Employee's death. During such
post-Retirement period in which the Restrictions remain in effect, all of
the Employee's Performance Shares shall be immediately forfeited if
Employee: (A) directly or indirectly owns any equity or proprietary
interest in (except for ownership of shares in a publicly traded company
not exceeding five percent of any class of outstanding securities), or is
an employee, agent, director, advisor, or consultant to or for, any
Competitor (as defined below) of the Company in the United States, whether
on his or her own behalf or on behalf of any person, in the procuring,
sale, marketing, promotion, or distribution of any product or product lines
competitive with any product or product lines of the Company at the time of
Employee's Retirement, or if Employee assists in, manages, or supervises
any of the foregoing activities, or (B) undertakes any action to induce or
cause any supplier to discontinue any part of its business with the
Company, or (C) attempts to induce any merchant, buyer, or manager or
higher level employee of the Company to terminate his or her employment
with the Company, or (D) discloses confidential or proprietary information
of the Company to any person, firm, corporation, association, or other
entity for any reason or purpose whatsoever, or make use of any such
information for his or her own purposes, so long as such information has
not otherwise been disclosed to the public or is not otherwise in the
public domain except as required by law or pursuant to administrative or
legal process. For purposes of this Agreement, "Retirement" shall mean a
retirement at or after Employee has attained age 62, and "Competitor" shall
mean (a) at any time only a chain of retail stores with 50 or more store
locations; provided, however, that the average square footage of the
chain's stores is less than 15,000 square feet, or (b) a chain of retail
stores with 100 or more
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store locations (without regard to square footage) whose gross revenues in
plus size women's apparel (sizes 14 - 34) exceed 5% of its total gross
revenues.
(c) Vesting Based on Performance Goals.
(i) Vesting Date. Unless the Performance Shares vest earlier under Section
3(b)(i) or 3(d), the Performance Shares shall vest on February 2, 2008 (the
"Vesting Date"), subject to Employee's continued employment with the Company or
a subsidiary through the Vesting Date except as otherwise provided in Section
3(b)(ii) and Section 3(b)(iv), and subject to the Company's achievement of the
performance goals described in subsection (ii) below.
(ii) Performance Goals. Except as provided in Section 3(b) or 3(d), the
number of Shares that shall be vested pursuant to this Agreement shall depend on
the Company's achievement of the following performance goals over the
Performance Period. The Performance Period is the period beginning January 31,
2005 and ending February 2, 2008. The number of Shares that vest at the end of
the Performance Period shall be determined based on the Company's Cumulative
Free Cash Flow for the Performance Period, as follows:
Cumulative Free Cash Flow for Percentage of
Performance Period Target Shares That Vest
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Minimum: 50%
Target: 100%
Maximum: 200%
The percentage of Target Shares that shall vest will be interpolated between
each of the measuring points, and the number of vested Shares shall be rounded
up to the next highest whole Share. Free Cash Flow shall be calculated by the
Committee using the definition and methodology set forth on the attached Exhibit
A.
(iii) Calculation of Vested Shares. At the end of the Performance Period,
the Committee shall determine whether and to what extent the performance goals
have been met and that all other material conditions have been satisfied, and
the resulting number of Performance Shares that shall be vested for the
Performance Period. The Committee shall certify its conclusions in writing.
Except as described in Section 3(b) or 3(d), Employee must be employed by the
Company on the Vesting Date in order for Employee to receive payment with
respect to the Performance Shares. If the Performance Shares vest at less than
100% of the Target Shares, the Performance Shares that do not vest shall be
forfeited as of the Vesting Date. If the Performance Shares vest at more than
100% of the Target Shares, the number of Performance Shares shall be increased
to the vested amount as of the Vesting Date, but Performance Shares in excess of
the vested amount will no longer be earnable hereunder. The Company shall
distribute Shares to Employee equal to the vested Performance Shares, free of
the Restrictions, not later than 30 days after receipt by the Company of the
audit opinion of its
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independent auditors with respect to the Company's annual financial statements
for the last fiscal year of the Performance Period, and in any event not later
than 60 days after the Vesting Date.
(iv) Coordination with Sections 3(b) and 3(d). If a Termination as
described in Section 3(b) or a Change in Control as described in Section 3(d)
occurs before the end of the Performance Period, the vesting of the Performance
Shares shall be determined pursuant to Section 3(b) or 3(d), whichever is
applicable. If no Termination or Change in Control occurs before the end of the
Performance Period, the vesting of the Performance Shares shall be determined
pursuant to the achievement of performance goals under this Section 3(c).
(d) Change in Control.
(i) Acceleration of Vesting. In the event of a Change in Control at a time
that Employee is employed by the Company or any of its subsidiaries or
simultaneously with Employee's Termination (or following a Termination in which
Performance Shares are not forfeited under Section 3(b)(ii) or 3(b)(iv), Shares
equal to the Target Shares shall vest immediately prior to the Change in Control
and shall be distributed free of the Restrictions effective as of the Change of
Control.
(ii) Definitions of Certain Terms. For purposes of this Agreement, the
following definitions shall apply:
(1) "Beneficial Owner," "Beneficially Owns," and "Beneficial
Ownership" shall have the meanings ascribed to such terms for purposes of
Section 13(d) of the Exchange Act and the rules thereunder, except that,
for purposes of this Section 3(d), "Beneficial Ownership" (and the related
terms) shall include Voting Securities that a Person has the right to
acquire pursuant to any agreement, or upon exercise of conversion rights,
warrants, options, or otherwise, regardless of whether any such right is
exercisable within 60 days of the date as of which Beneficial Ownership is
to be determined.
(2) "Change in Control" means and shall be deemed to have occurred if
(i) any Person, other than the Company or a Related Party,
acquires directly or indirectly the Beneficial Ownership of any Voting
Security of the Company and immediately after such acquisition such
Person has, directly or indirectly, the Beneficial Ownership of Voting
Securities representing 20 percent or more of the total voting power
of all the then-outstanding Voting Securities; or
(ii) those individuals who as of the Date of Grant constitute the
Board or who thereafter are elected to the Board and whose election,
or nomination for election, to the Board was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who
either were directors as of the Date of Grant or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the members of the Board; or
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(iii) there is consummated a merger, consolidation,
recapitalization, or reorganization of the Company, a reverse stock
split of outstanding Voting Securities, or an acquisition of
securities or assets by the Company (a "Transaction"), other than a
Transaction which would result in the holders of Voting Securities
having at least 80 percent of the total voting power represented by
the Voting Securities outstanding immediately prior thereto continuing
to hold Voting Securities or voting securities of the surviving entity
having at least 60 percent of the total voting power represented by
the Voting Securities or the voting securities of such surviving
entity outstanding immediately after such Transaction and in or as a
result of which the voting rights of each Voting Security relative to
the voting rights of all other Voting Securities are not altered; or
(iv) there is implemented or consummated a plan of complete
liquidation of the Company or sale or disposition by the Company of
all or substantially all of the Company's assets other than any such
transaction which would result in Related Parties owning or acquiring
more than 50 percent of the assets owned by the Company immediately
prior to the transaction.
(3) "Person" shall have the meaning ascribed for purposes of Section
13(d) of the Exchange Act and the rules thereunder.
(4) "Related Party" means (i) a majority-owned subsidiary of the
Company; or (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any majority-owned subsidiary of
the Company; or (iii) a corporation owned directly or indirectly by the
shareholders of the Company in substantially the same proportion as their
ownership of Voting Securities; or (iv) if, prior to any acquisition of a
Voting Security which would result in any Person Beneficially Owning more
than ten percent of any outstanding class of Voting Security and which
would be required to be reported on a Schedule 13D or an amendment thereto,
the Board approved the initial transaction giving rise to an increase in
Beneficial Ownership in excess of ten percent and any subsequent
transaction giving rise to any further increase in Beneficial Ownership;
provided, however, that such Person has not, prior to obtaining Board
approval of any such transaction, publicly announced an intention to take
actions which, if consummated or successful (at a time such Person has not
been deemed a "Related Party"), would constitute a Change of Control.
(5) "Voting Securities" means any securities of the Company which
carry the right to vote generally in the election of directors.
(e) Delivery of Certificates. Upon vesting of Performance Shares under any
provision of this Section 3, the Company shall promptly deliver to Employee one
or more certificates representing the vested Shares, or shall cause such Shares
to be delivered to a broker or bank which maintains an account for Employee or
Employee's designee, for deposit to such
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account, or shall make delivery of such Shares by other reasonable means
determined by the Committee.
4. Dividend and Distribution Equivalents.
The Company shall credit to a bookkeeping account on its records for
Employee an amount equal to all dividends and distributions on the Target Shares
which would otherwise be payable to the Employee if the Target Shares
represented actual Shares, when, as, and if declared and paid on Shares. The
accumulated amounts equivalent to dividends and distributions shall be deferred
and shall be payable to the Employee when, as and if the Performance Shares vest
under Section 3 in the same proportion that the number of Performance Shares
that vest bears to the number of Target Shares. Payment shall be made on the
date on which the vested Shares are issued as described in the applicable
provision of Section 3. Unless otherwise determined by the Committee, all
amounts equivalent to dividends and distributions referred to in the immediately
preceding sentence, other than equivalents to regular quarterly cash dividends
(if any), shall be deemed reinvested in additional Performance Shares at the
Fair Market Value of Shares on the date when such dividends and distributions
would be paid on Shares and such additional Performance Shares shall be subject
to the same Restrictions as apply to the original Performance Shares. As
provided above, these additional Performance Shares shall vest in the same
proportion that the number Performance Shares that vest bears to the total
number of Target Shares. No interest will be credited on any cash amount (if
any) of dividends payable at the time of vesting.
5. Tax Withholding.
Employee agrees to remit to the Company and any subsidiary, and authorizes
the Company and any subsidiary to deduct from any payment to be made to Employee
hereunder or otherwise to be paid by the Company if such remittance has not been
made, any amount that federal, state, local, or foreign tax law requires to be
withheld with respect to distribution of the Shares and the dividend and
distribution amounts described in Section 4. Unless otherwise determined by the
Board or Committee, unless the Employee has made other arrangements satisfactory
to the Company to provide for payment of mandatory withholding taxes in advance
of the payment date (by such deadline as the Company may specify), the Company
will withhold, at the applicable income tax withholding rate, from the number of
vested Shares a number of whole Shares up to but not exceeding that number which
has a Fair Market Value nearest to but not exceeding the minimum amount of
federal, state and local taxes required to be withheld as a result of the
payment. The Employee may elect such other methods of satisfying such
withholding obligation as may be permitted under rules and regulations adopted
by the Committee and in effect at the time of payment, which may include the
surrender of Shares of the Company's common stock owned separately by Employee.
In the case of the withholding or surrender of Shares to pay withholding taxes,
the Shares withheld or the Shares surrendered will be valued at the Fair Market
Value determined in accordance with procedures for valuing Shares as set forth
in rules and regulations adopted by the Committee and otherwise in effect at the
time of lapse of such risks of forfeiture.
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6. Deferred Compensation Plan.
Notwithstanding the foregoing, if Employee elects to defer any of the
Performance Shares pursuant to the Charming Shoppes Variable Deferred
Compensation Plan for Executives, or a successor plan (the "Deferred
Compensation Plan"), the terms of the Deferred Compensation Plan shall govern
the timing of payment of vested Shares and dividend and distribution amounts.
The Company and Employee acknowledge and agree that if any provisions of this
Agreement are subject to section 409A of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company and Employee may take such actions as they
mutually deem appropriate to modify the terms of this Agreement so as to comply
with section 409A of the Code. In addition, other provisions of this Agreement
notwithstanding, (i) if the timing of any distribution hereunder would result in
Employee's constructive receipt of income relating to the Performance Shares
prior to such distribution, the date of distribution will be the earliest date
after the specified date of distribution that distribution can be effected
without resulting in such constructive receipt; and (ii) any rights of Employee
or retained authority of the Company with respect to Performance Shares
hereunder shall be automatically modified and limited to the extent necessary so
that Employee will not be deemed to be in constructive receipt of income
relating to the Performance Shares prior to the distribution and so that
Employee shall not be subject to any penalty under Code section 409A.
7. Miscellaneous.
This Agreement shall be binding upon the heirs, executors, administrators,
and successors of the parties. This Agreement constitutes the entire agreement
between the parties with respect to the Performance Shares granted hereby, and
supersedes any prior agreements or documents with respect to such Performance
Shares. No amendment, alteration, suspension, discontinuation, or termination of
this Agreement which may impose any additional obligation upon the Company or
materially and adversely affect the rights of Employee with respect to the
Performance Shares shall be valid unless in each instance such amendment,
alteration, suspension, discontinuation, or termination is expressed in a
written instrument duly executed in the name and on behalf of the Company (if
subject to such an additional obligation) and by Employee (if Employee's rights
are materially and adversely affected).
CHARMING SHOPPES, INC.
BY:______________________________________
(Authorized Officer)
EMPLOYEE:
_________________________________________
Attachment: Exhibit A: Cumulative Free Cash Flow
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EXHIBIT A
CUMULATIVE FREE CASH FLOW
Performance Period - Fiscal Years 2006, 2007 and 2008
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Three Year Cumulative Free Cash Flow* at Target
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* The Three Year Cumulative Free Cash Flow means the aggregate amount of
Free Cash Flow** for each of fiscal years 2006, 2007 and 2008.
** "Free Cash Flow" means Net Cash provided by Operating Activities***
(Adjusted for one-time non-recurring cash charges in accordance with
generally accepted accounting principles consistently applied) minus
(the sum of Investment in Capital Assets*** (excluding purchases of
Assets in connection with an acquisition of a business) plus Purchases
of Assets under Capital Leases***).
*** As defined and recorded in the Company's Consolidated Statement of
Cash Flows for each of the three fiscal years ended in the Performance
Period.
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