CHARMING SHOPPES, INC. INDUCEMENT GRANT STOCK APPRECIATION RIGHTS AGREEMENT
EXHIBIT
10.3
CHARMING
SHOPPES, INC.
INDUCEMENT
GRANT
Agreement
dated as of April 2, 2009 (the “Grant Date”) between CHARMING SHOPPES, INC. (the
“Company”) and Xxxxx X. Xxxxxxx (the “Employee”).
WHEREAS,
the Employee has commenced employment with the Company in the capacity of
President and Chief Executive Officer, and as a member of the Board of Directors
of the Company, with effect from the Grant Date;
WHEREAS,
the Company determined to grant the stock appreciation rights more fully
described in this Agreement to the Employee as an inducement to the Employee to
become employed by the Company and its subsidiaries; and
WHEREAS,
the Company and the Employee are parties to a Severance Agreement dated as of
April 2, 2009, (the “Severance Agreement”).
1. Grant
of SAR; Consideration; Employee Acknowledgments.
The
Company hereby confirms the grant to the Employee on the Grant Date of a stock
appreciation right (the “SAR”) with respect to 1,100,000 shares of the Company’s
common stock, par value $.10 per share (the “Shares”). The SAR
represents the right to receive, at exercise, a number of Shares with a then
Fair Market Value equal to the appreciation in value of the Shares over the base
amount. The base amount is $1.82 per share, which is the Fair Market
Value of a Share on the Grant Date (the “Base Amount”). This grant is
an “inducement grant” within the meaning of Nasdaq Marketplace Rule 4350(i) and
Nasdaq interpretations thereunder and is made pursuant to the 2003 Incentive
Compensation Plan (the “2003 Plan”) which was re-approved by the Company’s
Shareholders on June 26, 2008.
The
Employee shall be required to pay no consideration for the grant of the SAR
except for his agreement to become employed by the Company and to provide
services to the Company prior to exercise and his agreement to the terms of this
Stock Appreciation Rights Agreement (the “Agreement”), and any interpretations
and decisions of the Committee relating hereto. Although this SAR is
not granted under the 2004 Stock Award and Incentive Plan (the “Plan”), the
terms of the Plan governing the rights and obligations of an employee granted
stock appreciation rights under the Plan shall apply with equal force to this
SAR, including any rules and regulations under the Plan. The Employee
acknowledges and agrees that (i) the SAR is nontransferable, except as provided
in Section 9 hereof and under applicable terms of the Plan, (ii) the SAR is
subject to forfeiture in the event of the Employee’s termination of employment
in certain circumstances, as specified in Section 7 hereof, and (iii) sales of
Shares will be subject to the Federal securities laws as well as the Company’s
policies regulating trading by employees, including any applicable “blackout” or
other designated periods in which sales of Shares are not
permitted.
2. Incorporation
of Plan by Reference.
As stated
in Section 1 above, all of the terms, conditions and other provisions of the
Plan governing the rights and obligations of an employee granted stock
appreciation rights under the Plan are hereby incorporated by reference into
this Agreement. Capitalized terms used in this Agreement but not
defined herein shall have the same meanings as in the Plan. If there
is any conflict between the provisions of this Agreement and the provisions of
the Plan applicable by virtue of the preceding sentence, the provisions of the
Plan shall govern, except to the extent otherwise provided
herein. Employee hereby accepts the grant of the SAR, acknowledges
receipt of the Plan, and agrees to be bound by all the terms and applicable
provisions hereof and thereof (as presently in effect or hereafter amended), and
by all decisions and determinations of the Board or Committee relating to the
SAR and this Agreement.
3. Date
When Exercisable.
(a) This SAR may be exercised
only if and to the extent that it has become exercisable as specified in this
Agreement. Subject to Sections 6 and 7 below, and all other terms and
conditions of this Agreement, this SAR shall become exercisable as
follows:
(i) Subject to the limit set
forth in Section 3(c), this SAR shall become exercisable during the period
beginning on the Grant Date and ending January 29, 2010 with respect to 25% of
the Shares available under this SAR, on the later of:
(A) the
last day of any period of five consecutive trading days after the Grant Date on
which the Fair Market Value of a Share is equal to or greater than 120% of the
Base Amount, and
(B) the
earlier of January 29, 2010, and the first trading day during the period
beginning on the Grant Date and ending January 29, 2010 on which the Fair Market
Value of a Share is equal to or greater than $2.40;
(ii) Subject to the limit
set forth in Section 3(c), this SAR shall become exercisable during the period
beginning February 1, 2010 and ending January 28, 2011 as follows:
(A) with
respect to any of the Shares subject to Section 3(a)(i) that have not yet vested
as of January 29, 2010 in accordance with Section 3(a)(i), on the last day of
any period of five consecutive trading days after the Grant Date on which the
Fair Market Value of a Share is equal to or greater than 120% of the Base
Amount, but not earlier than February 1, 2010, and
(B) with
respect to an additional 25% of the Shares available under this SAR, on the
later of:
(I) the
last day of any period of five consecutive trading days after the Grant Date on
which the Fair Market Value of a Share is equal to or greater than 120% of the
Base Amount, and
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(II) the
earlier of (aa) January 28, 2011, and (bb) the first trading day during the
period beginning February 1, 2010 and ending January 28, 2011 on which the Fair
Market Value of a Share is equal to or greater than $3.50;
(iii) Subject to the limit
set forth in Section 3(c), this SAR shall become exercisable during the period
beginning January 31, 2011 and ending January 27, 2012 as follows:
(A) with
respect to any of the Shares subject to Section 3(a)(i) or (ii) that have not
yet vested as of January 28, 2011 in accordance with Section 3(a)(i) or (ii), on
the last day of any period of five consecutive trading days after the Grant Date
on which the Fair Market Value of a Share is equal to or greater than 120% of
the Base Amount, but not earlier than January 31, 2011, and
(B) with
respect to an additional 25% of the Shares available under this SAR, on the
later of:
(I)
the last day of any period of five consecutive trading days after the Grant Date
on which the Fair Market Value of a Share is equal to or greater than 120% of
the Base Amount, and
(II) the
earlier of (aa) January 27, 2012, and (bb) the first trading day during the
period beginning January 31, 2011 and ending January 27, 2012 on which the Fair
Market Value of a Share is equal to or greater than $5.00;
(iv) Subject to the limit
set forth in Section 3(c), this SAR shall become exercisable during the period
beginning January 30, 2012 and ending February 1, 2013 as follows:
(A) with
respect to any of the Shares subject to Section 3(a)(i), (ii) or (iii) that have
not yet vested as of January 27, 2012 in accordance with Section 3(a)(i), (ii)
or (iii), on the last day of any period of five consecutive trading days after
the Grant Date on which the Fair Market Value of a Share is equal to or greater
than 120% of the Base Amount, but not earlier than January 30, 2012,
and
(B) with
respect to an additional 25% of the Shares available under this SAR, on the
later of:
(I)
the last day of any period of five consecutive trading days after the Grant Date
on which the Fair Market Value of a Share is equal to or greater than 120% of
the Base Amount, and
(II) the
earlier of (aa) February 1, 2013, and (bb) the first trading day during the
period beginning January 30, 2012 and ending February 1, 2013 on which the Fair
Market Value of a Share is equal to or greater than
$7.50; and
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(v) Subject
to the limit set forth in Section 3(c), this SAR shall become exercisable with
respect to any of the Shares that have not yet vested as of February 1, 2013 in
accordance with Section 3(a)(i), (ii), (iii) or (iv), on the later
of:
(A) the
last day of any period of five consecutive trading days after the Grant Date on
which the Fair Market Value of a Share is equal to or greater than 120% of the
Base Amount (but not earlier than February 4, 2013), provided such goal is
attained on or before the scheduled expiration time of the SAR, as set forth in
Section 3(b), and
(B) the
first trading day of any Fiscal Year of the Company beginning on or after
February 3, 2013 and before the scheduled expiration time of the SAR, as set
forth in Section 3(b).
(b) The number of Shares with
respect to which the SAR may be exercised shall be cumulative, but shall not
exceed 100% of the Shares subject to the SAR. If the foregoing
schedule would produce fractional Shares, the number of Shares for which the SAR
becomes exercisable shall be rounded down to the nearest whole
Share. The SAR shall expire at 5:00 p.m. on the day before the
seventh anniversary of the Grant Date, unless the SAR terminates on an earlier
date as provided herein. The following shall be subject to adjustment
as provided in Section 10(c) of the Plan: the number of Shares
subject to this SAR and becoming exercisable under Section 3(a), the Base
Amount, and the target stock price under Section 3(a) at which vesting is
accelerated.
(c) The
number of Shares with respect to which the SAR becomes exercisable pursuant to
paragraphs (i), (ii), (iii), (iv) and (v) of Section 3(a) shall be decreased to
the extent necessary (if any) so that the aggregate “Spread” with respect to the
number of Shares for which the SAR becomes exercisable in any Fiscal Year of the
Company does not exceed the amount set forth in the table below. For
purposes of this Section 3(c), “Spread” shall mean the excess of the Fair Market
Value of a Share on the date the SAR becomes exercisable with respect to the
Share, over the Base Amount.
|
Fiscal Year in which Vesting
Occurs:
|
Limit on Spread
|
|
Fiscal
Year Ending January 30, 2010
|
$159,500
|
|
January
31, 2010 – January 29, 2011
|
$1,000,000
|
|
January
30, 2011 – January 28, 2012
|
$1,750,000
|
|
January
29, 2012 – February 2, 2013
|
$10,340,500
|
|
February
3, 2013 – February 1, 2014
|
$3,666,667
|
|
Any
Fiscal Year beginning on or after February 2, 2014
|
$3,500,000
|
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4. Method
of Exercise.
(a) The SAR may be exercised, to the extent
the SAR is then vested and exercisable, by delivery to and receipt by the
Secretary of the Company at 0000 Xxxxx Xxxx, Xxxxxxxx, Xxxxxxxxxxxx 00000, of a
written notice, signed by the Employee, specifying the portion of the vested SAR
that the Employee wishes to exercise. Simultaneous with or as soon as
practicable after the receipt of such notice, the Company shall deliver to the
Employee a number of whole Shares that will be determined by dividing the Stock
Appreciation by the Fair Market Value of a Share on the date of exercise, less
applicable tax withholding. ”Stock Appreciation” shall mean the
amount that results from multiplying (i) the number of Shares as to which the
SAR is exercised by (ii) the amount by which the Fair Market Value of a Share on
the date of exercise exceeds the Base Amount. Only whole Shares will
be delivered pursuant to the exercise of the SAR.
(b) Upon exercise of the SAR,
the Company will deliver a stock certificate for the Shares to be delivered,
with any requisite legend affixed. Such exercise may include
instructions to the Company to deliver Shares due upon exercise of the SAR to
any registered broker or dealer designated by the Committee in lieu of delivery
to the Employee. Such instructions must designate the account into
which the Shares are to be deposited. The method of exercise and
related matters governed by this Section 4 shall be subject to Rules and
Regulations (under the Plan or otherwise) adopted by the Committee and in effect
at the time the Employee’s notice of exercise is received by the Company; such
Rules and Regulations may vary from or limit the procedures specified in this
Section 4, and may specify other methods of exercise. Upon exercise
of any portion of the SAR, the exercised portion of the SAR shall terminate and
cease to be outstanding.
(c) If, on the date on which the vested SAR
will terminate according to its terms, the Employee has not given the Company
written notice of exercise, and if the Stock Appreciation amount is a positive
number, then the outstanding vested portion of the SAR shall be automatically
exercised and taxes shall be withheld as described in Section 5
below.
5. Tax
Withholding.
The
Company will withhold from the Shares to be delivered upon the exercise of the
SAR a sufficient number of such Shares to satisfy the minimum federal, state and
local tax withholding obligations relating to the SAR exercise. The
Shares withheld will be valued at the Fair Market Value, determined in such
manner as may be specified and applicable under the Plan.
6. Acceleration
of Exercisability; Change of Control Provisions; Definitions.
(a) The following provisions shall apply in
the event of a Change of Control:
(i) In the event of a Change
of Control at a time when the Employee is employed by the Company or any of its
subsidiaries, if the acquiring company does not convert the Employee’s
outstanding SAR to a stock appreciation right with respect to the stock of the
acquiring company (or the parent of the acquiring company, if the acquiror is a
subsidiary) that has the same economic value, vesting provisions and other terms
as the Employee’s outstanding SAR, this SAR shall become fully vested and
exercisable immediately prior to the occurrence of such Change of
Control.
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(ii) If the Employee’s employment is
terminated as a result of a Qualifying Termination which occurs upon or within
24 months following a Change of Control, the SAR shall become fully vested and
exercisable on the date of the Qualifying Termination (to the extent that it is
not already vested).
(b) Exercise
after a Change of Control. In the event of the
Employee’s termination of employment after a Change of Control, the vested SAR,
to the extent then outstanding, shall be exercisable for the applicable time
period described in Section 7(a)(iii), (iv), (v) or (vi) (determined without
regard to any requirement that the termination occur at least one year after the
Grant Date).
(c) Other
Actions. In the event of a Change of Control, the Committee
may make such adjustments and take such other actions with respect to
outstanding SARs as the Committee deems appropriate pursuant to Section 10(c) of
the Plan.
(d) Involuntary
Termination: Without Cause; Good Reason. If the Employee’s
employment is terminated by the Company without Cause or if he terminates his
employment for Good Reason, this SAR shall become vested and exercisable on the
date of such termination of employment to the extent set forth below (which
shall include (and shall not be in addition to) that portion of this SAR which
has already become vested and exercisable pursuant to Section 3 hereof);
provided, however, that such accelerated vesting shall not occur unless the Fair
Market Value of a Share is equal to or greater than 120% of the Base Amount on
any five consecutive trading days during the period beginning on the Grant Date
and ending on the date of such termination of employment; and further provided
that vesting in the Fiscal Year in which such termination occurs shall be
limited to the extent necessary (if any) so that such vesting, after taking into
account any previous vesting under Section 3(a) for such Fiscal Year, does not
exceed the limit set forth in Section 3(c) for such Fiscal Year. To
the extent vesting under this Section 6(d) is limited by Section 3(c) with
respect to the Fiscal Year in which such termination occurs, such vesting shall
occur on the first trading day of the next Fiscal Year subject to the Section
3(c) limit for such Fiscal Year, and the first trading day of each subsequent
Fiscal Year (subject to the Section 3(c) limit for each such Fiscal Year), until
the SAR has become vested and exercisable to the extent set forth
below:
|
Exercisable
Portion of SAR
|
|
|
Date of Employment
Termination
|
(Subject to Section 6(d)
Limit)
|
|
April
2, 2009 to April 1, 2010
|
50%
|
|
April
2, 2010 to April 1, 2011
|
75%
|
|
April
2, 2011 and thereafter
|
100%
|
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(e) Definitions of Certain
Terms. For purposes of this Agreement, the following
definitions shall have the meanings ascribed to them in the Severance
Agreement:
”Beneficial Owner”; “Cause”; “Change of Control” (except
that “20%” in Section 2.7(a) of the Severance Agreement shall be changed to
“50%” for purposes of this Agreement); “Disability”; “Good
Reason”; “Notice of
Termination”; “Qualifying Termination”;
“Person”; “Related
Party”; and “Voting
Securities”.
7. Termination
of Employment.
(a) This SAR shall terminate and no longer
be exercisable at the earlier of (i) the scheduled expiration time of the SAR,
as set forth in Section 3(b) above, or (ii) the earliest time specified below at
or following a termination of employment of the Employee. In the
event of termination of employment before a Change of Control, the SAR shall be
exercisable as follows:
(i) The SAR shall terminate at the time of
voluntary termination of the Employee’s employment with the Company and its
subsidiaries at any time prior to the expiration of one year after the Grant
Date of this SAR, other than by reason of the Employee’s death, or Disability,
in which event the SAR shall no longer be exercisable.
(ii) The SAR shall terminate at the time of
the involuntary termination for Cause of the Employee’s employment with the
Company and its subsidiaries in which event the SAR shall no longer be
exercisable.
(iii) The SAR shall continue in effect until
the expiration of 90 days after the voluntary termination of the Employee’s
employment with the Company and its subsidiaries, at any time after the
expiration of one year after the Grant Date of this SAR. During such
90 day period, this SAR shall be exercisable only to the extent that it was
exercisable at the date of the Employee’s termination of
employment.
(iv) The SAR shall continue in effect until
the expiration of 90 days after the date the Employee terminates his employment
for Good Reason or the involuntary termination of the Employee’s employment,
other than for reasons of Cause or Disability, with the Company and its
subsidiaries at any time. During such 90 day period, this SAR shall be
exercisable to the extent that it was exercisable at the date of the Employee’s
termination of employment, plus the number of additional Shares (if any) as to
which the SAR becomes exercisable pursuant to Section 6(d).
(v) The SAR shall continue in effect until
the expiration of one year after the Employee’s death if the Employee dies while
employed by the Company or any of its subsidiaries. During such one
year period, this SAR shall be exercisable to the extent that it was exercisable
at the date of the Employee’s death, plus the number of additional shares (if
any) as to which the SAR would have become exercisable within 180 days from the
date of the Employee’s death pursuant to Section 3(a) but for the death of the
Employee (but disregarding any Change of Control occurring after the Employee’s
death).
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(vi) The SAR shall continue in effect until
the expiration of one year after the termination of the Employee’s employment
with the Company and its subsidiaries by reason of the Employee’s
Disability. During such one year period, this SAR shall be
exercisable to the extent that it was exercisable at the date of the Employee’s
Disability, plus the number of additional shares (if any) as to which the SAR
would have become exercisable within 180 days from the date of the Employee’s
Disability pursuant to Section 3(a) but for the Disability of the Employee (but
disregarding any Change of Control occurring after the Employee’s
Disability).
(b) Any portion of the SAR that is not
exercisable at the date of termination of employment and that does not become
exercisable pursuant to Section 7(a) shall terminate as of the Employee’s
termination date. Notwithstanding anything in this Section 7 to the
contrary, in no event may the SAR be exercised after the expiration date of the
SAR as set forth in Section 3(b).
(c) Except as provided in Section 8, an
Employee shall not be deemed to have terminated employment for purposes of this
Section 7 if his employment terminates with the Company but thereafter continues
with one of the Company’s subsidiaries or terminates with a subsidiary but
thereafter continues with the Company or another subsidiary.
8. Change
in Job Status.
Should
the Employee cease to have the titles of President and Chief Executive Officer
of the Company (other than in connection with the termination of the Employee’s
employment with the Company) then the Employee’s employment with the Company and
its subsidiaries shall be deemed to have been terminated involuntarily (but not
for Cause) in respect of all or a portion of this SAR.
9. Limits
on Transfer of SARs; Beneficiaries.
No right
or interest of a participant in this SAR shall be pledged, encumbered or
hypothecated to or in favor of any third party or shall be subject to any lien,
obligation or liability of the Employee to any third party. This SAR
shall not be transferable to any third party by the Employee otherwise than by
will or the laws of descent and distribution, and this SAR shall be exercisable,
during the lifetime of the Employee, only by the Employee; provided, however,
that the Employee will be entitled to designate a beneficiary or beneficiaries
to exercise his or her rights under this SAR upon the death of the Employee, in
the manner and to the extent permitted by the Committee under Rules and
Regulations adopted by the Committee under the Plan, and the Committee may
permit transfers otherwise to the extent permitted under the Plan.
8
10. Investment
Representation.
Unless,
at the time of any exercise of this SAR, the issuance and delivery of Shares
hereunder to the Employee is registered under a then-effective registration
statement under the Securities Act of 1933, as amended (the “Securities Act”),
and complies with all applicable registration requirements under state
securities laws, the Employee shall provide to the Company, as a condition to
the valid exercise of this SAR and the delivery of any certificates
representing
Shares, appropriate evidence, satisfactory in form and substance to the Company,
that he or she is acquiring the Shares for investment and not with a view to the
distribution of the Shares or any interest in the Shares, and a representation
to the effect that the Employee shall make no sale or other disposition of the
Shares unless (i) the Company shall have received an opinion of counsel
satisfactory to it in form and substance that such sale or other disposition may
be made without registration under the then-applicable provisions of the
Securities Act, the related rules and regulations of the Securities and Exchange
Commission, and applicable state securities laws and regulations, or (ii) the
sale or other disposition of the Shares shall be registered under a currently
effective registration statement under the Securities Act and complies with all
applicable registration requirements under state securities laws. The
certificates representing the Shares may bear an appropriate legend giving
notice of the foregoing restriction on transfer of the Shares, and any other
restrictive legend deemed necessary or appropriate by the
Committee.
11. 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 SAR, and supersedes any prior
agreements or documents with respect to the SAR. No amendment,
alteration, suspension, discontinuation or termination of this Agreement which
may impose any additional obligation upon the Company or impair the rights of
the Employee with respect to the SAR 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
and by the Employee.
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CHARMING
SHOPPES, INC.
|
|
By: _______________________________
|
|
(Authorized
Officer)
|
|
EMPLOYEE:
|
|
___________________________________
|
|
Xxxxx
X. Xxxxxxx
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