EXHIBIT 99.3
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 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 of the 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.
(i) Forfeiture. Unless otherwise determined by the Committee or as provided
by the Employment Agreement described below, if Employee's employment terminates
and she thereafter 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, Disability, termination by Employee for Good Reason, or termination by
the Company for reasons other than Cause, the Performance Shares that have not
vested at or before such Termination shall be forfeited at the date of such
Termination. For purposes of this Agreement, "Cause," "Good Reason" and
"Disability" shall have the meanings ascribed to such terms in the Employment
Agreement by and between the Company and Employee dated as of January 1, 2005
(the "Employment Agreement"). Accordingly, unless otherwise determined by the
Committee or as provided by the Employment Agreement, Employee's voluntary
Termination (other than due to Disability or for Good Reason) or Termination by
the Company for Cause will result in forfeiture of all Performance Shares that
have not vested.
(ii) Vesting. In the event of a Termination due to death, Disability,
termination by Employee for Good Reason, or termination by the Company for
reasons other than Cause, Shares equal to the Target Shares shall vest and be
distributed to Employee free of the Restrictions as of the date of such
Termination. Notwithstanding anything in the Agreement to the contrary, Shares
equal to the Target Shares shall vest and be distributed to Employee under all
events as may be specified for full vesting of stock awards under the Employment
Agreement.
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(c) Vesting Based on Performance Goals.
(i) Vesting Date. Unless the Target Shares vest earlier under Section 3(b)
or 3(d), the Performance Shares shall vest on the February 2, 2008 (the "Vesting
Date"), subject to Employee's continued employment with the Company to the
Vesting Date 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 the 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. 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
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
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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. 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), 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. For purposes of
this Agreement, "Change in Control" shall have the meaning ascribed to such term
in the Employment Agreement.
(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 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 dividends and distributions shall be deferred and shall be payable
to the Employee when, as and if the Target Shares vest under Section 3 in the
same proportion that the number of Target Shares that vest bears to the total
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 dividends and distributions referred
to in the immediately preceding sentence, other than 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 vesting restrictions as apply to the original
Performance Shares. The shares of additional Performance Shares shall vest in
the same proportion that the number of original Target Shares that vest bears to
the total number of original 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 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 from the number of vested
Shares a number of whole Shares up to but not exceeding that number which has a
Fair Market
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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.
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.
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. EMPLOYEE:
BY:_________________________ BY:________________________________
(Authorized Officer) ▇▇▇▇▇▇ ▇. ▇▇▇▇
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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