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PROPOSAL TO APPROVE THE RESTRICTED STOCK PLAN General On October 4, 1989, the Board adopted the Restricted Stock Plan (the "Plan"), subject to approval by the stockholders. Salaried key employees of the Company, or of any subsidiary corporation of the Company now existing or hereafter formed or acquired (a "Subsidiary" or "Subsidiaries"), will be eligible to participate in the Plan, including the five most highly compensated executive officers of the Company whose names and positions are set forth on page 7 hereof (individually, a "Participant"; collectively, "Participants"). The Plan will expire on June 30, 1999, although awards made prior to expiration may extend beyond that date. The Plan is intended to be part of a total compensation program that will enable the Company and its Subsidiaries to retain the services of persons holding key positions and to attract qualified persons to fill such positions in the future. The Plan provides for the award of Shares (as defined below) to key employees of the Company and its Subsidiaries who achieve individual and corporate performance goals determined by the Compensation Committee of the Board, with such award being subject to such restrictions, terms and conditions as the Compensation Committee may require. By providing for such performance-based awards, the Plan seeks to motivate key employees to achieve the performance goals applicable to them and to give these persons the opportunity for capital accumulation in the Common Stock of the Company. Decisions on whether or not an award will be made to a particular Participant and the number of Shares awarded will be based, among other things, upon the extent to which a Participant achieves his or her performance goals. The Plan will become effective only upon being approved by the stockholders of the Company. The following summary of the Plan is not intended to be complete and is qualified in its entirety by reference to the Plan, a copy of which is attached as Exhibit A to this Proxy Statement. Number of Shares The number of shares to be issued pursuant to the Plan will not exceed, in the aggregate, five hundred thousand (500.000) shares of the Common Stock of the Company (the "Shares"). subject to appropriate adjustment in the event of a change in the capitalization of the Company. The Shares awarded under the Plan will be Shares of Common Stock previously issued but held in the Company's treasury. The aggregate number of Shares as to which restrictions will lapse in any fiscal year of the Company will not exceed one hundred thousand (100,000), and the aggregate number of Shares which may be awarded to any employee pursuant to the Plan will not exceed sixty thousand (60,000). Because performance standards and any terms and conditions of awards are set by the Compensation Committee. in its sole discretion, no calculation can be made of the amounts which would have been awarded under the Plan if it had been in effect in the fiscal year of the Company ended July 2, 1989. Terms of Awards The Compensation Committee will grant awards of Shares under the Plan in accordance with the terms and conditions set forth in an agreement between the Company and the Participant (a "Stock Agreement"). Each Stock Agreement will contain such restrictions. terms and conditions as the Compensation Committee may require, including without limitation the price, if any, which a Participant will be required to pay for the Shares. A Participant will be entitled to enjoy all rights and privileges of stockholders of the Company generally with respect to the Shares awarded under the Plan, including the right to receive dividends and the right to vote on matters which come before the stockholders. However, during the period that any portion of the Shares are subject to any restrictions, the Participant will not be permitted to sell, transfer, assign, or otherwise dispose of such restricted Shares or pledge, grant a security interest in or otherwise encumber such restricted Shares. Except as otherwise provided in a Stock Agreement, upon termination of employment of a Participant, all Shares owned by such Participant with respect to which restrictions have not lapsed will be (a) deemed to be offered for sale by the Participant to the Company at a price equal to the lesser of (i) the fair market value of the Shares at such time or (ii) the same price paid initially by the Participant for such Shares plus interest thereon from the date of the Participant's purchase through and including the date of the Company's payment for such Shares, at the prime rate announced from time to time by The First National Bank of Boston or (b) forfeited by the Participant and will revert to the Company without further action on anyone's part if no purchase price had been paid for such Shares. Restrictions on Shares granted as an award under the Plan will lapse at such time or times and on such terms, conditions and performance criteria as the Compensation Committee may, in its sole discretion, determine and set forth in a Stock Agreement, provided, however, that the restrictions on such Shares will lapse only if the Participant. on the date of such lapse, is then and has continuously been an employee of the Company or a Subsidiary from the date of the award. If the Participant dies or becomes disabled the Compensation Committee. in its sole discretion, may determine that the restrictions upon some or all Shares awarded to the Participant will thereupon immediately lapse. If there is a change in control of the Company (as defined in the Plan), any restrictions on a Participant's awarded Shares will lapse and any and all Share certificates not previously delivered to the Participant will be delivered to the Participant. The Compensation Committee also may decide at any time, In its sole discretion and on such terms and conditions as it deems appropriate, to remove restrictions on Shares awarded to any Participant under the Plan. Administration The Plan will be administered by the Compensation Committee of the Board, which will consist of no fewer than three directors, each of whom shall be a "disinterested person" within the meaning of Rule 16b-3 (or any successor rule or regulation) promulgated under the Exchange Act. Subject to the express provisions of the Plan, the Compensation Committee will have the authority to determine which key employees of the Company and its Subsidiaries will participate in the Plan, any individual or corporate performance goals applicable to a Participant. which Participants will be awarded Shares, the date on which awards will be made, the number of Shares to be awarded, the restrictions to be applicable to a particular award and all other terms of the awards, and to amend the Plan and awards (including amendments which accelerate the lapse of any restrictions), to terminate the Plan and to make all other determinations necessary or advisable for administering the Plan.Any and all powers and functions of the Compensation Committee may be exercised by the Board. which will enjoy the same rights and be subject to the same restrictions as the Compensation Committee; provided, however, that with respect to the participation in the Plan by employees who are members of the Board, the Board may exercise such powers only if, at the time of such exercise, a majority of the members of the entire Board and a majority of the directors acting in the particular matter are "disinterested persons" within the meaning of Rule 16b-3 (or any successor rule or regulation) promulgated under the Exchange Act. Certain Federal Income Tax Consequences If a Participant receiving an award of Shares under the Plan makes an election with respect to such Shares under Section 83(b) of the Internal Revenue Code of 1986. as amended (the "Code"), not later than 30 days after the date Shares are transferred to such Participant pursuant to such award, such Participant will recognize ordinary income at the time of transfer in an amount equal to the excess of (i) the fair market value of the Shares covered by the award (determined without regard to any restriction other than a restriction which by its terms will never lapse) at the time of such transfer over (ii) the price paid for such Shares, if any. In the absence of such election, the Participant will recognize ordinary income at the time at which the restrictions which impose a substantial risk of forfeiture of such Shares (the "Restrictions") lapse, in an amount equal to the excess of (i) the fair market value of such Shares at such time over (ii) the price paid for such Shares, if any. The ordinary income recognized by an employee with respect to Shares awarded pursuant to the Plan will be subject to both wage withholding and employment taxes. If a Section 83(b) election is made, dividends received on Shares which are subject to Restrictions will be treated as dividend income. If a Participant does not make an election under Section 83(b), dividends received on the Shares prior to the time the Restrictions on such Shares lapse will be treated as additional compensation, and not dividend income, for federal income tax purposes, and will be subject to wage withholding and employment taxes. A Participant's tax basis in Shares received pursuant to the Plan will be equal to the sum of the price paid for such Shares, if any, and the amount of ordinary income recognized by such Participant with respect to the transfer of such Shares or the lapse of Restrictions thereon . The Participant's holding period for such Shares for purposes of determining gain or loss on a subsequent sale will begin immediately after the transfer of such Shares to the Participant, if a Section 83(b) election is made with respect to such Shares. or immediately after the Restrictions on such Shares lapse, if no Section 83(b) election is made. In general, a deduction will be allowed to the Company, for federal income tax purposes, in an amount equal to the ordinary income recognized by a Participant with respect to Shares awarded pursuant to the Plan, provided that such amount constitutes an ordinary and necessary business expense of the Company and is reasonable, and provided further that the Company satisfies its withholding obligation with respect to such income. If, subsequent to the lapse of Restrictions on his or her Shares, the Participant sells such Shares, the difference, if any, between the amount realized from such sale and the tax basis of such Shares to the holder will be taxed as long-term or short-term capital gain or loss, depending on whether the Participant's holding period for such Shares exceeds the applicable holding period at the time of sale and provided that the Participant holds such Shares as a capital asset at such time. Ordinary income and capital gains currently are taxed at the same rates for federal income tax purposes. Legislation has been proposed, however, that would provide a preferential rate (other than for purposes of the alternative minimum tax) for "qualified net capital gains" recognized by a Participant before his 1992 taxable year. The proposed legislation also provides an indexing mechanism for inflation based on the consumer price index, which will adjust the tax basis of Shares for which the Participant's holding period begins after December 31, 1991. If a Section 83(b) election is made and, before the Restrictions on the Shares lapse, the Shares which are subject to such election are resold to the Company or are forfeited, (i) no deduction would be allowed to such Participant for the amount included in the income of such Participant by reason of such Section 83(b) election. and 60 the Participant would realize a loss in an amount equal to the excess, if any, of the amount paid for such Shares over the amount received by the Participant upon such resale or forfeiture (which loss would be a capital loss if the Shares are held as a capital asset at such time). In such event, the Company would be required to include in its income the amount of any deduction previously allowable to it in connection with the transfer of such Shares. As described above, upon a change in control of the Company (as defined in the Plan). any Restrictions on the Shares awarded under the Plan will lapse. In general, if the total amount of payments in the nature of compensation that are contingent upon a "change in control" of the Company (as defined in Section 28OG of the Code) equals or exceeds three times a recipient's "base amount" (generally, such recipient's average annual compensation for the five years preceding the change in control), then, subject to certain exceptions, the payments may be treated as parachute payments under Section 28OG of the Code, in which case a portion of the payments would be nondeductible to the Company and the recipient would be subject to a 20% excise tax on such portion of the payments under Section 4999 of the Code. The Plan is not qualified under the provisions of Section 401(a) of the Code, and is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). THE BOARD RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS CONSIDER AND APPROVE THE PLAN.