<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 22, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
GARGOYLES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WASHINGTON 91-1247269
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5866 SOUTH 194TH STREET
KENT, WASHINGTON 98032
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
GARGOYLES, INC.
1995 STOCK INCENTIVE COMPENSATION PLAN
(FULL TITLE OF THE PLAN)
STEVEN R. KINGMA
VICE PRESIDENT, CHIEF FINANCIAL OFFICER,
SECRETARY AND TREASURER
GARGOYLES, INC.
5866 SOUTH 194TH STREET
KENT, WASHINGTON 98032
(206) 872-6100
(NAME, ADDRESS AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
----------------------
COPIES TO:
CYNTHIA L. POPE STEWART M. LANDEFELD
114 W. MAGNOLIA STREET, 4TH FLOOR PERKINS COIE
BELLINGHAM, WASHINGTON 98225 1201 THIRD AVENUE, 40TH FLOOR
SEATTLE, WASHINGTON 98101-3099
----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
TITLE OF SECURITIES NUMBER TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED (1) OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION FEE
SHARE(2) PRICE(2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value 817,500 $10.25 $8,379,375 $2,540
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Together with an indeterminate number of additional shares which may be
necessary to adjust the number of shares reserved for issuance pursuant
to the Gargoyles, Inc. 1995 Stock Incentive Compensation Plan as the
result of any future stock split, stock dividend or similar adjustment
of the outstanding Common Stock of the Registrant.
(2) Estimated solely for the purpose of calculating the registration fee.
The price per share is estimated to be $10.25 based on the average of
the high ($10.75) and low ($9.75) sales prices for the Common
Stock in the over-the-counter market on November 21, 1996 as reported
on the Nasdaq National Market.
<PAGE> 2
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are hereby incorporated by reference in this
Registration Statement:
(a) The Registrant's Registration Statement on Form S-1 filed
with the Securities and Exchange Commission (the "Commission") on July 3, 1996;
(b) All other reports filed by the Registrant pursuant to
Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended
(the "Exchange Act"), since the fiscal year covered by the Form S-1 referred to
in (a) above.
(c) The description of the Registrant's Common Stock contained
in the Registration Statement on Form 8-A filed with the Commission on
September 9, 1996 under Section 12(g) of the Exchange Act.
All documents filed by the Registrant pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act after the date hereof and prior to the
filing of a post-effective amendment, which indicate that the securities
offered hereby have been sold or which deregister the securities covered hereby
then remaining unsold, shall also be deemed to be incorporated by reference into
this Registration Statement and to be a part hereof commencing on the respective
dates on which such documents are filed.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act authorize a court to award, or a corporation's board of
directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). Section 10 of the Registrant's Bylaws provides for
indemnification of the Registrant's directors, officers, employees and agents to
the maximum extent permitted by Washington law.
Section 23B.08.320 of the Washington Business Corporation Act
authorizes a corporation to limit a director's liability to the corporation or
its shareholders for monetary damages for acts or omissions as a director,
except in certain circumstances involving intentional misconduct, self-dealing
or illegal corporate loans or distributions, or any transactions from which the
director personally receives a benefit in money, property or services to which
the director is not entitled. Article 8 of the Registrant's Restated Articles of
Incorporation contains provisions implementing, to the fullest extent permitted
by Washington law, such limitations on a director's liability to the Registrant
and its shareholders.
The Registrant has also entered into indemnification agreements
pursuant to which it has agreed, among other things, to indemnify its directors
and officers against certain liabilities.
ITEM 8. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------------- ----------------------------------------------------------------------
<S> <C>
5.1 Opinion of Perkins Coie
23.1 Consent of Ernst & Young LLP
23.2 Consent of Perkins Coie (included in opinion filed as Exhibit 5.1)
24.1 Power of Attorney (see signature page)
99.1 Gargoyles, Inc. 1995 Stock Incentive Compensation Plan, as amended and
restated on July 22, 1996
</TABLE>
II-1
<PAGE> 3
ITEM 9. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this 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 this Registration
Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, 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.
(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, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefits plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in this 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.
C. Insofar as indemnification for liabilities arising under the Securities Act
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 Commission such indemnification is
against public policy as expressed in the Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Kent, State of Washington, on November 22, 1996.
GARGOYLES, INC.
By /s/ Douglas B. Hauff
--------------------------------------
Douglas B. Hauff
President, Chief Executive Officer
POWER OF ATTORNEY
EACH PERSON WHOSE INDIVIDUAL SIGNATURE APPEARS BELOW HEREBY AUTHORIZES
DOUGLAS B. HAUFF AND STEVEN R. KINGMA AND EACH OF THEM AS ATTORNEYS-IN-FACT,
WITH FULL POWER OF SUBSTITUTION, TO EXECUTE IN THE NAME AND ON BEHALF OF SUCH
PERSON, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, AND TO FILE, ANY AND ALL
AMENDMENTS TO THIS REGISTRATION STATEMENT, INCLUDING ANY AND ALL POST-EFFECTIVE
AMENDMENTS.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities indicated on November 22, 1996.
SIGNATURE TITLE
--------- -----
/s/ Erik J. Anderson Chairman of the Board
- -------------------------------------
Erik J. Anderson
/s/ Douglas B. Hauff President, Chief Executive
- ------------------------------------- Officer and Director
Douglas B. Hauff
/s/ Steven R. Kingma Vice President, Chief Financial
- ------------------------------------- Officer, Secretary and Treasurer
Steven R. Kingma
/s/ Timothy C. Potts Director
- -------------------------------------
Timothy C. Potts
/s/ William D. Ruckelshaus Director
- -------------------------------------
William D. Ruckelshaus
/s/ Paul S. Shipman Director
- -------------------------------------
Paul S. Shipman
/s/ Walter F. Walker Director
- -------------------------------------
Walter F. Walker
II-3
<PAGE> 5
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------------- -----------------------------------------------------------------
<S> <C>
5.1 Opinion of Perkins Coie
23.1 Consent of Ernst & Young LLP
23.2 Consent of Perkins Coie (included in opinion filed as Exhibit 5.1)
24.1 Power of Attorney (see signature page)
99.1 Gargoyles, Inc. 1995 Stock Incentive Compensation Plan, as amended
and restated on July 22, 1996
</TABLE>
<PAGE> 1
EXHIBIT 5.1
[Perkins Coie Letterhead]
November 22, 1996
Gargoyles, Inc.
5866 South 194th Street
Kent, WA 98032
RE: 817,500 SHARES OF COMMON STOCK (NO PAR VALUE) OF
GARGOYLES, INC. (THE "COMPANY")
Ladies and Gentlemen:
We have acted as counsel to you in connection with the preparation of a
Registration Statement on Form S-8 (the "Registration Statement") pursuant to
the Securities Act of 1933, as amended (the "Act"), which you are filing with
the Securities and Exchange Commission with respect to 817,500 shares of Common
Stock, no par value (the "Shares"), of Gargoyles, Inc. (the "Company") to be
issued pursuant to the Company's 1995 Stock Incentive Compensation Plan, as
amended and restated (the "Plan").
We have examined the Registration Statement and such other documents
and records of the Company as we have deemed relevant and necessary for the
purposes of this opinion. In giving this opinion we are assuming the
authenticity of all instruments presented to us as originals, the conformity
with originals of all instruments presented to us as copies and the genuineness
of all signatures.
Based upon and subject to the foregoing, we are of the opinion that the
Shares that will be issued pursuant to the Plan, upon the due execution by the
Company and the registration by its registrar of the Shares and the issuance
thereof by the Company in accordance with the terms of the Plan, and the receipt
of consideration therefor in accordance with the terms of the Plan, will be
validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
PERKINS COIE
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement on
Form S-8 pertaining to the Gargoyles, Inc. 1995 Stock Incentive Compensation
Plan of our report dated June 14, 1996, except for the second paragraph of Note
13, as to which the date is August 29, 1996 with respect to the consolidated
financial statements of Gargoyles, Inc. included in its Registration Statement
on Form S-1 filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Seattle, Washington
November 21, 1996
<PAGE> 1
EXHIBIT 99.1
GARGOYLES, INC.
1995 STOCK INCENTIVE COMPENSATION PLAN
AS AMENDED AND RESTATED ON JULY 22, 1996
SECTION 1. PURPOSE
The purpose of the Gargoyles, Inc. 1995 Stock Incentive Compensation
Plan (the "Plan") is to enhance the long-term shareholder value of Gargoyles,
Inc., a Washington corporation (the "Company"), by offering opportunities to
employees, directors, officers, consultants, agents, advisors and independent
contractors of the Company and its Subsidiaries (as defined in Section 2) to
participate in the Company's growth and success, and to encourage them to remain
in the service of the Company and its Subsidiaries and to acquire and maintain
stock ownership in the Company.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set
forth below:
2.1 AWARD
"Award" means an award or grant made to a Participant pursuant to the
Plan, including, without limitation, awards or grants of Options, Stock
Appreciation Rights, Stock Awards, Performance Awards, Other Stock-Based Awards
or any combination of the foregoing (including any Dividend Equivalent Rights
granted in connection with such Awards).
2.2 BOARD
"Board" means the Board of Directors of the Company.
2.3 CAUSE
"Cause" means dishonesty, fraud, misconduct, or disclosure of
confidential information, or conviction or confession of a crime (except minor
violations), in each case as determined by the Plan Administrator, and its
determination shall be conclusive and binding.
2.4 CODE
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.5 COMMON STOCK
"Common Stock" means the common stock of the Company.
-1-
<PAGE> 2
2.6 DISABILITY
"Disability" means a mental or physical impairment of the Holder which
is expected to result in death or which has lasted or is expected to last for a
continuous period of 12 months or more and which causes the Holder to be unable,
in the opinion of the Company and two independent physicians, to perform his or
her duties for the Company and to be engaged in any substantial gainful
activity. Disability shall be deemed to have occurred on the first day after the
Company and the two independent physicians have furnished their opinion of
Disability to the Plan Administrator.
2.7 DIVIDEND EQUIVALENT RIGHT
"Dividend Equivalent Right" means an Award granted under Section 13.
2.8 EXCHANGE ACT
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.9 FAIR MARKET VALUE
"Fair Market Value" shall be as established in good faith by the Plan
Administrator or (a) if the Common Stock is listed on the Nasdaq National
Market, the closing selling price for the Common Stock as reported by the Nasdaq
National Market for a single trading day or (b) if the Common Stock is listed on
the New York Stock Exchange or the American Stock Exchange, the closing selling
price for the Common Stock as such price is officially quoted in the composite
tape of transactions on such exchange for a single trading day. If there is no
such reported price for the Common Stock for the date in question, then such
price on the last preceding date for which such price exists shall be
determinative of Fair Market Value.
2.10 GRANT DATE
"Grant Date" means the date the Plan Administrator adopted the granting
resolution or a later date designated in a resolution of the Plan Administrator
as the date an Award is to be granted.
2.11 HOLDER
"Holder" means the Participant to whom an Award is granted or the
personal representative of a Holder who has died.
2.12 INCENTIVE STOCK OPTION
"Incentive Stock Option" means an Option to purchase Common Stock
granted under Section 7 with the intention that it qualify as an "incentive
stock option" as that term is defined in Section 422 of the Code.
-2-
<PAGE> 3
2.13 NONQUALIFIED STOCK OPTION
"Nonqualified Stock Option" means an Option to purchase Common Stock
granted under Section 7 other than an Incentive Stock Option.
2.14 OPTION
"Option" means the right to purchase Common Stock granted under
Section 7.
2.15 OTHER STOCK-BASED AWARD
"Other Stock-Based Award" means an Award granted under Section 12.
2.16 PARTICIPANT
"Participant" means an individual who is a Holder of an Award or, as
the context may require, any employee, director, officer, consultant, agent,
advisor or independent contractor of the Company or a Subsidiary who has been
designated by the Plan Administrator as eligible to participate in the Plan.
2.17 PERFORMANCE AWARD
"Performance Award" means an Award granted under Section 11, the payout
of which is subject to achievement through a performance period of performance
goals prescribed by the Plan Administrator.
2.18 PLAN ADMINISTRATOR
"Plan Administrator" means the Board or any committee of the Board
designated to administer the Plan under Section 3.1.
2.19 RESTRICTED STOCK
"Restricted Stock" means shares of Common Stock granted under Section
10, the rights of ownership of which are subject to restrictions prescribed by
the Plan Administrator.
2.20 SECURITIES ACT
"Securities Act" means the Securities Act of 1933, as amended.
2.21 STOCK APPRECIATION RIGHT
"Stock Appreciation Right" means an Award granted under Section 9.
2.22 STOCK AWARD
"Stock Award" means an Award granted under Section 10.
-3-
<PAGE> 4
2.23 SUBSIDIARY
"Subsidiary," except as expressly provided otherwise, means any entity
that is directly or indirectly controlled by the Company or in which the Company
has a significant ownership interest, as determined by the Plan Administrator,
and any entity that may become a direct or indirect parent of the Company.
2.24 SUCCESSOR CORPORATION
"Successor Corporation" has the meaning set forth under Section 16.2.
SECTION 3. ADMINISTRATION
3.1 PLAN ADMINISTRATOR
The Plan shall be administered by the Board or a committee or
committees (which term includes subcommittees) appointed by, and consisting of
two or more members of, the Board. If and so long as the Common Stock is
required to be registered under Section 12(b) or 12(g) of the Exchange Act, the
Board shall consider in selecting the Plan Administrator and the membership of
any committee acting as Plan Administrator for any persons subject or likely to
become subject to Section 16 under the Exchange Act the provisions regarding (a)
"outside directors" as contemplated by Section 162(m) of the Code and (b)
"nonemployee directors" as contemplated by Rule 16b-3 under the Exchange Act.
The Board may delegate the responsibility for administering the Plan with
respect to designated classes of eligible Participants to different committees,
subject to such limitations as the Board deems appropriate. Committee members
shall serve for such term as the Board may determine, subject to removal by the
Board at any time.
3.2 ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR
Except for the terms and conditions explicitly set forth in the Plan,
the Plan Administrator shall have exclusive authority, in its discretion, to
determine all matters relating to Awards under the Plan, including the selection
of individuals to be granted Awards, the type of Awards, the number of shares of
Common Stock subject to an Award, all terms, conditions, restrictions and
limitations, if any, of an Award and the terms of any instrument that evidences
the Award. The Plan Administrator shall also have exclusive authority to
interpret the Plan and may from time to time adopt, and change, rules and
regulations of general application for the Plan's administration. The Plan
Administrator's interpretation of the Plan and its rules and regulations, and
all actions taken and determinations made by the Plan Administrator pursuant to
the Plan, shall be conclusive and binding on all parties involved or affected.
The Plan Administrator may delegate administrative duties to such of the
Company's officers as it so determines.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 AUTHORIZED NUMBER OF SHARES
Subject to adjustment from time to time as provided in Section 16.1, a
maximum of 150,000 shares of Common Stock shall be available for issuance under
the Plan; provided that
-4-
<PAGE> 5
52,577 of such shares shall become available for issuance only upon the
effectiveness of the Company's registration statement relating to the initial
public offering of the Common Stock. Shares issued under the Plan shall be drawn
from authorized and unissued shares.
4.2 LIMITATIONS
(a) Subject to adjustment from time to time as provided in Section
16.1, not more than an aggregate of 50,000 shares shall be available for
issuance pursuant to grants of Stock Awards, Performance Awards or Other
Stock-Based Awards under the Plan.
(b) Subject to adjustment from time to time as provided in Section
16.1, not more than 10,000 shares of Common Stock may be made subject to Awards
under the Plan to any individual Participant in the aggregate in any one fiscal
year of the Company, except that the Company may make additional one-time grants
to newly hired Participants of up to 30,000 shares per such Participant; such
limitation shall be applied in a manner consistent with the requirements of, and
only to the extent required for compliance with, the exclusion from the
limitation on deductibility of compensation under Section 162(m) of the Code.
4.3 REUSE OF SHARES
Any shares of Common Stock that have been made subject to an Award that
cease to be subject to the Award (other than by reason of exercise or payment of
the Award to the extent it is exercised for or settled in shares), shall again
be available for issuance in connection with future grants of Awards under the
Plan; provided, however, that any such shares shall be counted in accordance
with the requirements of Section 162(m) of the Code. Shares that are subject to
tandem Awards shall be counted only once.
SECTION 5. ELIGIBILITY
Awards may be granted under the Plan to those officers, directors and
key employees of the Company and its Subsidiaries as the Plan Administrator from
time to time selects. Awards may also be made to consultants, agents, advisors
and independent contractors who provide services to the Company and its
Subsidiaries.
SECTION 6. AWARDS
6.1 FORM AND GRANT OF AWARDS
The Plan Administrator shall have the authority, in its sole
discretion, to determine the type or types of Awards to be made under the Plan.
Such Awards may include, but are not limited to, Incentive Stock Options,
Nonqualified Stock Options, Stock Appreciation Rights, Stock Awards, Performance
Awards, Other Stock-Based Awards and Dividend Equivalent Rights. Awards may be
granted singly, in combination or in tandem so that the settlement or payment of
one automatically reduces or cancels the other. Awards may also be made in
combination or in tandem with, in replacement of, as alternatives to, or as the
payment form for, grants or rights under any other employee or compensation plan
of the Company.
-5-
<PAGE> 6
6.2 ACQUIRED COMPANY AWARDS
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Awards under the Plan in substitution for awards issued
under other plans, or assume under the Plan awards issued under other plans, if
the other plans are or were plans of other acquired entities ("Acquired
Entities") (or the parent of the Acquired Entity) and the new Award is
substituted, or the old award is assumed, by reason of a merger, consolidation,
acquisition of property or of stock, reorganization or liquidation (the
"Acquisition Transaction"). In the event that a written agreement pursuant to
which the Acquisition Transaction is completed is approved by the Board and said
agreement sets forth the terms and conditions of the substitution for or
assumption of outstanding awards of the Acquired Entity, said terms and
conditions shall be deemed to be the action of the Plan Administrator without
any further action by the Plan Administrator, except as may be required for
compliance with Rule 16b-3 under the Exchange Act, and the persons holding such
Awards shall be deemed to be Participants and Holders.
SECTION 7. AWARDS OF OPTIONS
7.1 GRANT OF OPTIONS
The Plan Administrator is authorized under the Plan, in its sole
discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock
Options, which shall be appropriately designated.
7.2 OPTION EXERCISE PRICE
The exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date with respect to
Incentive Stock Options and not less than 85% of the Fair Market Value on the
Grant Date with respect to Nonqualified Stock Options.
7.3 TERM OF OPTIONS
The term of each Option shall be as established by the Plan
Administrator or, if not so established, shall be 10 years from the Grant Date.
7.4 EXERCISE OF OPTIONS
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option the time at which or the installments in which the
Option shall become exercisable, which provisions may be waived or modified by
the Plan Administrator at any time. If not so established in the instrument
evidencing the Option, the Option will become exercisable according to the
following schedule, which may be waived or modified by the Plan Administrator at
any time:
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<PAGE> 7
<TABLE>
<CAPTION>
Period of Holder's Continuous Employment
or Service With the Company or Its Percent of Total Option
Subsidiaries From the Grant Date That Is Exercisable
-------------------------------- -------------------
<S> <C>
After 1 year 25%
After 2 years 50%
After 3 years 75%
After 4 years 100%
</TABLE>
To the extent that the right to purchase shares has accrued thereunder,
an Option may be exercised from time to time by written notice to the Company,
in accordance with procedures established by the Plan Administrator, setting
forth the number of shares with respect to which the Option is being exercised
and accompanied by payment in full as described in Section 7.5. An Option may
not be exercised as to less than 100 shares at any one time (or the lesser
number of remaining shares covered by the Option).
7.5 PAYMENT OF EXERCISE PRICE
The exercise price for shares purchased under an Option shall be paid
in full to the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased. Such consideration
must be paid in cash or check (unless, at the time of exercise, the Plan
Administrator determines not to accept a personal check), except that the Plan
Administrator, in its sole discretion, may, either at the time the Option is
granted or at any time before it is exercised and subject to such limitations as
the Plan Administrator may determine, authorize payment in cash and/or one or
more of the following alternative forms: (a) tendering (either actually or, if
and so long as the Common Stock is registered under Section 12(b) or 12(g) of
the Exchange Act, by attestation) Common Stock already owned by the Holder for
at least six months (or any shorter period necessary to avoid a charge to the
Company's earnings for financial reporting purposes) having a Fair Market Value
on the day prior to the exercise date equal to the aggregate Option exercise
price; (b) a promissory note delivered pursuant to Section 14; (c) if and so
long as the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act, delivery of a properly executed exercise notice, together with
irrevocable instructions, to (i) a brokerage firm designated by the Company to
deliver promptly to the Company the aggregate amount of sale or loan proceeds to
pay the Option exercise price and any withholding tax obligations that may arise
in connection with the exercise and (ii) the Company to deliver the certificates
for such purchased shares directly to such brokerage firm, all in accordance
with the regulations of the Federal Reserve Board; or (d) such other
consideration as the Plan Administrator may permit.
7.6 POST-TERMINATION EXERCISES
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option whether the Option will continue to be exercisable, and
the terms and conditions of such exercise, if a Holder ceases to be employed by,
or to provide services to, the Company or its Subsidiaries, which provisions may
be waived or modified by the Plan Administrator at any time.
-7-
<PAGE> 8
If not so established in the instrument evidencing the Option, the Option will
be exercisable according to the following terms and conditions, which may be
waived or modified by the Plan Administrator at any time.
In case of termination of the Holder's employment or services other
than by reason of death or Cause, the Option shall be exercisable, to the extent
of the number of shares purchasable by the Holder at the date of such
termination, only (a) within one year if the termination of the Holder's
employment or services are coincident with Disability or (b) within three months
after the date the Holder ceases to be an employee, director, officer,
consultant, agent, advisor or independent contractor of the Company or a
Subsidiary if termination of the Holder's employment or services is for any
reason other than death or Disability, but in no event later than the remaining
term of the Option. Any Option exercisable at the time of the Holder's death may
be exercised, to the extent of the number of shares purchasable by the Holder at
the date of the Holder's death, by the personal representative of the Holder's
estate entitled thereto at any time or from time to time within one year after
the date of death, but in no event later than the remaining term of the Option.
In case of termination of the Holder's employment or services for Cause, the
Option shall automatically terminate upon first discovery by the Company of any
reason for such termination and the Holder shall have no right to purchase any
Shares pursuant to such Option, unless the Plan Administrator determines
otherwise. If a Holder's employment or services with the Company are suspended
pending an investigation of whether the Holder shall be terminated for Cause,
all the Holder's rights under any Option likewise shall be suspended during the
period of investigation.
A transfer of employment or services between or among the Company and
its Subsidiaries shall not be considered a termination of employment or
services. The effect of a Company-approved leave of absence on the terms and
conditions of an Option shall be determined by the Plan Administrator, in its
sole discretion.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
To the extent required by Section 422 of the Code, Incentive Stock
Options shall be subject to the following additional terms and conditions:
8.1 DOLLAR LIMITATION
To the extent the aggregate Fair Market Value (determined as of the
Grant Date) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time during any calendar year (under the Plan and all
other stock option plans of the Company) exceeds $100,000, such portion in
excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event
the Participant holds two or more such Options that become exercisable for the
first time in the same calendar year, such limitation shall be applied on the
basis of the order in which such Options are granted.
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8.2 10% SHAREHOLDERS
If a Participant owns more than 10% of the total voting power of all
classes of the Company's stock, then the exercise price per share of an
Incentive Stock Option shall not be less than 110% of the Fair Market Value of
the Common Stock on the Grant Date and the Option term shall not exceed five
years. The determination of 10% ownership shall be made in accordance with
Section 422 of the Code.
8.3 ELIGIBLE EMPLOYEES
Individuals who are not employees of the Company or one of its parent
corporations or subsidiary corporations may not be granted Incentive Stock
Options. For purposes of this Section 8.3, "parent corporation" and "subsidiary
corporation" shall have the meanings attributed to those terms for purposes of
Section 422 of the Code.
8.4 TERM
The term of an Incentive Stock Option shall not exceed 10 years.
8.5 EXERCISABILITY
To qualify for Incentive Stock Option tax treatment, an Option
designated as an Incentive Stock Option must be exercised within three months
after termination of employment for reasons other than death, except that, in
the case of termination of employment due to total disability, such Option must
be exercised within one year after such termination. Employment shall not be
deemed to continue beyond the first 90 days of a leave of absence unless the
Participant's reemployment rights are guaranteed by statute or contract. For
purposes of this Section 8.5, "total disability" shall mean a mental or physical
impairment of the Participant which is expected to result in death or which has
lasted or is expected to last for a continuous period of 12 months or more and
which causes the Participant to be unable, in the opinion of the Company and two
independent physicians, to perform his or her duties for the Company and to be
engaged in any substantial gainful activity. Total disability shall be deemed to
have occurred on the first day after the Company and the two independent
physicians have furnished their opinion of total disability to the Plan
Administrator.
8.6 TAXATION OF INCENTIVE STOCK OPTIONS
In order to obtain certain tax benefits afforded to Incentive Stock
Options under Section 422 of the Code, the Participant must hold the shares
issued upon the exercise of an Incentive Stock Option for two years after the
Grant Date of the Incentive Stock Option and one year from the date of exercise.
A Participant may be subject to the alternative minimum tax at the time of
exercise of an Incentive Stock Option. The Participant shall give the Company
prompt notice of any disposition of shares acquired by the exercise of an
Incentive Stock Option prior to the expiration of such holding periods.
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8.7 PROMISSORY NOTES
The amount of any promissory note delivered pursuant to Section 14 in
connection with an Incentive Stock Option shall bear interest at a rate
specified by the Plan Administrator but in no case less than the rate required
to avoid imputation of interest (taking into account any exceptions to the
imputed interest rules) for federal income tax purposes.
SECTION 9. STOCK APPRECIATION RIGHTS
9.1 GRANT OF STOCK APPRECIATION RIGHTS
The Plan Administrator may grant a Stock Appreciation Right separately
or in tandem with a related Option.
9.2 TANDEM STOCK APPRECIATION RIGHTS
A Stock Appreciation Right granted in tandem with a related Option will
give the Holder the right to surrender to the Company all or a portion of the
related Option and to receive an appreciation distribution (in shares of Common
Stock or cash or any combination of shares and cash, as the Plan Administrator,
in its sole discretion, shall determine at any time) in an amount equal to the
excess of the Fair Market Value for the date the Stock Appreciation Right is
exercised over the exercise price per share of the right, which shall be the
same as the exercise price of the related Option. A tandem Stock Appreciation
Right will have the same other terms and provisions as the related Option. Upon
and to the extent a tandem Stock Appreciation Right is exercised, the related
Option will terminate.
9.3 STAND-ALONE STOCK APPRECIATION RIGHTS
A Stock Appreciation Right granted separately and not in tandem with an
Option will give the Holder the right to receive an appreciation distribution in
an amount equal to the excess of the Fair Market Value for the date the Stock
Appreciation Right is exercised over the exercise price per share of the right.
A stand-alone Stock Appreciation Right will have such terms as the Plan
Administrator may determine, except that the exercise price per share of the
right must be at least equal to 85% of the Fair Market Value on the Grant Date
and the term of the right, if not otherwise established by the Plan
Administrator, shall be 10 years from the Grant Date.
9.4 EXERCISE OF STOCK APPRECIATION RIGHTS
Unless otherwise provided by the Plan Administrator in the instrument
that evidences the Stock Appreciation Right, the provisions of Section 7.6
relating to the termination of a Holder's employment or services shall apply
equally, to the extent applicable, to the Holder of a Stock Appreciation Right.
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SECTION 10. STOCK AWARDS
10.1 GRANT OF STOCK AWARDS
The Plan Administrator is authorized to make Awards of Common Stock to
Participants on such terms and conditions and subject to such restrictions, if
any (which may be based on continuous service with the Company or the
achievement of performance goals related to (i) sales, gross margin, operating
profits or profits, (ii) growth in sales, gross margin operating profit or
profit, (iii) return ratios related to sales, gross margin operating profit or
profit, (iv) cash flow, (v) asset management (including inventory management),
or (vi) total shareholder return, where such goals may be stated in absolute
terms or relative to comparison companies), as the Plan Administrator shall
determine, in its sole discretion, which terms, conditions and restrictions
shall be set forth in the instrument evidencing the Award. The terms, conditions
and restrictions that the Plan Administrator shall have the power to determine
shall include, without limitation, the manner in which shares subject to Stock
Awards are held during the periods they are subject to restrictions and the
circumstances under which forfeiture of Restricted Stock shall occur by reason
of termination of the Holder's services.
10.2 ISSUANCE OF SHARES
Upon the satisfaction of any terms, conditions and restrictions
prescribed in respect to a Stock Award, or upon the Holder's release from any
terms, conditions and restrictions of a Stock Award, as determined by the Plan
Administrator, the Company shall deliver, as soon as practicable, to the Holder
or, in the case of the Holder's death, to the personal representative of the
Holder's estate or as the appropriate court directs, a stock certificate for the
appropriate number of shares of Common Stock.
10.3 WAIVER OF RESTRICTIONS
Notwithstanding any other provisions of the Plan, the Plan
Administrator may, in its sole discretion, waive the forfeiture period and any
other terms, conditions or restrictions on any Restricted Stock under such
circumstances and subject to such terms and conditions as the Plan Administrator
shall deem appropriate.
SECTION 11. PERFORMANCE AWARDS
11.1 PLAN ADMINISTRATOR AUTHORITY
Performance Awards may be denominated in cash, shares of Common Stock
or any combination thereof. The Plan Administrator is authorized to grant
Performance Awards and shall determine the nature, length and starting date of
the performance period for each Performance Award and the performance objectives
to be used in valuing Performance Awards and determining the extent to which
such Performance Awards have been earned. Performance objectives and other terms
may vary from Participant to Participant and between groups of Participants.
Performance objectives shall be based on (i) sales, gross margin, operating
profits or profits, (ii) growth in sales, gross margin operating profit or
profit, (iii) return ratios related to sales, gross margin operating profit or
profit, (iv) cash flow, (v) asset management (including
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inventory management) or (vi) total shareholder return, where such goals may be
stated in absolute terms or relative to comparison companies, as the Plan
Administrator shall determine, in its sole discretion. Additional performance
measures may be used to the extent their use would comply with the exclusion
from the limitation on deductibility of compensation under Section 162(m) of the
Code. Performance periods may overlap and Participants may participate
simultaneously with respect to Performance Awards that are subject to different
performance periods and different performance factors and criteria.
The Plan Administrator shall determine for each Performance Award the
range of dollar values or number of shares of Common Stock (which may, but need
not, be shares of Restricted Stock pursuant to Section 10), or a combination
thereof, to be received by the Participant at the end of the performance period
if and to the extent that the relevant measures of performance for such
Performance Awards are met. No Performance Awards having an aggregate maximum
dollar value in excess of $250,000 shall be granted to any individual
Participant in any one fiscal year of the Company, such limitations to be
applied in a manner consistent with the requirements of, and to the extent
required for compliance with, the exclusion from the limitation on deductibility
of compensation under Section 162(m) of the Code. The earned portion of a
Performance Award may be paid currently or on a deferred basis with such
interest or earnings equivalent as may be determined by the Plan Administrator.
Payment shall be made in the form of cash, whole shares of Common Stock (which
may, but need not, be shares of Restricted Stock pursuant to Section 10),
Options or any combination thereof, either in a single payment or in annual
installments, all as the Plan Administrator shall determine.
11.2 ADJUSTMENT OF AWARDS
The Plan Administrator may adjust the performance goals and
measurements applicable to Performance Awards to take into account changes in
law and accounting and tax rules and to make such adjustments as the Plan
Administrator deems necessary or appropriate to reflect the inclusion or
exclusion of the impact of extraordinary or unusual items, events or
circumstances, except that, to the extent required for compliance with the
exclusion from the limitation on deductibility of compensation under Section
162(m) of the Code, no adjustment shall be made that would result in an increase
in the compensation of any Participant whose compensation is subject to the
limitation on deductibility under Section 162(m) of the Code for the applicable
year. The Plan Administrator also may adjust the performance goals and
measurements applicable to Performance Awards and thereby reduce the amount to
be received by any Participant pursuant to such Awards if and to the extent that
the Plan Administrator deems it appropriate.
11.3 PAYOUT UPON TERMINATION
The Plan Administrator shall establish and set forth in each instrument
that evidences a Performance Award whether the Award will be payable, and the
terms and conditions of such payment, if a Holder ceases to be employed by, or
to provide services to, the Company or its Subsidiaries, which provisions may be
waived or modified by the Plan Administrator at any time. If not so established
in the instrument evidencing the Performance Award, the Award will be payable
according to the following terms and conditions, which may be waived or modified
by the Plan Administrator at any time. If during a performance period a
Participant's employment or
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services with the Company terminate by reason of the Participant's Retirement,
Early Retirement at the Company's request, Disability or death, such Participant
shall be entitled to a payment with respect to each outstanding Performance
Award at the end of the applicable performance period (i) based, to the extent
relevant under the terms of the Award, on the Participant's performance for the
portion of such performance period ending on the date of termination and (ii)
prorated for the portion of the performance period during which the Participant
was employed by the Company, all as determined by the Plan Administrator. The
Plan Administrator may provide for an earlier payment in settlement of such
Performance Award discounted at a reasonable interest rate and otherwise in such
amount and under such terms and conditions as the Plan Administrator deems
appropriate.
Except as otherwise provided in Section 16 or in the instrument
evidencing the Performance Award, if during a performance period a Participant's
employment or services with the Company terminate other than by reason of the
Participant's Retirement, Early Retirement at the Company's request, Disability
or death, then such Participant shall not be entitled to any payment with
respect to the Performance Awards relating to such performance period, unless
the Plan Administrator shall otherwise determine. The provisions of Section 7.6
regarding leaves of absence and termination for Cause shall apply to Performance
Awards.
SECTION 12. OTHER STOCK-BASED AWARDS
The Plan Administrator may grant other Awards under the Plan pursuant
to which shares of Common Stock (which may, but need not, be shares of
Restricted Stock pursuant to Section 10) are or may in the future be acquired,
or Awards denominated in stock units, including ones valued using measures other
than market value. Such Other Stock-Based Awards may be granted alone or in
addition to or in tandem with any Award of any type granted under the Plan and
must be consistent with the Plan's purpose.
SECTION 13. DIVIDEND EQUIVALENT RIGHTS
Any Awards under the Plan may, in the Plan Administrator's discretion,
earn Dividend Equivalent Rights. In respect of any Award that is outstanding on
the dividend record date for Common Stock, the Participant may be credited with
an amount equal to the cash or stock dividends or other distributions that would
have been paid on the shares of Common Stock covered by such Award had such
covered shares been issued and outstanding on such dividend record date. The
Plan Administrator shall establish such rules and procedures governing the
crediting of Dividend Equivalent Rights, including the timing, form of payment
and payment contingencies of such Dividend Equivalent Rights, as it deems are
appropriate or necessary.
SECTION 14. LOANS, INSTALLMENT PAYMENTS AND LOAN GUARANTEES
To assist a Holder (including a Holder who is an officer or director of
the Company) in acquiring shares of Common Stock pursuant to an Award granted
under the Plan, the Plan Administrator, in its sole discretion, may authorize,
either at the Grant Date or at any time before the acquisition of Common Stock
pursuant to the Award, (a) the extension of a loan to the Holder
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by the Company, (b) the payment by the Holder of the purchase price, if any, of
the Common Stock in installments, or (c) the guarantee by the Company of a loan
obtained by the grantee from a third party. The terms of any loans, installment
payments or loan guarantees, including the interest rate and terms of and
security for repayment, will be subject to the Plan Administrator's discretion;
provided, however, that repayment of any Company loan to the Holder shall be
secured by delivery of a full-recourse promissory note for the loan amount
executed by the Holder, together with any other form of security determined by
the Plan Administrator. The maximum credit available is the purchase price, if
any, of the Common Stock acquired, plus the maximum federal and state income and
employment tax liability that may be incurred in connection with the
acquisition.
SECTION 15. ASSIGNABILITY
No Option, Stock Appreciation Right, Performance Award, Other
Stock-Based Award or Dividend Equivalent Right granted under the Plan may be
assigned, pledged or transferred by the Holder other than by will or by the laws
of descent and distribution, and during the Holder's lifetime, such Awards may
be exercised only by the Holder. Notwithstanding the foregoing, and to the
extent permitted by Section 422 of the Code, the Plan Administrator, in its sole
discretion, may permit such assignment, transfer and exercisability and may
permit a Holder of such Awards to designate a beneficiary who may exercise the
Award or receive compensation under the Award after the Holder's death;
provided, however, that any Award so assigned or transferred shall be subject to
all the same terms and conditions contained in the instrument evidencing the
Award.
SECTION 16. ADJUSTMENTS
16.1 ADJUSTMENT OF SHARES
In the event that, at any time or from time to time, a stock dividend,
stock split, spin-off, combination or exchange of shares, recapitalization,
merger, consolidation, distribution to shareholders other than a normal cash
dividend, or other change in the Company's corporate or capital structure
results in (a) the outstanding shares, or any securities exchanged therefor or
received in their place, being exchanged for a different number or class of
securities of the Company or of any other corporation or (b) new, different or
additional securities of the Company or of any other corporation being received
by the holders of shares of Common Stock of the Company, then the Plan
Administrator, in its sole discretion, shall make such equitable adjustments as
it shall deem appropriate in the circumstances in (i) the maximum number and
class of securities subject to the Plan as set forth in Section 4.1, (ii) the
maximum number and class of securities that may be made subject to Awards to any
individual Participant as set forth in Section 4.2, and (iii) the number and
class of securities that are subject to any outstanding Award and the per share
price of such securities, without any change in the aggregate price to be paid
therefor. The determination by the Plan Administrator as to the terms of any of
the foregoing adjustments shall be conclusive and binding.
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16.2 CORPORATE TRANSACTION
Upon a merger (other than a merger of the Company in which the holders
of shares of Common Stock immediately prior to the merger have the same
proportionate ownership of shares of Common Stock in the surviving corporation
immediately after the merger), consolidation, acquisition of property or stock,
separation, reorganization (other than a mere reincorporation or the creation of
a holding company) or liquidation of the Company, as a result of which the
shareholders of the Company receive cash, stock or other property in exchange
for or in connection with their shares of Common Stock, any Option, Stock
Appreciation Right or restricted Stock Award granted hereunder shall terminate,
but the Holder shall have the right immediately prior to any such merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation to exercise such Holder's Award in whole or in part whether or not
the vesting requirements set forth in the Award agreement have been satisfied;
provided, that such acceleration will not occur if it would render unavailable
"pooling of interests" accounting treatment for any reorganization, merger or
consolidation of the Company.
If the shareholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their shares of Common Stock in
any transaction involving a merger (other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation
or reorganization (other than a mere reincorporation or the creation of a
holding company), all Options, Stock Appreciation Rights and Restricted Stock
Awards granted hereunder shall be converted into Awards for shares of Exchange
Stock unless the Company and the corporation issuing the Exchange Stock, in
their sole discretion, determine that any or all such Awards granted hereunder
shall not be converted into Awards for shares of Exchange Stock but instead
shall terminate in accordance with the provisions set forth above. The amount
and price of converted Awards shall be determined by adjusting the amount and
price of the Awards granted hereunder in the same proportion as used for
determining the number of shares of Exchange Stock the holders of the shares of
Common Stock receive in such merger, consolidation, acquisition of property or
stock, separation or reorganization. The converted Awards shall be fully vested
whether or not the vesting requirements set forth in the Award agreement have
been satisfied; provided, that such acceleration will not occur if it would
render unavailable "pooling of interests" accounting treatment for any
reorganization, merger or consolidation of the Company.
16.3 FURTHER ADJUSTMENT OF AWARDS
Subject to the preceding Section 16.2, and subject to the limitations
set forth in Section 11, the Plan Administrator shall have the discretion,
exercisable at any time before a sale, merger, consolidation, reorganization,
liquidation or change in control of the Company, as defined by the Plan
Administrator, to take such further action as it determines to be necessary or
advisable, and fair and equitable to Participants, with respect to Awards. Such
authorized action may include (but shall not be limited to) establishing,
amending or waiving the type, terms, conditions or duration of, or restrictions
on, Awards so as to provide for earlier, later, extended or additional time for
exercise, payment or settlement or lifting restrictions, differing methods for
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calculating payments or settlements, alternate forms and amounts of payments and
settlements and other modifications, and the Plan Administrator may take such
actions with respect to all Participants, to certain categories of Participants
or only to individual Participants. The Plan Administrator may take such actions
before or after granting Awards to which the action relates and before or after
any public announcement with respect to such sale, merger, consolidation,
reorganization, liquidation or change in control that is the reason for such
action.
16.4 LIMITATIONS
The grant of Awards will in no way affect the Company's right to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
16.5 FRACTIONAL SHARES
In the event of any adjustment in the number of shares covered by any
Option, any fractional shares resulting from such adjustment shall be
disregarded and each such Option shall cover only the number of full shares
resulting from such adjustment.
SECTION 17. WITHHOLDING
The Company may require the Holder to pay to the Company the amount of
any withholding taxes that the Company is required to withhold with respect to
the grant, exercise, payment or settlement of any Award. In such instances, the
Plan Administrator may, in its discretion and subject to the Plan and applicable
law, permit the Holder to satisfy withholding obligations, in whole or in part,
by paying cash, by electing to have the Company withhold shares of Common Stock
or by transferring shares of Common Stock to the Company, in such amounts as are
equivalent to the Fair Market Value of the withholding obligation. The Company
shall have the right to withhold from any Award or any shares of Common Stock
issuable pursuant to an Award or from any cash amounts otherwise due or to
become due from the Company to the Participant an amount equal to such taxes.
The Company may also deduct from any Award any other amounts due from the
Participant to the Company or a Subsidiary.
SECTION 18. AMENDMENT AND TERMINATION OF PLAN
18.1 AMENDMENT OF PLAN
The Plan may be amended by the shareholders of the Company. The Board
may also amend the Plan in such respects as it shall deem advisable; however, to
the extent required for compliance with Section 422 of the Code or any
applicable law or regulation, shareholder approval will be required for any
amendment that will (a) increase the aggregate number of shares as to which
Incentive Stock Options may be granted, (b) modify the employees or class of
employees eligible to receive Incentive Stock Options, or (c) otherwise require
shareholder approval under any applicable law or regulation. Amendments made to
the Plan which would constitute "modifications" to Incentive Stock Options
outstanding on the date of such Amendments shall not be applicable to such
outstanding Incentive Stock Options but shall have prospective effect only.
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18.2 TERMINATION OF PLAN
The Company's shareholders or the Board may suspend or terminate the
Plan at any time. The Plan will have no fixed expiration date; provided,
however, that no Incentive Stock Options may be granted more than 10 years after
the earlier of the Plan's adoption by the Board or approval by the shareholders.
18.3 CONSENT OF HOLDER
The amendment or termination of the Plan shall not, without the consent
of the Holder of any Award under the Plan, alter or impair any rights or
obligations under any Award theretofore granted under the Plan.
SECTION 19. GENERAL
19.1 AWARD AGREEMENTS
Awards granted under the Plan shall be evidenced by a written agreement
which shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and which are not inconsistent with the
Plan.
19.2 CONTINUED EMPLOYMENT OR SERVICES; RIGHTS IN AWARDS
None of the Plan, participation in the Plan as a Participant or any
action of the Plan Administrator taken under the Plan shall be construed as
giving any Participant or employee of the Company any right to be retained in
the employ of the Company or limit the Company's right to terminate the
employment or services of the Participant.
19.3 REGISTRATION; CERTIFICATES FOR SHARES
The Company shall be under no obligation to any Participant to register
for offering or resale or to qualify for exemption under the Securities Act, or
to register or qualify under state securities laws, any shares of Common Stock,
security or interest in a security paid or issued under, or created by, the
Plan, or to continue in effect any such registrations or qualifications if made.
The Company may issue certificates for shares with such legends and subject to
such restrictions on transfer and stop-transfer instructions as counsel for the
Company deems necessary or desirable for compliance by the Company with federal
and state securities laws.
Inability of the Company to obtain, from any regulatory body having
jurisdiction, the authority deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any shares hereunder or the unavailability of an
exemption from registration for the issuance and sale of any shares hereunder
shall relieve the Company of any liability in respect of the nonissuance or sale
of such shares as to which such requisite authority shall not have been
obtained.
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19.4 NO RIGHTS AS A SHAREHOLDER
No Option, Stock Appreciation Right, Performance Award or Other
Stock-Based Award shall entitle the Holder to any cash dividend (except to the
extent provided in an Award of Dividend Equivalent Rights), voting or other
right of a shareholder unless and until the date of issuance under the Plan of
the shares that are the subject of such Award, free of all applicable
restrictions.
19.5 COMPLIANCE WITH LAWS AND REGULATIONS
It is the Company's intention that, if and so long as any of the
Company's equity securities are registered pursuant to Section 12(b) or 12(g) of
the Exchange Act, the Plan shall comply in all respects with Rule 16b-3 under
the Exchange Act and, if any Plan provision is later found not to be in
compliance with such Rule 16b-3, the provision shall be deemed null and void,
and in all events the Plan shall be construed in favor of its meeting the
requirements of Rule 16b-3. Notwithstanding anything in the Plan to the
contrary, the Board, in its sole discretion, may bifurcate the Plan so as to
restrict, limit or condition the use of any provision of the Plan to
Participants who are officers or directors subject to Section 16 of the Exchange
Act without so restricting, limiting or conditioning the Plan with respect to
other Participants. Additionally, in interpreting and applying the provisions of
the Plan, any Option granted as an Incentive Stock Option pursuant to the Plan
shall, to the extent permitted by law, be construed as an "incentive stock
option" within the meaning of Section 422 of the Code.
19.6 NO TRUST OR FUND
The Plan is intended to constitute an "unfunded" plan. Nothing
contained herein shall require the Company to segregate any monies or other
property, or shares of Common Stock, or to create any trusts, or to make any
special deposits for any immediate or deferred amounts payable to any
Participant, and no Participant shall have any rights that are greater than
those of a general unsecured creditor of the Company.
19.7 SEVERABILITY
If any provision of the Plan or any Award is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Award under any law deemed applicable by the Plan
Administrator, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without, in
the Plan Administrator's determination, materially altering the intent of the
Plan or the Award, such provision shall be stricken as to such jurisdiction,
person or Award, and the remainder of the Plan and any such Award shall remain
in full force and effect.
SECTION 20. EFFECTIVE DATE
The Plan's effective date is the date on which it is adopted by the
Board, so long as it is approved by the Company's shareholders at any time
within 12 months of such adoption or, if earlier, and to the extent required for
compliance with Rule 16b-3 under the Exchange Act, at the next annual meeting of
the Company's shareholders after adoption of the Plan by the Board.
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