<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Royal Precision, Inc.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
ROYAL PRECISION, INC.
15170 NORTH HAYDEN ROAD
SUITE 1
SCOTTSDALE, AZ 85260
1998 ANNUAL MEETING OF STOCKHOLDERS
September 9, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of Royal Precision, Inc. which will be held at 9:30 a.m., Local
Time, on October 1, 1998 at 15170 North Hayden Road, Suite 1, Scottsdale,
Arizona. The matters on the meeting agenda are described in the Notice of 1998
Annual Meeting of Stockholders and Proxy Statement which accompany this letter.
We hope you will be able to attend the meeting, but whatever your
plans, we ask that you please complete, execute, and date the enclosed proxy
card and return it in the envelope provided so that your shares will be
represented at the meeting.
Very truly yours,
Raymond J. Minella, Chairman of the Board Thomas A. Schneider, President
<PAGE> 3
ROYAL PRECISION, INC.
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 1, 1998
TO THE STOCKHOLDERS OF
ROYAL PRECISION, INC.
The Annual Meeting of the Stockholders of Royal Precision, Inc., a
Delaware corporation (the "Company"), will be held at 15170 North Hayden Road,
Suite 1, Scottsdale, Arizona, on October 1, 1998 at 9:30 a.m., Local Time, for
the following purposes:
1. To elect three directors, each to serve for a term of three years or
until their successors are duly elected;
2. To consider and vote upon a proposal to approve the Royal Precision,
Inc. Stock Option Plan as further described in the Proxy Statement
attached hereto;
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on August 21,
1998 as the record date for the determination of stockholders entitled to notice
of and to vote at the Annual Meeting and any adjournment thereof. A list of
stockholders will be available for examination by any stockholder at the Annual
Meeting and for a period of 10 days before the Annual Meeting, at the Company's
office, 15170 North Hayden Road, Suite 1, Scottsdale, Arizona.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN,
DATE, AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED.
By Order of the Board of Directors
Raymond J. Minella, Chairman of the Board Thomas A. Schneider, President
Scottsdale, Arizona
September 9, 1998
<PAGE> 4
ROYAL PRECISION, INC.
----------------------------------
1998 ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 1, 1998
----------------------------------
PROXY STATEMENT
DATED SEPTEMBER 9, 1998
----------------------------------
GENERAL INFORMATION
Solicitation. This Proxy Statement is furnished to the stockholders of
Royal Precision, Inc., a Delaware corporation (the "Company"), in connection
with the solicitation by the Board of Directors of the Company (the "Board of
Directors") of proxies to be voted at the 1998 Annual Meeting of Stockholders of
the Company (the "Annual Meeting") to be held on October 1, 1998 and any
adjournment thereof. This Proxy Statement and the accompanying proxy card are
first being mailed to stockholders on or about September 9, 1998.
Voting Rights. Stockholders of record at the close of business on
August 21, 1998 are entitled to notice of and to vote at the Annual Meeting. As
of that date, there were 5,601,697 shares of Common Stock of the Company, par
value $.001 per share ("Common Stock"), issued and outstanding. Each stockholder
of record on August 21, 1998 is entitled to one vote per share held with respect
to all matters which may be brought before the Annual Meeting.
Authorization. All shares represented by properly executed proxies
received by the Company pursuant to this solicitation will be voted in
accordance with the stockholder's directions specified on the proxy card. If no
directions have been specified by marking the appropriate squares on the
accompanying proxy card, the shares represented by such proxy will be voted in
accordance with the recommendations of the Board of Directors, which are (1) FOR
the election of Lawrence Bain, Ronald L. Chalmers and Leslie Reesing, as
directors of the Company; and (2) FOR the approval of the Royal Precision, Inc.
Stock Option Plan (the "Plan"). The proxy will also be voted at the discretion
of the persons acting under the proxy to transact such other business as may
properly come before the Annual Meeting and any adjournment thereof.
Revocation. Any stockholder returning the accompanying proxy has the
power to revoke it at any time before its exercise by giving notice of
revocation to the Company, by duly executing and delivering to the Company a
proxy card bearing a later date, or by voting in person at the Annual Meeting.
Stockholder Agreement. As of the record date for the Annual Meeting,
the Edwards/Johnston Group (see "SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS; note (o)"), held approximately 74%
of the Common Stock of the Company and corresponding voting power which will be
sufficient to elect all of the nominees as directors. The provisions of the
Stockholder Agreement do not pertain to any other issue to be voted on by
stockholders.
Tabulation. Under Section 216 of the General Corporation Law of the
State of Delaware ("GCL") and the bylaws of the Company, a quorum must be
present at the Annual Meeting in order for any valid action, including the
election of directors, approval of the Plan and voting on the other matters
presented to the meeting, other than adjournment, to be taken thereat. Section
216 of the GCL and the bylaws of the Company provide that a quorum consists of a
majority of the shares entitled to vote at the Annual Meeting present in person
or represented by proxy. Shares represented by signed proxies that are returned
to the Company will be counted toward the quorum in all matters even though they
are marked as "Abstain," "Against" or "Withhold Authority" on one or more or all
matters or they are not marked at all (see "Authorization"). Broker/dealers, who
hold their customers' shares in street name,
<PAGE> 5
may, under the applicable rules of the exchanges and other self-regulatory
organizations of which such broker/dealers are members, sign and submit proxies
for such shares and may vote such shares on routine matters, which, under such
rules, typically include the election of directors, but broker/dealers may not
vote such shares on other matters, which typically include the approval of stock
compensation plans (such as the Plan which is on the agenda of the Annual
Meeting), without specific instructions from the customer who owns such shares.
Proxies signed and submitted by broker/dealers which have not been voted on
certain matters as described in the previous sentence are referred to as broker
non-votes. Such proxies count toward the establishment of a quorum.
Under Section 216 of the GCL and the bylaws of the Company, directors
are elected by a plurality of the votes for the respective nominees. Therefore,
proxies that are marked "Withhold Authority" and broker non-votes, if any, will
not affect the election of directors.
Under Section 162(m) of the Internal Revenue Code of 1986 and the
regulations thereunder (the "Code"), the Plan is deemed to be approved by the
stockholders if a majority of the votes cast on the issue are cast in favor of
approval. For the purpose of Section 162(m), a proxy marked "Abstain" has the
same effect as a vote against approval but a broker non-vote is disregarded in
determining the number of shares voted for approval and in determining the total
number of shares as to which the majority is determined in such matter.
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
At the Annual Meeting, the three nominees to the Board of Directors
receiving the highest number of votes will be elected to serve for terms of
three years or until their successors are duly elected. See "GENERAL INFORMATION
- - Tabulation." The Company has no reason to believe that any of the nominees
named below will not stand for election or serve as a director. In the event any
person nominated fails to stand for election, the proxies will be voted for the
election of such other person as designated by the persons named in the proxy.
BUSINESS EXPERIENCE
Nominees of the Board of Directors for Election at the 1998 Annual
Meeting
Lawrence Bain, age 48, has been a director of the Company since April
1998. Since June 1995, Mr. Bain has been a Senior Vice President/Managing
Director of Everen Securities, investments. Prior thereto, for more than five
years, Mr. Bain was a Senior Vice President with Dean Witter Reynolds, a
brokerage firm.
Ronald L. Chalmers, age 52, served as the Director of Sales/Marketing
of Brunswick Corporation from 1992 to May 1996. From May 1996 until October
1997, he served as President of FM Precision Golf Manufacturing Corp. He has
served as Executive Vice President - Administration/Manufacturing of the Company
since October 1997 and has been a director of the Company since June 1996.
Leslie Reesing, age 42, was elected as a director in August 1998 to
fill a vacancy on the Board. Ms. Reesing was Senior Systems Project Manager for
Charles Schwab & Co., a stock broker, during 1992 and 1993, Vice President and
Manager-Data Processing with First Interstate Bank from 1994 to 1996 and is
currently a high school teacher with the Maricopa Unified School District in
Phoenix, Arizona. Ms. Reesing is the daughter of Richard P. Johnston and the
sister of David E. Johnston.
Directors Whose Terms Continue until the 1999 Annual Meeting
David E. Johnston, age 43, served as Vice President of the Company from
its organization in 1996 until October 1997, and Executive Vice President, Chief
Operating Officer from October 1997 until August 1998, at which time he was
appointed Executive Vice President, Special Projects. Mr. Johnston has been a
director of the Company since June 1996. Mr. Johnston was Sales Manager of
Buckhorn Rubber Products, Inc., a molded rubber products manufacturer, from 1989
to 1996. Mr. Johnston is the son of Richard P. Johnston and the brother of
Leslie Reesing.
2
<PAGE> 6
Kenneth J. Warren, age 55, has been Secretary of the Company and a
director since its organization in 1996. Mr. Warren has been a practicing
attorney in Columbus, Ohio for over 20 years. Before 1996, he was a partner in
Schwartz, Kelm, Warren & Ramirez. During 1996, he was of counsel to its
successor, Schwartz, Warren & Ramirez L.L.C. In January 1997, he opened his own
office for the practice of law. Mr. Warren is also Secretary of PH Group Inc., a
manufacturer of presses, and Cable Link, Inc., a cable television equipment
refurbisher.
Robert G.J. Burg, II, age 41, joined Royal Grip, Inc. in January 1992
as the Regional Sales Manager for the Western Sales Region, became its Senior
Vice President, Marketing, Sales, and Tour Relations in January 1992, and was
President from February 1995 to October 1997. From October 1997 to December
1997, he served as a director and Executive Vice President - Sales/Marketing of
the Company. Since February 1998, Mr. Burg has been President of Danny Edwards
Profile Sports, which conducts corporate golf schools for executives throughout
the country. Mr. Burg was re-elected as a director of the Company in June 1998
to fill a vacancy on the Board.
Directors Whose Terms Continue until the 2000 Annual Meeting
Danny Edwards, age 46, has been a director and Vice Chairman of the
Board of the Company since August 1997. Mr. Edwards was Chairman of the Board
and chief executive officer of Royal Grip, Inc. from its inception in 1988 until
1997 and served as President from 1988 to 1994. Mr. Edwards has played on the
Professional Golf Association Tour since 1975 and has won five tournaments. Mr.
Edwards is a principal of Danny Edwards Profile Sports.
Richard P. Johnston, age 67, has been Chairman of the Board of
Merbanco, Inc. ("Merbanco"), a merchant banking company (see "CERTAIN
TRANSACTIONS"), since 1991, served as Chairman of the Board of Republic Realty
Mortgage Co., a commercial mortgage company, from 1992 to 1995, and was Managing
Director of Hamilton Robinson & Co., an investment advisory company from 1991 to
1994. Mr. Johnston has been a director of the Company since its organization in
1996 and served as Chairman of the Board of the Company from May 1996 to October
1997. Mr. Johnston is a founder and a director of AGCO Corporation (AG: NYSE), a
farm implement manufacturer and distributor, and a director of Myers Industries,
Inc. (MYE: AMEX), a plastic and rubber products manufacturer. Richard P.
Johnston is the father of Leslie Reesing and David E. Johnston.
Raymond J. Minella, age 48, has been a director of the Company since
its organization in 1996 and Chairman of the Board since August 1998. Since
1990, Mr. Minella has been an indirect managing partner of Berenson Minella &
Company, L.P., an investment and merchant banking firm (see "CERTAIN
TRANSACTIONS"). Mr. Minella is a director of NEXClaim, Inc., an insurance
recovery business, and a member of the board of National Network of Estate
Planning Attorneys, located in Denver, Colorado.
EXECUTIVE OFFICERS
The principal occupation of each other executive officer of the Company
for the past five years is as follows:
Thomas A. Schneider, age 38, is a certified public accountant and was
Vice President - Finance and Secretary of Royal Grip, Inc. from January 1996 to
October, 1997 and served as Vice President, Chief Financial Officer of the
Company from October 1997 to August 1998, when he was elected to serve as
President, Chief Operating Officer and Chief Financial Officer. Prior to 1996,
Mr. Schneider served for five years as the controller of Karsten Manufacturing
Corp., the maker of Ping golf equipment.
Anthony Montgomery, age 35, was President of Montgomery & Assoc. from
1993 to 1995 and Vice President of Unique Impressions from 1995 to 1996,
companies engaged in manufacturing and marketing of golf products, served as
Director of Sales of FM Precision Golf Manufacturing Corp., the Company's shaft
manufacturing subsidiary, in 1996 and 1997, and has been Vice President, Sales
of the Company since April 1998.
Kevin Neill, age 29, has been Corporate Controller of the Company since
June 1998. From July 1991 to October 1995, Mr. Neill was employed by Arthur
Andersen LLP, an accounting firm, and from October 1995 to June 1998, he was
Assistant Controller of SunCor Development, a real estate development company.
3
<PAGE> 7
William B. Faragher, age 46, was Controller, chief accounting officer
of the Company from October 1997 to June 1998 when he was appointed Division
Controller, chief accounting officer. Prior to joining the Company in June 1996,
Mr. Faragher was Controller of Brunswick Golf from January 1991 to May 1996.
BOARD OF DIRECTORS MEETINGS
The Board of Directors held six meetings in fiscal 1998 and each of the
directors attended at least 75% of the aggregate number of meetings of the Board
of Directors (held during the period for which he was a director) and committees
(if any) on which he served.
COMMITTEES
The Company has a standing Audit Committee and a standing Personnel and
Compensation Committee. The Personnel and Compensation Committee recommends
nominees for director.
The Audit Committee (currently comprised of Raymond Minella, David E.
Johnston and Leslie Reesing), recommends the firm to be employed by the Company
as its independent auditors; consults with the firm so chosen to be the
independent auditors with regard to the plan of audit; reviews, in consultation
with the independent auditors, their report of audit, or proposed report of
audit, and the accompanying management letter, if any, and consults with the
independent auditors with regard to the adequacy of the internal accounting
controls. The Audit Committee held one meeting in fiscal 1998.
The Personnel and Compensation Committee (currently comprised of
Kenneth J. Warren, Chairman, Raymond Minella, Lawrence Bain and Danny Edwards)
reports on the selection of the principal officers, including the chairman,
president and other executive officers; and the fixing of their salaries;
determines the amount of salary and bonus paid to principal officers of the
Company and its subsidiaries; administers certain employee benefit plans and
identifies candidates and recommends to the Board of Directors nominees for
membership on the Board of Directors. The Personnel and Compensation Committee's
current policy is that only the Board has the power to approve nominees for
directors, recommendations for nominees can come only through the Personnel and
Compensation Committee, and the Personnel and Compensation Committee will
consider nominees recommended by stockholders, management, board members and
others (subject, however, to the Stockholder Agreement described under note (o)
of "SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS, DIRECTORS, NOMINEES AND
EXECUTIVE OFFICERS"). The Personnel and Compensation Committee held one meeting
in fiscal 1998.
4
<PAGE> 8
ROYAL PRECISION, INC. STOCK OPTION PLAN
PROPOSAL
The Plan was adopted by the Board of Directors on October 5, 1997. The
Board has proposed that the Company's stockholders approve the Plan.
PURPOSE, DURATION, AMENDMENT AND TERMINATION
The Plan is designed to attract and retain capable employees, officers,
directors, and consultants and to provide them with long term incentives to
continue their services to the Company, to maximize the value of the Company to
its stockholders and to acquire a continuing ownership interest in the Company.
No award of a stock option (an "Option") may be granted under the Plan more than
10 years after October 5, 1997. The Board of Directors may at any time terminate
the Plan, or make such amendment to the Plan as it may deem advisable. However,
no amendment will be effective without the approval of the stockholders of the
Company if it would: authorize the grant of Options that may be exercised more
than 10 years after the date of grant or that have an exercise price which is
less than the fair market value of a share on the date of grant, or materially
increase the number of shares of Common Stock which may be issued under the
Plan. No amendment or termination of the Plan may materially impair the rights
of a person to whom an Option was granted (a "Grantee"), under any Option made
before the adoption of such amendment or termination by the Board of Directors,
without the written consent of such Grantee.
ADMINISTRATION
The Plan will be administered by a committee of the Board of Directors
consisting of two or more directors, each of whom is a "non-employee director"
as described in paragraph (b)(3) of Rule 16b-3 and is an "outside director" as
described in Code Section 162(m) and the regulations thereunder (the
"Committee"). Unless the Board of Directors designates another of its committees
to administer the Plan, the Plan will be administered by a committee consisting
of those members of the Personnel and Compensation Committee who are qualified,
but, if the Personnel and Compensation Committee is abolished or its membership
does not contain two persons who are qualified, the Board of Directors will
either reconstitute the Personnel and Compensation Committee or create another
committee that complies with these requirements to administer the Plan. Subject
to the express provisions of the Plan, the Committee has the authority, in its
discretion, to: determine the participants, grant Options and determine their
timing, pricing and amount; define, prescribe, amend and rescind rules,
regulations, procedures, terms and conditions relating to the Plan; make all
other determinations necessary or advisable for administering the Plan,
including, but not limited to, interpreting the Plan, correcting defects,
reconciling inconsistencies and resolving ambiguities; and review and resolve
all claims.
COMMON STOCK
The aggregate number of shares of Common Stock in respect of which
Options may be granted under the Plan may not exceed 750,000. This number and
the terms of any Option will be adjusted proportionately if the shares of Common
Stock are split, combined or altered by a share dividend or a merger or other
corporate event. If any Option granted under the Plan is canceled, terminates or
expires for any reason without having been exercised in full, the shares of
Common Stock related to the unexercised portion of the Option may be used again.
Except as otherwise determined by the Board of Directors, the shares of Common
Stock issued under the Plan will be authorized but unissued shares. However,
shares which are to be delivered under the Plan may be obtained by the Company
from its treasury, by purchases on the open market or from private sources. The
proceeds of the exercise of any Option will be general corporate funds of the
Company.
EMPLOYEES' AND CONSULTANTS' STOCK OPTIONS
Only employees and consultants who are not members of the Committee
are eligible to receive Options under this provision of the Plan. On June 30,
1998, the Company had 389 full-time employees and two consultants. The Committee
will determine which eligible employees or consultants will be granted Options,
the number of shares of Common Stock for which the Options may be exercised,
whether any Option is an incentive stock option or a non-
5
<PAGE> 9
qualified option, the times when they will receive them and the terms and
conditions of individual Option grants (which need not be identical); provided,
however, that the maximum number of shares of Common Stock which first become
exercisable under all Options granted to any one employee, shall not exceed
250,000 shares during any fiscal year of the Company. The Committee will
determine the exercise price of each Option at the time that it is granted, but
in no event will the exercise price of an Option be less than the fair market
value of a share of Common Stock on the date of grant, which is the per share
closing price on the Nasdaq National Market System on the day prior to the grant
date. On September 1, 1998, the closing price of a share of Common Stock on the
Nasdaq National Market System was $3-7/8.
The Committee will determine the times when an Option vests and the
term during which an Option is exercisable at the time that it is granted, but
no Option will be exercisable after 10 years from the date of grant. If no
express determination is made by the Committee, each Option will vest and first
become exercisable as to 25% of the shares of Common Stock originally subject to
the Option on each of the first four anniversaries of the date of grant provided
the Grantee thereof has been an employee or a consultant, as the case may be,
continuously during the time beginning on the date of grant and ending on the
date when such portion of the Option first becomes exercisable. If no express
determination is made by the Committee, each Option will lapse and cease to be
exercisable upon the earliest of the expiration of 10 years from the date of
grant, nine months after the Grantee ceases to be an employee or consultant
because of his death or disability (six months for incentive stock options, see
below), three months after the Grantee's employment with or services to the
Company are terminated by the Company without cause, or immediately upon
termination of the Grantee's employment with or services to the Company for
cause or by the Grantee's resignation. The Committee may, in its sole
discretion, accelerate the time at which any Options become exercisable or waive
any provisions of the Plan relating to the manner of payment or procedures for
the exercise of any Option. Any such acceleration may be made effective with
respect to one or more or all Grantees, with respect to some or all of the
shares subject to an Option of any Grantee or for a period of time ending at or
before the expiration date of any Option.
If the Company merges or consolidates with or sells substantially all
of its assets to a person that was not one of its affiliates before such
transaction, or any such unaffiliated person or corporation has publicly
announced a tender offer to purchase more than 20% of the outstanding voting
securities of the Company, the Committee, in its discretion, may provide that,
for a period of time, not extending beyond the period for which the Option was
originally granted, after the execution of the acquisition agreement in final
definitive form, the announcement of such offer or the mailing of a proxy
statement or prospectus concerning such transaction, notwithstanding the
provisions of any Option, any Option may be exercised in whole or in part during
such time period or that upon the termination of such time period any such
Option shall expire and be null and void. The Committee may provide that such
action shall be conditioned on the completion of the transaction that occasioned
it, and that if such transaction is not timely completed, any exercise or
vesting of any Option shall be unwound.
Only eligible employees may be granted incentive stock options under
the Plan. The Committee will determine whether an Option is an incentive stock
option or a nonqualified option (as such terms are defined in the Code, see
"Taxation") at the time that it is granted, and if no express determination is
made by the Committee, all Options shall be nonqualified options. The aggregate
fair market value of the shares of Common Stock, determined as of the time the
Option is granted, which first become exercisable under all incentive stock
options granted to any one employee may not exceed $100,000 during any calendar
year and if that limit would be exceeded by the terms of any incentive stock
option, the exercisability of a portion of such Option will be deferred. No 10%
stockholder will be granted an incentive stock option, unless at the time such
incentive stock option is granted, the exercise price thereof is at least 110%
of the fair market value of a share on the date of grant and the Option is not
exercisable after five years from the date of grant.
The Committee may, in its sole discretion, and upon such terms and
conditions as it shall determine at or after the date of grant, permit the
exercise price of an Option to be paid in cash, by the tender to the Company of
shares of Common Stock owned by the Grantee or by a combination thereof. If the
Committee does not make such determination, the exercise price must be paid in
cash, by certified or cashier's check, wire transfer or reduction of a debt of
the Company to the Grantee. Shares of Common Stock may not be delivered to the
Company as payment for the exercise of an Option, if such shares have been owned
by the Grantee (together with his decedent or testator) for less than six months
or if such shares were acquired upon the exercise of an incentive stock option
and their disposition would be taxable.
6
<PAGE> 10
DIRECTORS' OPTIONS
Only directors who are not employees of the Company are eligible to
receive Options under this provision of the Plan. At the Annual Meeting, seven
directors would be eligible under this standard. On the date of each annual
meeting of stockholders, an Option will automatically be granted to each
eligible director who attended at least 75% of the total number of meetings of
the Board of Directors (and committees thereof of which he is a member) during
the most recently ended fiscal year of the Company. The number of shares subject
to each Option shall be determined by a resolution adopted by the Board of
Directors on or before the meeting date. Any such resolution shall continue in
force for the next meeting date, unless it is amended or repealed, the meeting
date is more than 10 years after the Board adopted the Plan, or there are not a
sufficient number of shares remaining available under the Plan. This provision
of the Plan will not be operative until such time as such a resolution is
adopted. At such time as such a resolution is adopted, the Plan provides that
the exercise price of such Options will be the fair market value of a share of
Common Stock on the date of grant. Each Option will vest and first become
exercisable as to 25% of the shares originally subject to the Option on the date
of each annual meeting of stockholders which is held more than six months after
the date the Option was granted if the Grantee is a director at the time of the
adjournment of the meeting and further provided that no portion of an Option
shall vest and become exercisable after the Grantee has ceased to be a director,
regardless of the reason for such cessation; and any portion of an Option that
has vested and become exercisable will lapse and cease to be exercisable upon
the earliest of 10 years from the date of grant, nine months after the Grantee
ceases to be a director because of his death or disability, immediately upon
resignation by the Grantee as a director or three months after the Grantee
ceases to be a director for any reason other than his death, disability or
resignation. Notwithstanding the foregoing, if certain events occur which may
change control of the Company, the Committee may, in its discretion, cause any
outstanding Options to be exercisable (see "Employees' and Consultants' Stock
Options" above).
PROVISIONS APPLICABLE TO ALL TYPES OF OPTIONS
The Committee may permit the voluntary surrender of all or a portion of
any Option to be conditioned upon the granting to the participant of a new
Option for the same or a different number of shares as the Option surrendered,
or may require such voluntary surrender as a condition precedent to a grant of a
new Option to such participant. Subject to the other provisions of the Plan,
such new Option shall be exercisable at the price, during the period and on such
other terms and conditions as are specified by the Committee at the time the new
Option is granted. The Committee may grant Options having terms and conditions
which vary from those specified in the Plan if such Options are granted in
substitution for, or in connection with the assumption of, existing options
granted by another business entity and assumed or otherwise agreed to be
provided for by the Company pursuant to a transaction involving a merger or
consolidation of or acquisition of substantially all of the assets or stock of
another business entity that is not a subsidiary of the Company prior to such
acquisition. The Committee, subject to the written consent of the Grantee where
the action impairs or adversely alters the rights of the Grantee, has the right
at any time after the date of grant of any Option to modify its terms.
DISABILITY
If a Grantee who is an employee with or consultant to the Company is
absent from work with the Company because of a physical or mental disability,
such Grantee will not be considered to have ended his employment or consulting
relationship with the Company for purposes of the Plan, while he has that
disability, unless he resigns or the Committee decides otherwise. If a Grantee,
who is a director, is absent from meetings of the Board of Directors because of
a physical or mental disability such Grantee will not be considered to have
ended his service with the Board of Directors, for purposes of the Plan, while
he has that disability, unless he resigns or is not re-elected by the
stockholders.
TRANSFER RESTRICTIONS
No Option or other benefit under the Plan may be sold, pledged or
otherwise transferred other than by will or the laws of descent and
distribution; and no Option may be exercised during the life of the participant
to whom it was granted except by such participant.
7
<PAGE> 11
TAXATION
GRANTEES SHOULD CONSULT THEIR INDIVIDUAL TAX ADVISERS BEFORE EXERCISING ANY
OPTION OR DISPOSING OF ANY SHARES ACQUIRED ON THE EXERCISE OF AN OPTION
Grantees are not taxed on the grant or exercise of an incentive stock
option. The difference between the exercise price of an incentive stock option
and the fair market value of a share of Common Stock received upon the exercise
of the incentive stock option may be subject to the federal alternative minimum
tax. If a Grantee exercises an incentive stock option and disposes of any of the
shares of Common Stock received by such Grantee as a result of such exercise
within two years from the date of grant or within one year after the transfer of
such shares to such Grantee, the Company will receive a tax deduction and the
Grantee will be taxed, as ordinary income, on the lesser of the gain on sale or
the difference between the exercise price and the fair market value of a share
at the time of exercise; and the Grantee must pay or provide for the withholding
taxes on such ordinary income. The Grantee will also have a capital gain to the
extent that the sale price exceeds the fair market value on the date of
exercise. If the shares are not sold by the Grantee before the end of those
periods, the Grantee will have a capital gain or capital loss upon sale of the
shares to the extent that the sale price differs from the exercise price. No tax
effect will result to the Company by reason of the grant or exercise of
incentive stock options, or upon the disposition of shares after expiration of
two years from the date of grant or one year from the date of exercise.
Nonqualified Options are not taxed upon grant. The Grantee is taxed, as
ordinary income, on the exercise of such an Option. The exercise of a
nonqualified Option requires the Grantee to realize ordinary income to the
extent that the fair market value on the date of exercise exceeds the exercise
price. The Grantee's basis for determining capital gain or capital loss upon
sale of the shares is the higher of their fair market value on the date of
exercise and the exercise price. The Company is entitled to a deduction equal to
the ordinary income realized by the Grantee upon the exercise of nonqualified
Options.
The Plan is intended to be a performance based compensation plan that
will comply with the requirements of Code Section 162(m) and the regulations
thereunder. If the Plan complies with such law and regulations and the Plan
continues to be in compliance, amounts deductible by the Company under the Plan
will not be limited by the cap on the deductibility of compensation paid to
certain executive officers of public corporations which exceeds $1,000,000.
Compliance with Section 162(m) may depend upon factors such as relationships
between the Company and the members of the Personnel and Compensation Committee
and periodic reauthorization of the Plan by the stockholders, and other factors
which are presently unforeseeable and, therefore, no assurance can be given that
the Company will remain in compliance with these rules or that non-compliance
will not cause amounts payable under the Plan to become non-deductible.
8
<PAGE> 12
NEW PLAN BENEFITS
The following table sets forth the number of shares of Common Stock
that will be received under the Plan by (i) each of the Named Executives (see
"COMPENSATION OF MANAGEMENT - Summary Compensation Table"), (ii) the current
executive officers of the Company as a group, (iii) the current directors of the
Company who are not executive officers, as a group, and (iv) all employees of
the Company, including all current officers of the Company who are not executive
officers of the Company, as a group, to the extent such Options are
determinable.
ROYAL PRECISION, INC. STOCK OPTION PLAN
<TABLE>
<CAPTION>
Employees' and
Consultants' Options Directors' Options
Name and Position Number of Shares Number of Shares
----------------- ---------------- ----------------
<S> <C> <C>
Christopher A. Johnston, Chairman
of the Board, Chief Executive Officer (a) (c) Not applicable
Allen W. Ritchie, President, Chief
Executive Officer (b) Not applicable Not applicable
Executive Group (c) Not applicable
Non-Executive Director Group Not applicable (d)
Non-Executive Officer Employee Group (c) Not applicable
</TABLE>
- --------------------
(a) Mr. Johnston resigned as an officer and director in August 1998.
(b) Mr. Ritchie resigned as an officer in December 1997 and as a director in
July 1998.
(c) Grants of Options to employees and consultants are discretionary with the
Committee and are, therefore, not currently determinable. See "COMPENSATION OF
MANAGEMENT" for certain information as to grants of Options made in previous
fiscal years.
(d) Grants to directors are determined by resolution of the Board of Directors.
No such resolution has been adopted.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of
Common Stock present, or represented, and entitled to vote at the Annual Meeting
will be required to approve the Plan. See "General Information Tabulation." As
of the record date for the Annual Meeting, the current executive officers and
directors of the Company held approximately 55% of the Common Shares of the
Company and corresponding voting power.
BOARD RECOMMENDATION
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE PLAN.
9
<PAGE> 13
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table sets forth, as of July 31, 1998, certain
information with respect to the beneficial ownership of shares of Common Stock
by (i) each person known to the Company to be the beneficial owner of more than
5% of the outstanding shares of Common Stock, (ii) each director or nominee for
director of the Company, (iii) each of the Named Executives (see "COMPENSATION
OF MANAGEMENT; Summary Compensation Table"), and (iv) the Company's directors
and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
BENEFICIAL OWNER SHARES (a) OF CLASS
---------------------------------------- ------------------- ------------
<S> <C> <C>
Christopher A. Johnston (c) 1,231,741(c)(o) 21.9%
David E. Johnston (d) 219,875(d)(o) 3.0%
Richard P. Johnston (e) 671,361(e)(o) 11.9%
Ronald L. Chalmers (f) 130,814(f) 2.0%
Berenson Minella Investment
Partnership, L.P. No. VI (g) 1,231,741(o) 21.9%
Raymond J. Minella (h) 1,240,091(h)(o)
22.1%
RPJ/JAJ Partners, Ltd. (i) 626,309(o) 11.1%
Kenneth J. Warren (j) 349,354(j)(o) 6.0%
Lawrence Bain (k) 18,125(k) (b)
Danny Edwards (l) 519,835(l)(o) 9.2%
Robert G. J. Burg, II (m) 100,000(m) 1.7%
Leslie Reesing (n) 2,000(n) (b)
Allen W. Ritchie -0- --
Edwards/Johnston Group (o) 4,232,257(o)(p) 74.0%
All directors and officers as a group 3,151,455(p) 55.0%
(13 persons)
</TABLE>
- --------------------
(a) Unless otherwise indicated, the beneficial owner has sole voting and
dispositive power over these shares subject to the spousal rights, if any, of
the spouses of those beneficial owners who have spouses.
(b) Less than 1%.
(c) Mr. Johnston's address is 3490 Clubhouse Drive, Suite 102, Jackson Hole, WY
83001. This amount does not include 54,572 shares acquired by Mr. Johnston in
August 1998 upon exercise of an option nor 414,787 shares owned by Mr. Warren
and others subject to a stockholders agreement which grants Mr. Johnston a right
of first
10
<PAGE> 14
refusal and a call right, which rights are not currently exercisable. Mr.
Johnston is a member of the Edwards/Johnston Group (see note (o)).
(d) Mr. Johnston's address is 1935 West Muirhead Loop, Suite 128, Tucson, AZ
85737. This amount includes 11,106 shares issuable upon the exercise of options
which are exercisable within 60 days and 208,769 shares which have been pledged
to RPJ/JAJ Partners, Ltd. under a pledge agreement pursuant to which the pledgee
will only acquire voting power or dispositive power over the shares upon the
occurrence of certain contingencies which have not yet occurred. Mr. Johnston is
a member of the Edwards/Johnston Group (see note (o)).
(e) Mr. Johnston's address is 3490 Clubhouse Drive, Suite 102, Jackson, WY
83001. This amount includes (i) 626,309 shares owned by RPJ/JAJ Partners, Ltd.
of which Mr. Johnston and his wife, Jayne A. Johnston, who are general partners,
share voting and dispositive power over the shares owned by the partnership (see
note (i)); (ii) 20,000 shares owned by Richard P. Johnston and Jayne A.
Johnston, as Trustees of the Johnston Family Charitable Remainder Unitrust #1
dated April 11, 1994, over which shares Mr. Johnston and his wife share voting
and dispositive power; and (iii) 25,052 shares issuable upon the exercise of
options which are exercisable within 60 days. This amount does not include
542,800 shares which have been pledged to RPJ/JAJ Partners under pledge
agreements which grant voting and dispositive power over such shares upon the
occurrence of certain contingencies which have not yet occurred. Mr. and Mrs.
Johnston are members of the Edwards/Johnston Group (see note (o)).
(f) Mr. Chalmers' address is c/o FM Precision Golf Manufacturing Corp., P. O.
Box 298, Torrington, CT 06790. This amount includes 5,553 shares issuable upon
the exercise of options which are exercisable within 60 days. Mr. Chalmers'
shares are subject to an agreement with the Company which grants the Company a
right of first refusal and a call right upon termination of his employment with
the Company. These rights are not currently exercisable within 60 days.
(g) The address of Berenson Minella Investment Partnership, L.P. No. VI
("Partnership VI") is 667 Madison Avenue, New York, NY 10021. Berenson Minella &
Company, L.P. ("Berenson Minella") is the sole general partner of Partnership
VI. Berenson Corp., which is wholly owned by Jeffrey L. Berenson, and Minella
Corp., which is wholly owned by Raymond J. Minella, are the general partners of
Berenson Minella. Berenson Minella is a member of the Edwards/Johnston Group
(see note (o)). Partnership VI, Berenson Minella, Berenson Corp., Minella Corp.,
Raymond J. Minella and Jeffrey L. Berenson may each be deemed to have shared
voting and shared investment power over these shares.
(h) Mr. Minella's address is c/o Berenson Minella & Co., 667 Madison Avenue, New
York, NY 10021. This amount includes 1,231,741 shares owned by Partnership VI,
of which Mr. Minella is an indirect general partner (see note (g)). As such, Mr.
Minella shares voting power and investment power over these shares. This amount
also includes 8,350 shares issuable upon the exercise of options which are
exercisable within 60 days. Mr. Minella is a member of the Edwards/Johnston
Group (see note (o)).
(i) The address of RPJ/JAJ Partners, Ltd. is 3490 Clubhouse Drive, Suite 102,
Jackson Hole, WY 83001. This amount does not include 542,800 shares pledged to
RPJ/JAJ Partners, Ltd. pursuant to pledge agreements which only grant voting and
dispositive power over such shares to RPJ/JAJ Partners upon the occurrence of
certain contingencies which have not yet occurred. The general partners of
RPJ/JAJ Partners, Ltd. are Richard P. Johnston and his wife, Jayne A. Johnston
(see note (e)). RPJ/JAJ Partners, Ltd. is a member of the Edwards/Johnston Group
(see note (o)).
(j) Mr. Warren's address is 5920 Cromdale Drive, Suite 1, Dublin, OH 43017. This
amount includes 15,323 shares issuable upon the exercise of options which are
exercisable within 60 days and 334,031 shares which have been pledged to RPJ/JAJ
Partners, Ltd. under a pledge agreement pursuant to which the pledgee will only
acquire voting power or dispositive power over the shares upon the occurrence of
certain contingencies which have not yet occurred. Mr. Warren is a party to a
stockholders agreement under which the holders of 80,756 shares have granted him
and Christopher A. Johnston rights of first refusal, which rights are not
currently exercisable, and Mr. Warren has granted a right of first refusal and a
call right on his 334,031 shares to Christopher A. Johnston, which rights are
not currently exercisable. Mr. Warren is a member of the Edwards/Johnston Group
(see note (o)).
11
<PAGE> 15
(k) Mr. Bain's address is c/o Everen Securities, 28601 Chagrin Boulevard, Suite
250, Woodmere Village, OH 44122. This amount includes 5,625 shares issuable upon
the exercise of options which are exercisable within 60 days.
(l) Mr. Edwards' address is 15990 North Greenway-Hayden Loop #900, Scottsdale,
AZ 85260. This amount includes (i) 55,883 shares issuable upon the exercise of
options which are exercisable within 60 days; and (ii) 100,000 shares as to
which Mr. Edwards has granted Robert G. J. Burg, II, the right to purchase,
which right has not been exercised, and as to which Mr. Edwards has sole voting
power and shares dispositive power with Mr. Burg (see note (m)). Mr. Edwards is
a member of the Edwards/Johnston Group (see note (o)).
(m) Mr. Burg's address is 15990 North Greenway-Hayden Loop #900, Scottsdale, AZ
85260. This amount includes 100,000 shares as to which Mr. Burg has the right to
purchase from Danny Edwards, which right has not been exercised, and as to which
Mr. Burg shares dispositive power with Mr. Edwards. See Note (l).
(n) Ms. Reesing's address is 3231 East Desert Flower Lane, Phoenix, AZ 85044.
This amount does not include 1,000 shares owned by Ms. Reesing's husband, as to
which shares Ms. Reesing disclaims beneficial ownership.
(o) On May 12, 1997, Danny Edwards, Drew M. Brown, DMB Property Ventures Limited
Partnership, the general partner of which is DMB GP, Inc. (the shareholders of
which are Drew M. Brown, Mark N. Sklar and the Bennett Dorrance Trust dated
April 21, 1989, the trustee of which is Bennett Dorrance), Mark N. Sklar and
Bennett Dorrance (collectively the "Edwards Parties"), Christopher A. Johnston,
RPJ/JAJ Partners, Ltd., the general partners of which are Richard P. Johnston
and Jayne A. Johnston, David E. Johnston, Berenson Minella (see note (g) for
more information regarding Berenson Minella's ownership of shares and the owners
of Berenson Minella), Kenneth J. Warren (collectively the "Johnston Parties")
(the Edwards Parties and the Johnston Parties collectively form the
"Edwards/Johnston Group"), and the Company entered into a Stockholder Agreement
whereby they agreed that the Company's Board of Directors would be composed of
nine members, three of which are elected by the Edwards Parties and six of which
are elected by the Johnston Parties. (The Board of Directors subsequently
increased the number of directors to 10 and the vacancy was filled by an
"independent" person as permitted by the Stockholder Agreement. This director
subsequently resigned due to time constraints.) The Edwards/Johnston Group's
address is c/o Christopher A. Johnston, 3490 Clubhouse Drive, Jackson Hole, WY
83001.
(p) This amount includes 127,934 shares issuable upon the exercise of options
which are exercisable within 60 days. This amount does not include any shares
excluded by notes (c), (e), (i) and (n) above.
12
<PAGE> 16
COMPENSATION OF MANAGEMENT
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the
annual and long term compensation of the chief executive officer of the Company
and the other executive officers, whose total annual salary and bonus exceeded
$100,000 during the last fiscal year (the "Named Executives"), for the Company's
fiscal years since its inception.
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
Securities
Underlying
Annual Compensation Options All Other
Name and Principal Position Year Salary Bonus (shares) Compensation
- --------------------------- ---- ------ ----- -------- ------------
<S> <C> <C> <C> <C> <C>
Christopher A. Johnston, Chairman of the 1997 $150,500 (b) -- 54,572 (c) --
Board, Chief Executive Officer (a) 1998 $135,589 -- -- --
Allen W. Ritchie, President, Chief
Executive Officer 1998 (d) (d) (d) (d)
</TABLE>
- --------------------
(a) Mr. Johnston resigned as an officer and director in August 1998.
(b) This amount was paid by Merbanco. See "CERTAIN TRANSACTIONS."
(c) The amount in this column represents outstanding stock options granted in
March 1997 (see "Aggregated Option Exercises in the Last Fiscal Year and Fiscal
Year End Option Values", below).
(d) In October 1997, Mr. Ritchie was elected to serve as President, Chief
Executive Officer of the Company at a salary of $125,000 to commence December 1,
1997 and was granted an option to purchase 250,000 shares of Common Stock at a
price of $6.75. Mr. Ritchie resigned this position in December 1997, he received
no salary, his stock option did not vest, and his stock option terminated upon
his resignation.
OPTION GRANTS IN LAST FISCAL YEAR
The only stock option granted to either of the Named Executives during
the fiscal year ended May 31, 1998 was the stock option granted to Mr. Ritchie,
which option has terminated. See footnote (d) to the Summary Compensation Table
above.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth certain information concerning the
number and value of unexercised Options held by the Named Executives at the end
of the fiscal year ended May 31, 1998.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Securities In-the-Money Options
Underlying Unexercised at Fiscal Year-End:
Options at Fiscal Year-End: Exercisable/
Name Exercisable/Unexercisable Unexercisable
--------------------------- ------------------------------ ------------------------
<S> <C> <C>
Christopher A. Johnston 54,572/0 $269,995/0
Allen W. Ritchie 0/0 $0/0
</TABLE>
13
<PAGE> 17
CONSULTING AGREEMENT WITH DIRECTOR
The Company has entered into a Consulting Agreement with Danny Edwards.
Under the Consulting Agreement, Mr. Edwards will make himself available to
consult with the Company on matters relating to its business and Mr. Edwards has
agreed to endorse the products of the Company and promote the Company and its
products by actively appearing on the "Nike" tour and in golf tournaments
sponsored by the PGA. Mr. Edwards' consulting obligations are limited to 25
hours during a calendar quarter. The agreement expires August 29, 1999. The
Company has agreed to pay Mr. Edwards $180,000 per year and provide him with
health insurance for his services as a consultant. If Mr. Edwards does not
complete the first two days of at least 10 tournaments on the Nike tour or PGA
events in any year, the Company may reduce the payment to him by $15,000 for
each tournament not completed, unless the non-completion is due to injury and
Mr. Edwards appears and promotes the Company products at such tournament. The
Company may terminate the agreement if Mr. Edwards engages in gross and willful
misconduct injurious to the Company or if Mr. Edwards fails to complete the
first two days of at least five tournaments during any year unless
non-completion is due to injury and Mr. Edwards appears at the tournament and
promotes the Company's products. Mr. Edwards has agreed not to compete with the
Company during the term of the agreement and to hold confidential information in
confidence during the term of the agreement and for one year thereafter.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
Non-employee directors receive a quarterly retainer of $2,500 if the
director attends the quarterly meeting, as well as reimbursement for certain
travel expenses incurred in connection with attending meetings.
CERTAIN TRANSACTIONS
In May 1996, Christopher A. Johnston, RPJ/JAJ Partners, Ltd., David E.
Johnston, Berenson Minella & Company, L.P. ("Berenson Minella"), an investment
banking firm in which Raymond J. Minella is an indirect general partner, Kenneth
J. Warren and several members of Brunswick management, capitalized the Company
by purchasing all of its capital stock and purchased the golf shaft
manufacturing business of Brunswick Corporation ("Brunswick").
Prior to the Brunswick acquisition, the Company entered into an
agreement with Merbanco, an investment banking firm owned by Christopher A.
Johnston and by Richard P. Johnston and his spouse, and Berenson Minella
pursuant to which the Company paid a $250,000 fee to each of Merbanco and
Berenson Minella. Additionally, the Company entered into agreements with
Merbanco and Berenson Minella under which Merbanco and Berenson Minella would
provide further financial advisory services to the Company. Under these
agreements, Merbanco was to be paid $150,000 annually and Berenson Minella was
to be paid $50,000 annually. Under the agreement between the Company and
Merbanco, Merbanco provided the services of Christopher A. Johnston and David E.
Johnston to the Company on a substantially full-time basis and Richard P.
Johnston on a part-time basis. Under the agreement between the Company and
Berenson Minella, Berenson Minella provided financial advisory services of
Raymond Minella as needed. These agreements were terminated by the parties in
August 1997. Christopher A. Johnston and David E. Johnston became salaried
employees of the Company in July 1997.
The Company paid legal fees of $209,893 to Kenneth J. Warren during the
fiscal year ended May 31, 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
On August 28, 1997, a Form 3 report was transmitted to the Commission
for filing to report the beneficial ownership by Berenson Minella of equity
securities of the Company pursuant to Section 16 of the Exchange Act and the
rules promulgated thereunder by the Commission ("Section 16"). While these
shares are held of record by Berenson Minella, the General Partner of Berenson
Minella Investment Partnership, L.P. No. VI, the beneficial ownership of such
shares should also have been attributed to Berenson Minella Investment
Partnership, L.P. No. VI,
14
<PAGE> 18
Raymond J. Minella and Jeffrey L. Berenson. Forms 3 were filed with the
Commission on June 8, 1998 by Berenson Minella Investment Partnership, L.P. No.
VI, and Jeffrey L. Berenson, and amended Forms 3 were filed for Raymond J.
Minella and Berenson Minella to this effect. The Company does not know of any
other failures to make filings required by Section 16 on a timely basis by any
of its directors, executive officers or beneficial owners of 10% or more of its
equity securities.
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP served as the Company's independent accountants for
the fiscal year ended May 31, 1998 and has audited the Company's financial
statements since its inception in 1996. At the suggestion of management, the
Audit Committee has recommended the retention of Arthur Andersen as the
Company's independent accountants for the 1999 fiscal year.
A representative of Arthur Andersen LLP is expected to be present at
the Annual Meeting. The representative will have an opportunity to make a
statement if he so desires and is expected to be available to respond to
appropriate questions of stockholders.
OTHER BUSINESS
The Board of Directors does not intend to present, and has no knowledge
that others will present, any other business at the meeting. If, however, any
other matters are properly brought before the meeting, it is intended that the
persons named in the enclosed proxy will vote the shares represented thereby in
accordance with their best judgment.
COST OF SOLICITATION OF PROXIES
The cost of this solicitation will be paid by the Company. The Company
may request persons holding shares in their names for others to forward
soliciting materials to their principals to obtain authorization for the
execution of proxies, and the Company will reimburse such persons for their
expenses in so doing.
STOCKHOLDER PROPOSALS
A stockholder proposal intended for inclusion in the proxy statement
and form of proxy for the Annual Meeting of Stockholders of the Company to be
held in 1999 ("1999 Annual Meeting") must be received by the Company before May
12, 1999, at its offices at 15170 North Hayden Road, Suite 1, Scottsdale, AZ
85260, Attention: President. Proxies solicited by the Company's Board of
Directors for the 1999 Annual Meeting shall confer discretionary authority to
vote on untimely stockholder proposals submitted to the Company outside the
processes of Rule 14a-8 under the Securities Exchange Act of 1934 (i.e., the
procedure for placing a stockholder's proposal in the Company's proxy
materials). Such a stockholder proposal will be considered untimely unless it is
received by the Company on or before July 25, 1999, at its offices at 15170
North Hayden Road, Suite 1, Scottsdale, AZ 85260, Attention: President.
15
<PAGE> 19
ROYAL PRECISION, INC.
STOCK OPTION PLAN
---------------------
OCTOBER 5, 1997
---------------------
PREAMBLE:
1. Royal Precision, Inc. a Delaware corporation (the "Company"), by
means of this Stock Option Plan (the "Plan"), desires to attract and retain
capable employees, officers, directors and consultants and to provide them with
long term incentives to continue their services to the Company, to maximize the
value of the Company to its stockholders and to acquire a continuing ownership
interest in the Company.
2. The Company has determined that the foregoing objectives will be
promoted by granting Options (as hereinafter defined) under this Plan to certain
employees, officers, directors and consultants of the Company and of its Parent
and Subsidiaries, if any, pursuant to this Plan.
TERMS:
ARTICLE 1. DEFINITIONS.
Section 1.1. General. Certain words and phrases used in this Plan shall
have the meanings given to them below in this section:
"Board of Directors" means the board of directors of the Company.
"Code" means the Internal Revenue Code of 1986 and the regulations
thereunder, as now in effect or hereafter amended.
"Committee" means the Committee of the Board of Directors that
administers the Plan under Section 2.1 below.
"Common Stock" means the common stock with a par value of one mil
($0.001) per share, of the Company.
"Consultant" means any person who provides services to any Employer
(other than as an Employee or a Director or in connection with the offer or sale
of securities of the Employer in a capital raising transaction) and who is a
consultant or an adviser to the Employer within the meaning of General
Instruction A.1. to Form S-8 promulgated by the SEC under the Securities Act of
1933.
"Date of Grant" means the date an Option is first granted.
"Director" means a member of the Board of Directors.
"Effective Date" means the date this Plan is first adopted by the Board
of Directors.
"Employee" means any common law employee of an Employer.
"Employer" means the Company or any Parent or Subsidiary of the Company
which employs a given Employee or has engaged a given Consultant.
"Exchange Act" means the Securities Exchange Act of 1934 and the
regulations thereunder, as now in effect or hereafter amended.
<PAGE> 20
"Exercise Price" means, with respect to an Option, the amount of
consideration that must be delivered to the Company in order to purchase a
single Share thereunder.
"Fair Market Value of a Share" means the amount determined to be the
fair market value of a single Share by the Committee based upon the trading
price of the Shares, their offering price in public and private offerings by the
Company and such other factors as it deems relevant. In the absence of such a
determination, the Fair Market Value of a Share shall be deemed to be (a) if the
Shares are listed or admitted to trading on a national securities exchange or
the NASDAQ - National Market System, the per Share closing price regular way on
the principal national securities exchange or the NASDAQ - National Market
System on which the Shares are listed or admitted to trading on the day prior to
the date of determination or, if no closing price can be determined for the date
of determination, the most recent date for which such price can reasonably be
ascertained, or (b) if the Shares are not listed or admitted to trading on a
national securities exchange or the NASDAQ - National Market System, the mean
between the representative bid and asked per Share prices in the
over-the-counter market at the closing of the day prior to the date of
determination or the most recent such bid and asked prices then available, as
reported by NASDAQ or if the Shares are not then quoted by NASDAQ as furnished
by any market maker selected from time to time by the Company for that purpose.
"Grantee" means any Participant to whom an Option has been granted.
"Holder" means any Grantee who holds a valid Option and any heir or
legal representative to whom such Grantee's Option has been transferred by will
or the laws of descent and distribution.
"Incentive Stock Option" or "ISO" means a Stock Option intended to
comply with the terms and conditions set forth in Section 422 of the Code.
"Meeting Date" means the date of each annual meeting of the
stockholders of the Company at which Directors are elected.
"Nonqualified Option" means a Stock Option other than an Incentive
Stock Option.
"Officer" means an officer of the Company as defined in 17 C.F.R.ss.
240.16a-1(f) as now in effect or hereafter amended.
"Option" or "Stock Option" means a right granted under Article 5, 6 or
7 of the Plan to a Grantee to purchase a stated number of Shares at a stated
Exercise Price.
"Option Agreement" means an agreement evidencing an Option
substantially in the form of Exhibit A, Exhibit B or Exhibit C attached hereto.
"Parent" means a parent of a given corporation as such term is defined
in Section 424(e) of the Code.
"Participant" means a person who is eligible to receive an Option under
the Plan.
"Plan" means this Plan as it may be amended or restated from time to
time.
"Rule 16b-3" means Rule 16b-3 (17 C.F.R. ss. 240.16b-3) promulgated
under Section 16(b) of the Exchange Act as now in effect or hereafter amended.
"SEC" means the Securities and Exchange Commission.
"Shares" means shares of Common Stock.
"Subsidiary" means a subsidiary of a given corporation as such term is
defined in Section 424(f) of the Code.
"Ten Percent Stockholder" means a person who owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or any Parent or Subsidiary of the Company. Ownership shall, for the
purposes of the previous sentence, be determined under the rules set forth in
Section 424 of the Code.
"Termination without cause" means a termination by an Employer of the
employment or consulting relationship of a Grantee with the
<PAGE> 21
Employer that is not for cause and is not occasioned by the resignation, death
or disability of the Grantee.
Section 1.2. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles.
Section 1.3. Effect of Definitions. The definitions set forth in
Section 1.1 above shall apply equally to the singular, plural, adjectival,
adverbial and other forms of any of the words and phrases defined regardless of
whether they are capitalized.
ARTICLE 2. ADMINISTRATION.
Section 2.1. Committee. The Plan shall be administered by a committee
of the Board of Directors consisting of two or more Directors, each of whom is a
"Non--Employee Director" as described in paragraph (b)(3) of Rule 16b-3 and is
an "outside director" as described in Code Section 162(m) and the regulations
thereunder. Unless the Board of Directors designates another of its committees
to administer the Plan, the Plan shall be administered by a committee consisting
of those members of the Compensation Committee of the Board of Directors who are
disinterested persons and are outside directors, but, if the Compensation
Committee is abolished or its membership does not contain two persons who comply
with the requirements of the first sentence of this Section 2.1, the Board of
Directors shall either reconstitute the Compensation Committee in compliance
with, or create another Committee that complies with, the requirements of the
first sentence of this Section 2.1 to administer the Plan.
Section 2.2. Authority. Subject to the express provisions of the Plan
and in addition to the powers granted by other sections of the Plan, the
Committee has the authority, in its discretion, to (a) determine the
Participants, grant Options and determine their timing, pricing and amount; (b)
define, prescribe, amend and rescind rules, regulations, procedures, terms and
conditions relating to the Plan; (c) make all other determinations necessary or
advisable for administering the Plan including, but not limited to, interpreting
the Plan, correcting defects, reconciling inconsistencies and resolving
ambiguities; and (d) review and resolve all claims of Employees, Consultants,
Directors, Grantees, Holders and Participants. The actions and determinations of
the Committee on matters related to the Plan shall be conclusive and binding
upon the Company and all Employees, Consultants, Directors, Grantees, Holders
and Participants.
ARTICLE 3. SHARES.
Section 3.1. Number. The aggregate number of Shares in respect of which
Options may be granted under the Plan shall not exceed 750,000, which number of
Shares is hereby reserved for issuance under the Plan out of the authorized but
unissued Shares.
Section 3.2. Cancellations. If any portion of an Option is canceled,
terminates or expires for any reason without having been exercised, the Shares
related to such unexercised portion, shall be available again for the purposes
of the Plan.
Section 3.3. Anti-Dilution.
(a) If the Shares are split or if a dividend of Shares is paid
on the Shares, the number of Shares on which each then outstanding Option is
based and the number of Shares as to which Options may be granted under this
Plan shall be increased automatically by the ratio between the number of Shares
outstanding immediately after such event and the number of Shares outstanding
immediately before such event (ignoring for this purpose any provision for the
repurchase or cash payment of fractional shares) and the Exercise Price thereof
shall be decreased automatically by the same ratio. If the Shares are combined
into a lesser number of Shares, the number of Shares for which each then
outstanding Option is based and the number of Shares as to which Options may be
granted under the Plan shall be decreased automatically by such ratio and the
Exercise Price thereof shall be increased automatically by such ratio.
(b) If any other change occurs in the Shares, through
recapitalization, merger, consolidation or exchange of shares or otherwise,
there shall automatically be substituted for each Share subject to an
unexercised Option and each
<PAGE> 22
Share available for additional grants of Options, the number and kind of shares
or other securities or property into which each outstanding Share was changed,
and the Exercise Price shall be increased or decreased proportionally so that
the aggregate Exercise Price for the securities subject to each Option shall
remain the same as immediately before such event. In addition, the Committee may
make such further equitable adjustments in the Plan and the then outstanding
Options as are deemed necessary and appropriate by the Committee including, but
not limited to, changing the number of Shares reserved under the Plan or covered
by outstanding Options, the Exercise Price of outstanding Options and the
vesting conditions of outstanding Options.
Section 3.4. Source. Except as otherwise determined by the Board of
Directors, the Shares issued under the Plan shall be drawn from the Company's
authorized but unissued Shares. However, Shares which are to be delivered under
the Plan may be obtained by the Company from its treasury, by purchases on the
open market or from private sources, as well as by issuing authorized but
unissued Shares. The proceeds of the exercise of any Option shall be general
corporate funds of the Company. No Shares may be sold under any Option Agreement
for less than the par value thereof. No fractional Shares shall be issued or
sold under the Plan nor will any cash payment be made in lieu of fractional
Shares.
Section 3.5. Rights of a Stockholder. No Holder nor any person claiming
under or through any Holder shall have any right, title or interest in or to any
Shares allocated or reserved under the Plan or subject to any Option except as
to such Shares, if any, for which certificates representing such Shares have
been issued to such Holder upon the due exercise of an Option.
Section 3.6. Securities Laws. No Option shall be exercised nor shall
any Shares or other securities be issued or transferred pursuant to an Option
unless and until all applicable requirements imposed by federal and state
securities laws and by any stock exchanges upon which the Shares may be listed,
have been fully complied with. As a condition precedent to the exercise of an
Option or the issuance of Shares pursuant to the grant or exercise of an Option,
the Company may require the Holder to take any reasonable action to meet such
requirements including providing undertakings as to the investment intent of the
Holder, accepting transfer restrictions on the Shares issuable thereunder and
providing opinions of counsel, in form and substance acceptable to the Company,
as to the availability of exemptions from such requirements.
ARTICLE 4. ELIGIBILITY.
Section 4.1. Article 5. Only Employees who are not members of the
Committee shall be eligible to receive Options under Article 5 below.
Section 4.2. Article 6. Only Consultants shall be eligible to receive
Options under Article 6 below.
Section 4.3. Article 7. Only Directors who are not Employees shall be
eligible to receive Options under Article 7 below.
ARTICLE 5. EMPLOYEES' STOCK OPTIONS.
Section 5.1. Determinations. The Committee shall determine which
Participants shall be granted Options, the number of Shares for which the
Options may be exercised, the times when they shall receive them and the terms
and conditions of individual Option grants (which need not be identical).
Section 5.2. Exercise Price. The Committee shall determine the Exercise
Price of each Option at the time that it is granted, but in no event shall the
Exercise Price of an Option be less than the Fair Market Value of a Share on the
Date of Grant. If no express determination of the Exercise Price of an Option is
made by the Committee, the Exercise Price thereof is equal to the Fair Market
Value of a Share on the Date of Grant.
Section 5.3. Term. Subject to the rule set forth in the next sentence,
the Committee shall determine the times when an Option vests and the term during
which an Option is exercisable at the time that it is granted. No Option shall
be exercisable after the expiration of ten years from the Date of Grant. If no
express determination of the times when Options are exercisable is made by the
Committee:
<PAGE> 23
(a) each Option shall vest and first become exercisable
(subject to the rule set forth in Section 5.4(c) below) as to 25% of the Shares
subject to such Option on each of the first four anniversaries of the Date of
Grant provided the Grantee has been an Employee continuously during the time
beginning on the Date of Grant and ending on the date when such portion vests
and first becomes exercisable and further provided that no portion of an Option
shall vest and become exercisable after the employment of the Grantee by his
Employer has terminated, regardless of the reason for such termination.
(b) any portion of an Option that has vested and become
exercisable shall lapse and cease to be exercisable upon the earliest of:
(i) the expiration of ten years from the Date of Grant,
(ii) subject to the rule set forth in Section 5.4(d) below, nine months after
the Grantee ceases to be an Employee because of death or disability,
(iii) three months after the termination without cause of the Grantee's
employment with all Employers, or
(iv) immediately upon termination of the Grantee's employment with all Employers
by the applicable Employers for cause or by the Grantee's resignation.
Where both an Incentive Stock Option and a Nonqualified Option are granted, the
number of Shares which become exercisable under clause (a) of the previous
sentence at any time shall be calculated on the basis of the total of the Shares
subject to both Options and the Options shall become exercisable as to that
number of Shares first under the Incentive Stock Option and then under the
Nonqualified Option, unless the rule set forth in Section 5.4(c) below would
defer the exercisability of such Incentive Stock Option, in which case such
Nonqualified Options shall become exercisable first.
Section 5.4. Incentive Stock Options.
(a) The Committee shall determine whether any Option is an
Incentive Stock Option or a Nonqualified Option at the time that it is granted
and, if no express determination is made by the Committee, all Options shall be
Nonqualified Options.
(b) If the Committee grants Incentive Stock Options, they
shall be on such terms and conditions as may be necessary to render them
"incentive stock options" pursuant to Section 422 of the Code.
(c) The aggregate Fair Market Value of the Shares, determined
as of the time the Option is granted, which first become exercisable under all
Incentive Stock Options granted to any one Grantee under this Plan or any other
plan of the Company or any Parent or Subsidiary of the Company, shall not exceed
$100,000 during any calendar year and, if the foregoing limit would be exceeded
in any given calendar year by the terms of any Incentive Stock Option granted
hereunder, the exercisability of such portion of such Option as would exceed
such limit shall be deferred to the first day of the next calendar year and, if
such excess involves more than one Option, the exercisability of the most
recently granted Option shall be deferred first.
(d) If the employment of a Grantee, who holds an ISO, with any
Employer is terminated because of a "disability" (within the meaning of Section
22(e)(3) of the Code), the unexercised portion of the ISO may be exercised only
within six months after the date on which employment was terminated, and only to
the extent that such Grantee could have otherwise exercised such ISO as of the
date of termination. If a Grantee, who holds an ISO, dies while employed by an
Employer (or within six months after termination of employment by reason of a
disability or within 30 days after termination of employment without cause), the
unexercised portion of the ISO at the time of death may be exercised only within
six months after the date of death, and only to the extent that the Grantee
could have otherwise exercised such ISO at the time of death. In such event,
such ISO may be exercised by the executor or administrator of the Grantee's
estate or by any Holder.
(e) No Ten Percent Stockholder shall be granted an Incentive
Stock Option unless, at the time such Incentive Stock Option is granted, the
<PAGE> 24
Exercise Price thereof is at least 110% of the Fair Market Value of a Share on
the Date of Grant and the Incentive Stock Option, by its terms, is not
exercisable after the expiration of five years from the Date of Grant.
(f) If a Holder exercises an Incentive Stock Option and
disposes of any of the Shares received by such Holder as a result of such
exercise within two years from the Date of Grant or within one year after the
issuance of such Shares to such Holder upon such exercise, such Holder shall
notify the Company of such disposition and the consideration received as a
result thereof and pay or provide for the withholding taxes on such disposition
as required by Section 8.3 below.
(g) An Option that is designated as a Nonqualified Option
under this Plan shall not be treated as an "incentive stock option" as such term
is defined in Section 422(b) of the Code.
Section 5.5. Exercise.
(a) An Option shall be exercised by the delivery of the Option
Agreement therefor, with the notice of exercise attached thereto properly
completed and duly executed by the Holder, to the Treasurer of the Company,
together with the aggregate Exercise Price for the number of Shares as to which
the Option is being exercised, after the Option has vested and become
exercisable and before it has lapsed and ceased to be exercisable.
(b) An Option may be exercised as to less than all of the
Shares purchasable thereunder, but not for a fractional share. No Option may be
exercised as to less than 100 Shares unless it is exercised as to all of the
Shares then available thereunder. If an Option is exercised as to less than all
of the Shares purchasable thereunder, a new duly executed Option Agreement
reflecting the decreased number of Shares exercisable under such Option, but
otherwise of the same tenor, shall be returned to the Holder.
(c) The Committee may, in its sole discretion and upon such
terms and conditions as it shall determine at or after the Date of Grant, permit
the Exercise Price to be paid in cash, by the tender to the Company of Shares
owned by the Holder, or by a combination thereof. If the Committee does not make
such determination, the Exercise Price shall be paid in cash.
(d) If any portion of the Exercise Price of an Option is
payable in cash, it may be paid by (i) delivery of a certified or cashier's
check payable to the order of the Company in such amount, (ii) wire transfer of
immediately available funds to a bank account designated by the Company or (iii)
reduction of a debt of the Company to the Holder.
(e) If any portion of the Exercise Price of an Option is
payable in Shares, it may be paid by delivery of certificates representing a
number of Shares having a total fair market value on the date of exercise equal
to or greater than the required amount, duly endorsed for transfer with all
signatures guaranteed by a medallion signature guarantee. If more Shares than
are necessary to pay such Exercise Price based on their fair market value on the
date of exercise are delivered to the Company, it shall return to the Holder a
certificate for the balance of the whole number of Shares and a check payable to
the order of the Holder for any fraction of a Share. Shares may not be delivered
to the Company as payment for the exercise of an Option if such Shares have been
owned by the Holder (together with his decedent or testator) for less than six
months or if the disposition of such Shares would require the giving of a notice
under Section 5.4(f) above.
(f) Promptly after an Option is properly exercised, the
Company shall issue to the Holder a certificate representing the Shares
purchased thereunder.
Section 5.6. Option Agreement. Promptly after the Date of Grant, the
Company shall duly execute and deliver to the Grantee an Option Agreement
setting forth the terms of the Option. Option Agreements are not negotiable
instruments or securities (as such term is defined in Article 8 of the Uniform
Commercial Code). Lost and destroyed Option Agreements may be replaced without
bond.
Section 5.7. New Hires. A person to whom the Company is offering
employment may be granted
<PAGE> 25
a Nonqualified Option under this Article 5, but any such grant shall lapse if
the person does not subsequently become an Employee pursuant to such offer.
ARTICLE 6. CONSULTANTS' STOCK OPTIONS.
Section 6.1. Determinations. The Committee shall determine which
Participants shall be granted Options, the number of Shares for which the
Options may be exercised, the times when they shall receive them and the terms
and conditions of individual Option grants (which need not be identical).
Section 6.2. Exercise Price. The Committee shall determine the Exercise
Price of each Option at the time that it is granted, but in no event shall the
Exercise Price of an Option be less than the Fair Market Value of a Share on the
Date of Grant. If no express determination of the Exercise Price of an Option is
made by the Committee, the Exercise Price thereof is equal to the Fair Market
Value of a Share on the Date of Grant.
Section 6.3. Term. Subject to the rule set forth in the next sentence,
the Committee shall determine the times when an Option vests and the term during
which an Option is exercisable at the time that it is granted. No Option shall
be exercisable after the expiration of ten years from the Date of Grant. If no
express determination of the times when Options are exercisable is made by the
Committee:
(a) each Option shall vest and first become exercisable as to
25% of the Shares subject to such Option on each of the first four anniversaries
of the Date of Grant provided the Grantee has been a Consultant continuously
during the time beginning on the Date of Grant and ending on the date when such
portion vests and first becomes exercisable and further provided that no portion
of an Option shall vest and become exercisable after the termination of the
Grantee's consulting relation with his Employer, regardless of the reason for
such termination.
(b) any portion of an Option that has vested and become
exercisable shall lapse and cease to be exercisable upon the earliest of:
(i) the expiration of ten years from the Date of Grant,
(ii) nine months after the Grantee ceases to be a Consultant because of death or
disability, or
(iii) three months after the termination without cause of the Grantee's
consulting relation with the Employer, or
(iv) immediately upon termination of the Grantee's consulting relation with the
Employer for cause or by the Grantee's resignation.
Section 6.4. Not Incentive Stock Options. An Option under this Article
6 shall not be treated as an Incentive Stock Option.
Section 6.5. Exercise.
(a) An Option shall be exercised by the delivery of the Option
Agreement therefor, with the notice of exercise attached thereto properly
completed and duly executed by the Holder, to the Treasurer of the Company,
together with the aggregate Exercise Price for the number of Shares as to which
the Option is being exercised, after the Option has vested and become
exercisable and before it has lapsed and ceased to be exercisable.
(b) An Option may be exercised as to less than all of the
Shares purchasable thereunder, but not for a fractional share. No Option may be
exercised as to less than 100 Shares unless it is exercised as to all of the
Shares then available thereunder. If an Option is exercised as to less than all
of the Shares purchasable thereunder, a new duly executed Option Agreement
reflecting the decreased number of Shares exercisable under such Option, but
otherwise of the same tenor, shall be returned to the Holder.
(c) The Committee may, in its sole discretion and upon such
terms and conditions as it shall determine at or after the Date of Grant, permit
the Exercise Price to be paid in cash, by the tender to the Company of Shares
owned by the Holder, or by a combination thereof. If the Committee does not make
such determination, the Exercise Price shall be paid in cash.
(d) If any portion of the Exercise Price of an Option is
payable in cash, it may be paid
<PAGE> 26
by (i) delivery of a certified or cashier's check payable to the order of the
Company in such amount, (ii) wire transfer of immediately available funds to a
bank account designated by the Company or (iii) reduction of a debt of the
Company to the Holder.
(e) If any portion of the Exercise Price of an Option is
payable in Shares, it may be paid by delivery of certificates representing a
number of Shares having a total fair market value on the date of exercise equal
to or greater than the required amount, duly endorsed for transfer with all
signatures guaranteed by a medallion signature guarantee. If more Shares than
are necessary to pay such Exercise Price based on their fair market value on the
date of exercise are delivered to the Company, it shall return to the Holder a
certificate for the balance of the whole number of Shares and a check payable to
the order of the Holder for any fraction of a Share. Shares may not be delivered
to the Company as payment for the exercise of an Option if such Shares have been
owned by the Holder (together with his decedent or testator) for less than six
months or if the disposition of such Shares would require the giving of a notice
under Section 5.4(f) above.
(f) Promptly after an Option is properly exercised, the
Company shall issue to the Holder a certificate representing the Shares
purchased thereunder.
Section 6.6. Option Agreement. Promptly after the Date of Grant, the
Company shall duly execute and deliver to the Grantee an Option Agreement
setting forth the terms of the Option. Option Agreements are neither negotiable
instruments nor securities (as such term is defined in Article 8 of the Uniform
Commercial Code). Lost and destroyed Option Agreements may be replaced without
bond.
ARTICLE 7. DIRECTORS' OPTIONS.
Section 7.1. Grant. On each Meeting Date, an Option shall be
automatically granted to each Director who is eligible to receive Options under
Section 4.3 above and who attended at least seventy five per cent (75%) of the
total number of meetings of the Board of Directors (and committees thereof of
which he is a member) during the most recently ended fiscal year of the Company.
The number of Shares subject to each Option granted under this Section 7.1 shall
be determined by a resolution adopted by the [{Committee}{Board of Directors}]
on or before a Meeting Date, uniformly applying to all eligible Directors, which
establishes, increases or decreases the number of Shares subject to such Option
Any such resolution shall continue in force for the next Meeting Date, unless it
is amended or repealed, the Meeting Date is more than ten years after the
Effective Date or there are not a sufficient number of Shares remaining
available under Section 3.1 above. This Section 7.1 shall not be operative until
such time as such a resolution is adopted.
Section 7.2. Exercise Price. The Exercise Price of an Option shall be
equal to the Fair Market Value of a Share on the Date of Grant.
Section 7.3. Term.
(a) Each Option shall vest and first become exercisable as to
25% of the Shares originally subject to the Option on each Meeting Date which is
held more than six months after the Date of Grant if the Grantee is a Director
at the time of the adjournment of the meeting of stockholders held on such
Meeting Date and further provided that no portion of an Option shall vest and
become exercisable after the Grantee has ceased to be a Director, regardless of
the reason for such cessation.
(b) any portion of an Option that has vested and become
exercisable shall lapse and cease to be exercisable upon the earliest of:
(i) the expiration of ten years from the Date of Grant,
(ii) nine months after the Grantee ceases to be a Director because of his death
or disability,
(iii) immediately upon resignation by the Grantee as a Director, or
(iv) three months after the Grantee ceases to be a Director for any reason other
than his death, disability or resignation.
<PAGE> 27
Section 7.4. Not Incentive Stock Options. An Option under this Article
7 shall not be treated as an Incentive Stock Option.
Section 7.5. Exercise.
(a) An Option shall be exercised by the delivery of the Option
Agreement therefor, with the notice of exercise attached thereto properly
completed and duly executed by the Holder, to the Treasurer of the Company,
together with the aggregate Exercise Price for the number of Shares as to which
the Option is being exercised, after the Option has vested and become
exercisable and before it has lapsed and ceased to be exercisable.
(b) An Option may be exercised as to less than all of the
Shares purchasable thereunder but not for a fractional Share. No Option may be
exercised as to less than 100 Shares unless it is exercised as to all of the
Shares then available thereunder. If an Option is exercised as to less than all
of the Shares purchasable thereunder, a new duly executed Option Agreement
reflecting the decreased number of Shares exercisable under such Option, but
otherwise of the same tenor, shall be returned to the Holder.
(c) The Committee may, in its sole discretion and upon such
terms and conditions as it shall determine at or after the Date of Grant, permit
the Exercise Price to be paid in cash, by the tender to the Company of Shares
owned by the Holder, or by a combination thereof. If the Committee does not make
such determination, the Exercise Price shall be paid in cash.
(d) If any portion of the Exercise Price of an Option is
payable in cash, it may be paid by (i) delivery of a certified or cashier's
check payable to the order of the Company in such amount, (ii) wire transfer of
immediately available funds to a bank account designated by the Company or (iii)
reduction of a debt of the Company to the Holder.
(e) If any portion of the Exercise Price of an Option is
payable in Shares, it may be paid by delivery of certificates representing a
number of Shares having a total fair market value on the date of exercise equal
to or greater than the required amount, duly endorsed for transfer with all
signatures guaranteed by a medallion signature guarantee. If more Shares than
are necessary to pay such Exercise Price based on their fair market value on the
date of exercise are delivered to the Company, it shall return to the Holder a
certificate for the balance of the whole number of Shares and a check payable to
the order of the Holder for any fraction of a Share. Shares may not be delivered
to the Company as payment for the exercise of an Option if such Shares have been
owned by the Holder (together with his decedent or testator) for less than six
months or if the disposition of such Shares would require the giving of a notice
under Section 5.4(f) above.
(f) Promptly after an Option is properly exercised, the
Company shall issue to the Holder a certificate representing the Shares
purchased thereunder.
Section 7.6. Option Agreement. Promptly after the Date of Grant, the
Company shall duly execute and deliver to the Grantee an Option Agreement
setting forth the terms of the Option. Option Agreements are neither negotiable
instruments nor securities (as such term is defined in Article 8 of the Uniform
Commercial Code). Lost and destroyed Option Agreements may be replaced without
bond.
ARTICLE 8. PROVISIONS APPLICABLE TO ALL TYPES OF OPTIONS.
Section 8.1. Maximum Shares. Notwithstanding any other provision of
this Plan, the maximum number of Shares with respect to which Options may be
granted during any fiscal year of the Company to any Employee shall be 250,000
Shares.
Section 8.2. Corporate Mergers and Acquisitions. The Committee may
grant Options having terms and conditions which vary from those specified in the
Plan if such Options are granted in substitution for, or in connection with the
assumption of, existing options granted by another business entity and assumed
or otherwise agreed to be provided for by the Company pursuant to or by reason
of a transaction involving a merger or consolidation of or acquisition of
substantially all of the assets or stock of another business entity that is
<PAGE> 28
not a Subsidiary of the Company prior to such acquisition, with or by the
Company or its Subsidiaries.
Section 8.3. Withholding. The Company shall have the right to withhold
from any payments due under any Option or due to any Holder from the Company as
compensation or otherwise the amounts of any federal, state or local withholding
taxes not paid by the Holder at the time of the exercise or vesting of any
Option or upon a disposition of Shares received upon the exercise of an
Incentive Stock Option. If cash payments sufficient to allow for withholding of
taxes are not made at the time of exercise or vesting of an Option, the Holder
exercising such Option shall pay to the Company an amount equal to the
withholding required to be made less the withholding otherwise made in cash or,
if allowed by the Committee in its discretion and pursuant to rules adopted by
the Committee consistent with Section 5.5 above, Shares previously owned by the
Holder. The Company may make such other provisions as it deems appropriate to
withhold any taxes the Company determines are required to be withheld in
connection with the exercise of any Option or upon a disqualifying disposition
of Shares received upon the exercise of an Incentive Stock Option, including,
but not limited to, the withholding of Shares from an Option upon such terms and
conditions as the Committee may provide. The Company may require the Holder to
satisfy any relevant withholding requirements before issuing Shares or
delivering any Option to the Holder.
Section 8.4. Disability. If a Grantee who is an Employee or a
Consultant is absent from work because of a physical or mental disability, for
purposes of the Plan such Grantee will not be considered to have ended his
employment or consulting relationship with the Company while such Grantee has
that disability, unless he resigns or terminates such relationship or the
Committee decides otherwise. If a Grantee who is a Director is absent from
meetings of the Board of Directors because of a physical or mental disability,
for purposes of the Plan such Grantee will not be considered to have ended his
service with the Board of Directors while such Grantee has that disability,
unless he resigns or is not re-elected by the stockholders.
Section 8.5. Merger of the Company. If the Company merges or
consolidates with or sells substantially all of its assets to a person that was
not one of its affiliates before such transaction, or any such unaffiliated
person or corporation has publicly announced a tender offer to purchase more
than 20% of the outstanding voting securities of the Company, the Committee, in
its discretion, may provide that, for a period of time, not extending beyond the
ten year period referred to in Sections 5.3, 6.3, and 7.3 above and the five
year period referred to in Section 5.4(e) above, after the execution of the
acquisition agreement in final definitive form, the announcement of such offer
or the mailing of a proxy statement or prospectus concerning such transaction,
notwithstanding the provisions of any Option, any Option may be exercised in
whole or in part during such time period or that upon the termination of such
time period any such Option shall expire and be null and void. The Committee may
provide that any such action shall be conditioned on the completion of the
transaction that occasioned it, and that if such transaction is not timely
completed, any exercise or vesting of any Option shall be unwound.
Section 8.6. Surrender and Exchange. The Committee may permit the
voluntary surrender of all or a portion of any Option to be conditioned upon the
granting to the Holder of a new Option for the same or a different number of
Shares as the Option surrendered, or may require such voluntary surrender as a
condition precedent to a grant of a new Option to such Holder. Subject to the
provisions of the Plan, such new Option shall be exercisable at the price,
during the period and on such other terms and conditions as are specified by the
Committee at the time the new Option is granted. Upon surrender, the Option
surrendered shall be canceled and the Shares previously subject to it shall be
available for the grant of other Options.
Section 8.7. Acceleration. Notwithstanding anything else in the Plan,
the Committee may, in its sole discretion, at any time or from time to time,
accelerate the time at which any Options mature or vest or waive any provisions
of the Plan relating to the manner of payment or procedures for the exercise or
maturity of any Option. Any such acceleration may be made effective (a) with
respect to one or more or all Holders, (b) with respect to some or all of
<PAGE> 29
the Shares subject to or forming the basis for any Option to any Holder or (c)
for a period of time ending at or before the expiration date of any Option.
Section 8.8. Actions by Committee After Grant. The Committee shall
have, subject to the written consent of the Holder where the action impairs or
adversely alters the rights of the Holder, the right, at any time and from time
to time after the Date of Grant of any Option, to modify the terms of any
Option.
ARTICLE 9. GENERAL PROVISIONS.
Section 9.1. No Right to Employment. Nothing in the Plan or any Option
or any instrument executed pursuant to the Plan will confer upon any Grantee any
right to continue to be employed by or provide services to the Company or affect
the right of the Company to terminate the employment of any Grantee or its other
relationship with any Grantee. Nothing in the Plan or any Option or any
instrument executed pursuant to the Plan will confer upon any Grantee any right
to continue to be a Director of the Company or affect the right of the
stockholders to terminate the directorship of any Grantee.
Section 9.2. Limited Liability. The liability of the Company under this
Plan or in connection with any exercise of any Option is limited to the
obligations expressly set forth in the Plan and in the grant of any Option, and
no term or provision of this Plan nor of any Option shall be construed to impose
any duty, obligation or liability on the Company not expressly set forth in the
Plan or any grant of any Option.
Section 9.3. Assumption of Options. Upon the dissolution or liquidation
of the Company, or upon a reorganization, merger or consolidation of the Company
with one or more other entities as a result of which the Company is not the
surviving entity, or upon a sale of substantially all the assets of the Company
to another entity, any Options outstanding theretofore granted or sold hereunder
must be assumed by the surviving or purchasing entity, with appropriate
adjustments as to the number and kind of shares and price.
Section 9.4. No Transfer. No Option or other benefit under the Plan may
be sold, pledged or otherwise transferred other than by will or the laws of
descent and distribution; and no Option may be exercised during the life of the
Grantee to whom it was granted except by such Grantee.
Section 9.5. Expenses. All costs and expenses incurred in connection
with the administration of the Plan including any excise tax imposed upon the
transfer of Shares pursuant to the exercise of an Option shall be borne by the
Company.
Section 9.6. Notices. Notices and other communications required or
permitted to be made under the Plan shall be in writing and shall be deemed to
have been duly given only if personally delivered or if sent by first class mail
addressed (a) if to a Holder, at his residence address set forth in the records
of the Company or (b) if to the Company, to its President at its principal
executive office.
Section 9.7. Third Parties. Nothing herein expressed or implied is
intended or shall be construed to give any person other than the Holders any
rights or remedies under this Plan.
Section 9.8. Saturdays, Sundays and Holidays. Where this Plan
authorizes or requires a payment or performance on a Saturday, Sunday or public
holiday, such payment or performance shall be deemed to be timely if made on the
next succeeding business day; provided, however, that this Section 9.8 shall not
be construed to extend the ten year period referred to in Sections 5.3, 6.3, and
7.3 above or the five year period referred to in Section 5.4(e) above.
Section 9.9. Rules of Construction. The captions and section numbers
appearing in this Plan are inserted only as a matter of convenience. They do not
define, limit or describe the scope or intent of the provisions of this Plan. In
this Plan words in the singular number include the plural, and in the plural
include the singular; and words of the masculine gender include the feminine and
the neuter and, when the sense so indicates, words of the neuter gender may
refer to any gender.
<PAGE> 30
Section 9.10. Governing Law. The validity, terms, performance and
enforcement of this Plan shall be governed by laws of the State of Delaware that
are applicable to agreements negotiated, executed, delivered and performed
solely in the State of Delaware.
Section 9.11. Effective Date of the Plan. The Plan shall become
effective upon its approval by the affirmative vote of the holders of a majority
of the outstanding Shares present or represented and entitled to vote at a
meeting of the stockholders of the Company. Options may be granted by the
Committee before such approval, but all Options so granted shall be conditioned
on such approval and shall be void if such approval is not given within 12
months after the Effective Date.
Section 9.12. Amendment and Termination. No Option shall be granted
under the Plan more than ten years after the Effective Date. The Board of
Directors may at any time terminate the Plan or make such amendment of the Plan
as it may deem advisable; provided, however, that no amendment shall be
effective without the approval of the stockholders of the Company by the
affirmative vote of the holders of a majority of the outstanding Shares present
or represented and entitled to vote at a meeting of stockholders duly held, if
it were to:
(a) authorize the grant of Options that may be exercised more
than ten years after the Date of Grant or that have an Exercise Price which is
less than the Fair Market Value of a Share on the Date of Grant; or
(b) materially increase the number of Shares which may be
issued under the Plan;
and, further, provided, however, that no amendment or termination of the Plan
shall be effective to materially impair the rights of a Holder under any Option
granted before the adoption of such amendment or termination by the Board of
Directors, without the written consent of such Holder. No termination or
amendment of this Plan or any Option nor waiver of any right or requirement
under this Plan or any Option shall be binding on the Company unless it is in a
writing duly entered into its records and executed by a duly authorized Officer.
<PAGE> 31
EXHIBIT A
EMPLOYEES' OPTION AGREEMENT
ROYAL PRECISION, INC.
3490 CLUBHOUSE DRIVE
JACKSON HOLE, WYOMING 83001
<<Date of Grant>>
<<Name of Grantee>>
<<Street>>
<<City, State, Zip>>
Congratulations. You have been granted a Stock Option under the
Company's Stock Option Plan dated October 5, 1997 (the "Plan") on the following
terms:
1. NUMBER OF SHARES. The number of Shares of Common Stock of the Company that
you may purchase under this Option is:<<Number>>
2. EXERCISE PRICE. The Exercise Price to purchase Shares under this Option is:
$<<Price>> per Share.
3. VESTING. [25%] of the Shares originally subject to this Option will vest
and become exercisable on the first [four] anniversaries of the date of
this Agreement if you have been an Employee of the Company continuously
from the date of this Agreement through the date when such portion of the
Option vests[ subject to the special rule referred to in paragraph 5
below]. No portion of this Option shall vest and become exercisable after
your employment with your Employer has terminated, regardless of the reason
for such termination.
4. LAPSE. This Option will lapse and cease to be exercisable upon the earliest
of:
(i) the expiration of 10 years from the date of this Agreement,
(ii) nine [six] months after you cease to be an Employee because of
your death or disability,
(iii) three months after a termination without cause of your
employment with your Employer, or
(iv) immediately upon termination of your employment with your
Employer by such Employer for cause or by your resignation.
5. TAXATION. This Option is [an Incentive Stock Option][a Nonqualified
Option].[ Because this Option is an Incentive Stock Option vesting of a
portion of this Option or of other Incentive Stock Options held by you may
be deferred under a special rule set forth in Section 5.4 (c) of the Plan.
If you exercise this Option and dispose of any of the Shares received by
you as a result of such exercise within two years from the date above or
within one year after the issuance of such Shares to you upon such
exercise, you must notify the Company of such disposition and the amount
received as a result thereof and pay or provide for the withholding taxes
on such disposition.] [You will have taxable income upon the exercise of
this Option. At that time, you must pay to the Company an amount equal to
the required federal, state, and local tax withholding less any withholding
otherwise made from your salary or bonus. You must satisfy any relevant
withholding requirements before the Company issues Shares to you.]
<PAGE> 32
6. EXERCISE. This Option may be exercised by the delivery of this Agreement,
with the notice of exercise attached hereto properly completed and signed
by you, to the Treasurer of the Company, together with the aggregate
Exercise Price for the number of Shares as to which the Option is being
exercised, after the Option has become exercisable and before it has ceased
to be exercisable. The Exercise Price must be paid in cash by (a) delivery
of a certified or cashier's check payable to the order of the Company in
such amount, (b) wire transfer of immediately available funds to a bank
account designated by the Company, or (c) reduction of a debt of the
Company to you. This Option may be exercised as to less than all of the
Shares purchasable hereunder, but not for a fractional share, nor may it be
exercised as to less than 100 Shares unless it is exercised as to all of
the Shares then available hereunder.
7. NO TRANSFER. This Option may not be sold, pledged nor otherwise transferred
other than by will or the laws of descent and distribution; and it may be
exercised during your lifetime only by you. This Agreement is neither a
negotiable instrument nor a security (as such term is defined in Article 8
of the Uniform Commercial Code).
8. NOT AN EMPLOYMENT AGREEMENT. This Agreement is not an employment agreement
and nothing contained herein gives you any right to continue to be employed
by or provide services to the Company or affects the right of the Company
to terminate your employment or other relationship with you.
9. PLAN CONTROLS. This Agreement is an Option Agreement (as such term is
defined in the Plan) under Article 5 of the Plan. The terms of this
Agreement are subject to, and controlled by, the terms of the Plan, as it
is now in effect or may be amended from time to time hereafter, which are
incorporated herein as if they were set forth in full. Any words or phrases
defined in the Plan have the same meanings in this Agreement. The Company
will provide you with a copy of the Plan promptly upon your written or oral
request made to its Treasurer.
10. MISCELLANEOUS. This Agreement sets forth the entire agreement of the
parties with respect to the subject matter hereof and it supersedes and
discharges all prior agreements (written or oral) and negotiations and all
contemporaneous oral agreements concerning such subject matter. This
Agreement may not be amended or terminated except by a writing signed by
the party against whom any such amendment or termination is sought. If any
one or more provisions of this Agreement shall be found to be illegal or
unenforceable in any respect, the validity and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired
thereby. This Agreement shall be governed by the laws of the State of
Delaware.
Please acknowledge your acceptance of this Agreement by signing the
enclosed copy in the space provided below and returning it promptly to the
Company.
ROYAL PRECISION, INC.
By: ______________________________________
<<Name of Officer>>, <<Title>>
Accepted and Agreed to as of
the date first set forth above:
__________________________________
<<Name of Grantee>>
<PAGE> 33
OPTION EXERCISE FORM
The undersigned hereby exercises the right to purchase ________________
shares of Common Stock of the Company pursuant to the Option Agreement dated
<<Date of Grant>> under the Company's Stock Option Plan dated October 5, 1997.
The undersigned hereby represents and warrants to the Company that he is not
exercising such rights or planning to transfer such shares while in the
possession of material inside information relating to the Company.
Date: ________________________
__________________________________
<<Name of Holder>>
_______________________________
Sign and complete this Option Exercise Form and deliver it to:
ROYAL PRECISION, INC.
Attn.: Treasurer
P.O. Box 25182
Jackson Hole, Wyoming 83001
together with the Exercise Price in cash by (a) delivery of a certified or
cashier's check payable to the order of the Company in such amount, (b) wire
transfer of immediately available funds to a bank account designated by the
Company, or (c) reduction of a debt of the Company to you.
<PAGE> 34
EXHIBIT B
CONSULTANTS' OPTION AGREEMENT
ROYAL PRECISION, INC.
3490 CLUBHOUSE DRIVE
JACKSON HOLE, WYOMING 83001
<<Date of Grant>>
<<Name of Grantee>>
<<Street>>
<<City, State, Zip>>
Congratulations. You have been granted a Stock Option under the
Company's Stock Option Plan dated October 5, 1997 (the "Plan") on the following
terms:
1. NUMBER OF SHARES. The number of Shares of Common Stock of the Company that
you may purchase under this Option is:<<Number>>
2. EXERCISE PRICE. The exercise price to purchase Shares under this Option is:
$<<Price>> per Share.
3. VESTING. [25%] of the Shares originally subject to this Option will vest
and become exercisable on the first [four] anniversaries of the date of
this Agreement if you have been a Consultant to the Company continuously
from the date of this Agreement through the date when such portion of the
Option vests. No portion of this Option shall vest and become exercisable
after the termination of the your consulting relation with your Employer,
regardless of the reason for such termination.
4. LAPSE. This Option will lapse and cease to be exercisable upon the earliest
of:
(i) the expiration of 10 years from the date of this Agreement,
(ii) nine months after you cease to be a Consultant because of your death
or disability,
(iii)three months after a termination without cause of your consulting
relationship with your Employer; or
(iv) immediately upon termination of your consulting relationship with your
Employer for cause or by your resignation.
5. TAXATION. This Option is a Nonqualified Option. You will have taxable
income upon the exercise of this Option. At that time, you must pay to the
Company an amount equal to the required federal, state, and local tax
withholding less any withholding otherwise made from compensation payable
to you. You must satisfy any relevant withholding requirements before the
Company issues Shares to you.
6. EXERCISE. This Option may be exercised by the delivery of this Agreement,
with the notice of exercise attached hereto properly completed and signed
by you, to the Treasurer of the Company, together with the aggregate
Exercise Price for the number of Shares as to which the Option is being
exercised, after the Option has become exercisable and before it has ceased
to be exercisable. The Exercise Price must be paid in cash by (a) delivery
of a certified or cashier's check payable to the order of the Company in
such amount, (b) wire transfer of immediately available funds to a bank
account designated by the Company, or (c) reduction of a debt of the
<PAGE> 35
Company to you. This Option may be exercised as to less than all of the
Shares purchasable hereunder, but not for a fractional share, nor may it be
exercised as to less than 100 Shares unless it is exercised as to all of
the Shares then available hereunder.
7. NO TRANSFER. This Option may not be sold, pledged nor otherwise transferred
other than by will or the laws of descent and distribution; and it may be
exercised during your lifetime only by you. This Agreement is neither a
negotiable instrument nor a security (as such term is defined in Article 8
of the Uniform Commercial Code).
8. NOT A CONSULTING AGREEMENT. This Agreement is not a consulting agreement
and nothing contained herein gives you any right to continue to provide
services to the Company or affect the right of the Company to terminate the
consulting relationship with you.
9. PLAN CONTROLS. This Agreement is an Option Agreement (as such term is
defined in the Plan) under Article 6 of the Plan. The terms of this
Agreement are subject to, and controlled by, the terms of the Plan, as it
is now in effect or may be amended from time to time hereafter, which are
incorporated herein as if they were set forth in full. Any words or phrases
defined in the Plan have the same meanings in this Agreement. The Company
will provide you with a copy of the Plan promptly upon your written or oral
request made to its Treasurer.
10. MISCELLANEOUS. This Agreement sets forth the entire agreement of the
parties with respect to the subject matter hereof and it supersedes and
discharges all prior agreements (written or oral) and negotiations and all
contemporaneous oral agreements concerning such subject matter. This
Agreement may not be amended or terminated except by a writing signed by
the party against whom any such amendment or termination is sought. If any
one or more provisions of this Agreement shall be found to be illegal or
unenforceable in any respect, the validity and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired
thereby. This Agreement shall be governed by the laws of the State of
Delaware.
Please acknowledge your acceptance of this Agreement by signing the
enclosed copy in the space provided below and returning it promptly to the
Company.
ROYAL PRECISION, INC.
By: ______________________________________
<<Name of Officer>>, <<Title>>
Accepted and Agreed to as of
the date first set forth above:
__________________________________
<<Name of Grantee>>
<PAGE> 36
OPTION EXERCISE FORM
The undersigned hereby exercises the right to purchase ________________
shares of Common Stock of the Company pursuant to the Option Agreement dated
<<Date of Grant>> under the Company's Stock Option Plan dated October 5, 1997.
Date: ________________________
__________________________________
<<Name of Holder>>
_______________________________
Sign and complete this Option Exercise Form and deliver it to:
ROYAL PRECISION, INC.
Attn.: Treasurer
P.O. Box 25182
Jackson Hole, Wyoming 83001
together with the Exercise Price in cash by (a) delivery of a certified or
cashier's check payable to the order of the Company in such amount, (b) wire
transfer of immediately available funds to a bank account designated by the
Company, or (c) reduction of a debt of the Company to you.
<PAGE> 37
EXHIBIT C
DIRECTORS' OPTION AGREEMENT
ROYAL PRECISION, INC.
3490 CLUBHOUSE DRIVE
JACKSON HOLE, WYOMING 83001
<<Date of Grant>>
<<Name of Grantee>>
<<Street>>
<<City, State, Zip>>
Congratulations. You have been granted a Stock Option under the
Company's Stock Option Plan dated October 5, 1997 (the "Plan") on the following
terms:
. NUMBER OF SHARES. The number of Shares of Common Stock of the Company that
you may purchase under this Option is:<<Number>>
2. EXERCISE PRICE. The exercise price to purchase Shares under this Option is:
$<<Price>> per Share.
3. VESTING. [25%] of the Shares originally subject to this Option will vest
and become exercisable on each Meeting Date which occurs more than six
months after the date of this Agreement if you are a Director at the time
of the adjournment of the meeting of stockholders held on such Meeting
Date.
4. LAPSE. This Option will lapse and cease to be exercisable upon the earliest
of:
(i) the expiration of 10 years from the date of this Agreement,
(ii) nine months after you cease to be a Director because of your
death or Disability,
(iii)immediately upon your resignation as a Director, or
(iv) three months after you cease to be a Director for any reason
other than your death, disability or resignation.
5. TAXATION. This Option is a Nonqualified Option. You will have taxable
income upon the exercise of this Option.
6. EXERCISE. This Option may be exercised by the delivery of this Agreement,
with the notice of exercise attached hereto properly completed and signed
by you, to the Treasurer of the Company, together with the aggregate
Exercise Price for the number of Shares as to which the Option is being
exercised, after the Option has become exercisable and before it has ceased
to be exercisable. The Exercise Price must be paid in cash by (a) delivery
of a certified or cashier's check payable to the order of the Company in
such amount, (b) wire transfer of immediately available funds to a bank
account designated by the Company, or (c) reduction of a debt of the
Company to you. This Option may be exercised as to less than all of the
Shares purchasable hereunder, but not for a fractional share, nor may it be
exercised as to less than 100 Shares unless it is exercised as to all of
the Shares then available hereunder.
<PAGE> 38
7. NO TRANSFER. This Option may not be sold, pledged nor otherwise transferred
other than by will or the laws of descent and distribution; and it may be
exercised during your lifetime only by you. This Agreement is neither a
negotiable instrument nor a security (as such term is defined in Article 8
of the Uniform Commercial Code).
8. NOT AN EMPLOYMENT AGREEMENT. This Agreement is not an employment agreement
and nothing contained herein gives you any right to continue to be a
Director of the Company or affect the right of the stockholders to
terminate your directorship.
9. PLAN CONTROLS. This Agreement is an Option Agreement (as such term is
defined in the Plan) under Article 7 of the Plan. The terms of this
Agreement are subject to, and controlled by, the terms of the Plan, as it
is now in effect or may be amended from time to time hereafter, which are
incorporated herein as if they were set forth in full. Any words or phrases
defined in the Plan have the same meanings in this Agreement. The Company
will provide you with a copy of the Plan promptly upon your written or oral
request made to its Treasurer.
10. MISCELLANEOUS. This Agreement sets forth the entire agreement of the
parties with respect to the subject matter hereof and it supersedes and
discharges all prior agreements (written or oral) and negotiations and all
contemporaneous oral agreements concerning such subject matter. This
Agreement may not be amended or terminated except by a writing signed by
the party against whom any such amendment or termination is sought. If any
one or more provisions of this Agreement shall be found to be illegal or
unenforceable in any respect, the validity and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired
thereby. This Agreement shall be governed by the laws of the State of
Delaware.
Please acknowledge your acceptance of this Agreement by signing the
enclosed copy in the space provided below and returning it promptly to the
Company.
ROYAL PRECISION, INC.
By: ______________________________________
<<Name of Officer>>, <<Title>>
Accepted and Agreed to as of
the date first set forth above:
__________________________________
<<Name of Grantee>>
<PAGE> 39
OPTION EXERCISE FORM
The undersigned hereby exercises the right to purchase ________________
shares of Common Stock of the Company pursuant to the Option Agreement dated
<<Date of Grant>> under the Company's Stock Option Plan, dated October 5, 1997.
Date: ________________________
__________________________________
<<Name of Holder>>
_______________________________
Sign and complete this Option Exercise Form and deliver it to:
ROYAL PRECISION, INC.
Attn.: Treasurer
P.O. Box 25182
Jackson Hole, Wyoming 83001
together with the Exercise Price in cash by (a) delivery of a certified or
cashier's check payable to the order of the Company in such amount, (b) wire
transfer of immediately available funds to a bank account designated by the
Company, or (c) reduction of a debt of the Company to you.
<PAGE> 40
ROYAL PRECISION, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas A. Schneider and Kenneth J. Warren,
and each of them, severally, with full power of substitution, as proxies for the
undersigned, and hereby authorizes them to represent and to vote, as designated
below, all of the shares of Common Stock of Royal Precision, Inc. held of record
by the undersigned on August 21, 1998, at the Annual Meeting of Stockholders to
be held on October 1, 1998, or any adjournment thereof, with all the power the
undersigned would possess if present in person.
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF ALL NOMINEES
NAMED BELOW AND A VOTE FOR PROPOSAL 2.
1. TO ELECT AS DIRECTORS THE NOMINEES NAMED BELOW FOR TERMS OF THREE YEARS AND
UNTIL THEIR SUCCESSORS ARE DULY ELECTED.
NOMINEES: Lawrence Bain Ronald L. Chalmers Leslie Reesing
[ ] FOR all nominees listed above (except as marked to the contrary)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME LISTED ABOVE.)
2. APPROVAL OF THE COMPANY'S STOCK OPTION PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting of Stockholders or any
adjournment thereof.
(Continued, and to be dated and signed, on the other side)
(Continued from the other side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED TO ELECT ALL NOMINEES LISTED ABOVE AND FOR PROPOSAL 2.
The undersigned hereby acknowledges receipt with this Proxy of a copy of the
Notice of Annual Meeting and Proxy Statement dated September 9, 1998 and a copy
of the Company's 1997 Annual Report to Stockholders.
Dated: _________________________ , 1998
-------------------------------
Signature
-------------------------------
Signature (if held jointly)
IMPORTANT: Please sign exactly
as name or names appear to the
left. When shares are held by
joint tenants, both should
sign. When signing as attorney,
executor, administrator,
trustee or guardian, please
give full title as such.
Corporations should sign in
their full corporate name by
their president or other
authorized officer. If a
partnership or other entity,
please sign in partnership or
other entity name by an
authorized person. PLEASE MARK,
SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
