SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
ROYAL PRECISION, INC.
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(Name of Registrant as Specified In Its Charter)
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(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:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
ROYAL PRECISION, INC.
15170 NORTH HAYDEN ROAD
SUITE 1
SCOTTSDALE, AZ 85260
ANNUAL MEETING OF STOCKHOLDERS
September 5, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Royal Precision, Inc. which will be held at 9:30 a.m., local time, on September
26, 2000 at 15170 North Hayden Road, Suite 1, Scottsdale, Arizona. The matters
on the meeting agenda are described in the Notice of 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,
/s/ Richard P. Johnston /s/ Thomas A. Schneider
Richard P. Johnston, Thomas A. Schneider,
Chairman of the Board President
<PAGE>
ROYAL PRECISION, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 26, 2000
TO THE STOCKHOLDERS OF
ROYAL PRECISION, INC.
The Annual Meeting of Stockholders of Royal Precision, Inc., a Delaware
corporation (the "Company"), will be held at 15170 North Hayden Road, Suite 1,
Scottsdale, Arizona, on September 26, 2000 at 9:30 a.m., local time, for the
following purposes:
1. To elect two directors to serve for terms of three years and one
director to serve for a term of one year or until their successors are duly
elected.
2. To amend the Royal Precision, Inc. Stock Option Plan to increase the
aggregate number of shares in respect to which options may be granted under the
Plan from 750,000 to 1,500,000.
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 11, 2000
as the record date for the determination of stockholders entitled to notice of
and an opportunity 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
/s/ Richard P. Johnston /s/ Thomas A. Schneider
Richard P. Johnston, Thomas A. Schneider,
Chairman of the Board President
Scottsdale, Arizona
September 5, 2000
<PAGE>
ROYAL PRECISION, INC.
----------------------------------
PROXY STATEMENT
DATED SEPTEMBER 5, 2000
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ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 26, 2000
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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 of proxies by the Board of Directors of the Company (the
"Board of Directors") for use in voting at the Annual Meeting of Stockholders of
the Company (the "Annual Meeting") to be held on September 26, 2000 and any
adjournment thereof. This Proxy Statement and the accompanying proxy card are
first being mailed to stockholders on or about September 5, 2000.
VOTING RIGHTS. Stockholders of record at the close of business on August
11, 2000 (the "Record Date") are entitled to notice of and to vote at the Annual
Meeting. As of the Record Date, there were 5,678,956 shares of Common Stock of
the Company, par value $.001 per share ("Common Stock"), issued and outstanding.
Each stockholder of record on the Record Date 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
recommendation of the Board of Directors, which is (i) FOR the election of
Raymond J. Minella, Danny Edwards and Richard P. Johnston as directors of the
Company; and (ii) FOR the amendment to the Royal Precision, Inc. Stock Option
Plan (the "Plan") to increase the number of shares authorized for issuance under
the Plan from 750,000 to 1,500,000 (the "Amendment").
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 corporate Secretary of 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.
TABULATION. A quorum must be present at the Annual Meeting in order for any
valid action, including the election of directors and voting on other matters
presented to the meeting, other than adjournment, to be taken thereat. 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 for purposes of determining
whether there is a 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"). If shares are held in street
name through a broker or other nominee, the broker or nominee may not be
permitted to exercise voting discretion under certain circumstances. Brokers
have the authority under NASDAQ Exchange rules to vote customers' unvoted shares
on "routine" matters including the election of directors. However, brokers do
not typically have the authority to vote customers' unvoted shares for
"non-routine" matters, including the Amendment to the Plan. Proxies signed and
submitted by brokers which have not been voted on certain matters are referred
to as broker non-votes. Such proxies count toward the establishment of a quorum,
but will not be considered as present with respect to matters not voted upon.
<PAGE>
Under Section 216 of the Delaware General Corporation Law 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.
PROPOSAL 1
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 and one year, respectively, 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 a substitute nominee as
designated by the Board of Directors.
BUSINESS EXPERIENCE
NOMINEES OF THE BOARD OF DIRECTORS FOR ELECTION TO THREE YEAR TERMS AT THE
2000 ANNUAL MEETING
RAYMOND J. MINELLA, age 50, has been a director of the Company since its
organization in 1996 and served as Chairman of the Board from August 1998 to
October 1999. Since 1990, Mr. Minella has been an indirect managing partner of
Berenson Minella & Company, L.P., an investment and merchant banking firm. Mr.
Minella is a director of NEXClaim, Inc., an insurance recovery business, and a
member of the board of the National Network of Estate Planning Attorneys,
located in Denver, Colorado.
DANNY EDWARDS, age 49, 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 when it became a subsidiary of the Company, and served as its 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.
NOMINEE OF THE BOARD OF DIRECTORS FOR ELECTION TO A ONE YEAR TERM AT THE
2000 ANNUAL MEETING
RICHARD P. JOHNSTON, age 69, 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 and from October 1999 to the present. Mr. Johnston was
Chairman of the Board of Merbanco, Inc., a merchant banking company, from 1991
to 1998, 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 is a director of Myers Industries, Inc. (MYE: AMEX), a plastic and
rubber products manufacturer. Richard P. Johnston is the father of David E.
Johnston.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE ELECTION OF EACH OF THE DIRECTOR NOMINEES.
MEMBER WHOSE TERM CONTINUES UNTIL THE 2001 ANNUAL MEETING
CHARLES S. MECHEM, JR., age 70, was elected as a director in March 2000 to
fill a vacancy on the Board. Mr. Mechem retired as Chairman of Convergys
Corporation, a provider of outsourced customer management services in May 2000,
a post he was elected to in January 1999. He served as Chairman of Cincinnati
Bell Inc., a telecommunications services holding company, from April 1996 to
December 1998 and has been a consultant with Arnold Palmer Enterprises since
March 1996. Mr. Mechem retired in December 1995 as Commissioner of the Ladies
Professional Golf Association and is now Commissioner Emeritus of that
organization. Mr. Mechem is a director of Arnold Palmer Golf Company, Convergys
Corporation, Mead Corporation, a manufacturer and seller of paper and wood
products, and Ohio National Life Insurance Company.
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<PAGE>
MEMBERS WHOSE TERMS CONTINUE UNTIL THE 2002 ANNUAL MEETING
DAVID E. JOHNSTON, age 45, served as Vice President of the Company from its
organization in 1996 until October 1997, Executive Vice President, Chief
Operating Officer from October 1997 until August 1998, and Executive Vice
President, Special Projects from August 1998 to October 1999. Mr. Johnston has
been a director of the Company since June 1996. Mr. Johnston is Executive
Director of the Johnston Family Charitable Foundation, a private charitable
foundation. 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.
THOMAS A. SCHNEIDER, age 40, President, Chief Operating Officer of the
Company, 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.
EXECUTIVE OFFICERS
The principal occupation of each other executive officer of the Company for
the past five years is as follows:
RONALD L. CHALMERS, age 55, served as 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., the Company's
shaft manufacturing subsidiary. He was a director of the Company from June 1996
to August 1999 and served as Executive Vice President -
Administration/Manufacturing of the Company from October 1997 to October 1999
and has served as Executive Vice President - Manufacturing since October 1999.
ANTHONY J. MONTGOMERY, age 37, 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. in 1996 and 1997,
served as Vice President, Sales of the Company from April 1998 to July 1999 and
has served as Executive Vice President of Sales and Marketing since July 1999.
KEVIN L. NEILL, age 31, is a certified public accountant and served as
Corporate Controller of the Company from June 1998 until January 1999, Vice
President - Finance from January 1999 to November 1999, and has been Vice
President - Finance and Chief Financial Officer since November 1999. 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.
BOARD COMMITTEES AND MEETINGS
The Board of Directors held seven meetings in fiscal 2000 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.
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 (comprised of Danny Edwards (Chair), Raymond J. Minella
and Richard P. Johnston during fiscal year 2000), assists the Company's Board of
Directors in fulfilling its responsibility to oversee the Company's financial
reporting process, including the quality and integrity of the Company's
financial reports and other financial information; the Company's systems of
internal accounting and financial controls; and the annual independent audit of
the Company's financial statements. The Audit Committee held two meetings in
fiscal 2000.
3
<PAGE>
The Personnel and Compensation Committee (comprised of Raymond J. Minella
(Chair), Richard P. Johnston and Danny Edwards during fiscal year 2000) 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;
however, 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. The Personnel and Compensation Committee held one meeting in fiscal
2000.
DIRECTORS' COMPENSATION
Non-employee directors receive a quarterly retainer of $2,500 as well as
reimbursement for certain travel expenses incurred in connection with attending
meetings. Pursuant to the Plan, each non-employee member of the Board of
Directors receives (i) upon his initial election, an option for 20,000 shares
and (ii) an annual grant of options to purchase 5,000 shares if he attends 75%
of the meetings of the directors or committees upon which he serves, at a price
equal to the fair market value of such shares on the day preceding the date of
grant.
PROPOSAL 2
AMENDMENT TO THE ROYAL PRECISION, INC. STOCK OPTION PLAN
At the Annual Meeting, the Company will seek stockholder approval of an
amendment to the Royal Precision, Inc. Stock Option Plan to increase the number
of shares of Common Stock authorized for issuance under the Plan from 750,000 to
1,500,000. The Board of Directors believes that the increase in the number of
shares authorized for issuance under the Plan is necessary for optimal use of
the Plan. After such increase, the Board believes that the Plan can continue to
be used in the future to more closely link the personal interest of participants
with the performance of the Company and to attract and retain the best available
personnel. THE BOARD OF DIRECTORS HAS APPROVED THE AMENDMENT TO THE PLAN AND
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE AMENDMENT.
SUMMARY OF THE PLAN
The Plan was adopted by the Board of Directors on October 5, 1997, approved
by the Company's stockholders at their 1998 Annual Meeting on October 1, 1998
and amended by the Directors on November 30, 1999 to effect certain
administrative changes. The Plan was adopted to provide a means by which
employees, directors and consultants of the Company and its affiliates could be
given an opportunity to purchase stock in the Company, to assist in retaining
the services of such persons, and to provide incentives for such persons to
exert maximum efforts for the success of the Company. There are currently 49
employees, six directors, and five consultants eligible to be participants in
the Plan. The options may be either incentive options or nonqualified options.
4
<PAGE>
The following table sets forth options that have been granted at an
exercise price of $2.25 per share subject to approval of the Plan by the
Stockholders. Other future grants are not yet determinable.
Number
Name and Position Dollar Value* of Shares
----------------- ------------- ---------
Raymond J. Minella, Chief Executive Officer -- --
Richard P. Johnston, Chief Executive Oficer -- --
Thomas A. Schneider, President $225,000 100,000
Anthony J. Montgomery, Executive Vice President $180,000 80,000
Ronald L. Chalmers, Executive Vice President -- --
Kevin L. Neill, Vice President-Finance -- --
Executive Group $405,000 180,000
Non-Executive Director Group -- --
Non-Executive Officer Employee Group -- --
----------
* Represents number of shares under option multiplied by exercise price.
On August 11, 2000, the last reported sale price of the Common Stock on the
Nasdaq National Market was $2.938 per share.
ADMINISTRATION
Unless the Board of Directors designates another of its committees to
administer the Plan, the Plan shall be administered by (i) a committee
consisting of those members of the Personnel and Compensation Committee of the
Board of Directors who are disinterested persons and are outside directors or
(ii) the Board of Directors. The Plan is currently administered by the Board of
Directors.
Subject to the express provisions of the Plan, the Committee has the
authority, in its discretion, to (i) determine the participants, grant options,
determine whether tax offset payments should be authorized and, if authorized,
the percentage of such tax offset payments, and determine the timing, pricing
and amount of the options; (ii) define, prescribe, amend and rescind rules,
regulations, procedures, terms and conditions relating to the Plan; (iii) 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 (iv) review and
resolve all claims of employees, consultants, directors, grantees, holders and
participants.
PROVISIONS APPLICABLE TO OPTIONS
The maximum number of shares with respect to which options may be granted
during any fiscal year of the Company to any employee is 250,000.
An option granted under the Plan may not have an exercise price less than
the fair market value of the Common Stock at the close of business on the day
preceding the date of grant or an exercise period that exceeds 10 years from the
date of grant. An incentive stock option granted under the Plan is subject to
certain other limitations which allow the option holder to qualify for favorable
tax treatment.
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 Company stock 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. No option may be exercised as to less than 100 shares unless it is
exercised as to all of the shares then available thereunder.
An option is not transferable except by will or by the laws of descent and
distribution and may be exercised, during the lifetime of the optionee, only by
the optionee or by the optionee's guardian or legal representative.
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<PAGE>
If no express determination of the times when options are exercisable is
made at the time of grant, 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. The Committee may at any time, in its sole
discretion, 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.
Unless provided otherwise at the time of grant, 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 10 years from the date of grant,
(ii) nine months after the grantee ceases to be an employee, director or
consultant because of death or disability, (iii) three months after the
termination without cause of the grantee's employment with the Company, or (iv)
immediately upon termination of the grantee's employment with the Company for
cause or by the grantee's resignation.
TAX CONSEQUENCES
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 (as defined in the Plan) received upon the
exercise of an 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 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 Internal Revenue 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. 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.
The Plan is not qualified under Section 401(a) of the Internal Revenue Code
and is not subject to the Employee Retirement Income Security Act of 1974. The
Company must withhold U.S. federal, state, and local income tax and social
security taxes on the ordinary income realized upon the exercise of an option.
REQUIRED VOTE
Approval of the Amendment requires the affirmative vote of a majority of
shares of Common Stock present at the Annual Meeting in person or by proxy.
Abstentions are considered present for this proposal, so they will have the same
effect as votes against the Amendment. Broker non-votes are not considered
present for this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL OF THE AMENDMENT.
6
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table sets forth, as of July 31, 2000, 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 five percent
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.
NUMBER OF PERCENT
BENEFICIAL OWNER SHARES (a) OF CLASS
---------------- ---------- --------
Ronald L. Chalmers (c) 144,147(c) 2.4%
Anthony J. Montgomery (d) 71,191(d) 1.2%
Kevin L. Neill (e) 10,833(e) (b)
Thomas A. Schneider (f) 66,673(f) 1.1%
Danny Edwards (g) 599,152(g) 10.1%
David E. Johnston (h) 219,875(h) 3.7%
Richard P. Johnston (i) 792,609(i) 13.4%
Charles S. Mechem, Jr. (j) 3,200(j) (b)
Raymond J. Minella (k) 709,696(k) 12.0%
Jeffrey L. Berenson (l) 606,609(l) 10.2%
Christopher A. Johnston (m) 1,286,313(m) 21.7%
Johnston Family Charitable Remainder
Unitrust # 3 (n) 731,709(n) 12.4%
Kenneth J. Warren (o) 364,995(o) 6.2%
All directors and officers as a group
(10 persons) 2,982,375(p) 50.4%
----------
(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. Chalmers' address is c/o FM Precision Golf Manufacturing Corp., P. O.
Box 298, Torrington, CT 06790. This amount includes 18,886 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.
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<PAGE>
(d) Mr. Montgomery's address is 15170 North Hayden Road, Suite 1, Scottsdale,
AZ 85260. This amount includes 29,438 shares issuable upon the exercise of
options which are exercisable within 60 days. Mr. Montgomery's 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.
(e) Mr. Neill's address is 15170 North Hayden Road, Suite 1, Scottsdale, AZ
85260. This amount includes 10,833 shares issuable upon the exercise of
options which are exercisable within 60 days.
(f) Mr. Schneider's address is 15170 North Hayden Road, Suite 1, Scottsdale, AZ
85260. This amount includes 55,226 shares issuable upon the exercise of
options which are exercisable within 60 days.
(g) Mr. Edwards' address is 15990 North Greenway-Hayden Loop #900, Scottsdale,
AZ 85260. This amount includes (i) 62,550 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 to a former officer and director of the
Company, the right to purchase, which right has not been exercised. This
amount does not include 4,000 shares owned directly by Mr. Edwards' spouse
as to which shares Mr. Edwards disclaims beneficial ownership.
(h) 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.
(i) Mr. Johnston's address is 4350 Greens Place, Wilson, WY 83014. This amount
includes (i) 731,709 shares owned by Richard P. Johnston and Jayne A.
Johnston, as Trustees of the Johnston Family Charitable Remainder Unitrust
#3, over which shares Mr. Johnston and his wife share voting and
dispositive power; (ii) 35,848 shares owned by Richard P. Johnston and
Jayne A. Johnston, as Trustees of the Johnston Family Living Trust u/a
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 344,472 shares which have been pledged to RPJ/JAJ Partners,
Ltd., of which Richard P. Johnston and Jayne A. Johnston are general
partners, under a pledge agreement which grants voting and dispositive
power over such shares upon the occurrence of certain contingencies which
has not yet occurred.
(j) Mr. Mechem's address is 201 E. 4th Street, 20th floor, Cincinnati, Ohio
45202.
(k) Mr. Minella's address is c/o Berenson Minella & Co., 667 Madison Avenue,
New York, NY 10021. This amount includes (i) 9,781 shares owned by Berenson
Minnela & Company, LLC, of which Mr. Minella is a member; (ii) 96,343
shares owned by Berenson Minella & Co. 1993 Profit Sharing Plan; (iii)
157,295 shares owned by Berenson Minella & Co. 1996 Profit Sharing Plan and
(iv) 8,350 shares issuable upon the exercise of options which are
exercisable within 60 days.
(l) Mr. Berenson's address is c/o Berenson Minella & Co., 667 Madison Avenue,
New York, NY 10021. This amount includes (i) 9,781 shares owned by Berenson
Minnela & Company, LLC, of which Mr. Berenson is a member; (ii) 96,343
shares owned by Berenson Minella & Co. 1993 Profit Sharing Plan and (iii)
157,295 shares owned by Berenson Minella & Co. 1996 Profit Sharing Plan.
(m) Mr. Johnston's address is 3490 Clubhouse Drive, Suite 102, Jackson Hole, WY
83001. This amount does not include 403,478 shares owned by Mr. Warren and
others subject to a stockholders agreement which grants Mr. Johnston a
right of first refusal and a call right, which rights are not currently
exercisable.
(n) The address of the Johnston Family Charitable Remainder Unitrust #3 is 4350
Greens Place, Wilson, WY 83014. (See note (i).)
(o) Mr. Warren's address is 5920 Cromdale Drive, Suite 1, Dublin, OH 43017.
This amount includes (i) 20,323 shares issuable upon the exercise of
options which are exercisable within 60 days and (ii) 344,472 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
has not yet occurred. Mr. Warren is a party to a stockholders agreement
under which the holders of 59,006 shares have granted him and Christopher
8
<PAGE>
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 shares to Christopher A. Johnston, which rights are not
currently exercisable.
(p) This amount includes 241,769 shares issuable upon the exercise of options
which are exercisable within 60 days. This amount does not include the
shares excluded by note (g) above.
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 and the four most
highly paid executive officers, whose total annual salary and bonus exceeded
$100,000 during the last fiscal year (collectively, the "Named Executives"), for
the three fiscal years ended May 31, 2000.
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
--------
Securities
Annual Compensation Underlying
------------------- Options All Other
Name and Principal Position Year Salary Bonus (shares) Compensation
--------------------------- ---- -------- ------- -------- ------------
<S> <C> <C> <C> <C> <C>
Raymond J. Minella (*) 1998 $ 10,000 -- -- --
1999 $ 7,500 -- -- --
2000 $ 10,000 -- 5,000 --
Richard P. Johnston (*) 1998 $ 10,000 -- -- --
1999 $ 7,500 -- -- --
2000 $ 10,000 -- 5,000 --
Thomas A. Schneider, President 1998 $110,000 -- -- --
and Chief Operating Officer 1999 $110,000 $35,000 50,000 --
2000 $146,462 $82,500 120,000 --
Ronald L. Chalmers, Executive 1998 $ 90,000 -- -- $16,623
Vice President 1999 $ 95,047 $ 5,000 10,000 $ 9,746
2000 $ 95,000 $73,625 35,000 $15,435
Anthony J. Montgomery, Executive 1998 $ 72,000 $ 3,000 -- $ 6,649
Vice President 1999 $ 88,316 $25,000 5,000 $30,376
2000 $135,577 $77,000 100,000 --
Kevin L. Neill, Vice President - Finance 1998 -- -- -- --
1999 $ 63,173 $ 7,500 10,000 --
2000 $ 81,558 $28,000 45,000 --
</TABLE>
----------
(*) Raymond J. Minella served as Chairman of the Board from August 1998 to
August 1999 at which time Richard P. Johnston succeeded him as Chairman of
the Board. The Chairman of the Board, by reason of his position, functions
as the "chief executive officer" of the Company. The Chairman of the Board
receives no compensation (other than his normal directors fees of $2,500
per quarter) for serving as such "chief executive officer".
9
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to options
to purchase securities from the Company granted to the Named Executives during
fiscal year 2000:
<TABLE>
<CAPTION>
Number of % of Total
Securities Options
Underlying Granted to
Options Employees in Exercise Price Expiration Grant Date
Name Granted(#) Fiscal Year ($/Share) Date Present Value(3)
---- ---------- ----------- --------- ---- ----------------
<S> <C> <C> <C> <C> <C>
Raymond J. Minella 5,000(1) .8% $ 3.125 5/25/10 $ 11,375
Richard P. Johnston 5,000(1) .8% $ 3.125 5/25/10 $ 11,375
Thomas A. Schneider 55,000 $ 2.625 6/23/09 $105,105
65,000 $ 2.75 1/25/10 $130,130
--------
Total 120,000(2) 19.5%
Ronald L. Chalmers 15,000 $2.0625 7/7/09 $ 22,530
5,000 $ 1.875 8/16/04 $ 5,110
10,000 $ 2.75 1/25/10 $ 20,020
5,000 $ 3.125 5/25/10 $ 11,375
--------
Total 35,000(2) 5.7%
Anthony J. Montgomery 50,000 $ 2.625 6/23/09 $ 95,550
50,000 $ 2.75 1/25/10 $100,100
--------
Total 100,000(2) 16.2%
Kevin L. Neill 20,000 $2.0625 7/7/99 $ 30,040
25,000 $ 2.75 1/25/10 $ 50,050
--------
45,000(2) 7.3%
--------
</TABLE>
----------
(1) Options vest 25% on each Annual Meeting Date of Stockholders held more than
six months after grant.
(2) Options vest one-third on each of the first three anniversaries of the date
of grant.
(3) The Grant Date Present Value was determined using the standard application
of the Black-Scholes option pricing methodology using the following
weighted average assumptions: volatility 54.8%, dividend yield 0%, and a
risk free interest rate of 6.6% based on the options being outstanding for
approximately 10 years (except for the option granted to Ronald L. Chalmers
for 5,000 shares expiring in August 2004, for which five years was used).
The Grant Date Present Values do not take into account risk factors such as
non-transferability and limits on exercisability. In assessing the Grant
Date Present Values indicated in the above table, it should be kept in mind
that no matter what theoretical value is placed on an option on the date of
grant, the ultimate value of the option is dependent on the market value of
the Common Stock at a future date, and the extent, if any, by which such
market value exceeds the exercise price on the date of exercise.
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, 2000.
10
<PAGE>
Value of Unexercised
Number of Securities In-the-Money Options at
Underlying Unexercised Fiscal Year-End:
Options at Fiscal Year-End: Exercisable/
Name Exercisable/Unexercisable Unexercisable
---- ------------------------- -------------
Raymond J. Minella 8,350/5,000 $22,528/$0
Richard P. Johnston 25,052/5000 $67,590/$0
Thomas A. Schneider 36,728/153,500 $0/$29,435
Ronald L. Chalmers 13,853/36,700 $24,019/$22,570
Anthony J. Montgomery 12,756/103,350 $31,825/$28,829
Kevin L. Neill 2,900/52,100 $1,861/$25,989
SEVERANCE AGREEMENTS
The Company has entered into severance agreements with Thomas A. Schneider,
Anthony J. Montgomery and Kevin L. Neill, which take effect if the employee's
employment is terminated by the Company (or any purchaser or successor to the
Company) for any reason, other than cause, or there is a change in the terms of
the employee's employment resulting in his relocation from the Phoenix area or
travel requirements by such employee of more than 10 days per month; a reduction
in pay; demotion, or change in authority or duties. These agreements provide for
severance pay of twelve months, nine months and seven months, respectively, to
be paid at the time of termination of employment, paid coverage under the
Company's existing medical and dental plans for like terms, acceleration of
vesting of all outstanding options held by the employee and extension of the
exercise period of such options for one year.
REPORT OF THE PERSONNEL AND COMPENSATION COMMITTEE
The following report does not constitute soliciting material and should not
be deemed filed or incorporated by reference to any other Company filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent specifically incorporated.
During fiscal year 2000, Raymond J. Minella, Danny Edwards and Richard P.
Johnston functioned as the Personnel and Compensation Committee (the
"Committee"). This Committee reviews and approves the Company's compensation
philosophy and policies and the application of such policies to the compensation
of the executive officers. The Company's philosophy is to link executive pay to
performance that enhances stockholder value. The goals of the compensation
program are to provide compensation levels necessary to attract and retain
exceptional talent, to motivate the executives to achieve the Company's business
goals, and to recognize individual contributions as well as overall business
results.
The key elements of the Company's executive compensation are base salary,
performance based bonus and long-term incentives in the form of stock options.
The Committee does not use a formula to weight the various factors it considers.
The Company's policies with respect to each of the elements are discussed below.
11
<PAGE>
BASE SALARIES
Base salaries for executive officers are determined by evaluating the
responsibilities of the position and the experience of the individual, and by
reference to the competitive marketplace for executive talent, including a
comparison to base salaries for comparable positions at other companies included
in the Company's peer group. Base salary adjustments are determined annually by
evaluating the financial performance and, where appropriate, certain
non-financial performance measures of the Company, and the individual
performance of each executive officer.
Richard P. Johnston is the current "acting chief executive officer" by
virtue of his serving as Chairman of the Board. From the beginning of the last
fiscal year until Mr. Johnston's election in August 1999, Raymond J. Minella
served in the same capacity. This is a part-time position and the Chairman of
the Board does not receive compensation in such capacity. Thomas A. Schneider is
the President and Chief Operating Officer and in the fiscal year ended May 31,
2000, his base salary was adjusted based on both his individual performance and
market comparisons, including companies in the Peer Index referred to below. The
Committee also took into account the longevity of Mr. Schneider's service to the
Company and its belief that Mr. Schneider is an excellent representative of the
Company by virtue of his stature in the golfing industry.
EXECUTIVE BONUSES
The Company's executive officers are eligible for an annual cash bonus.
Individual and corporate performance objectives are established at the beginning
of each year by the Committee. Eligible executives are assigned target bonus
levels. The corporate performance measure for bonus payments for the fiscal year
ended may 31, 2000 was based on the Company's pre-tax profitability.
Mr. Schneider's bonus for fiscal 2000 was based on the role of Mr.
Schneider in promoting the long-term strategic growth of the Company and the
Company's profitability during the year. In fiscal 2000, the Company met or
exceeded its primary profitability goals.
STOCK OPTIONS
The purpose of the Company's stock option plan is to enable the Company to
attract and retain capable employees, officers, directors and consultants and to
provide them with long-term incentives to continue their service to the Company,
align their interests with those of the stockholders, to maximize the value of
the Company to its stockholders and to aid the employee in acquiring an
ownership interest in the Company.
The guidelines used in fiscal 2000 by the Committee in making the stock
option grants to Mr. Schneider and other executive officers of the Company took
into account the duties and responsibilities of the individual, their potential
impact on the performance of the Company, individual performance, years of
service to the Company, the number of outstanding options and the size of prior
option grants.
In fiscal 2000, Mr. Schneider received options to purchase 120,000 shares
at an exercise price equal to the fair market value of a share on the day
preceding the date of grant.
POLICY ON DEDUCTIBILITY OF COMPENSATION
The Budget Reconciliation Act of 1993 amended the Internal Revenue Code to
add Section 162(m) which bars a deduction to any publicly held corporation for
compensation paid to a "covered employee" in excess of $1 million per year.
Generally, the Company intends that compensation paid to its "covered employees"
shall be deductible to the fullest extent permitted by law.
12
<PAGE>
CONCLUSION
Through the programs described above, a significant portion of the
Company's executive compensation is linked directly to corporate and individual
performance and stock price appreciation. The Compensation Committee intends to
continue the policy of linking executive compensation to corporate performance
and returns to stockholders.
PERSONNEL AND COMPENSATION COMMITTEE
Raymond J. Minella, Chair
Richard P. Johnston
Danny Edwards
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Richard P. Johnston, Raymond J. Minella and Danny Edwards, all of whom are
outside directors, served on the Personnel and Compensation Committee in fiscal
year 2000. Mr. Johnston also served as Chairman of the Board of the Company and
as a director of each of its subsidiaries. No director or executive officer of
the Company serves on the compensation committee of the board of directors of
any company for which Messrs. Johnston, Minella and Edwards serve as directors.
The Company entered into a Personal Services Agreement with Danny Edwards
dated August 29, 1999. Under the Agreement, Mr. Edwards was to make himself
available to consult with the Company on matters relating to its business and in
addition, agreed to promote the Company and its products, make a presentation at
all of his or Profile Sports' golf schools on the benefits of the Company's
products, permit four persons designated by the Company to attend one of his or
Profile Sports' golf schools during the term of the Agreement at no cost, and to
use exclusively the Company's equipment supplied to him by the Company. The
Company agreed to pay Mr. Edwards $5,000 per month and provide him with health
insurance for his services. The term of the Agreement expires May 31, 2001. Mr.
Edwards agreed not to compete with the Company during the term of the agreement
or until the date of the termination of Mr. Edwards' retention by the Company,
whichever comes later.
See "CERTAIN TRANSACTIONS" below.
13
<PAGE>
STOCK PERFORMANCE GRAPH
The performance graph compares the cumulative total shareholder return on
the Company's Common Stock with the cumulative total return for the NASDAQ Stock
Market (the "Market Index") and an index of NASDAQ Stocks (SIC 3949) - Sporting
and Athletic Goods (the "Peer Index"), assuming an investment of $100 on
September 3, 1997 (the date the Common Stock commenced trading on the NASDAQ
Stock Market) in each of the Company's Common Stock, the stock comprising the
Market Index and the stock comprising the Peer Index.
Company/Index 9/3/97 5/31/98 5/31/99 5/31/00
------------- ------ ------- ------- -------
Royal Precision $100 $ 60 $ 35 $ 34
Market Index $100 $106 $144 $202
Peer Index $100 $111 $ 90 $ 79
CERTAIN TRANSACTIONS
The Company paid legal fees of $168,000 to Kenneth J. Warren, a director
(until his resignation in September 1999), Secretary and general counsel, during
the fiscal year ended May 31, 2000.
The Company entered into a Personal Services Agreement with Danny Edwards
dated August 29, 1999. Under the Agreement, Mr. Edwards was to make himself
available to consult with the Company on matters relating to its business and in
addition, agreed to promote the Company and its products, make a presentation at
all of his or Profile Sports' golf schools on the benefits of the Company's
products, permit four persons designated by the Company to attend one of his or
Profile Sports' golf schools during the term of the Agreement at no cost, and to
use exclusively the Company's equipment supplied to him by the Company. The
Company agreed to pay Mr. Edwards $5,000 per month and provide him with health
insurance for his services. The term of the Agreement expires May 31, 2001. Mr.
Edwards agreed not to compete with the Company during the term of the agreement
or until the date of the termination of Mr. Edwards' retention by the Company,
whichever comes later.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than 10% of the
Company's Common Stock to file reports of ownership and changes in ownership
with the Securities and Exchange Commission ("SEC"). Executive officers,
directors and greater than 10% stockholders are required by SEC regulations to
furnish the Company with all copies of Section 16(a) forms they file.
14
<PAGE>
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during the fiscal year
ended May 31, 2000, all such filing requirements were complied with in a timely
fashion.
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP served as the Company's independent accountants for the
fiscal year ended May 31, 2000 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 LLP as the
Company's independent accountants for the 2001 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 2001 must be received by the Company before May 8, 2001, at its executive
offices at 15170 North Hayden Road, Suite 1, Scottsdale, AZ 85260, Attention:
President.
15
<PAGE>
ROYAL PRECISION, INC.
STOCK OPTION PLAN
----------
OCTOBER 5, 1997
(RESTATED TO REFLECT AMENDMENTS ADOPTED NOVEMBER 30, 1999 AND MAY 25, 2000)
----------
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 Board of Directors or a 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.
"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.
<PAGE>
"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.
"TAX OFFSET PAYMENT" means a payment in cash which may be authorized by the
Committee to be paid to a Grantee of a Nonqualified Option in an amount
determined by the following formula:
1-[A + (1-A) + B]
----------------- - C = D
C
where "A" is the maximum federal marginal income tax rate imposed on
individuals, "B" is the maximum marginal income tax rate imposed on individuals
by the State in which the Grantee is domiciled, "C" is the difference between
the Exercise Price and the Fair Market Value of a Share at the time of exercise,
times the number of Shares subject to such exercise, and "D" is the amount of
-2-
<PAGE>
the Tax Offset Payment. If at the time of exercise of a Nonqualified Option with
respect to which a Tax Offset Payment has been authorized, in the reasonable
opinion of the chief financial officer of the Company, (a) the Company may
offset from income an amount equal to the full amount of the Tax Offset Payment,
the Tax Offset Payment shall be paid at such time by first paying any
withholding taxes due with respect to the exercise and grant of the Tax Offset
Payment, and then by paying to the Grantee the balance, or (b) the Company may
not offset from income an amount equal to the full amount of the Tax Offset
Payment, only that portion of the Tax Offset Payment, if any, equal to the
amount of the tax benefit available to the Company or its stockholders (the
"Partial Tax Offset Payment") shall be paid at such time by first paying any
withholding taxes due with respect to the exercise and grant of the Tax Offset
Payment, and then by paying to the Grantee the balance, if any, of the Partial
Tax Offset Payment. The balance of the Tax Offset Payment shall be paid to such
Grantee as and when the Company may utilize the tax benefit resulting therefrom.
"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 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) 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 or
(b) the Board of Directors.
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, determine whether Tax Offset Payments should be authorized and, if
authorized, the percentage of such Tax Offset Payment, and determine the timing,
pricing and amount of the Options; (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 1,500,000, which number
----------
-3-
<PAGE>
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 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 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.
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Section 4.3. ARTICLE 7. Only Directors 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, which Participants will be granted Tax
Offset Payments and the percentage of Tax Offset Payments, the manner of
payment, 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:
(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
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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 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
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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 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
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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 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
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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.
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.
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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 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, all Options shall immediately
vest and may thereafter, but not 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, be exercised in whole or in part 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.
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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 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.
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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.
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.
-12-
<PAGE>
EXHIBIT A
EMPLOYEES' OPTION AGREEMENT
ROYAL PRECISION, INC.
15170 N. HAYDEN ROAD, SUITE 1
SCOTTSDALE, AZ 85260
(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>
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. [You have been granted a ____% Tax
Offset Payment.]
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)
-2-
<PAGE>
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
15170 N. Hayden Road, Suite 1
Scottsdale, AZ 85260
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.
-3-
<PAGE>
EXHIBIT B
CONSULTANTS' OPTION AGREEMENT
ROYAL PRECISION, INC.
15170 N. HAYDEN ROAD, SUITE 1
SCOTTSDALE, AZ 85260
(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>
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)
-2-
<PAGE>
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
15170 N. Hayden Road, Suite 1
Scottsdale, AZ 85260
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.
-3-
<PAGE>
EXHIBIT C
DIRECTORS' OPTION AGREEMENT
ROYAL PRECISION, INC.
15170 N. HAYDEN ROAD, SUITE 1
SCOTTSDALE, AZ 85260
(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 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.
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>
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
15170 N. Hayden Road, Suite 1
Scottsdale, AZ 85260
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>
ANNEX A
ROYAL PRECISION, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard P. Johnston and Kenneth J. Warren,
and each of them, individually, 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 11, 2000, at the Annual Meeting of
Stockholders to be held on September 26, 2000, 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: Raymond Minella Danny Edwards
TO ELECT AS A DIRECTOR THE NOMINEE NAMED BELOW FOR A TERM OF ONE YEAR AND
UNTIL HIS SUCCESSOR IS DULY ELECTED.
NOMINEE: Richard P. Johnston
[ ] 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 AMENDMENT TO THE COMPANY'S STOCK OPTION PLAN TO INCREASE THE
NUMBER OF SHARES AVAILABLE AS DESCRIBED IN THE PROXY STATEMENT.
[ ] 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.)
<PAGE>
(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 5, 2000 and a
copy of the Company's 2000 Annual Report to Stockholders.
Dated , 2000
-----------------------------
-----------------------------------------
(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.