<PAGE>
As filed with the Securities and Exchange Commission on August 10, 1998
Registration No. _________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
PRICESMART, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0628530
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
----------------
4649 MORENA BLVD.
SAN DIEGO, CALIFORNIA 92117
(619) 581-4530
(Address of principal executive offices, including zip code, and
telephone number)
THE 1998 EQUITY PARTICIPATION PLAN OF PRICESMART, INC.
(Full title of the plans)
----------------
GILBERT A. PARTIDA Copies to:
President and Chief Executive Officer SCOTT N. WOLFE, ESQ.
PRICESMART, INC. LATHAM & WATKINS
4649 MORENA BLVD. 701 "B" STREET, SUITE 2100
SAN DIEGO, CALIFORNIA 92117 SAN DIEGO, CALIFORNIA 92101
(619) 581-4530 (619) 236-1234
(Name, address, including zip code, and
telephone number, including area code, of
agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Securities to be Offering Price Aggregate Offering Registration
to be Registered Registered Per Share Price Fee
------------------- ---------- -------------- ------------------ ------------
<S> <C> <C> <C> <C>
Common Stock, $.0001 par value 700,000(1) $15.00(2) $10,500,000(2) $3,098
</TABLE>
(1) A maximum of 700,000 shares of common stock, $.0001 par value per share
(the "Common Stock"), were reserved for issuance under The 1998 Equity
Participation Plan of PriceSmart, Inc. (the "Plan"). All shares reserved
for issuance under the Plan are being registered hereunder.
(2) The exercise price cannot be presently determined for any of the 700,000
shares of Common Stock reserved for issuance under the Plan. Accordingly,
pursuant to Rule 457(h), the Proposed Maximum Offering Price Per Share is
$15.00 per share of Common Stock, which is based on the average of the high
and low prices for the Common Stock as reported on the Nasdaq National
Market on August 5, 1998.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I
ITEM 1. PLAN INFORMATION.
Not required to be filed with this Registration Statement.
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.
Not required to be filed with this Registration Statement.
PART II
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents previously filed with the Securities and
Exchange Commission (the "Commission") by PriceSmart, Inc., a Delaware
corporation (the "Company"), are hereby incorporated by reference in this
Registration Statement:
(a) The Annual Report on Form 10-K filed pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange
Act") on November 26, 1997 (the "Annual Report on Form 10-K");
(b) The Quarterly Reports on Form 10-Q filed pursuant to the
Exchange Act on January 14, 1998, April 14, 1998 and July 15,
1998;
(c) All other reports filed pursuant to Section 13(a) or 15(d) of
the Exchange Act since the effective date of the Annual Report
on Form 10-K; and
(c) The description of the Company's Common Stock contained in the
Registration Statement on Form 10 filed with the Commission on
July 3, 1997, together with the amendments thereto filed with
the Commission on August 1, 1997 and August 13, 1997.
All documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date this
Registration Statement is filed with the Commission and prior to the filing
of a post-effective amendment which indicates that all securities offered
have been sold or which deregisters all securities then remaining unsold
shall be deemed to be incorporated by reference in this Registration
Statement and to be a part of it from the respective dates of filing of such
documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Registration Statement to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Registration Statement.
2
<PAGE>
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law, the
Company has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under
the Securities Act.
The Company's Amended and Restated Certificate of Incorporation and
Bylaws provide that the Company will indemnify its directors and officers to
the fullest extent permitted by Delaware law. Delaware law permits, but does
not require, a corporation to indemnify officers, directors, employees or
agents and expressly provides that the indemnification provided for under
Delaware law shall not be deemed exclusive of any indemnification right under
any bylaw, vote of stockholders or disinterested directors, or otherwise.
Delaware law permits indemnification against expenses and certain other
liabilities arising out of legal actions brought or threatened against such
persons for their conduct on behalf of the Company, provided that each such
person acted in good faith and in a manner that he or she reasonably believed
was in or not opposed to the Company's best interests and in the case of a
criminal proceeding, had no reasonable cause to believe his or her conduct
was unlawful. Delaware law does not allow indemnification of directors in the
case of an action by or in the right of the Company (including stockholder
derivative suits) unless the directors successfully defend the action or
indemnification is ordered by the court. The Company is a party to
indemnification agreements with each of its directors and officers.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
The Exhibit Index immediately preceding the exhibits is
incorporated herein by reference.
ITEM 9. UNDERTAKINGS.
(a) The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the "Securities
Act");
3
<PAGE>
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in
the information set forth in this Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information
in this Registration Statement;
PROVIDED, HOWEVER, that the undertakings set forth in paragraphs (a)(1)(i)
and (a)(1)(ii) above do not apply if the Registration Statement is on Form
S-3, Form S-8 or Form F-3, and the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by the Company pursuant to Section
13 or 15(d) of the Exchange Act that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Company hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise,
the Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director,
4
<PAGE>
officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on August 5, 1998.
PriceSmart, Inc.
By: /s/ GILBERT A. PARTIDA
-----------------------------------------
Gilbert A. Partida
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Gilbert A. Partida his true and lawful
attorney-in-fact, acting alone, with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all amendments including post-effective amendments
and any registration statement filed pursuant to Rule 462(b) under the
Securities Act to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Commission, hereby ratifying and confirming all that said attorney-in-fact or
his substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ ROBERT E. PRICE Chairman of the Board August 5, 1998
- -----------------------------
Robert E. Price
/s/ GILBERT A. PARTIDA President, Chief Executive Officer and August 5, 1998
- ----------------------------- Director (Principal Executive Officer)
Gilbert A. Partida
/s/ KAREN J. RATCLIFF Executive Vice President and Chief August 5, 1998
- ----------------------------- Financial Officer (Principal Financial
Karen J. Ratcliff Officer and Principal Accounting
Officer)
/s/ RAFAEL BARCENAS Director August 5, 1998
- -----------------------------
Rafael Barcenas
/s/ KATHERINE L. HENSLEY Director August 5, 1998
- -----------------------------
Katherine L. Hensley
/s/ JEON C. JANKS Director August 5, 1998
- -----------------------------
Jeon C. Janks
/s/ LAWRENCE B. KRAUSE Director August 5, 1998
- -----------------------------
Lawrence B. Krause
</TABLE>
6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
------- ----
<S> <C>
4.1 The 1998 Equity Participation Plan of PriceSmart, Inc. --
5.1 Opinion of Latham & Watkins. --
23.1 Consent of Ernst & Young LLP. --
23.2 Consent of Latham & Watkins (included in Exhibit 5.1 --
hereto).
24.1 Power of Attorney (included on signature page hereto). --
</TABLE>
7
<PAGE>
THE 1998 EQUITY PARTICIPATION PLAN
OF
PRICESMART, INC.
PriceSmart, Inc., a Delaware corporation, has adopted The 1998
Equity Participation Plan of PriceSmart, Inc. (the "Plan"), effective July
20, 1998, for the benefit of its eligible employees, consultants and
directors.
The purposes of the Plan are as follows:
(1) To provide an additional incentive for directors, Employees
(as such term is defined below) and consultants to further the growth,
development and financial success of the Company by personally benefiting
through the ownership of Company stock and/or rights which recognize such
growth, development and financial success.
(2) To enable the Company to obtain and retain the services of
directors, Employees and consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company and/or rights which will reflect the growth, development and
financial success of the Company.
ARTICLE I.
DEFINITIONS
1.1. GENERAL. Wherever the following terms are used in the Plan
they shall have the meanings specified below, unless the context clearly
indicates otherwise.
1.2. ADMINISTRATOR. "Administrator" shall mean the entity that
conducts the general administration of the Plan as provided herein. With
reference to the administration of the Plan with respect to Options granted
to Independent Directors, the term "Administrator" shall refer to the Board.
With reference to the administration of the Plan with respect to any other
Award, the term "Administrator" shall refer to the Committee unless the Board
has assumed the authority for administration of the Plan generally as
provided in Section 11.1.
1.3. AWARD. "Award" shall mean an Option, a Restricted Stock
award, a Performance Award, a Dividend Equivalents award, a Deferred Stock
award, a Stock Payment award or a Stock Appreciation Right which may be
awarded or granted under the Plan (collectively, "Awards").
1.4. AWARD AGREEMENT. "Award Agreement" shall mean a written
agreement executed by an authorized officer of the Company and the Holder
which shall contain such terms and conditions with respect to an Award as the
Administrator shall determine, consistent with the Plan.
1.5. AWARD LIMIT. "Award Limit" shall mean 150,000 shares of
Common Stock, as adjusted pursuant to Section 12.3 of the Plan.
<PAGE>
1.6. BOARD. "Board" shall mean the Board of Directors of the
Company.
1.7. CHANGE IN CONTROL. "Change in Control" shall mean a change in
ownership or control of the Company effected through either any of the
following transactions:
(a) any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Company) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities
pursuant to a tender or exchange offer made directly to the Company's
stockholders which the Board does not recommend such stockholders to
accept; or
(b) there is a change in the composition of the Board over a
period of thirty-six (36) consecutive months (or less) such that a majority
of the Board members (rounded up to the nearest whole number) ceases, by
reason of one or more proxy contests for the election of Board members, to
be comprised of individuals who either (i) have been Board members
continuously since the beginning of such period or (ii) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (i) who were still in
office at the time such election or nomination was approved by the Board.
1.8. CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.9. COMMITTEE. "Committee" shall mean the Compensation Committee
of the Board, or another committee or subcommittee of the Board, appointed as
provided in Section 11.1.
1.10. COMMON STOCK. "Common Stock" shall mean the common stock of
the Company, par value $.0001 per share, and any equity security of the
Company issued or authorized to be issued in the future, but excluding any
preferred stock and any warrants, options or other rights to purchase Common
Stock. Debt securities of the Company convertible into Common Stock shall be
deemed equity securities of the Company.
1.11. COMPANY. "Company" shall mean PriceSmart, Inc., a Delaware
corporation.
1.12. CORPORATE TRANSACTION. "Corporate Transaction" shall mean
any of the following stockholder-approved transactions to which the Company
is a party:
(a) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State in which the Company is incorporated, form a holding
company or effect a similar reorganization as to form whereupon the Plan
and all Options are assumed by the successor entity;
2
<PAGE>
(b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions
to clause (a), above; or
(c) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Company's outstanding securities are
transferred or issued to a person or persons different from those who held
such securities immediately prior to such merger.
1.13. DEFERRED STOCK. "Deferred Stock" shall mean Common Stock
awarded under Article VIII of the Plan.
1.14. DIRECTOR. "Director" shall mean a member of the Board.
1.15. DIVIDEND EQUIVALENT. "Dividend Equivalent" shall mean a
right to receive the equivalent value (in cash or Common Stock) of dividends
paid on Common Stock, awarded under Article VIII of the Plan.
1.16. EMPLOYEE. "Employee" shall mean any officer or other
employee (as defined in accordance with Section 3401(c) of the Code) of the
Company, or of any corporation which is a Subsidiary.
1.17. EXCHANGE ACT. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
1.18. FAIR MARKET VALUE. "Fair Market Value" of a share of Common
Stock as of a given date shall be (i) the closing price of a share of Common
Stock on the principal exchange on which shares of Common Stock are then
trading, if any (or as reported on any composite index which includes such
principal exchange), on the trading day previous to such date, or if shares
were not traded on the trading day previous to such date, then on the next
preceding date on which a trade occurred, or (ii) if Common Stock is not
traded on an exchange but is quoted on NASDAQ or a successor quotation
system, the mean between the closing representative bid and asked prices for
the Common Stock on the trading day previous to such date as reported by
NASDAQ or such successor quotation system; or (iii) if Common Stock is not
publicly traded on an exchange and not quoted on NASDAQ or a successor
quotation system, the Fair Market Value of a share of Common Stock as
established by the Administrator acting in good faith.
1.19. GRANTEE. "Grantee" shall mean an Employee or consultant
granted a Performance Award, Dividend Equivalent, Stock Payment or Stock
Appreciation Right, or an award of Deferred Stock, under the Plan.
1.20. HOLDER. "Holder" shall mean a person who has been granted or
awarded an Award.
3
<PAGE>
1.21. INCENTIVE STOCK OPTION. "Incentive Stock Option" shall mean
an option which conforms to the applicable provisions of Section 422 of the
Code and which is designated as an Incentive Stock Option by the Committee.
1.22. INDEPENDENT DIRECTOR. "Independent Director" shall mean a
member of the Board who is not an Employee of the Company.
1.23. NON-QUALIFIED STOCK OPTION. "Non-Qualified Stock Option"
shall mean an Option which is not designated as an Incentive Stock Option by
the Committee.
1.24. OPTION. "Option" shall mean a stock option granted under
Article IV of the Plan. An Option granted under the Plan shall, as
determined by the Committee, be either a Non-Qualified Stock Option or an
Incentive Stock Option; PROVIDED, HOWEVER, that Options granted to
Independent Directors and consultants shall be Non-Qualified Stock Options.
1.25. OPTIONEE. "Optionee" shall mean an Employee, consultant or
Independent Director granted an Option under the Plan.
1.26. PERFORMANCE AWARD. "Performance Award" shall mean a cash
bonus, stock bonus or other performance or incentive award that is paid in
cash, Common Stock or a combination of both, awarded under Article VIII of
the Plan.
1.27. PERFORMANCE CRITERIA. "Performance Criteria" shall mean the
following business criteria with respect to the Company or any Subsidiary:
(a) net income, (b) pre-tax income, (c) operating income, (d) cash flow, (e)
earnings per share, (f) return on equity, (g) return on invested capital or
assets, (h) cost reductions or savings, (i) funds from operations, (j)
appreciation in the fair market value of Common Stock and (k) earnings before
any one or more of the following items: interest, taxes, depreciation or
amortization.
1.28. PLAN. "Plan" shall mean The 1998 Equity Participation Plan
of PriceSmart, Inc.
1.29. QDRO. "QDRO" shall mean a qualified domestic relations order
as defined by the Code or Title I of the Employee Retirement Income Security
Act of 1974, as amended, or the rules thereunder.
1.30. RESTRICTED STOCK. "Restricted Stock" shall mean Common Stock
awarded under Article VII of the Plan.
1.31. RESTRICTED STOCKHOLDER. "Restricted Stockholder" shall mean
an Employee or consultant granted an award of Restricted Stock under Article
VII of the Plan.
1.32. RULE 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3
under the Exchange Act, as such Rule may be amended from time to time.
1.33. SECTION 162(m) PARTICIPANT. "Section 162(m) Participant"
shall mean any key Employee designated by the Committee as a key Employee
whose compensation for the fiscal
4
<PAGE>
year in which the key Employee is so designated or a future fiscal year may
be subject to the limit on deductible compensation imposed by Section 162(m)
of the Code.
1.34. SECURITIES ACT. "Securities Act" shall mean the Securities
Act of 1933, as amended.
1.35. STOCK APPRECIATION RIGHT. "Stock Appreciation Right" shall
mean a stock appreciation right granted under Article IX of the Plan.
1.36. STOCK PAYMENT. "Stock Payment" shall mean (a) a payment in
the form of shares of Common Stock, or (b) an option or other right to
purchase shares of Common Stock, as part of a deferred compensation
arrangement, made in lieu of all or any portion of the compensation,
including without limitation, salary, bonuses and commissions, that would
otherwise become payable to a key Employee or consultant in cash, awarded
under Article VIII of the Plan.
1.37. SUBSIDIARY. "Subsidiary" shall mean any corporation in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
1.38. TERMINATION OF CONSULTANCY. "Termination of Consultancy"
shall mean the time when the engagement of a Holder as a consultant to the
Company or a Subsidiary is terminated for any reason, with or without cause,
including, but not by way of limitation, by resignation, discharge, death or
retirement; but excluding terminations where there is a simultaneous
commencement of employment with the Company or any Subsidiary. The
Committee, in its absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Consultancy, including, but
not by way of limitation, the question of whether a Termination of
Consultancy resulted from a discharge for good cause, and all questions of
whether a particular leave of absence constitutes a Termination of
Consultancy. Notwithstanding any other provision of the Plan, the Company or
any Subsidiary has an absolute and unrestricted right to terminate a
consultant's service at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in writing.
1.39. TERMINATION OF DIRECTORSHIP. "Termination of Directorship"
shall mean the time when an Optionee who is an Independent Director ceases to
be a Director for any reason, including, but not by way of limitation, a
termination by resignation, failure to be elected, death or retirement. The
Board, in its sole and absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Directorship with respect to
Independent Directors.
1.40. TERMINATION OF EMPLOYMENT. "Termination of Employment" shall
mean the time when the employee-employer relationship between a Holder and
the Company or any Subsidiary is terminated for any reason, with or without
cause, including, but not by way of limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding (i) terminations
where there is a simultaneous reemployment or continuing employment of a
Holder by the Company or any Subsidiary, (ii) at the discretion of the
Committee, terminations
5
<PAGE>
which result in a temporary severance of the employee-employer relationship,
and (iii) at the discretion of the Committee, terminations which are followed
by the simultaneous establishment of a consulting relationship by the Company
or a Subsidiary with the former employee. The Committee, in its absolute
discretion, shall determine the effect of all matters and questions relating
to Termination of Employment, including, but not by way of limitation, the
question of whether a Termination of Employment resulted from a discharge for
good cause, and all questions of whether a particular leave of absence
constitutes a Termination of Employment; PROVIDED, HOWEVER, that, with
respect to Incentive Stock Options, unless otherwise determined by the
Committee in its discretion, a leave of absence, change in status from an
employee to an independent contractor or other change in the
employee-employer relationship shall constitute a Termination of Employment
if, and to the extent that, such leave of absence, change in status or other
change interrupts employment for the purposes of Section 422(a)(2) of the
Code and the then applicable regulations and revenue rulings under said
Section. Notwithstanding any other provision of the Plan, the Company or any
Subsidiary has an absolute and unrestricted right to terminate an Employee's
employment at any time for any reason whatsoever, with or without cause,
except to the extent expressly provided otherwise in writing.
ARTICLE II.
SHARES SUBJECT TO PLAN
2.1. SHARES SUBJECT TO PLAN.
(a) The shares of stock subject to Awards or purchase under
Article X shall be Common Stock. The aggregate number of such shares which
may be issued upon exercise of Options or rights or Awards under the Plan
or upon the purchase of Common Stock pursuant to Article X, shall not
exceed 700,000. The shares of Common Stock issuable upon purchase,
exercise of Options or rights, or upon any such Awards may be either
previously authorized but unissued shares or treasury shares.
(b) The maximum number of shares which may be subject to Awards
granted under the Plan to any individual or which may be purchased by such
individual pursuant to Article X in any fiscal year shall not exceed the
Award Limit. To the extent required by Section 162(m) of the Code, shares
subject to Options which are canceled continue to be counted against the
Award Limit and if, after grant of an Option, the price of shares subject
to such Option is reduced, the transaction is treated as a cancellation of
the Option and a grant of a new Option and both the Option deemed to be
canceled and the Option deemed to be granted are counted against the Award
Limit. Furthermore, to the extent required by Section 162(m) of the Code,
if, after grant of a Stock Appreciation Right, the base amount on which
stock appreciation is calculated is reduced to reflect a reduction in the
Fair Market Value of the Common Stock, the transaction is treated as a
cancellation of the Stock Appreciation Right and a grant of a new Stock
Appreciation Right and both the Stock Appreciation Right deemed to be
canceled and the Stock Appreciation Right deemed to be granted are counted
against the Award Limit.
6
<PAGE>
2.2. ADD-BACK OF OPTIONS AND OTHER RIGHTS. If any Option, or
other right to acquire shares of Common Stock under any other Award under the
Plan, expires or is canceled without having been fully exercised, or is
exercised in whole or in part for cash as permitted by the Plan, the number
of shares subject to such Option or other right but as to which such Option
or other right was not exercised prior to its expiration, cancellation or
exercise may again be optioned, granted or awarded hereunder, subject to the
limitations of Section 2.1. Furthermore, any shares subject to Awards which
are adjusted pursuant to Section 12.3 and become exercisable with respect to
shares of stock of another corporation shall be considered canceled and may
again be optioned, granted or awarded hereunder, subject to the limitations
of Section 2.1. Shares of Common Stock which are delivered by the Holder or
withheld by the Company upon the exercise of any Award under the Plan, in
payment of the exercise price thereof or tax withholding thereon, may again
be optioned, granted or awarded hereunder, subject to the limitations of
Section 2.1. If any share of Restricted Stock is forfeited by the Holder or
repurchased by the Company pursuant to Section 7.5 hereof, such share may
again be optioned, granted or awarded hereunder, subject to the limitations
of Section 2.1. Notwithstanding the provisions of this Section 2.2, no
shares of Common Stock may again be optioned, granted or awarded if such
action would cause an Incentive Stock Option to fail to qualify as an
incentive stock option under Section 422 of the Code.
ARTICLE III.
GRANTING OF AWARDS
3.1. AWARD AGREEMENT. Each Award shall be evidenced by an Award
Agreement. Award Agreements evidencing Awards intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code. Award Agreements
evidencing Incentive Stock Options shall contain such terms and conditions as
may be necessary to meet the applicable provisions of Section 422 of the Code.
3.2. PROVISIONS APPLICABLE TO SECTION 162(m) PARTICIPANTS.
(a) The Committee, in its discretion, may determine whether an
Award is to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code.
(b) Notwithstanding anything in the Plan to the contrary, the
Committee may grant any Award to a Section 162(m) Participant, including
Restricted Stock the restrictions with respect to which lapse upon the
attainment of performance goals which are related to one or more of the
Performance Criteria and any performance or incentive award described in
Article VIII that vests or becomes exercisable or payable upon the
attainment of performance goals which are related to one or more of the
Performance Criteria.
(c) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect
to any
7
<PAGE>
Award granted under Articles VII and VIII which may be granted to
one or more Section 162(m) Participants, no later than ninety (90) days
following the commencement of any fiscal year in question or any other
designated fiscal period or period of service (or such other time as may be
required or permitted by Section 162(m) of the Code), the Committee shall,
in writing, (i) designate one or more Section 162(m) Participants, (ii)
select the Performance Criteria applicable to the fiscal year or other
designated fiscal period or period of service, (iii) establish the various
performance targets, in terms of an objective formula or standard, and
amounts of such Awards, as applicable, which may be earned for such fiscal
year or other designated fiscal period or period of service and (iv)
specify the relationship between Performance Criteria and the performance
targets and the amounts of such Awards, as applicable, to be earned by each
Section 162(m) Participant for such fiscal year or other designated fiscal
period or period of service. Following the completion of each fiscal year
or other designated fiscal period or period of service, the Committee shall
certify in writing whether the applicable performance targets have been
achieved for such fiscal year or other designated fiscal period or period
of service. In determining the amount earned by a Section 162(m)
Participant, the Committee shall have the right to reduce (but not to
increase) the amount payable at a given level of performance to take into
account additional factors that the Committee may deem relevant to the
assessment of individual or corporate performance for the fiscal year or
other designated fiscal period or period of service.
3.3. CONSIDERATION. In consideration of the granting of an Award
under the Plan, the Holder shall agree, in the Award Agreement, to remain in
the employ of (or to consult for or to serve as an Independent Director of,
as applicable) the Company or any Subsidiary for a period of at least six
months (or such shorter period as may be fixed in the Award Agreement or by
action of the Administrator following grant of the Award) after the Award is
granted (or, in the case of an Independent Director, until the next annual
meeting of stockholders of the Company).
3.4. AT-WILL EMPLOYMENT. Nothing in the Plan or in any Award
Agreement hereunder shall confer upon any Holder any right to continue in the
employ of, or as a consultant for, the Company or any Subsidiary, or as a
director of the Company, or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly
reserved, to discharge any Holder at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided otherwise in a
written employment agreement between the Holder and the Company and any
Subsidiary.
ARTICLE IV.
GRANTING OF OPTIONS TO EMPLOYEES,
CONSULTANTS AND INDEPENDENT DIRECTORS
4.1. ELIGIBILITY. Any Employee or consultant selected by the
Committee pursuant to Section 4.4(a)(i) shall be eligible to be granted an
Option. Each Independent Director of the Company shall be eligible to be
granted Options at the times and in the manner set forth in Section 4.5.
8
<PAGE>
4.2. DISQUALIFICATION FOR STOCK OWNERSHIP. No person may be
granted an Incentive Stock Option under the Plan if such person, at the time
the Incentive Stock Option is granted, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company or any then existing Subsidiary or parent corporation (within the
meaning of Section 422 of the Code) unless such Incentive Stock Option
conforms to the applicable provisions of Section 422 of the Code.
4.3. QUALIFICATION OF INCENTIVE STOCK OPTIONS. No Incentive
Stock Option shall be granted to any person who is not an Employee.
4.4. GRANTING OF OPTIONS TO EMPLOYEES AND CONSULTANTS.
(a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of the Plan:
(i) Determine which Employees or consultants
(including Employees or consultants who have previously received
Awards under the Plan) should be granted Options;
(ii) Subject to the Award Limit, determine the number
of shares to be subject to such Options granted to the selected
Employees or consultants;
(iii) Subject to Section 4.3, determine whether
such Options are to be Incentive Stock Options or Non-Qualified
Stock Options and whether such Options are to qualify as
performance-based compensation as described in Section
162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such
Options, consistent with the Plan; PROVIDED, HOWEVER, that the
terms and conditions of Options intended to qualify as
performance-based compensation as described in Section
162(m)(4)(C) of the Code shall include, but not be limited to,
such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code.
(b) Upon the selection of an Employee or consultant to be
granted an Option, the Committee shall instruct the Secretary of the
Company to issue the Option and may impose such conditions on the grant of
the Option as it deems appropriate. Without limiting the generality of the
preceding sentence, the Committee may, in its discretion and on such terms
as it deems appropriate, require as a condition on the grant of an Option
to an Employee or consultant that the Employee or consultant surrender for
cancellation some or all of the unexercised Options, any other Award or
other rights which have been previously granted to him or her under the
Plan or otherwise. An Option, the grant of which is conditioned upon such
surrender, may have an Option price lower (or higher) than the exercise
price of such surrendered Option or other award, may cover the same (or a
lesser or greater) number of shares as such surrendered Option or other
award, may contain such other terms as the Committee deems appropriate, and
shall be exercisable in
9
<PAGE>
accordance with its terms, without regard to the number of shares, price,
exercise period or any other term or condition of such surrendered Option
or other award.
(c) Any Incentive Stock Option granted under the Plan may be
modified by the Committee, with the consent of the Optionee, to disqualify
such Option from treatment as an "incentive stock option" under Section 422
of the Code.
4.5. GRANTING OF OPTIONS TO INDEPENDENT DIRECTORS.
(a) Each person who (i) is an Independent Director as of the date
of the adoption by the Board of the Plan (each such person, an "INITIAL
INDEPENDENT DIRECTOR") and (ii) as of the date of such adoption, has
purchased not less than five hundred (500) shares of Common Stock (other than
purchases pursuant to the exercise of an option granted pursuant any stock
option plan of the Company) during the period beginning on September 1, 1997
and ending on the date of such adoption, automatically shall be granted, as
of the date of such adoption, an Option to purchase a number of shares of
Common Stock equal to three times the number of shares of Common Stock
actually purchased (other than purchases pursuant to the exercise of an
option granted pursuant to any stock option plan of the Company) by such
person during the period beginning on September 1, 1997 and ending on the
date of adoption by the Board of the Plan. Following the date of adoption by
the Board of the Plan, on the date of the purchase of additional shares of
Common Stock (other than a purchase pursuant to the exercise of an option
granted pursuant to the Plan or any other stock option plan of the Company)
(the date of each such purchase of additional shares, an "ADDITIONAL PURCHASE
DATE"), (x) by each person who (i) is an Initial Independent Director and
(ii) has purchased in the aggregate not less than five hundred (500) shares
of Common Stock (other than purchases pursuant to the exercise of an option
granted pursuant to the Plan or any other stock option plan of the Company)
during the period beginning on September 1, 1997 and ending on the applicable
Additional Purchase Date, such person automatically shall be granted, as of
each such Additional Purchase Date, an Option to purchase a number of shares
of Common Stock equal to the difference between (I) three times the number of
such shares of Common Stock actually purchased (other than purchases pursuant
to the exercise of an option granted pursuant to the Plan or any other stock
option plan of the Company) by such person during the period beginning on
September 1, 1997 and (II) the number of shares of Common Stock subject to
options previously granted pursuant to this Section 4.5(a); and (y) by each
person who (i) becomes an Independent Director after the date of adoption by
the Board of the Plan and (ii) has purchased in the aggregate not less than
five hundred (500) shares of Common Stock (other than purchases pursuant to
the exercise of an option granted pursuant to the Plan or any other stock
option plan of the Company) during the period beginning on the date such
person became an Independent Director and ending on the applicable Additional
Purchase Date, such person automatically shall be granted, as of each such
Additional Purchase Date, an Option to purchase a number of shares of Common
Stock equal to the difference between (I) three times the number of such
shares of Common Stock actually purchased (other than purchases pursuant to
the exercise of an option granted pursuant to the Plan or any other stock
option plan of the Company) by such person during the period beginning on the
date
10
<PAGE>
such person became an Independent Director and (II) the number of shares of
Common Stock subject to options previously granted pursuant to this Section
4.5(a). Notwithstanding anything to the contrary in this Plan, no
Independent Director shall be granted an Option or Options under this Section
4.5(a) which, in the aggregate, shall be exercisable for more than eight
thousand one hundred forty-six (8,146) shares of Common Stock (subject to
adjustment as provided in Section 12.3).
(b) In addition to the options granted pursuant to Section
4.5(a), during the term of the Plan, the Board shall from time to time, in
its absolute discretion, and subject to applicable limitations of the Plan:
(i) Select from among the Independent Directors
(including Independent Directors who have previously received
Options under the Plan) such of them as in its opinion should be
granted Options;
(ii) Subject to the Award Limit, determine the number
of shares to be subject to such Options granted to the selected
Independent Directors;
(iii) Subject to the provisions of Article V,
determine the terms and conditions of such Options, consistent
with the Plan.
4.6. GRANTING OF OPTIONS UPON STOCK PURCHASES. The Committee may
provide that upon the purchase of Common Stock by an Employee or consultant
pursuant to Article X, an Option shall automatically be granted to such
Employee or consultant which shall cover a number of shares and be subject to
such terms and conditions as shall be determined by the Committee in its
discretion.
ARTICLE V.
TERMS OF OPTIONS
5.1. OPTION PRICE. The price per share of the shares subject to
each Option granted to Employees and consultants shall be set by the
Committee; PROVIDED, HOWEVER, that such price shall be no less than the par
value of a share of Common Stock, unless otherwise permitted by applicable
state law, and (i) in the case of Options intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code, such price shall not be less than 100% of the Fair Market Value of a
share of Common Stock on the date the Option is granted; (ii) in the case of
Incentive Stock Options such price shall not be less than 100% of the Fair
Market Value of a share of Common Stock on the date the Option is granted (or
the date the Option is modified, extended or renewed for purposes of Section
424(h) of the Code); (iii) in the case of Incentive Stock Options granted to
an individual then owning (within the meaning of Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of stock of
the Company or any Subsidiary or parent corporation thereof (within the
meaning of Section 422 of the Code), such price shall not be less than 110%
of the Fair Market Value of a share of Common Stock on the date the Option is
granted (or the date the Option is modified, extended or renewed for purposes
of Section 424(h) of the Code).
11
<PAGE>
5.2. OPTION TERM. The term of an Option granted to an Employee or
consultant shall be set by the Committee in its discretion; PROVIDED,
HOWEVER, that, in the case of Incentive Stock Options, the term shall not be
more than ten (10) years from the date the Incentive Stock Option is granted,
or five (5) years from such date if the Incentive Stock Option is granted to
an individual then owning (within the meaning of Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of stock of
the Company or any Subsidiary or parent corporation thereof (within the
meaning of Section 422 of the Code). Except as limited by requirements of
Section 422 of the Code and regulations and rulings thereunder applicable to
Incentive Stock Options, the Committee may extend the term of any outstanding
Option in connection with any Termination of Employment or Termination of
Consultancy of the Optionee, or amend any other term or condition of such
Option relating to such a termination.
5.3. OPTION VESTING
(a) The period during which the right to exercise, in whole or
in part, an Option granted to an Employee or a consultant vests in the
Optionee shall be set by the Committee and the Committee may determine that
an Option may not be exercised in whole or in part for a specified period
after it is granted ; PROVIDED, HOWEVER, that, unless the Committee
otherwise provides in the terms of the Award Agreement or otherwise, no
Option shall be exercisable by any Optionee who is then subject to Section
16 of the Exchange Act within the period ending six months and one day
after the date the Option is granted. At any time after grant of an
Option, the Committee may, in its sole and absolute discretion and subject
to whatever terms and conditions it selects, accelerate the period during
which an Option granted to an Employee or consultant vests.
(b) No portion of an Option granted to an Employee or consultant
which is unexercisable at Termination of Employment or Termination of
Consultancy, as applicable, shall thereafter become exercisable, except as
may be otherwise provided by the Committee either in the Award Agreement or
by action of the Committee following the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of stock
with respect to which "incentive stock options" (within the meaning of
Section 422 of the Code, but without regard to Section 422(d) of the Code)
are exercisable for the first time by an Optionee during any calendar year
(under the Plan and all other incentive stock option plans of the Company
and any parent or subsidiary corporation (within the meaning of Section 422
of the Code) of the Company) exceeds $100,000, such Options shall be
treated as Non-Qualified Options to the extent required by Section 422 of
the Code. The rule set forth in the preceding sentence shall be applied by
taking Options into account in the order in which they were granted. For
purposes of this Section 5.3(c), the Fair Market Value of stock shall be
determined as of the time the Option with respect to such stock is granted.
5.4 TERMS OF OPTIONS GRANTED TO INDEPENDENT DIRECTORS. The price
per share of the shares subject to each Option granted to an Independent
Director shall equal 100% of the
12
<PAGE>
Fair Market Value of a share of Common Stock on the date the Option is
granted. Subject to Section 6.6, the term of each Option granted to an
Independent Director shall be six (6) years from the date the Option is
granted, without variation or acceleration hereunder. Options granted to
Independent Directors shall become exercisable in cumulative annual
installments of 20% on each of the first, second, third, fourth and fifth
anniversaries of the date of Option grant, without variation or acceleration
hereunder except as provided in Section 12.3(b). No portion of an Option
which is unexercisable at Termination of Directorship shall thereafter become
exercisable.
ARTICLE VI.
EXERCISE OF OPTIONS
6.1. PARTIAL EXERCISE. An exercisable Option may be exercised in
whole or in part. However, an Option shall not be exercisable with respect
to fractional shares and the Administrator may require that, by the terms of
the Option, a partial exercise be with respect to a minimum number of shares.
6.2. MANNER OF EXERCISE. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the
Secretary of the Company or his office:
(a) A written notice complying with the applicable rules
established by the Administrator stating that the Option, or a portion
thereof, is exercised. The notice shall be signed by the Optionee or other
person then entitled to exercise the Option or such portion of the Option;
(b) Such representations and documents as the Administrator, in
its absolute discretion, deems necessary or advisable to effect compliance
with all applicable provisions of the Securities Act and any other federal
or state securities laws or regulations. The Administrator may, in its
absolute discretion, also take whatever additional actions it deems
appropriate to effect such compliance including, without limitation,
placing legends on share certificates and issuing stop-transfer notices to
agents and registrars;
(c) In the event that the Option shall be exercised pursuant to
Section 12.1 by any person or persons other than the Optionee, appropriate
proof of the right of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the
shares with respect to which the Option, or portion thereof, is exercised.
However, the Administrator, may in its discretion (i) allow a delay in
payment up to thirty (30) days from the date the Option, or portion
thereof, is exercised; (ii) allow payment, in whole or in part, through the
delivery of shares of Common Stock which have been owned by the Optionee
for at least six months, duly endorsed for transfer to the Company with a
Fair Market Value on the date of delivery equal to the aggregate exercise
price of the Option or exercised portion thereof; (iii) allow payment, in
whole or in part, through the surrender of shares of Common Stock then
issuable upon exercise of the Option having a Fair
13
<PAGE>
Market Value on the date of Option exercise equal to the aggregate
exercise price of the Option or exercised portion thereof; (iv) allow
payment, in whole or in part, through the delivery of property of any
kind which constitutes good and valuable consideration; (v) allow
payment, in whole or in part, through the delivery of a full recourse,
limited recourse or non-recourse (as determined by the Committee)
promissory note bearing interest (at no less than such rate as shall
then preclude the imputation of interest under the Code) and payable
upon such terms as may be prescribed by the Committee or the Board; (vi)
allow payment, in whole or in part, through the delivery of a notice
that the Optionee has placed a market sell order with a broker with
respect to shares of Common Stock then issuable upon exercise of the
Option, and that the broker has been directed to pay a sufficient
portion of the net proceeds of the sale to the Company in satisfaction
of the Option exercise price; or (vii) allow payment through any
combination of the consideration provided in the foregoing subparagraphs
(ii), (iii), (iv), (v) and (vi). In the case of a promissory note, the
Administrator may also prescribe the form of such note and the security
to be given for such note. The Option may not be exercised, however, by
delivery of a promissory note or by a loan from the Company when or
where such loan or other extension of credit is prohibited by law.
6.3. CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The Company
shall not be required to issue or deliver any certificate or certificates for
shares of stock purchased upon the exercise of any Option or portion thereof
prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;
(b) The completion of any registration or other qualification of
such shares under any state or federal law, or under the rulings or
regulations of the Securities and Exchange Commission or any other
governmental regulatory body which the Administrator shall, in its absolute
discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Administrator shall, in its
absolute discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Administrator may establish from time to time
for reasons of administrative convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax, which in the
discretion of the Committee or the Board may be in the form of
consideration used by the Optionee to pay for such shares under Section
6.2(d).
6.4. RIGHTS AS STOCKHOLDERS/DIVIDEND EQUIVALENTS. Optionees shall
not be, nor have any of the rights or privileges of, stockholders of the
Company in respect of any shares purchasable upon the exercise of any part of
an Option unless and until certificates representing
14
<PAGE>
such shares have been issued by the Company to such Optionees. Notwithstanding
the foregoing, any Optionee who is an Employee or consultant selected by the
Committee may be granted Dividend Equivalents based on the dividends declared
on Common Stock, to be credited as of dividend payment dates, during the
period between the date an Option is granted, and the date such Option is
exercised, vests or expires, as determined by the Committee. Such Dividend
Equivalents shall be converted to cash or additional shares of Common Stock
by such formula and at such time and subject to such limitations as may be
determined by the Committee. Dividend Equivalents granted with respect to
Options intended to be qualified performance-based compensation for purposes
of Section 162(m) of the Code shall be payable, with respect to pre-exercise
periods, regardless of whether such Option is subsequently exercised.
6.5. OWNERSHIP AND TRANSFER RESTRICTIONS. The Administrator, in
its absolute discretion, may impose such restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an Option as
it deems appropriate. Any such restriction shall be set forth in the
respective Award Agreement and may be referred to on the certificates
evidencing such shares. The Committee may require the Employee to give the
Company prompt notice of any disposition of shares of Common Stock acquired
by exercise of an Incentive Stock Option within (i) two years from the date
of granting (including the date the Option is modified, extended or renewed
for purposes of Section 424(h) of the Code) such Option to such Employee or
(ii) one year after the transfer of such shares to such Employee. The
Committee may direct that the certificates evidencing shares acquired by
exercise of any such Option refer to such requirement to give prompt notice
of disposition.
6.6. LIMITATIONS ON EXERCISE OF OPTIONS GRANTED TO INDEPENDENT
DIRECTORS. No Option granted to an Independent Director may be exercised
to any extent by anyone after the first to occur of the following events:
(a) The expiration of twelve (12) months from the date of the
Optionee's death;
(b) the expiration of twelve (12) months from the date of the
Optionee's Termination of Directorship by reason of his permanent and total
disability (within the meaning of Section 22(e)(3) of the Code);
(c) the expiration of three (3) months from the date of the
Optionee's Termination of Directorship for any reason other than such
Optionee's death or his permanent and total disability, unless the Optionee
dies within said three-month period; or
(d) The expiration of ten (10) years from the date the Option
was granted.
6.7. ADDITIONAL LIMITATIONS ON EXERCISE OF OPTIONS. Optionees
may be required to comply with any timing or other restrictions with respect
to the settlement or exercise of an Option, including a window-period
limitation, as may be imposed in the discretion of the Administrator.
15
<PAGE>
ARTICLE VII.
AWARD OF RESTRICTED STOCK
7.1. ELIGIBILITY. Subject to the Award Limit, Restricted Stock
may be awarded to any Employee who the Committee determines is a key Employee
or any consultant who the Committee determines should receive such an Award.
7.2. AWARD OF RESTRICTED STOCK
(a) The Committee may from time to time, in its absolute
discretion:
(i) Determine which Employees are key Employees and
select from among the key Employees or consultants (including
Employees or consultants who have previously received other
awards under the Plan) such of them as in its opinion should be
awarded Restricted Stock; and
(ii) Determine the purchase price, if any, and other
terms and conditions applicable to such Restricted Stock,
consistent with the Plan.
(b) The Committee shall establish the purchase price, if any,
and form of payment for Restricted Stock; PROVIDED, HOWEVER, that such
purchase price shall be no less than the par value of the Common Stock to
be purchased, unless otherwise permitted by applicable state law. In all
cases, legal consideration shall be required for each issuance of
Restricted Stock.
(c) Upon the selection of a key Employee or consultant to be
awarded Restricted Stock, the Committee shall instruct the Secretary of the
Company to issue such Restricted Stock and may impose such conditions on
the issuance of such Restricted Stock as it deems appropriate.
7.3. RIGHTS AS STOCKHOLDERS. Subject to Section 7.4, upon delivery
of the shares of Restricted Stock to the escrow holder pursuant to Section
7.6, the Restricted Stockholder shall have, unless otherwise provided by the
Committee, all the rights of a stockholder with respect to said shares,
subject to the restrictions in his Award Agreement, including the right to
receive all dividends and other distributions paid or made with respect to
the shares; PROVIDED, HOWEVER, that in the discretion of the Committee, any
extraordinary distributions with respect to the Common Stock shall be subject
to the restrictions set forth in Section 7.4.
7.4. RESTRICTION. All shares of Restricted Stock issued under the
Plan (including any shares received by holders thereof with respect to shares
of Restricted Stock as a result of stock dividends, stock splits or any other
form of recapitalization) shall, in the terms of each individual Award
Agreement, be subject to such restrictions as the Committee shall provide,
which restrictions may include, without limitation, restrictions concerning
voting rights and transferability and restrictions based on duration of
employment with the Company, Company performance and individual performance;
PROVIDED, HOWEVER, that, unless the Committee otherwise provides in the terms
of the Award Agreement or otherwise, no share of Restricted
16
<PAGE>
Stock granted to a person subject to Section 16 of the Exchange Act shall be
sold, assigned or otherwise transferred until at least six months and one day
have elapsed from the date on which the Restricted Stock was issued, and
PROVIDED, FURTHER, that, except with respect to shares of Restricted Stock
granted to Section 162(m) Participants, by action taken after the Restricted
Stock is issued, the Committee may, on such terms and conditions as it may
determine to be appropriate, remove any or all of the restrictions imposed by
the terms of the Award Agreement. Restricted Stock may not be sold or
encumbered until all restrictions are terminated or expire. If no
consideration was paid by the Restricted Stockholder upon issuance, a
Restricted Stockholder's rights in unvested Restricted Stock shall lapse upon
Termination of Employment or, if applicable, upon Termination of Consultancy
with the Company; PROVIDED, HOWEVER, that the Committee in its sole and
absolute discretion may provide that such rights shall not lapse in the event
of a Termination of Employment following a "change of ownership or control"
(within the meaning of Treasury Regulation Section 1.62-27(e)(2)(v) or any
successor regulation thereto) of the Company or because of the Restricted
Stockholder's death or disability; PROVIDED, FURTHER, except with respect to
shares of Restricted Stock granted to Section 162(m) Participants, the
Committee in its sole and absolute discretion may provide that no such right
of repurchase shall exist in the event of a Termination of Employment, or a
Termination of Consultancy, without cause or following any Change in Control
of the Company or because of the Restricted Stockholder's retirement, or
otherwise.
7.5. REPURCHASE OF RESTRICTED STOCK. The Committee shall provide
in the terms of each individual Award Agreement that the Company shall have
the right to repurchase from the Restricted Stockholder the Restricted Stock
then subject to restrictions under the Award Agreement immediately upon a
Termination of Employment or, if applicable, upon a Termination of
Consultancy between the Restricted Stockholder and the Company, at a cash
price per share equal to the price paid by the Restricted Stockholder for
such Restricted Stock; PROVIDED, HOWEVER, that the Committee in its sole and
absolute discretion may provide that no such right of repurchase shall exist
in the event of a Termination of Employment following a "change of ownership
or control" (within the meaning of Treasury Regulation Section
1.162-27(e)(2)(v) or any successor regulation thereto) of the Company or
because of the Restricted Stockholder's death or disability; PROVIDED,
FURTHER, that, except with respect to shares of Restricted Stock granted to
Section 162(m) Participants, the Committee in its sole and absolute
discretion may provide that no such right of repurchase shall exist in the
event of a Termination of Employment or a Termination of Consultancy without
cause or following any Change in Control of the Company or because of the
Restricted Stockholder's retirement, or otherwise.
7.6. ESCROW. The Secretary of the Company or such other escrow
holder as the Committee may appoint shall retain physical custody of each
certificate representing Restricted Stock until all of the restrictions
imposed under the Award Agreement with respect to the shares evidenced by
such certificate expire or shall have been removed.
7.7. LEGEND. In order to enforce the restrictions imposed upon
shares of Restricted Stock hereunder, the Committee shall cause a legend or
legends to be placed on certificates representing all shares of Restricted
Stock that are still subject to restrictions under Award Agreements, which
legend or legends shall make appropriate reference to the conditions imposed
thereby.
17
<PAGE>
7.8. SECTION 83(b) ELECTION. If a Restricted Stockholder makes an
election under Section 83(b) of the Code, or any successor section thereto,
to be taxed with respect to the Restricted Stock as of the date of transfer
of the Restricted Stock rather than as of the date or dates upon which the
Restricted Stockholder would otherwise be taxable under Section 83(a) of the
Code, the Restricted Stockholder shall deliver a copy of such election to the
Company immediately after filing such election with the Internal Revenue
Service.
ARTICLE VIII.
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, DEFERRED STOCK, STOCK PAYMENTS
8.1. ELIGIBILITY. Subject to the Award Limit, one or more
Performance Awards, Dividend Equivalents, awards of Deferred Stock, and/or
Stock Payments may be granted to any Employee whom the Committee determines
is a key Employee or any consultant whom the Committee determines should
receive such an Award.
8.2. PERFORMANCE AWARDS. Any key Employee or consultant selected
by the Committee may be granted one or more Performance Awards. The value of
such Performance Awards may be linked to any one or more of the Performance
Criteria or other specific performance criteria determined appropriate by the
Committee, in each case on a specified date or dates or over any period or
periods determined by the Committee. In making such determinations, the
Committee shall consider (among such other factors as it deems relevant in
light of the specific type of award) the contributions, responsibilities and
other compensation of the particular key Employee or consultant.
8.3. DIVIDEND EQUIVALENTS. Any key Employee or consultant
selected by the Committee may be granted Dividend Equivalents based on the
dividends declared on Common Stock, to be credited as of dividend payment
dates, during the period between the date a Stock Appreciation Right,
Deferred Stock or Performance Award is granted, and the date such Stock
Appreciation Right, Deferred Stock or Performance Award is exercised, vests
or expires, as determined by the Committee. Such Dividend Equivalents shall
be converted to cash or additional shares of Common Stock by such formula and
at such time and subject to such limitations as may be determined by the
Committee.
8.4. STOCK PAYMENTS. Any key Employee or consultant selected by
the Committee may receive Stock Payments in the manner determined from time
to time by the Committee. The number of shares shall be determined by the
Committee and may be based upon the Performance Criteria or other specific
performance criteria determined appropriate by the Committee, determined on
the date such Stock Payment is made or on any date thereafter.
8.5. DEFERRED STOCK. Any key Employee or consultant selected by
the Committee may be granted an award of Deferred Stock in the manner
determined from time to time by the Committee. The number of shares of
Deferred Stock shall be determined by the Committee and may be linked to the
Performance Criteria or other specific performance criteria determined to be
appropriate by the Committee, in each case on a specified date or dates or
over
18
<PAGE>
any period or periods determined by the Committee. Common Stock underlying a
Deferred Stock award will not be issued until the Deferred Stock award has
vested, pursuant to a vesting schedule or performance criteria set by the
Committee. Unless otherwise provided by the Committee, a Holder of Deferred
Stock shall have no rights as a Company stockholder with respect to such
Deferred Stock until such time as the Award has vested and the Common Stock
underlying the Award has been issued.
8.6. TERM. The term of a Performance Award, Dividend Equivalent,
award of Deferred Stock and/or Stock Payment shall be set by the Committee in
its discretion.
8.7. EXERCISE OR PURCHASE PRICE. The Committee may establish the
exercise or purchase price of a Performance Award, shares of Deferred Stock,
or shares received as a Stock Payment; PROVIDED, HOWEVER, that such price
shall not be less than the par value for a share of Common Stock, unless
otherwise permitted by applicable state law.
8.8. EXERCISE UPON TERMINATION OF EMPLOYMENT OR TERMINATION OF
CONSULTANCY. A Performance Award, Dividend Equivalent, award of Deferred
Stock and/or Stock Payment is exercisable or payable only while the Holder is
an Employee or consultant; PROVIDED, HOWEVER, that the Committee in its sole
and absolute discretion may provide that the Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment may be exercised or
paid subsequent to a Termination of Employment following a "change of control
or ownership" (within the meaning of Section 1.162-27(e)(2)(v) or any
successor regulation thereto) of the Company; PROVIDED, FURTHER, that except
with respect to Performance Awards granted to Section 162(m) Participants,
the Committee in its sole and absolute discretion may provide that the
Performance Awards may be exercised or paid following a Termination of
Employment or a Termination of Consultancy without cause, or following a
Change in Control of the Company, or because of the Grantee's retirement,
death or disability, or otherwise.
8.9. FORM OF PAYMENT. Payment of the amount determined under
Section 8.2 or 8.3 above shall be in cash, in Common Stock or a combination
of both, as determined by the Committee. To the extent any payment under
this Article VIII is effected in Common Stock, it shall be made subject to
satisfaction of all provisions of Section 6.3.
ARTICLE IX.
STOCK APPRECIATION RIGHTS
9.1. GRANT OF STOCK APPRECIATION RIGHTS. A Stock Appreciation
Right may be granted to any key Employee or consultant selected by the
Committee. A Stock Appreciation Right may be granted (a) in connection and
simultaneously with the grant of an Option, (b) with respect to a previously
granted Option, or (c) independent of an Option. A Stock Appreciation Right
shall be subject to such terms and conditions not inconsistent with the Plan
as the Committee shall impose and shall be evidenced by an Award Agreement.
Without limiting the generality of the foregoing, the Committee may, in its
discretion and on such terms as it deems appropriate, require as a condition
of the grant of a Stock Appreciation Right to an Employee or consultant that
the Employee or consultant surrender for cancellation some or all of the
19
<PAGE>
unexercised Options, awards of Restricted Stock or Deferred Stock,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments, or other rights which have been previously granted to him or her
under the Plan or otherwise. A Stock Appreciation Right, the grant of which
is conditioned upon such surrender, may have an exercise price lower (or
higher) than the exercise price of the surrendered Option or other award, may
cover the same (or a lesser or greater) number of shares as such surrendered
Option or other award, may contain such other terms as the Committee deems
appropriate, and shall be exercisable in accordance with its terms, without
regard to the number of shares, price, exercise period or any other term or
condition of such surrendered Option or other award.
9.2. COUPLED STOCK APPRECIATION RIGHTS.
(a) A Coupled Stock Appreciation Right ("CSAR") shall be related
to a particular Option and shall be exercisable only when and to the extent
the related Option is exercisable.
(b) A CSAR may be granted to the Grantee for no more than the
number of shares subject to the simultaneously or previously granted Option
to which it is coupled.
(c) A CSAR shall entitle the Grantee (or other person entitled
to exercise the Option pursuant to the Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the
extent then exercisable pursuant to its terms) and to receive from the
Company in exchange therefor an amount determined by multiplying the
difference obtained by subtracting the Option exercise price from the Fair
Market Value of a share of Common Stock on the date of exercise of the CSAR
by the number of shares of Common Stock with respect to which the CSAR
shall have been exercised, subject to any limitations the Committee may
impose.
9.3. INDEPENDENT STOCK APPRECIATION RIGHTS.
(a) An Independent Stock Appreciation Right ("ISAR") shall be
unrelated to any Option and shall have a term set by the Committee. An
ISAR shall be exercisable in such installments as the Committee may
determine. An ISAR shall cover such number of shares of Common Stock as
the Committee may determine; provided, however, that unless the Committee
otherwise provides in the terms of the ISAR or otherwise, no ISAR granted
to a person subject to Section 16 of the Exchange Act shall be exercisable
until at least six months have elapsed from (but excluding) the date on
which the Option was granted. The exercise price per share of Common Stock
subject to each ISAR shall be set by the Committee. An ISAR is exercisable
only while the Grantee is an Employee or consultant; provided that the
Committee may determine that the ISAR may be exercised subsequent to
Termination of Employment or Termination of Consultancy without cause, or
following a Change in Control of the Company, or because of the Grantee's
retirement, death or disability, or otherwise.
20
<PAGE>
(b) An ISAR shall entitle the Grantee (or other person entitled
to exercise the ISAR pursuant to the Plan) to exercise all or a specified
portion of the ISAR (to the extent then exercisable pursuant to its terms)
and to receive from the Company an amount determined by multiplying the
difference obtained by subtracting the exercise price per share of the ISAR
from the Fair Market Value of a share of Common Stock on the date of
exercise of the ISAR by the number of shares of Common Stock with respect
to which the ISAR shall have been exercised, subject to any limitations the
Committee may impose.
9.4. PAYMENT AND LIMITATIONS ON EXERCISE.
(a) Payment of the amount determined under Section 9.2(c) and
9.3(b) above shall be in cash, in Common Stock (based on its Fair Market
Value as of the date the Stock Appreciation Right is exercised) or a
combination of both, as determined by the Committee. To the extent such
payment is effected in Common Stock it shall be made subject to
satisfaction of all provisions of Section 6.3 above pertaining to Options.
(b) Grantees of Stock Appreciation Rights may be required to
comply with any timing or other restrictions with respect to the settlement
or exercise of a Stock Appreciation Right, including a window-period
limitation, as may be imposed in the discretion of the Committee.
ARTICLE X.
STOCK PURCHASES
10.1. ELIGIBILITY TO PURCHASE COMMON STOCK.
(a) The Committee may grant to any consultant or any Employee
the right to purchase Common Stock under this Plan from time to time, in
such amounts and subject to such terms and conditions as the Committee may
determine, and, at the discretion of the Committee, such determinations may
include determining categories of employees and the number of shares to be
made available to employees in each such category; PROVIDED, HOWEVER, that
the total number of shares granted in an action taken by category must be
readily determinable. The Committee shall determine the purchase price for
such Common Stock; PROVIDED, HOWEVER, that the purchase price for Common
Stock purchased under this Article X shall be no less than the Fair Market
Value of such Common Stock as of the date of purchase.
(b) Each person who is an Independent Director as of the date of
the adoption by the Board of the Plan automatically shall be granted, on
the date of such adoption, the right under this Article X to purchase a
number of shares of Common Stock equal to the difference between (i) two
thousand seven hundred sixteen (2,716) shares of Common Stock and (ii) the
number of shares of Common Stock purchased by such Independent Director
since September 1, 1997 (other than purchases pursuant to the exercise of
an option granted pursuant to any stock option plan of the Company);
provided that any Independent Director who has purchased more than two
thousand seven
21
<PAGE>
hundred sixteen (2,716) shares of Common Stock since September 1, 1997
(without taking into account purchases pursuant to the exercise of an
option granted pursuant to any stock option plan of the Company) shall
not receive any grant under this Article X. During the term of the
Plan, a person who is initially elected to the Board after the adoption
by the Board of the Plan and who is an Independent Director at the time
of such initial election automatically shall be granted the right under
this Article X to purchase two thousand seven hundred sixteen (2,716)
shares of Common Stock (subject to adjustment as provided in Section
12.3) on the date of such initial election. The purchase price for any
Common Stock to be purchased pursuant to this Section 10.1(b) shall be
the Fair Market Value of such Common Stock as of the date of purchase.
10.2. TERMINATION OF EMPLOYMENT, TERMINATION OF CONSULTANCY OR
TERMINATION OF DIRECTORSHIP. An Employee, Independent Director or consultant
whom the Committee has granted the right to purchase Common Stock under this
Article X may only purchase such Common Stock while he or she is an Employee,
Independent Director or consultant.
10.3. FORM OF PAYMENT. An eligible Employee, Independent Director
or consultant may purchase Common Stock pursuant to this Article X only upon
delivery of all of the following to the Secretary of the Company or his office:
(a) Written notice complying with the applicable rules
established by the Administrator stating the number of shares of Common
Stock to be purchased;
(b) Such representations and documents as the Administrator, in
its absolute discretion, deems necessary or advisable to effect compliance
with all applicable provisions of the Securities Act and any other federal
or state securities laws or regulations. The Administrator may, in its
absolute discretion, also take whatever additional actions it deems
appropriate to effect such compliance including, without limitation,
placing legends on share certificates and issuing stop-transfer notices to
agents and registrars; and
(c) Full cash payment to the Secretary of the Company for the
shares being purchased. However, the Administrator may in its discretion
allow payment, in whole or in part, through the delivery of a full
recourse, limited recourse or non-recourse (as determined by the Committee)
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such
terms as may be prescribed by the Committee or the Board. The
Administrator may prescribe the form of such promissory note and the
security to be given for such note. Notwithstanding the foregoing,
however, Common Stock may not be purchased under this Article X by delivery
of a promissory note or by a loan from the Company when or where such loan
or other extension of credit is prohibited by law.
10.4. CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The Company
shall not be required to issue or deliver any certificate or certificates for
shares of Common Stock purchased under this Article X prior to fulfillment of
all of the following conditions:
22
<PAGE>
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;
(b) The completion of any registration or other qualification of
such shares under any state or federal law, or under the rulings or
regulations of the Securities and Exchange Commission or any other
governmental regulatory body which the Administrator shall, in its absolute
discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Administrator shall, in its
absolute discretion, determine to be necessary or advisable; and
(d) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax, which in the
discretion of the Committee or the Board may be in the form of
consideration used by the Employee or consultant to pay for such shares
under Section 10.3(c).
10.5. RIGHTS AS STOCKHOLDERS/ DIVIDEND EQUIVALENTS. An Employee,
Independent Director or consultant who is granted the right to purchase
Common Stock under this Article X shall not be, nor have any of the rights or
privileges of, stockholders of the Company in respect of any shares
purchasable pursuant to such right unless and until certificates representing
such shares have been issued by the Company to such Employee, Independent
Director or consultant.
10.6. STOCKHOLDER APPROVAL REQUIREMENTS. All rights to purchase
Common Stock pursuant to this Article X are subject to stockholder approval
of the Plan. If such stockholder approval is not obtained within twelve
months after the date of the Board's initial adoption of the Plan, then all
Common Stock purchased by any Employee, Independent Director or consultant
pursuant to this Article X shall be returned to the Company, all
consideration paid to the Company shall be returned to the Employee,
Independent Director or consultant and all such purchases shall be canceled
and be null and void AB INITIO.
10.7. SECTION 83(b) ELECTION. If an Employee, Independent Director
or consultant makes an election under Section 83(b) of the Code, or any
successor section thereto, to be taxed with respect to the Common Stock
purchased pursuant to this Article X as of the date of transfer of such
Common Stock rather than as of the date or dates upon which such Employee,
Independent Director or consultant would otherwise be taxable under Section
83(a) of the Code, he or she shall deliver a copy of such election to the
Company immediately after filing such election with the Internal Revenue
Service.
ARTICLE XI.
ADMINISTRATION
11.1. COMPENSATION COMMITTEE. The Compensation Committee (or
another committee or a subcommittee of the Board assuming the functions of
the Committee under the Plan) shall consist solely of two or more Independent
Directors appointed by and holding office at the pleasure of the Board, each
of whom is both a "non-employee director" as defined by Rule
23
<PAGE>
16b-3 and an "outside director" for purposes of Section 162(m) of the Code.
Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by the Board.
11.2. DUTIES AND POWERS OF COMMITTEE. It shall be the duty of the
Committee to conduct the general administration of the Plan in accordance
with its provisions. The Committee shall have the power to interpret the
Plan and the agreements pursuant to which Awards are granted or awarded, and
to adopt such rules for the administration, interpretation, and application
of the Plan as are consistent therewith and to interpret, amend or revoke any
such rules. Notwithstanding the foregoing, the full Board, acting by a
majority of its members in office, shall conduct the general administration
of the Plan with respect to Options granted to Independent Directors. Any
such grant or award under the Plan need not be the same with respect to each
Holder. Any such interpretations and rules with respect to Incentive Stock
Options shall be consistent with the provisions of Section 422 of the Code.
In its absolute discretion, the Board may at any time and from time to time
exercise any and all rights and duties of the Committee under the Plan except
with respect to matters which under Rule 16b-3 or Section 162(m) of the Code,
or any regulations or rules issued thereunder, are required to be determined
in the sole discretion of the Committee.
11.3. MAJORITY RULE; UNANIMOUS WRITTEN CONSENT. The Committee
shall act by a majority of its members in attendance at a meeting at which a
quorum is present or by a memorandum or other written instrument signed by
all members of the Committee.
11.4. COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS.
Members of the Committee shall receive such compensation, if any, for their
services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with the
administration of the Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers, or other persons. The Committee, the Company and the
Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Holders, the Company and all other
interested persons. No members of the Committee or Board shall be personally
liable for any action, determination or interpretation made in good faith
with respect to the Plan or Awards, and all members of the Committee and the
Board shall be fully protected by the Company in respect of any such action,
determination or interpretation.
ARTICLE XII.
MISCELLANEOUS PROVISIONS
12.1. NOT TRANSFERABLE.
(a) No Award under the Plan may be sold, pledged, assigned or
transferred in any manner other than by will or the laws of descent and
distribution or,
24
<PAGE>
subject to the consent of the Administrator, pursuant to a QDRO, unless
and until such Award has been exercised, or the shares underlying such
Award have been issued, and all restrictions applicable to such shares
have lapsed. No Option, Restricted Stock award, Deferred Stock award,
Performance Award, Stock Appreciation Right, Dividend Equivalent or
Stock Payment or interest or right therein shall be liable for the
debts, contracts or engagements of the Holder or his successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether
such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect, except to the extent
that such disposition is permitted by the preceding sentence.
(b) During the lifetime of the Holder, only he or she may
exercise an Option or other Award (or any portion thereof) granted to him
or her under the Plan, unless it has been disposed of pursuant to a QDRO.
After the death of the Holder, any exercisable portion of an Option or
other Award may, prior to the time when such portion becomes unexercisable
under the Plan or the applicable Award Agreement, be exercised by his
personal representative or by any person empowered to do so under the
deceased Holder's will or under the then applicable laws of descent and
distribution.
12.2. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN. Except as
otherwise provided in this Section 12.2, the Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from
time to time by the Board or the Committee. However, without approval of the
Company's stockholders given within twelve months before or after the action
by the Board or the Committee, no action of the Board or the Committee may,
except as provided in Section 12.3, increase the limits imposed in Section
2.1 on the maximum number of shares which may be issued under the Plan. No
amendment, suspension or termination of the Plan shall, without the consent
of the Holder alter or impair any rights or obligations under any Award
theretofore granted or awarded, unless the Award itself otherwise expressly
so provides. No Awards may be granted or awarded during any period of
suspension or after termination of the Plan, and in no event may any
Incentive Stock Option be granted under the Plan after the first to occur of
the following events:
(a) The expiration of ten years from the date the Plan is
adopted by the Board; or
(b) The expiration of ten years from the date the Plan is
approved by the Company's stockholders under Section 12.4.
12.3. CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY,
ACQUISITION OR LIQUIDATION OF THE COMPANY, CHANGE IN CONTROL AND OTHER
CORPORATE EVENTS.
(a) Subject to Section 12.3(d), in the event that the
Administrator determines that any dividend or other distribution (whether
in the form of cash, Common Stock, other securities, or other property),
recapitalization, reclassification, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
25
<PAGE>
repurchase, liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of the Company
(including, but not limited to, a Corporate Transaction), or exchange of
Common Stock or other securities of the Company, issuance of warrants or
other rights to purchase Common Stock or other securities of the Company,
or other similar corporate transaction or event, affects the Common Stock
such that an adjustment is determined by the Administrator to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with
respect to an Award, then the Administrator shall, in such manner as it may
deem equitable, adjust any or all of
(i) the number and kind of shares of Common Stock (or
other securities or property) with respect to which Awards may be
granted or awarded or which may be purchased pursuant to Article
X (including, but not limited to, adjustments of the limitations
in Section 2.1 on the maximum number and kind of shares which may
be issued and adjustments of the Award Limit),
(ii) the number and kind of shares of Common Stock (or
other securities or property) which may be purchased pursuant to
Article X or which are subject to outstanding Options,
Performance Awards, Stock Appreciation Rights, Dividend
Equivalents, or Stock Payments, and the number and kind of shares
of outstanding Restricted Stock or Deferred Stock, and
(iii) the grant, exercise price or purchase price
with respect to any Award or Common Stock which is purchasable
pursuant to Article X.
(b) Subject to Sections 12.3(b)(vii) and 12.3(d), in the event
of any Corporate Transaction or other transaction or event described in
Section 12.3(a) or any unusual or nonrecurring transactions or events
affecting the Company, any affiliate of the Company, or the financial
statements of the Company or any affiliate, or of changes in applicable
laws, regulations, or accounting principles, the Administrator, in its sole
and absolute discretion, and on such terms and conditions as it deems
appropriate, either by the terms of the Award or by action taken prior to
the occurrence of such transaction or event and either automatically or
upon the Holder's request, is hereby authorized to take any one or more of
the following actions whenever the Administrator determines that such
action is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan
or with respect to any Award under the Plan, to facilitate such
transactions or events or to give effect to such changes in laws,
regulations or principles:
(i) To provide for either the purchase of any such
Award for an amount of cash equal to the amount that could have
been attained upon the exercise of such Award or realization of
the Holder's rights had such Award been currently exercisable or
payable or fully vested
26
<PAGE>
or the replacement of such Award with other rights or property
selected by the Administrator in its sole discretion;
(ii) To provide that the Award cannot vest, be
exercised or become payable after such event;
(iii) To provide that such Award shall be
exercisable as to all shares covered thereby, notwithstanding
anything to the contrary in (A) Section 5.3 or 5.4 or (B) the
provisions of such Award;
(iv) To provide that such Award be assumed by the
successor or survivor corporation, or a parent or subsidiary
thereof, or shall be substituted for by similar options, rights
or awards covering the stock of the successor or survivor
corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices; and
(v) To make adjustments in the number and type of
shares of Common Stock (or other securities or property) subject
to outstanding Awards, and in the number and kind of outstanding
Restricted Stock or Deferred Stock and/or in the terms and
conditions of (including the grant or exercise price), and the
criteria included in, outstanding options, rights and awards and
options, rights and awards which may be granted in the future.
(vi) To provide that, for a specified period of time
prior to such event, the restrictions imposed under an Award
Agreement upon some or all shares of Restricted Stock or Deferred
Stock may be terminated, and, in the case of Restricted Stock,
some or all shares of such Restricted Stock may cease to be
subject to repurchase under Section 7.5 or forfeiture under
Section 7.4 after such event.
(vii) None of the foregoing discretionary actions
taken under this Section 12.3(b) shall be permitted with respect
to Options granted under Section 4.5 to Independent Directors to
the extent that such discretion would be inconsistent with the
applicable exemptive conditions of Rule 16b-3. In the event of a
Change in Control or a Corporate Transaction, to the extent that
the Board does not have the ability under Rule 16b-3 to take or
to refrain from taking the discretionary actions set forth in
Section 12.3(b)(iii) above, each Option granted to an Independent
Director shall be exercisable as to all shares covered thereby
upon such Change in Control or during the five days immediately
preceding the consummation of such Corporate Transaction and
subject to such consummation, notwithstanding anything to the
contrary in Section 5.4 or the vesting schedule of such Options.
In the event of a Corporate Transaction, to the extent that the
Board does not have the ability under
27
<PAGE>
Rule 16b-3 to take or to refrain from taking the discretionary
actions set forth in Section 12.3(b)(ii) above, no Option granted
to an Independent Director may be exercised following such
Corporate Transaction unless such Option is, in connection with
such Corporate Transaction, either assumed by the successor or
survivor corporation (or parent or subsidiary thereof) or replaced
with a comparable right with respect to shares of the capital stock
of the successor or survivor corporation (or parent or subsidiary
thereof).
(c) Subject to Section 12.3(d) and 12.8, the Administrator may,
in its discretion, include such further provisions and limitations in any
Award, agreement or certificate, as it may deem equitable and in the best
interests of the Company.
(d) With respect to Awards described in Article VII or VIII
which are granted to Section 162(m) Participants and are intended to
qualify as performance-based compensation under Section 162(m)(4)(C), no
adjustment or action described in this Section 12.3 or in any other
provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Award to fail to so qualify under
Section 162(m)(4)(C), or any successor provisions thereto. No adjustment or
action described in this Section 12.3 or in any other provision of the Plan
shall be authorized to the extent that such adjustment or action would
cause the Plan to violate Section 422(b)(1) of the Code. Furthermore, no
such adjustment or action shall be authorized to the extent such adjustment
or action would result in short-swing profits liability under Section 16 or
violate the exemptive conditions of Rule 16b-3 unless the Administrator
determines that the Award is not to comply with such exemptive conditions.
The number of shares of Common Stock subject to any Award shall always be
rounded to the next whole number.
12.4. APPROVAL OF PLAN BY STOCKHOLDERS. The Plan will be submitted
for the approval of the Company's stockholders within twelve months after the
date of the Board's initial adoption of the Plan. Awards and rights to
purchase Common Stock pursuant to Article X may be granted or awarded prior
to such stockholder approval, provided that (i) such Awards shall not be
exercisable nor shall such Awards vest prior to the time when the Plan is
approved by the stockholders; (ii) if such approval has not been obtained at
the end of said twelve-month period, all Awards previously granted or awarded
under the Plan shall thereupon be canceled and become null and void; and
(iii) all rights to purchase Common Stock granted pursuant to Article X shall
be subject to cancellation as provided in Section 10.6. In addition, if the
Board determines that Awards other than Options or Stock Appreciation Rights
which may be granted to Section 162(m) Participants should continue to be
eligible to qualify as performance-based compensation under Section
162(m)(4)(C) of the Code, the Performance Criteria must be disclosed to and
approved by the Company's stockholders no later than the first stockholder
meeting that occurs in the fifth year following the year in which the
Company's stockholders previously approved the Performance Criteria.
12.5. TAX WITHHOLDING. The Company shall be entitled to require
payment in cash or deduction from other compensation payable to each Holder
of any sums required by federal, state or local tax law to be withheld with
respect to the issuance, vesting, exercise or
28
<PAGE>
payment of any Award. The Administrator may in its discretion and in
satisfaction of the foregoing requirement allow such Holder to elect to have
the Company withhold shares of Common Stock otherwise issuable under such
Award (or allow the return of shares of Common Stock) having a Fair Market
Value equal to the sums required to be withheld.
12.6. LOANS. The Committee may, in its discretion, extend one or
more loans to Employees in connection with the exercise or receipt of an
Award granted or awarded under the Plan, or the issuance of Restricted Stock
or Deferred Stock awarded under the Plan. The terms and conditions of any
such loan shall be set by the Committee.
12.7. FORFEITURE PROVISIONS. Pursuant to its general authority to
determine the terms and conditions applicable to Awards under the Plan, the
Administrator shall have the right (to the extent consistent with the
applicable exemptive conditions of Rule 16b-3) to provide, in the terms of
Awards made under the Plan, or to require a Holder to agree by separate
written instrument, that (a) (i) any proceeds, gains or other economic
benefit actually or constructively received by the Holder upon any receipt or
exercise of the Award, or upon the receipt or resale of any Common Stock
underlying the Award, must be paid to the Company, and (ii) the Award shall
terminate and any unexercised portion of the Award (whether or not vested)
shall be forfeited, if (b)(i) a Termination of Employment, Termination of
Consultancy or Termination of Directorship occurs prior to a specified date,
or within a specified time period following receipt or exercise of the Award,
or (ii) the Holder at any time, or during a specified time period, engages in
any activity in competition with the Company, or which is inimical, contrary
or harmful to the interests of the Company, as further defined by the
Administrator or the Holder incurs a Termination of Employment, Termination
of Consultancy or Termination of Directorship for cause.
12.8. LIMITATIONS APPLICABLE TO SECTION 16 PERSONS AND
PERFORMANCE-BASED COMPENSATION. Notwithstanding any other provision of the
Plan, the Plan, and any Award granted or awarded to any individual who is
then subject to Section 16 of the Exchange Act, shall be subject to any
additional limitations set forth in any applicable exemptive rule under
Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the
Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan and Awards granted
or awarded hereunder shall be deemed amended to the extent necessary to
conform to such applicable exemptive rule. Furthermore, notwithstanding any
other provision of the Plan or any Award described in Article VII or VIII
which is granted to a Section 162(m) Participant and is intended to qualify
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code shall be subject to any additional limitations set forth in Section
162(m) of the Code (including any amendment to Section 162(m) of the Code) or
any regulations or rulings issued thereunder that are requirements for
qualification as performance-based compensation as described in Section
162(m)(4)(C) of the Code, and the Plan shall be deemed amended to the extent
necessary to conform to such requirements.
12.9. EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS. The
adoption of the Plan shall not affect any other compensation or incentive
plans in effect for the Company or any Subsidiary. Nothing in the Plan shall
be construed to limit the right of the Company (a) to establish any other
forms of incentives or compensation for Employees, Directors or Consultants
of the Company or any Subsidiary or (b) to grant or assume options or other
rights or awards
29
<PAGE>
otherwise than under the Plan in connection with any proper corporate purpose
including but not by way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, partnership,
limited liability company, firm or association.
12.10. COMPLIANCE WITH LAWS. The Plan, the granting and vesting of
Awards under the Plan and the issuance and delivery of shares of Common Stock
and the payment of money under the Plan or under Awards granted or awarded
hereunder are subject to compliance with all applicable federal and state
laws, rules and regulations (including but not limited to state and federal
securities law and federal margin requirements) and to such approvals by any
listing, regulatory or governmental authority as may, in the opinion of
counsel for the Company, be necessary or advisable in connection therewith.
Any securities delivered under the Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the Company as
the Company may deem necessary or desirable to assure compliance with all
applicable legal requirements. To the extent permitted by applicable law,
the Plan and Awards granted or awarded hereunder shall be deemed amended to
the extent necessary to conform to such laws, rules and regulations.
12.11. TITLES. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of the Plan.
12.12. GOVERNING LAW. The Plan and any agreements hereunder shall
be administered, interpreted and enforced under the internal laws of the
State of Delaware without regard to conflicts of laws thereof.
* * *
I hereby certify that the foregoing Plan was duly adopted by the
Board of Directors of PriceSmart, Inc. on July 20, 1998.
Executed on this 31st day of July, 1998.
/s/ Robert M. Gans
-----------------------------------
Secretary
<PAGE>
[LATHAM & WATKINS LETTERHEAD]
August 10, 1998
PriceSmart, Inc.
4649 Morena Boulevard
San Diego, California 92117
Re: Form S-8 Registration Statement;
700,000 Shares of Common Stock
Ladies and Gentlemen:
In connection with the registration by PriceSmart, Inc., a Delaware
corporation (the "Company"), of 700,000 shares of common stock, par value
$.0001 per share (the "Shares"), of the Company to be issued pursuant to The
1998 Equity Participation Plan of PriceSmart, Inc. (the "Plan") under the
Securities Act of 1933, as amended (the "Act"), on a Registration Statement
on Form S-8 filed with the Securities and Exchange Commission on August 10,
1998 (as amended from time to time, the "Registration Statement"), you have
requested our opinion with respect to the matters set forth below.
In our capacity as your counsel in connection with such
registration, we are familiar with the proceedings taken and proposed to be
taken by the Company in connection with the authorization, issuance and sale
of the Shares, and for the purposes of this opinion, have assumed such
proceedings will be timely completed in the manner presently proposed. In
addition, we have made such legal and factual examinations and inquiries,
including an examination of originals or copies certified or otherwise
identified to our satisfaction of such documents, corporate records and
instruments, as we have deemed necessary or appropriate for purposes of this
opinion.
<PAGE>
PriceSmart, Inc.
August 10, 1998
Page 2
In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals,
and the conformity to authentic original documents of all documents submitted
to us as copies.
We are opining herein as to the effect on the subject transaction
only of the General Corporation Law of the State of Delaware, and we express
no opinion with respect to the applicability thereto, or the effect thereon,
of the laws of any other jurisdiction or any other laws, or as to any matters
of municipal law or the laws of any other local agencies within the state.
Subject to the foregoing, it is our opinion that as of the date
hereof the Shares have been duly authorized, and, upon the issuance of and
payment for the Shares in accordance with the terms set forth in the Plan,
the Shares will be validly issued, fully paid and nonassessable.
We consent to your filing this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Latham & Watkins
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the 1998 Equity Participation Plan of PriceSmart,
Inc. of our report dated October 16, 1997, with respect to the financial
statements of PriceSmart, Inc. included in its Annual Report on Form 10-K for
the year ended August 31, 1997.
ERNST & YOUNG LLP
San Diego, California
August 6, 1998
