<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
- ---- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
- ---- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE EXCHANGE ACT
OF 1934
For the transition period from ______________ to ______________
COLUMBIA SPORTSWEAR COMPANY
(Exact name of registrant as specified in its charter)
Oregon 0-23939 93-0498284
- -------------------------------------------------------------------------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification Number)
incorporation or
organization)
6600 North Baltimore Portland, Oregon 97203
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(503) 286-3676
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES NO X
------ ------
The number of shares of Common Stock outstanding on May 14, 1998, was
25,232,176.
<PAGE>
COLUMBIA SPORTSWEAR COMPANY
MARCH 31, 1998
INDEX TO FORM 10-Q
<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION PAGE NO.
ITEM 1 - Financial Statements - Columbia Sportswear
Company (Unaudited)
Condensed Consolidated Balance Sheets........................ 2
Condensed Consolidated Statements of Operations.............. 3
Condensed Consolidated Statements of Cash Flows.............. 4
Notes to Condensed Consolidated Financial Statements......... 5
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations ................... 7
PART II. OTHER INFORMATION
ITEM 2 - Change in Securities and Use of Proceeds ............... 10
ITEM 4 - Submission of Matters to a Vote of Security Holders .... 11
ITEM 6 - Exhibits and Reports on Form 8-K........................ 12
SIGNATURES....................................................... 13
</TABLE>
<PAGE>
COLUMBIA SPORTSWEAR COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,1998 DECEMBER 31,1997
------------- ----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 6,264 $ 4,001
Accounts receivable, net of allowance of $2,479 and
$2,461, respectively 58,691 76,086
Receivable from underwriters(Note 2) 107,934 -
Deferred income taxes (Note 5) 6,300 -
Inventories (Note 3) 65,419 48,300
Prepaid expenses and other current assets 1,789 2,430
----------- ----------
Total current assets 246,397 130,817
Property, plant, and equipment, net 46,981 35,277
Intangibles and other assets 3,715 8,383
----------- ----------
Total assets $ 297,093 $ 174,477
----------- ----------
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 29,109 $ 20,427
Accounts payable 34,631 21,765
Accrued liabilities 11,522 12,899
Current portion of long-term debt 158 154
Distribution payable 89,262 5,866
----------- ----------
Total current liabilities 164,682 61,111
Long-term debt 2,789 2,831
Deferred income taxes (Note 5) 4,300 -
----------- ----------
Total liabilities 171,771 63,942
Shareholders' Equity:
Preferred stock; 10,000,000 shares authorized; none
issued and outstanding - -
Common stock; 50,000,000 shares authorized; issued
and outstanding 25,232,176, and 18,792,176 124,837 17,886
Retained earnings 8,906 101,805
Foreign currency translation adjustment (3,313) (3,806)
Unearned portion of restricted stock issued for
future services (5,108) (5,350)
----------- ----------
Total shareholders' equity 125,322 110,535
----------- ----------
Total liabilities and shareholders' equity $ 297,093 $ 174,477
----------- ----------
----------- ----------
</TABLE>
See accompanying notes to condensed consolidated financial statements
2
<PAGE>
COLUMBIA SPORTSWEAR COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1998 1997
------------ --------------
<S> <C> <C>
Net sales $ 74,938 $ 54,495
Cost of sales 46,001 33,743
----------- -----------
Gross profit 28,937 20,752
Selling, general, and administrative 28,330 21,883
----------- -----------
Income (loss) from operations 607 (1,131)
Interest expense, net 438 300
----------- -----------
Income (loss) before income tax 169 (1,431)
Income tax benefit (Note 5) 1,932 11
----------- -----------
Net income (loss) (Note 7) $ 2,101 $ (1,420)
----------- -----------
----------- -----------
Net income (loss) per share (Note 6):
Basic $ 0.11 $ (0.08)
Diluted $ 0.11 $ (0.08)
Weighted average shares outstanding :
Basic 19,174,842 18,792,176
Diluted 19,558,978 18,792,176
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
COLUMBIA SPORTSWEAR COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1998 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 2,101 $ (1,420)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 1,904 1,686
Non-cash compensation 242 242
Loss on disposal of property, plant, & equipment 44 -
Deferred income taxes (2,000) -
Changes in operating assets and liabilities:
Accounts receivable 16,714 12,501
Inventories (16,851) (16,015)
Prepaid expenses and other current assets (642) (58)
Intangibles and other assets (991) (320)
Accounts payable 14,220 9,575
Accrued liabilities (2,277) (3,777)
--------- --------
Net cash provided by operating activities 12,464 2,414
--------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to property, plant, and equipment (13,287) (2,967)
Proceeds from sale of property, plant, and equipment 94 -
Maturity of short-term investments - 222
--------- --------
Net cash used in investing activities (13,193) (2,745)
--------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Net borrowings on notes payable 8,727 407
Repayments on long-term debt (38) (31)
Distributions paid to shareholders (5,866) (132)
--------- --------
Net cash provided by financing activities 2,823 244
--------- --------
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH 169 (123)
--------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,263 (210)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,001 3,283
--------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,264 $ 3,073
--------- --------
--------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for interest $ 757 $ 461
Cash paid during the period for state and foreign income taxes 762 294
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been
prepared by the management of Columbia Sportswear Company ("the Company") and
in the opinion of management contain all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the Company's
financial position as of March 31, 1998 and December 31, 1997, and the
results of operations and cash flows for the three months ended March 31,
1998 and 1997. It should be understood that accounting measurements at
interim dates inherently involve greater reliance on estimates than at year
end. The results of operations for the three months ended March 31, 1998 are
not necessarily indicative of the results to be expected for the full year.
The accompanying financial statements should be read in conjunction with the
audited financial statements and notes thereto including in the Company's
final prospectus, which forms part of the registration statement on Form S-1
(file no. 333-43199) filed in connection with the Company's initial public
offering of 6,440,000 shares (including an over-allotment option of 840,000
shares) of its Common Stock (the "IPO").
NOTE 2. INITIAL PUBLIC OFFERING
The IPO closed on April 1, 1998. Gross proceeds from the IPO (including
exercise of the over -allotment option) totaled $115,920,000 and proceeds net
of underwriting discounts and commissions totaled $107,934,400, which at
March 31, 1998 was recorded as a receivable from underwriters.
NOTE 3. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
Raw Materials $ 5,091 $ 4,565
Work In process 16,143 7,637
Finished goods 44,185 36,098
--------- ---------
$ 65,419 $ 48,300
--------- ---------
--------- ---------
</TABLE>
NOTE 4. DIVIDENDS
In March 1998 the Company declared a dividend to its shareholders of record
on March 23, 1998 in an amount equal to the greater of $95 million or the
amount of the Company Subchapter S accumulated adjustments account as of
March 26, 1998, the date of termination of the Company's S corporation status
(the "Termination Date"). The Company has not yet determined the final
amount of the Subchapter S accumulated adjustments account as of the
Termination Date, however, the Company believes the dividend will exceed $95
million.
NOTE 5. INCOME TAXES
In connection with the IPO, the Company became subject to federal and state
income taxes from the Termination Date. The condensed consolidated statement
of operations for the three months ended March 31, 1998 reflects adjustments
for income taxes based upon income before provision for income taxes as if
the Company had been subject to additional federal and state income taxes
based upon an effective tax rate of 40%.
5
<PAGE>
In accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" , the Company recorded a net deferred tax asset
of $2,000,000 for cumulative temporary differences between financial
statement and income tax bases of the Company's assets and liabilities by
recording a benefit for such deferred tax assets in its condensed
consolidated statement of operations on the Termination Date. The net amount
represents a current asset of $6,300,000 and a non-current liability of
$4,300,000. Such deferred tax assets are based on the cumulative temporary
difference upon the conversion from an S corporation to a C corporation on
the Termination Date.
During interim periods, income tax expense is based on the estimated
effective income tax rate that is expected for the entire fiscal year. The
estimated effective tax rate for the three months ended March 31, 1998 was
40%. The net income tax benefit for the three months ended March 31, 1998 was
$1,932,000. This amount includes the recording of the net deferred tax asset
of approximately $2,000,000 and the provision for income taxes for the three
months ended March 31, 1998 of $68,000.
NOTE 6. EARNINGS PER SHARE
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
requires dual presentation of basic and diluted earnings per share
("EPS"). Basic EPS is based on the weighted average number of common
shares outstanding. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock.
There were no adjustments to net income in computing diluted earnings per
share for the three months ended March 31, 1998 and 1997. A reconciliation
of the common shares used in the denominator for computing basic and diluted
earnings per share is as follows:
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1998 1997
---------- ----------
<S> <C> <C>
Weighted average common shares outstanding,
used in computing basic earnings per share 19,175 18,792
Effect of dilutive stock options 384 -
------- --------
Weighted-average common shares outstanding,
used in computing diluted earnings per share 19,559 18,792
------- --------
------- --------
Earnings (loss) per share of common stock - basic
and diluted $ 0.11 $ (0.08)
</TABLE>
NOTE 7. COMPREHENSIVE INCOME
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income". Comprehensive income
(loss) was approximately $2,594,000 and $(2,202,000) for the three months
ended March 31, 1998 and 1997, respectively. The differences from net income
consist of changes in foreign currency translation adjustments.
6
<PAGE>
FORWARD LOOKING STATEMENTS
The statements in this report concerning certain expected future expenses as
a percentage of net sales, future financing and working capital requirements,
and the Year 2000 issue constitute forward - looking statements that are
subject to risks and uncertainties Factors that could adversely affect
selling, general and administrative expense as a percentage of net sales
include, but are not limited to, increased competitive factors (including
increased competition, new product offerings by competitors and price
pressures), unfavorable seasonal differences in sales volume, changes in
consumer preferences, an inability to increase sales to department stores or
to open and operate new concept shops on favorable terms, a failure to manage
growth effectively (including timely implementation of the Company's
enterprise system and expansion of its distribution center) and
unavailability of independent manufacturing, labor or supplies at reasonable
prices, as well as unfavorable business conditions and disruptions in the
outerwear, sportswear and rugged footwear industries and general economy.
Factors that could materially affect future financing requirements include,
but are not limited to, the ability to obtain additional financing on
acceptable terms and greater than expected S corporation dividends. Factors
that could materially affect future working capital requirements include, but
are not limited to, the industry factors and general business conditions
noted above. Factors that could materially affect the Year 2000 issue
include, but are not limited to, unanticipated costs associated with any
required modifications to the Company's computer systems and associated
software.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,1998 COMPARED TO THREE MONTHS ENDED MARCH 31,1997
NET SALES: Net sales increased 37.4% to $74.9 million for the three month
period ended March 31, 1998 from $54.5 million for the comparable period in
1997. Domestic sales increased 42.5% to $60.0 million for the three month
period ended March 31, 1998 from $42.1 million for the comparable period in
1997. Net international sales, excluding Canada, increased 23.8% to $10.4
million for the three month period ended March 31, 1998 from $8.4 million for
the comparable period in 1997. Canadian sales grew 12.6% to $4.6 million for
the three month period ended March 31, 1998 compared to the same period in
1997. These increases were attributable to increased sales of spring
sportswear units and timely shipments of products to customers
GROSS PROFIT: Gross profit as a percentage of net sales was 38.6% for the
three months ending March 31, 1998 compared to 38.1% for the comparable
period in 1997. The increase in gross margin was due to increased domestic
and European wholesale sales as a percentage of total sales, which have
traditionally been higher margin than other International markets, as well
as efficiencies in the manufacturing process and continued strength of the
brand in the market.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE: Selling, general, and
administrative expense increased 29.2% to $28.3 million for the three months
ended March 31, 1998 from $21.9 million for the comparable period in 1997,
primarily as a result of an increase in variable selling and operating
expenses to support both the higher level of sales and continued investment
in operational infrastructure. As a percentage of sales, selling, general,
and administrative decreased to 37.8% for the three months ended March 31,
1998 from 40.2% for the comparable period in 1997, reflecting the Company's
operating expense leverage. The Company believes that it will be able to
continue to leverage selling, general, and administrative as a percentage of
sales as its international operations become more established and its
sportswear and footwear sales expand.
INTEREST EXPENSE: Interest expense increased by 46% for the three months
ended March 31, 1998 from the comparable period in 1997. The increase was
attributable to additional borrowing requirements for working capital during
the three months ended March 31, 1998.
PROVISION FOR INCOME TAXES: Income tax expense for the three months ended
March 31, 1998 includes a deferred income tax benefit of $2.0 million as a
result of the conversion to C corporate status in connection with the IPO.
7
<PAGE>
NET INCOME: Earnings per share were based on the weighted average number of
common shares outstanding for the three months ended March 31,1998 and 1997.
If the shares issued in connection with the IPO had been outstanding for the
three months ended March 31, 1998, the total shares outstanding would have
been 25.2 million and 25.6 million for basic and diluted methods,
respectively, resulting in earnings per share of $0.08 for the three months
ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company financed its operations in the three months ended March 31, 1998
primarily through cash from operations and current cash balances. At March
31, 1998, the Company had total cash equivalents of $6.3 million compared to
$3.1 million at March 31, 1997. Cash provided by operating activities was
$12.5 million for the three months ended March 31, 1998 and $2.4 million
for the comparable period in 1997. This increase was primarily due to a
decrease in accounts receivable and increase in accounts payable offset by an
increase in inventory, which provided additional working capital to fund the
Company's first quarter operations.
The Company's primary capital requirements are for working capital, investing
activities associated with expansion of its distribution center, systems
development and general corporate needs. Net cash used in investing
activities was $13.2 million for the three months ended March 31, 1998 and
$2.7 million for the comparable period in 1997.
Cash provided from financing activities was $2.8 million for the three months
ended March 31, 1998 and $244,000 for the comparable period in 1997. The
increase in net cash provided from financing activities was primarily due to
increases in net short term borrowings offset by the repayment of an
outstanding note from a shareholder of approximately $5.7 million.
To fund its working capital requirements, the Company has an unsecured
revolving line of credit of $50 million with Wells Fargo Bank, N.A. which
expires June 30, 1998. As of March 31, 1998, $20.5 million was outstanding
under this line of credit bearing interest at a rate of 6.2% per annum. The
Company expects to renew or replace this line of credit upon its expiration.
The Company is party to a Buying Agency Agreement with Nissho Iwai American
Corporation ("Nissho") pursuant to which Nissho provides the Company
unsecured credit, the amount of which varies annually at Nissho's discretion,
and acts as a buying agent on behalf of the Company. At March 31, 1998 the
maximum amount available under the Nissho Agreement was $120 million, which
includes $70 million allowed under the credit line and amounts available for
letters of credit. The agreement expires September 30, 1998. As of March
31, 1998, $23.7 million was outstanding under the Company's line of credit
with Nissho bearing interest at a rate of 6.2% per annum.
The Company maintains a credit agreement with The Hong Kong and Shanghai
Banking Corporation Limited for an uncommitted and unsecured line of credit
with a combined limit of $60 million. Within this limit, up to $45 million
may be used as an import line of credit for issuing documentary letters of
credit and up to $25 million may be used as a revolving line of credit for
working capital. As of March 31,1998, $5 million was outstanding under the
agreement bearing interest at a rate of 6% per annum.
Proceeds from the IPO net of underwriting discounts and commissions totaled
$107.9 million, of which an amount equal to the greater of $95 million or the
amount of the Company Subchapter S accumulated adjustments account as of the
Termination Date was declared as a dividend to shareholders of record on
March 23, 1998. As of April 1, 1998, $95 million has been distributed to
such shareholders, however, the Company has not yet determined the final
amount of the Subchapter S accumulated adjustments account as of the
Termination date. The additional dividend is not estimated to significantly
effect the Company's liquidity.
8
<PAGE>
For the three months ended March 31, 1998, the Company expended approximately
$13.0 million, excluding capitalized interest, on capital projects. In
connection with these capital projects, the Company intends to enter into a
long term borrowing arrangement in mid-1998 to provide funds to complete the
projects. The Company believes that its liquidity requirements for the next
12 months and beyond will be adequately covered by the IPO proceeds, short
term arrangements, and the anticipated long term borrowing facility.
The Company is currently expending capital for a new enterprise management
information system, expected to be fully operational by late 1998, which will
address the Year 2000 issue on all core Company business systems. The
Company has other ancillary systems that will be modified to address the Year
2000 issue. The Company, however, cannot be certain that these planned system
modifications will be completed in a timely fashion. In addition, the
Company has not thoroughly analyzed the impact of other parties' computer
system failures, but the Company believes costs incurred in responding to
other parties' Year 2000 computer system failures, together with the cost of
modifications to the Company's computer systems, will not have a material
impact on the Company's results of operations or financial condition.
9
<PAGE>
PART II OTHER INFORMATION
ITEM 2 CHANGE IN SECURITIES AND USE OF PROCEEDS
On March 24, 1998, prior to the completion of the IPO, the Company amended
and restated its articles of incorporation, increasing the total number of
authorized shares of capital stock to 50,000,000 shares of Common Stock and
10,000,000 shares of Preferred Stock. The Second Amended and Restated
Articles of Incorporation also converted each share of nonvoting Common Stock
into one share of voting Common Stock, and effected a 0.59-for-one reverse
stock split.
Effective as of March 24, 1998, prior to completion of the IPO and the filing
of the Second Amended and Restated Articles of Incorporation, the Company
issued 686,504 shares of Common Stock to holders of the Company's voting
Common Stock pursuant to an Agreement Regarding Plan of Recapitalization,
dated March 23, 1998. The issuance was made pursuant to Section 3(a) (9) of
the Securities Act of 1933.
The Company's registration statement (No. 333-43199) on Form S-1 for the IPO
was declared effective by the Securities and Exchange Commission on March 26,
1998. In the IPO, which closed on April 1, 1998, the Company registered and
issued 6,440,000 shares of Common Stock, including 840,000 shares issued upon
exercise of an overallotment option granted to the underwriters. The
managing underwriters for the IPO were Goldman, Sachs & Co., NationsBanc
Montgomery Securities LLC and PaineWebber Incorporated in the United States,
and Goldman Sachs International, NationsBanc Montgomery Securities LLC,
PaineWebber International and Credit Lyonnaise Securities outside the United
States. The IPO price was $18 per share, or an aggregate of $115,920,000.
Underwriter discounts and commissions totaled $7,985,600. The Company paid
an estimated total of $1,000,000 for other expenses in connection with the
IPO. Proceeds to the Company, net of underwriter discounts, commissions and
other expenses, were $106,934,400.
As of April 1, 1998, $95,000,000 of the net proceeds from the IPO had been
distributed to the Company's shareholders of record as of March 23, 1998,
including direct payments to the Company's Chairman, President and Chief
Executive Officer, Director of Retail Operations, Chief Operating Officer and
various trusts.
The remaining $11,900,000 of net proceeds after distribution of dividends
were used for general corporate operating requirements, including current
working capital needs and capital project funding.
10
<PAGE>
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 20, 1998, by consent resolution in lieu of an annual meeting of
shareholders, the holders of the Company's outstanding voting Common Stock took
the actions described below:
1. The shareholders elected each of Gertrude Boyle, Timothy P. Boyle,
Sarah A. Bany, Murrey R. Albers, Edward S. George and John Stanton to
the Company's Board of Directors, by the vote indicated below, to
serve until the next annual meeting of shareholders:
2,764,748 shares of voted in favor (pre-reverse split)
0 shares voted against or withheld
0 abstentions
0 broker nonvotes
2. The shareholders approved, by the vote indicated below, an increase in
the number of authorized shares under the 1997 Stock Incentive Plan to
2,500,000 shares of Common Stock:
2,764,748 shares voted in favor (pre-reverse split)
0 shares voted against or withheld
0 abstentions
0 broker nonvotes
On March 23, 1998, by consent resolution, the holders of the Company's
outstanding Common Stock (including voting and nonvoting Common Stock) took
the actions described below:
1. The shareholders approved, by the vote indicated below, an Agreement
Regarding Plan of Recapitalization:
2, 764,748 shares of voting Common Stock voted in favor
(pre-reverse split)
0 shares voted against or withheld
0 abstentions
0 broker nonvotes
27, 922, 825 shares of nonvoting Common Stock voted in favor
(pre-reverse split)
0 shares voted against or withheld
0 abstentions
0 broker nonvotes
2. The shareholders approved, by the vote indicated below, the Second
Amended and Restated Articles of Incorporation:
2,764,748 shares of voting Common Stock voted in favor
(pre-reverse split)
0 shares voted against or withheld
0 abstentions
0 broker nonvotes
27, 922, 825 shares of nonvoting Common Stock voted in favor
(pre-reverse split)
0 shares voted against or withheld
0 abstentions
0 broker nonvotes
11
<PAGE>
As of each of March 20 and March 23, 1998, there were 2,764,748 shares of
voting Common Stock outstanding and 27,922,825 shares of nonvoting Common
Stock outstanding. The foregoing share numbers do not reflect the
Company's conversion of nonvoting stock to voting stock or a 0.59-for-one
reverse stock split.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 1997 Stock Incentive Plan, as amended
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLUMBIA SPORTSWEAR COMPANY
Date: 5/14/98 /s/ Patrick D. Anderson
------------------------------ ----------------------------------
Patrick D. Anderson
Chief Financial Officer and Authorized
Officer
13
<PAGE>
COLUMBIA SPORTSWEAR COMPANY
1997 STOCK INCENTIVE PLAN, AS AMENDED
1. PURPOSE. The purpose of this Stock Incentive Plan (the "Plan") is
to enable Columbia Sportswear Company (the "Company") to attract and retain
the services of (1) selected employees, officers and directors of the Company
and (2) selected nonemployee agents, consultants, advisors and independent
contractors of the Company.
2. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided
below and in SECTION 13, the shares to be offered under the Plan shall
consist of Common Stock of the Company, and the total number of shares of
Common Stock that may be issued under the Plan shall not exceed 2,500,000
shares. The shares issued under the Plan may be authorized and unissued
shares or reacquired shares. If an option, stock appreciation right or
performance unit granted under the Plan expires, terminates or is cancelled,
the unissued shares subject to such option, stock appreciation right or
performance unit shall again be available under the Plan. If shares sold or
awarded as a bonus under the Plan are forfeited to or repurchased by the
Company, the number of shares forfeited or repurchased shall again be
available under the Plan.
3. EFFECTIVE DATE AND DURATION OF PLAN.
(a) EFFECTIVE DATE. The Plan shall become effective as of March
12, 1997. No option, stock appreciation right or performance unit granted
under the Plan shall become exercisable, however, until the Plan is approved
by the affirmative vote of the holders of a majority of the shares of Common
Stock represented at a shareholders meeting at which a quorum is present, and
any such awards under the Plan before such approval shall be conditioned on
and subject to such approval. Subject to this limitation, options, stock
appreciation rights and performance units may be granted and shares may be
awarded as bonuses or sold under the Plan at any time after the effective
date and before termination of the Plan.
(b) DURATION. The Plan shall continue in effect until all shares
available for issuance under the Plan have been issued and all restrictions
on such shares have lapsed. The Board of Directors may suspend or terminate
the Plan at any time except with respect to options, performance units and
shares subject to restrictions then outstanding under the Plan. Termination
shall not affect any outstanding options, any right of the Company to
repurchase shares or the forfeitability of shares issued under the Plan.
<PAGE>
4. ADMINISTRATION.
(a) BOARD OF DIRECTORS. The Plan shall be administered by the
Board of Directors of the Company, which shall determine and designate from
time to time the individuals to whom awards shall be made, the amount of the
awards and the other terms and conditions of the awards. Subject to the
provisions of the Plan, the Board of Directors may from time to time adopt
and amend rules and regulations relating to administration of the Plan,
advance the lapse of any waiting period, accelerate any exercise date, waive
or modify any restriction applicable to shares (except those restrictions
imposed by law) and make all other determinations in the judgment of the
Board of Directors necessary or desirable for the administration of the Plan.
The interpretation and construction of the provisions of the Plan and
related agreements by the Board of Directors shall be final and conclusive.
The Board of Directors may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any related agreement in the
manner and to the extent it shall deem expedient to carry the Plan into
effect, and it shall be the sole and final judge of such expediency.
(b) COMMITTEE. The Board of Directors may delegate to the
Compensation Committee of the Board of Directors (the "Committee") any or all
authority for administration of the Plan. If authority is delegated to the
Committee, all references to the Board of Directors in the Plan shall mean
and relate to the Committee, except (i) as otherwise provided by the Board of
Directors, (ii) that only the Board of Directors may amend or terminate the
Plan as provided in SECTIONS 3 and 13 and (iii) that if the Committee
includes officers of the Company, the Committee shall not be permitted to
grant options to persons who are officers of the Company.
5. TYPES OF AWARDS; ELIGIBILITY. The Board of Directors may, from
time to time, take the following action, separately or in combination, under
the Plan: (i) grant Incentive Stock Options, as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), as provided in
SECTIONS 6(a) and 6(b); (ii) grant options other than Incentive Stock Options
("Non-Statutory Stock Options") as provided in SECTIONS 6(a) and 6(c); (iii)
award stock bonuses as provided in SECTION 7; (iv) sell shares subject to
restrictions as provided in SECTION 8; (v) grant stock appreciation rights as
provided in SECTION 9; (vi) grant cash bonus rights as provided in SECTION
10; and (vii) grant performance units as provided in SECTION 11. Any such
awards may be made to employees, including employees who are officers or
directors, and to other individuals described in SECTION 1 who the Board of
Directors believes have made or will make an important contribution to the
Company; PROVIDED, HOWEVER, that only employees of the Company shall be
eligible to receive Incentive Stock Options under the Plan. The Board of
Directors shall select the individuals to whom awards shall be made and shall
specify the action taken with respect to each individual to whom an award is
made. At the discretion of the Board of Directors, an individual may be
given an election to surrender an award in exchange for the grant of a new
award. No employee may be granted options or stock appreciation rights under
the Plan for more than an aggregate of 100,000 shares
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of Common Stock in connection with the hiring of the employee or 100,000
shares of Common Stock in any calendar year otherwise.
6. OPTION GRANTS.
(a) GENERAL RULES RELATING TO OPTIONS.
(i) TERMS OF GRANT. The Board of Directors may grant options
under the Plan. With respect to each option grant, the Board of Directors
shall determine the number of shares subject to the option, the option
price, the period of the option, the time or times at which the option may
be exercised and whether the option is an Incentive Stock Option (subject
to the provisions of Section 6(b)) or a Non-Statutory Stock Option. At the
time of the grant of an option or at any time thereafter, the Board of
Directors may provide that an optionee who exercised an option with Common
Stock of the Company shall automatically receive a new option to purchase
additional shares equal to the number of shares surrendered and may specify
the terms and conditions of such new options.
(ii) EXERCISE OF OPTIONS. Except as provided in SECTION
6(a)(iv) or as determined by the Board of Directors, no option granted
under the Plan may be exercised unless at the time of such exercise the
optionee is employed by or in the service of the Company and shall have
been so employed or provided such service continuously since the date the
option was granted. Absence on leave or on account of illness or
disability under rules established by the Board of Directors shall not,
however, be deemed an interruption of employment or service for this
purpose. Unless otherwise determined by the Board of Directors, vesting of
options shall not continue during an absence on leave (including an
extended illness) or on account of disability. Except as provided in
SECTIONS 6(a)(iv) and 12, options granted under the Plan may be exercised
from time to time over the period stated in each option in such amounts and
at such times as shall be prescribed by the Board of Directors, provided
that options shall not be exercised for fractional shares. Unless
otherwise determined by the Board of Directors, if an optionee does not
exercise an option in any one year with respect to the full number of
shares to which the optionee is entitled in that year, the optionee's
rights shall be cumulative and the optionee may purchase those shares in
any subsequent year during the term of the option.
(iii) NONTRANSFERABILITY. Each Incentive Stock Option and,
unless otherwise determined by the Board of Directors, each other option
granted under the Plan by its terms shall be nonassignable and
nontransferable by the optionee, either voluntarily or by operation of law,
except by will or by the laws of descent and distribution of the state or
country of the optionee's domicile at the time of death.
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(iv) TERMINATION OF EMPLOYMENT OR SERVICE.
(A) GENERAL RULE. Unless otherwise determined by the Board
of Directors, in the event an optionee's employment or service with
the Company terminates for any reason other than because of physical
disability or death as provided in SECTIONS 6(a)(iv)(B) and (C), his
or her option may be exercised at any time before the expiration date
of the option or the expiration of 30 days after the date of
termination, whichever is the shorter period, but only if and to the
extent the optionee was entitled to exercise the option at the date of
termination.
(B) TERMINATION BECAUSE OF TOTAL DISABILITY.
Unless otherwise determined by the Board of Directors, in the event an
optionee's employment or service with the Company terminates because
of total disability, his or her option may be exercised at any time
before the expiration date of the option or the expiration of 12
months after the date of termination, whichever is the shorter period,
but only if and to the extent the optionee was entitled to exercise
the option at the date of termination. The term "total disability"
means a medically determinable mental or physical impairment that is
expected to result in death or has lasted or is expected to last for a
continuous period of 12 months or more and that causes the optionee to
be unable, in the opinion of the Company and two independent
physicians, to perform his or her duties as an employee, director,
officer or consultant of the Company and to be engaged in any
substantial gainful activity. Total disability shall be deemed to
have occurred on the first day after the Company and the two
independent physicians have furnished their opinion of total
disability to the Company.
(C) TERMINATION BECAUSE OF DEATH. Unless otherwise
determined by the Board of Directors, in the event of an optionee's
death while employed by or providing service to the Company, his or
her option may be exercised at any time before the expiration date of
the option or the expiration of 12 months after the date of death,
whichever is the shorter period, but only if and to the extent the
optionee was entitled to exercise the option at the date of death and
only by the person or persons to whom the optionee's rights under the
option shall pass by the optionee's will or by the laws of descent and
distribution of the state or country of domicile at the time of death.
(D) AMENDMENT OF EXERCISE PERIOD APPLICABLE TO TERMINATION.
The Board of Directors, at the time of grant or, with respect to an
option that is not an Incentive Stock Option, at any time thereafter,
may extend the 30-day and 12-month exercise periods any length of time
not longer than the original expiration date of the option, and may
increase
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the portion of an option that is exercisable, subject to such
terms and conditions as the Board of Directors may determine.
(E) FAILURE TO EXERCISE OPTION. To the extent that the
option of any deceased optionee or any optionee whose employment or
service terminates is not exercised within the applicable period, all
further rights to purchase shares pursuant to the option shall cease
and terminate.
(v) PURCHASE OF SHARES. Unless the Board of Directors
determines otherwise, shares may be acquired pursuant to an option granted
under the Plan only upon the Company's receipt of written notice from the
optionee of the optionee's intention to exercise, specifying the number of
shares as to which the optionee desires to exercise the option and the date
on which the optionee desires to complete the transaction, and if required
in order to comply with the Securities Act of 1933, as amended, containing
a representation that it is the optionee's present intention to acquire the
shares for investment and not with a view to distribution. Unless the
Board of Directors determines otherwise, on or before the date specified
for completion of the purchase of shares pursuant to an option, the
optionee must have paid the Company the full purchase price of those shares
in cash (including, with the consent of the Board of Directors, cash that
may be the proceeds of a loan from the Company (provided that, with respect
to an Incentive Stock Option, such loan is approved at the time of option
grant)) or, with the consent of the Board of Directors, in whole or in
part, in Common Stock of the Company valued at fair market value,
restricted stock, performance units or other contingent awards denominated
in either stock or cash, promissory notes and other forms of consideration.
The fair market value of Common Stock provided in payment of the purchase
price shall be the closing price of the Common Stock as reported in THE
WALL STREET JOURNAL on the last trading day before the date the option is
exercised if the Common Stock is publicly traded, or such other reported
value of the Common Stock as shall be specified by the Board of Directors.
No shares shall be issued until full payment for the shares has been made.
With the consent of the Board of Directors (which, in the case of an
Incentive Stock Option, shall be given only at the time of grant), an
optionee may request the Company to apply automatically the shares to be
received upon the exercise of a portion of a stock option (even though
stock certificates have not yet been issued) to satisfy the purchase price
for additional portions of the option. Each optionee who has exercised an
option shall, immediately upon notification of the amount due, if any, pay
to the Company in cash amounts necessary to satisfy any applicable federal,
state and local tax withholding requirements. If additional withholding is
or becomes required beyond any amount deposited before delivery of the
certificates, the optionee shall pay such amount to the Company on demand.
If the optionee fails to pay the amount demanded, the Company may withhold
that amount from other amounts payable by the Company to the optionee,
including salary, subject to applicable law. With the consent of the Board
of Directors an optionee may satisfy this obligation, in whole or in part,
by having the Company
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withhold from the shares to be issued upon exercise that number of shares
that would satisfy the withholding amount due or by delivering to the
Company Common Stock to satisfy the withholding amount. Upon the exercise
of an option, the number of shares reserved for issuance under the Plan
shall be reduced by the number of shares issued upon exercise of the
option.
(b) INCENTIVE STOCK OPTIONS. Incentive Stock Options shall be
subject to the following additional terms and conditions:
(i) LIMITATION ON AMOUNT OF GRANTS. If the aggregate fair
market value of stock (determined as of the date the option with respect to
such stock is granted) with respect to which Incentive Stock Options
granted under this Plan (and any other stock incentive plan of the Company
or its parent or subsidiary corporations) are exercisable for the first
time by an employee during any calendar year exceeds $100,000, the portion
of the option or options not exceeding $100,000 will be treated as an
Incentive Stock Option and the portion of the option exceeding $100,000
will be treated as a Non-Statutory Stock Option. The preceding sentence
will be applied by taking options into account in the order in which they
were granted. The Company may designate stock that is treated as acquired
pursuant to exercise of an option that is in part an Incentive Stock Option
and in part a Non-Statutory Stock Option as Incentive Stock Option stock by
issuing a separate certificate for that stock and identifying the
certificate as Incentive Stock Option stock in its stock records. In the
absence of such a designation, each share of stock issued pursuant to
exercise of the option will be treated in part as Incentive Stock Option
stock and in part as Non-Statutory Stock Option stock.
(ii) LIMITATIONS ON GRANTS TO 10 PERCENT SHAREHOLDERS.
An Incentive Stock Option may be granted under the Plan to an employee
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company only if the option price is at least
110 percent of the fair market value, as described in SECTION 6(b)(iv), of
the Common Stock subject to the option on the date it is granted and the
option by its terms is not exercisable after the expiration of five years
from the date it is granted.
(iii) DURATION OF OPTIONS. Subject to SECTIONS 6(a)(ii) and
6(b)(ii), Incentive Stock Options granted under the Plan shall continue in
effect for the period fixed by the Board of Directors, except that no
Incentive Stock Option shall be exercisable after the expiration of 10
years from the date it is granted.
(iv) OPTION PRICE. The option price per share shall be
determined by the Board of Directors at the time of grant. Except as
provided in SECTION 6(b)(ii), the option price shall not be less than
100 percent of the fair market value of the Common Stock covered by the
Incentive Stock Option at the date the option is granted. The fair market
value shall be deemed to be the closing price of the
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Common Stock as reported in THE WALL STREET JOURNAL on the day before the
date the option is granted if the stock is publicly traded, or, if there
has been no sale on that date, on the last preceding date on which a sale
occurred, or such other value of the Common Stock as shall be specified by
the Board of Directors.
(v) LIMITATION ON TIME OF GRANT. No Incentive Stock Option
shall be granted on or after the 10th anniversary of the effective date of
the Plan.
(vi) CONVERSION OF INCENTIVE STOCK OPTIONS. The Board of
Directors may at any time, without the optionee's consent, convert an
Incentive Stock Option to a Non-Statutory Stock Option.
(c) NON-STATUTORY STOCK OPTIONS. Non-Statutory Stock Options shall
be subject to the following terms and conditions, in addition to those set forth
in SECTION 6(a) above:
(i) OPTION PRICE. The option price for Non-Statutory Stock
Options shall be determined by the Board of Directors at the time of grant
and may be any amount determined by the Board of Directors.
(ii) DURATION OF OPTIONS. Non-Statutory Stock Options granted
under the Plan shall continue in effect for the period fixed by the Board
of Directors.
7. STOCK BONUSES. The Board of Directors may award shares under the
Plan as stock bonuses. Shares awarded as a bonus shall be subject to the
terms, conditions and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability and
forfeiture of the shares awarded, together with such other restrictions as
may be determined by the Board of Directors. The Board of Directors may
require the recipient to sign an agreement as a condition of the award, but
may not require the recipient to pay any monetary consideration other than
amounts necessary to satisfy tax withholding requirements. The agreement may
contain any terms, conditions, restrictions, representations and warranties
required by the Board of Directors. The certificates representing the shares
awarded shall bear any legends required by the Board of Directors. The
Company may require any recipient of a stock bonus to pay to the Company in
cash upon demand amounts necessary to satisfy any applicable federal, state
or local tax withholding requirements. If the recipient fails to pay the
amount demanded, the Company may withhold that amount from other amounts
payable by the Company to the recipient, including salary, subject to
applicable law. With the consent of the Board of Directors, a recipient may
deliver Common Stock to the Company to satisfy this withholding obligation.
Upon the issuance of a stock bonus, the number of shares reserved for
issuance under the Plan shall be reduced by the number of shares issued.
8. RESTRICTED STOCK. The Board of Directors may issue shares under the
Plan for such consideration (including promissory notes and services) as
determined by the
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Board of Directors. Shares issued under the Plan shall be subject to the
terms, conditions and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability, repurchase
by the Company and forfeiture of the shares issued, together with such other
restrictions as may be determined by the Board of Directors. All Common
Stock issued pursuant to this SECTION 8 shall be subject to a purchase
agreement, which shall be executed by the Company and the prospective
recipient of the shares before the delivery of certificates representing such
shares to the recipient. The purchase agreement may contain any terms,
conditions, restrictions, representations and warranties required by the
Board of Directors. The certificates representing the shares shall bear any
legends required by the Board of Directors. The Company may require any
purchaser of restricted stock to pay to the Company in cash upon demand
amounts necessary to satisfy any applicable federal, state or local tax
withholding requirements. If the purchaser fails to pay the amount demanded,
the Company may withhold that amount from other amounts payable by the
Company to the purchaser, including salary, subject to applicable law. With
the consent of the Board of Directors, a purchaser may deliver Common Stock
to the Company to satisfy this withholding obligation. Upon the issuance of
restricted stock, the number of shares reserved for issuance under the Plan
shall be reduced by the number of shares issued.
9. STOCK APPRECIATION RIGHTS.
(a) GRANT. Stock appreciation rights may be granted under the Plan
by the Board of Directors, subject to such rules, terms and conditions as the
Board of Directors may determine.
(b) EXERCISE.
(i) Each stock appreciation right shall entitle the holder, upon
exercise, to receive from the Company in exchange therefor an amount equal
in value to the excess of the fair market value on the date of exercise of
one share of Common Stock of the Company over its fair market value on the
date of grant (or, in the case of a stock appreciation right granted in
connection with an option, the excess of the fair market value of one share
of Common Stock of the Company over the option price per share under the
option to which the stock appreciation right relates), multiplied by the
number of shares covered by the stock appreciation right or the option, or
portion thereof, that is surrendered. Payment by the Company upon
exercise of a stock appreciation right may be made in Common Stock valued
at fair market value, in cash or partly in Common Stock and partly in cash,
all as determined by the Board of Directors.
(ii) A stock appreciation right shall be exercisable only at the
time or times established by the Board of Directors. If a stock
appreciation right is granted in connection with an option, the following
rules shall apply: (1) the stock appreciation right shall be exercisable
only to the extent and on the same conditions that the related option may
be exercised; (2) the stock appreciation right shall be
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exercisable only when the fair market value of the stock exceeds the option
price of the related option; (3) the stock appreciation right shall be for
no more than 100 percent of the excess of the fair market value of the
stock at the time of exercise over the option price; (4) upon exercise of
the stock appreciation right, the option or portion thereof to which the
stock appreciation right relates terminates; and (5) upon exercise of the
option, the related stock appreciation right or portion thereof terminates.
(iii) The Board of Directors may withdraw any stock appreciation
right granted under the Plan at any time and may impose any conditions upon
the exercise of a stock appreciation right or adopt rules and regulations
from time to time affecting the rights of holders of stock appreciation
rights. Such rules and regulations may govern the right to exercise stock
appreciation rights granted before adoption or amendment of such rules and
regulations, as well as stock appreciation rights granted thereafter.
(iv) For purposes of this SECTION 9, the fair market value of
the Common Stock shall be determined as of the date the stock appreciation
right is exercised, under the methods set forth in SECTION 6(b)(iv).
(v) No fractional shares shall be issued upon exercise of a
stock appreciation right. In lieu thereof, cash may be paid in an amount
equal to the value of the fraction or, if the Board of Directors shall
determine, the number of shares may be rounded downward to the next whole
share.
(vi) Each stock appreciation right granted in connection with an
Incentive Stock Option, and unless otherwise determined by the Board of
Directors, each other stock appreciation right granted under the Plan by
its terms shall be nonassignable and nontransferable by the holder, either
voluntarily or by operation of law, except by will or by the laws of
descent and distribution of the state or country of the holder's domicile
at the time of death, and each stock appreciation right by its terms shall
be exercisable during the holder's lifetime only by the holder.
(vii) Each participant who has exercised a stock appreciation
right shall, upon notification of the amount due, pay to the Company in
cash amounts necessary to satisfy any applicable federal, state and local
tax withholding requirements. If the participant fails to pay the amount
demanded, the Company may withhold that amount from other amounts payable
by the Company to the participant, including salary, subject to applicable
law. With the consent of the Board of Directors, a participant may satisfy
this obligation, in whole or in part, by having the Company withhold from
any shares to be issued upon exercise that number of shares that would
satisfy the withholding amount due or by delivering Common Stock to the
Company to satisfy the withholding amount.
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(viii) Upon the exercise of a stock appreciation right for
shares, the number of shares reserved for issuance under the Plan shall be
reduced by the number of shares issued. Cash payments of stock
appreciation rights shall not reduce the number of shares of Common Stock
reserved for issuance under the Plan.
10. CASH BONUS RIGHTS.
(a) GRANT. The Board of Directors may grant cash bonus rights under
the Plan in connection with (i) options granted or previously granted,
(ii) stock appreciation rights granted or previously granted, (iii) stock
bonuses awarded or previously awarded and (iv) shares sold or previously sold
under the Plan. Cash bonus rights will be subject to such rules, terms and
conditions as the Board of Directors may determine. Unless otherwise determined
by the Board of Directors, each cash bonus right granted under the Plan by its
terms shall be nonassignable and nontransferable by the holder, either
voluntarily or by operation of law, except by will or by the laws of descent and
distribution of the state or country of the holder's domicile at the time of
death. The payment of a cash bonus shall not reduce the number of shares of
Common Stock reserved for issuance under the Plan.
(b) CASH BONUS RIGHTS IN CONNECTION WITH OPTIONS. A cash bonus right
granted in connection with an option will entitle an optionee to a cash bonus
when the related option is exercised (or terminates in connection with the
exercise of a stock appreciation right related to the option) in whole or in
part if, in the sole discretion of the Board of Directors, the bonus right will
result in a tax deduction that the Company has sufficient taxable income to use.
If an optionee purchases shares upon exercise of an option and does not exercise
a related stock appreciation right, the amount of the bonus, if any, shall be
determined by multiplying the excess of the total fair market value of the
shares to be acquired upon exercise over the total option price for the shares
by the applicable bonus percentage. If the optionee exercises a related stock
appreciation right in connection with the termination of an option, the amount
of the bonus, if any, shall be determined by multiplying the total fair market
value of the shares and cash received pursuant to the exercise of the stock
appreciation right by the applicable bonus percentage. The bonus percentage
applicable to a bonus right, including a previously granted bonus right, may be
changed from time to time at the sole discretion of the Board of Directors but
shall in no event exceed 75 percent.
(c) CASH BONUS RIGHTS IN CONNECTION WITH STOCK BONUS. A cash bonus
right granted in connection with a stock bonus will entitle the recipient to a
cash bonus payable when the stock bonus is awarded or restrictions, if any, to
which the stock is subject lapse. If bonus stock awarded is subject to
restrictions and is repurchased by the Company or forfeited by the holder, the
cash bonus right granted in connection with the stock bonus shall terminate and
may not be exercised. The amount and timing of payment of a cash bonus shall be
determined by the Board of Directors.
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(d) CASH BONUS RIGHTS IN CONNECTION WITH STOCK PURCHASES. A cash
bonus right granted in connection with the purchase of stock pursuant to
SECTION 8 will entitle the recipient to a cash bonus when the shares are
purchased or restrictions, if any, to which the stock is subject lapse. Any
cash bonus right granted in connection with shares purchased pursuant to
SECTION 8 shall terminate and may not be exercised in the event the shares
are repurchased by the Company or forfeited by the holder pursuant to
applicable restrictions. The amount of any cash bonus to be awarded and
timing of payment of a cash bonus shall be determined by the Board of
Directors.
(e) TAXES. The Company shall withhold from any cash bonus paid
pursuant to this SECTION 10 the amount necessary to satisfy any applicable
federal, state and local withholding requirements.
11. PERFORMANCE UNITS. The Board of Directors may grant performance
units consisting of monetary units which may be earned in whole or in part if
the Company achieves certain goals established by the Board of Directors over
a designated period of time, but not in any event more than 10 years. The
goals established by the Board of Directors may include earnings per share,
return on shareholders' equity, return on invested capital and such other
goals as the Board of Directors may establish. In the event that the minimum
performance goal established by the Board of Directors is not achieved at the
conclusion of a period, no payment shall be made to the participants. In the
event the maximum corporate goal is achieved, 100 percent of the monetary
value of the performance units shall be paid to or vested in the
participants. Partial achievement of the maximum goal may result in a
payment or vesting corresponding to the degree of achievement as determined
by the Board of Directors. Payment of an award earned may be in cash or in
Common Stock or a combination of both, and may be made when earned, or vested
and deferred, as the Board of Directors determines. Deferred awards shall
earn interest on the terms and at a rate determined by the Board of
Directors. Unless otherwise determined by the Board of Directors, each
performance unit granted under the Plan by its terms shall be nonassignable
and nontransferable by the holder, either voluntarily or by operation of law,
except by will or by the laws of descent and distribution of the state or
country of the holder's domicile at the time of death. Each participant who
has been awarded a performance unit shall, upon notification of the amount
due, pay to the Company in cash amounts necessary to satisfy any applicable
federal, state and local tax withholding requirements. If the participant
fails to pay the amount demanded, the Company may withhold that amount from
other amounts payable by the Company to the participant, including salary,
subject to applicable law. With the consent of the Board of Directors a
participant may satisfy this obligation, in whole or in part, by having the
Company withhold from any shares to be issued that number of shares that
would satisfy the withholding amount due or by delivering Common Stock to the
Company to satisfy the withholding amount. The payment of a performance unit
in cash shall not reduce the number of shares of Common Stock reserved for
issuance under the Plan. The number of shares reserved for issuance under
the Plan shall be reduced by the number of shares issued upon payment of an
award.
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12. CHANGES IN CAPITAL STRUCTURE.
(a) STOCK SPLITS; STOCK DIVIDENDS. If the outstanding Common
Stock of the Company is hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of any stock split, combination of shares, dividend payable
in shares, recapitalization or reclassification, appropriate adjustment shall
be made by the Board of Directors in the number and kind of shares available
for grants under the Plan. In addition, the Board of Directors shall make
appropriate adjustment in the number and kind of shares as to which
outstanding options, or portions thereof then unexercised, shall be
exercisable, so that the optionee's proportionate interest before and after
the occurrence of the event is maintained. Notwithstanding the foregoing,
the Board of Directors shall have no obligation to effect any adjustment that
would or might result in the issuance of fractional shares, and any
fractional shares resulting from any adjustment may be disregarded or
provided for in any manner determined by the Board of Directors. Any such
adjustments made by the Board of Directors shall be conclusive.
(b) MERGERS, REORGANIZATIONS, ETC. In the event of a merger,
consolidation, plan of exchange, acquisition of property or stock,
separation, reorganization or liquidation to which the Company is a party or
a sale of all or substantially all of the Company's assets (each, a
"Transaction"), the Board of Directors shall, in its sole discretion and to
the extent possible under the structure of the Transaction, select one of the
following alternatives for treating outstanding options under the Plan:
(i) Outstanding options shall remain in effect in accordance
with their terms.
(ii) Outstanding options shall be converted into options to
purchase stock in the corporation that is the surviving or acquiring
corporation in the Transaction. The amount, type of securities subject
thereto and exercise price of the converted options shall be determined by
the Board of Directors of the Company, taking into account the relative
values of the companies involved in the Transaction and the exchange rate,
if any, used in determining shares of the surviving corporation to be
issued to holders of shares of the Company. Unless otherwise determined by
the Board of Directors, the converted options shall be vested only to the
extent that the vesting requirements relating to options granted hereunder
have been satisfied.
(iii) The Board of Directors shall provide a 30-day period
before the consummation of the Transaction during which outstanding options
may be exercised to the extent then exercisable, and upon the expiration of
that 30-day period, all unexercised options shall immediately terminate.
The Board of Directors may, in its sole discretion, accelerate the
exercisability of options so that they are exercisable in full during that
30-day period.
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(c) DISSOLUTION OF THE COMPANY. In the event of the dissolution of
the Company, options shall be treated in accordance with SECTION 12(b)(iii).
(d) RIGHTS ISSUED BY ANOTHER CORPORATION. The Board of Directors may
also grant options, stock appreciation rights, performance units, stock bonuses
and cash bonuses and issue restricted stock under the Plan having terms,
conditions and provisions that vary from those specified in this Plan, provided
that any such awards are granted in substitution for, or in connection with the
assumption of, existing options, stock appreciation rights, stock bonuses, cash
bonuses, restricted stock and performance units granted, awarded or issued by
another corporation and assumed or otherwise agreed to be provided for by the
Company pursuant to or by reason of a Transaction.
13. AMENDMENT OF PLAN. The Board of Directors may at any time, and from
time to time, modify or amend the Plan in such respects as it shall deem
advisable because of changes in the law while the Plan is in effect or for any
other reason. Except as provided in SECTIONS 6(a)(iv), 9, 10 and 12, however,
no change in an award already granted shall be made without the written consent
of the holder of such award.
14. APPROVALS. The Company's obligations under the Plan are subject to
the approval of state and federal authorities or agencies with jurisdiction in
the matter. The Company will use its best efforts to take steps required by
state or federal law or applicable regulations, including rules and regulations
of the Securities and Exchange Commission and any stock exchange on which the
Company's shares may then be listed, in connection with the grants under the
Plan. The foregoing notwithstanding, the Company shall not be obligated to
issue or deliver Common Stock under the Plan if such issuance or delivery would
violate applicable state or federal securities laws.
15. EMPLOYMENT AND SERVICE RIGHTS. Nothing in the Plan or any award
pursuant to the Plan shall (i) confer upon any employee any right to be
continued in the employment of the Company or interfere in any way with the
Company's right to terminate such employee's employment at any time, for any
reason, with or without cause, or to decrease such employee's compensation or
benefits, or (ii) confer upon any person engaged by the Company any right to be
retained or employed by the Company or to the continuation, extension, renewal
or modification of any compensation, contract or arrangement with or by the
Company.
16. RIGHTS AS A SHAREHOLDER. The recipient of any award under the Plan
shall have no rights as a shareholder with respect to any Common Stock until the
date of issue to the recipient of a stock certificate for those shares. Except
as otherwise expressly provided in the Plan, no adjustment shall be made for
dividends or other rights for which the record date occurs before the date such
stock certificate is issued.
Adopted: March 12, 1997
13
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