<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 14, 1999.
REGISTRATION NO. 333-_______________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
EASYRIDERS, INC.
(Exact name of issuer as specified in its charter)
DELAWARE 33-0811505
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
28210 DOROTHY DRIVE, AGOURA HILLS, CALIFORNIA 91301
(Address of principal executive offices) (Zip Code)
EASYRIDERS, INC. AMENDED AND RESTATED 1998
EXECUTIVE INCENTIVE COMPENSATION PLAN
(Full title of the plan)
J. ROBERT FABREGAS
CFO, Executive Vice President and Secretary
EASYRIDERS, INC.
28210 Dorothy Drive
Agoura Hills, California 91301
(818) 889-8740
(Name, address and telephone number of agent for service)
The Commission is requested to send copies of all orders, communications and
notices to:
BRENT COSTELLO, ESQ.
KAYE, SCHOLER, FIERMAN, HAYS & HANDLER, LLP
1999 Avenue of the Stars, Suite 1600
Los Angeles, California 90067
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered (1) (2) Share (1) (2) Price (1) (2) Fee (1) (2)
- ---------- ------------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Common Stock,
Par Value $.001 per share 40,500 $6.00 $ 243,000 $ 67.55
587,500 $5.00 $2,937,500 $ 816.63
25,000 $2.25 $ 56,250 $ 15.64
75,000 $2.0625 $ 154,688 $ 43.00
1,152,000 $1.75 $2,016,000 $ 560.45
200,000 $3.08 $ 616,000 $ 171.25
720,000 $1.56 $1,123,200 $ 312.25
------------- -------------
$7,146,638 $1,986.77
</TABLE>
________________________
(1) These amounts have been estimated in accordance with Rule 457(c) and 457(h)
solely for the purpose of calculating the Registration Fee, and have been
determined according to the following offering price information: 40,500
shares of Common Stock are reserved for issuance pursuant to options granted
under the Company's Amended and Restated 1998 Executive Incentive
Compensation Plan (the "Plan") at an exercise price of $6.00 per share;
587,500 shares of Common Stock are reserved for issuance pursuant to options
granted under the Plan at an exercise price of $5.00 per share; 25,000
shares of Common Stock are reserved for issuance pursuant to options granted
under the Plan at an exercise price of $2.25 per share; 75,000 shares of
Common Stock are reserved for issuance pursuant to options granted under the
Plan at an exercise price of $2.06 per share; 1,152,000 shares of Common
Stock are reserved for issuance pursuant to options granted under the Plan
at an exercise price of $1.75 per share; 200,000 shares of Common Stock were
granted under the Plan to an employee of the Company for services rendered
to the Company and the Proposed Maximum Offering Price Per Share for such
shares is assumed to be $3.08 per share, the estimated fair value of the
shares at the date of issuance; pursuant to Rule 457(h), for all shares of
Common Stock being registered hereunder with an exercise price which cannot
be determined (720,000), the Proposed Maximum Offering Price Per Share is
$1.56, which is the average of the high and low prices of the Common Stock
reported on the American Stock Exchange on May 6, 1999.
(2) This Registration Statement also covers such undeterminable number of
additional shares of the Registrant's Common Stock as may become issuable in
the event certain anti-dilution provisions contained in the options granted
under the Company's 1998 Executive Incentive Compensation Plan become
operative. No additional registration fee is included for these shares.
Exhibit Index begins on page II-6.
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
Item 1. Plan Information.*
----------------
Item 2. Registrant Information and Employee Plan Annual Information.*
-----------------------------------------------------------
* The documents containing the information specified in this Part I have been
or will be sent or given to optionees as specified by Rule 428(b)(1)
promulgated under the Securities Act of 1933, as amended (the "Act"). Such
documents are not filed with the Securities and Exchange Commission (the
"Commission") either as part of this Registration Statement or as
prospectuses or prospectus supplements pursuant to Rule 424 promulgated
under the Act. These documents and the documents incorporated by reference
in this Registration Statement pursuant to Item 3 of Part II of this Form S-
8, taken together, constitute a prospectus that meets the requirements of
Section 10(a) of the Act. Copies of all documents incorporated by reference
in Item 3 of Part II of this Form S-8 (other than exhibits to such documents
unless such exhibits are specifically incorporated by reference herein), as
well as other documents required to be delivered to employees pursuant to
Rule 428(b), will be provided without charge to each person, including any
beneficial owner, on the written or oral request of such person made to
Easyriders, Inc., 28210 Dorothy Drive, Agoura Hills, California 91301,
Attention: J. Robert Fabregas, CFO, Executive Vice President and Secretary,
Telephone: (818) 889-8740.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
---------------------------------------
The following documents heretofore filed by Easyriders, Inc. (the "Company")
with the Commission are hereby incorporated by reference in this Registration
Statement:
1. The Company's Prospectus filed September 11, 1998 relating to the
Registration Statement on Form S-4 filed with the Commission on July
6, 1998 (File No. 333-58501), as amended on August 28, 1998.
2. The Company's Current Report on Form 8-K filed on October 8, 1998.
3. Annual Report of the Company on Form 10-K for the year ended December
31, 1998.
4. Annual Report of the Company on Form 10-K/A for the year ended
December 31, 1998.
5. The description of the Common Stock contained in Item 1 of the
Company's Form 8-A for a Registration of Certain Classes of Securities
filed with the Commission pursuant to Section 12(b) of the Exchange
Act on September 23, 1998.
All documents filed by the Company or the Plan with the Commission pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, after the date of this Registration Statement and prior to the filing
of a post-effective amendment indicating that all securities offered have been
sold or which deregisters all securities then remaining unsold shall be deemed
to be incorporated by reference herein and shall be part hereof from the date of
the filing of such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall 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 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.
II-1
<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
-----------------------------------------
The Company's Certificate of Incorporation provides that the personal
liability of the directors of the Company shall be limited to the fullest extent
permitted by the provisions of Section 102(b)(7) of the General Corporation Law
of the State of Delaware (the "DGCL"). Section 102(b)(7) of the DGCL generally
provides that no director shall be liable personally to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
however, the Certificate of Incorporation does not eliminate the liability of a
director for (i) any breach of the director's duty of loyalty to the Company or
its stockholders; (ii) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; (iii) acts or omissions in
respect of certain unlawful dividend payments or stock redemptions or
repurchases; or (iv) any transaction from which such director derives an
improper personal benefit. The effect of this provision is to eliminate the
rights of the Company and its stockholders (through stockholder's derivatives
suits on behalf of the Company) to recover monetary damages against a director
for breach of his or her fiduciary duty of care as a director (including
breaches resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) through (iv) above. The limitations
summarized above, however, do not affect the ability of the Company or its
stockholders to seek nonmonetary remedies, such as injunction or rescission,
against a director for breach of his or her fiduciary duty. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act") may be permitted to directors, officers, or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission (the "Commission"), such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
In addition, the Certificate of Incorporation of the Company provides that
the Company shall, to the fullest extent permitted by Section 145 of the DGCL,
indemnify all persons whom it may indemnify pursuant to Section 145 of the DGCL.
Section 145 of the DGCL permits a company to indemnify an officer or director
who was or is a party or is threatened to be made a party to any proceeding
because of his or her position, if the officer or director acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Company and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The Company's Certificate of Incorporation, (the "Charter"), provides that
the Company shall, to the fullest extent permitted by applicable law, indemnify
any person who was or is a party or is threatened to be made a party to any
action, suit or proceeding of the type described above by reason of the fact
that he or she is or was or has agreed to become a director or officer of the
Company, or is serving at the request of the Company as director or officer of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, provided that with respect to any action, suit or proceeding
initiated by a director or officer, the Company shall indemnify such director of
officer only if the action, suit or proceeding was authorized by the Company's
Board of Directors or is a suit for enforcement of rights to indemnification or
advancement of expenses in accordance with the procedure therefor prescribed in
the Charter. The Charter also provides that the expenses of directors and
officers incurred as a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
shall be paid by the Company as they are incurred and in advance of the final
disposition of the action, suit or proceeding, provided that if applicable law
so requires, the advance payment of expenses shall be made only upon receipt by
the Company of an undertaking by or on behalf of the director or officer to
repay all amounts so advanced in the event it is ultimately determined by a
final decision, order or decree of a court of competent jurisdiction that the
director or officer is not entitled to be indemnified for such expenses under
the Charter.
II-2
<PAGE>
The Company currently maintains an insurance policy which, within the limits
and subject to the terms and conditions thereof, covers certain expenses and
liabilities that may be incurred by directors and officers in connection with or
as a consequence of certain actions, suits or proceedings that may be brought
against them as a result of an act or omission committed or suffered while
acting as a director or officer of the Company.
Item 7. Exemption from Registration Claimed
-----------------------------------
Not Applicable.
Item 8. Exhibits
--------
See Index to Exhibits on page II-6.
Item 9. Undertakings
------------
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to
include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, 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.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934, as amended) that is incorporated by
reference in the 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Agoura Hills, State of California, on this 7th day of
May, 1999.
Easyriders, Inc.
By: /s/ J. Robert Fabregas
---------------------------------
J. Robert Fabregas
CFO, Executive Vice President
and Secretary.
II-4
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints J. Robert
Fabregas and William E. Prather his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any or all
amendments and post-effective amendments to this Registration Statement, and to
file the same, with all Exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Name Capacity Date
/s/ John E. Martin Chairman of the Board May 7, 1999
- -----------------------
John E. Martin
/s/ William E. Prather President and May 7, 1999
- -----------------------
William E. Prather Chief Executive Officer
/s/ J. Robert Fabregas CFO, Executive Vice President May 7, 1999
- -----------------------
J. Robert Fabregas and Secretary
(Principal Financial and
Accounting Officer)
/s/ Daniel J. Gallery Director May 7, 1999
- -----------------------
Daniel J. Gallery
/s/ Wayne L. Knyal Director May 7, 1999
- -----------------------
Wayne L. Knyal
/s/ Joseph Teresi Director May 7, 1999
- -----------------------
Joseph Teresi
/s/ Robert Davis Director May 7, 1999
- -----------------------
Robert Davis
/s/ Ellen Meagher Director May 7, 1999
- -----------------------
Ellen Meagher
/s/ Joseph J. Jacobs Director May 7, 1999
- -----------------------
Joseph J. Jacobs
II-5
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit No. Description of Exhibit Reference
- ------------- ---------------------------------- ---------------------
4.1 Registrant's Amended and Filed herewith
Restated 1998 Executive Incentive
Compensation Plan
5 Opinion of Kaye, Scholer, Fierman, Filed herewith
Hays & Handler, LLP
23.1 Consent of Kaye, Scholer, Fierman, Included in Exhibit 5
Hays & Handler, LLP
23.2 Consent of Deloitte & Touche LLP Filed herewith
23.3 Consent of Jones, Jensen & Company Filed herewith
II-6
<PAGE>
EXHIBIT 4.1
EASYRIDERS, INC.
AMENDED AND RESTATED 1998 EXECUTIVE INCENTIVE COMPENSATION PLAN
WHEREAS, the 1998 Executive Incentive Compensation Plan (the "Original
Plan") of Easyriders, Inc. (the "Company") became effective upon approval
thereof by the stockholders of Newriders, Inc. on September 22, 1998;
WHEREAS, the Board of Directors of the Company has determined to amend and
restate the Original Plan in its entirety;
NOW, THEREFORE, the Original Plan is hereby amended and restated as
follows:
1. PURPOSE. The purpose of this 1998 Executive Incentive Compensation
Plan (the "Plan") is to assist Easyriders, Inc. (the "Company") and its
subsidiaries in attracting, motivating, retaining and rewarding high-quality
executives and other employees, officers, Directors and independent contractors,
enabling such persons to acquire or increase a proprietary interest in the
Company in order to strengthen the mutuality of interests between such persons
and the Company's stockholders, and providing such persons with annual and long
term performance incentives to expend their maximum efforts in the creation of
stockholder value. The Plan is also intended to qualify certain compensation
awarded under the Plan for tax deductibility under Section 162(m) of the Code
(as hereafter defined) to the extent deemed appropriate by the Committee (or any
successor committee) of the Board of Directors of the Company.
2. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to the terms defined in Section 1
hereof.
(a) "Annual Incentive Award" means a conditional right granted to a
Participant under Section 8(c) hereof to receive a cash payment, Stock or
other Award, unless otherwise determined by the Committee, after the end of
a specified fiscal year.
(b) "Award" means any Option, SAR (including Limited SAR), Restricted
Stock, Deferred Stock, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, Performance Award or
Annual Incentive Award, together with any other right or interest granted
to a Participant under the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts which
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards
or other rights are transferred if and to the extent permitted under
Section 10(b) hereof. If, upon a Participant's death, there is no
designated Beneficiary or surviving designated Beneficiary, then the term
Beneficiary means person, persons, trust or trusts entitled by will or the
laws of descent and distribution to receive such benefits.
<PAGE>
(d) "Beneficial Owner," "Beneficially Owning" and "Beneficial
Ownership" shall have the meanings ascribed to such terms in Rule 13d-3
under the Exchange Act and any successor to such Rule.
(e) "Board" means the Company's Board of Directors.
(f) "Change in Control" means Change in Control as defined with
related terms in Section 9 of the Plan.
(g) "Change in Control Price" means the amount calculated in
accordance with Section 9(c) of the Plan.
(h) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions and
regulations thereto.
(i) "Committee" means a committee or subcommittee designated by the
Board to administer the Plan; provided, however, that the Committee shall
consist of at least two directors, each of whom shall be (i) a "Non-
Employee Director" within the meaning of Rule 16b-3 under the Exchange Act,
unless administration of the Plan by "Non-Employee Directors" is not then
required in order for exemptions under Rule 16b-3 to apply to transactions
under the Plan, and (ii) an "outside director" as defined under Section
162(m) of the Code, unless administration of the Plan by "outside
directors" is not then required in order to qualify for tax deductibility
under Section 162(m) of the Code.
(j) "Corporate Transaction" means a transaction as defined in Section
9(b) of the Plan.
(k) "Covered Employee" means an Eligible Person who is a Covered
Employee as specified in Section 8(e) of the Plan.
(l) "Deferred Stock" means a right, granted to a Participant under
Section 6(e) hereof, to receive Stock, cash or a combination thereof at the
end of a specified deferral period.
(m) "Director" means a member of the Board.
(n) "Disability" means a permanent and total disability (within the
meaning of Section 22(e) of the Code), as determined by a medical doctor
satisfactory to the Committee.
(o) "Dividend Equivalent" means a right, granted to a Participant
under Section 6(g) hereof, to receive cash, Stock, other Awards or other
property equal in value to dividends paid with respect to a specified
number of shares of Stock, or other periodic payments.
2
<PAGE>
(p) "Effective Date" means the effective date of the Plan, which shall
be the date on which the Reorganization is consummated, subject to approval
by stockholders as provided in Section 10(k).
(q) "Eligible Person" means each executive officer of the Company(as
defined under the Exchange Act) and other officers, Directors and employees
of the Company or of any subsidiary, and independent contractors with the
Company or any subsidiary. The foregoing notwithstanding, no Non-Employee
Director shall be an Eligible Person for purposes of receiving any Awards
under this Plan other than Formula Grants of Options granted under Section
6(b)(iv) of the Plan and Formula Grants of Restricted Stock granted under
Section 6(d)(v) of the Plan. An employee on leave of absence may be
considered as still in the employ of the Company or a subsidiary for
purposes of eligibility for participation in the Plan.
(r) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor
provisions and rules thereto.
(s) "Executive Officer" means an executive officer of the Company as
defined under the Exchange Act.
(t) "Fair Market Value" means the fair market value of Stock, Awards
or other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee,
the Fair Market Value of Stock as of any given date shall be the closing
sale price per share reported on a consolidated basis for stock listed on
the principal stock exchange or market on which Stock is traded on the date
as of which such value is being determined or, if there is no sale on that
date, then on the last previous day on which a sale was reported.
(u) "Formula Grants" means the Formula Grant Options and Formula Grant
Restricted Stock granted to Non-Employee Directors pursuant to Sections
6(b)(iv) and 6(d)(v) of the Plan.
(v) "Incentive Stock Option" or "ISO" means any Option intended to be
designated as an incentive stock option within the meaning of Section 422
of the Code or any successor provision thereto.
(w) "Incumbent Board" means the Board as defined in Section 9(b) of
the Plan.
(x) "Initial Performance Awards" means those Performance Awards
described on Exhibit A to the Plan.
(y) "Limited SAR" means a right granted to a Participant under Section
6(c) hereof.
3
<PAGE>
(z) "Non-Employee Director" shall mean a member of the Board who is
not an employee of the Company or any subsidiary, and who meets the
definition of a Non-Employee Director described in Rule 16b-3.
(aa) "Option" means a right granted to a Participant under Section
6(b) hereof, to purchase Stock or other Awards at a specified price during
specified time periods.
(ab) "Other Stock-Based Awards" means Awards granted to a Participant
under Section 6(h) hereof.
(ac) "Participant" means a person who has been granted an Award under
the Plan which remains outstanding, including a person who is no longer an
Eligible Person.
(ad) "Performance Award" means a conditional right, granted to a
Participant under Section 8 hereof, to receive a cash payment, Stock or
other Award, based upon performance criteria specified by the Committee,
including the Initial Performance Awards.
(ae) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
and shall include a "group" as defined in Section 13(d) thereof.
(af) "Reorganization" means a series of reorganization transactions
which include: (i) the Company's acquisition of all of the issued and
outstanding stock of Paisano Publications, Inc., a California corporation,
and certain affiliated corporations; (ii) the Company's acquisition of all
of the outstanding membership interests of M & B Restaurants, L.C., a Texas
limited liability company; and (iii) the merger of Easyriders Sub, Inc., a
Nevada corporation and a wholly owned subsidiary of the Company, into
Newriders, Inc., a Nevada corporation.
(ag) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) hereof, that is subject to certain restrictions and to a risk
of forfeiture.
(ah) "Retire" or "Retirement" means termination of service as a
Director after having attained at least age 62 and having served as a
Director for at least 5 years, other than by reason of death, Disability or
the Director's willful misconduct or negligence.
(ai) "Rule 16b-3" and "Rule 16a-l(c)(3)" means Rule 16b-3 and Rule
16a-l(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.
(aj) "Stock" means the Company's Common Stock, and such other
securities as may be substituted (or resubstituted) for Stock pursuant to
Section 10(c) hereof.
4
<PAGE>
(ak) "Stock Appreciation Rights" or "SAR" means a right granted to a
Participant under Section 6(c) hereof.
3. ADMINISTRATION.
(a) AUTHORITY OF THE COMMITTEE. The Plan shall be administered by
the Committee. The Committee shall have authority, in each case subject to
and consistent with the provisions of the Plan and subject to ratification
by the Board, to select Eligible Persons to become Participants, grant
Awards, and determine the type, number and other terms and conditions of,
Awards. The Committee shall have full and final authority, in each case
subject to and consistent with the provisions of the Plan, to prescribe
Award agreements (which need not be identical for each Participant) and
rules and regulations for the administration of the Plan, construe and
interpret the Plan and Award agreements and correct defects, supply
omissions or reconcile inconsistencies therein, and to make all other
decisions and determinations as the Committee may deem necessary or
advisable for the administration of the Plan. Notwithstanding anything to
the contrary herein, whenever the terms of this Plan provide that the
Committee shall determine any matter or take any action relating to the
Plan, such determination shall in each case (other than any such case where
the determination or action is only ministerial in nature) be subject to
ratification of the Board.
(b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. The Committee shall
exercise sole and exclusive discretion on any matter relating to a
Participant then subject to Section 16 of the Exchange Act with respect to
the Company to the extent necessary in order that transactions by such
Participant shall be exempt under Rule 16b-3 under the Exchange Act. Any
action of the Committee shall be final, conclusive and binding on all
persons, including the Company, its subsidiaries, Participants,
Beneficiaries, transferees under Section 10(b) hereof or other persons
claiming rights from or through a Participant, and stockholders. The
express grant of any specific power to the Committee, and the taking of any
action by the Committee, shall not be construed as limiting any power or
authority of the Committee. The Committee may delegate to officers or
managers of the Company or any subsidiary, or committees thereof, the
authority, subject to such terms as the Committee shall determine, (i) to
perform administrative functions, (ii) with respect to Participants not
subject to Section 16 of the Exchange Act, to perform such other functions
as the Committee may determine, and (iii) with respect to Participants
subject to Section 16, to perform such other functions of the Committee as
the Committee may determine to the extent performance of such functions
will not result in the loss of an exemption under Rule 16b-3 otherwise
available for transactions by such persons, in each case to the extent
permitted under applicable law and subject to the requirements set forth in
Section 8(d). The Committee may appoint agents to assist it in
administering the Plan.
(c) LIMITATION OF LIABILITY. The Committee and each member thereof
shall be entitled to, in good faith, rely or act upon any report or other
information
5
<PAGE>
furnished to him or her by any executive officer, other officer or employee
of the Company or a subsidiary, the Company's independent auditors,
consultants or any other agents assisting in the administration of the
Plan. Members of the Committee and any officer or employee of the Company
or a subsidiary acting at the direction or on behalf of the Committee shall
not be personally liable for any action or determination taken or made in
good faith with respect to the Plan, and shall, to the extent permitted by
law, be fully indemnified and protected by the Company with respect to any
such action or determination.
4. STOCK SUBJECT TO PLAN.
(a) OVERALL NUMBER OF SHARES SUBJECT TO AWARDS. Subject to adjustment
as provided in Section 10(c) hereof, the total number of shares of Stock
that may be subject to the granting of Awards under the Plan at any point
in time during the term of the Plan shall be equal to 2,800,000 shares.
Any shares of Stock delivered under the Plan may consist, in whole or in
part, of authorized and unissued shares or treasury shares. In no event
shall the aggregate number of shares of stock which may be issued pursuant
to ISOs exceed 2,800,000 shares.
(b) APPLICATION OF LIMITATIONS. The limitation contained in Section
4(a) shall apply not only to Awards that are settleable by the delivery of
shares of stock but also to Awards relating to shares of stock but
settleable only in cash (such as cash-only SARs). The Committee may adopt
reasonable counting procedures to ensure appropriate counting, avoid double
counting (as, for example, in the case of tandem or substitute awards) and
make adjustments if the number of shares of Stock actually delivered
differs from the number of shares previously counted in connection with an
Award.
5. ELIGIBILITY; PER-PERSON AWARD LIMITATIONS. Awards may be granted
under the Plan only to Eligible Persons. In each fiscal year during any part of
which the Plan is in effect, an Eligible Person may not be granted Awards
relating to more than 1,000,000 shares of Stock, subject to adjustment as
provided in Section 10(c),in the aggregate under Sections 6(b), 6(c), 6(d),
6(e), 6(f), 6(g), 6(h), 8(b) and 8(c). In addition, the maximum amount that may
be earned as a final Annual Incentive Award or other cash Award in any fiscal
year by any one Participant shall be $1,000,000, and the maximum amount that may
be earned as a final Performance Award or other cash Award in respect of a
performance period by any one Participant shall be $5,000,000, plus, in each
case for any Participant receiving one or more Initial Performance Awards, the
amount of such Awards as set forth on Exhibit A to the Plan.
6. SPECIFIC TERMS OF AWARDS.
(a) GENERAL. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any Award
or the exercise thereof, at the date of grant or thereafter (subject to
Section 10(e)), such additional terms and conditions, not inconsistent with
the provisions of the Plan, as the Committee shall
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determine, including terms requiring forfeiture of Awards in the event of
termination of employment by the Participant and terms permitting a
Participant to make elections relating to his or her Award. The Committee
shall retain full power and discretion to accelerate, waive or modify, at
any time, any term or condition of an Award that is not mandatory under the
Plan. Except in cases in which the Committee is authorized to require other
forms of consideration under the Plan, or to the extent other forms of
consideration must be paid to satisfy the requirements of Delaware law, no
consideration other than services may be required for the grant (but not
the exercise) of any Award.
(b) OPTIONS. The Committee is authorized to grant Options to
participants on the following terms and conditions:
(i) EXERCISE PRICE. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee. The
exercise price may be less than the Fair Market Value of a share of
Stock on the date of grant of such Option, unless the option being
granted is an Incentive Stock Option which must comply with Section
422 of the Code.
(ii) TIME AND METHOD OF EXERCISE. The Committee shall
determine the time or times at which or the circumstances under which
an Option may be exercised in whole or in part (including based on
achievement of performance goals and/or future service requirements),
the time or times at which Options shall cease to be or become
exercisable following termination of employment or upon other
conditions, the methods by which such exercise price may be paid or
deemed to be paid, the form of such payment, including, without
limitation, cash, Stock, other Awards or awards granted under other
plans of the Company or any subsidiary, or other property (including
notes or other contractual obligations of Participants to make payment
on a deferred basis), and the methods by or forms in which Stock will
be delivered or deemed to be delivered to Participants.
(iii) ISOS. The terms of any ISO granted under the Plan
shall comply in all respects with the provisions of Section 422 of the
Code. Anything in the Plan to the contrary notwithstanding, no term of
the Plan relating to ISOs (including any SAR in tandem therewith)
shall be interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be exercised, so as to disqualify
either the Plan or any ISO under Section 422 of the Code, unless the
Participant has first requested the change that will result in such
disqualification.
(iv) FORMULA GRANTS OF OPTIONS TO NON-EMPLOYEE DIRECTORS.
Subject to adjustment as provided in the first sentence of Section
10(c) hereof, each Non-Employee Director shall receive (A) on the date
of his or her appointment as a Director of the Company, an Option to
purchase 15,000 shares of Stock, and (B) each year, on the day the
Company issues its earnings
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release for the prior fiscal year, an Option to purchase 15,000 shares
of Stock. Options granted to Non-Employee Directors pursuant to this
Section shall be for a term of 10 years and shall become exercisable
at the rate of 33 1/3% per year commencing on the first anniversary of
the date on which the Option is granted; provided, however, that the
Options shall be fully exercisable in the event that, while serving as
a Director, the Non-Employee Director dies, suffers a Disability, or
Retires. The per share exercise price of all Options granted to Non-
Employee Directors pursuant to this paragraph (iv) shall be equal to
the Fair Market Value of a share of Stock on the date such Option is
granted. Unless otherwise extended in the sole discretion of the
Committee, the unexercised portion of any Option granted pursuant to
this paragraph (iv) shall become null and void (C) three months after
the date on which such Non-Employee Director ceases to be a Director
of the Company for any reason other than the Non-Employee Director's
willful misconduct or negligence, Disability, death or Retirement, (D)
immediately in the event of the Non-Employee Director's willful
misconduct or negligence, (E) one year after the Non-Employee Director
ceases to be a Director by reason of his Disability, (F) at the
expiration of its original term, if the Non-Employee Director ceases
to be a Director by reason of his Retirement, and (G) twelve months
after the date of the Non-Employee Director's death in the event that
such death occurs prior to the time the Option otherwise would become
null and void pursuant to this sentence.
(c) STOCK APPRECIATION RIGHTS. The Committee is authorized to grant
SARs to Participants on the following terms and conditions:
(i) RIGHT TO PAYMENT. A SAR shall confer on the
Participant to whom it is granted a right to receive, upon exercise
thereof, the excess of (A) the Fair Market Value of one share of stock
on the date of exercise (or, in the case of a "Limited SAR," the Fair
Market Value determined by reference to the Change in Control Price,
as defined under Section 9(c) hereof), over (B) the grant price of the
SAR as determined by the Committee. The grant price of an SAR shall
not be less than the Fair Market Value of a share of Stock on the date
of grant except as provided under Section 7(a) hereof.
(ii) OTHER TERMS. The Committee shall determine at the date
of grant or thereafter, the time or times at which and the
circumstances under which a SAR may be exercised in whole or in part
(including based on achievement of performance goals and/or future
service requirements), the time or times at which SARs shall cease to
be or become exercisable following termination of employment or upon
other conditions, the method of exercise, method of settlement, form
of consideration payable in settlement, method by or forms in which
Stock will be delivered or deemed to be delivered to Participants,
whether or not a SAR shall be in tandem or in combination with any
other Award, and any other terms and conditions of any SAR. Limited
SARs that may only be exercised
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in connection with a Change in Control or other event as specified by
the Committee may be granted on such terms, not inconsistent with this
Section 6(c), as the Committee may determine. SARs and Limited SARs
may be either freestanding or in tandem with other Awards.
(d) RESTRICTED STOCK. The Committee is authorized to grant Restricted
Stock to Participants on the following terms and conditions:
(i) GRANT AND RESTRICTIONS. Restricted Stock shall be
subject to such restrictions on transferability, risk of forfeiture
and other restrictions, if any, as the Committee may impose, which
restrictions may lapse separately or in combination at such times,
under such circumstances (including based on achievement of
performance goals and/or future service requirements), in such
installments or otherwise, as the Committee may determine at the date
of grant or thereafter. In no event shall the restricted period be
less than three years unless the Restricted Stock is subject to
performance conditions in accordance with Section 8 of this Plan, in
which case the restricted period shall not be less than one year.
Except to the extent restricted under the terms of the Plan and any
Award agreement relating to the Restricted Stock, a Participant
granted Restricted Stock shall have all of the rights of a
stockholder, including the right to vote the Restricted Stock and the
right to receive dividends thereon (subject to any mandatory
reinvestment or other requirement imposed by the Committee). During
the restricted period applicable to the Restricted Stock, subject to
Section 10(b) below, the Restricted Stock may not be sold,
transferred, pledged, hypothecated, margined or otherwise encumbered
by the Participant.
(ii) FORFEITURE. Except as otherwise determined by the
Committee at the time of the Award, upon termination of a
Participant's employment during the applicable restriction period, the
Participant's Restricted Stock that is at that time subject to
restrictions shall be forfeited and reacquired by the Company;
provided that the Committee may provide, by rule or regulation or in
any Award agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted Stock
shall be waived in whole or in part in the event of terminations
resulting from specified causes.
(iii) CERTIFICATES FOR STOCK. Restricted Stock granted
under the Plan may be evidenced in such manner as the Committee shall
determine. If certificates representing Restricted Stock are
registered in the name of the Participant, the Committee may require
that such certificates bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such Restricted
Stock, that the Company retain physical possession of the
certificates, and that the Participant deliver a stock power to the
Company, endorsed in blank, relating to the Restricted Stock.
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(iv) DIVIDENDS AND SPLITS. As a condition to the grant of
an Award of Restricted Stock, the Committee may require that any cash
dividends paid on a share of Restricted Stock be automatically
reinvested in additional shares of Restricted Stock or applied to the
purchase of additional Awards under the Plan. Unless otherwise
determined by the Committee, Stock distributed in connection with a
Stock split or Stock dividend, and other property distributed as a
dividend, shall be subject to restrictions and a risk of forfeiture to
the same extent as the Restricted Stock with respect to which such
Stock or other property has been distributed.
(v) FORMULA GRANTS OF RESTRICTED STOCK TO NON-EMPLOYEE
DIRECTORS. Subject to adjustment as provided in the first sentence of
Section 10(c) hereof, commencing at the end of the Company's fiscal
year that begins January 1, 1998, each Non-Employee Director shall
receive each year, on the day the Company issues its earnings release
for the prior fiscal year, an Award of shares of Restricted Stock, in
an amount to be determined annually by the Board of Directors. Each
Award of Restricted Stock shall become non-forfeitable on the third
anniversary of the date on which the Restricted Stock is granted;
provided, however, that all Restricted Stock granted to a Non-Employee
Director shall become nonforfeitable in the event that, while serving
as a Director, the Non-Employee Director dies, suffers a Disability,
or Retires. In the event that a Non-Employee Director ceases to serve
as a Director for any reason other than the death, Disability or
Retirement of the Non-Employee Director, the Restricted Stock that is
at that time subject to restrictions shall be forfeited and reacquired
by the Company.
(e) DEFERRED STOCK. The Committee is authorized to grant Deferred
Stock to Participants, which are rights to receive Stock, cash, or a
combination thereof at the end of a specified deferral period, subject to
the following terms and conditions:
(i) AWARD AND RESTRICTIONS. Satisfaction of an Award of
Deferred Stock shall occur upon expiration of the deferral period
specified for such Deferred Stock by the Committee (or, if permitted
by the Committee, as elected by the Participant). In addition,
Deferred Stock shall be subject to such restrictions (which may
include a risk of forfeiture) as the Committee may impose, if any,
which restrictions may lapse at the expiration of the deferral period
or at earlier specified times (including based on achievement of
performance goals and/or future service requirements), separately or
in combination, in installments or otherwise, as the Committee may
determine. In no event shall an Award of Deferred Stock payable in
Stock have a deferral period of less than three years unless the Award
is subject to performance conditions in accordance with Section 8 of
the Plan, in which case the deferral period shall be for not less than
one year. Deferred Stock may be satisfied by delivery of Stock, cash
equal to the Fair Market Value of the specified number of shares of
Stock
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covered by the Deferred Stock, or a combination thereof, as determined
by the Committee at the date of grant or thereafter. Prior to
satisfaction of an Award of Deferred Stock, an Award of Deferred Stock
carries no voting or dividend or other rights associated with share
ownership.
(ii) FORFEITURE. Except as otherwise determined by the
Committee, upon termination of a Participant's employment during the
applicable deferral period thereof to which forfeiture conditions
apply (as provided in the Award agreement evidencing the Deferred
Stock), the Participant's Deferred Stock that is at that time subject
to deferral (other than a deferral at the election of the Participant)
shall be forfeited; provided that the Committee may provide, by rule
or regulation or in any Award agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating
to Deferred Stock shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of Deferred
Stock.
(iii) DIVIDEND EQUIVALENTS. Unless otherwise determined by the
Committee at date of grant, Dividend Equivalents on the specified
number of shares of Stock covered by an Award of Deferred Stock shall
be either (A) paid with respect to such Deferred Stock at the dividend
payment date in cash or in shares of unrestricted Stock having a Fair
Market Value equal to the amount of such dividends, or (B) deferred
with respect to such Deferred Stock and the amount or value thereof
automatically deemed reinvested in additional Deferred Stock, other
Awards or other investment vehicles, as the Committee shall determine
or permit the Participant to elect.
(f) BONUS STOCK AND AWARDS IN LIEU OF OBLIGATIONS. The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in
lieu of Company obligations to pay cash or deliver other property under the
Plan or under other plans or compensatory arrangements, provided that, in
the case of Participants subject to Section 16 of the Exchange Act, the
amount of such grants remains within the discretion of the Committee to the
extent necessary to ensure that acquisitions of Stock or other Awards are
exempt from liability under Section 16(b) of the Exchange Act. Stock or
Awards granted hereunder shall be subject to such other terms as shall be
determined by the Committee.
(g) DIVIDEND EQUIVALENTS. The Committee is authorized to grant
Dividend Equivalents to a Participant entitling the Participant to receive
cash, Stock, other Awards, or other property equal in value to dividends
paid with respect to a specified number of shares of Stock, or other
periodic payments. Dividend Equivalents may be awarded on a free-standing
basis or in connection with another Award. The Committee may provide that
Dividend Equivalents shall be paid or distributed when accrued or shall be
deemed to have been reinvested in additional Stock, Awards, or other
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investment vehicles, and subject to such restrictions on transferability
and risks of forfeiture, as the Committee may specify.
(h) OTHER STOCK-BASED AWARDS. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other
Awards that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Stock, as deemed by the
Committee to be consistent with the purposes of the Plan, including,
without limitation, convertible or exchangeable debt securities, other
rights convertible or exchangeable into Stock, purchase rights for Stock,
Awards with value and payment contingent upon performance of the Company or
any other factors designated by the Committee, and Awards valued by
reference to the book value of Stock or the value of securities of or the
performance of specified subsidiaries or business units. The Committee
shall determine the terms and conditions of such Awards. Stock delivered
pursuant to an Award in the nature of a purchase right granted under this
Section 6(h) shall be purchased for such consideration, paid for at such
times, by such methods, and in such forms, including, without limitation,
cash, Stock, other Awards or other property, as the Committee shall
determine. Cash awards, as an element of or supplement to any other Award
under the Plan, may also be granted pursuant to this Section 6(h).
7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of
the Company, any subsidiary, or any business entity to be acquired by the
Company or a subsidiary, or any other right of a Participant to receive
payment from the Company or any subsidiary. Such additional, tandem, and
substitute or exchange Awards may be granted at any time. If an Award is
granted in substitution or exchange for another Award or award, the
Committee shall require the surrender of such other Award or award in
consideration for the grant of the new Award. In addition, Awards may be
granted in lieu of cash compensation, including in lieu of cash amounts
payable under other plans of the Company or any subsidiary, in which the
value of Stock subject to the Award is equivalent in value to the cash
compensation (for example, Deferred Stock or Restricted Stock), or in which
the exercise price, grant price or purchase price of the Award in the
nature of a right that may be exercised is equal to the Fair Market Value
of the underlying Stock minus the value of the cash compensation
surrendered (for example, Options granted with an exercise price
"discounted" by the amount of the cash compensation surrendered).
(b) TERM OF AWARDS. The term of each Award shall be for such period
as may be determined by the Committee; provided that in no event shall the
term of any Option or SAR exceed a period of ten years (or such shorter
term as may be required in respect of an ISO under Section 422 of the
Code).
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(c) FORM AND TIMING OF PAYMENT UNDER AWARDS; DEFERRALS. Subject to the
terms of the Plan and any applicable Award agreement, payments to be made
by the Company or a subsidiary upon the exercise of an Option or other
Award or settlement of an Award may be made in such forms as the Committee
shall determine, including, without limitation, cash, Stock, other Awards
or other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may be
accelerated, and cash paid in lieu of Stock in connection with such
settlement, in the discretion of the Committee or upon occurrence of one or
more specified events (in addition to a Change in Control). Installment or
deferred payments may be required by the Committee (subject to Section
10(e) of the Plan) or permitted at the election of the Participant on terms
and conditions established by the Committee. Payments may include, without
limitation, provisions for the payment or crediting of a reasonable
interest rate on installment or deferred payments or the grant or crediting
of Dividend Equivalents or other amounts in respect of installment or
deferred payments denominated in Stock.
(d) EXEMPTIONS FROM SECTION 16(B) LIABILITY. It is the intent of the
Company that this Plan comply in all respects with applicable provisions of
Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary to ensure that
neither the grant of any Awards to nor other transaction by a Participant
who is subject to Section 16 of the Exchange Act is subject to liability
under Section 16(b) thereof (except for transactions acknowledged in
writing to be non-exempt by such Participant). Accordingly, if any
provision of this Plan or any Award agreement does not comply with the
requirements of Rule 16b-3 or Rule 16a-1(c)(3) as then applicable to any
such transaction, such provision will be construed or deemed amended to the
extent necessary to conform to the applicable requirements of Rule 16b-3 or
Rule 16a-1(c)(3) so that such Participant shall avoid liability under
Section 16(b). In addition, the purchase price of any Award conferring a
right to purchase Stock shall be not less than any specified percentage of
the Fair Market Value of Stock at the date of grant of the Award then
required in order to comply with Rule 16b-3.
8. PERFORMANCE AND ANNUAL INCENTIVE AWARDS.
(a) PERFORMANCE AWARDS. The right of a Participant to exercise or
receive a grant or settlement of any Award made under the Plan, and the
timing thereof, may be subject to such performance conditions as may be
specified by the Committee. In addition, any Eligible Person selected by
the Committee may be granted one or more Performance Awards under this
Section 8, which shall entitle such Eligible Person to a conditional right
to receive a cash payment, Stock or other Award, if the conditions set by
the Committee are met. The value of such a Performance Award may be linked
to the market value, book value, net profits or other measure of the value
of the Stock or any other performance goals determined to be appropriate by
the Committee, including, without limitation, the business criteria set
forth in Section 8(b)(ii), in each case on a specified date or dates or
over a period or periods determined by the Committee. The
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Committee may use such business criteria and other measures of performance
as it may deem appropriate in establishing any performance conditions, and
may exercise its discretion to reduce the amounts payable under any Award
subject to performance conditions, except as limited under Sections 8(b)
and 8(c) hereof in the case of a Performance Award or Annual Incentive
Award intended to qualify under Code Section 162(m). In making such
determinations, the Committee shall consider such factors as it deems
relevant in light of the specific type of Award, such as the contributions,
responsibilities, and other compensation of the Eligible Person receiving
the Award. Notwithstanding the foregoing or anything in the Plan to the
contrary, the Committee shall have the right to determine whether or not a
Performance Award to be granted to an Eligible Person who is designated by
the Committee as likely to be a Covered Employee should qualify as
"performance-based" compensation for purposes of Code Section 162(m), and
may grant one or more Performance Awards that do not so qualify to such an
Eligible Person if it deems appropriate in the circumstances.
(b) PERFORMANCE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES. If
and to the extent that the Committee determines that a Performance Award to
be granted to an Eligible Person who is designated by the Committee as
likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Code Section 162(m), the grant, exercise
and/or settlement of such Performance Award shall be contingent upon
achievement of preestablished performance goals and other terms set forth
in this Section 8(b).
(i) PERFORMANCE GOALS GENERALLY. The performance goals for
such Performance Awards shall consist of one or more business criteria
and a targeted level or levels of performance with respect to each of
such criteria, as specified by the Committee consistent with this
Section 8(b). Performance goals shall be objective and shall otherwise
meet the requirements of Code Section 162(m) and regulations
thereunder including the requirement that the level or levels of
performance targeted by the Committee result in the achievement of
performance goals being "substantially uncertain." The Committee may
determine that such Performance Awards shall be granted, exercised
and/or settled upon achievement of any one performance goal or that
two or more of the performance goals must be achieved as a condition
to grant, exercise and/or settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to any one
Participant or to different Participants.
(ii) BUSINESS CRITERIA. One or more of the following
business criteria for the Company, on a consolidated basis, and/or
specified subsidiaries or business units of the Company (except with
respect to the total stockholder return and earnings per share
criteria), shall be used by the Committee in establishing performance
goals for such Performance Awards unless the Committee, in its sole
discretion, determines to use one or more other business criteria that
meet the requirements of Code Section 162(m) and the regulations
thereunder: (1) total
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stockholder return; (2) such total stockholder return as compared to
total return (on a comparable basis) of a publicly available index
such as, but not limited to, the Standard & Poor's 500 Stock Index or
the S&P Specialty Retailer Index; (3) net income; (4) pretax earnings;
(5) earnings before interest expense, taxes, depreciation and
amortization; (6) pretax operating earnings after interest expense and
before bonuses, service fees, and extraordinary or special items; (7)
operating margin; (8) earnings per share; (9) growth in earnings per
share; (10) return on equity; (11) return on capital; (12) return on
investment; (13) operating earnings; (14) working capital or
inventory; and (15) ratio of debt to stockholders' equity. One or more
of the foregoing business criteria shall also be exclusively used in
establishing performance goals for Annual Incentive Awards granted to
a Covered Employee under Section 8(c) hereof.
(iii) PERFORMANCE PERIOD; TIMING FOR ESTABLISHING PERFORMANCE
GOALS. Achievement of performance goals in respect of such
Performance Awards shall be measured over a performance period of up
to ten years, as specified by the Committee. Performance goals shall
be established not later than 90 days after the beginning of any
performance period applicable to such Performance Awards, or at such
other date as may be required or permitted for "performance-based
compensation" under Code Section 162(m).
(iv) PERFORMANCE AWARD POOL. The Committee may establish a
Performance Award pool, which shall be an unfunded pool, for purposes
of measuring Company performance in connection with Performance
Awards. The amount of such Performance Award pool shall be based upon
the achievement of a performance goal or goals based on one or more of
the business criteria set forth in Section 8(b)(ii) hereof during the
given performance period, as specified by the Committee in accordance
with Section 8(b)(iii) hereof. The Committee may specify the amount of
the Performance Award Pool as a percentage of any of such business
criteria, a percentage thereof in excess of a threshold amount, or as
another amount which need not bear a strictly mathematical
relationship to such business criteria.
(v) SETTLEMENT OF PERFORMANCE AWARDS; OTHER TERMS. Settlement
of such Performance Awards shall be in cash, Stock, other Awards or
other property, in the discretion of the Committee. The Committee may,
in its discretion, reduce the amount of a settlement otherwise to be
made in connection with such Performance Awards. The Committee shall
specify the circumstances in which such Performance Awards shall be
paid or forfeited in the event of termination of employment by the
Participant prior to the end of a performance period or settlement of
Performance Awards.
(c) ANNUAL INCENTIVE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES. If
and to the extent that the Committee determines that an Annual Incentive
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Award to be granted to an Eligible Person who is designated by the Committee as
likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Code Section 162(m), the grant, exercise and/or
settlement of such Annual Incentive Award shall be contingent upon achievement
of preestablished performance goals and other terms set forth in this Section
8(c).
(i) ANNUAL INCENTIVE AWARD POOL. The Committee may establish
an Annual Incentive Award pool, which shall be an unfunded pool, for
purposes of measuring Company performance in connection with Annual
Incentive Awards. The amount of such Annual Incentive Award pool shall
be based upon the achievement of a performance goal or goals based on
one or more of the business criteria set forth in Section 8(b)(ii)
hereof during the given performance period, as specified by the
Committee in accordance with Section 8(b)(iii) hereof. The Committee
may specify the amount of the Annual Incentive Award pool as a
percentage of any such business criteria, a percentage thereof in
excess of a threshold amount, or as another amount which need not bear
a strictly mathematical relationship to such business criteria.
(ii) POTENTIAL ANNUAL INCENTIVE AWARDS. Not later than the end
of the 90th day of each fiscal year, or at such other date as may be
required or permitted in the case of Awards intended to be
"performance-based compensation" under Code Section 162(m), the
Committee shall determine the Eligible Persons who will potentially
receive Annual Incentive Awards, and the amounts potentially payable
thereunder, for that fiscal year, either out of an Annual Incentive
Award pool established by such date under Section 8(c)(i) hereof or as
individual Annual Incentive Awards. In the case of individual Annual
Incentive Awards intended to qualify under Code Section 162(m), the
amount potentially payable shall be based upon the achievement of a
performance goal or goals based on one or more of the business
criteria set forth in Section 8(b)(ii) hereof in the given performance
year, as specified by the Committee; in other cases, such amount shall
be based on such criteria as shall be established by the Committee.
In all cases, the maximum Annual Incentive Award of any Participant
shall be subject to the limitation set forth in Section 5 hereof.
(iii) PAYOUT OF ANNUAL INCENTIVE AWARDS. After the end of each
fiscal year, the Committee shall determine the amount, if any, of (A)
the Annual Incentive Award pool, and the maximum amount of potential
Annual Incentive Award payable to each Participant in the Annual
Incentive Award pool, or (B) the amount of potential Annual Incentive
Award otherwise payable to each Participant. The Committee may, in its
discretion, determine that the amount payable to any Participant as a
final Annual Incentive Award shall be reduced from the amount of his
or her potential Annual Incentive Award, including a determination to
make no final Award whatsoever. The Committee shall specify the
circumstances in which an Annual Incentive Award shall be paid or
forfeited
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in the event of termination of employment by the Participant prior to
the end of a fiscal year or settlement of such Annual Incentive Award.
(d) WRITTEN DETERMINATIONS. All determinations by the Committee as to
the establishment of performance goals, the amount of any Performance Award
pool or potential individual Performance Awards and as to the achievement
of performance goals relating to Performance Awards under Section 8(b), and
the amount of any Annual Incentive Award pool or potential individual
Annual Incentive Awards and the amount of final Annual Incentive Awards
under Section 8(c), shall be made in writing in the case of any Award
intended to qualify under Code Section 162(m). The Committee may not
delegate any responsibility relating to such Performance Awards or Annual
Incentive Awards.
(e) STATUS OF SECTION 8(B) AND SECTION 8(C) AWARDS UNDER CODE SECTION
162(M). It is the intent of the Company that Performance Awards and Annual
Incentive Awards under Section 8(b) and 8(c) hereof granted to persons who
are designated by the Committee as likely to be Covered Employees within
the meaning of Code Section 162(m) and regulations thereunder shall, if so
designated by the Committee, constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Sections 8(b), (c), (d) and (e),
including the definitions of Covered Employee and other terms used therein,
shall be interpreted in a manner consistent with Code Section 162(m) and
regulations thereunder. The foregoing notwithstanding, because the
Committee cannot determine with certainty whether a given Participant will
be a Covered Employee with respect to a fiscal year that has not yet been
completed, the term Covered Employee as used herein shall mean only a
person designated by the Committee, at the time of grant of Performance
Awards or an Annual Incentive Award, as likely to be a Covered Employee
with respect to that fiscal year. If any provision of the Plan or any
agreement relating to such Performance Awards or Annual Incentive Awards
does not comply or is inconsistent with the requirements of Code Section
162(m) or regulations thereunder, such provision shall be construed or
deemed amended to the extent necessary to conform to such requirements.
9. CHANGE IN CONTROL.
(a) EFFECT OF "CHANGE IN CONTROL." In the event of a "Change in
Control," as defined in Section 9(b), the following provisions shall apply
unless the Board of Directors provides otherwise at least fifteen (15) days
prior to such Change in Control:
(i) Any Award carrying a right to exercise that was not
previously exercisable and vested shall become fully exercisable and
vested as of the time of the Change in Control and shall remain
exercisable and vested for the balance of the stated term of such
Award without regard to any termination of employment
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by the Participant, subject only to applicable restrictions set forth
in Section 10(a) hereof;
(ii) Any optionee who holds an Option shall be entitled to
elect, during the 60-day period immediately following a Change in
Control, in lieu of acquiring the shares of Stock covered by such
Option, to receive, and the Company shall be obligated to pay, in cash
the excess of the Change in Control Price over the exercise price of
such Option, multiplied by the number of shares of Stock covered by
such Option; provided, however, that no optionee who is subject to
Section 16 with respect to the Company at the time of the Change in
Control shall be entitled to make such an election if the acquisition
of the right to make such election would represent a non-exempt
purchase under Section 16(b) by such optionee;
(iii) Limited SARs (and other SARs if so provided by their terms)
shall become exercisable for amounts, in cash, determined by reference
to the Change in Control Price;
(iv) The restrictions, deferral of settlement, and forfeiture
conditions applicable to any other Award granted under the Plan shall
lapse and such Awards shall be deemed fully vested as of the time of
the Change in Control, except to the extent of any waiver by the
Participant and subject to applicable restrictions set forth in
Section 10(a) hereof; and
(v) With respect to any such outstanding Award subject to
achievement of performance goals and conditions under the Plan, such
performance goals and other conditions will be deemed to be met if and
to the extent so provided by the Committee in the Award agreement
relating to such Award.
(b) DEFINITION OF "CHANGE IN CONTROL." A "Change in Control" shall be
deemed to have occurred upon:
(i) An acquisition by any Person (other than Joseph Teresi, John
E. Martin or William E. Prather) of Beneficial Ownership of the shares
of Common Stock of the Company then outstanding (the "Company Common
Stock Outstanding") or the voting securities of the Company then
outstanding entitled to vote generally in the election of directors
(the "Company Voting Securities Outstanding") if such acquisition of
Beneficial Ownership results in the Person's Beneficially Owning 25%
or more of the Company Common Stock outstanding or 25% or more of the
combined voting power of the Company Voting Securities Outstanding; or
(ii) The approval by the stockholders of the Company of a
reorganization, merger, consolidation, complete liquidation or
dissolution of the Company, sale or disposition of all or
substantially all of the assets of the Company, or similar
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corporate transaction (in each case referred to in this Section 9(b)
as a "Corporate Transaction") or, if consummation of such Corporate
Transaction is subject, at the time of such approval by stockholders,
to the consent of any government or governmental agency, the obtaining
of such consent (either explicitly or implicitly); provided, however,
that any merger, consolidation, sale, disposition or other similar
transaction to or with one or more Participants or entities controlled
by one or more Participants shall not constitute a Corporate
Transaction in respect of such Participant(s); or
(iii) A change in the composition of the Board such that the
individuals who, as of the Effective Date, constitute the Board (such
Board shall be hereinafter referred to as the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board;
provided, however, for purposes of this Section 9(b), that any
individual who becomes a member of the Board subsequent to the
Effective Date whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least a majority
of those individuals who are members of the Board and who were also
members of the Incumbent Board (or deemed to be such pursuant to this
provision) shall be considered as though such individual were a member
of the Incumbent Board; and, provided, further, that any such
individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest subject to Rule 14a-11
of Regulation 14A under the Exchange Act, including any successor to
such Rule, or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board shall in no
event be considered as a member of the Incumbent Board.
Notwithstanding the provisions set forth in subparagraphs (i) and (ii) of
this Section 9(b), the following shall not constitute a Change in Control for
purposes of the Plan: (1) any acquisition by or consummation of a Corporate
Transaction with any entity that was a subsidiary of the Company immediately
prior to the transaction or an employee benefit plan (or related trust)
sponsored or maintained by the Company or an entity that was a subsidiary of the
Company immediately prior to the transaction if, immediately after such
transaction (including consummation of all related transactions), the surviving
entity is controlled by no Person other than such subsidiary, employee benefit
plan (or related trust) and/or other Persons who controlled the Company
immediately prior to such transaction; or (2) any acquisition or consummation of
a Corporate Transaction following which more than 50% of, respectively, the
shares then outstanding of common stock of the corporation resulting from such
acquisition or Corporate Transaction and the combined voting power of the voting
securities then outstanding of such corporation entitled to vote generally in
the election of directors is then Beneficially Owned, directly or indirectly, by
all or substantially all of the individuals and entities who were Beneficial
Owners, respectively, of the Company Common Stock Outstanding and Company Voting
Securities Outstanding immediately prior to such acquisition or Corporate
Transaction in substantially the same proportions as their ownership,
immediately prior to such acquisition or
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Corporate Transaction, of the Company Common Stock Outstanding and Company
Voting Securities Outstanding, as the case may be.
(c) DEFINITION OF "CHANGE IN CONTROL PRICE." The "Change in Control
Price" means an amount in cash equal to the higher of (i) the amount of
cash and fair market value of property that is the highest price per share
paid (including extraordinary dividends) in any Corporate Transaction
triggering the Change in Control under Section 9(b)(ii) hereof or any
liquidation of shares following a sale of substantially all assets of the
Company, or (ii) the highest Fair Market Value per share at any time during
the 60-day period preceding and 60-day period following the Change in
Control.
10. GENERAL PROVISIONS.
(a) COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS. The Company may, to
the extent deemed necessary or advisable by the Committee, postpone the
issuance or delivery of Stock or payment of other benefits under any Award
until completion of such registration or qualification of such Stock or
other required action under any federal or state law, rule or regulation,
listing or other required action with respect to any stock exchange or
automated quotation system upon which the Stock or other Company securities
are listed or quoted, or compliance with any other obligation of the
Company, as the Committee may consider appropriate, and may require any
Participant to make such representations, furnish such information and
comply with or be subject to such other conditions as it may consider
appropriate in connection with the issuance or delivery of Stock or payment
of other benefits in compliance with applicable laws, rules, and
regulations, listing requirements, or other obligations. The foregoing
notwithstanding, in connection with a Change in Control, the Company shall
take or cause to be taken no action and shall undertake or permit to arise
no legal or contractual obligation, that results or would result in any
postponement of the issuance or delivery of Stock or payment of benefits
under any Award or the imposition of any other conditions on such issuance,
delivery or payment, to the extent that such postponement or other
condition would represent a greater burden on a Participant than existed on
the 90th day preceding the Change in Control.
(b) LIMITS ON TRANSFERABILITY; BENEFICIARIES. No Award or other right
or interest of a Participant under the Plan, including any Award or right
which constitutes a derivative security as generally defined in Rule 16a-
l(c) under the Exchange Act, shall be pledged, hypothecated or otherwise
encumbered or subject to any lien, obligation or liability of such
Participant to any party (other than the Company or a subsidiary), or
assigned or transferred by such Participant otherwise than by will or the
laws of descent and distribution or to a Beneficiary upon the death of a
Participant, and such Awards or rights that may be exercisable shall be
exercised during the lifetime of the Participant only by the Participant or
his or her guardian or legal representative, except that Awards and other
rights (other than ISOs and SARs in tandem therewith) may be transferred to
one or more Beneficiaries or other transferees during the lifetime of the
20
<PAGE>
Participant, and may be exercised by such transferees in accordance with
the terms of such Award, but only if and to the extent such transfers and
exercises are permitted by the Committee pursuant to the express terms of
an Award agreement (subject to any terms and conditions which the Committee
may impose thereon, and further subject to any prohibitions or restrictions
on such transfers pursuant to Rule 16b-3). A Beneficiary, transferee, or
other person claiming any rights under the Plan from or through any
Participant shall be subject to all terms and conditions of the Plan and
any Award agreement applicable to such Participant, except as otherwise
determined by the Committee, and to any additional terms and conditions
deemed necessary or appropriate by the Committee.
(c) ADJUSTMENTS. In the event that any dividend or other distribution
(whether in the form of cash, stock or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or other
similar corporate transaction or event affects the Stock such that an
adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the rights of Participants under the
Plan, then the Committee shall, in such manner as it may deem equitable,
adjust any or all of (i) the number and kind of shares of Stock which may
be delivered in connection with Awards granted thereafter, (ii) the number
and kind of shares of Stock by which annual per-person Award limitations
are measured under Section 5 hereof, (iii) the number and kind of shares of
Stock subject to or deliverable in respect of outstanding Awards and (iv)
the exercise price, grant price or purchase price relating to any Award
and/or make provision for payment of cash or other property in respect of
any outstanding Award. In addition, the Committee is authorized to make
adjustments in the terms and conditions of, and the criteria included in,
Awards (including Performance Awards and performance goals, and Annual
Incentive Awards and any Annual Incentive Award pool or performance goals
relating thereto) in recognition of unusual or nonrecurring events
(including, without limitation, events described in the preceding sentence,
as well as acquisitions and dispositions of businesses and assets)
affecting the Company, any subsidiary or any business unit, or the
financial statements of the Company or any subsidiary, or in response to
changes in applicable laws, regulations, accounting principles, tax rates
and regulations or business conditions or in view of the Committee's
assessment of the business strategy of the Company, any subsidiary or
business unit thereof, performance of comparable organizations, economic
and business conditions, personal performance of a Participant, and any
other circumstances deemed relevant; provided that no such adjustment shall
be authorized or made if and to the extent that such authority or the
making of such adjustment would cause Options, SARs, Performance Awards
granted under Section 8(b) hereof or Annual Incentive Awards granted under
Section 8(c) hereof to Participants designated by the Committee as Covered
Employees and intended to qualify as "performance-based compensation" under
Code Section 162(m) and the regulations thereunder to otherwise fail to
qualify as "performance-based compensation" under Code Section 162(m) and
regulations thereunder.
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<PAGE>
(d) TAXES. The Company and any subsidiary is authorized to withhold
from any Award granted, any payment relating to an Award under the Plan,
including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially
payable in connection with any transaction involving an Award, and to take
such other action as the Committee may deem advisable to enable the Company
and Participants to satisfy obligations for the payment of withholding
taxes and other tax obligations relating to any Award. This authority shall
include authority to withhold or receive Stock or other property and to
make cash payments in respect thereof in satisfaction of a Participant's
tax obligations, either on a mandatory or elective basis in the discretion
of the Committee.
(e) CHANGES TO THE PLAN AND AWARDS. The Board may amend, alter,
suspend, discontinue or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of stockholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company's stockholders not later than the
annual meeting next following such Board action if such amendment
represents a material change to the Plan or such stockholder approval is
required by any federal or state law or regulation (including, without
limitation, Rule 16b-3 or Code Section 162(m) ) or the rules of any stock
exchange or automated quotation system on which the Stock may then be
listed or quoted, and the Board may otherwise, in its discretion, determine
to submit other such changes to the Plan to stockholders for approval;
provided that, without the consent of an affected Participant, no such
Board action may materially and adversely affect the rights of such
Participant under any previously granted and outstanding Award. The
Committee may waive any conditions or rights under, or amend, alter,
suspend, discontinue or terminate any Award theretofore granted and any
Award agreement relating thereto, except as otherwise provided in the Plan;
provided that, without the consent of an affected Participant, no such
Committee action may materially and adversely affect the rights of such
Participant under such Award. Notwithstanding anything in the Plan to the
contrary, if any right under this Plan would cause a transaction to be
ineligible for pooling of interest accounting that would, but for the right
hereunder, be eligible for such accounting treatment, the Committee may
modify or adjust the right so that pooling of interest accounting shall be
available, including the substitution of Stock having a Fair Market Value
equal to the cash otherwise payable hereunder for the right which caused
the transaction to be ineligible for pooling of interest accounting.
Notwithstanding anything herein to the contrary, the provisions of Section
6(b)(iv) and Section 6(d)(v) of this Plan which govern formula grants of
Options and Restricted Stock to Non-Employee Directors, shall not be
amended more than once every six months other than to comport with changes
to the Code or the rules promulgated thereunder or the Employee Retirement
Income Security Act of 1974, as amended, or the rules promulgated
thereunder, or with rules promulgated by the Securities and Exchange
Commission, unless such limit on amendments is not required under Rule 16b-
3 or other applicable law.
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<PAGE>
(f) LIMITATION ON RIGHTS CONFERRED UNDER PLAN. Neither the Plan nor
any action taken hereunder shall be construed as (i) giving any Eligible
Person or Participant the right to continue as an Eligible Person or
Participant or in the employ of the Company or a subsidiary; (ii)
interfering in any way with the right of the Company or a subsidiary to
terminate any Eligible Person's or Participant's employment at any time,
(iii) giving an Eligible Person or Participant any claim to be granted any
Award under the Plan or to be treated uniformly with other Participants and
employees, or (iv) conferring on a Participant any of the rights of a
stockholder of the Company unless and until the Participant is duly issued
or transferred shares of Stock in accordance with the terms of an Award.
(g) UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligation to deliver Stock pursuant to an Award, nothing contained in the
Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company, provided that the
Committee may authorize the creation of trusts and deposit therein cash,
Stock, other Awards or other property, or make other arrangements to meet
the Company's obligations under the Plan. Such trusts or other arrangements
shall be consistent with the "unfunded" status of the Plan unless the
Committee otherwise determines with the consent of each affected
Participant. The trustee of such trusts may be authorized to dispose of
trust assets and reinvest the proceeds in alternative investments, subject
to such terms and conditions as the Committee may specify and in accordance
with applicable law.
(h) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by
the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board or a committee or subcommittee thereof to adopt such other incentive
arrangements as it may deem desirable including incentive arrangements and
awards which do not qualify under Code Section 162(m).
(i) PAYMENTS IN THE EVENT OF FORFEITURES; FRACTIONAL SHARES. Unless
otherwise determined by the Committee, in the event of a forfeiture of an
Award with respect to which a Participant paid cash or other consideration,
the Participant shall be repaid the amount of such cash or other
consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee shall determine whether
cash, other Awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or otherwise eliminated.
(j) GOVERNING LAW. The validity, construction and effect of the Plan,
any rules and regulations under the Plan, and any Award agreement shall be
determined in
23
<PAGE>
accordance with the laws of the State of California without giving effect
to principles of conflicts of laws, and applicable federal law.
(k) PLAN EFFECTIVE DATE AND STOCKHOLDER APPROVAL; TERMINATION OF PLAN.
The Plan which has been unanimously approved by all of the members of the
Board of Directors of the Company and Newriders, Inc., and by Newriders,
Inc. as the sole shareholder of the Company, shall become effective on the
Effective Date, subject to the approval at the 1998 Annual Meeting of
Stockholders of Newriders, Inc., by stockholders of Newriders, Inc.
eligible to vote in the election of directors, by a vote sufficient to meet
the requirements of Code Sections 162(m) and 422, Rule 16b-3 under the
Exchange Act, applicable NASDAQ requirements (if the Company's Common Stock
is then listed on NASDAQ), applicable AMEX requirements (if the Company's
Common Stock is then listed on AMEX), and other laws, regulations, and
obligations of the Company applicable to the Plan, and the ratification of
the Plan by the Committee. Awards may be granted subject to stockholder
approval and Committee ratification, but may not be exercised or otherwise
settled in the event such approval and ratification is not obtained. The
Plan shall terminate at such time as no shares of Common Stock remain
available for issuance under the Plan and the Company has no further rights
or obligations with respect to outstanding Awards under the Plan.
24
<PAGE>
EXHIBIT A
TERM SHEET
FOR
ANNUAL INCENTIVE AWARDS/LONG-TERM INCENTIVE PERFORMANCE AWARD
TO
JOHN MARTIN
UNDER THE
EASYRIDERS 1998 EXECUTIVE INCENTIVE COMPENSATION PLAN
1. CONDITIONS: The Annual Incentive Awards and the Long-Term Incentive
Performance Award described herein, including the performance targets, will be
attached as an Exhibit to the Easyriders 1998 Executive Incentive Compensation
Plan (the "Easyriders Plan"), which will be unanimously approved by the Boards
of Directors of Newriders, Inc. (the "Company") and Easyriders, Inc.
("Easyriders"), and by the public shareholders of the Company, and will be
ratified by the Easyriders Compensation Committee immediately after the
Reorganization, at the same time it ratifies the Easyriders Plan. The
description of the Easyriders Plan in the Registration/Proxy Statement of
Easyriders and the Company on Form S-4 (the "S-4") will contain a description of
these awards, which are intended to qualify as "performance-based" compensation
for purposes of Code Section 162(m). The Bonuses are payable by the Company.
2. ANNUAL INCENTIVE AWARD:
a. Annual Incentive Performance Periods -- Each of the calendar years
1999 through 2004 or, if earlier, the end of the calendar year during which
all principal and interest on the promissory notes aggregating $7.3 million
referred to in the Stock Purchase Agreement dated June 30, 1998, between
Easyrider and John Martin (the "Martin Notes") is paid or forgiven.
b. Amount -- If the EBITDA Target is met for any Performance Period,
Martin will be entitled to a cash bonus in an amount equal to (1) the total
amount of interest he is obligated to pay in cash to Easyriders for such
Performance Period with respect to the Martin Notes (i.e., the cash bonus
will not include interest deferred by Martin pursuant to the terms of the
Martin Notes), multiplied by (2) a fraction, the numerator of which is one
and the denominator of which is one minus the highest marginal rate for
federal, state and local income taxes applicable to Martin in the year the
bonus is paid.
c. Payment -- The payment of an Annual Incentive Award for any
Performance Period will be made to Martin by the Company no later than
three business days after the Compensation Committee of Easyriders
certifies that the EBITDA Target for such Performance Period has been met,
provided that, the Company shall retain an amount equal to any accrued
interest then owed by Martin to Easyriders with respect to the Martin Notes
but not yet paid, and apply such amount against Martin's obligation to pay
such accrued interest.
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<PAGE>
d. EBITDA Targets -- The EBITDA Target (i) for the 1999 Performance
Period will be 125% of EBITDA/1/ of Easyriders for calendar year 1998 and
(ii) for each Performance Period beginning with and including the year 2000
will be 125% of the average EBITDA of Easyriders for the two calendar years
immediately prior to such Performance Period. For example, if Easyrider's
EBITDA for the year 1998 is $10,000,000, then the EBITDA Target for the
year 1999 Performance Period will be $12,500,000 (125% of $10,000,000); if
Easyrider's EBITDA for the year 1998 is $10,000,000 and Easyrider's EBITDA
for the year 1999 is $12,000,000, then the EBITDA Target for the year 2000
Performance Period will be $13,750,000 (125% of $11,000,000); and if
Easyrider's EBITDA for the year 1998 is $10,000,000 and Easyrider's EBITDA
for the year 1999 is $8,000,000, then the EBITDA Target for the year 2000
Performance Period will be $11,250,000 (125% of $9,000,000). The
Compensation Committee of Easyriders will be given the discretion to adjust
the EBITDA Target within the first 90 days of a Performance Period to
reflect extraordinary corporate transactions
e. Bonus for 1998: If Martin is a director of the Company or is
performing services under his employment agreement with the Company through
the end of 1998, Martin will be entitled to a bonus from the Company for
1998 equal to (1) the total amount of interest he is obligated to pay in
cash to Easyriders for 1998 with respect to the Martin Notes (i.e., the
cash bonus will not include interest deferred by Martin pursuant to the
terms of the Martin Notes), multiplied by (2) a fraction, the numerator of
which is one and the denominator of which is one minus the highest marginal
rate for federal, state and local income taxes in effect for 1999
applicable to Martin. This bonus will be paid no later than March 31, 1999.
3. LONG-TERM INCENTIVE PERFORMANCE AWARD:
a. Long-Term Incentive Performance Period -- Consummation of
Reorganization through the tenth anniversary of such date, or if earlier,
the end of the calendar year during which all principal and interest on the
Martin Notes is paid or otherwise forgiven.
b. Amount -- If the Long-Term Incentive Targets set forth below are
met at any time during the Long-Term Incentive Performance Period, Martin
will be entitled to a cash bonus (the "Long-Term Incentive Performance
Award") in an amount equal to (1) the remaining principal amount (and any
accrued interest) on the Martin Notes, multiplied by (2) a fraction, the
numerator of which is one and the denominator of which is one minus the
highest marginal rate for federal, state and local income taxes applicable
to Martin in the year the bonus is paid, up to a maximum payment of
$13,000,000.
_________________
/1/ As such term is used in the Operating Summary that appears on page 43 of
the Revised Confidential Information Memorandum of Newriders, Inc., dated
May 1998, prepared with the assistance of Imperial Capital, LLC.
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<PAGE>
c. Payment -- The payment of the Long-Term Incentive Performance
Award will be made to Martin no later than three business days after the
Compensation Committee of Easyriders certifies that the Long-Term Incentive
Targets have been met by Easyriders by applying the amount of such Award
against Martin's obligation to pay the remaining principal amount (and any
accrued interest) on the Martin Notes.
d. Long-Term Incentive Target -- Easyrider's successful completion of
a public or private offering of equity or debt securities and the
application of the proceeds thereof to the payment in full of (a) all
amounts due pursuant to Easyrider's Senior Credit Agreement (as such term
is defined in the S-4), and (b) the Contributor Notes (as such term is
defined in the S-4), provided that if such offering occurs at any time
during 1999, there was a positive amount of EBITDA for Easyriders for
calendar year 1998, and if such offering occurs at any time on or after
January 1, 2000, at least 80% of the EBITDA Target with respect to the
Annual Incentive Award for the year immediately preceding the year in which
the offering is made has been met or at least 80% of the EBITDA Target with
respect to the Annual Incentive Award for each of the second and third
calendar years preceding the year in which the offering is made have been
met. For example, if the EBITDA Target for the year 2001 is $10,000,000 and
EBITDA for 2001 is $8,000,000, then the proviso to the foregoing sentence
shall have been satisfied for any date in the year 2002; and if the EBITDA
Target for the years 2001, 2000, and 1999 is $10,000,000, $9,000,000 and
$8,000,000, respectively, and EBITDA for such years is $7,000,000,
$7,200,000 and $6,400,000, respectively, then the proviso to the foregoing
sentence shall have been satisfied for any date in the year 2002.
4. TERMINATION OF MARTIN'S EMPLOYMENT: At such time as Martin ceases to
be a director of the Company and to perform services under his employment
agreement with the Company, no further bonuses shall be payable pursuant hereto.
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Exhibit A
TERM SHEET
FOR
INITIAL AWARD
UNDER THE EASYRIDERS 1998 EXECUTIVE INCENTIVE COMPENSATION PLAN
TO
WILLIAM NORDSTROM
Grant Date: The date the Reorganization is consummated.
Grant: 200,000 shares of Easyriders Common Stock, pursuant to a
Restricted Share Agreement to be entered into between Easyriders
and Mr. Nordstrom.
Vesting: The 200,000 shares will be 100% vested on the Grant Date.
<PAGE>
Exhibit 5
Letterhead of Kaye, Scholer, Fierman, Hays & Handler, LLP
May 11, 1999
Board of Directors
Easyriders, Inc.
28210 Dorothy Drive
Agoura Hills, CA 91301
Re: Registration Statement on Form S-8
----------------------------------
Gentlemen:
In connection with the Registration Statement on Form S-8 (the
"Registration Statement") filed by Easyriders, Inc., a Delaware corporation (the
"Company"), with the Securities and Exchange Commission (the "Commission") for
the purpose of registering under the Securities Act of 1933, as amended (the
"Act"), the Company's common stock (the "Common Stock") to be issued pursuant to
the Company's Amended and Restated 1998 Executive Incentive Compensation Plan
(the "Plan"), we have examined such corporate records, certificates and other
documents, upon which we have relied, and reviewed such questions of law as we
have deemed necessary or appropriate for the purpose of this opinion.
On the basis of such examination and review, we advise you that the Common
Stock issuable under the Plan, subject to the issuance, delivery and payment
therefore in the manner contemplated by the Registration Statement and the Plan,
will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement. In giving such opinion and consent, we
do not thereby admit that we come within the category of persons whose consent
is required under Section 7 of the Act or the rules and regulations of the
Commission thereunder.
Very truly yours,
Kaye, Scholer, Fierman, Hays & Handler, LLP
<PAGE>
EXHIBIT 23.2
Letterhead of Deloitte & Touche LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Easyriders, Inc. on Form S-8 of our report dated April 14, 1999 appearing in the
Annual Report on Form 10-K of Easyriders, Inc. for the year ended December 31,
1998.
DELOITTE & TOUCHE LLP
Costa Mesa, California
May 11, 1999
<PAGE>
Exhibit 23.3
Letterhead of Jones, Jensen & Company
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
of Easyriders, Inc. on Form S-8 of our report dated June 3, 1997 on our audit of
the consolidated financial statements of Newriders, Inc. and Subsidiary, which
report is included in the registration statement of Easyriders, Inc. on Form S-4
(File No. 333-58501).
May 12, 1999
Sincerely,
Jones, Jensen & Company
