<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 27, 1998
REGISTRATION NO. 333-______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
FRONTIER FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
WASHINGTON 91-1223535
<S> <C>
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
332 S.W. EVERETT MALL WAY
P.O. BOX 2215
EVERETT, WASHINGTON 98203
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
FRONTIER FINANCIAL CORPORATION INCENTIVE STOCK OPTION PLAN
(FULL TITLE OF THE PLAN)
JAMES F. FELICETTY
SECRETARY AND TREASURER
FRONTIER FINANCIAL CORPORATION
332 S.W. EVERETT MALL WAY
P.O. BOX 2215
EVERETT, WASHINGTON 98203
(425) 514-0719
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
----------------------
COPIES TO:
LINDA A. SCHOEMAKER
PERKINS COIE LLP
1201 THIRD AVENUE, 40TH FLOOR
SEATTLE, WASHINGTON 98101-3099
----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================================
TITLE OF SECURITIES Amount to Be Proposed Maximum Proposed Maximum Amount of
TO BE REGISTERED Registered Offering Price Per Share(1) Aggregate Offering Price(1) Registration Fee
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
no par value 526,183 (2) $37.00 $19,468,771.00 $5,743
================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended. The
price per share is estimated to be $37.00, based on the trading price
of the Registrant's Common Stock on March 24, 1998.
(2) Includes an indeterminate number of additional shares that may be
necessary to adjust the number of shares reserved for issuance pursuant
to the Frontier Financial Corporation Incentive Stock Option Plan as
the result of any future stock split, stock dividend, spin-off,
combination or exchange of shares, recapitalization, merger,
consolidation, distribution to shareholders other than a normal cash
dividend, or similar adjustment of the Registrant's outstanding Common
Stock.
<PAGE> 2
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents are hereby incorporated by reference into this
Registration Statement:
(a) The Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997, filed with the Securities and Exchange Commission
(the "Commission") on March 25, 1998 under Section 13(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which contains certified
financial statements for the most recent fiscal year for which such statements
have been filed;
(b) All other reports filed by the Registrant pursuant to
Section 13(a) or 15(d) of the Exchange Act since the end of the fiscal year
covered by the Annual Report on Form 10-K referred to in (a) above; and
(c) The description of the Registrant's Common Stock contained
in the Registrant's Registration Statement on Form 8-A filed with the Commission
on March 27, 1987, under Section 12 of the Exchange Act, including any
amendments or reports filed for the purpose of updating such description.
Any document filed by the Registrant pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date hereof and prior to the filing of
a post-effective amendment that indicates that the securities offered hereby
have been sold or that deregisters the securities covered hereby then remaining
unsold shall also be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof commencing on the respective date
on which such document is filed.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act (the "WBCA") authorize a court to award, or a corporation's
board of directors to grant, indemnification to directors, officers, employees
and agents of the Registrant and those serving at the Registrant's request in
similar positions in any other corporation, partnership, joint venture, trust or
other enterprise in terms sufficiently broad to permit such indemnification
under certain circumstances for liabilities (including reimbursement for
expenses incurred) arising under the Securities Act of 1933, as amended (the
"Securities Act"). Article IX of the Registrant's Bylaws provides for
indemnification of the Registrant's directors and officers, to the maximum
extent permitted by Washington law, against expenses and liabilities (including
any obligation to pay any judgment, settlement, fine or expenses, including
attorneys' fees) actually and reasonably incurred in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, in which the director or officer is,
was or is threatened to be made a party to such action or is otherwise involved
in such action by reason of serving or having served at the request of the
Registrant as a director or officer of another corporation.
Section 23B.08.320 of the WBCA authorizes a corporation to limit a
director's liability to the corporation or its shareholders for monetary damages
for acts or omissions as a director, except in certain circumstances involving
intentional misconduct, self-dealing or illegal corporate loans or
distributions, or any transaction from which the director personally receives a
benefit in money, property or services to which the director is not legally
entitled. Subject to shareholder approval, the Board of Directors has amended
the Registrant's Articles of Incorporation to provide, to the fullest extent
permitted by Washington law, limitations on a director's liability to the
Registrant and its shareholders.
The Registrant also maintains an insurance policy insuring its
directors and officers against liability for certain acts or omissions while
acting in their official capacity.
II-1
<PAGE> 3
ITEM 8. EXHIBITS
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<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
5.1 Opinion of Perkins Coie LLP regarding legality of the Common Stock being registered
23.1 Consent of Moss Adams LLP
23.2 Consent of Perkins Coie LLP (included in its Opinion filed as Exhibit 5.1)
24.1 Power of Attorney (see page II-4)
99.1 Amended and Restated Frontier Financial Corporation Incentive Stock Option Plan
</TABLE>
ITEM 9. UNDERTAKINGS
A. 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:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this Registration
Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the termination of
the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
<PAGE> 4
C. Insofar as indemnification for liabilities arising under the Securities Act
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 Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the 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 of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-3
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act, 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 Everett, State of Washington, on the 25th day of
March, 1998.
FRONTIER FINANCIAL CORPORATION
By /s/ ROBERT J. DICKSON
---------------------------------------
Robert J. Dickson
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Robert J. Dickson and James F. Felicetty, and each of them, as true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
to sign in the name and on behalf of such person, individually and in each
capacity stated below, any or all amendments (including pre-effective 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.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons on
the 25th day of March, 1998 in the capacities indicated.
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Signature Title
--------- -----
<S> <C> <C>
/s/ ROBERT J. DICKSON President and Chief Executive Officer
-------------------------------------------- (Principal Executive Officer), Director
Robert J. Dickson
/s/ JAMES F. FELICETTY Secretary and Treasurer (Principal
-------------------------------------------- Financial and Accounting Officer)
James F. Felicetty
/s/ GEORGE E. BARBER Director
--------------------------------------------
George E. Barber
/s/ LUCY DEYOUNG Director
--------------------------------------------
Lucy DeYoung
/s/ DAVID A. DUJARDIN Director
--------------------------------------------
David A. Dujardin
/s/ EDWARD D. HANSEN Director
--------------------------------------------
Edward D. Hansen
/s/ WILLIAM H. LUCAS Director
--------------------------------------------
William H. Lucas
Director
--------------------------------------------
James H. Mulligan
/s/ EDWARD J. NOVACK Director
--------------------------------------------
Edward J. Novack
</TABLE>
II-4
<PAGE> 6
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C> <C>
/s/ J. DONALD REGAN Director
--------------------------------------------
J. Donald Regan
/s/ ROGER L. RICE Director
--------------------------------------------
Roger L. Rice
/s/ ROY A. ROBINSON Director
--------------------------------------------
Roy A. Robinson
/s/ WILLIAM J. ROBINSON Director
--------------------------------------------
William J. Robinson
/s/ EDWARD C. RUBATINO Director
--------------------------------------------
Edward C. Rubatino
Director
--------------------------------------------
Darrell J. Storkson
</TABLE>
II-5
<PAGE> 7
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
5.1 Opinion of Perkins Coie LLP regarding legality of the Common Stock being registered
23.1 Consent of Moss Adams LLP
23.2 Consent of Perkins Coie LLP (included in its Opinion filed as Exhibit 5.1)
24.1 Power of Attorney (see page II-4)
99.1 Amended and Restated Frontier Financial Corporation Incentive Stock Option Plan
</TABLE>
<PAGE> 1
EXHIBIT 5.1
PERKINS COIE LLP
1201 THIRD AVENUE, 40TH FLOOR, SEATTLE, WASHINGTON 98101-3099
TELEPHONE: (206) 583-8888 FACSIMILE: (206) 583-8500
March 25, 1998
Frontier Financial Corporation
332 S.W. Everett Mall Way
P.O. Box 2215
Everett, WA 98203
Re: Registration Statement on Form S-8 of Shares of Common Stock, No
Par Value Per Share, of Frontier Financial Corporation
Ladies and Gentlemen:
We have acted as counsel to you in connection with the preparation of a
Registration Statement on Form S-8 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act"), which you are filing with the
Securities and Exchange Commission with respect to 526,183 shares of Common
Stock, no par value per share (the "Shares"), which may be issued pursuant to
the Frontier Financial Corporation Incentive Stock Option Plan (the "Plan"). We
have examined the Registration Statement and such documents and records of the
Company and other documents as we have deemed necessary for the purpose of this
opinion. In giving this opinion, we are assuming the authenticity of all
instruments presented to us as originals, the conformity with originals of all
instruments presented to us as copies and the genuineness of all signatures.
Based upon and subject to the foregoing, we are of the opinion that upon
(a) the action of the shareholders of Frontier Financial Corporation approving
an increase in the number of shares that may be issued under the Plan and (b)
the due execution by the Company and the registration by its registrar of such
Shares, issuance thereof by the Company in accordance with the terms of the
Plan, and the receipt of consideration therefor in accordance with the terms of
the Plan, such Shares will be duly authorized, validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement. In giving such consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
PERKINS COIE LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-8 of our report dated January
20, 1998 included in Frontier Financial Corporation's Annual Report on Form 10-K
for the year ended December 31, 1997.
/s/ MOSS ADAMS LLP
Everett, Washington
March 26, 1998
<PAGE> 1
AMENDED AND RESTATED
FRONTIER FINANCIAL CORPORATION
INCENTIVE STOCK OPTION PLAN
1. PURPOSE
This Incentive Stock Option Plan (the "Plan") is intended to promote
the best interests of FRONTIER FINANCIAL CORPORATION and its subsidiaries
("Frontier" or the "Corporation") and its stockholders by providing an incentive
and reward for those key top-management officers and employees who contribute to
the operating progress and success of Frontier.
1.1 FAVORABLE TAX TREATMENT
Implementation of this Plan is designed to take advantage of the
favorable income tax treatment afforded to the recipient of incentive stock
options pursuant to Internal Revenue Code Sections 421 to 425 and its associated
regulations.
1.2 ADVANTAGES TO KEY EMPLOYEES
This Plan provides a means whereby certain key employees of Frontier
are afforded the opportunity of investing in the common stock of Frontier under
beneficial income tax consequences. Upon the exercise of the incentive stock
options granted pursuant to this plan, employees will not recognize either
ordinary or capital gain income, but may trigger the application of the
alternative minimum tax. Income realization is deferred until such time as the
employee sells the stock obtained pursuant to the exercise of the incentive
stock option and the income may be characterized as capital gain, instead of
ordinary, income upon such subsequent sale.
1.3 ADVANTAGES TO FRONTIER
The Plan advances the interest of Frontier by enhancing the ability of
Frontier to attract and retain the services of highly qualified and highly
motivated employees and provides such key employees with additional incentive to
exert their best efforts on behalf of Frontier to maximize the appreciation of
the value of Frontier stock.
2. STOCK AVAILABLE PURSUANT TO PLAN
Shares of stock that may be issued under the Plan shall be authorized
and unissued shares of common stock of Frontier. The maximum number of shares
that may be issued pursuant to this Plan shall be 750,000 shares of common
stock.
<PAGE> 2
2.1 ADJUSTMENTS
The quantity of common stock available under this Plan shall be
proportionally adjusted to reflect any future common stock dividends, common
stock splits, recapitalization, and reorganization of Frontier as is further
described in paragraphs 4.7 and 4.8. Subject to the obtainment of shareholder
approval pursuant to the provisions of paragraph 7, the Board of Directors may
increase the amount of authorized but unissued common stock available under this
Plan.
2.2 UNEXERCISED OPTIONS
Shares of common stock reserved for stock option grants pursuant to
this Plan that are not exercised shall again become available for new option
grant upon the expiration or termination of the unexercised option.
3. ELIGIBILITY
The following rules are applicable concerning the determination of
eligibility of any employees of Frontier.
3.1 BOARD OF DIRECTORS
The Board of Directors shall have the authority and responsibility of
determining which employees of Frontier shall be eligible to receive incentive
stock options pursuant to this Plan. The Board of Directors may establish a
committee consisting of three (3) or more directors who are not employees of
Frontier, who may make recommendations to the Board of Directors as to which key
employees should receive incentive stock options, the number of options to be
offered to each key employee, and the fair market value of such stock at the
time an incentive stock option is granted.
3.2 KEY EMPLOYEES
The Board of Directors may grant incentive stock options pursuant to
this Plan only to persons deemed "key employees". Key employees are defined as
those employees of Frontier who, in the absolute sole discretion and judgment of
the Board of Directors or a committee thereof, have substantial responsibility
in the direction, management, and profitability of Frontier or any branch or
division of Frontier.
3.3 EMPLOYMENT STATUS
Except as otherwise permitted by this Plan, for the entire time
commencing on the date that an incentive stock option is granted pursuant to
this Plan until three (3) months before its exercise, the option holder must
continually be an employee of Frontier. Such three-month period shall be
extended to one year in the case of permanent and total disability, but not
death, of the employee.
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<PAGE> 3
3.4 STOCK OWNERSHIP
At the time an incentive stock option is granted, a key employee may
not own Frontier stock possessing more than ten per cent (10%) of the total
combined voting power of all classes of the stock of Frontier. An exception to
this ownership limitation shall be if exercise price of the stock granted
pursuant to the option shall equal or exceed 110% of the fair market value of
the stock on the date the option is granted and the option must be exercised
within five (5) years from the date of the grant.
4. INCENTIVE STOCK OPTION AGREEMENT REQUIREMENTS
In granting incentive stock options to key employees pursuant to this
Plan, Frontier shall enter into written agreements with its key employees,
"Frontier Financial Corporation Incentive Stock Option Agreement." Said written
agreements must, among other things, provide that the substance of the following
terms and conditions be included therein, subject, however, to amendment as may
be necessary to comply with the Internal Revenue Code and regulations thereto,
Securities and Exchange Commission requirements, and amendments made pursuant to
paragraph 7 below.
4.1 OPTION PRICE
The option price shall not be less than the fair market value of the
stock at the time such option is granted. However, in the event the option is
granted to a key employee who at the time of the grant owns ten per cent or more
of the combined voting power of all classes of Frontier stock, then the option
price shall equal or exceed 110% of the fair market value of the stock at the
time such option is granted. The Board of Directors of Frontier shall make a
good faith attempt to value the Frontier stock accurately. The Incentive Stock
Option Agreement shall specifically set forth the option price in terms of
American Dollars.
4.2 TERM OF OPTION
No Incentive Stock Option may be exercisable after the expiration of
ten (10) years from the date such option is granted and, to the extent required
pursuant to the rules and regulations promulgated by the Securities and Exchange
Commission, no Incentive Stock Option shall be exercisable until six months has
expired from the date of the grant of the option. However, the ten year period
shall be limited to five (5) years for any option granted to a key employee who
at the time of the grant owns ten per cent or more of the combined voting power
of all classes of Frontier stock. The Incentive Stock Option Agreement shall
provide that in the event a key employee terminates employment with Frontier
prior to the expiration of an option, that option shall be deemed to expire upon
the termination of employment; provided, however, that if such termination is
the result of the key employee retiring in good standing, the Board of Directors
may extend the right to exercise such option for a period of six (6) months
immediately following the date of full retirement.
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<PAGE> 4
4.3 EXERCISE OF OPTION
An option shall be deemed exercised when written notice of such
exercise has been given to the Corporation at its principal business office by
the person entitled to exercise the Option and full payment in cash or cash
equivalents (or with shares of Common Stock as hereafter provided) for the
shares with respect to which the Option is exercised has been received by the
Corporation. As soon as practicable after any proper exercise of an Option in
accordance with the provisions of this Plan, the Corporation shall deliver to
the Optionee at the main office of the Corporation, or such other place as shall
be mutually acceptable, a certificate or certificates representing the shares of
Common Stock as to which the Option has been exercised.
The Board of Directors may provide that, upon exercise of the Option,
the Optionee may elect to pay for all or some of the shares of Common Stock
underlying the Option with shares of Common Stock of the Corporation previously
acquired and owned at the time of exercise by the Optionee, subject to all
restrictions and limitations of applicable laws, rules, and regulations,
including Section 424(c)(3) of the Internal Revenue Code, and provided that the
Optionee makes representations and warranties satisfactory to the Corporation
regarding his or her title to the shares used to effect the purchase, including
without limitation representations and warranties that the Optionee has good and
marketable title to such shares free and clear of any and all liens,
encumbrances, charges, equities, claims, security interests, options or
restrictions and has full power to deliver such shares without obtaining the
consent or approval of any person or governmental authority other than those
which have already given consent or approval in a form satisfactory to the
Corporation. The equivalent dollar value of the shares used to effect the
purchase shall be the fair market value of the shares on the date of the
purchase as determined by the Board of Directors or the President and Secretary
of the Corporation in its/their sole discretion, exercised in good faith.
4.4 TIME LIMIT FOR GRANTING OPTIONS
Any Incentive Stock Option issued pursuant to this Plan must be granted
within ten (10) years from the earlier of date on which this Plan is adopted by
the Board of Directors of Frontier or the date such plan is approved by the
stockholders of Frontier. However, this Plan shall be void unless the
shareholders of Frontier approve of its adoption either 12 months before or
after it is adopted by the Board of Directors.
4.5 TRANSFERABILITY OF OPTION RIGHTS
No option granted pursuant to this Plan may be assigned or transferred;
provided, however, that upon the death of a key employee, who at death was
actively employed by Frontier, the spouse and/or children of the key employee or
personal representative of his estate shall have the right to exercise an
unexpired option for a period of six (6) months immediately following the death
of the key employee. During the life of the key employee, the option may be
exercised only by the key employee; provided, however, that in the case of
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<PAGE> 5
permanent and total disability, the option may be exercised by a court-appointed
legal representative of the key employee at any time within one year of the
termination of employment.
4.6 TERMINATION OF EMPLOYMENT
Any option granted pursuant to this Plan shall terminate and expire
upon the termination of employment of the key employee by Frontier for any
reason other than death; provided, however, that if the key employee has retired
or been otherwise terminated with the approval of the Board of Directors, the
Board may grant to the key employee a period of six (6) months following such
retirement in which to exercise all or any portion of the stock option.
4.7 RECAPITALIZATION
In the event there is any increase or decrease in the number of issued
shares of common stock of Frontier resulting from a subdivision or consolidation
of shares, a capital adjustment, the issuance of a stock dividend, the
declaration of a stock split, or other increase or decrease in such shares,
there shall be a proportional adjustment effected without receipt of
consideration by Frontier as follows: (a) in the aggregate number of shares of
common stock on which options may be granted to all key employees under this
Plan; (b) in the aggregate number of shares of common stock on which options
have been granted to any one key employee; (c) in the number of shares covered
by each outstanding option; and (d) in the price per share of stock, subject to
the provisions of Section 4.1 above in each such option.
4.8 MERGER OR CONSOLIDATION
Subject to any required action by the stockholders of Frontier, if
Frontier shall be the surviving or resulting corporation in any merger or
consolidation, any option granted hereunder shall pertain to and apply to the
securities to which a holder of the number of shares of common stock subject to
the option would have been entitled; that a dissolution or liquidation of
Frontier or a merger or consolidation in which Frontier is not the surviving or
resulting corporation shall cause every option outstanding hereunder to
terminate, except that the surviving or resulting corporation may, in its
absolute and uncontrolled discretion, tender options to purchase its shares on
its own terms and conditions, both as to the number of shares and otherwise. In
any event, however, a key employee with an unexercised option granted pursuant
to this plan shall have the right to immediately prior to such dissolution,
liquidation, merger or consolidation to exercise the option granted hereby to
the full extent therefore not exercised. Any options exercised pursuant to this
paragraph can be exercised by providing written notice and the exercise price
shall be due and payable concurrent with the closing of the dissolution,
liquidation, consolidation or merger of Frontier.
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<PAGE> 6
4.9 LIMITATIONS ON DISPOSITION
In order to preserve the favorable income tax treatment afforded to
incentive stock options, disposition of stock acquired by the exercise of an
incentive stock option cannot occur within two (2) years from the date the
option was granted nor within one (1) year after the transfer of such shares to
the key employee by the exercising of such option. Nothing in this Plan shall
prevent an employee from making a disqualifying disposition. However, if the key
employee transfers, except by bequest or inheritance, such stock within the
above two and/or one year periods, the key employee shall be obligated to use
Frontier as the transfer agent and inform Frontier in writing the number of
shares transferred, the consideration received in such transfer and the original
exercise price of the stock transferred. If any key employee disposes of stock
obtained pursuant to this Plan and such disposition generates a payroll tax
withholding obligation, it is agreed that the key employee shall make
appropriate arrangements with Frontier to fund his/her requisite share of such
payroll tax obligation.
4.10 INVESTMENT PURPOSE
The key employee at the time of the exercise of an Incentive Stock
Option shall state in writing that said employee is purchasing Frontier stock
for investment purposes and that said key employee has no present intention of
selling the Frontier stock.
4.11 NONALIENABILITY
The key employee must agree that he or she will not in any way assign,
pledge, encumber, or otherwise transfer any right, title and interest in his or
her right to purchase Frontier stock, or any other right under this Plan.
4.12 RIGHTS BEFORE EXERCISE
Except as provided in paragraphs 4.7 and 4.8, a key employee with an
unexercised stock option shall have no rights as a shareholder with respect to
any shares of common stock of Frontier subject to option until said key employee
has delivered payment for such stock to the duly authorized officer of Frontier.
The employee shall have no right to any cash dividends for which the record date
precedes the date of Frontier's receipt of the payment for such stock.
4.13 SEQUENTIAL EXERCISE OF OPTIONS ISSUED BEFORE JANUARY 1, 1987
Frontier previously adopted an Incentive Stock Option Plan, which
terminates according to the ten year provisions on March 10, 1992. Accordingly,
after the effective date of this Plan, there will be outstanding unexpired
options from the prior plan. Any option granted before January 1, 1987 pursuant
to the prior plan must be exercised sequentially on a first issued, first
exercised basis. Any option granted after January 1, 1987 under the prior plan
does not have to be exercised in a sequential manner. Any option granted
pursuant to this Plan does not have to be exercised in a sequential manner.
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<PAGE> 7
4.14 AGGREGATE FAIR MARKET VALUE LIMITATION
In order to preserve the preferential income tax treatment afforded to
Incentive Stock Options, this Plan places a limit on the options to be granted
to a key employee. The limitation is determined by placing a limit of $100,000
on the aggregate value of option stock that can be exercised for the first time
in a calendar year. Aggregate value is determined on the date the option is
granted. Internal Revenue Code Section 422(d). This does not place a $100,000
limit on the exercise stock options in any one year. Rather, the limit is
imposed on the first calendar year which an option can be exercised. In the
event said IRC Section 422(d) is subsequently amended by Congress, this dollar
limitation shall be deemed amended commensurately.
4.15 IDENTIFICATION NUMBERS
Each Incentive Stock Option Agreement between Frontier and a key
employee shall include an identification number. Agreements shall be numbered
consecutively, commencing with the first agreement authorized by the Board of
Directors. For example, the first Incentive Stock Option Agreement may have the
identification number "ISOK-001". Subsequent Incentive Option Agreements would
then be numbered ISOK-002, ISOK-003, ISOK-004, etc.
4.16 NON REGISTERED STOCK
Unless Frontier, in its sole discretion, determines to register the
common stock that may be issued pursuant to this Plan any stock of Frontier
obtained by a key employee pursuant to this plan is not registered stock and
accordingly, is a restricted security. Therefore, any disposition of such stock
by a key employee shall be made in accordance with the applicable rules and
regulations of the Securities and Exchange Commission.
5. ADMINISTRATION
This Plan shall be administered by the Board of Directors of Frontier.
However, the Board of Directors may establish a special committee, including the
Personnel Committee of Frontier, to administer this Plan and appoint members of
the Board of Directors to such committee. No director who is an active officer
or employee of Frontier may serve as a member of the committee administering
this Plan. No member of such committee shall be eligible to participate in this
Plan. However, such committee may solicit input and recommendations from any
officer or employee of Frontier who shall not, by virtue of offering such
information or recommendations, be considered ineligible for Incentive Stock
Options. The committee shall make recommendations periodically to the Board of
Directors including recommendations as to the key employees who should be
granted stock options and the quantity and fair market value of such stock
options. The final decisions as to Incentive Stock Options, however, shall be
made by the Board of Directors and such decisions shall be set forth in the
Minutes of the meeting of the Board of Directors at which the action was taken.
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5.1 INTERPRETATION AND CONSTRUCTION
The committee appointed by the Board of Directors, if any, shall have
the responsibility and authority for interpreting and constructing any
provisions of the plan, any option granted pursuant to the plan, or any other
agreement pertaining to the plan. The decision of the Board shall be final and
conclusive and binding upon all key employees.
5.2 PERSONAL LIABILITY
No member of the Board of Directors or committee of the Board shall be
liable for any action or determination made hereunder.
6. EFFECTIVE DATE
This Plan shall become effective upon its approval by both of the
following: The Board of Directors of Frontier and the holders of a majority of
the outstanding shares of common stock of Frontier at a duly called meeting of
said shareholders. Said shareholder approval must occur within either 12 months
before or after the plan is adopted by the Board of Directors. No option may be
granted by the Board of Directors under this Plan after the expiration of ten
(10) years following said effective date.
7. AMENDMENTS
The Board of Directors may from time to time alter, amend, suspend or
discontinue this Plan or alter or amend any and all option agreements granted
pursuant to this Plan.
7.1 ADDITIONAL APPROVAL REQUIRED
The approval of the shareholders of Frontier by a vote of the
shareholders representing a majority of the outstanding capital stock of
Frontier shall be required for amendments or alterations to the Plan that will:
(a) Increase the maximum number of shares as to which options may be granted
under this Plan; (b) decrease the minimum option price; (c) decrease, directly
or indirectly by cancellation and substitution of options or otherwise, the
option price applicable to any option granted under this Plan; (d) be treated
as the adoption of a new plan pursuant the Internal Revenue Code and its
applicable regulations; and (e) result in a material modification of the plan
eligibility requirements.
7.2 EXCEPTIONS
Provided, however, that the provisions of this clause shall not (a)
prevent the granting to any key employee holding an unexpired option under this
plan, of an additional option(s) under this plan; (b) withdraw the
administration of this Plan from the committee; (c) permit any member of the
committee to be eligible to receive or hold an option under the Plan; and (d)
alter any outstanding option agreement to the detriment of the key employee
holding the option without the consent of such employee.
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8. USE OF PROCEEDS
The proceeds received by Frontier from the sale of its common stock
pursuant to the exercise of options by key employees shall be used for general
corporate purposes.
9. REDEMPTION OF STOCK UPON TERMINATION
Frontier, solely at Frontier's option, shall have the right to redeem
any stock owned by a key employee resulting from the exercising of a stock
option pursuant to this Plan upon the key employee's termination of employment.
The term of Frontier's option to redeem such stock shall be three months,
commencing on the employment termination date. The redemption price shall be the
fair market value of the stock on the date of redemption and the redemption
price shall be paid in cash by Frontier upon the redemption.
10. FINANCING THE EXERCISE OF THE OPTIONS
Frontier may initiate a financing program that would allow a key
employee to finance up to 75% of the exercise price of any option granted
pursuant to this Plan. If such financing is offered, it shall be in Frontier's
sole discretion to determine the terms and conditions of such financing.
Frontier shall be allowed to make an independent assessment of whether financing
should be provided to any individual based on that individual's credit history.
Thus, if a financing plan is adopted, the decision whether a key employee is
entitled to utilize such financing is solely a credit decision to be made by
Frontier.
11. ADOPTION AND/OR GRANT OF OPTIONS OUTSIDE THIS PLAN
Nothing in this Plan shall be construed as limiting Frontier from
establishing another stock option plan (statutory or nonstatutory) that would
operate concurrently with this Plan; provided, however, that the approval of
the shareholders of Frontier by vote of the shareholders representing a
majority of the outstanding capital stock of Frontier shall be required to
adopt any additional plan. Moreover, if any additional plan is adopted, no
option granted under this plan shall be contingent upon the exercise or
nonexercise of any option granted under the additional plan.
12. PARAGRAPH HEADINGS
The paragraph headings used in this Plan are for the reference
convenience of the reader. In the event of a conflict between the language of a
particular paragraph and a paragraph heading, the language of the paragraph
shall prevail.
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