SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 1, 1998
FINGERHUT COMPANIES, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 1-8668 41-1396490
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
4400 Baker Road, Minnetonka, Minnesota 55343
(Address of principal executive offices) (zip code)
(612) 932-3100
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
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Item 2. Disposition of Assets.
On September 25, 1998, Fingerhut Companies, Inc., a Minnesota
corporation ("FCI"), spun off (the "Spin-Off") FCI's approximate 83%
interest in Metris Companies Inc., a Delaware corporation ("Metris").
Pursuant to the Spin-Off, FCI effected a distribution of all of the shares
of common stock, par value $.01 per share, of Metris (the "Metris Shares")
owned by FCI on a pro rata basis to all of the holders of common stock, par
value $.01 per share, of FCI (the "FCI Common") on the applicable record
date, September 11, 1998 (the "Record Date"). Each Fingerhut shareholder
received 0.318351 of a Metris Share for every share of FCI Common held on
the Record Date.
Certificates representing fractional Metris Shares were not
issued. Instead, Norwest Bank Minnesota, N.A., as the distribution agent
for the Spin-Off, calculated cash in lieu of fractional share payments
based on $49.0625 per share, which was the average of the closing bid and
asked prices of Metris Shares as of the Distribution Date. On September 28,
1998, checks for cash in lieu of fractional shares were mailed to the
record holders of FCI Common as of the Record Date.
The Metris Shares are listed on the Nasdaq under the symbol MTRS.
On August 18, 1998, FCI received a written ruling from the Internal Revenue
Service ("IRS") stating that, among other things, the Spin-Off would not be
a taxable event to either of FCI or the holders of FCI Common. The
Spin-Off, and each of the other transactions related thereto, were approved
by the Board of Directors of FCI on August 10, 1998.
Further information regarding the Spin-Off can be found in the
Form 8-K dated August 17, 1998, announcing IRS approval of the Spin-Off and
in the Information Statement mailed to record holders of FCI Common earlier
this month.
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Item 5. Other Events.
Option Exercises and Share Repurchase.
Earlier this month, Theodore Deikel, the chairman and chief
executive officer of FCI, exercised certain options to acquire FCI Common,
which resulted in Deikel's holdings increasing by a net total of 2,178,328
shares. In connection with these option exercises, on September 3, 1998,
FCI repurchased from Deikel 528,331 shares at a price of $27.50 per share
(i) to cover additional taxes in excess of FCI's withholding obligation
relating to the option exercises and (ii) to pay the outstanding balance of
a loan to a third party which Deikel incurred to pay taxes on his exercise
of options in 1992.
Stock Repurchase; Non-Recurring Charge.
FCI announced on September 25, 1998 that, following the Spin-Off,
FCI will begin repurchasing shares with funds obtained by discontinuing its
current dividend of $.04 per quarter, will take a non-recurring charge of
$120 million relating to the refinancing of certain privately-placed senior
notes and will take a non-recurring, after-tax write-down of certain
assets. Additional information regarding these developments can be found in
the press release attached hereto as Exhibit 99.1.
Amendments to Stock Option Plans.
On August 18, 1998, FCI amended each of its Stock Option Plan
(the "1990 Plan"), 1992 Long-Term Incentive and Stock Option Plan (the
"1992 Plan") and 1995 Long-Term Incentive and Stock Option Plan (the "1995
Plan"; collectively, the "Plans"). These amendments, among other things,
(i) permit FCI to make loans to optionees under the Plans at market
interest rates or to withhold FCI common, in each case in the sole
discretion of the Compensation Committee of the Board of Directors, in
order to assist such optionees in paying the exercise price or taxes
relating to option exercises and (ii) permit, in the case of the 1990 Plan
and the 1995 Plan (subject to certain conditions), the acceleration of
options granted under such Plans as of the time immediately prior to the
Record Date, so long as such options are exercised prior to the
Distribution Date. Copies of the Amended and Restated 1990 Plan, Amendment
No. 2 to the 1992 Plan and the Amended and Restated 1995 Plan are attached
hereto as Exhibits 99.2, 99.3 and 99.4, respectively.
<PAGE>
Item 7. Financial Statements and Exhibits.
(b) Pro Forma Financial Information:
Pro forma financial statements relating to the Spin-Off are not
included herewith, but will be filed by amendment hereto on or before
November 8, 1998.
(c) Exhibits:
99.1 Press Release of Fingerhut Companies, Inc., dated
September 25, 1998.
99.2 Fingerhut Companies, Inc. Stock Option Plan, Amended
and Restated as of August 18, 1998.
99.3 Amendment No. 2, dated as of August 18, 1998, to
Fingerhut Companies, Inc. 1992 Long-Term Incentive
and Stock Option Plan.
99.4 Fingerhut Companies, Inc. 1995 Long-Term Incentive
and Stock Option Plan, Amended and Restated as of
August 18, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Date: October 1, 1998
FINGERHUT COMPANIES, INC.
By: /s/ Michael P. Sherman
----------------------------
Michael P. Sherman
Executive Vice President,
Business Development,
General Counsel and Secretary
[LOGO]
For Immediate Release
Contact: Lynda Nordeen Eapen Chacko
Fingerhut Companies, Inc. Director, Investor Relations
(612) 936-5015 (612) 932-3371
[email protected] [email protected]
FINGERHUT POSITIONS FOR LONG-TERM GROWTH POST METRIS SPIN
Company Comfortable with Street Expectations, Commences Stock Repurchase,
Incurs Non-recurring Charge, Strengthens Board
MINNEAPOLIS - Sept. 25, 1998 - Fingerhut Companies, Inc. (NYSE: FHT)
today announced that it will immediately begin, under a prior
authorization, repurchasing its shares with funds obtained by discontinuing
its current dividend of $.04 per share per quarter. In addition, Fingerhut
will take a $31 million non-recurring, after-tax charge to position the
company for growth as it completes the tax-free spin of its 83-percent
owned financial services subsidiary, Metris Companies Inc. (NASDAQ: MTRS).
"Fingerhut stock, which is currently selling below book, is
undervalued and the Board of Directors believes there is more benefit to
our shareholders in repurchasing stock and investing in growth than in
paying a nominal quarterly dividend," said Ted Deikel, Fingerhut chairman
and chief executive officer.
As a result of Fingerhut's increased focus on growth through
acquisitions and development of its intellectual and database marketing
business, coupled with increased productivity in the Company's Tennessee
and Minnesota distribution centers, the Company will record a one-time,
non- cash charge to write down its distribution center in Utah. An
additional charge will be taken as part of the Company's internal
cost-reduction program, and an extraordinary loss will be recorded to
refinance Fingerhut's $120 million in privately placed senior notes,
thereby replacing high coupon debt with financing that takes advantage of
the current low interest rate environment.
"Fingerhut is now a growth company," said Will Lansing, Fingerhut
president. "We plan to achieve better than 15 percent top and bottom line
growth going forward. We remain comfortable with the Street expectations
for both the third quarter and the full year operating results net of the
non-recurring charge. And the outlook for 1999 is bright."
Deikel said, "Through the creation of Metris we have built $1 billion
in value for our shareholders and with the spin-off at hand, Fingerhut's
management team is capitalizing on our database and information management
expertise, building our Internet and e-commerce business, and leveraging
our infrastructure to produce long-term profitable growth and to again
build significant value for our shareholders."
According to Deikel, Fingerhut's three-point strategy is to expand its
business through
<PAGE>
acquisitions, evidenced by the Company's recent purchase of Arizona Mail
Order, expand into the e- commerce market beginning with the equity
purchase of PC Flowers and Gifts, and aggressively grow its database and
services business.
"We intend to aggressively seize opportunities in the direct marketing
industry's consolidating environment," said Deikel.
The Company also announced the appointment of Robert H. Lessin to its
board of directors. Lessin is chairman and chief executive officer of Wit
Capital, the leading online Investment Bank. The move, coupled with the May
hiring of Lansing as Fingerhut president, reflects the Company's enhanced
Internet strategy and underscores its commitment to be a major e-commerce
player. Lansing served as chief operating officer of Prodigy, the online
service owned by IBM and Sears, and was a partner at McKinsey, leading the
consulting firm's Internet practice.
Lansing said: "Fingerhut is now positioned to grow sales, increase
market share, grow our Internet business, create new lines of revenue, and
generate high-quality earnings growth."
Fingerhut Companies, Inc. is a leading database marketing company
selling a broad range of products and services through catalogs, direct
marketing and the Internet. The Company also owns Figi's, a food and gift
catalog company, and Arizona Mail Order, a catalog apparel company.
Fingerhut owns approximately 20 percent of PC Flowers & Gifts, an Internet
retailer. Based in Minnetonka, Minnesota, the Company and its subsidiaries
employ approximately 10,000 people. Fingerhut can be found on the Internet
at www.fingerhut.com, www.andysgarage.com, www.thehut.com and
www.pcflowers.com.
This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
statements include statements regarding intent, belief or current
expectations of the Company and its management. Prospective investors are
cautioned that any such forward looking statements are not guarantees of
future performance and involve a number of risks and uncertainties that may
cause the Company's actual results to differ materially from the results
discussed in the forward looking statements.
FINGERHUT COMPANIES, INC.
STOCK OPTION PLAN
AMENDED AND RESTATED AS OF AUGUST 18, 1998
1. Purpose. The purpose of the Fingerhut Companies, Inc. Stock Option
Plan (the "Plan") is to advance the interests of Fingerhut Companies, Inc.
(the "Company") and its stockholders by providing options to purchase
Common Shares (as defined in Paragraph 4 hereof) of the Company ("Options")
to certain key executives of the Company and if its subsidiaries who
contribute significantly to the long- term performance and growth of the
Company and such subsidiaries.
2. Administration. The Plan shall be administered by a Stock Option
Committee (the "Committee") appointed by the Board of Directors (the
"Board") of the Company from among its members and shall consist of not
less than three members thereof who are and shall remain Committee members
only so long as they remain "disinterested persons" as defined in Rule
16b-3 under the Securities Exchange Act of 1934 (the "1934 Act").
The Committee shall have all the powers vested in it by the terms
of the Plan, such powers to include exclusive authority (within the
limitations described herein) to select the employees to be granted under
the Plan, to determine the type, size and terms of the Options to be
granted to each employee selected, to determine the time when Options will
be granted and to prescribe the form of the instruments embodying Options
granted under the Plan. The Committee shall be authorized to interpret the
Plan and the Options granted under the Plan, to establish, amend and
rescind any rules and regulations relating to the Plan, and to make any
other determinations which it believes necessary or advisable for the
administration of the Plan. The Committee may correct any defect or supply
any omission or reconcile any inconsistency in the Plan or in any Option in
the manner and to the extent the Committee deems desirable to carry it into
effect. Any decision of the Committee in the administration of the Plan, as
described herein, shall be final and conclusive. The Committee may act only
by a majority of its members in office, except that the members thereof may
authorize any one or more of their number or any officer of the Company to
execute and deliver documents on behalf of the Committee. No member of the
Committee shall be liable for anything done or omitted to be done by him or
by any other member of the Committee in connection with the Plan, except
for his own willful misconduct or as expressly provided by statute.
3. Participation. (a) Subsidiaries. If a subsidiary of the Company
wishes to participate in the Plan and its participation shall have been
approved by the Board, the board of directors of the subsidiary shall adopt
a resolution in form and substance satisfactory to the
<PAGE>
Committee authorizing participation by the subsidiary in the Plan with
respect to its employees. As used herein, the term "subsidiary" means any
corporation at least one-half of whose outstanding voting stock is owned,
directly or indirectly, by the Company.
A subsidiary participating in the Plan may cease to be a
participating Company at any time by action of the Board or by action of
the board of directors of such subsidiary, which latter action shall be
effective not earlier than the date of delivery to the Secretary of the
Company of a certified copy of a resolution of the subsidiary's board of
directors taking such action. If the participation in the Plan of a
subsidiary shall terminate, such termination shall not relieve it of any
obligations therefore incurred by it under the Plan, except with the
approval of the Board.
(b) Employees. Subject to the provisions of the Plan, the Committee
shall have exclusive power to select the officers and other key employees
of the Company and its subsidiaries participating in the Plan to be granted
Options under the Plan, but no Option shall be granted to any member of the
Committee.
4. Options Under the Plan. (a) Type of Options. Options under the Plan
will include "non-qualified stock options" and "incentive stock options"
which qualify under Section 422A of the Internal Revenue Code of 1986 as
amended (the "Code"). Options are rights to purchase Common Shares of the
Company having a par value per share as set forth in the Company having a
par value per share as set forth in the Company's Articles of Incorporation
(the "Common Shares").
(b) Maximum Number of Shares That May Be Issued. There may be issued
under the Plan pursuant to the exercise of Options an aggregate of not more
than 7,768,000 Common Shares, subject to adjustment as provided in
Paragraph 7. Common Shares issued pursuant to the Plan may be either
authorized but unissued shares or reacquired shares, or both.
The number of Common Shares available for grant of options under
the Plan shall be decreased by the sum of the number of shares with respect
to which Options have been issued and are then outstanding and the number
of shares issued upon exercise of Options. In the event any outstanding
Option under the Plan for any reason expires, is terminated, or is canceled
prior to the end of the period during which Options may be granted, the
Common Shares called for by the unexercised portion of such Option may
again be subject to an Option under the Plan.
(c) Rights With Respect to Shares. An employee to whom an Option is
granted (and any person succeeding to such an employee's right pursuant to
the Plan) shall have no rights as a shareholder with respect to any Common
Shares until the date of the issuance of a stock certificate to him for
such shares. Except as provided in Paragraph 7, no adjustment shall be made
for dividends, distributions or
<PAGE>
other rights (whether ordinary or extraordinary, and whether in cash,
securities or other property) for which the record date is prior to the
date such stock certificate is issued.
5. Stock Option Agreements. Each Option granted under the Plan shall
be evidenced by an instrument in such form as the Committee shall prescribe
from time to time in accordance with the Plan and shall comply with the
following terms and conditions (and with such other terms and conditions,
including but not limited to restrictions upon the Option or the Common
Shares issuable upon exercise thereof, as the Committee, in its discretion,
shall establish):
(a) The option price shall not be less than the par value of the
Common Shares subject to such Option and, in the case of Options granted
after completion of the initial public offering of the Company, if any (the
"Public Offering") shall not be less than the fair market value of the
Common Shares subject to such Option at the time the Option is granted, as
determined in good faith by the Committee. However, the option price of an
Incentive Stock Option granted to any employee shall not be less than 100%
of the fair market value of the Common Shares on the date the Option is
granted, and the option price of an Incentive Stock Option granted to any
employee who owns stock representing more than ten percent of the voting
power of all classes of stock of the Company or of a subsidiary (a "Ten
Percent Employee"), shall not be less than 110% of such fair market value
or less than the par value of such Common Shares.
(b) The Committee shall determine the number of Common Shares to be
subject to each Option.
(c) Except as otherwise determined by the Committee or in an option or
award agreement, no option or award granted under the Plan shall be
transferable by an optionee or grantee, otherwise than by will or the laws
of descent or distribution and during the lifetime of an optionee or
grantee, the option shall be exercisable only by such optionee.
(d) Except as set forth in Section 5 (h) below, the Option shall not
be exercisable:
(i) (A) in the case of any Incentive Stock Option granted to a
Ten Percent Employee, after the expiration of five years from the date it
is granted, (B) in the case of any Incentive Stock Option granted to an
individual who is not a Ten Percent Employee, after the expiration of ten
years from the date it is granted, and (C) in the case of any other Option,
after the expiration of ten years and one month from the date it is
granted. An Option may be exercised during such period only at such time or
times as the Committee may establish;
(ii) unless payment in full is made for the shares being acquired
thereunder at the time of exercise; such payment shall be made in United
States dollars by cash or
<PAGE>
check, or, if the Committee in its sole discretion so permits (A) by
certifying to the Company that the person exercising the Option owns a
specified number of Common Shares having a fair market value equal to all
or part of the exercise price applicable to such Option (such fair market
value to be determined in such reasonable manner as may be provided for
from time to time by the Committee or as may be required in order to comply
with or to conform to the requirements of any applicable or relevant laws
or regulations) and having the Company withhold such specified number of
Common Shares from the Common Shares otherwise deliverable upon exercise of
the Option or (B) by requesting the Company to withhold, from the Common
Shares deliverable upon exercise of the Option, Common Shares with a fair
market value (as determined above) equal to all or part of the exercise
price of such Option, or (C) by a combination of United States dollars and
Common Shares as aforesaid.
(iii) unless the person exercising the Option has been, at all
times during the period beginning with the date of grant of the Option and
ending on the date of such exercise, an officer or employee of the Company
or of one of its subsidiary corporations, or of a corporation, or a parent
or subsidiary of a corporation, substituting or assuming the Option in a
transaction to which Section 425(a) of the Code is applicable, except that
(A) in the case of any Nonqualified Stock Option, if such
person shall cease to be an officer or employee of the Company or one of
its subsidiary corporations solely by reason of a period of Related
Employment as defined in paragraph 6, he may during such period of Related
Employment, exercise the nonqualified stock option as if he continued to be
such an officer or employee; or
(B) if such person shall cease to be such an officer or
employee on account of an involuntary termination of employment (other than
death or disability) or on account of voluntary termination of employment
(other than pursuant to retirement as described in section 5(d) (iii) (d)),
while holding an Option which has not expired and has not been fully
exercised, such person may before the expiration of thirty (30) days after
such termination (but in no event after the Option has expired under the
provisions of subparagraph 5 (d) (i) hereof) exercise the Option with
respect to any shares as to which he could have exercised the Option on the
date he terminated employment, except that the Committee may in its sole
discretion refuse to permit a person who has voluntarily terminated his
employment to exercise any Options after the date of termination, or
(C) if such person shall cease to be such an officer or
employee by reason of death or disability (as may be determined by the
Board in it sole and absolute discretion) while holding an Option which has
not expired and has not been fully exercised, such person (or in the case
of death, his executors, administrators, heirs or distributees, as the case
may be) may exercise the Option (but in no event after the Option has
expired under the
<PAGE>
provisions of subparagraph 5 (d) (i) hereof) with respect to any shares as
to which such person could have exercised the Option on the date he ceased
to be such an officer or employee; or
(D) if such person shall cease to be such an officer or
employee by reason of retirement under an approved retirement program of
the Company or a subsidiary (or such other plan as may be approved by the
Committee, in its sole discretion, for this purpose) while holding an
Option which has not expired and has not been fully exercised, such person
at any time within three years of the date he ceased to be such an officer
or employee (but in no event after the Option has expired under the
provisions of subparagraph 5 (d) (i) hereof), may exercise the Option with
respect to any shares as to which he could have exercised the Option on the
date he ceased to be such an officer or employee; or
(E) if any person to whom an Option has been granted shall
die after termination of employment for any reason, or shall become
disabled (as may be determined by the Committee in its sole and absolute
discretion) within 30 days of his termination or employment for any reason,
holding an Option which has not been fully exercised, he or his executors,
administrators, heirs or distributees, as the case may be, may, at any time
within one year after the date of such event (but in no event after the
Option has expired under the provisions of subparagraph 5 (d) (i) hereof),
exercise the Option with respect to any shares as to which such person
could have exercised the Option at the time of his death or disability; or
(F) notwithstanding the foregoing provisions of this Section
5 (d) (iii), the Committee shall have the authority, on a case by case
basis, in its sole and absolute discretion to extend for a period of up to
two (2) years following the termination of employment of an optionee the
period of vesting referred to in Paragraph 5 (g) and the period of
exercisability, provided such extension complies with section 5 (d) (i);
and
(iv) if the issuance of any Common Shares pursuant to the
exercise of an Option would constitute a violation by the Company or the
person to whom the Option has been granted of any applicable law or
regulation of any governmental authority.
As to Incentive Stock Options granted under the Plan, the
aggregate fair market value of Common Shares (determined at the time of
grant) with respect to which Incentive Stock Options are exerciseable for
the first time by any employee during any calendar year under the Plan and
any other stock option plan of the Company and its subsidiaries shall not
exceed $100,000.
(f) Any Option which may, under circumstances existing at the time of
its grant, upon its exercise constitute a transaction subject to the
Hart-Scott-Rodino Anti-Trust Improvements Act of 1976 or regulations
promulgated
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thereunder ("H-S-R"), shall contain provisions requiring the parties
thereto to comply with H-S-R prior to the issuance of Common Shares
thereunder.
(g) Any outstanding Option which has not otherwise vested prior
thereto shall be exercisable in full as of the time immediately prior to
the Record Date set by the Board of Directors with respect to the Company's
distribution (the "Spin-Off") of its shares of Metris Companies Inc.
("Metris") to the public shareholders of the Company; provided that the
following conditions are satisfied: (i) the optionee exercises the Option
prior to the Spin-Off, (ii) the optionee pays the exercise price in United
States dollars by cash or check and (iii) the optionee (other than Metris
employees) agrees that if the optionee's employment with the Company is
voluntarily terminated by the optionee within one year after such exercise,
the optionee shall promptly pay back to the Company the excess of the fair
market value of the shares received upon exercise of such Option
(determined on the date of exercise) over the exercise price thereof. With
respect to Options acquired after the Spin-Off, the Committee shall have
full and complete authority to determine whether an Option will be
exercisable in full at any time or from time to time during the term
thereof, or to provide for the exercise thereof in such installments, upon
the occurrence of such events (such as termination of employment for any
reason) and at such times during the term of the Option as the Committee
may determine and specify in the option agreement.
(h) Notwithstanding the vesting provisions contained in Section 5
hereof, but subject to the other terms and conditions set forth herein, an
Option may be exercised in full immediately following the date of a "Change
in Control" (as hereinafter defined). For purposes of this Plan, the
following terms shall have the definitions set forth below:
(A) "Change in Control" shall mean:
(i) a change in control of a nature that would be required
to be reported in response to Item 6 (e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Company is then subject to such
reporting requirement; or
(ii) the public announcement (which, for purposes of this
definition, shall include, without limitation, a report filed pursuant to
Section 13(d) of the Exchange Act) by the Company or any "person" (as such
term issued in Sections 13(d) and 14(d) of the Exchange Act) that such
person has become the "beneficial owner" (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities
of the Company representing 30% or more of the combined voting power of the
Company's then outstanding securities; provided, however, that
notwithstanding the foregoing, no Change of Control shall be deemed to have
occurred for purposes of this Plan by reason of ownership of 30% or more of
the total voting capital stock of the Company then issued and outstanding
by any
<PAGE>
subsidiary of the Company or any employee benefit plan of the Company or of
any subsidiary of the Company or any entity holding shares of the Common
Stock organized, appointed or established for, or pursuant to the terms of,
any such plan (any such person or entity described in this proviso is
referred to herein as a "Company Entity"); or
(iii) the announcement of a tender offer by any person or
entity (other than a Company Entity) for 30% or more of the Company's
voting capital stock then issued and outstanding, which tender offer has
not been approved by the Board, a majority of the members of which are
Continuing Directors (as hereinafter defined), and recommended to the
shareholders of the Company; or (iv) the Continuing Directors (as
hereinafter defined) cease to constitute a majority of the Company's Board
of Directors; or
(v) the shareholders of the Company approve (x) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Company
stock would be converted into cash, securities or other property, other
than a merger of the Company in which shareholders immediately prior to the
merger have the same proportionate ownership of stock of the surviving
corporation immediately after the merger; (y) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of
all or substantially all of the assets of the Company; or (z) any plan of
liquidation or dissolution of the Company.
(B) "Continuing Director" shall mean any person who is a member
of the Board of Directors of the Company, while such person is a member of
the Board of Directors, who is not an Acquiring Person (as defined below)
or an Affiliate or Associate (as defined below) of an Acquiring Person, or
a representative of an Acquiring Person or of any such Affiliate or
Associate, and who (x) was a member of the Board of Directors on the date
of the applicable option or award agreement or (y) subsequently becomes a
member of the Board of Directors, if such person's initial nomination for
election or initial election to the Board of Directors is recommended or
approved by a majority of the Continuing Directors. For purposes of this
subparagraph (ii), "Acquiring Person" shall mean any "person" (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) who or which,
together with all Affiliates and Associates of such person, is the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly of securities of the Company representing 30%
or more of the combined voting power of the Company's then outstanding
securities, but shall not include any Company Entity; and "Affiliate" and
"Associate" shall have the respective meanings ascribed to such terms in
Rule 12b-2 promulgated under the Exchange Act.
(i) In order to assist the person exercising an Option in paying any
taxes (including all federal, state and local taxes to be withheld or
collected upon exercise of an Option which does not qualify as an Incentive
Stock Option
<PAGE>
hereunder), the Committee, in its absolute discretion and subject to such
additional terms as it may adopt, shall cause the Company to loan money to
such person in an amount equal to the optionee's tax liability arising as a
result of such exercise in exchange for a promissory note, which note shall
(A) be fully recourse to the optionee, (B) be payable on the demand of the
Company (or in any event at the earlier of one year from the borrowing date
or the date of termination of such optionee's employment) and (C) provide
for interest at a market rate to be determined by the Committee (such rate
not to be less than the minimum rate required to avoid the imputation of
income, original issue discount or a below-market-rate loan pursuant to
Sections 483, 1274 or 7872 of the Code or any successor provisions
thereto).
6. Related Employment. For the purposes of this Plan, Related
Employment shall mean the employment of an individual by an employer which
is neither the Company nor a subsidiary of the Company provided (i) such
employment is undertaken by the individual at the request of the Company or
a subsidiary thereof, (ii) immediately prior to undertaking such employment
the individual was an officer or employee of the Company or a subsidiary
thereof, or was engaged in Related Employment as herein defined and (iii)
such employment is recognized by the Committee, in its sole discretion, as
Related Employment for purposes of this Paragraph 6. The death or
disability of an individual during a period of Related Employment as herein
defined shall be treated, for purposes of this Plan, as if the death or
onset of disability had occurred while the individual was an officer or
employee of the Company.
7. Change in Common Shares. In the event of any change in the
outstanding Common Shares of the Company by reason of any stock split,
stock dividend, recapitalization, merger, consolidation, reorganization,
combination or exchange of shares or other similar event or in the event of
a conversion to equity of all or a part of that Company's intercompany debt
or other contribution to capital if such change or event equitably requires
an adjustment in the number or kind of shares that may be issued under the
Plan pursuant to subparagraph 4 (b), in the number or kind of shares
subject to, or the option price per share under, any outstanding Option
which has been granted to any participant, or in any measure of
performance, such adjustment shall be made by the Committee and shall be
conclusive and binding for all purposes of the Plan. In no event shall the
excess of the aggregate fair market value of the Common Shares subject to
the Options immediately after any substitution, exchange or adjustment over
the aggregate price for such Common Shares be more than the excess of the
aggregate fair market value of all the Shares subject to the Options
immediately before any such substitution, exchange or adjustment over the
aggregate option price of such Common Shares nor shall the adjusted Option
give the holder thereof any additional benefits he did not have under the
old Option.
8. Financial Assistance. If those members of the Board who are
ineligible to receive Options under the Plan
<PAGE>
determine that such action is advisable, the Company may assist any person
to whom such an Option has been granted in obtaining financing from the
Company or from a bank or other third party, in such amount as is required
to permit the exercise of an Option and/or the payment of any taxes in
respect thereof. Such assistance may take any form that the Committee deems
appropriate, including, but not limited to a direct loan from the Company
or one of its subsidiaries, or the maintenance by the Company or one of its
subsidiaries of deposits with such bank or third party.
9. Miscellaneous Provisions.
(a) No employee or other person shall have any claim or right to be
granted an Option under the Plan. Neither the Plan nor any action taken
thereunder shall be construed as giving any employee any right to be
retained in the employ of the Company or any subsidiary.
(b) Except as otherwise provided in this Plan or in an option or award
agreement, a participant's rights and interest under the Plan may not be
assigned or transferred in whole or in part either directly or by operation
of law or otherwise including, but not limited to, execution, levy,
garnishment, attachment, pledge, bankruptcy or in any other manner and no
such right or interest of any participant in the Plan shall be subject to
any obligation or liability of such participant.
(c) No Common Shares or other company securities shall be issued
hereunder unless counsel for the Company shall be satisfied that such
issuance will be in compliance with applicable federal and state securities
laws.
(d) In order to comply with all applicable federal, state or local
income tax laws or regulations, the Company may take such action as it
deems appropriate to ensure that all applicable federal or state payroll,
withholding, income or other taxes, which are the sole and absolute
responsibility of the person exercising an Option under the Plan, are
withheld or collected from such person. In order to assist the person
exercising an Option in paying all federal, state or local taxes to be
withheld or collected upon exercise of an Option which does not qualify as
an Incentive Stock Option hereunder, the Committee, in its absolute
discretion and subject to such additional terms as it may adopt, shall
permit such person to satisfy all or part of such tax obligation by
requesting the Company to withhold, from the Common Shares deliverable upon
exercise of the Option, Common Shares having a fair market value equal to
all or part of such taxes, such fair market value to be determined in
accordance with Section 5(d)(ii).
(e) The expenses of the Plan shall be borne by the Company. However,
if an Option is granted to an employee of a subsidiary of the Company and
the Option grant results in the issuance by the Company to the participant
of Common Shares, such subsidiary shall pay to the Company an amount equal
to the fair market value thereof, as determined by the Committee, on the
date such Common Shares are issued minus the amount, if any, received by
the Company in respect of
<PAGE>
the purchase of such Common Shares.
(f) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the issuance of Common Shares under the Plan and the
issuance of Common Shares under the Plan and the issuance of Common Shares
shall be subordinate to the claims of the Company's general creditors.
(g) By accepting any option or other benefit under the Plan, each
participant and each person claiming under or through him shall be
conclusively deemed to have indicated his acceptance and ratification of,
and consent to, any action taken under the Plan by the Company, the Board
or the Committee.
(h) The masculine pronoun means the feminine and the singular means
the plural wherever appropriate.
(i) The appropriate officers of the Company shall cause to be filed
any reports, returns or other information regarding options hereunder or
any Common Shares issued pursuant hereto as may be required by Section 13
or 15 (d) of the 1934 Act or any other applicable statute, rule or
regulation.
(j) It is the intent of the Company that the Incentive Stock Options
granted under this Plan meet the appropriate provisions of the Code, and
any ambiguities in construction shall be interpreted in order to effectuate
such intent.
10. Amendment of Discontinuance. The Plan may be amended at any time
and from time to time by the Board, but no amendment which increases the
aggregate number of Common Shares which may be issued pursuant to the Plan
shall be effective unless and until the same is approved by the
shareholders of the Company. No amendment of the Plan shall adversely
affect any right or any participant with respect to any Option theretofore
granted without such participant's written consent.
11. Termination. This Plan terminates upon the earlier of the
following dates or events to occur:
(a) upon the adoption of a resolution of the Board terminating
the Plan; or
(b) December 31, 1999. No termination of the Plan shall alter or
impair any of the rights or obligations of any person, without his consent,
under any Option theretofore granted under the Plan.
12. Shareholder Adoption. The Plan shall be submitted to the
shareholders of the Company for their approval and adoption. The Plan shall
not be effective and no Option shall be granted hereunder unless and until
the Plan as been so approved and adopted.
AMENDMENT NO. 2
dated as of August 18, 1998
to
Fingerhut Companies, Inc. 1992 Long-Term Incentive and Stock Option Plan
The following amendments to the Fingerhut Companies, Inc. 1992
Long-Term Incentive and Stock Option Plan (the "1992 Plan") were adopted by
the Board of Directors of Fingerhut Companies, Inc., on October 1, 1997,
effective as of the date set forth above:
1. The third sentence of Section 7(c) of the 1992 Plan is amended to
read in its entirety as follows:
"Payment shall be made to the Company in cash (including
bank check, certified check, personal check, or money order), or,
if the Committee in its sole discretion so permits, (i) by
certifying to the Company that the optionee or grantee owns a
specified number of shares having a fair market value equal to
all or part of the exercise price applicable to such option or
award and having the Company withhold such specified number of
shares from the shares otherwise deliverable upon exercise of the
option or award, or (ii) by requesting the Company to withhold,
from the shares deliverable upon exercise of the option or award,
shares with a fair market value equal to all or part of the
exercise price of such option or award, or (iii) by delivering
the optionee's or grantee's promissory note, which shall provide
for interest at a rate not less than the minimum rate required to
avoid the imputation of income, original issue discount or a
below-market-rate loan pursuant to Sections 483, 1274 or 7872 of
the Code or any successor provisions thereto, or (iv) a
combination of cash, the optionee's or grantee's promissory note
and such shares."
2. The 1992 Plan is amended to add a new Section 7(e) to read in its
entirety as expressly set forth below:
"(e) In order to assist the person exercising an option or
award in paying any taxes (including all federal, state and local
taxes to be withheld or collected upon exercise of an option or
award which does not qualify as an Incentive Stock Option
hereunder), the Committee, in its absolute discretion and subject
to such additional terms as it may adopt, shall cause the Company
to loan money to such person in an amount equal to the optionee's
or grantee's tax liability arising as a result of such exercise
in exchange for a promissory note, which note shall (A) be fully
recourse to the optionee or grantee, (B) be payable on the demand
of the Company (or in any event at the earlier of one year from
the borrowing date or the date of termination of such optionee's
or grantee's employment) and (C) provide for interest at a market
rate to be determined by the Committee (such rate not to be less
than the minimum rate required to avoid the imputation of income,
original issue discount or a below-market-rate loan pursuant to
Sections 483, 1274 or 7872 of the Code or any successor
provisions thereto)."
<PAGE>
3. Section 11(a) of the 1992 Plan is amended to read in its entirety
as follows:
"(a) In order to comply with all applicable federal, state
or local income tax laws or regulations, the Company may take
such action as it deems appropriate to ensure that all applicable
federal or state payroll, withholding, income or other taxes,
which are the sole and absolute responsibility of an optionee or
grantee under the Plan, are withheld or collected from such
optionee or grantee. In order to assist an optionee or grantee in
paying all federal, state or local taxes to be withheld or
collected upon exercise of an option or award which does not
qualify as an Incentive Stock Option hereunder, the Committee, in
its absolute discretion and subject to such additional terms as
it may adopt, shall permit the optionee or grantee to satisfy all
or part of such tax obligation by requesting the Company to
withhold, from the shares deliverable upon exercise of the option
or award, shares having a fair market value equal to all or part
of such taxes, such fair market value to be determined in
accordance with Section 5."
FINGERHUT COMPANIES, INC.
By:___________________________
Michael P. Sherman
Executive Vice President,
Business Development,
General Counsel and Secretary
FINGERHUT COMPANIES, INC.
1995 LONG-TERM INCENTIVE AND STOCK OPTION PLAN
AMENDED AND RESTATED AS OF AUGUST 18, 1998
1. Purpose of Plan.
This Plan shall be known as the "FINGERHUT COMPANIES, INC. 1995
LONG-TERM INCENTIVE AND STOCK OPTION PLAN" and is hereinafter referred to
as the "Plan." The purpose of the Plan is to aid in maintaining and
developing personnel capable of ensuring the future success of Fingerhut
Companies, Inc., a Minnesota corporation (the "Company"), to offer such
personnel additional incentives to put forth maximum efforts for the
success of the business, and to afford them an opportunity to acquire a
proprietary interest in the Company through stock options and other
long-term incentive awards as provided herein. Options granted under this
Plan may be either incentive stock options ("Incentive Stock Options"')
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"'), or stock options which do not qualify as Incentive
Stock Options ("Nonqualified Stock Options"). Awards granted under this
Plan may be stock appreciation rights, restricted stock or performance
awards as hereinafter described.
2. Stock Subject to Plan.
Subject to the provisions of Section 15 hereof, the stock to be
subject to options or other awards under the Plan shall be the Company's
common stock, $.01 par value (the "Common Stock"). Subject to adjustment as
provided in Section 15 hereof, the maximum number of shares on which
options may be exercised or other awards issued under this Plan shall be
4,250,000 shares. If an option or award under the Plan expires, or for any
reason is terminated or unexercised with respect to any shares, such shares
shall again be available for options or awards thereafter
<PAGE>
granted during the term of the Plan.
3. Administration of Plan.
(a) The Plan shall be administered by the Compensation Committee of
the Board of Directors (the "Committee") which shall be a committee
comprised solely of two or more "outside directors" of Fingerhut Companies,
Inc. which satisfied the requirements of Section 162(m) of the Code;
provided, however, that until the first meeting of shareholders of the
Company at which directors are to be elected that occurs after January 1,
1996 (or such later date as may be provided in regulations proposed or
promulgated under the Code), the Compensation Committee may be composed of
two or more disinterested directors within the meaning of Rule 16b-3
promulgated under the Securities Act of 1934.
(b) The Committee shall have plenary authority in its discretion, but
subject to the express provisions of the Plan: (i) to determine the
purchase price of the Common Stock covered by each option or award, (ii) to
determine the employees to whom and the time or times at which such options
and awards shall be granted and the number of shares to be subject to each,
(iii) to determine the form of payment to be made upon the exercise of an
SAR or in connection with performance awards, either cash, Common Stock or
a combination thereof, (iv) to determine the terms of exercise of each
option and award, (v) to accelerate the time at which all or any part of an
option or award may be exercised, (vi) to amend or modify the terms of any
option or award with the consent of the optionee, (vii) to interpret the
Plan, (viii) to prescribe, amend and rescind rules and regulations relating
to the Plan, (ix) to determine the terms and provisions of each
<PAGE>
option and award agreement under the Plan (which agreements need not be
identical), including the designation of those options intended to be
Incentive Stock Options, and (x) to make all other determinations necessary
or advisable for the administration of the Plan, subject to the exclusive
authority of the Board of Directors under Section 16 hereof to amend or
terminate the Plan. The Committee's determinations on the foregoing
matters, unless otherwise disapproved by the Board of Directors of the
Company, shall be final and conclusive.
4. Eligibility.
Incentive Stock Options may only be granted under this Plan to any
full or part-time employee (which term as used herein includes, but is not
limited to, officers and directors who are also employees) of the Company
and of its present and future subsidiary corporations within the meaning of
Section 424(f) of the Code (herein called "subsidiaries"). Full or
part-time employees, consultants or independent contractors to the Company
or one of its subsidiaries shall be eligible to receive Nonqualified Stock
Options and awards. In determining the persons to whom options and awards
shall be granted and the number of shares subject to each, the Committee
may take into account the nature of services rendered by the respective
employees or consultants, their present and potential contributions to the
success of the Company and such other factors as the Committee in its
discretion shall deem relevant. A person who has been granted an option or
award under this Plan may be granted additional options or awards under the
Plan if the Committee shall so determine; provided, however, that for
Incentive Stock Options granted after December 31, 1986, to the extent the
aggregate fair market value (determined at the time
<PAGE>
the Incentive Stock Option is granted) of the Common Stock with respect to
which all Incentive Stock Options are exercisable for the first time by an
employee during any calendar year (under all plans described in subsection
(d) of Section 422 of the Code of his employer corporation and its parent
and subsidiary corporations) exceeds $100,000, such options shall be
treated as Nonqualified Stock Options. Nothing in the Plan or in any
agreement thereunder shall confer on any employee any right to continue in
the employ of the Company or any of its subsidiaries or affect, in any way,
the right of the Company or any of its subsidiaries to terminate his or her
employment at any time.
5. Price.
The option price for all Incentive Stock Options granted under the
Plan shall be determined by the Committee but shall not be less than 100%
of the fair market value per share of Common Stock at the date of grant of
such option. The option price for Nonqualified Stock Options granted under
the Plan and, if applicable, the price for all awards shall also be
determined by the Committee. For purposes of the preceding sentence and for
all other valuation purposes under the Plan, the fair market value of the
Common Stock shall be as reasonably determined by the Committee. If on the
date of grant of any option or award hereunder the Common Stock is not
traded on an established securities market, the Committee shall make a good
faith attempt to satisfy the requirements of this Section 5 and in
connection therewith shall take such action as it deems necessary or
advisable.
6. Term.
Each option and award and all rights and obligations thereunder shall
expire on the date determined by the Committee
<PAGE>
and specified in the option or award agreement. The Committee shall be
under no duty to provide terms of like duration for options or awards
granted under the Plan, but the term of an Incentive Stock Option may not
extend more than ten (10) years from the date of grant of such option and
the term of options granted under the Plan which do not qualify as
Incentive Stock Options may not extend more than fifteen (15) years from
the date of granting of such option.
7. Exercise of Option or Award.
"(a) Any outstanding option or award which has not otherwise vested
prior thereto shall be exercisable in full as of the time immediately prior
to the Record Date set by the Board of Directors with respect to the
Company's distribution (the "Spin- Off") of its shares of Metris Companies
Inc. ("Metris") to the public shareholders of the Company; provided that
the following conditions are satisfied: (i) the optionee or grantee
exercises the option or award prior to the Spin-Off, (ii) the optionee or
grantee pays the exercise price in United States dollars by cash or check
and (iii) the optionee or grantee (other than Metris employees) agrees that
if the optionee's or grantee's employment with the Company is voluntarily
terminated by the optionee or grantee within one year after such exercise,
the optionee or grantee shall promptly pay back to the Company the excess
of the fair market value of the shares received upon exercise of such
option or award (determined on the date of exercise) over the exercise
price thereof. With respect to options or awards acquired after the
Spin-Off, the Committee shall have full and complete authority to determine
whether an option or award will be exercisable in full at any time or from
time to time during the term thereof, or to provide for the exercise
thereof in such
<PAGE>
installments, upon the occurrence of such events (such as termination of
employment for any reason) and at such times during the term of the option
or award as the Committee may determine and specify in the option or award
agreement."
(b) The exercise of any option or award granted hereunder shall only
be effective at such time that the sale of Common Stock pursuant to such
exercise will not violate any state or federal securities or other laws.
(c) An optionee or grantee electing to exercise an option or award
shall give written notice to the Company of such election and of the number
of shares subject to such exercise. The full purchase price of such shares
shall be tendered with such notice of exercise. Payment shall be made to
the Company in cash (including bank check, certified check, personal check,
or money order), or, if the Committee in its sole discretion so permits,
(i) by certifying to the Company that the optionee or grantee owns a
specified number of shares having a fair market value equal to all or part
of the exercise price applicable to such option or award and having the
Company withhold such specified number of shares otherwise deliverable upon
exercise of the option or award, or (ii) by requesting the Company to
withhold, from the shares deliverable upon exercise of the option or award,
shares with a fair market value equal to all or part of the exercise price
of such option or award, or (iii) by delivering the optionee's or grantee's
promissory note, which shall provide for interest at a rate not less than
the minimum rate required to avoid the imputation of income, original issue
discount or a below-market-rate loan pursuant to Sections 483, 1274 or 7872
of the Code or any successor provisions thereto, or (iv) a combination of
cash, the optionee's or grantee's
<PAGE>
promissory note and such shares. The fair market value of such tendered
shares shall be determined as provided in Section 5 hereof. The optionee's
or grantee's promissory note shall be a full recourse liability of the
optionee and may, at the discretion of the Committee, be secured by a
pledge of the shares being purchased. Until such person has been issued the
shares subject to such exercise, he or she shall possess no rights as a
shareholder with respect to such shares.
(d) The Committee may grant "restoration" options, separately or
together with another option, pursuant to which, subject to the terms and
conditions established by the Committee and any applicable requirements of
Rule 16b-3 promulgated under the Securities and Exchange Act of 1934 or any
other applicable law, the optionee would be granted a new option when the
payment of the exercise price of the option to which such "restoration"
option relates is made by the delivery of shares of Common Stock owned by
the optionee, as described in subsection (c) above, which new option would
be an option to purchase the number of shares not exceeding the sum of (a)
the number of shares of Common Stock tendered as payment upon the exercise
of the option to which such "restoration" option relates and (b) the number
of shares of Common Stock, if any, tendered as payment of the amount to be
withheld under applicable income tax laws in connection with the exercise
of the option to which such "restoration" option relates, as described in
Section 11 hereof. "Restoration" options may be granted with respect to
options previously granted under this Plan or any prior stock option plan
of the Company, and may be granted in connection with any option granted
under this Plan at the time of such grant. The purchase price of the Common
Stock under each such new option, and the other terms and
<PAGE>
conditions of such option, shall be determined by the Committee consistent
with the provisions of the Plan.
(e) In order to assist the person exercising an option or award in
paying any taxes (including all federal, state and local taxes to be
withheld or collected upon exercise of an option or award which does not
qualify as an Incentive Stock Option hereunder), the Committee, in its
absolute discretion and subject to such additional terms as it may adopt,
shall cause the Company to loan money to such person in an amount equal to
the optionee's or grantee's tax liability arising as a result of such
exercise in exchange for a promissory note, which note shall (A) be fully
recourse to the optionee or grantee, (B) be payable on the demand of the
Company (or in any event at the earlier of one year from the borrowing date
or the date of termination of such optionee's or grantee's employment) and
(C) provide for interest at a market rate to be determined by the Committee
(such rate not to be less than the minimum rate required to avoid the
imputation of income, original issue discount or a below-market-rate loan
pursuant to Sections 483, 1274 or 7872 of the Code or any successor
provisions thereto).
8. Stock Appreciation Rights.
(a) Grant. At the time of grant of an option or award under the Plan
(or at any other time), the Committee, in its discretion, may grant a stock
appreciation right ("SAR") evidenced by an agreement in such form as the
Committee shall from time to time approve. Any such SAR may be subject to
restrictions on the exercise thereof as may be set forth in the agreement
representing such SAR, which agreement shall comply with and be subject to
the following terms and conditions and any additional terms and conditions
established by the Committee that
<PAGE>
are consistent with the terms of the Plan.
(b) Exercise. An SAR shall be exercised by the delivery to the Company
of a written notice which shall state that the holder thereof elects to
exercise his or her SAR as to the number of shares specified in the notice
and which shall further state what portion, if any, of the SAR exercise
amount (hereinafter defined) the holder thereof requests be paid in cash
and what portion, if any, is to be paid in Common Stock of the Company. The
Committee promptly shall cause to be paid to such holder the SAR exercise
amount either in cash, in Common Stock of the Company, or any combination
of cash and shares as the Committee may by the holder of the SAR or in the
sole and absolute discretion of the Committee. The SAR exercise amount is
the excess of the fair market value of one share of Common Stock on the
date of exercise over the per share exercise price in respect of which the
SAR was granted, multiplied by the number of shares as to which the SAR is
exercised. For the purposes hereof, the fair market value of the Common
Stock shall be determined as provided in Section 5 hereof.
9. Restricted Stock Awards.
Awards of Common Stock subject to forfeiture and transfer restrictions
may be granted by the Committee. Any restricted stock award shall be
evidenced by an agreement in such form as the Committee shall from time to
time approve, which agreement shall comply with and be subject to the
following terms and conditions and any additional terms and conditions
established by the Committee that are consistent with the terms of the
Plan:
(a) Grant of Restricted Stock Awards. Each restricted stock award made
under the Plan shall be for such number of
<PAGE>
shares of Common Stock as shall be determined by the Committee and set
forth in the agreement containing the terms of such restricted stock award.
Such agreement shall set forth a period of time during which the grantee
must remain in the continuous employment of the Company in order for the
forfeiture and transfer restrictions to lapse. If the Committee so
determines, the restrictions may lapse during such restricted period in
installments with respect to specified portions of the shares covered by
the restricted stock award. The agreement may also, in the discretion of
the Committee, set forth performance or other conditions that will subject
the Common Stock to forfeiture and transfer restrictions. The Committee
may, at its discretion, waive all or any part of the restrictions
applicable to any or all outstanding restricted stock awards.
(b) Delivery of Common Stock and Restrictions. At the time of a
restricted stock award, a certificate representing the number of shares of
Common Stock awarded thereunder shall be registered in the name of the
grantee. Such certificate shall be held by the Company or any custodian
appointed by the Company for the account of the grantee subject to the
terms and conditions of the Plan, and shall bear such a legend setting
forth the restrictions imposed thereon as the Committee, in its discretion,
may determine. The grantee shall have all rights of a shareholder with
respect to the Common Stock, including the right to receive dividends and
the right to vote such shares, subject to the following restrictions: (i)
the grantee shall not be entitled to delivery of the stock certificate
until the expiration of the restricted period and the fulfillment of any
other restrictive conditions set forth in the restricted stock agreement
with respect to such Common Stock; (ii) none of such
<PAGE>
shares may be sold, assigned, transferred, pledged, hypothecated or
otherwise encumbered or disposed of during such restricted period or until
after the fulfillment of any such other restrictive conditions; and (iii)
except as otherwise determined by the Committee, all of the Common Stock
shall be forfeited and all rights of the grantee to such Common Stock shall
terminate, without further obligation on the part of the Company, unless
the grantee remains in the continuous employment of the Company for the
entire restricted period in relation to which such Common Stock was granted
and unless any other restrictive conditions relating to the restricted
stock award are met. Any Common Stock, any other securities of the Company
and any other property (except for cash dividends) distributed with respect
to the Common Stock subject to restricted stock awards shall be subject to
the same restrictions, terms and conditions as such restricted Common
Stock.
(c) Termination of Restrictions. At the end of the restricted period
and provided that any other restrictive conditions of the restricted stock
award are met, or at such earlier time as otherwise determined by the
Committee, all restrictions set forth in the agreement relating to the
restricted stock award or in the Plan shall lapse as to the restricted
Common Stock subject thereto, and a stock certificate for the appropriate
number of shares of Common Stock, free of the restrictions and the
restricted stock legend, shall be delivered to the grantee or his
beneficiary or estate, as the case may be. If the Common Stock is traded on
a securities exchange, the Company shall not be required to deliver such
certificates until such shares have been admitted for trading on such
securities exchange.
<PAGE>
10. Performance Awards.
The Committee is further authorized to grant Performance Awards.
Subject to the terms of this Plan and any applicable award agreement, a
Performance Award granted under the Plan (i) may be denominated or payable
in cash, Common Stock (including, without limitation, restricted stock),
other securities, other awards, or other property and (ii) shall confer on
the holder thereof rights valued as determined by the Committee, in its
discretion, and payable to, or exercisable by, the holder of the
Performance Award, in whole or in part, upon the achievement of such
performance goals during such performance periods as the Committee, in its
discretion, shall establish. Subject to the terms of this Plan and any
applicable award agreement, the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance Award granted, and the amount of any payment or transfer to be
made by the grantee and by the Company under any Performance Award shall be
determined by the Committee.
11. Income Tax Withholding.
In order to comply with all applicable federal, state or local income
tax laws or regulations, the Company may take such action as it deems
appropriate to ensure that all applicable federal or state payroll,
withholding, income or other taxes, which are the sole and absolute
responsibility of an optionee or grantee under the Plan, are withheld or
collected from such optionee or grantee. In order to assist an optionee or
grantee in paying all federal, state and local taxes to be withheld or
collected upon exercise of an option or award which does not qualify as an
Incentive Stock Option hereunder, the Committee, in its absolute discretion
and subject to such additional terms as it may adopt, shall permit the
optionee or grantee to satisfy all or part of such tax obligation by
requesting the Company to withhold, from the shares deliverable upon
exercise of the option or award, shares having a fair market value equal to
all or part of such taxes, such fair market value to be determined in
accordance with Section 5.
<PAGE>
12. Additional Restrictions.
(a) The Committee shall have full and complete authority to determine
whether all or any part of the Common Stock acquired upon exercise of any
of the options or awards granted under the Plan shall be subject to
restrictions on the transferability thereof or any other restrictions
affecting in any manner the optionee's or grantee's rights with respect
thereto, but any such restriction shall be contained in the agreement
relating to such options or awards.
(b) No person, who is an employee of the Company at the time of grant,
may be granted any award or awards, the value of which awards are based
solely on an increase in the value of the Common Stock after the date of
grant of such awards, for more than 250,000 shares, in the aggregate, in
any one calendar year period. The foregoing annual limitation specifically
includes the grant of any awards representing "qualified performance-based
compensation" within the meaning of Section 162(m) of the Code.
13. Ten Percent Shareholder Rule.
Notwithstanding any other provision in the Plan, if at the time an
option is otherwise to be granted pursuant to the Plan the optionee owns
directly or indirectly (within the meaning of Section 424(d) of the Code)
Common Stock of the Company possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or its
parent or subsidiary corporations, if any (within the meaning of Section
422(b)(6) of the Code), then any Incentive Stock Option to be granted to
such optionee pursuant to the Plan shall satisfy the requirements of
Section 422(c)(5) of the Code, and the option price shall be not less than
110% of the fair market value of the Common Stock determined as described
herein, and such option by
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its terms shall not be exercisable after the expiration of five (5) years
from the date such option is granted.
14. Limits on Transferability.
Except as otherwise determined by the Committee or in an option or
award agreement, no option or award granted under the Plan shall be
transferable by an optionee or grantee, otherwise than by will or the laws
of descent or distribution and during the lifetime of an optionee or
grantee, the option shall be exercisable only by such optionee.
15. Dilution or Other Adjustments.
If there shall be any change in the Common Stock through merger,
consolidation, reorganization, recapitalization, dividend in the form of
stock (of whatever amount), stock split or other change in the corporate
structure, appropriate adjustments in the Plan and outstanding options and
awards shall be made by the Committee. In the event of any such changes,
adjustments shall include, where appropriate, changes in the aggregate
number of shares subject to the Plan, the number of shares and the price
per share subject to outstanding options and awards and the amount payable
upon exercise of outstanding awards, in order to prevent dilution or
enlargement of option or award rights.
16. Amendment or Discontinuance of Plan.
The Board of Directors may amend or discontinue the Plan at any time.
Subject to the provisions of Section 15 hereof, however, no amendment of
the Plan shall without shareholder approval: (i) increase the maximum
number of shares under the Plan as provided in Section 2 hereof, (ii)
decrease the minimum price provided in Section 5 hereof, (iii) extend the
maximum term under Section 6 hereof, or (iv) modify the eligibility
requirements for participation in the Plan. The Board of
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Directors shall not alter or impair any option or award theretofore granted
under the Plan without the consent of the holder of the option or award.
17. Time of Granting.
Nothing contained in the Plan or in any resolution adopted or to be
adopted by the Board of Directors or by the shareholders of the Company,
and no action taken by the Committee or the Board of Directors (other than
the execution and delivery of an option or award agreement), shall
constitute the granting of an option or award hereunder.
18. Effective Date and Termination of Plan.
(a) The Plan shall be submitted to the shareholders of the Company for
their approval and adoption.
(b) Unless the Plan shall have been discontinued as provided in
Section 16 hereof, the Plan shall terminate March 31, 2005. No option or
award may be granted after such termination, but termination of the Plan
shall not, without the consent of the optionee or grantee, alter or impair
any rights or obligations under any option or award theretofore granted.
