As filed with the Securities and Exchange Commission on
January 19, 1996
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SHARPER IMAGE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-2493558
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
650 Davis Street
San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
SHARPER IMAGE CORPORATION
1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
STOCK OPTION PLAN
(Full title of the Plans)
Richard Thalheimer
Chief Executive Officer
Sharper Image Corporation
650 Davis Street, San Francisco, California 94111
(Name and address of agent for service)
(415) 445-6000
(Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
========================================================================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price Fee
- ---------- ------------- -------------- --------- ---
- -------------------------------------------------------------------------
Options to Purchase 50,000 N/A N/A N\A
Common
Stock (1994
Non-Employee
Director Stock
Option Plan)
Common Stock,
$0.01 par value 50,000 $4.875 $ 243,750 $ 84.05
(1994 Non-Employee
Director
Stock Option Plan)
Options to Purchase 750,000 N\A N\A N\A
Common Stock
(Stock Option Plan)
Common Stock,
$0.01 par value 750,000 $4.875 $3,656,250 $1,260.77
(Stock Option Plan)
<PAGE>
(1) This Registration Statement shall also cover any additional
shares of Common Stock which become issuable under the 1994
Non-Employee Director Stock Option Plan and the Stock Option Plan
by reason of any stock dividend, stock split, recapitalization or
other similar transaction effected without the receipt of
consideration which results in an increase in the number of the
outstanding shares of Common Stock of Sharper Image Corporation.
(2) Calculated solely for purposes of this offering under Rule
457(h) of the Securities Act of 1933, as amended, on the basis of
the high and low selling price per share of Common Stock of
Sharper Image Corporation on January 12, 1996 as reported by
the Nasdaq National Market.
2.
<PAGE>
PART II
Information Required in the Registration Statement
Item 3. Incorporation of Documents by Reference
Sharper Image Corporation (the "Registrant") hereby
incorporates by reference into this Registration Statement the
following documents previously filed with the Securities and
Exchange Commission (the "Commission"):
a. The Registrant's Annual Report on Form 10-K for the
fiscal year ended January 31, 1995 filed with the Commission on
April 27, 1995;
b. (1) The Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended April 30, 1995;
(2) The Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended July 31, 1995;
(3) The Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended October 31, 1995;
c. The Registrant's Annual Report on Form 11-K for the
period ended December 31, 1994; and
d. The Registrant's Registration Statement No. 0-15827
on Form 8-A filed with the Commission on May 6, 1987 in which
there is described the terms, rights and provisions applicable to
the Registrant's outstanding Common Stock.
All reports and definitive proxy or information
statements filed pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "1934 Act")
after the date of this Registration Statement and prior to the
filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or which deregisters all
securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to
be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Registration
Statement to the extent that a statement contained herein or in
any subsequently filed document which also is deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute
a part of this Registration Statement.
Item 4. Description of Securities
Not applicable.
Item 5. Interests of Named Experts and Counsel
Not applicable.
<PAGE>
Item 6. Indemnification of Directors and Officers
Article VII, Section 6, of the Bylaws of the Registrant
permits indemnification of directors, officers and employees
within the limitations permitted by Section 145 of the General
Corporation Law of Delaware.
As permitted by Section 102 of the Delaware General
Corporation Law, the Registrant's Certificate of Incorporation
contains provisions eliminating a director's personal liability
for monetary damages to the Registrant and its stockholders
arising from a breach of a director's fiduciary duty except for
(i) liability under Section 174 of the Delaware General
Corporation Law, (ii) any breach of the director's duty of
loyalty to the Registrant or its stockholders, (iii) acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law or (iv) any
transaction from which the director derived an improper personal
benefit.
The Registrant has entered into supplemental
indemnification agreements with directors and certain officers.
These agreements provide substantially broader indemnity rights
than those provided under the Delaware law and the Registrant's
Bylaws.
Under the indemnification agreements, indemnity is
provided to such officers or directors with respect to judgments
and amounts paid in settlement of actions brought against them by
or on behalf of the Registrant (except under the circumstances
noted above), while indemnification, under Delaware law, is
generally permitted only with respect to the expenses incurred in
connection with such actions. Also, under Delaware law, amounts
may be paid as indemnity, and litigation expenses may be advanced
during the course of an action, if the individual claiming
indemnity meets certain specified standards of conduct. Under the
indemnification agreements, a determination that a director has
met these standards is not required for such indemnity, although
the indemnification agreement excludes indemnity for conduct
which is adjudged to be knowingly fraudulent, deliberately
dishonest or to constitute willful misconduct. With respect to
expenses incurred during the course of an action, such expenses
would be paid by the Registrant, subject to the individual's
agreement in the indemnification agreement to reimburse the
Registrant if it is ultimately determined that the individual is
not entitled to indemnity as to those expenses. With respect to
expenses incurred, the director would be entitled under the
indemnification agreement to the same rights as are provided in
the Bylaws discussed above.
The indemnification agreements are not intended to deny
or otherwise limit third-party or derivative suits against the
Registrant or its directors, but to the extent a director were
entitled to indemnity or contribution under the indemnification
agreement, the financial burden of a third-party suit would be
borne by the Registrant, and the Registrant would not benefit
from derivative recoveries against the directors. Such recoveries
would accrue to the benefit of the Registrant but would be offset
by the Registrant's obligations to the director under the
indemnification agreement.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
Exhibit
Number Exhibit
- ------ -------
4 Instruments Defining Rights of Stockholders.
Reference is made to Registrant's
Registration Statement No. 0-15827 on Form 8-A which
is incorporated herein by reference
pursuant to Item 3(d) of this Registration
Statement.
5 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
II-2.
<PAGE>
23.1 Consent of Deloitte & Touche LLP, Independent
Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained
in Exhibit 5.
24 Power of Attorney. Reference is made to page II-4
of this Registration Statement.
99.1 Sharper Image Corporation 1994 Non-Employee Director
Stock Option Plan.
99.2 Form of Notice of Grant of Automatic Stock Option -
Initial Grant.
99.3 Form of Notice of Grant of Automatic Stock Option -
Annual Grant.
99.4 Form of Stock Option Agreement.
99.5 Sharper Image Corporation Stock Option Plan.
99.6 Form of Notice of Grant and Stock Option Agreement
(incorporated by reference to
Exhibit No. 28.2 of Registration Statement No.
33-55614 on Form S-8 filed with the Commission on
December 11, 1992).
II-3.
<PAGE>
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 of 1933, as amended ("1933 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 clauses (1)(i) and (1)(ii)
shall not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13
or Section 15(d) of the 1934 Act that are incorporated by
reference into this Registration Statement; (2) that for the
purpose of determining any liability under the 1933 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; and (3)
to remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold upon the termination of the Registrant's 1994 Non-Employee
Director Stock Option Plan and/or Stock Option Plan.
B. The undersigned Registrant hereby undertakes that,
for purposes of determining any liability under the 1933 Act,
each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the 1934 Act that is incorporated by
reference into this Registration Statement shall be deemed to be
a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising
under the 1933 Act may be permitted to directors, officers or
controlling persons of the Registrant pursuant to the indemnity
provisions summarized in Item 6 or otherwise, the Registrant has
been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the 1933
Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the 1933 Act and will be governed by the final adjudication of
such issue.
II-4.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, the Registrant certifies that it has reasonable
grounds to believe that it meets all of the requirements for
filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Francisco, State of
California, on this 17th day of January, 1996.
SHARPER IMAGE CORPORATION
By: RICHARD THALHEIMER
------------------------
Richard Thalheimer
Chairman of the Board and
Chief Executive Officer
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Sharper Image
Corporation, a Delaware corporation, do hereby constitute and
appoint Richard Thalheimer and Tracy Wan, and each of them, the
lawful attorneys-in-fact and agents with full power and authority
to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, and either one of
them, determine may be necessary or advisable or required to
enable said corporation to comply with the Securities Act of
1933, as amended, and any regulations or requirements of the
Securities and Exchange Commission in connection with this
Registration Statement. Without limiting the generality of the
foregoing power and authority, the powers granted include the
power and authority to sign the names of the undersigned officers
and directors in the capacities indicated below to this
Registration Statement, to any and all amendments, both
pre-effective and post-effective, and supplements to this
Registration Statement, and to any and all instruments or
documents filed as part of or in conjunction with this
Registration Statement or amendments or supplements thereof, and
each of the undersigned hereby ratifies and confirms that all
said attorneys and agents, or either of them, shall do or cause
to be done by virtue hereof. This Power of Attorney may be signed
in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed
this Power of Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Registration Statement has been signed below by
the following persons in the capacities and on the dates
indicated.
Signature Title Date
- --------- ----- ----
RICHARD THALHEIMER
- ------------------ Chairman of the Board January 17, 1996
Richard Thalheimer and Chief Executive
Officer (Principal
Executive Officer)
II-5.
<PAGE>
Signature Title Date
- --------- ----- ----
TRACY WAN Senior Vice President, January 17, 1996
- ------------------- Chief Financial Officer
Tracy Wan and Secretary (Principal
Financial and Accounting
Officer
ELYSE ENG THALHEIMER Director January 17, 1996
- --------------------
Elyse Eng Thalheimer
ALAN R. THALHEIMER Director January 17, 1996
- --------------------
Alan R. Thalheimer
LAWRENCE W. FELDMAN Director January 17, 1996
- --------------------
Lawrence W. Feldman
MAURICE W. GREGG Director January 17, 1996
- --------------------
Maurice Gregg
J. GARY SHANSBY Director January 17, 1996
- -------------------
J. Gary Shansby
II-6.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
SHARPER IMAGE CORPORATION
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit
- ------ -------
4 Instruments Defining Rights of Stockholders.
Reference is made to Registrant's Registration
Statement No. 0-15827 on Form 8-A which is
incorporated herein by reference pursuant to Item
3(d) of this Registration Statement.
5 Opinion and Consent of Brobeck, Phleger &
Harrison LLP.
23.1 Consent of Deloitte & Touche LLP, Independent
Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is
contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-5
of this Registration Statement.
99.1 Sharper Image Corporation 1994 Non-Employee
Director Stock Option Plan.
99.2 Form of Notice of Grant of Automatic Stock Option
- Initial Grant.
99.3 Form of Notice of Grant of Automatic Stock Option
- Annual Grant.
99.4 Form of Stock Option Agreement.
99.5 Sharper Image Corporation Stock Option Plan.
99.6 Form of Notice of Grant and Stock Option Agreement
(incorporated by reference to Exhibit No. 28.2
of Registration Statement No. 33-55614 on Form S-8
filed with the Commission on December 11, 1992).
Exhibit 5
Opinion and Consent of Brobeck, Phleger & Harrison LLP
January 18, 1996
SHARPER IMAGE CORPORATION
650 Davis Street
San Francisco, CA 94111
Re: Sharper Image Corporation (the "Company")
Registration Statement for Offering of
800,000 Shares of Common Stock
Ladies and Gentlemen:
We refer to your registration on Form S-8 (the
"Registration Statement") under the Securities Act of 1933, as
amended, of (i) 50,000 shares of the Company's Common Stock
available for issuance under the Company's 1994 Non-Employee
Director Stock Option Plan and (ii) 750,000 shares of the
Company's Common Stock available for issuance under the Company's
Stock Option Plan. We advise you that, in our opinion, when such
shares have been issued and sold pursuant to the applicable
provisions of the Company's 1994 Non-Employee Director Stock
Option Plan or Stock Option Plan and in accordance with the
Registration Statement, such shares will be validly issued, fully
paid and nonassessable shares of the Company's Common Stock.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
-------------------------------
BROBECK, PHLEGER & HARRISON LLP
Exhibit 23.1
Consent of Deloitte & Touche LLP, Independent Auditors
Sharper Image Corporation
San Francisco, California
We consent to the incorporation by reference in this
Registration Statement of Sharper Image Corporation on
Form S-8 of our reports dated March 31, 1995, appearing
in and incorporated by reference in the Annual Report on
Form 10-K of Sharper Image Corporation for the year ended
January 31, 1995.
January 19, 1996
<PAGE>
Exhibit 23.2
Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5
Exhibit 24
Power of Attorney. Reference is made to page II-5 of this
Registration Statement.
EXHIBIT 99.1
SHARPER IMAGE CORPORATION
1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
I. PURPOSE OF THE PLAN
This 1994 Non-Employee Directors Stock Option Plan (the
"Plan") is intended to promote the interests of Sharper Image Corporation, a
California corporation (the "Corporation"), by providing the non-employee
members of the Corporation's Board of Directors with the opportunity to acquire
a proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in the service of the
Corporation.
II. DEFINITIONS
For purposes of the Plan, the following definitions shall be
in effect:
BOARD: the Corporation's Board of Directors.
CODE: the Internal Revenue Code of 1986, as amended.
COMMON STOCK: shares of the Corporation's common stock.
CHANGE IN CONTROL: a change in ownership or control
of the Corporation effected through either of the following transactions:
a. any person or related group of persons (other than
the Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing fifty
percent (50%) or more of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's shareholders which the Board
does not recommend such shareholders to accept; or
b. there is a change in the composition of the Board
over a period of twenty-four (24) consecutive months or less such that
a majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of
the Board members described in clause (A) who were still in office at
the time such election or nomination was approved by the Board.
<PAGE>
CORPORATE TRANSACTION: any of the following shareholder-
approved transactions to which the Corporation is a party:
a. a merger or consolidation in which the Corporation
is not the surviving entity, except for a transaction the
principal purpose of which is to change the State in which the
Corporation is incorporated,
b. the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation, or
c. any reverse merger in which the Corporation is the
surviving entity but in which securities possessing fifty percent (50%)
or more of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different
from the persons holding those securities immediately prior to such
merger.
EFFECTIVE DATE: October 7, 1994, the date on which the Plan
was first adopted by the Board.
FAIR MARKET VALUE: the Fair Market Value per share of Common
Stock determined in accordance with the following provisions:
a. If the Common Stock is not at the time listed or
admitted to trading on any national securities exchange but is traded
on the Nasdaq National Market, the Fair Market Value shall be the
closing selling price per share on the date in question, as such price
is reported by the National Association of Securities Dealers on the
Nasdaq National Market. If there is no reported closing selling price
for the Common Stock on the date in question, then the closing selling
price on the last preceding date for which such quotation exists shall
be determinative of Fair Market Value.
b. If the Common Stock is at the time listed or
admitted to trading on any national securities exchange, then the Fair
Market Value shall be the closing selling price per share on the date
in question on the exchange serving as the primary market for the
Common Stock, as such price is officially quoted in the composite tape
of transactions on such exchange. If there is no reported sale of
Common Stock on such exchange on the date in question, then the Fair
Market Value shall be the closing selling price on the exchange on the
last preceding date for which such quotation exists.
HOSTILE TAKE-OVER: a change in ownership of the Corporation
effected through the following transaction:
2.
<PAGE>
a. any person or related group of persons (other than
the Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing fifty
percent (50%) or more of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's shareholders which the Board
does not recommend such shareholders to accept, and
b. more than fifty percent (50%) of the securities so
acquired in such tender or exchange offer are accepted from holders
other than the officers and directors of the Corporation subject to the
short-swing profit restrictions of Section 16 of the 1934 Act.
1934 ACT: the Securities Exchange Act of 1934, as amended.
OPTIONEE: any person to whom an option is granted under the
Plan.
PERMANENT DISABILITY OR PERMANENTLY DISABLED: the inability of
the Optionee to perform his or her normal duties as a Board member as a result
of any medically determinable physical or mental impairment expected to result
in death or to be of continuous duration of twelve (12) months or more.
TAKE-OVER PRICE: the greater of (a) the Fair Market Value per
share of Common Stock on the date the option is surrendered to the Corporation
in connection with a Hostile Take-Over or (b) the highest reported price per
share of Common Stock paid by the tender offeror in effecting such Hostile
Take-Over.
III. ADMINISTRATION OF THE PLAN
The terms and conditions of each automatic option grant
(including the timing and pricing of the option grant) shall be determined by
the express terms and conditions of the Plan, and neither the Board nor any
committee of the Board shall exercise any discretionary functions with respect
to option grants made pursuant to the Plan.
IV. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance
under the Plan and shall be drawn from either authorized but unissued shares of
Common Stock or from reacquired shares of Common Stock, including shares
repurchased by the Corporation on the open market. The maximum number of shares
of Common Stock which may be issued over the term of the Plan shall not exceed
50,000 shares, subject to adjustment from time to time in accordance with the
provisions of this Article IV.
3.
<PAGE>
B. Should one or more outstanding options under this Plan
expire or terminate for any reason prior to exercise in full, then the shares
subject to the portion of each option not so exercised shall be available for
subsequent option grants under the Plan. Shares subject to any option or portion
thereof surrendered in accordance with Article VII and all share issuances under
the Plan, whether or not the shares are subsequently repurchased by the
Corporation pursuant to its repurchase rights under the Plan, shall reduce on a
share-for-share basis the number of shares of Common Stock available for
issuance under the Plan. In addition, should the exercise price of an
outstanding option under the Plan be paid with shares of Common Stock, then the
number of shares of Common Stock available for issuance under the Plan shall be
reduced by the gross number of shares for which the option is exercised, and not
by the net number of shares of Common Stock actually issued to the holder of
such option.
C. Should any change be made to the Common Stock issuable
under the Plan by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, then appropriate adjustments shall be made to (i) the maximum
number and/or class of securities issuable under the Plan, (ii) the number
and/or class of securities for which automatic option grants are to be
subsequently made to each newly-elected or continuing non-employee Board member
under the Plan and (iii) the number and/or class of securities and price per
share in effect under each option outstanding under the Plan. The adjustments to
the outstanding options shall be made by the Board in a manner which shall
preclude the enlargement or dilution of rights and benefits under such options
and shall be final, binding and conclusive.
V. ELIGIBILITY
The individuals eligible to receive automatic option grants
pursuant to the provisions of this Plan shall be limited to (i) those
individuals who are serving as non-employee Board members on the Effective Date,
(ii) those individuals who are first elected or appointed as non-employee Board
members after the Effective Date, whether through appointment by the Board or
election by the Corporation's shareholders and (iii) those individuals who are
re-elected as non-employee Board members at one or more Annual Shareholders
meetings held after such Effective Date. Each non-employee Board member eligible
to participate in the Plan pursuant to the foregoing criteria shall be
designated an Eligible Director for purposes of the Plan.
VI. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Date. Option grants shall be made on the dates
specified below:
- Each individual who is serving as an Eligible
Director on the Effective Date shall automatically be granted at that
time a non-statutory stock option to purchase 2,000 shares of Common
Stock.
4.
<PAGE>
- Each individual who is first elected or appointed
as an Eligible Director, whether through appointment by the Board or
election by the Corporation's shareholders, at any time after the
Effective Date shall automatically be granted, on the date of such
initial election or appointment, a non-statutory stock option to
purchase 2,000 shares of Common Stock.
- At each Annual Shareholder Meeting, commencing with
the 1995 Annual Meeting, each individual who is re-elected as an
Eligible Director shall automatically be granted, on the date of that
Annual Meeting, a non-statutory option to purchase 1,000 shares of
Common Stock, provided such individual has served as a Board member for
a period of at least six (6) months.
There shall be no limit on the number of such annual
1,000-share option grants any one Eligible Director may receive over his or her
period of continued Board service.
B. Exercise Price. The exercise price per share of Common
Stock subject to each automatic option grant shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the
automatic grant date.
C. Payment.
The exercise price shall become immediately due upon
exercise of the option and shall be payable in one of the alternative forms
specified below:
(i) full payment in cash or check made payable
to the Corporation's order; or
(ii) full payment in shares of Common Stock
held for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial-reporting purposes and valued at
Fair Market Value on the Exercise Date (as such term is defined below);
or
(iii) full payment in a combination of shares of
Common Stock held for the requisite period necessary to avoid a charge
to the Corporation's earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date and cash or check
payable to the Corporation's order; or
(iv) to the extent the option is exercised for
vested shares, full payment through a broker-dealer sale and remittance
procedure pursuant to which the non-employee Board member (I) shall
provide irrevocable written instructions to a Corporation-designated
brokerage firm
5.
<PAGE>
to effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the
purchased shares and (II) shall concurrently provide written directives
to the Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale
transaction.
For purposes of this Section VI.C, the Exercise Date shall be
the date on which written notice of the option exercise is delivered to the
Corporation. Except to the extent the sale and remittance procedure specified
above is utilized in connection with the exercise of the option for vested
shares, payment of the exercise price for the purchased shares must accompany
the exercise notice. However, if the option is exercised for any unvested
shares, then the Optionee must also execute and deliver to the Corporation a
stock purchase agreement for those unvested shares which provides the
Corporation with the right to repurchase, at the exercise price paid per share,
any unvested shares held by the Optionee at the time of cessation of Board
service and which precludes the sale, transfer or other disposition of any
shares purchased under the option, to the extent those shares are at the time
subject to the Corporation's repurchase right.
D. Exercisability/Vesting. Each automatic grant shall be
immediately exercisable for any or all of the option shares. However, any shares
purchased under the option shall be subject to repurchase by the Corporation, at
the exercise price paid per share, upon the Optionee's cessation of Board
service prior to vesting in those shares. The shares subject to each automatic
grant shall vest, and the Corporation's repurchase right with respect to those
shares shall lapse, upon Optionee's completion of one (1) year of Board service
measured from the automatic grant date. Vesting of the option shares shall be
subject to acceleration as provided in Section VI.G and Article VII. In no
event, however, shall any additional option shares vest after the Optionee's
cessation of Board service.
E. Option Term. Each automatic grant under the Plan shall have
a maximum term of ten (10) years measured from the automatic grant date.
F. Non-Transferability. During the lifetime of the Optionee,
each automatic option grant, together with the limited stock appreciation right
pertaining to such option, shall be exercisable only by the Optionee and shall
not be assignable or transferable by the Optionee other than a transfer of the
option effected by will or by the laws of descent and distribution following
Optionee's death.
G. Effect of Termination of Board Service.
1. Should the Optionee cease to serve as a Board member for
any reason (other than death or Permanent Disability) while holding one or more
automatic option grants under the Plan, then such individual shall have a six
(6)-month period
6.
<PAGE>
following the date of such cessation of Board service in which to exercise each
such option for any or all of the option shares in which the Optionee is vested
at the time of such cessation of Board service. Each such option shall
immediately terminate and cease to be outstanding, at the time of such cessation
of Board service, with respect to any option shares in which the Optionee is not
otherwise at that time vested.
2. Should the Optionee die within six (6) months after
cessation of Board service, then any automatic option grant held by the Optionee
at the time of death may subsequently be exercised, for any or all of the option
shares in which the Optionee is vested at the time of his or her cessation of
Board service (less any option shares subsequently purchased by the Optionee
prior to death), by the personal representative of the Optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution. The
right to exercise each such option shall lapse upon the expiration of the twelve
(12)-month period measured from after the date of the Optionee's death.
3. Should the Optionee die or become Permanently Disabled
while serving as a Board member, then the shares of Common Stock at the time
subject to each automatic option grant held by such Optionee shall immediately
vest in full (and the Corporation's repurchase right with respect to those
shares shall terminate), and the Optionee (or the representative of the
Optionee's estate or the person or persons to whom the option is transferred
upon the Optionee's death) shall have a twelve (12)-month period following the
date of the Optionee's cessation of Board service in which to exercise such
option for any or all of those vested shares of Common Stock.
4. In no event shall any automatic grant under this Plan
remain exercisable after the expiration date of the maximum ten (10)-year option
term. Upon the expiration of the applicable post-service exercise period under
subparagraphs 1 through 3 above or (if earlier) upon the expiration of the
maximum ten (10)-year option term, the automatic grant shall terminate and cease
to be outstanding for any option shares in which the Optionee was vested at the
time of his or her cessation of Board service but for which such option was not
otherwise exercised.
H. Shareholder Rights. The holder of an automatic option grant
shall have none of the rights of a shareholder with respect to any shares
subject to such option until such individual shall have exercised the option and
paid the exercise price for the purchased shares.
I. Remaining Terms. The remaining terms and conditions of each
automatic option grant shall be as set forth in the form Non-Statutory Stock
Option Agreement attached as Exhibit A.
7.
<PAGE>
VII. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE
TAKE-OVER
A. In the event of any Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the specified effective date for the Corporate Transaction,
become fully exercisable for all of the shares of Common Stock at the time
subject to that option and may be exercised for all or any portion of such
shares as fully-vested shares of Common Stock. Immediately following the
consummation of the Corporate Transaction, each automatic option grant under the
Plan shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation or its parent company.
B. In connection with any Change in Control of the
Corporation, the shares of Common Stock at the time subject to each outstanding
option but not otherwise vested shall automatically vest in full so that each
such option shall, immediately prior to the specified effective date for the
Change in Control, become fully exercisable for all of the shares of Common
Stock at the time subject to that option and may be exercised for all or any
portion of such shares as fully-vested shares of Common Stock. Each such option
shall remain fully exercisable for the option shares which vest in connection
with the Change in Control until the expiration or sooner termination of the
option term or the cash-out of the option in accordance with Section VII.C.
C. Upon the occurrence of a Hostile Take-Over, the Optionee
shall have a thirty (30)-day period in which to surrender to the Corporation
each automatic option grant held by him or her under this Plan for a period of
at least six (6) months. The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Take-Over Price of the shares of Common Stock at the time subject to the
surrendered option (whether or not the Optionee is otherwise at the time vested
in those shares) over (ii) the aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation. No approval or consent of the Board
shall be required in connection with such option surrender and cash
distribution.
D. The shares of Common Stock subject to each option
surrendered in connection with the Hostile Take-Over shall NOT be available for
subsequent option grant under this Plan.
E. The automatic option grants outstanding under the Plan
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
8.
<PAGE>
VIII. AMENDMENT OF THE PLAN AND AWARDS
The Board has complete and exclusive power and authority to
amend or modify the Plan in any or all respects whatsoever. However, (i) the
Plan, together with the option grants outstanding under the Plan, may not be
amended at intervals more frequently than once every six (6) months, other than
to the extent necessary to comply with applicable Federal income tax laws and
regulations, and (ii) no such amendment or modification shall adversely affect
rights and obligations with respect to options at the time outstanding under the
Plan, unless the affected Optionees consent to such amendment. In addition, the
Board may not, without the approval of the Corporation's shareholders, amend the
Plan to (i) materially increase the maximum number of shares issuable under the
Plan or the number of shares issuable per newly-elected or continuing
non-employee Board member, except for permissible adjustments under Section
IV.B., (ii) materially modify the eligibility requirements for Plan
participation or (iii) materially increase the benefits accruing to Plan
participants.
IX. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan became effective immediately upon adoption by the
Board on October 7, 1994, and one or more automatic option grants may be made
under the Plan at any time on and after such effective date. However, no options
granted under the Plan shall become exercisable in whole or in part prior to
approval of the Plan by the Corporation's shareholders at the 1995 Annual
Meeting. If such approval is not obtained, then all options previously granted
under the Plan shall terminate and cease to be outstanding, and no further
option grants shall be made under the Plan.
B. The Plan shall terminate upon the earlier of (i) September
30, 2004 or (ii) the date on which all shares available for issuance under the
Plan shall have been issued or cancelled pursuant to the exercise or cash-out of
the options granted under the Plan. If the date of termination is determined
under clause (i) above, then all option grants and unvested stock issuances
outstanding on such date shall thereafter continue to have force and effect in
accordance with the provisions of the instruments evidencing such option grants
or stock issuances.
X. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares pursuant to option grants or share issuances under the Plan shall be used
for general corporate purposes.
XI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
under the Plan and the issuance of Common Stock upon the exercise of the option
grants made
9.
<PAGE>
hereunder shall be subject to the Corporation's procurement of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the options granted under it, and the Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued
or delivered under this Plan unless and until there shall have been compliance
with all applicable requirements of Federal and state securities laws, including
the filing and effectiveness of the Form S-8 registration statement for the
shares of Common Stock issuable under the Plan, and all applicable listing
requirements of any securities exchange on which the Common Stock is then listed
for trading.
XII. NO IMPAIRMENT OF RIGHTS
Neither the action of the Corporation in establishing the Plan
nor any provision of the Plan shall be construed or interpreted so as to affect
adversely or otherwise impair the right of the Corporation or the shareholders
to remove any individual from the Board at any time in accordance with the
provisions of applicable law.
XIII. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets under the
Plan may not be assigned, encumbered or otherwise transferred by any Optionee.
B. The provisions of the Plan relating to the exercise of
options and the vesting of shares shall be governed by the laws of the State of
California, as such laws are applied to contracts entered into and performed in
such State.
C. The provisions of the Plan shall inure to the benefit of,
and be binding upon, the Corporation and its successors or assigns, whether by
Corporate Transaction or otherwise, and the Optionees and the legal
representatives of their respective estates or their respective heirs or
legatees.
10.
EXHIBIT 99.2
SHARPER IMAGE CORPORATION
NOTICE OF GRANT
INITIAL GRANT OF AUTOMATIC STOCK OPTION
Notice is hereby given of the following stock option (the
"Option") to purchase shares of the common stock of SHARPER IMAGE CORPORATION
(the "Corporation") which has been granted pursuant to the Corporation's 1994
Non-Employee Director Stock Option Plan (the "Plan"):
OPTIONEE: __________________________________________
GRANT DATE: __________________________________________
TYPE OF OPTION: Non-Statutory Stock Option
EXERCISE PRICE: $___________________ per share
NUMBER OF OPTION SHARES: 2,000 shares
EXPIRATION DATE: ____________________________________
EXERCISE SCHEDULE: The Option is immediately exercisable for
all the Option Shares
VESTING SCHEDULE: The Option Shares shall be unvested and
subject to repurchase by the Corporation, at the Exercise
Price paid per share, upon the Optionee's cessation of service
as a member of the Corporation's Board of Directors (the
"Board"). The Optionee shall acquire a vested interest in, and
the Corporation's repurchase right shall lapse with respect
to, the Option Shares upon Optionee's completion of one (1)
year of Board service measured from the Grant Date. In no
event shall any additional Option Shares vest following
Optionee's cessation of Board service.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the express terms and conditions of the Plan
governing automatic option grants to Board members. Optionee further agrees to
be bound by the terms and conditions of the Plan and the terms and conditions of
the Option as set forth in the Stock Option Agreement attached hereto as Exhibit
A.
<PAGE>
Optionee hereby acknowledges receipt of a copy of the official
Plan Summary and Prospectus attached hereto as Exhibit B. A copy of the Plan is
also available upon request made to the Corporate Secretary at the Corporate
Offices at 650 Davis Street, San Francisco, CA 94111.
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED
OPTION SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL NOT BE
TRANSFERRABLE AND SHALL BE SUBJECT TO REPURCHASE BY THE CORPORATION AND ITS
ASSIGNS, AT THE EXERCISE PRICE PAID PER SHARE, UPON OPTIONEE'S TERMINATION OF
SERVICE WITH THE CORPORATION. THE TERMS AND CONDITIONS OF SUCH REPURCHASE RIGHT
SHALL BE SET FORTH IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION
EXERCISE.
No provision of this Notice of Grant or the attached Stock
Option Agreement shall in any way be construed or interpreted so as to affect
adversely or otherwise impair the right of the Corporation or the shareholders
to remove Optionee from the Board at any time in accordance with the provisions
of applicable law.
DATED: _____________________, 199_
SHARPER IMAGE CORPORATION
By:___________________________________
Title:________________________________
______________________________________
OPTIONEE
Address: ____________________________
____________________________
ATTACHMENTS:
EXHIBIT A: STOCK OPTION AGREEMENT
EXHIBIT B: PLAN SUMMARY AND PROSPECTUS FOR NON-EMPLOYEE DIRECTORS
EXHIBIT 99.3
SHARPER IMAGE CORPORATION
NOTICE OF GRANT
ANNUAL GRANT OF AUTOMATIC STOCK OPTION
Notice is hereby given of the following stock option (the
"Option") to purchase shares of the common stock of SHARPER IMAGE CORPORATION
(the "Corporation") which has been granted pursuant to the Corporation's 1994
Non-Employee Director Stock Option Plan (the "Plan"):
OPTIONEE: _______________________________________________
GRANT DATE: ______________________________________________
TYPE OF OPTION: Non-Statutory Stock Option
EXERCISE PRICE: $____________________ per share
NUMBER OF OPTION SHARES: 1,000 shares
EXPIRATION DATE: ________________________________________
EXERCISE SCHEDULE: The Option is immediately exercisable for
all the Option Shares
VESTING SCHEDULE: The Option Shares shall be unvested and
subject to repurchase by the Corporation, at the Exercise
Price paid per share, upon the Optionee's cessation of service
as a member of the Corporation's Board of Directors (the
"Board"). The Optionee shall acquire a vested interest in, and
the Corporation's repurchase right shall lapse with respect
to, the Option Shares upon Optionee's completion of one (1)
year of Board service measured from the Grant Date. In no
event shall any additional Option Shares vest following
Optionee's cessation of Board service.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the express terms and conditions of the Plan
governing automatic option grants to Board members. Optionee further agrees to
be bound by the terms and conditions of the Plan and the terms and conditions of
the Option as set forth in the Stock Option Agreement attached hereto as Exhibit
A.
<PAGE>
Optionee hereby acknowledges receipt of a copy of the official
Plan Summary and Prospectus attached hereto as Exhibit B. A copy of the Plan is
also available upon request made to the Corporate Secretary at the Corporate
Offices at 650 Davis Street, San Francisco, CA 94111.
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED
OPTION SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL NOT BE
TRANSFERRABLE AND SHALL BE SUBJECT TO REPURCHASE BY THE CORPORATION AND ITS
ASSIGNS, AT THE EXERCISE PRICE PAID PER SHARE, UPON OPTIONEE'S TERMINATION OF
SERVICE WITH THE CORPORATION. THE TERMS AND CONDITIONS OF SUCH REPURCHASE RIGHT
SHALL BE SET FORTH IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION
EXERCISE.
No provision of this Notice of Grant or the attached Stock
Option Agreement shall in any way be construed or interpreted so as to affect
adversely or otherwise impair the right of the Corporation or the shareholders
to remove Optionee from the Board at any time in accordance with the provisions
of applicable law.
DATED: _____________________, 199_
SHARPER IMAGE CORPORATION
By: __________________________________
Title: _______________________________
_______________________________________
OPTIONEE
Address: _____________________________
_____________________________
ATTACHMENTS:
EXHIBIT A: STOCK OPTION AGREEMENT
EXHIBIT B: PLAN SUMMARY AND PROSPECTUS FOR NON-EMPLOYEE DIRECTORS
EXHIBIT 99.4
SHARPER IMAGE CORPORATION
1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
NON-STATUTORY STOCK OPTION AGREEMENT
RECITALS
A. The Corporation has approved and implemented the 1994
Non-Employee Director Stock Option Plan (the "Plan") pursuant to which eligible
non-employee members of the Board will automatically receive special option
grants at periodic intervals over their period of Board service in order to
provide such individuals with a meaningful incentive to continue to serve as
Board members.
B. Optionee is an eligible non-employee Board member, and this
Agreement is executed pursuant to, and is intended to carry out the purposes of,
the Plan in connection with the automatic grant of a stock option to purchase
shares of the Corporation's common stock ("Common Stock") under the Plan.
C. The granted option is intended to be a non-statutory option
which does not meet the requirements of Section 422 of the Internal Revenue
Code.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and
conditions set forth in this Agreement, there is hereby granted to Optionee, as
of the date of grant (the "Grant Date") specified in the accompanying Notice of
Grant of Automatic Stock Option (the "Grant Notice"), a stock option to purchase
up to that number of shares of Common Stock (the "Option Shares") as is
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term at the price per share (the "Exercise Price")
specified in the Grant Notice.
2. OPTION TERM. This option shall have a maximum term of ten
(10) years measured from the Grant Date and shall expire at the close of
business on the Expiration Date specified in the Grant Notice, unless sooner
terminated under Paragraph 5, 7 or 8.
3. LIMITED TRANSFERABILITY. This option, together with the
limited stock appreciation right provided under Paragraph 8.B., shall be neither
transferable nor assignable by Optionee, other than a transfer of this option
effected by will or by the laws of descent and distribution following Optionee's
death, and may be exercised, during Optionee's lifetime, only by Optionee.
<PAGE>
4. EXERCISABILITY/VESTING.
A. This option shall be immediately exercisable for any or all
of the Option Shares, whether or not the Option Shares are vested in accordance
with the Vesting Schedule set forth in the Grant Notice, and shall remain so
exercisable until the expiration or sooner termination of the option term.
B. Optionee shall vest in the Option Shares in accordance with
the Vesting Schedule set forth in the Grant Notice. Vesting in the Option Shares
shall also be subject to acceleration in accordance with the provisions of
Paragraphs 5, 7 and 8 of this Agreement. In no event, however, shall any
additional Option Shares vest following Optionee's cessation of service as a
Board member.
5. CESSATION OF BOARD SERVICE. Should Optionee's service as a
Board member cease while this option remains outstanding, then the option term
specified in Paragraph 2 shall terminate (and this option shall cease to be
outstanding) prior to the Expiration Date in accordance with the following
provisions:
- Should Optionee cease to serve as a Board member for any
reason (other than death or permanent disability) while holding this
option, then the period for exercising this option shall be reduced to
a six (6)-month period commencing with the date of such cessation of
Board service, but in no event shall this option be exercisable at any
time after the Expiration Date. During such limited period of
exercisability, this option may not be exercised for more than the
number of Option Shares (if any) in which the Optionee is vested on the
date Optionee ceases service as a Board member. Upon the earlier of (i)
the expiration of such six (6)-month period or (ii) the specified
Expiration Date, the option shall terminate and cease to be exercisable
with respect to any vested Option Shares for which the option has not
been exercised.
- Should Optionee die during the six (6)-month period
following his or her cessation of Board service, then the personal
representative of Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's will or in accordance
with the laws of descent and distribution shall have the right to
exercise this option for any or all of the Option Shares in which the
Optionee is vested at the time of Optionee's cessation of Board service
(less any Option Shares purchased by Optionee after such cessation of
Board service but prior to death). Such right of exercise shall
terminate, and this option shall accordingly cease to be exercisable
for such vested Option Shares, upon the earlier of (A) the expiration
of the twelve (12)-month period measured from the date of Optionee's
death or (B) the specified Expiration Date of the option term.
2.
<PAGE>
- Should Optionee die or become permanently disabled while
serving as a Board member, then all the Option Shares subject to this
option at the time of such cessation of Board service shall immediately
vest and Optionee, or the personal representative of Optionee's estate
or the person or persons to whom the option is transferred pursuant to
Optionee's will or in accordance with the laws of descent and
distribution, shall have the right to exercise this option for any or
all of those vested Option Shares. Such right of exercise shall
terminate, and this option shall accordingly cease to be outstanding
with respect to the Option Shares, upon the earlier of (A) the
expiration of the twelve (12)-month period measured from the date on
which Optionee dies or becomes permanently disabled or (B) the
specified Expiration Date of the option term.
- Upon Optionee's cessation of Board service for any reason
other than death or permanent disability, this option shall immediately
terminate and cease to be outstanding with respect to any and all
Option Shares in which the Optionee is not otherwise at that time
vested in accordance with the normal Vesting Schedule set forth in the
Grant Notice or the special vesting acceleration provisions of
Paragraph 7 or 8 of this Agreement.
- Optionee shall be deemed to be PERMANENTLY DISABLED if
Optionee is unable to perform his or her normal duties as a Board
member as a result of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration
of twelve (12) months or more.
6. ADJUSTMENT IN OPTION SHARES.
A. Should any change be made to the Common Stock issuable
under the Plan by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, then the number and class of securities purchasable under this
option and the Exercise Price payable per share shall be appropriately adjusted
to prevent the dilution or enlargement of Optionee's rights hereunder; provided,
however, the aggregate Exercise Price shall remain the same.
B. Should this option be assumed in connection with any
Corporate Transaction under Paragraph 7, then this option shall be appropriately
adjusted to apply and pertain to the number and class of securities which would
have been issued to Optionee in the consummation of such Corporate Transaction
had the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the Exercise Price payable per
share, provided the aggregate Exercise Price payable hereunder shall remain the
same.
3.
<PAGE>
7. CORPORATE TRANSACTION. In the event of any of the following
shareholder-approved transactions to which the Corporation is a party (a
"Corporate Transaction"):
(i) a merger or consolidation in which the Corporation
is not the surviving entity, except for a transaction the
principal purpose of which is to change the State in which the
Corporation is incorporated,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in liquidation
or dissolution of the Corporation, or
(iii) any reverse merger in which the Corporation is
the surviving entity but in which securities possessing fifty
percent (50%) or more of the total combined voting power of the
Corporation's outstanding securities are transferred to a person
or persons different from the persons holding those securities
immediately prior to such merger,
all Option Shares at the time subject to this option but not
otherwise vested shall automatically vest so that this option shall, immediately
prior to the specified effective date for the Corporate Transaction, become
exercisable for all of those Option Shares as fully-vested shares of Common
Stock and may be exercised for all or any portion of such shares. Immediately
following the consummation of the Corporate Transaction, this option shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation or its parent company.
8. CHANGE IN CONTROL/HOSTILE TAKEOVER.
A. All Option Shares subject to this option at the time of a
Change in Control (as defined below) but not otherwise vested shall
automatically vest so that this option shall, immediately prior to the effective
date of such Change in Control, become exercisable for all of those Option
Shares as fully-vested shares of Common Stock and may be exercised for all or
any portion of such shares. his option shall remain exercisable for such
fully-vested Option Shares until the earliest to occur of (i) the specified
Expiration Date of the option term, (ii) the sooner termination of this option
in accordance with Paragraph 5 or 7 or (iii) the surrender of this option under
Paragraph 8.B.
B. Provided this option has been outstanding for at least six
(6) months prior to the occurrence of a Hostile Take-Over (defined below),
Optionee shall have an unconditional right (exercisable during the thirty
(30)-day period immediately following the consummation of such Hostile
Take-Over) to surrender this option to the Corporation in exchange for a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Take-Over Price (as defined below) of the Option Shares at the time subject to
the
4.
<PAGE>
surrendered option (whether or not those Option Shares are at the time vested)
over (ii) the aggregate Exercise Price payable for such shares.
To exercise this limited stock appreciation right, Optionee
must, during the applicable thirty (30)-day exercise period, provide the
Corporation with written notice of the option surrender in which there is
specified the number of Option Shares as to which the Option is being
surrendered. Such notice must be accompanied by the return of Optionee's copy of
this Agreement, together with any written amendments to such Agreement. The cash
distribution shall be paid to Optionee within five (5) days following such
delivery date, and no approval or consent of the Board shall be required in
connection with such option surrender and cash distribution. Upon receipt of
such cash distribution, this option shall be cancelled with respect to the
shares subject to the surrendered option (or the surrendered portion), and
Optionee shall cease to have any further right to acquire those Option Shares
under this Agreement. The option shall, however, remain outstanding for the
balance of the Option Shares (if any) in accordance with the terms and
provisions of this Agreement, and the Corporation shall accordingly issue a new
stock option agreement (substantially in the same form of this Agreement) for
those remaining Option Shares.
This limited stock appreciation right shall in all events
terminate upon the expiration or sooner termination of the option term and may
not be assigned or transferred by Optionee.
C. For purposes of this Agreement, the following definitional
provisions shall be in effect:
A CHANGE IN CONTROL shall be deemed to occur in the
event:
(i) any person or related group of persons (other than
the Corporation or a person that directly or indirectly controls,
is controlled by, or is under common control with, the
Corporation) directly or indirectly acquires beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act (the "1934
Act")) of securities possessing fifty percent (50%) or more of
the total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made directly
to the Corporation's shareholders which the Board does not
recommend such shareholders to accept; or
(ii) there is a change in the composition of the Board
over a period of twenty-four (24) consecutive months or less such
that a majority of the Board members ceases, by reason of one or
more contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously
since the beginning of such period or (B) have been elected or
nominated for election as Board members during such period by at
least a majority of the Board members described in clause (A)
5.
<PAGE>
who were still in office at the time such election or nomination
was approved by the Board.
A HOSTILE TAKE-OVER shall be deemed to occur in the event (i)
any person or related group of persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing fifty percent (50%) or more of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's shareholders which the Board does not recommend
such shareholders to accept and (ii) more than fifty percent (50%) of the
securities so acquired in such tender or exchange offer are accepted from
holders other than officers and directors of the Corporation subject to the
short-swing profit restrictions of Section 16 of the 1934 Act.
The TAKE-OVER PRICE per share shall be deemed to be equal to
the greater of (a) the Fair Market Value per share of Common Stock on the date
the option is surrendered to the Corporation in connection with a Hostile
Take-Over, as determined in accordance with the valuation provisions of
Paragraph 9(b), or (b) the highest reported price per share of Common Stock paid
by the tender offeror in effecting such Hostile Take-Over.
9. MANNER OF EXERCISING OPTION.
A. In order to exercise this option for all or any part of the
Option Shares for which the option is at the time exercisable, Optionee (or in
the case of exercise after Optionee's death, Optionee's executor, administrator,
heir or legatee, as the case may be) must take the following actions:
(i) To the extent the option is exercised for vested
Option Shares, the Secretary of the Corporation shall be provided
with written notice of the option exercise (the "Exercise
Notice"), in substantially the form of Exhibit I attached hereto,
in which there is specified the number of vested Option Shares to
be purchased under the exercised option. To the extent the option
is exercised for one or more unvested Option Shares, the Optionee
shall deliver to the Secretary of the Corporation a stock
purchase agreement (in form and substance satisfactory to the
Corporation) which grants the Corporation the right to
repurchase, at the Exercise Price, any and all unvested Option
Shares held by the Optionee at the time of his or her cessation
of Board service and which precludes the sale, transfer or other
disposition of any purchased Option Shares while they remain
subject to such repurchase right ("the Purchase Agreement").
(ii) The aggregate Exercise Price for the purchased
shares shall be paid in one of the following alternative forms:
6.
<PAGE>
- full payment in cash or check made payable to the
Corporation's order; or
- full payment in shares of Common Stock held by
Optionee for the requisite period necessary to avoid a
charge to the Corporation's earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise
Date; or
- full payment in a combination of shares of Common
Stock held for the requisite period necessary to avoid a
charge to the Corporation's earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise
Date and cash or check made payable to the Corporation's
order; or
- to the extent the option is exercised for vested
Option Shares, full payment effected through a broker-dealer
sale and remittance procedure pursuant to which Optionee
shall provide irrevocable written instructions (A) to a
Corporation-designated brokerage firm to effect the
immediate sale of the vested shares purchased under the
option and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds
to cover the aggregate Exercise Price payable for those
shares and (B) to the Corporation to deliver the
certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
(iii) Appropriate documentation evidencing the right to
exercise this option shall be furnished the Corporation if the
person or persons exercising the option is other than the
Optionee.
B. For purposes of subparagraph 9.A. above and for all other
valuation purposes under this Agreement, the Fair Market Value per share of
Common Stock on any relevant date shall be the determined in accordance with the
following provisions:
- If the Common Stock is not at the time listed or
admitted to trading on any national securities exchange but
is traded on the Nasdaq National Market, the Fair Market
Value shall be the closing selling price per share on the
date in question as such price is reported by the National
Association of Securities Dealers on the Nasdaq National
Market. If there is no reported closing selling price for
the Common Stock on the date in question, then the closing
selling price on the last preceding date for which such
quotation exists shall be determinative of Fair Market
Value.
7.
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- If the Common Stock is at the time listed or admitted
to trading on any national securities exchange, then the
Fair Market Value shall be the closing selling price per
share on the date in question on the exchange serving as the
primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on
such exchange. If there is no reported sale of Common Stock
on such exchange on the date in question, then the Fair
Market Value shall be the closing selling price on the
exchange on the last preceding date for which such quotation
exists.
C. The Exercise Date shall be the date on which the Exercise
Notice is delivered to the Secretary of the Corporation, together with the
appropriate Purchase Agreement for any unvested shares acquired under the
option. Except to the extent the sale and remittance procedure specified above
is utilized in connection with the exercise of the option for vested shares,
payment of the Exercise Price for the purchased shares must accompany such
notice.
D. As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or other person or persons
exercising this option) a certificate or certificates representing the purchased
Option Shares. To the extent any such Option Shares are unvested, the
certificates for those Option Shares shall be endorsed with an appropriate
legend evidencing the Corporation's repurchase rights and may be held in escrow
with the Corporation until such shares vest.
E. In no event may this option be exercised for any fractional
share.
10. SHAREHOLDER RIGHTS. The holder of this option shall not
have any of the rights of a shareholder with respect to the Option Shares until
such individual shall have exercised this option and paid the Exercise Price for
the purchased shares.
11. NO IMPAIRMENT OF RIGHTS. This Agreement shall not in any
way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. Nor shall this Agreement in any way be construed or
interpreted so as to affect adversely or otherwise impair the right of the
Corporation or the shareholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
12. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of this
option and the issuance of the Option Shares upon such exercise shall be subject
to compliance by the Corporation and Optionee with all applicable requirements
of law relating thereto and with all applicable regulations of any securities
exchange on which shares of the Common Stock may be listed for trading at the
time of such exercise and issuance.
8.
<PAGE>
13. SUCCESSORS AND ASSIGNS. Except to the extent otherwise
provided in Paragraph 3 or 7, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Corporation and its successors and
assigns and the Optionee and the legal representatives of the Optionee's estate
or the heirs or legatees of the Optionee.
14. DISCHARGE OF LIABILITY. The inability of the Corporation
to obtain approval from any regulatory body having authority deemed by the
Corporation to be necessary to the lawful issuance and sale of any Common Stock
pursuant to this option shall relieve the Corporation of any liability with
respect to the non-issuance or sale of the Common Stock as to which such
approval shall not have been obtained. However, the Corporation shall use its
best efforts to obtain all such applicable approvals.
15. NOTICES. Any notice required to be given or delivered to
the Corporation under the terms of this Agreement shall be in writing and
addressed to the Corporation in care of the Corporate Secretary at the Corporate
Offices at 650 Davis Street, San Francisco, CA 94111. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed to have been given or delivered upon personal delivery
or upon deposit in the U.S. mail, postage prepaid and properly addressed to the
party to be notified.
16. CONSTRUCTION/GOVERNING LAW. This Agreement and the option
evidenced hereby are made and granted pursuant to the Plan and are in all
respects limited by and subject to the express terms and provisions of the Plan.
The interpretation, performance, and enforcement of this Agreement shall be
governed by the laws of the State of California without resort to that State's
conflict-of-laws rules.
17. SHAREHOLDER APPROVAL. The Plan was adopted by the Board on
October 7, 1994 subject to shareholder approval at the 1995 Annual Shareholders
Meeting. Notwithstanding any provisions to the contrary in this Agreement, this
option may not be exercised in whole or part prior to such shareholder approval.
Should such shareholder approval not be obtained at the 1995 Annual Meeting,
then this option shall thereupon terminate and cease to be outstanding without
ever becoming exercisable for the Option Shares.
9.
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE OF
NONSTATUTORY STOCK OPTION
I hereby notify Sharper Image Corporation (the "Corporation")
that I elect to purchase ___________ shares of Common Stock of the Corporation
(the "Purchased Shares") pursuant to that certain option (the "Option") granted
to me on ___________, 199_ to purchase up to [1,000/2,000] shares of the
Corporation's Common Stock at an option price of $_______ per share (the
"Exercise Price").
Concurrently with the delivery of this Exercise Notice to the
Secretary of the Corporation, I shall hereby pay to the Corporation the Exercise
Price for the Purchased Shares in accordance with the provisions of my agreement
with the Corporation evidencing the Option and shall deliver whatever additional
documents may be required by such agreement as a condition for exercise.
Alternatively, I may utilize the special broker/dealer sale and remittance
procedure specified in my agreement to effect payment of the Exercise Price for
any Purchased Shares in which I am vested at the time of exercise.
_____________________ ______________________________________
Date Optionee
Address: ____________________________
____________________________
EXHIBIT 99.5
SHARPER IMAGE CORPORATION
STOCK OPTION PLAN
(As amended and restated through February 24, 1995)
I. PURPOSE OF THE PLAN
This Sharper Image Corporation Stock Option Plan, as amended and
restated (the "Plan") is intended to promote the interests of the Sharper Image
Corporation (the "Company") by providing eligible individuals, who are
responsible for the management, growth and financial success of the Company or
its parent or subsidiary corporations or who otherwise render valuable services
to the Company or its parent or subsidiary corporations, with the opportunity to
acquire a proprietary interest, or increase their proprietary interest, in the
Company and thereby provide them with an incentive to remain in the service of
the Company or its parent or subsidiary corporations.
For purposes of the Plan, the following provisions shall be
applicable in determining the parent and subsidiary corporations of the Company:
A. Any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company shall be considered to be a PARENT
corporation of the Company, provided each such corporation in the unbroken chain
(other than the Company) owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
B. Each corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company shall be considered to be a SUBSIDIARY
of the Company, provided each such corporation (other than the last corporation)
in the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
II. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by one or more committees
comprised of members of the Company's Board of Directors (the "Board"). The
primary committee (the "Primary Committee") shall be comprised of two (2) or
more Board members and shall have sole and exclusive authority to grant stock
options and stock appreciation rights to officers of the Company subject to the
short-swing profit restrictions of the Federal securities laws. Stock options
may be granted to all other eligible employees and consultants by either the
Primary Committee or a secondary committee comprised of two (2) or more Board
<PAGE>
members (the "Secondary Committee"). The members of the Primary Committee and
the Secondary Committee shall each serve for such period of time as the Board
may determine and shall be subject to removal by the Board at any time.
B. No Board member shall be eligible to serve on the Primary
Committee if such individual has, within the twelve (12)-month period
immediately preceding the date he or she is to be appointed to such Committee,
received any option grant or stock appreciation right under this Plan or any
other stock plan of the Company (or any parent or subsidiary corporation),
except that non-employee Board members may receive automatic option grants under
the Company's 1994 Non-Employee Director Stock Option Plan.
C. Subject to the limited authority provided the Secondary Committee
to effect option grants in accordance with the provisions of subsection A of
this Section II, the Primary Committee shall serve as the Plan Administrator and
shall have full power and authority (subject to the express provisions of the
Plan) to establish such rules and regulations as it may deem appropriate for the
proper administration of the Plan and to make such determinations under the Plan
and any outstanding option as it may deem necessary or advisable. Decisions of
the Plan Administrator shall be final and binding on all parties with an
interest in the Plan or any option outstanding thereunder.
III. ELIGIBILITY FOR OPTION GRANTS
The persons eligible to receive option grants under the Plan
("Optionee") are as follows:
(i) key employees (including officers) of the Company (or its
parent or subsidiary corporations) who are responsible for the
management, growth and financial success of the Company (or its parent
or subsidiary corporations); and
(ii) those consultants who provide valuable services to the
Company (or its parent or subsidiary corporations).
The Plan Administrator shall have full authority to determine which
eligible individuals are to receive option grants under the Plan, the number of
shares to be covered by each such grant, whether the granted option is to be an
incentive stock option ("Incentive Option") which satisfies the requirements of
Section 422 of the Internal Revenue Code or a non-statutory option not intended
to meet such requirements, the time or times at which each such option is to
become exercisable, and the maximum term for which the option is to remain
outstanding.
2.
<PAGE>
IV. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall consist of shares of the
Company's authorized but unissued or reacquired common stock ("Common Stock").
The maximum number of issuable shares shall not exceed 2,405,0001, subject to
adjustment as provided in subsection C. In no event, however, shall any one
participant in the Plan be granted stock options or separately exercisable stock
appreciation rights for more than 300,000 shares in any fiscal year, starting
with the fiscal year beginning February 1, 1994, except that for the fiscal year
in which an individual receives his or her initial stock option grant under the
Option Plan, the limit will be increased to 400,000 shares. Such share
limitation shall also be subject to adjustment as provided in subsection C.
B. Shares of Common Stock subject to the unexercised portion of any
outstanding options under the Plan which expire or terminate prior to exercise
in full or which are otherwise cancelled in accordance with the
cancellation-regrant provisions of Section VIII shall be available for
subsequent option grants under the Plan. Shares subject to any option cancelled
or surrendered in accordance with the provisions of Section VII or Section X
shall not be available for subsequent option grants under the Plan. Shares
issued under the Plan, whether or not such shares are subsequently repurchased
by the Company, shall reduce on a share-for-share basis the number of shares of
Common Stock available for subsequent option grants under the Plan. In addition,
should the option price of an outstanding option under the Plan be paid with
shares of Common Stock, then the number of shares of Common Stock available for
issuance under the Plan shall be reduced by the gross number of shares for which
the option is exercised, and not by the net number of shares of Common Stock
actually issued to the option holder.
C. In the event any change is made to the Common Stock issuable
under the Plan by reason of any stock dividend, stock split, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without receipt of consideration, then appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the maximum number and/or class of securities for which
stock options and separately exercisable stock appreciation rights may be
granted per participant in any fiscal year and (iii) the aggregate number and/or
class of securities and the option price per share in effect under each
outstanding option in order to prevent the dilution or enlargement of benefits
thereunder. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.
- --------
1 This figure includes a 750,000-share increase approved by the Board on
October 7, 1994 and is subject to shareholder approval at the 1995 Annual
Stockholders Meeting.
3.
<PAGE>
D. Shares of Common Stock issuable upon exercise of an option
granted under the Plan may be subject to such restrictions on transfer or other
restrictions as may be determined by the Plan Administrator.
V. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by action
of the Plan Administrator and may, at the Plan Administrator's discretion, be
either Incentive Options or non-statutory options. Individuals who are not
Employees (as defined in subsection C.2 below) may only be granted non-statutory
options. Each option grant shall be evidenced by one or more instruments in the
form approved by the Plan Administrator; provided, however, that each such
instrument shall comply with the terms and conditions specified in this Section
V and in Section VII. Each instrument evidencing an Incentive Option shall, in
addition, be subject to the applicable provisions of Section VI.
A. Option Price.
1. The option price per share shall be fixed by the Plan
Administrator. In no event, however, shall the option price per share be less
than one hundred percent (100%) of the Fair Market Value of a share of Common
Stock on the date of the option grant, subject to Sections VI.A and VI.D.
2. The option price shall become immediately due upon exercise
of the option and shall, subject to the provisions of Section XI and the
documents evidencing the option grant, be payable in one of the following
alternative forms (as determined by the Plan Administrator):
(A) in cash or check made payable to the Company's order; or
(B) in shares of Common Stock of the Company held by the
Optionee for the requisite period necessary to avoid a charge to the
Company's earnings for financial reporting purposes and valued at Fair
Market Value on the date the option is exercised; or
(C) through a broker-dealer sale and remittance procedure
pursuant to which the Optionee shall provide irrevocable written
instructions (I) to a Company-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Company, out of
the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate option price payable for the purchased shares plus
all applicable Federal and state income and employment taxes required to
be withheld by the Company by reason of such purchase and (II) to the
Company to deliver
4.
<PAGE>
the certificates for the purchased shares directly to such brokerage
firm in order to effect the sale transaction.
Except to the extent such sale and remittance procedure is utilized,
payment of the option price must occur at the time the option is exercised.
3. The Fair Market Value of a share of Common Stock on any
relevant date under the Plan shall be determined in accordance with the
following provisions:
(A) If the Common Stock is not at the time listed or
admitted to trading on any stock exchange but is traded on the Nasdaq
National Market, the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price
is reported on the Nasdaq National Market or any successor system. If
there is no reported closing selling price for the Common Stock on the
date in question, then the closing selling price on the last preceding
date for which such quotation exists shall be determinative of Fair
Market Value.
(B) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question
on the stock exchange determined by the Plan Administrator to be the
primary market for the Common Stock, as such price is officially quoted
in the composite tape of transactions on such exchange. If there is no
reported sale of Common Stock on such exchange on the date in question,
then the Fair Market Value shall be the closing selling price on the
exchange on the last preceding date for which such quotation exists.
B. Term and Exercise of Options. Each option granted under the Plan
shall be exercisable at such time or times, during such period, and for such
number of shares as shall be determined by the Plan Administrator and set forth
in the stock option agreement evidencing such option. However, no option granted
under the Plan shall have a term in excess of ten (10) years from the grant
date. During the lifetime of the Optionee, the option shall be exercisable only
by the Optionee and shall not be assignable or transferable by the Optionee
otherwise than by will or by the laws of descent and distribution following the
Optionee's death.
C. Termination of Service.
1. Except to the extent otherwise provided below, the following
provisions shall govern the exercise period applicable to any options held by
the Optionee at the time of cessation of Service or death.
5.
<PAGE>
(A) Should the Optionee cease to remain in Service for any
reason other than death or permanent disability, then the period during
which each outstanding option held by such Optionee is to remain
exercisable shall be limited to the three (3)-month period following the
date of such cessation of Service.
(B) In the event such Service terminates by reason of
permanent disability (as defined in Section 22(e)(3) of the Internal
Revenue Code), then the period during which each outstanding option held
by the Optionee is to remain exercisable shall be limited to the twelve
(12)-month period following the date of such cessation of Service.
(C) Should the Optionee die while holding one or more
outstanding options, then the period during which each such option is to
remain exercisable shall be limited to the twelve (12)-month period
following the date of the Optionee's death. During such limited period,
the option may be exercised by the personal representative of the
Optionee's estate or by the person or persons to whom the option is
transferred pursuant to the optionee's will or in accordance with the
laws of descent and distribution.
(D) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of
shares (if any) which are exercisable at the time of his or her
cessation of Service. Upon the expiration of the limited post-Service
exercise period or (if earlier) upon the specified expiration date of
the option term, each such option shall terminate and cease to be
outstanding with respect to any shares for which the option has not
otherwise been exercised. Each outstanding option shall immediately
terminate and cease to be outstanding, at the time of the Optionee's
cessation of Service, with respect to any shares for which the option is
not otherwise at that time exercisable.
(E) The Board shall have full power and authority:
(i) to extend the period of time for which the option is
to remain exercisable following the optionee's termination of
Service from the normal three (3)-month (twelve (12) months in the
case of death or permanent disability) period to such greater period
of time as the Board shall deem appropriate under the circumstances;
provided, that in no event shall such option be exercisable after
the specified expiration date of the option term, or
(ii) to establish as a provision applicable to the
exercise of one or more options granted under the Plan that during
the limited period of exercisability following the cessation of
Service, the option may be exercised not only with respect to the
number of shares for which it is exercisable at the time of the
optionee's cessation of Service but also with respect to one or more
6.
<PAGE>
subsequent installments of purchasable shares for which the option
would otherwise have become exercisable had such cessation of
Service not occurred.
2. For all purposes under the Plan, unless specifically provided
otherwise in the option agreement evidencing the option grant, the Optionee
shall be deemed to remain in SERVICE for so long as such individual renders
services on a periodic basis to the Company or any parent or subsidiary
corporation in the capacity of an Employee, a non-employee member of the board
of directors or a consultant. The Optionee shall be considered to be an EMPLOYEE
for so long as such individual remains in the employ of the Company or one or
more of its parent or subsidiary corporations, subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance.
D. Stockholder Rights. An Optionee shall have none of the rights of
a stockholder with respect to any shares covered by the option until such
Optionee shall have exercised the option and paid the option price.
VI. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under the Plan. Incentive Options may only be granted
to individuals who are Employees. Options which are specifically designated as
"non-statutory" options when issued under the Plan shall not be subject to such
terms and conditions.
A. Dollar Limitation. The aggregate Fair Market Value (determined as
of the respective date or dates of grant) of the Common Stock for which one or
more options granted to any Employee under this Plan (or any other option plan
of the Company or its parent or subsidiary corporations) may for the first time
become exercisable as incentive stock options under the Federal tax laws during
any one calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as incentive stock options
under the Federal tax laws shall be applied on the basis of the order in which
such options are granted. Should the number of shares of Common Stock for which
any Incentive Option first becomes exercisable in any calendar year exceed the
applicable One Hundred Thousand Dollar ($100,000) limitation, then that option
may nevertheless be exercised in that calendar year for the excess number of
shares as a non-statutory option under the Federal tax laws.
B. 10% Stockholder. If the individual to whom an Incentive Option is
granted is the owner of stock (as determined under Section 424(d) of the
Internal Revenue Code) possessing ten percent (10%) or more of the total
combined voting power of all classes of stock of the Company or any parent or
subsidiary corporation (such individual to
7.
<PAGE>
be designated a "10% Stockholder"), then the option price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value of a share of
Common Stock on the date of the option grant, and no option granted to a 10%
Stockholder shall have a term in excess of five (5) years from the grant date.
Except as modified by the preceding provisions of this Section VI,
all provisions of the Plan shall be applicable to the Incentive Options granted
hereunder.
VII. CORPORATE TRANSACTION
A. In the event of one or more of the following stockholder-approved
transactions (a "Corporate Transaction"):
1. a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the state of the Company's incorporation;
2. the sale, transfer or other disposition of all or
substantially all of the assets of the Company; or
3. any reverse merger in which the Company is the surviving
entity,
then the exercisability of each option outstanding under the Plan shall
automatically accelerate so that each such option shall, immediately prior to
the specified effective date for the Corporate Transaction, become fully
exercisable with respect to the total number of shares of Common Stock at the
time subject to such option and may be exercised for all or any portion of such
shares. However, an outstanding option under the Plan shall not be so
accelerated if and to the extent: (i) such option is, in connection with the
Corporate Transaction, to be assumed by the successor corporation or parent
thereof or replaced with a comparable option to purchase shares of the capital
stock of the successor corporation or parent thereof or (ii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant, including provisions which wholly preclude
acceleration of exercisability upon any specified Corporate Transaction,
provided such provisions are set forth in the agreement evidencing the option.
The determination of comparability under clause (i) above shall be made by the
Plan Administrator, and its determination shall be final, binding and
conclusive.
B. Immediately following the consummation of the Corporate
Transaction, all outstanding options under the Plan shall terminate and cease to
be outstanding, except to the extent assumed by the successor corporation or its
parent company.
8.
<PAGE>
C. Each outstanding option which is assumed in connection with the
Corporate Transaction or is otherwise to continue in effect shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
and pertain to the number and class of securities which would have been issued
to the option holder, in consummation of such Corporate Transaction, had such
person exercised the option immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the option price payable per
share, provided the aggregate option price payable for such securities shall
remain the same. In addition, the class and number of securities available for
issuance under the Plan, on an aggregate and per participant basis, shall be
appropriately adjusted following the consummation of the Corporate Transaction.
D. The grant of options under this Section VII shall in no way
affect the right of the Company to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
VIII. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected Optionees, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options under the Plan covering the same or different
numbers of shares of Common Stock but having an option price per share not less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the new grant date (or in the case of an Incentive Option granted to a
10% Stockholder, not less than one hundred and ten percent (110%) of such Fair
Market Value).
IX. STOCK APPRECIATION RIGHTS
A. One or more Optionees may, upon such terms and conditions as the
Plan Administrator may establish at the time of the option grant or at any time
thereafter, be granted the right to surrender all or part of an unexercised
option in exchange for a distribution equal in amount to the excess of (i) the
Fair Market Value (on the surrender date) of the number of option shares which
are at the time exercisable under the surrendered option or portion thereof over
(ii) the aggregate option price payable for such shares. No surrender of an
option, however, shall be effective unless it is approved by the Plan
Administrator. If the surrender is so approved, then the distribution to which
the option holder shall accordingly become entitled under this subsection IX.A
may be made in shares of Common Stock valued at Fair Market Value at date of
surrender, in cash, or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.
9.
<PAGE>
B. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the surrender
date and may exercise such rights at any time prior to the later of (i) the
expiration of the five (5) business-day period following receipt by the option
holder of the rejection notice or (ii) the last day on which the option is
otherwise exercisable in accordance with the terms of the instrument evidencing
such option, but in no event may such rights be exercised at any time after ten
(10) years following the date of the option grant.
C. Notwithstanding the foregoing provisions of this Section IX, one
or more officers or directors of the Company subject to the short-swing profit
restrictions of the Federal securities laws may, in the Plan Administrator's
sole discretion, be granted limited stock appreciation rights in tandem with
their outstanding options under this Plan. Each outstanding option with such a
limited stock appreciation right in effect for at least six (6) months shall
automatically be cancelled, whether or not the option is otherwise at the time
exercisable, upon the occurrence of a Hostile Take-Over, and the Optionee shall
in return be entitled to a cash distribution from the Company in an amount equal
to the excess of (i) the Take-Over Price of the shares under the cancelled
option over (ii) the aggregate option price payable for such shares. Such cash
distribution shall be made within five (5) days following the consummation of
the Hostile Take-Over. Neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such option
cancellation and cash distribution.
D. For purposes of Section IX.C above, the following definitions
shall be in effect:
A HOSTILE TAKE-OVER shall be deemed to occur in the event (i)
any person or related group of persons (other than the Company or a person
that directly or indirectly controls, is controlled by, or is under common
control with, the Company) acquires ownership of securities possessing
more than fifty percent (50%) of the total combined voting power of the
Company's outstanding securities pursuant to a tender or exchange offer
made directly to the Company's stockholders which the Board does not
recommend such stockholders to accept and (ii) more than fifty percent
(50%) of the securities so acquired in such tender or exchange offer are
accepted from holders other than officers and directors of the Company
subject to the short-swing profit restrictions of Section 16 of the 1934
Act.
The TAKE-OVER PRICE per share shall be deemed to be equal to
the greater of (i) the Fair Market Value per share on the date of the
option cancellation or (ii) the highest reported price per share paid in
effecting such Hostile Take-Over.
10.
<PAGE>
E. The shares of Common Stock subject to any option surrendered or
cancelled for an appreciation distribution pursuant to this Section IX shall NOT
be available for subsequent option grants under the Plan.
X. LOANS
A. The Plan Administrator may assist any Optionee (including an
Optionee who is an officer of the Company) in the exercise of one or more
options granted to such Optionee, including the satisfaction of any Federal and
state income and employment tax obligations arising therefrom, by:
(i) authorizing the extension of a loan from the Company to such
Optionee, or
(ii) permitting the Optionee to pay the option price for the
purchased Common Stock in installments.
B. The terms of any loan or installment method of payment (including
the interest rate and terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Loans or installment payments may be
granted with or without security or collateral. However, any loan made to a
consultant or other non-employee advisor must be secured by property other than
the purchased shares of Common Stock. In all events the maximum credit available
to each Optionee may not exceed the sum of (i) the aggregate option price
payable for the purchased shares (less the par value) plus (ii) any Federal and
state income and employment tax liability incurred by the Optionee in connection
with such exercise.
C. The Plan Administrator may, in its absolute discretion, determine
that one or more outstanding loans under the Plan shall be subject to
forgiveness by the Company in whole or in part upon such terms and conditions as
the Plan Administrator may in its discretion deem appropriate.
XI. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to
continue in the Service or employ of the Company (or any parent or subsidiary
corporation of the Company employing or retaining such Optionee) for any period
of specific duration or interfere with or otherwise restrict in any way the
rights of the Company (or any parent or subsidiary corporation of the Company
employing or retaining such Optionee) or of the Optionee, which rights are
hereby expressly reserved by each, to terminate the Optionee at any time for any
reason whatsoever, with or without cause.
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XII. AMENDMENT OF THE PLAN AND OPTIONS
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects whatsoever. However, no such
amendment or modification shall adversely affect the rights and obligations of
an Optionee with respect to options at the time outstanding under the Plan
unless the Optionee consents to such amendment. In addition, the Board shall
not, without the approval of the Company's stockholders, amend the Plan to (i)
materially increase the maximum number of shares issuable under the Plan or the
maximum number of shares for which stock options and separately exercisable
stock appreciation rights may be granted per participant during any fiscal year,
except for permissible adjustments under Section IV.C, (ii) materially increase
the benefits accruing to individuals who participate in the Plan, or (iii)
materially modify the eligibility requirements for participation in the Plan.
B. Options to purchase shares of Common Stock may be granted under
the Plan which are in excess of the number of shares then available for issuance
under the Plan, provided any excess shares actually issued under the Plan are
held in escrow until there is obtained stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available for
issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the excess issuances are made, then (1) any
unexercised options representing such excess shall terminate and cease to be
exercisable and (2) the Company shall promptly refund to the Optionees the
option price paid for any excess shares issued under the Plan and held in
escrow, together with interest (at the applicable Short-Term Federal Rate) for
the period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.
XIII. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan was initially adopted by the Board in May, 1985. In
March 1987 the Plan was amended and restated by the Board to increase the number
of shares issuable thereunder to an aggregate of 1,155,000 shares (the "1987
Restatement"). The 1987 Restatement was approved by the stockholders in April
1987. In January, 1992 the Board approved a further restatement of the Plan (the
"1992 Restatement") to effect the following principal amendments: (1) increase
the number of shares available for issuance pursuant to the Plan by 500,000 to
1,655,000 shares in the aggregate; (2) allow consultants to receive option
grants or stock appreciation rights under the Plan; (3) conform the Plan to
recent changes in Rule 16b-3 of the Securities and Exchange Commission; and (4)
extend the term of the Plan from May 19, 1995 to January 19, 2002. The 1992
Restatement was approved by the stockholders in June 1992. On October 7, 1994,
the Board approved a further restatement of the Plan (the "1995 Restatement") to
effect the following principal adjustments: (i) increase the number of shares of
Common Stock authorized for issuance over the remaining term of the Plan by an
additional 750,000 shares to 2,405,000 shares; (ii)
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limit the aggregate number of shares for which any one individual may be granted
stock options and separately exercisable stock appreciation rights to 300,000
shares per fiscal year, starting with the fiscal year beginning February 1,
1994, except that for the fiscal year in which an individual receives his or her
initial stock option grant under the Plan, the limit will be increased to
400,000 shares; (iii) allow individuals in the Company's employ or service who
own or are deemed to own more than twenty-five percent (25%) of the Company's
outstanding Common Stock to receive stock options and stock appreciation rights
under the Plan and (iv) render the non-employee members of the Board ineligible
to receive any further option grants or stock appreciation rights under the
Plan. The 1995 Restatement was approved by the stockholders at the 1995 Annual
Stockholders Meeting.
B. The provisions of the 1987, 1992 and 1995 Restatements apply only
to options granted under the Plan from and after the respective dates such
Restatements were adopted by the Board. All options which were issued and
outstanding under the Plan immediately prior to such adoption of the such
Restatements continue to be governed by the terms and conditions of the Plan
(and the instrument evidencing each such option) as in effect on the date each
such option was previously granted, and nothing in the Restatements is to affect
or otherwise modify the respective rights or obligations of the holders of such
options with respect to the acquisition of shares of Common Stock thereunder.
C. Unless sooner terminated in accordance with Section VII, the Plan
shall terminate upon the earlier of (i) January 19, 2002 or (ii) the date on
which all shares available for issuance under the Plan shall have been issued or
cancelled pursuant to the exercise or surrender of options granted hereunder. If
the date of termination is determined under clause (i) above, then options
outstanding on such date shall thereafter continue to have force and effect in
accordance with the provisions of the instruments evidencing such options.
XIV. USE OF PROCEEDS
Any cash proceeds received by the Company from the issuance of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
XV. WITHHOLDING
The Company's obligation to deliver shares upon the exercise of any
option or stock appreciation right or the surrender of any option granted under
the Plan shall be subject to the Optionee's satisfaction of all applicable
Federal, state and local income and employment tax withholding requirements.
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XVI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option or stock
appreciation right under the Plan, and the issuance of Common Stock upon the
exercise of any such option shall be subject to the Company's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.
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