<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
ASHWORTH, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(set forth the amount on which
the filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
ASHWORTH, INC.
2791 Loker Avenue West
Carlsbad, California 92008
(760) 438-6610
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY MARCH 24, 2000
The annual meeting of stockholders of Ashworth, Inc., a Delaware
corporation (the "Company"), will be held in the Grand Ballroom at the Four
Seasons Resort, 7100 Four Seasons Point, Carlsbad, California, on Friday, March
24, 2000, at 8:30 a.m. local time, to consider and act upon the following
matters:
1. To elect two directors of the Company to serve for the ensuing three
years;
2. To vote on the adoption of the 2000 Equity Incentive Plan and the
concurrent termination of the Company's 1996 Incentive Stock Option
Plan, 1992 Founders' Nonqualified Stock Option Plan and 1996
Nonqualified Stock Option Plan for the purpose of simplifying plan
administration. The aggregate number of shares available for issuance
will be reduced from 2,041,439 to 1,900,000 shares; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on February 1, 2000 will
be entitled to vote at the meeting or any adjournment thereof. A proxy statement
is enclosed; please read it carefully. Proxies are being solicited by the Board
of Directors of the Company.
All stockholders, whether or not they expect to attend the meeting in
person, are urged to sign and date the enclosed proxy and return it promptly in
the enclosed postage-paid envelope in order to ensure representation of your
shares. No postage need be affixed if the proxy is mailed in the United States.
The giving of a proxy will not affect your right to vote in person if you choose
to attend the meeting.
By the order of the Board of Directors
/s/ HALINA BALYS
Halina Balys
Secretary
Carlsbad, California
February 16, 2000
<PAGE> 3
ASHWORTH, INC.
2791 Loker Avenue West
Carlsbad, California 92008
(760) 438-6610
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FRIDAY MARCH 24, 2000
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Ashworth, Inc., a Delaware corporation (the
"Company"), for use at the annual meeting of stockholders to be held in the
Grand Ballroom at the Four Seasons Resort, 7100 Four Seasons Point, Carlsbad,
California, on Friday March 24, 2000, at 8:30 a.m., local time and at any
adjournments thereof. All proxies will be voted in accordance with the
stockholders' instructions contained therein. If no choice is specified, proxies
will be voted in favor of the election of the nominees named in this proxy
statement. The Company anticipates that it will mail this proxy statement and
the accompanying proxy to the Company's stockholders on or about February 16,
2000.
Any stockholder signing and returning the enclosed proxy may revoke it
at any time before it is voted at the annual meeting by: (i) giving a later
dated written revocation of proxy to the Secretary of the Company, (ii)
providing a later dated amended proxy to the Secretary of the Company, or (iii)
voting in person at the annual meeting. The expense of soliciting proxies,
including the cost of preparing, assembling, and mailing this proxy material to
stockholders, will be borne by the Company. The Company may use the services of
its directors, officers and employees to solicit proxies personally or by
telephone, without additional salary or compensation to them. The Company will
reimburse brokerage houses, custodians, nominees, and fiduciaries for the cost
of forwarding proxy soliciting materials to the beneficial owners of the
Company's shares held of record by such persons.
SHARES OUTSTANDING AND VOTING RIGHTS
All voting rights are vested exclusively in the holders of the Company's
$.001 par value common stock. Only stockholders of record at the close of
business on February 1, 2000 (the record date), are entitled to notice of and to
vote at the annual meeting or any adjournment thereof. On the record date, the
Company had 13,536,573 shares of common stock outstanding, each share of which
is entitled to one vote on all matters to be voted upon at the annual meeting,
including the election of a director.
VOTES REQUIRED
Directors are elected by a plurality of the votes of the shares present
in person or represented by proxy at the annual meeting and entitled to vote on
the election of directors. Only those votes cast "FOR" the election of a
director or "WITHHELD" will be counted for purposes of determining the number of
votes required to elect the director. If a broker holding stock in "street name"
indicates on the proxy that it does not have discretionary authority to vote
certain shares on a particular matter, those shares will not be considered as
present and voting at the annual meeting with respect to the matter (a "broker
non-vote"). Abstentions and broker non-votes will not be counted in the election
of a director but will be counted for the purpose of establishing a quorum.
<PAGE> 4
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of common stock of the Company as of December 31, 1999 by:
(i) each person known by the Company to own beneficially more than 5% of the
Company's outstanding shares of common stock, (ii) each director of the Company,
(iii) the Company's Chief Executive Officer and the Company's four other most
highly compensated executive officers, and (iv) all directors and executive
officers of the Company as a group. Each person listed below has sole voting
power and sole investment powers with respect to shares shown as owned by him or
her. Information as to beneficial ownership is based upon statements furnished
to the Company by such persons.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
SHARES BENEFICIALLY OWNED
- ---------------------------------------------------------------------------------------------
Percent
Name(1) Shares Options(2) Total Owned(3)
- ----- ------ ---------- ----- --------
(#) (#) (#) (%)
<S> <C> <C> <C> <C>
Stephen Bartolin, Jr. 3,100 17,500 20,600 *
Stephen M. Carpenter 5,000 2,500 7,500 *
Suzi Chauvel 0 0 0 *
Andre P. Gambucci 24,000 55,000 79,000 *
John M. Hanson, Jr. 9,500 60,000 69,500 *
A. Michael Hecht 1,000 2,500 3,500 *
Randall L. Herrel, Sr. 6,500 446,094 452,594 3.2
James W. Nantz, III 50,000 157,500 207,500 1.5
Terence W. Tsang 0 0 0 *
All executive officers and
directors as a group (9 persons) 99,100 741,094 840,194 5.8
Fred Couples 368,000 1,000,000 1,368,000 9.3
1851 Alexander Bell Drive, Suite 410
Reston, Virginia 22091
Mellon Bank Corporation(4) 911,821 0 911,821 6.6
1 Mellon Bank Center
500 Grant Street
Pittsburgh, PA 15258
Dimensional Fund Advisors, Inc.(5) 933,200 0 933,200 6.8
1299 Ocean Avenue
Santa Monica, CA 90401
- ---------------------------------------------------------------------------------------------
</TABLE>
* Less than one percent.
(1) Unless otherwise indicated, the address for each shareholder is the same
as the address of the Company.
(2) Represents shares of common stock that may be acquired pursuant to
presently exercisable stock options, including stock options exercisable
within 60 days of December 31, 1999. All of these options, except for
those held by Messrs. Carpenter and Hecht, have exercise prices that are
higher than the market price of the Company's common stock on December 31,
1999 ($4.125).
2
<PAGE> 5
(3) Applicable percentage of ownership is based on approximately 13,776,573
shares of common stock outstanding as of December 31, 1999, together with
applicable stock options for such stockholder. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and includes voting and investment power with respect to
shares. Shares of common stock subject to options currently exercisable or
exercisable within 60 days after December 31, 1999 are deemed outstanding
for computing the percentage of ownership of the person holding such stock
options, but are not deemed outstanding for computing the percentage of
any other person.
(4) Mellon Bank Corporation has sole voting power over 900,721 shares and sole
power to dispose 911,821 shares.
(5) Dimensional Fund Advisors has sole voting and investment discretion over
933,200 shares and, as a company registered under the Investment Advisors
Act of 1940, disclaims beneficial ownership of these shares.
PROPASAL I
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes with
staggered three-year terms. The Company's certificate of incorporation provides
for three classes of directors, each consisting of approximately one-third of
the total number of directors. The Company currently has two Class I directors,
three Class II directors, and two Class III directors, whose terms will expire,
respectively, at the 2000, 2001, and 2002 annual meetings of stockholders (in
all cases subject to the election and qualification of their successors and
their earlier death, resignation, or removal). At each annual meeting of
stockholders, directors are elected for a term of three years to succeed those
directors whose terms then expire. The Class I directors elected at the 2000
annual meeting of stockholders will serve until the 2003 annual meeting of
stockholders (subject to the election and qualification of their successors and
their earlier death, resignation, or removal).
THE PERSONS NAMED IN THE ENCLOSED PROXY WILL VOTE TO ELECT JOHN M.
HANSON, JR. AND RANDALL L. HERREL, SR. AS CLASS I DIRECTORS, UNLESS THE
AUTHORITY TO VOTE FOR THEIR ELECTION IS WITHHELD BY MARKING THE PROXY TO THAT
EFFECT. Mr. Hanson and Mr. Herrel are currently Class I directors and have
indicated their willingness to serve if elected. However, if they are unable or
unwilling to stand for election, proxies may be voted for a substitute nominee
designated by the board of directors. Proxies cannot be voted for a greater
number of persons than the number of nominees named.
The table on the following page sets forth, for the Class I nominees and
for each director whose term continues after the annual meeting, his name and
age, his positions and offices with the Company, his principal occupations and
business experience for the past five years, the names of any other companies
for which he is a director, the year his services as a director of the Company
began, and the year his term as a director of the Company will expire.
3
<PAGE> 6
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
DIRECTORS OF THE COMPANY:
- --------------------------------------------------------------------------------------------------
NAME, AGE, DIRECTOR TERM
BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE EXPIRES
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
NOMINEES FOR CLASS I DIRECTORS:
John M. Hanson, Jr., age 59 1994 2000
Mr. Hanson is a certified public accountant, has been a stockholder and
officer of the accounting firm John M. Hanson & Company, from 1968 until
December 31, 1999 when he semi-retired. He now practices as a tax
specialist for a limited number of clients.
Randall L. Herrel, Sr., age 49 1996 2000
Mr. Herrel has been a director, president, and the Chief Executive
Officer of the Company since December 1996. For the two years prior to
this, Mr. Herrel served as president and chief operating officer of
Quiksilver, Inc., a young men's and women's apparel company in
Huntington Beach, California. Mr. Herrel joined Quiksilver in June 1989
and also served at various times as chief financial officer, treasurer
and secretary.
CONTINUING DIRECTORS:
CLASS II DIRECTORS
Andre Gambucci, age 71 1991 2001
Mr. Gambucci was a senior vice president and director of marketing of
Acordia of Colorado, a general insurance agency and insurance brokerage
firm in Colorado Springs, Colorado, from 1982 until December 31, 1995,
when he retired. He is now a consultant for Acordia National.
James W. Nantz, III, age 40 1998 2001
Mr. Nantz has been a television broadcaster for CBS Sports since 1985,
serving as the anchor of CBS Golf Coverage, including The Masters and
host of The NFL Today. He also serves as the play-by-play voice of
college basketball's Final Four.
Stephen G. Carpenter, Jr., age 60 1999 2001
Mr. Carpenter was a banker for 36 years. Most recently he was with
California United Bank, a publicly held company, and served as Chairman
and CEO from 1994 to 1998 and CEO from 1992 to 1994. Prior to that, Mr.
Carpenter served as Vice Chairman of Security Pacific Bank for three
years. He also served as a Director of the Los Angeles Board of the
Federal Reserve Bank of San Francisco.
CLASS III DIRECTORS
Stephen Bartolin, Jr., age 48 1998 2002
Mr. Bartolin has been President & CEO of the Five-Star, Five-Diamond
Broadmoor Hotel in Colorado Springs, Colorado from 1991 to the
present. He is also President & CEO of the Manitou and Pikes Peak
Railway Company, the Cog Land and Development Company, and the Broadmoor
Golf Club, Inc.
H. Michael Hecht, age 60 1999 2002
Mr. Hecht is an advisor to businesses on product, marketing,
distribution and sourcing strategies. From 1996 to 1999 he was President
of Dickson Trading North America, an investment company. From 1994 to
1996 he was President and CEO of Builders Emporium. From 1991 to 1994
he was President of Carter Hawley Hale, a department store company and
President and CEO of Broadway Department stores from 1984 to 1991. He
currently serves on the board of directors of Applause, Inc., Monrovia
Nurseries and Edison Brothers Stores, Inc., a publicly held company. He
has previously served on the board of directors of Carter Hawley Hale
Stores, Inc. and House of Fabrics.
- --------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 7
MEETINGS AND COMMITTEES OF THE BOARD
The audit committee oversees the accounting controls for the Company, and
is composed of Messrs. Hanson, Gambucci, Bartolin, Hecht and Carpenter. The
compensation committee recommends to the board of directors the compensation for
executive officers and has the authority to administer the Company's Stock
Option Plans. This committee is composed of Messrs. Bartolin, Carpenter, Hecht,
Gambucci and Hanson. The board of directors met in person four times and took
action three times by written consent in lieu of a meeting, the audit committee
met once, and the compensation committee met once. The Company does not have a
standing nominating committee. Each of the directors has attended all meetings
of the board of directors and all the meetings of the committees on which they
serve.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company each receive annual
compensation of $12,000 plus $1,000 and expenses for attendance at each board
meeting. These directors also receive an annual grant of an option to purchase
2,500 shares of the Company's common stock for each quarter during which they
serve as directors. All directors receive an annual $1,000 apparel allowance for
Ashworth clothing. No other arrangement exists pursuant to which any director of
the Company was compensated during the Company's last fiscal year for any
service provided as a director.
EXECUTIVE OFFICERS:
Set forth below are the names of the persons who served as executive
officers of the Company during fiscal 1999, other than Randall L. Herrel, Sr.,
whose position and business background are described above.
Terence W. Tsang 38, Sr. Vice President-Finance, Treasurer, Chief Financial
Officer and Chief Accounting Officer
Mr. Tsang has served as senior vice president-finance, treasurer, and chief
financial officer since March 1999, when he joined Ashworth, Inc. He has
served as chief accounting officer since June 1999. Prior to joining
Ashworth, Inc. he served as interim CFO, vice president of finance,
corporate controller and treasurer of Guess?, Inc. from 1993 to 1999.
Suzi Chauvel, age 48, Chief Marketing Officer
Ms. Chauvel has served as chief marketing officer since June 1999 when she
joined Ashworth, Inc. Prior to joining Ashworth, Inc. she was executive vice
president of apparel manufacturer Ocean Pacific from 1985 to 1992, and was
most recently president of PopEye Chauvel, a marketing firm specializing in
global branding with clients like Calvin Klein, Pepsi, Disney and Procter &
Gamble from 1992 to 1999.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following information sets forth the executive compensation for the
Company's Chief Executive Officer during fiscal 1999, and for each of the two
most highly compensated executive officers other than the CEO during fiscal
1999.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
PAYOUTS
AWARDS LONG-TERM
SECURITIES INCENTIVE
NAME UNDERLYING PLAN ALL OTHER
AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS PAYOUTS COMPENSATION(4)
- ---------------------- ----- ------ ----- ---------- --------- ---------------
($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C>
Randall L. Herrel, 1999 338,000 0 0 0 4,209
Chief Executive Officer 1998 338,000 0 60,000 0 2,100
1997(1) 276,000 50,000 106,094 0 0
Terence W. Tsang, 1999(2) 119,000 5,000 60,000 0 0
Sr. Vice President - 1998 0 0 0 0
Finance 1997 0 0 0 0
Suzi Chauvel 1999(3) 57,000 0 35,000 0 0
Chief Marketing Officer 1998 0 0 0 0 0
1997 0 0 0 0 0
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Herrel joined the Company on December 9, 1996 and did not begin to
receive a salary until 1997.
(2) Mr. Tsang joined the Company on March 15, 1999.
(3) Ms. Chauvel joined the Company on June 1,1999.
(4) Total amount shown in this column for the last fiscal year consists of the
following: (i) Mr. Herrel: $ 1,138 - premium payment made for life
insurance and $3,071 - premium for disability insurance.
6
<PAGE> 9
FISCAL 1999 STOCK OPTION GRANTS
The following table provides information regarding stock options granted
under the Company's stock option plans for fiscal 1999 to the executive officers
named in the Summary Compensation Table.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
INDIVIDUAL GRANT POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL RATE
OF STOCK PRICE
APPRECIATION
FOR OPTION TERM
- -----------------------------------------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS IN FISCAL OR BASE EXPIRATION
NAME GRANTED YEAR PRICE DATE(1) 5% 10%
- ---- --------- ---------- -------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
(#) ($/sh)
Randall L. Herrel, Sr. 0 0.0 0 0
Terence W. Tsang 20,000 4.0313 03/14/05 22,275 49,223
20,000 4.0313 03/14/06 22,275 49,223
20,000 9.8 4.0313 03/14/07 22,275 49,223
Suzi Chauvel 8,750 4.8750 05/31/05 11,785 26,042
8,750 4.8750 05/31/06 11,785 26,042
8,750 4.8750 05/31/07 11,785 26,042
8,750 5.7 4.8750 05/31/08 11,785 26,042
- ------------------------------------------------------------- ----------- ----------- ---------
</TABLE>
(1) Options expiring on 03/14/05 vest and become exercisable on 03/15/00;
options expiring on 03/14/06 vest and become exercisable on 03/15/01;
options expiring on 03/14/07 vest and become exercisable on 03/15/02;
options expiring on 05/31/05 vest and become exercisable on 06/01/00,
options expiring on 05/31/06 vest and become exercisable on 06/01/01;
options expiring on 05/31/07 vest and become exercisable on 06/01/02;
options expiring on 05/31/08 vest and become exercisable on 06/01/03.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers, directors, and persons who beneficially own more than 10% of the
Company's equity securities to file initial reports of ownership and reports of
changes in ownership of the Company's equity securities with the Securities and
Exchange Commission. Specific due dates for these reports have been established,
and the Company is required to disclose in this proxy statement any late filings
during the fiscal year ended October 31, 1999. To the Company's knowledge, based
solely on its review of the copies of such reports required to be furnished to
the Company during the fiscal year ended October 31, 1999, all of these reports
were timely filed except the following: on one occasion Terence W. Tsang failed
to timely file a Form 3 - the Initial Statement of Beneficial Ownership of
Securities; on one occasion H. Michael Hecht failed to timely file a Form 3 -
the Initial Statement of Beneficial Ownership of Securities; on one occasion
Stephen G. Carpenter failed to timely file a Form 3 - the Initial Statement of
Beneficial Ownership of Securities.
7
<PAGE> 10
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
- -------------------------------------------------------------------------------------------------
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTION
SHARES OPTIONS AT FY-END AT FY-END
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------------- -------------
(#) ($) (#) ($)
<S> <C> <C> <C> <C>
Randall L. Herrel, Sr. 0 0 326,094/140,000 0/0
Terence W. Tsang 0 0 0/60,000 0/241,878
Suzi Chauvel 0 0 0/35,000 0/0
- -------------------------------------------------------------------------------------------------
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
In fiscal year 1999, the Company had an executive employment agreement
with Randall L. Herrel, Sr.
Agreement with Mr. Herrel
The agreement with Mr. Herrel provides for at-will employment with a
base salary no less than $325,000, a severance provision and bonuses to be
determined periodically at the discretion of the Board of Directors on the basis
of merit and the Company's financial success and progress. The agreement with
Mr. Herrel includes severance payments upon termination of employment under
specific circumstances, such payments ranging from one-half to two times his
then annual base salary. The Company maintains a life insurance policy for
$1,000,000, the beneficiary of which may be named by Mr. Herrel.
Agreement with Mr. Tsang
The agreement with Mr. Tsang provides for at-will employment with an
annual salary of $200,000. The agreement also provides for a starting bonus of
$5,000 and initial options to purchase 60,000 shares of the Company's common
stock. The agreement with Mr. Tsang includes severance payments upon termination
of employment under specific circumstances.
Agreement with Ms. Chauvel
The agreement with Ms. Chauvel provides for at-will employment with an
annual salary of $150,000. The agreement also provides for initial options to
purchase 35,000 shares of the Company's common stock as well as the opportunity
to earn a bonus based on reaching certain performance-related goals. The
agreement with Ms. Chauvel includes severance payments upon termination of
employment under specific circumstances.
8
<PAGE> 11
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder returns on the Company's common stock over a
five year period with the cumulative total return of the Nasdaq Stock Market (U.
S. Companies) and the stocks of companies in the same Standard Industrial
Classification as the Company (SIC 2300-2399).
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
10/31/94 10/30/95 10/29/96 10/31/97 10/31/98 10/31/99
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ashworth, Inc. 100.00 64.29 61.90 94.64 60.71 39.88
Nasdaq Stock Market
(U.S. Companies) 100.00 118.62 139.30 182.56 206.42 340.72
Industry Index
Apparel & other finished
products-fabrics & like materials 100.00 98.14 106.05 112.56 94.26 60.48
- -----------------------------------------------------------------------------------------------------
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Bartolin, Carpenter, Hecht, Gambucci and Hanson are not current
or former officers or employees of Ashworth, Inc. There are no Compensation
Committee interlocks between Ashworth, Inc. and other entities involving
Ashworth's executive officers and board members who serve as executive officers
or board members of the other entities.
9
<PAGE> 12
REPORT OF THE COMPENSATION COMMITTEE
The compensation committee of the Board of Directors is composed of
Messrs. Bartolin, Carpenter, Hecht, Gambucci and Hanson, and has the authority
to administer the Company's executive compensation programs, including the
Company's stock incentive plans. The Company's executive compensation program is
designed to provide competitive levels of base compensation in order to attract,
retain and motivate high quality employees, tie individual total compensation to
individual performance and success of the Company, and align the interests of
the Company's executive officers with those of its stockholders.
Executive Compensation Programs
The Company's executive compensation program consists of three principal
elements: base salary, cash bonus, and stock options. The Board of Directors
sets the annual base salary for executives after consideration of the
recommendations of the Compensation Committee. Prior to making its
recommendations, the Compensation Committee reviews historical compensation
levels of the executives, evaluates past performance, and assesses expected
future contributions of the executives. In making the determinations regarding
base salaries, the Company considers generally available information regarding
the salaries prevailing in the industry.
The Company maintains incentive plans under which executive officers may
be paid cash bonuses at the end of each fiscal year. The bonuses under these
incentive plans depend upon individual performance and the achievement by the
Company of certain financial targets established by the Board of Directors prior
to the start of each fiscal year.
Total compensation for executive officers also includes long-term
incentives offered in the form of stock options, which are generally provided
through initial stock option grants at the date of hire and periodic additional
stock options grants. Stock options align the interests of the executive officer
with the interests of stockholders due to the fact that the executive can
realize a gain only if the Company's stock appreciates in value. In determining
the amount of such grants, the Compensation Committee considers the
contributions of each executive to the overall success of the Company in the
past fiscal year, the responsibilities to be assumed in the upcoming fiscal
year, appropriate incentives for the promotion of the long-term growth of the
Company, and grants to other executives in the industry holding comparable
positions as well as the executive's position within the Company. It has been
the Company's practice to fix the price of the options at the fair market value
on the date of the grant, thereby making the executive's value realized tied
directly to gains realized by the stockholders.
Chief Executive Officer Compensation
Mr. Herrel's employment contract provides for a base salary of $325,000
and permits increases in salary, the grant of stock options and the awarding of
a cash bonus at the discretion of the Compensation Committee. In determining Mr.
Herrel's total compensation for fiscal 1999, the Compensation Committee
considered the Company's overall performance, as measured by sales revenue,
profitability, earnings per share and share valuation. After considering these
indicia of performance, the Compensation Committee voted to keep Mr. Herrel's
salary at $338,000 and awarded him no stock options or bonus, due primarily to
the decline in earnings in fiscal 1999. In fiscal 1998, Mr. Herrel was granted
an increase in base compensation, from $325,000 to $338,000 and was awarded an
option to purchase 60,000 shares of stock, primarily due to an increase in sales
revenues. Because fiscal 1998 earnings per share were lower than target figures,
no cash bonus was awarded. Despite lower than expected earnings, the
Compensation Committee and the board felt that it was important to reward Mr.
Herrel for his significant contributions to the Company and to increase his
equity stake in the Company, further aligning his interests with those of the
Company's stockholders.
This report was furnished by
Messrs. Bartolin, Carpenter, Hecht,
Gambucci and Hanson
10
<PAGE> 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has a promotion agreement with Fred Couples who owns of
record or beneficially more than 5% of the Company's common stock. The agreement
requires Mr. Couples' exclusive endorsement and promotion of Ashworth products
during his lifetime. The Company has agreed to compensate Mr. Couples for these
services in the form of an annual payment of $657,000 until November 1, 2004, at
which time the Company will pay Mr. Couples $500,000 annually until August 31,
2011. In addition, Mr. Couples has the right to receive options to purchase
shares of the Company's common stock upon his performance of specified services.
The exercise price of the options will be the fair market value of the Company's
common stock at the time the options are granted, and the options will be
exercisable for a period of seven years. The Company has also made certain price
guaranties with respect to the options.
PROPOSAL II
ADOPTION OF 2000 EQUITY INCENTIVE PLAN
On December 14, 1999, the Board of Directors authorized the adoption,
subject to stockholder approval, of the Ashworth, Inc. 2000 Equity Incentive
Plan (the "2000 Plan") and the concurrent termination of the Company's 1992
Founders' Nonqualified Stock Option Plan, the 1996 Amended and Restated
Incentive Stock Option Plan and the 1996 Amended and Restated Nonqualified Stock
Option Plan (together, the "Existing Plans"). In aggregate, the Existing Plans
have 9,700,000 shares reserved for issuance. As of December 31, 1999, 7,658,561
shares underlying options have been awarded under the Existing Plans. The
remaining 2,041,439 shares reserved for issuance will be cancelled with the
termination of the Existing Plans. Following the cancellation of these shares
reserved for issuance, 1,900,000 shares of common stock will be reserved for
issuance under the 2000 Plan. Options currently outstanding under the Existing
Plans are unaffected by this proposal.
The board of Directors wishes to terminate the Existing Plans and adopt
the 2000 Plan to simplify plan administration. If this proposal is approved by
the stockholders, the total number of shares reserved for issuance under all
stock-based incentive plans will be reduced by approximately 140,000 shares. If
this proposal is not approved by the stockholders, the Existing Plans will not
terminate.
SUMMARY OF THE 2000 PLAN
The following summary of the 2000 Plan is qualified in its entirety by
the terms of the 2000 Plan, a copy of which is attached hereto as Appendix A.
Purpose and Eligibility. The 2000 Plan is intended to promote the
interests of the Company and its stockholders by using investment interests in
the Company to attract, retain and motivate its management and other persons, to
encourage and reward their contributions to the performance of the Company and
to align their interests with the interests of the Company's stockholders. The
persons eligible to receive an Award under the 2000 Plan include directors,
officers, employees, consultants, and advisors of the Company and its affiliated
entities.
Administration, Amendment and Termination. The administering body for
the 2000 Plan is the Board of Directors or a committee of the board (the
"Administrator"). As long as the Company has a class of equity securities
registered under Section l2 of the Securities Exchange Act of 1934, as amended
("Exchange Act"), the Administrator will be composed solely of "non-employee
directors" within the meaning of Rule 16b-3 under the Exchange Act. The
Administrator will have the power to construe the 2000 Plan and the rights of
recipients of Awards granted thereunder. The Administrator will also have the
power to (i) discontinue, suspend or amend the 2000 Plan in any manner (subject
to certain limited exceptions, including increases in the number of shares
available that may be the subject of Awards under
11
<PAGE> 14
the 2000 Plan and stockholder approval of other amendments that would materially
increase the benefits accruing to participants) and (ii) modify, extend, renew
or exchange outstanding Awards. The 2000 Plan, as amended from time to time,
shall, in the discretion of the Administrator, apply to and govern Awards
granted under the 2000 Plan prior to the date of such amendment, provided that
the consent of an Award holder is required if such amendment would alter,
terminate, impair or adversely affect an Award. Awards may be granted under the
2000 Plan until the 10th anniversary of the adoption of the 2000 Plan by the
Company's Board of Directors.
Securities Subject to the 2000 Plan. The 2000 Plan provides for the
grant ("Award") of stock options (including incentive stock options or
nonqualified stock options), restricted stock, stock appreciation rights, stock
payments, dividend equivalents, stock bonuses, stock sales, phantom stock and
other stock-based benefits. Stock options granted under the 2000 Plan may be
incentive stock options ("ISOs") intended to qualify under the provisions of
Section 422 of the Internal Revenue Code ("Code") or non-qualified stock
options that do not so qualify. The shares available under the 2000 Plan may
either be authorized and unissued shares or shares reacquired by the Company
through open market purchases or otherwise. If any Award granted under the 2000
Plan expires, terminates or is forfeited before the exercise thereof or the
payment in full thereof, the shares covered by the unexercised or unpaid
portion will become available for new grants under the 2000 Plan.
If (i) the outstanding shares of common stock of the Company are
increased, decreased or exchanged for a different number or kind of shares or
other securities, or if additional shares or new or different shares or other
securities are distributed in respect of such shares of common stock (or any
stock or securities received with respect to such common stock), through
merger, consolidation, sale or exchange of all or substantially all of the
properties of the Company, reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, spin-off or other
distribution with respect to such shares of common stock (or any stock or
securities received with respect to such common stock) or (ii) the value of the
outstanding shares of common stock of the Company is reduced by reason of an
extraordinary cash dividend, an appropriate and proportionate adjustment may be
made in (1) the maximum number and kind of shares subject to the 2000 Plan, (2)
the number and kind of shares or other securities subject to then outstanding
Awards, and/or (3) the price for each share or other unit of any other
securities subject to then outstanding Awards. Any adjustments under the 2000
Plan will be made by the Administrator, whose determination as to any
adjustment will be final, binding and conclusive.
As of the effective time and date of any change in control of the
Company (as defined in the 2000 Plan), the 2000 Plan and any then outstanding
Awards (whether or not vested) will automatically terminate unless: (i)
provision is made in writing in connection with such transaction for the
continuance of the 2000 Plan and for the assumption of such Awards, or for the
substitution for such Awards of new awards covering the securities of a
successor entity or an affiliate thereof with appropriate adjustments as to the
number and kind of securities and exercise prices, in which event the 2000 Plan
and such outstanding Awards shall continue or be replaced, as the case may be,
in the manner and under the terms so provided; or (ii) the Board otherwise
shall provide in writing for such adjustments as it deems appropriate in the
terms and conditions of the then-outstanding Awards (whether or not vested),
including without limitation (a) accelerating the vesting of outstanding Awards
and/or (b) providing for the cancellation of Awards and their automatic
conversion into the right to receive the securities, cash or other
consideration that a holder of the shares underlying such Awards would have
been entitled to receive upon consummation of such change in control had such
shares been issued and outstanding immediately prior to the effective date and
time of the change in control (net of the appropriate option exercise prices).
If, pursuant to the foregoing provisions of the 2000 Plan, the 2000 Plan and
the Awards shall terminate by reason of the occurrence of a change in control
without provision for any of the actions described in clause (i) or (ii) above,
then any recipient holding outstanding Awards shall have the right, at such
time immediately prior to the consummation of the change in control as the
Board shall designate, to
12
<PAGE> 15
exercise the recipient's Awards to the full extent not theretofore exercised,
including any installments which have not yet become vested.
Terms and Conditions of Awards Under the 2000 Plan. The Administrator
will select the recipients of Awards granted under the 2000 Plan and will
determine the dates, amounts, exercise prices, vesting periods and other
relevant terms of the Awards.
Award Pricing. The pricing of Awards, including the exercise price for
stock options granted under the 2000 Plan, shall be determined by the
Administrator as of the date the Award is granted; provided, however, that the
exercise price for a stock option may be no less than the fair market value of
the underlying shares as of such date. The Administrator may, with the consent
of the recipient and subject to compliance with statutory or administrative
requirements applicable to incentive stock options, amend the terms of any stock
option to provide that the exercise price of the shares remaining subject to the
option shall be reestablished at a price not less than 100% of the fair market
value of the underlying shares on the effective date of the amendment.
Award Vesting. Awards granted under the 2000 Plan vest and become
exercisable as determined by the Administrator in its discretion. Awards granted
under the 2000 Plan may be exercised at any time after they vest and before the
expiration date determined by the Administrator, provided that an Award intended
to qualify as an incentive stock option under the Code will not be exercisable
after the expiration of five years from the date of grant to certain holders of
significant amounts of the Company's outstanding common stock. Furthermore, in
the absence of a specific agreement to the contrary, options will generally
expire and become unexercisable immediately upon termination of the recipient's
employment with the Company for cause; 30 days after termination of the
recipient's employment with the Company for any reason other than cause, death,
permanent disability or normal retirement; or six months after termination of
the recipient's employment with the Company due to death, permanent disability
or normal retirement. The Committee may accelerate the vesting of any options
and may also extend the period following termination of employment with the
Company during which options may vest and/or be exercised.
Award Payments. The exercise price for Awards may be paid in cash or in
any other consideration the Committee deems acceptable, including securities of
the Company surrendered by the Award holder or withheld from the shares
otherwise deliverable upon exercise. The Company may extend or arrange for the
extension of credit to any Award holder to finance the Award holder's purchase
of shares upon exercise of the holder's Award on terms approved by the
Administrator, subject to restrictions under applicable laws and regulations, or
allow exercise in a broker's transaction in which the exercise price will not be
received until after exercise and subsequent sale of the underlying common
stock. Consideration received by the Company upon exercise of Awards granted
under the 2000 Plan will be used for general working capital purposes.
Limited Transferability of Awards. Awards are generally not transferable
by the recipient during the life of the recipient.
Awards Documentation. Awards granted under the 2000 Plan will be
evidenced by an agreement duly executed on behalf of the Company and by the
recipient or, a confirming memorandum issued by the Company to the recipient,
setting forth such terms and conditions applicable to the Award. The adoption of
the 2000 Plan shall not preclude the Company from establishing any other forms
of incentive or other compensation for employees, directors, advisors or
consultants of the Company, whether or not approved by stockholders.
Rights With Respect to Common Stock. No recipient of an Award under the
2000 Plan and no beneficiary or other person claiming under or through such
individual will have any right, title or interest in or to any shares of common
stock subject to any Award or any rights as a stockholder unless and until
13
<PAGE> 16
such Award is duly exercised pursuant to the terms of the 2000 Plan and the
exercise of such Award results in the issuance of shares of common stock to the
recipient.
Plan Provisions Regarding Section 162(m) the Internal Revenue Code. In
general, Section 162(m) of the Code imposes a $1,000,000 limit on the amount of
compensation that may be deducted by the Company in any tax year with respect to
the Chief Executive Officer of the Company and its other four most highly
compensated employees, including any compensation relating to an Award under the
2000 Plan. To prevent compensation relating to an Award under the 2000 Plan from
being subject to the $1,000,000 limit of Code Section 162(m), the 2000 Plan
provides that no one eligible person shall be granted any Awards with respect to
more than 250,000 shares of common stock in any one calendar year if such grant
would otherwise be subject to Code Section 162(m). Furthermore, if Code Section
162(m) would otherwise apply and if the amount of compensation an eligible
person would receive under an Award is not based solely on an increase in the
value of the underlying common stock of the Company after the date of grant or
award, the Administrator can condition the grant, vesting, or exercisability of
such an Award on the attainment of a preestablished objective performance goal.
For this purpose, a preestablished objective performance goal may include one or
more of the following performance criteria: (a) cash flow, (b) earnings per
share (including earnings before interest, taxes, and amortization), (c) return
on equity, (d) total stockholder return, (e) return on capital, (f) return on
assets or net assets, (g) income or net income, (h) operating income or net
operating income, (i) operating margin, (j) return on operating revenue, and (k)
any other similar performance criteria.
TAX INFORMATION
The following summary of certain federal income tax consequences of the
receipt and exercise of awards granted by the Company is based on the laws and
regulations in effect as of the date of this Proxy Statement and does not
purport to be a complete statement of the law in this area. Furthermore, the
discussion below does not address the tax consequences of the receipt and
exercise of awards under state and/or local tax laws, and such tax laws may not
correspond to the federal tax treatment described herein.
Federal Income Tax Treatment. The following is a brief, general
description of the federal income tax consequences of transactions under the
2000 Plan based on the federal income tax laws and regulations in effect on the
date hereof. This description does not purport to be a complete statement of the
law in this area and does not cover the tax consequences of the 2000 Plan (or
the grant or exercise of rights thereunder) under foreign, state or local tax
laws. The exact federal income tax treatment of transactions under the 2000 Plan
will vary depending upon the specific facts and circumstances involved.
Incentive Stock Options. The 2000 Plan authorizes the award of stock
options that are intended to qualify as "incentive stock options" under Section
422 of the Code ("ISOs"). If certain employment and holding period requirements
are satisfied, an optionee generally will not be subject to regular federal
income tax, and the Company will not be entitled to any deduction, on either the
grant or the exercise of an ISO. If the optionee makes no disposition of the
shares acquired upon exercise of an ISO within two years from the date of grant
or within one year from the date of exercise (the "Required Holding Periods"),
any gain or loss on the disposition of the acquired shares generally will be
treated as a long-term capital gain or loss, and no deduction will be available
to the Company at the time of such disposition. If, however, the optionee
disposes of the acquired shares at any time prior to the expiration of the
Required Holding Periods, then (subject to certain exceptions) the gain
recognized generally will constitute ordinary income to the extent of the excess
of (i) the fair market value of the shares either at the date of exercise or at
the date of disposition, whichever is less, over (ii) the purchase price paid
for such shares by the optionee on exercise of the ISO, and the Company
generally will be entitled to a deduction in an amount equal to the amount of
ordinary income recognized by the optionee. Any gain in excess of such ordinary
income amount will be a short-term or long-term capital gain, depending on the
optionee's holding period. The excess of the fair market value of the shares
acquired on the exercise date of an ISO over the exercise price of such option
generally is required to be included in the optionee's alternative
14
<PAGE> 17
minimum taxable income for the year in which the option is exercised and,
accordingly, may subject the optionee to the federal alternative minimum tax.
Nonqualified Stock Options. In general, there are no federal income tax
consequences to an optionee or to the Company on the grant of an option that
does not qualify as an ISO (a "Nonstatutory Option"). When the Nonstatutory
Option is exercised, however, the optionee generally will recognize ordinary
income equal to the excess of the fair market value of the shares as of the
exercise date over the purchase price paid for such shares, and the Company will
be entitled to a deduction equal to the amount of ordinary income recognized by
the optionee. A subsequent sale by an optionee of Common Stock acquired upon the
exercise of a Nonstatutory Option generally will result in the recognition of
capital gain or loss equal to the difference between the sales price and the sum
of the Exercise Price paid for such Common Stock plus the ordinary income
recognized with respect to such Common Stock. Such gain or loss will be a
short-term or long-term depending on the optionee's holding period
If a recipient of a Nonstatutory Option is a director, officer or
stockholder subject to Section 16 of the Exchange Act (an "Insider") and
exercises such option within six (6) months after the date of the grant, the
recognition of ordinary income generally will be deferred until the earlier of
(i) six (6) months after the date of grant or (ii) a disposition of the Common
Stock and the amount of such ordinary income generally will equal the excess of
the fair market value of the shares of Common Stock at that time over the
purchase price paid for such shares. Such an Insider, however, generally will be
entitled to make an election under Section 83(b) of the Code (an "83(b)
Election") within thirty (30) days after exercise to recognize ordinary income
on the date of exercise and based on the value of the underlying Common Stock on
such date. Insiders should consult their tax advisors to determine the tax
consequences to them of exercising options granted to them under the 2000 Plan
and the desirability of making 83(b) Elections with respect to such exercises.
Stock Appreciation Rights and Phantom Stock. Generally, the holder of a
stock appreciation right or phantom stock award will recognize ordinary income
equal to the amount paid by the Company under either arrangement on the date the
holder receives payment from the Company. If the Company places a limit on the
amount that will be payable under a stock appreciation right, the holder may
recognize ordinary income equal to the value of the holder's right under the
stock appreciation right at the time the value of such right equals such limit
and the stock appreciation right is exercisable. The Company will generally be
entitled to a deduction in an amount equal to the ordinary income recognized by
the holder.
Stock Purchase Rights -- Restricted Stock. Under the 2000 Plan, the
Company is authorized to grant rights to purchase Common Stock of the Company
subject to the right of the Company to repurchase such stock at the price paid
by the participant if the participant's employment relationship with the Company
terminates prior to the lapse of such repurchase right ("Restricted Stock"). In
general, there will be no tax consequences to a participant upon the grant of a
right to purchase Restricted Stock. Instead, the participant will be taxed at
ordinary income rates at the time the Company's repurchase rights expire or are
removed on an amount equal to the excess of the fair market value of the stock
at that time over the amount the participant paid to acquire such stock. A
participant who acquires Restricted Stock, however, may make an 83(b) Election
with respect to such stock. If such an election is timely made, the participant
to be taxed at ordinary income rates in the year in which the participant
acquires the Restricted Stock on the excess of the fair market value of the
stock at the time of the participant's acquisition of the stock (determined
without regard to the restrictions) over the amount paid to acquire such stock.
If a participant makes a timely Section 83(b) Election with respect to
Restricted Stock, the participant generally will not be required to report any
additional income with respect to such Restricted Stock until he disposes of
such stock. In the event that a participant forfeits Restricted Stock with
respect to which a Section 83(b) Election has been made, the participant
ordinarily will not be entitled to recognize any loss for federal income tax
purposes (except to the extent the amount realized by the participant at the
time of such forfeiture is less than the participant's purchase price for such
stock). The Company generally will
15
<PAGE> 18
be entitled to a deduction equal to the amount of ordinary income (if any)
recognized by a participant with respect to Restricted Stock for the taxable
year of the Company in which or with which ends the taxable year of the
participant in which such ordinary income is recognized.
Other Awards. In addition to the types of Awards described above, the
2000 Plan authorizes certain other Awards that may include payments in cash,
Company Common Stock, or a combination of cash and common stock. The tax
consequences of such Awards will depend upon the specific terms of such Awards.
Generally, however, a participant who receives an Award payable in cash will
recognize ordinary income, and the Company will be entitled to a deduction, with
respect to such Award at the earliest time at which the participant has an
unrestricted right to receive the amount of the cash payment. In general, the
sale or grant of stock to a participant under the 2000 Plan will be a taxable
event at the time the participant has an unrestricted right to receive such
stock if such stock would not be subject to a substantial risk of forfeiture or
would be transferable within the meaning of Section 83 of the Code in the hands
of the participant. (For such purposes, stock is ordinarily considered to be
transferable if it can be transferred to another person who takes the stock free
of any substantial risk of forfeiture.) In such case, the participant will
recognize ordinary income, and the Company will be entitled to a deduction,
equal to the excess of the fair market value of such stock on the date of the
Award over the amount, if any, that the participant pays for such stock. Stock
that at the time of receipt by a participant is subject to restrictions that
constitute a substantial risk of forfeiture and that is not transferable within
the meaning of Code Section 83, generally will be taxed under the rules
applicable to Restricted Stock as described above.
Withholding. In the event that an optionee or other recipient of an
Award under the 2000 Plan is an employee of the Company, the Company ordinarily
will be required to withhold applicable federal income taxes with respect to any
ordinary income recognized by such optionee or other Award recipient in
connection with stock options or other Awards under the 2000 Plan.
Certain Additional Rules Applicable to Awards. The terms of Awards
granted under the 2000 Plan may provide for accelerated vesting in connection
with a change in ownership or control of the Company. In that event and
depending upon the individual circumstances of the recipient, certain amounts
with respect to such Awards may constitute "excess parachute payments" under the
"golden parachute" provisions of the Code. Pursuant to these provisions, a
participant will be subject to a 20% excise tax on any "excess parachute
payments" and the Company will be denied any deduction with respect to such
payment. Participants should consult their tax advisors as to whether
accelerated vesting or payment of an Award in connection with a change in
ownership or control of the Company would give rise to an excess parachute
payment.
The Company generally is entitled to a deduction equal to ordinary
income recognized by a recipient in connection with an Award. However, the
Company's deduction (including the deduction related to ordinary income
recognized by a recipient) for compensation of certain corporate officers or
other employees may be limited to $1 million (per person) annually. Depending on
the nature of the Award, all or a portion of the ordinary income attributable to
certain Awards granted under the 2000 Plan may be included in the compensation
subject to such deduction limitation.
Special rules will apply in cases where a recipient pays the Exercise
Price of the Award or applicable withholding tax obligations under the 2000 Plan
by delivering previously owned Common Stock of the Company or by reducing the
number of shares of Common Stock otherwise issuable pursuant to the Award.
Participants who contemplate taking any such action should consult with their
personal tax advisors regarding the tax consequences of such action.
16
<PAGE> 19
PARTICIPATION IN THE 2000 PLAN BY EXECUTIVE OFFICERS AND OTHER EMPLOYEES
Participation in the 2000 Plan is in the discretion of the
Administrator. Accordingly, future participation by executive officers and other
employees under the 2000 Plan is not determinable.
VOTE REQUIRED
The affirmative vote of the holders of a majority of shares of the
common stock represented and voting, in person or by proxy, at the annual
meeting is required to approve the 2000 Plan. Accordingly, an abstention on this
vote will have the same effect as voting against adoption of the 2000 Plan. THE
BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL OF THE
ASHWORTH, INC. 2000 EQUITY INCENTIVE PLAN.
SELECTION OF INDEPENDENT AUDITORS
The independent public accounting firm of KPMG LLP audited the financial
statements of the Company for the period ended October 31, 1999. The Board of
Directors has appointed KPMG LLP as the Company's independent public accounting
firm to audit the financial statements for the period ending October 31, 2000. A
representative of KPMG LLP is expected to be present at the annual meeting and
available to respond to appropriate questions. This representative from KPMG LLP
will have an opportunity to make a statement if he or she so desires.
OTHER BUSINESS
Pursuant to the Company's advance notice provision contained in the
Company bylaws, stockholder proposals must be received by the Secretary of the
Company within seven days from the earlier of: the first public announcement of
the date of the annual meeting, or the date on which this proxy statement is
mailed to stockholders. Proposals received after that date are deemed untimely
and will not be considered at the meeting. As of the date of this proxy
statement, management of the Company was not aware of any other matters to be
presented at the annual meeting other than as set forth herein. However, if any
other matters are properly brought before the annual meeting, the shares
represented by valid proxies will be voted with respect to such matters in the
discretion of the designated proxies. An affirmative vote of a majority of
shares present in person or represented by proxy at the annual meeting is
necessary to approve any such matters.
17
<PAGE> 20
ANNUAL REPORT
The Company's annual report to stockholders for the fiscal year ended
October 31, 1999, including audited financial statements, accompanies this proxy
statement. COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED OCTOBER 31, 1999 AND THE EXHIBITS THERETO ARE AVAILABLE FROM THE
COMPANY WITHOUT CHARGE UPON WRITTEN REQUEST OF A STOCKHOLDER. Copies of the Form
10-K are also available on-line through the Securities and Exchange Commission
at www.sec.gov.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
FOR THE ANNUAL MEETING TO BE HELD IN MARCH 2001
Any stockholders intending to present a proposal at the Company's annual
meeting of stockholders to be held in March 2001, must deliver the proposal to
the Secretary of the Company no later than October 19, 2000, in order to have
the proposal considered for inclusion in the proxy statement and form of proxy
relating to that meeting.
By the order of the Board of Directors
/s/ HALINA BALYS
Halina Balys
Secretary
Carlsbad, California
February 16, 2000
18
<PAGE> 21
APPENDIX A
ASHWORTH, INC.
2000 EQUITY INCENTIVE PLAN
ARTICLE I
PURPOSE OF PLAN
The Company has adopted this Plan to promote the interests of the Company and
its stockholders by using investment interests in the Company to attract, retain
and motivate its management and other persons, to encourage and reward their
contributions to the performance of the Company, and to align their interests
with the interests of the Company's stockholders. Capitalized terms not
otherwise defined herein have the meanings ascribed to them in Article IX.
ARTICLE II
EFFECTIVE DATE AND TERM OF PLAN
2.1 TERM OF PLAN.
This Plan became effective as of the Effective Date and will continue in
effect until the Expiration Date, at which time this Plan will automatically
terminate.
2.2 EFFECT ON AWARDS.
Awards may be granted only during the Plan Term, but each Award granted
during the Plan Term will remain in effect after the Expiration Date until such
Award has been exercised, terminated or expired in accordance with its terms and
the terms of this Plan.
2.3 STOCKHOLDER APPROVAL.
This Plan must be approved by the Company's stockholders within 12
months before or after the Effective Date. The effectiveness of any Awards
granted prior to such stockholder approval will be subject to such stockholder
approval and rescinded if stockholder approval is not obtained.
ARTICLE III
SHARES SUBJECT TO PLAN
3.1 NUMBER OF SHARES.
The maximum number of shares of Common Stock that may be issued pursuant
to Awards under this Plan (including previous versions hereof or other plans
that are replaced or restated by this Plan) is 1,900,000, subject to adjustment
as set forth in Section 3.4.
3.2 SOURCE OF SHARES.
The Common Stock to be issued under this Plan will be made available, at
the discretion of the Administrator, either from authorized but unissued shares
of Common Stock or from previously issued shares of Common Stock reacquired by
the Company.
<PAGE> 22
3.3 AVAILABILITY OF UNUSED SHARES.
Shares of Common Stock subject to unexercised portions of any Award that
expire, terminate or are canceled, and shares of Common Stock issued pursuant to
an Award that are reacquired by the Company pursuant to the terms of the Award
under which such shares were issued, will again become available for the grant
of further Awards under this Plan as part of the shares available under Section
3.1. In addition, shares of Common Stock subject to an Award that are delivered
to or retained by the Company upon exercise to cover cashless exercise or tax
withholding, and any shares of Common Stock underlying an Award that are not
issued because the Award is settled in cash, will be available for grant of
further Awards under this Plan as part of the shares available under Section
3.1.
3.4 ADJUSTMENT PROVISIONS.
(a) Adjustments. If the Company consummates any Reorganization in
which holders of shares of Common Stock are entitled to receive in respect of
such shares any additional shares or new or different shares or securities, cash
or other consideration (including, without limitation, a different number of
shares of Common Stock), or if the outstanding shares of Common Stock are
increased, decreased or exchanged for a different number or kind of shares or
other securities through merger, consolidation, sale or exchange of assets of
the Company, reorganization, recapitalization, reclassification, combination,
stock dividend, stock split, reverse stock split, spin-off, or similar
transaction then, subject to Section 8.1, an appropriate and proportionate
adjustment shall be made by the Administrator in its discretion in: (1) the
maximum number and kind of shares subject to this Plan as provided in Section
3.1; (2) the number and kind of shares or other securities subject to then
outstanding Awards; and/or (3) the price for each share or other unit of any
other securities subject to, or measurement criteria applicable to, then
outstanding Awards.
(b) No Fractional Interests. No fractional interests will be
issued under the Plan resulting from any adjustments.
(c) Adjustments Related to Company Stock. To the extent any
adjustments relate to stock or securities of the Company, such adjustments will
be made by the Administrator, whose determination in that respect will be final,
binding and conclusive.
(d) Right to Make Adjustment. The grant of an Award will not
affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell, or
transfer all or any part of its business or assets.
(e) Limitations. No adjustment to the terms of an Incentive Stock
Option may be made unless such adjustment either: (i) would not cause the Option
to lose its status as an Incentive Stock Option; or (ii) is agreed to in writing
by the Administrator and the Recipient.
3.5 RESERVATION OF SHARES.
The Company will at all times reserve and keep available shares of
Common Stock equaling at least the total number of shares of Common Stock
issuable pursuant to all outstanding Awards.
A-2
<PAGE> 23
ARTICLE IV
ADMINISTRATION OF PLAN
4.1 ADMINISTRATOR.
(a) Plan Administration. This Plan will be administered by the
Board and may also be administered by a Committee of the Board appointed
pursuant to Section 4.1(b).
(b) Administration by Committee. The Board in its sole discretion
may from time to time appoint a Committee of not less than two (2) Board members
with authority to administer this Plan in whole or part and, subject to
applicable law, to exercise any or all of the powers, authority and discretion
of the Board under this Plan. The Board may from time to time increase or
decrease (but not below two (2)) the number of members of the Committee, remove
from membership on the Committee all or any portion of its members, and/or
appoint such person or persons as it desires to fill any vacancy existing on the
Committee, whether caused by removal, resignation or otherwise. The Board may
disband the Committee at any time.
4.2 AUTHORITY OF ADMINISTRATOR.
(a) Authority to Interpret Plan. Subject to the express
provisions of this Plan, the Administrator will have the power to implement,
interpret and construe this Plan and any Awards and Award Documents or other
documents defining the rights and obligations of the Company and Recipients
hereunder and thereunder, to determine all questions arising hereunder and
thereunder, and to adopt and amend such rules and regulations for the
administration hereof and thereof as it may deem desirable. The interpretation
and construction by the Administrator of any provisions of this Plan or of any
Award or Award Document, and any action taken by, or inaction of, the
Administrator relating to this Plan or any Award or Award Document, will be
within the discretion of the Administrator and will be conclusive and binding
upon all persons. Subject only to compliance with the express provisions hereof,
the Administrator may act in its discretion in matters related to this Plan and
any and all Awards and Award Documents.
(b) Authority to Grant Awards. Subject to the express provisions
of this Plan, the Administrator may from time to time in its discretion select
the Eligible Persons to whom, and the time or times at which, Awards will be
granted or sold, the nature of each Award, the number of shares of Common Stock
or the number of rights that make up or underlie each Award, the exercise price
and period (if applicable) for the exercise of each Award, and such other terms
and conditions applicable to each individual Award as the Administrator may
determine. Any and all terms and conditions of Awards may be established by the
Administrator without regard to existing Awards or other grants and without
incurring any obligation of the Company in respect of subsequent Awards. The
Administrator may grant at any time new Awards to an Eligible Person who has
previously received Awards or other grants (including other stock options)
regardless of the status of such other Awards or grants. The Administrator may
grant Awards singly or in combination or in tandem with other Awards as it
determines in its discretion.
(c) Procedures. Subject to the Company's charter or bylaws or any
Board resolution conferring authority on the Committee, any action of the
Administrator with respect to the administration of this Plan must be taken
pursuant to a majority vote of the authorized number of members of the
Administrator or by the unanimous written consent of its members; provided,
however, that (i) if the Administrator is the Committee and consists of two (2)
members, then actions of the Administrator must
A-3
<PAGE> 24
be unanimous, and (ii) actions taken by the Board will be valid if approved in
accordance with applicable law.
4.3 NO LIABILITY.
No member of the Board or the Committee or any designee thereof will be
liable for any action or inaction with respect to this Plan or any Award or any
transaction arising under this Plan or any Award except in circumstances
constituting bad faith of such member.
4.4 AMENDMENTS.
(a) Plan Amendments. The Administrator may at any time and from
time to time in its discretion, insofar as permitted by applicable law, rule or
regulation and subject to Section 4.4(c), suspend or discontinue this Plan or
revise or amend it in any respect whatsoever, and this Plan as so revised or
amended will govern all Awards, including those granted before such revision or
amendment. Without limiting the generality of the foregoing, the Administrator
is authorized to amend this Plan to comply with or take advantage of amendments
to applicable laws, rules or regulations, including the Securities Act, the
Exchange Act, the IRC, or the rules of any exchange or market system upon which
the Common Stock is listed or trades, or any rules or regulations promulgated
thereunder. No stockholder approval of any amendment or revision will be
required unless such approval is required by applicable law, rule or regulation.
(b) Award Amendments. The Administrator may at any time and from
time to time in its discretion, but subject to Section 4.4(c) and compliance
with applicable statutory or administrative requirements, accelerate or extend
the vesting or exercise period of any Award as a whole or in part, and make such
other modifications in the terms and conditions of an Award as it deems
advisable.
(c) Limitation. Except as otherwise provided in this Plan or in
the applicable Award Document, no amendment, revision, suspension or termination
of this Plan or an outstanding Award that would cause an Incentive Stock Option
to cease to qualify as such or that would alter, impair or diminish in any
material respect any rights or obligations under any Award theretofore granted
under this Plan may be effected without the written consent of the Recipient to
whom such Award was granted.
4.5 OTHER COMPENSATION PLANS.
This Plan supersedes and replaces all stock option plans of the Company
in effect as of the Effective Date, but the adoption of this Plan will not
affect any other stock option, incentive or other compensation plans in effect
from time to time for the Company, and this Plan will not preclude the Company
from establishing any other forms of incentive or other compensation for
employees, directors, advisors or consultants of the Company, whether or not
approved by stockholders. Notwithstanding the fact that this Plan supersedes and
replaces all stock option plans of the Company in effect as of the Effective
Date, this plan does not affect in any way, any outstanding award grants made
under such other plans prior to the Effective Date.
4.6 PLAN BINDING ON SUCCESSORS.
This Plan will be binding upon the successors and assigns of the
Company.
A-4
<PAGE> 25
4.7 REFERENCES TO SUCCESSOR STATUTES, REGULATIONS AND RULES.
Any reference in this Plan to a particular statute, regulation or rule
will also refer to any successor provision of such statute, regulation or rule.
4.8 INVALID PROVISIONS.
In the event that any provision of this Plan is found to be invalid or
otherwise unenforceable under any applicable law, such invalidity or
unenforceability is not to be construed as rendering any other provisions
contained herein invalid or unenforceable, and all such other provisions are to
be given full force and effect to the same extent as though the invalid and
unenforceable provision were not contained herein.
4.9 GOVERNING LAW.
This Agreement will be governed by and interpreted in accordance with
the internal laws of the State of Delaware, without giving effect to the
principles of the conflicts of laws thereof.
4.10 INTERPRETATION.
Headings herein are for convenience of reference only, do not constitute
a part of this Plan, and will not affect the meaning or interpretation of this
Plan. References herein to Sections or Articles are references to the referenced
Section or Article hereof, unless otherwise specified.
ARTICLE V
GENERAL AWARD PROVISIONS
5.1 PARTICIPATION IN PLAN.
(a) Eligibility to Receive Awards. A person is eligible to
receive grants of Awards if, at the time of the grant of the Award, such person
is an Eligible Person or has received an offer of employment from the Company,
provided that Awards granted to a person who has received an offer of employment
will terminate and be forfeited without consideration if the employment offer is
not accepted within such time as may be specified by the Company. Status as an
Eligible Person will not be construed as a commitment that any Award will be
granted under this Plan to an Eligible Person or to Eligible Persons generally.
(b) Eligibility to Receive Incentive Stock Options. Incentive
Stock Options may be granted only to Eligible Persons meeting the employment
requirements of Section 422 of the IRC.
(c) Awards to Foreign Nationals. Notwithstanding anything to the
contrary herein, the Administrator may, in order to fulfill the purposes of this
Plan, modify grants of Awards to Recipients who are foreign nationals or
employed outside of the United States to recognize differences in applicable
law, tax policy or local custom.
5.2 AWARD DOCUMENTS.
Each Award must be evidenced by an agreement duly executed on behalf of
the Company and by the Recipient or, in the Administrator's discretion, a
confirming memorandum issued by the Company to
A-5
<PAGE> 26
the Recipient, setting forth such terms and conditions applicable to the Award
as the Administrator may in its discretion determine. Awards will not be deemed
made or binding upon the Company, and Recipients will have no rights thereto,
until such an agreement is entered into between the Company and the Recipient or
such a memorandum is delivered by the Company to the Recipient, but an Award may
have an effective date prior to the date of such an agreement or memorandum.
Award Documents may be (but need not be) identical and must comply with and be
subject to the terms and conditions of this Plan, a copy of which will be
provided to each Recipient and incorporated by reference into each Award
Document. Any Award Document may contain such other terms, provisions and
conditions not inconsistent with this Plan as may be determined by the
Administrator. In case of any conflict between this Plan and any Award Document,
this Plan shall control.
5.3 PAYMENT FOR AWARDS.
(a) Payment of Exercise Price. The exercise price or other
payment for an Award is payable upon the exercise of a Stock Option or upon
other purchase of shares pursuant to an Award granted hereunder by delivery of
legal tender of the United States or payment of such other consideration as the
Administrator may from time to time deem acceptable in any particular instance;
provided, however, that the Administrator may, in the exercise of its
discretion, allow exercise of an Award in a broker-assisted or similar
transaction in which the exercise price is not received by the Company until
promptly after exercise.
(b) Company Assistance. The Company may assist any person to whom
an Award is granted (including, without limitation, any officer or director of
the Company) in the payment of the purchase price or other amounts payable in
connection with the receipt or exercise of that Award, by lending such amounts
to such person on such terms and at such rates of interest and upon such
security (if any) as may be consistent with applicable law and approved by the
Administrator. In case of such a loan, the Administrator may require that the
exercise be followed by a prompt sale of some or all of the underlying shares
and that a portion of the sale proceeds be dedicated to full payment of the
exercise price and amounts required pursuant to Section 5.10.
(c) Cashless Exercise. If permitted in any case by the
Administrator in its discretion, the exercise price for Awards may be paid by
capital stock of the Company delivered in transfer to the Company by or on
behalf of the person exercising the Award and duly endorsed in blank or
accompanied by stock powers duly endorsed in blank, with signatures guaranteed
in accordance with the Exchange Act if required by the Administrator; or
retained by the Company from the stock otherwise issuable upon exercise or
surrender of vested and/or exercisable Awards or other equity awards previously
granted to the Recipient and being exercised (if applicable) (in either case
valued at Fair Market Value as of the exercise date); or such other
consideration as the Administrator may from time to time in the exercise of its
discretion deem acceptable in any particular instance.
(d) No Precedent. Recipients will have no rights to the
assistance described in Section 5.3(b) or the exercise techniques described in
Section 5.3(c), and the Company may offer or permit such assistance or
techniques on an ad hoc basis to any Recipient without incurring any obligation
to offer or permit such assistance or techniques on other occasions or to other
Recipients.
5.4 NO EMPLOYMENT RIGHTS.
Nothing contained in this Plan (or in Award Documents or in any other
documents related to this Plan or to Awards) will confer upon any Eligible
Person or Recipient any right to continue in the employ
A-6
<PAGE> 27
of or engagement by the Company or any Affiliated Entity or constitute any
contract or agreement of employment or engagement, or interfere in any way with
the right of the Company or any Affiliated Entity to reduce such person's
compensation or other benefits or to terminate the employment or engagement of
such Eligible Person or Recipient, with or without cause. Except as expressly
provided in this Plan or in any statement evidencing the grant of an Award, the
Company has the right to deal with each Recipient in the same manner as if this
Plan and any such statement evidencing the grant of an Award did not exist,
including, without limitation, with respect to all matters related to the
hiring, discharge, compensation and conditions of the employment or engagement
of the Recipient. Unless otherwise set forth in a written agreement binding upon
the Company or an Affiliated Entity, all employees of the Company or an
Affiliated Entity are "at will" employees whose employment may be terminated by
the Company or the Affiliated Entity at any time for any reason or no reason,
without payment or penalty of any kind. Any question(s) as to whether and when
there has been a termination of a Recipient's employment or engagement, the
reason (if any) for such termination, and/or the consequences thereof under the
terms of this Plan or any statement evidencing the grant of an Award pursuant to
this Plan will be determined by the Administrator and the Administrator's
determination thereof will be final and binding.
5.5 RESTRICTIONS UNDER APPLICABLE LAWS AND REGULATIONS.
(a) Government Approvals. All Awards will be subject to the
requirement that, if at any time the Company determines, in its discretion, that
the listing, registration or qualification of the securities subject to Awards
granted under this Plan upon any securities exchange or interdealer quotation
system or under any federal, state or foreign law, or the consent or approval of
any government or regulatory body, is necessary or desirable as a condition of,
or in connection with, the granting of such an Award or the issuance, if any, or
purchase of shares in connection therewith, such Award may not be exercised as a
whole or in part unless and until such listing, registration, qualification,
consent or approval has been effected or obtained free of any conditions not
acceptable to the Company. During the term of this Plan, the Company will use
its reasonable efforts to seek to obtain from the appropriate governmental and
regulatory agencies any requisite qualifications, consents, approvals or
authorizations in order to issue and sell such number of shares of its Common
Stock as is sufficient to satisfy the requirements of this Plan. The inability
of the Company to obtain any such qualifications, consents, approvals or
authorizations will relieve the Company of any liability in respect of the
nonissuance or sale of such stock as to which such qualifications, consents,
approvals or authorizations pertain.
(b) No Registration Obligation; Recipient Representations. The
Company will be under no obligation to register or qualify the issuance of
Awards or underlying securities under the Securities Act or applicable state
securities laws. Unless the issuance of Awards and underlying securities have
been registered under the Securities Act and qualified or registered under
applicable state securities laws, the Company shall be under no obligation to
issue any Awards or underlying securities unless the Awards and underlying
securities may be issued pursuant to applicable exemptions from such
registration or qualification requirements. In connection with any such exempt
issuance, the Administrator may require the Recipient to provide a written
representation and undertaking to the Company, satisfactory in form and scope to
the Company, that such Recipient is acquiring such Awards and underlying
securities for such Recipient's own account as an investment and not with a view
to, or for sale in connection with, the distribution of any such securities, and
that such person will make no transfer of the same except in compliance with any
rules and regulations in force at the time of such transfer under the Securities
Act and other applicable law, and that if securities are issued without
registration, a legend to this effect (together with any other legends deemed
appropriate by the Administrator) may be endorsed upon the securities so issued,
and to the effect of any additional representations that are
A-7
<PAGE> 28
appropriate in light of applicable securities laws and rules. The Company may
also order its transfer agent to stop transfers of such shares. The
Administrator may also require the Recipient to provide the Company such
information and other documents as the Administrator may request in order to
satisfy the Administrator as to the investment sophistication and experience of
the Recipient and as to any other conditions for compliance with any such
exemptions from registration or qualification.
5.6 ADDITIONAL CONDITIONS.
Any Award may be subject to such provisions (whether or not applicable
to any other Award or Recipient) as the Administrator deems appropriate,
including without limitation provisions for the forfeiture of or restrictions on
resale or other disposition of securities of the Company acquired under this
Plan, provisions giving the Company the right to repurchase securities of the
Company acquired under this Plan in the event the Recipient leaves the Company
for any reason or elects to effect any disposition thereof, and provisions to
comply with federal and state securities laws.
5.7 NO PRIVILEGES RE STOCK OWNERSHIP OR SPECIFIC ASSETS.
Except as otherwise set forth herein, a Recipient or a permitted
transferee of an Award will have no rights as a shareholder with respect to any
shares issuable or issued in connection with the Award until the Recipient has
delivered to the Company all amounts payable and performed all obligations
required to be performed in connection with exercise of the Award and the
Company has issued such shares. No person will have any right, title or interest
in any fund or in any specific asset (including shares of capital stock) of the
Company by reason of any Award granted hereunder. Neither this Plan (or any
documents related hereto) nor any action taken pursuant hereto is to be
construed to create a trust of any kind or a fiduciary relationship between the
Company and any person. To the extent that any person acquires a right to
receive an Award hereunder, such right shall be no greater than the right of any
unsecured general creditor of the Company.
5.8 NONASSIGNABILITY.
No Award is assignable or transferable except: (a) by will or by the
laws of descent and distribution; or (b) subject to the final sentence of this
Section 5.8, upon dissolution of marriage pursuant to a qualified domestic
relations order or, in the discretion of the Administrator and under
circumstances that would not adversely affect the interests of the Company,
transfers for estate planning purposes or pursuant to a nominal transfer that
does not result in a change in beneficial ownership. During the lifetime of a
Recipient, an Award granted to such person will be exercisable only by the
Recipient (or the Recipient's permitted transferee) or such person's guardian or
legal representative. Notwithstanding the foregoing, Stock Options intended to
be treated as Incentive Stock Options (or other Awards subject to transfer
restrictions under the IRC) may not be assigned or transferred in violation of
Section 422(b)(5) of the IRC or the regulations thereunder, and nothing herein
is intended to allow such assignment or transfer.
5.9 INFORMATION TO RECIPIENTS.
(a) Provision of Information. The Administrator in its sole
discretion may determine what, if any, financial and other information is to be
provided to Recipients and when such financial and other information is to be
provided after giving consideration to applicable federal and state laws, rules
and regulations, including, without limitation, applicable federal and state
securities laws, rules and regulations.
A-8
<PAGE> 29
(b) Confidentiality. The furnishing of financial and other
information that is confidential to the Company is subject to the Recipient's
agreement to maintain the confidentiality of such financial and other
information, and not to use the information for any purpose other than
evaluating the Recipient's position under this Plan. The Administrator may
impose other restrictions on the access to and use of such confidential
information and may require a Recipient to acknowledge the Recipient's
obligations under this Section 5.9(b) (which acknowledgment is not to be a
condition to Recipient's obligations under this Section 5.9(b)).
5.10 WITHHOLDING TAXES.
Whenever the granting, vesting or exercise of any Award, or the issuance
of any securities upon exercise of any Award or transfer thereof, gives rise to
tax or tax withholding liabilities or obligations, the Administrator will have
the right as a condition thereto to require the Recipient to remit to the
Company an amount sufficient to satisfy any federal, state and local withholding
tax requirements arising in connection therewith. The Administrator may, in the
exercise of its discretion, allow satisfaction of tax withholding requirements
by accepting delivery of stock of the Company or by withholding a portion of the
stock otherwise issuable in connection with an Award, in each case valued at
Fair Market value as of the date of such delivery or withholding, as the case
may be, is determined.
5.11 LEGENDS ON AWARDS AND STOCK CERTIFICATES.
Each Award Document and each certificate representing securities
acquired upon vesting or exercise of an Award must be endorsed with all legends,
if any, required by applicable federal and state securities and other laws to be
placed on the Award Document and/or the certificate. The determination of which
legends, if any, will be placed upon Award Documents or the certificates will be
made by the Administrator in its discretion and such decision will be final and
binding.
5.12 EFFECT OF TERMINATION OF EMPLOYMENT ON AWARDS.
(a) Termination of Vesting. Notwithstanding anything to the
contrary herein, but subject to Section 5.12(b) Awards will be exercisable by a
Recipient (or the Recipient's successor in interest) following such Recipient's
termination of employment only to the extent that installments thereof had
become exercisable on or prior to the date of such termination and are not
forfeited pursuant to Section 5.15.
(b) Alteration of Vesting and Exercise Periods. Notwithstanding
anything to the contrary herein, the Administrator may in its discretion (i)
designate shorter or longer periods following a Recipient's termination of
employment during which Awards may vest or be exercised; provided, however, that
any shorter periods determined by the Administrator will be effective only if
provided for in this Plan or the instrument that evidences the grant to the
Recipient of the affected Award or if such shorter period is agreed to in
writing by the Recipient, and (ii) accelerate the vesting of all or any portion
of any Awards by increasing the number of shares purchasable at any time.
(c) Leave of Absence. In the case of any employee on an approved
leave of absence, the Administrator may make such provision respecting
continuance of Awards granted to such employee as the Administrator in its
discretion deems appropriate, except that in no event will an Award be
exercisable after the date such Award would expire in accordance with its terms
had the Recipient remained continuously employed.
A-9
<PAGE> 30
(d) General Cessation. Except as otherwise set forth in this Plan
or an Award Document or as determined by the Administrator in its discretion,
all Awards granted to a Recipient, and all of such Recipient's rights
thereunder, will terminate upon termination for any reason of such Recipient's
employment with the Company or any Affiliated Entity (or cessation of any other
service relationship between the Recipient and the Company or any Affiliated
Entity in place as of the date the Award was granted).
5.13 LOCK-UP AGREEMENTS.
Each Recipient agrees as a condition to receipt of an Award that, in
connection with any public offering by the Company of its equity securities and
upon the request of the Company and the principal underwriter (if any) in such
public offering, any shares of Common Stock acquired or that may be acquired
upon exercise or vesting of an Award may not be sold, offered for sale,
encumbered, or otherwise disposed of or subjected to any transaction that will
involve any sales of securities of the Company, without the prior written
consent of the Company or such underwriter, as the case may be, for a period of
not more than 365 days after the effective date of the registration statement
for such public offering. Each Recipient will, if requested by the Company or
the principal underwriter, enter into a separate agreement to the effect of this
Section 5.13.
5.14 RESTRICTIONS ON COMMON STOCK AND OTHER SECURITIES.
Common Stock or other securities of the Company issued or issuable in
connection with any Award will be subject to all of the restrictions imposed
under this Plan upon Common Stock issuable or issued upon exercise of Stock
Options, except as otherwise determined by the Administrator.
5.15 CANCELLATION AND RESCISSION OF AWARDS.
Unless an Award Document or other separate written agreement binding
upon the Company provides otherwise, the Administrator may cancel any unexpired,
unpaid or deferred Award (whether or not vested) at any time if the Recipient
thereof fails at any time to comply with all applicable provisions of the Award
Document or this Plan, or does any of the following:
(a) During employment or engagement with the Company or any
Affiliated Entity or at any time within 365 days after termination of employment
or engagement with the Company or any Affiliated Entity, renders services for
any organization or engages directly or indirectly in any business that, in the
judgment of the Chief Executive Officer of the Company or other senior officer
designated by the Administrator, is or becomes competitive with the Company or
any Affiliated Entity, or which organization or business, or the rendering of
services to such organization or business, is or becomes otherwise prejudicial
to or in conflict with the business or interests of the Company or any
Affiliated Entity. For a Recipient whose employment has terminated, the judgment
of the Chief Executive Officer or such other senior officer shall be based upon
the Recipient's position and responsibilities while employed by the Company or
any Affiliated Entity, the Recipient's post-employment responsibilities and
position with the other organization or business, the extent of past, current
and potential competition or conflict between the Company or any Affiliated
Entity and the other organization or business, the effect on the customers,
suppliers and competitors of the Company or Affiliated Entity of the Recipient's
assuming the post-employment position, the guidelines established in any
employee handbook, any
A-10
<PAGE> 31
employment agreement with the Recipient, and such other considerations as are
deemed by the Company to be relevant given the applicable facts and
circumstances.
(b) During employment or engagement with the Company or any
Affiliated Entity or at any time thereafter, fails to comply with any
confidentiality agreement with the Company or any Affiliated Entity to which the
Recipient is party, or with the policies of the Company or Affiliated Entity
regarding nondisclosure of confidential information, or without prior written
authorization from the Company or any Affiliated Entity, discloses to anyone
outside the Company or any Affiliated Entity, or uses for any purpose or in any
context other than in performance of the Recipient's duties to the Company or
any Affiliated Entity, any confidential or trade secret information of the
Company or any Affiliated Entity.
(c) During employment or engagement with the Company or any
Affiliated Entity or at any time thereafter, fails to comply with any agreement
with the Company or any Affiliated Entity regarding assignment of inventions, or
to otherwise disclose promptly and assign to the Company or any Affiliated
Entity all right, title and interest in any invention or idea, patentable or
not, made or conceived by the Recipient during and within the scope of
employment or engagement by the Company or any Affiliated Entity, relating in
any manner to the actual or anticipated business, research, or development work
of the Company or any Affiliated Entity, or to do anything reasonably necessary
to enable the Company or any Affiliated Entity to secure a patent where
appropriate in the United States and other countries.
(d) During employment or engagement with the Company or any
Affiliated Entity or at any time thereafter, breaches any agreement with or duty
to the Company or any Affiliated Entity. Upon and as a condition to exercise of
any Award, a Recipient shall certify on a form acceptable to the Company that he
or she is in compliance with the terms and conditions of this Plan and any
applicable Award Document and has not done any of the things described in this
Section 5.15. Furthermore, if a Recipient does any of the things described in
this Section 5.15 within 180 days after any exercise, payment or delivery
pursuant to an Award, the Company may rescind such exercise, payment or
delivery. The Company shall notify the Recipient in writing of any such
rescission within two years after such exercise, payment or delivery. Within ten
days after receiving such notice from the Company, a Recipient shall pay to the
Company the amount of any gain realized or payment received as a result of the
rescinded exercise, payment or delivery pursuant to an Award. Such payment shall
be made by returning to the Company all shares of capital stock that the
Recipient received in connection with the rescinded exercise, payment or
delivery, or if such shares have been transferred by the Recipient, then by
paying the equivalent value thereof at the time of their transfer to the Company
in cash. To assist in enforcement of the Company's rescission right described
above, the Company may, in its discretion, retain any Common Stock or other
consideration otherwise deliverable to a Recipient in connection with an Award
until the rescission period described above has lapsed.
5.16 LIMITS ON AWARDS TO ELIGIBLE PERSONS.
Notwithstanding any other provision of this Plan, in order for the
compensation attributable to Awards hereunder to qualify as Performance-Based
Compensation, no one Eligible Person shall be granted awards with respect to
more than 250,000 shares of Common Stock in any one calendar year. The
limitation set forth in this Section 5.16 will be subject to adjustment as
provided in Section 3.4 or under Article VIII, but only to the extent such
adjustment would not affect the status of compensation attributable to Awards as
Performance-Based Compensation.
A-11
<PAGE> 32
ARTICLE VI
AWARDS
6.1 STOCK OPTIONS.
(a) Nature of Stock Options. Stock Options may be Incentive Stock
Options or Nonqualified Stock Options.
(b) Option Exercise Price. The exercise price for each Stock
Option will be determined by the Administrator as of the date such Stock Option
is granted.
(c) Option Period and Vesting. Stock Options granted hereunder
will vest and may be exercised as determined by the Administrator, except that
exercise of Stock Options after termination of the Recipient's employment shall
be subject to Section 5.12. Each Stock Option granted hereunder and all rights
or obligations thereunder shall expire on such date as may be determined by the
Administrator, but not later than ten (10) years after the date the Stock Option
is granted and may be subject to earlier termination as provided herein or in
the Award Document. Except as otherwise provided herein, a Stock Option will
become exercisable, as a whole or in part, on the date or dates specified by the
Administrator and thereafter will remain exercisable until the exercise,
expiration or earlier termination of the Stock Option.
(d) Exercise of Stock Options. The exercise price for Stock
Options will be paid as set forth in Section 5.3. No Stock Option will be
exercisable except in respect of whole shares, and fractional share interests
shall be disregarded. Not fewer than 100 shares of Common Stock may be purchased
at one time and Stock Options must be exercised in multiples of 100 unless the
number purchased is the total number of shares for which the Stock Option is
exercisable at the time of exercise. A Stock Option will be deemed to be
exercised when the Secretary or other designated official of the Company
receives written notice of such exercise from the Recipient in the form of
Exhibit A hereto or such other form as the Company may specify from time to
time, together with payment of the exercise price in accordance with Section 5.3
and any amounts required under Section 5.10 or, with permission of the
Administrator, arrangement for such payment. Notwithstanding any other provision
of this Plan, the Administrator may impose, by rule and/or in Award Documents,
such conditions upon the exercise of Stock Options (including, without
limitation, conditions limiting the time of exercise to specified periods) as
may be required to satisfy applicable regulatory requirements, including,
without limitation, Rule 16b-3 and Rule 10b-5 under the Exchange Act, and any
amounts required under Section 5.10, or any applicable section of or regulation
under the IRC.
(e) Termination of Employment.
(i) Termination for Just Cause. Subject to Section 5.12 and
except as otherwise provided in a written agreement between the Company or an
Affiliated Entity and the Recipient, which may be entered into at any time
before or after termination of employment, in the event of a Just Cause
Dismissal of a Recipient all of the Recipient's unexercised Stock Options,
whether or not vested, will expire and become unexercisable as of the date of
such Just Cause Dismissal.
(ii) Termination Other Than for Just Cause. Subject to
Section 5.12 and except as otherwise provided in a written agreement between the
Company or an Affiliated Entity and the Recipient, which may be entered into at
any time before or after termination of employment, if a Recipient's employment
with the Company or any Affiliated Entity terminates for:
A-12
<PAGE> 33
(A) any reason other than for Just Cause Dismissal,
death, Permanent Disability or Retirement, the Recipient's Awards, whether or
not vested, will expire and become unexercisable as of the earlier of: (A) the
date such Stock Options would expire in accordance with their terms had the
Recipient remained employed; and (B) 90 days after the date of employment
termination in the case of Stock Options intended to be treated as Incentive
Stock Options, or 180 days after the date of employment termination in the case
of Nonqualified Stock Options.
(B) death or Permanent Disability or Retirement, the
Recipient's unexercised Awards will, whether or not vested, expire and become
unexercisable as of the earlier of: (A) the date such Awards would expire in
accordance with their terms had the Recipient remained employed; and (B) 365
days after the date of employment termination.
(f) Special Provisions Regarding Incentive Stock Options.
Notwithstanding anything herein to the contrary,
(i) The exercise price and vesting period of any Stock Option
intended to be treated as an Incentive Stock Option must comply with the
provisions of Section 422 of the IRC and the regulations thereunder. As of the
Effective Date, such provisions require, among other matters, that: (A) the
exercise price must not be less than the Fair Market Value of the underlying
stock as of the date the Incentive Stock Option is granted, and not less than
110% of the Fair Market Value as of such date in the case of a grant to a
Significant Stockholder; and (B) that the Incentive Stock Option not be
exercisable after the expiration of ten (10) years from the date of grant or the
expiration of five (5) years from the date of grant in the case of an Incentive
Stock Option granted to a Significant Stockholder.
(ii) 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 Recipient under this Plan (or any other option plan of
the Company or any of its subsidiaries or affiliates) may for the first time
become exercisable as Incentive Stock Options under the federal tax laws during
any one calendar year may not exceed $100,000.
(iii) Any Stock Options granted as Incentive Stock Options
pursuant to this Plan that for any reason fail or cease to qualify as such will
be treated as Nonqualified Stock Options. If the limit described in Section
6.1(f)(ii) is exceeded, the earliest granted Stock Options will be treated as
Incentive Stock Options, up to such limit.
6.2 PERFORMANCE AWARDS.
(a) Grant of Performance Award. The Administrator will determine
in its discretion the performance criteria (which need not be identical and may
be established on an individual or group basis) governing Performance Awards,
the terms thereof, and the form and time of payment of Performance Awards.
(b) Payment of Award. Upon satisfaction of the conditions
applicable to a Performance Award, payment will be made to the Recipient in
cash, in shares of Common Stock valued at Fair Market Value as of the date
payment is due, or in a combination of Common Stock and cash, as the
Administrator in its discretion may determine.
A-13
<PAGE> 34
6.3 RESTRICTED STOCK.
(a) Award of Restricted Stock. The Administrator will determine
the Purchase Price (if any), the terms of payment of the Purchase Price, the
restrictions upon the Restricted Stock, and when such restrictions will lapse.
(b) Requirements of Restricted Stock. All shares of Restricted
Stock granted or sold pursuant to this Plan will be subject to the following
conditions:
(i) No Transfer. The shares may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of, alienated or
encumbered until the restrictions are removed or expire;
(ii) Certificates. The Administrator may require that the
certificates representing Restricted Stock granted or sold to a Recipient remain
in the physical custody of an escrow holder or the Company until all
restrictions are removed or expire;
(iii) Restrictive Legends. Each certificate representing
Restricted Stock granted or sold to a Recipient pursuant to this Plan will bear
such legend or legends making reference to the restrictions imposed upon such
Restricted Stock as the Administrator in its discretion deems necessary or
appropriate to enforce such restrictions; and
(iv) Other Restrictions. The Administrator may impose such
other conditions on Restricted Stock as the Administrator may deem advisable,
including, without limitation, restrictions under the Securities Act, under the
Exchange Act, under the requirements of any stock exchange or interdealer
quotation system upon which such Restricted Stock or other securities of the
Company are then listed or traded and under any blue sky or other securities
laws applicable to such shares.
(c) Lapse of Restrictions. The restrictions imposed upon
Restricted Stock will lapse in accordance with such terms or other conditions as
are determined by the Administrator.
(d) Rights of Recipient. Subject to the provisions of Section
6.3(b) and any restrictions imposed upon the Restricted Stock, the Recipient
will have all rights of a stockholder with respect to the Restricted Stock
granted or sold to such Recipient under this Plan, including, without
limitation, the right to vote the shares and receive all dividends and other
distributions paid or made with respect thereto.
(e) Termination of Employment. Unless the Administrator in its
discretion determines otherwise, if a Recipient's employment with the Company or
any Affiliated Entity terminates for any reason, all of the Recipient's
Restricted Stock remaining subject to restrictions on the date of such
termination of employment will be repurchased by the Company at the Purchase
Price (if any) paid by the Recipient to the Company, without interest or
premium, and otherwise returned to the Company without consideration.
6.4 STOCK APPRECIATION RIGHTS.
(a) Granting of Stock Appreciation Rights. The Administrator may
at any time and from time to time approve the grant to Eligible Persons of Stock
Appreciation Rights, related or unrelated to Stock Options.
(b) SARs Related to Options.
A-14
<PAGE> 35
(i) A Stock Appreciation Right related to a Stock Option will
entitle the holder of the related Stock Option, upon exercise of the Stock
Appreciation Right, to surrender such Stock Option, or any portion thereof to
the extent previously vested but unexercised, with respect to the number of
shares as to which such Stock Appreciation Right is exercised, and to receive
payment of an amount computed pursuant to Section 6.4(b)(iii). Such Stock Option
will, to the extent surrendered, then cease to be exercisable.
(ii) A Stock Appreciation Right related to a Stock Option
hereunder will be exercisable at such time or times, and only to the extent
that, the related Stock Option is exercisable, and will not be transferable
except to the extent that such related Stock Option may be transferable (and
under the same conditions), will expire no later than the expiration of the
related Stock Option, and may be exercised only when the market price of the
Common Stock subject to the related Stock Option exceeds the exercise price of
the Stock Option.
(iii) Upon the exercise of a Stock Appreciation Right related
to a Stock Option, the Recipient will be entitled to receive payment of an
amount determined by multiplying: (A) the difference obtained by subtracting the
exercise price of a share of Common Stock specified in the related Stock Option
from the Fair Market Value of a share of Common Stock on the date of exercise of
such Stock Appreciation Right (or as of such other date or as of the occurrence
of such event as may have been specified in the instrument evidencing the grant
of the Stock Appreciation Right), by (B) the number of shares as to which such
Stock Appreciation Right is exercised.
(c) SARs Unrelated to Options. The Administrator may grant Stock
Appreciation Rights unrelated to Stock Options. Section 6.4(b)(iii) will govern
the amount payable at exercise under such Stock Appreciation Right, except that
in lieu of an option exercise price the initial base amount specified in the
Award shall be used.
(d) Limits. Notwithstanding the foregoing, the Administrator, in
its discretion, may place a dollar limitation on the maximum amount that will be
payable upon the exercise of a Stock Appreciation Right.
(e) Payments. Payment of the amount determined under the
foregoing provisions may be made solely in whole shares of Common Stock valued
at their Fair Market Value on the date of exercise of the Stock Appreciation
Right or, alternatively, at the discretion of the Administrator, in cash or in a
combination of cash and shares of Common Stock as the Administrator deems
advisable. The Administrator has full discretion to determine the form in which
payment of a Stock Appreciation Right will be made and to consent to or
disapprove the election of a Recipient to receive cash in full or partial
settlement of a Stock Appreciation Right. If the Administrator decides to make
full payment in shares of Common Stock, and the amount payable results in a
fractional share, payment for the fractional share will be made in cash.
6.5 STOCK PAYMENTS.
The Administrator may approve Stock Payments to any Eligible Person on
such terms and conditions as the Administrator may determine. Stock Payments
will replace cash compensation at the Fair Market Value of the Common Stock on
the date payment is due.
A-15
<PAGE> 36
6.6 DIVIDEND EQUIVALENTS.
The Administrator may grant Dividend Equivalents to any Recipient who
has received a Stock Option, SAR or other Award denominated in shares of Common
Stock. Dividend Equivalents may be paid in cash, Common Stock or other Awards;
the amount of Dividend Equivalents paid other than in cash will be determined by
the Administrator by application of such formula as the Administrator may deem
appropriate to translate the cash value of dividends paid to the alternative
form of payment of the Dividend Equivalent. Dividend Equivalents will be
computed as of each dividend record date and will be payable to recipients
thereof at such time as the Administrator may determine.
6.7 STOCK BONUSES.
The Administrator may issue Stock Bonuses to Eligible Persons on such
terms and conditions as the Administrator may determine.
6.8 STOCK SALES.
The Administrator may sell to Eligible Persons shares of Common Stock on
such terms and conditions as the Administrator may determine.
6.9 PHANTOM STOCK.
The Administrator may grant Awards of Phantom Stock to Eligible Persons.
Phantom Stock is a cash payment measured by the Fair Market Value of a specified
number of shares of Common Stock on a specified date, or measured by the excess
of such Fair Market Value over a specified minimum, which may but need not
include a Dividend Equivalent.
6.10 OTHER STOCK-BASED BENEFITS.
The Administrator is authorized to grant Other Stock-Based Benefits.
Other Stock-Based Benefits are any arrangements granted under this Plan not
otherwise described above that: (a) by their terms might involve the issuance or
sale of Common Stock or other securities of the Company; or (b) involve a
benefit that is measured, as a whole or in part, by the value, appreciation,
dividend yield or other features attributable to a specified number of shares of
Common Stock or other securities of the Company.
ARTICLE VII
NONEMPLOYEE DIRECTOR OPTIONS
7.1 ANNUAL GRANT OF OPTIONS.
Persons serving as Nonemployee Directors at the start of each fiscal
year shall receive a grant of an option to purchase up to 10,000 shares of the
Company's Common Stock (an "ANNUAL OPTION") at an exercise price per share equal
to the Fair Market Value of the Common Stock at that time, subject to: (a)
vesting as set forth in Section 7.2, and (b) adjustment as set forth in this
Plan. For purposes hereof, a "Nonemployee Director" is a director of the Company
who qualifies as a "Non-Employee Director" under Rule 16b-3 under the Exchange
Act (such person being an "ELIGIBLE DIRECTOR").
A-16
<PAGE> 37
7.2 VESTING.
Annual Options shall vest ratably (2,500) on the first day of each
fiscal quarter if the Recipient has remained a Non-Employee Director from the
grant date to such vesting time. Notwithstanding the foregoing, however, Annual
Options that have not vested and become exercisable at the time the optionee
ceases to be a Non-Employee Director shall terminate.
7.3 EXERCISE.
Nonemployee Directors' Options will be exercisable, and the exercise
price therefore shall be paid, in the same manner as provided herein for other
Stock Options.
7.4 TERM OF OPTIONS AND EFFECT OF TERMINATION.
Notwithstanding any other provision of the Plan, no Nonemployee
Director's Option granted under the Plan shall be exercisable after the
expiration of ten years from the effective date of its grant. In the event that
the recipient of any Nonemployee Directors' Options granted under the Plan shall
cease to be a director of the Company, all Annual Options granted under this
plan to such recipient shall be exercisable, to the extent already exercisable
at the date such recipient ceases to be a director and regardless of the reason
the recipient ceases to be a director, for a period of 365 days after that date
(or, if sooner, until the expiration of the option according to its terms), and
shall then terminate; In the event of the death of an optionee while such
optionee is a director of the Company or within the period after termination of
such status during which he or she is permitted to exercise an option, such
option may be exercised by any person or persons designated by the optionee on a
beneficiary designation form adopted by the Plan administrator for such purpose
or, if there is no effective beneficiary designation form on file with the
Company, by the executors or administrators of the optionee's estate or by any
person or persons who shall have acquired the option directly from the optionee
by his or her will or the applicable laws of descent and distribution.
7.5 AMENDMENT; SUSPENSION.
The Administrator may at any time and from time to time in its
discretion (a) change the number of shares or vesting periods associated with
the Annual Options, and (b) suspend and reactivate this Article VII.
ARTICLE VIII
CHANGE IN CONTROL
8.1 PROVISION FOR AWARDS UPON CHANGE IN CONTROL.
As of the effective time and date of any Change in Control, this Plan
and any then outstanding Awards (whether or not vested) will automatically
terminate unless: (a) provision is made in writing in connection with such
transaction for the continuance of this Plan and for the assumption of such
Awards, or for the substitution for such Awards of new awards covering the
securities of a successor entity or an affiliate thereof, with appropriate
adjustments as to the number and kind of securities and exercise prices or other
measurement criteria, in which event this Plan and such outstanding Awards will
continue or be replaced, as the case may be, in the manner and under the terms
so provided; or (b) the Board otherwise provides in writing for such adjustments
as it deems appropriate in the terms and conditions of the then-outstanding
Awards (whether or not vested), including, without limitation, (i) accelerating
the vesting of
A-17
<PAGE> 38
outstanding Awards, and/or (ii) providing for the cancellation of Awards and
their automatic conversion into the right to receive the securities, cash or
other consideration that a holder of the shares underlying such Awards would
have been entitled to receive upon consummation of such Change in Control had
such shares been issued and outstanding immediately prior to the effective date
and time of the Change in Control (net of the appropriate option exercise
prices). If, pursuant to the foregoing provisions of this Section 8.1, this Plan
and the Awards terminate by reason of the occurrence of a Change in Control
without provision for any of the action(s) described in clause (a) or (b)
hereof, then subject to Sections 5.12 and 5.15, any Recipient holding
outstanding Awards will have the right, at such time prior to the consummation
of the Change in Control as the Board designates, to exercise or receive the
full benefit of the Recipient's Awards to the full extent not theretofore
exercised, including any installments which have not yet become vested.
8.2 TERMINATION OF EMPLOYMENT IN CONNECTION WITH A CHANGE IN CONTROL.
(a) Acceleration of Awards. If a Change in Control occurs and
provision for Awards is made as described in part (a) or (b) of Section 8.1 such
that a Recipient continues to own Awards or replacement awards, but in
connection with such Change in Control the Recipient's employment with the
Company or an Affiliated Entity is terminated by the Company or an Affiliated
Entity, then, subject to Sections 5.12 and 5.15 and the terms of any written
employment agreement between the Company or any Affiliated Entity and the
Recipient and the specific terms of any Award, such Recipient will have the
right to exercise or receive the full benefit of the Recipient's Awards during
the applicable time period provided in Section 5.12, without regard to any
vesting or performance requirements or other milestones.
(b) Employment Termination. For purposes of this Section, and
subject to any separate written agreement binding upon the Company, a
Recipient's employment with the Company or any Affiliated Entity will be deemed
to have been terminated in connection with a Change in Control if: (i) the
Recipient is removed from the Recipient's employment by, or resigns the
Recipient's employment upon the request of, a Person exercising practical voting
control over the Company following the Change in Control or a person acting upon
authority or at the instruction of such Person; or (ii) the Recipient's position
is eliminated as a result of a reduction in force made to reduce over-capacity
or unnecessary duplication of personnel within 180 days after the consummation
of the Change in Control and the Recipient is not offered a replacement position
with compensation substantially similar to the compensation in effect
immediately before the Change in Control. Unless otherwise provided in a written
agreement with the Company or any Affiliated Entity, assignment of a Recipient
to different duties or reporting will not be deemed to constitute or justify
termination of Recipient's employment in connection with the Change in Control.
A-18
<PAGE> 39
ARTICLE IX
DEFINITIONS
Capitalized terms used in this Plan and not otherwise defined have the meanings
set forth below:
"ADMINISTRATOR" means the Board as long as no Committee has been
appointed and is in effect and also means the Committee to the extent that the
Board has delegated authority thereto.
"AFFILIATED ENTITY" means any Parent Corporation of the Company or
Subsidiary Corporation of the Company or any other entity controlling,
controlled by, or under common control with the Company.
"APPLICABLE DIVIDEND PERIOD" means (i) the period between the date a
Dividend Equivalent is granted and the date the related Stock Option, SAR, or
other Award is exercised, terminates, or is converted to Common Stock, or (ii)
such other time as the Administrator may specify in the written instrument
evidencing the grant of the Dividend Equivalent.
"AWARD" means any Stock Option, Performance Award, Restricted Stock,
Stock Appreciation Right, Stock Payment, Stock Bonus, Stock Sale, Phantom Stock,
Dividend Equivalent, or Other Stock-Based Benefit granted or sold to an Eligible
Person under this Plan, or any similar award granted by the Company prior to the
Effective Date and outstanding as of the Effective Date that is governed by this
Plan.
"AWARD DOCUMENT" means the agreement or confirming memorandum setting
forth the terms and conditions of an Award.
"BOARD" means the Board of Directors of the Company.
"CHANGE IN CONTROL" means the following and shall be deemed to occur if
any of the following events occurs:
(i) Any Person becomes the beneficial owner (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of thirty percent
(30%) or more of either the then outstanding shares of Common Stock or
the combined voting power of the Company's then outstanding securities
entitled to vote generally in the election of directors; or
(ii) Individuals who, as of the effective date hereof,
constitute the Board (the "INCUMBENT BOARD") cease for any reason to
constitute at least a majority of the Board, provided that any
individual who becomes a director after the effective date hereof whose
election, or nomination for election by the Company's shareholders, is
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered to be a member of the
Incumbent Board unless that individual was nominated or elected by any
person, entity or group (as defined above) having the power to exercise,
through beneficial ownership, voting agreement and/or proxy, twenty
percent (20%) or more of either the outstanding shares of Common Stock
or the combined voting power of the Company's then outstanding voting
securities entitled to vote generally in the election of directors, in
which case that individual shall not be considered to be a member of the
Incumbent Board unless such individual's election or nomination for
election by the Company's shareholders is approved by a vote of at least
two-thirds of the directors then comprising the Incumbent Board; or
A-19
<PAGE> 40
(iii) Consummation by the Company of the sale or other
disposition by the Company of all or substantially all of the Company's
assets or a Reorganization of the Company with any other person,
corporation or other entity, other than
(A) a Reorganization that would result in the voting
securities of the Company outstanding immediately prior thereto (or, in
the case of a Reorganization that is preceded or accomplished by an
acquisition or series of related acquisitions by any Person, by tender
or exchange offer or otherwise, of voting securities representing 5% or
more of the combined voting power of all securities of the Company,
immediately prior to such acquisition or the first acquisition in such
series of acquisitions) continuing to represent, either by remaining
outstanding or by being converted into voting securities of another
entity, more than 50% of the combined voting power of the voting
securities of the Company or such other entity outstanding immediately
after such Reorganization (or series of related transactions involving
such a Reorganization), or
(B) a Reorganization effected to implement a
recapitalization or reincorporation of the Company (or similar
transaction) that does not result in a material change in beneficial
ownership of the voting securities of the Company or its successor; or
(iv) Approval by the shareholders of the Company or an order by
a court of competent jurisdiction of a plan of liquidation of the
Company.
"COMMITTEE" means any committee appointed by the Board to administer
this Plan pursuant to Section 4.1.
"COMMON STOCK" means the common stock of the Company, as constituted on
the Effective Date, and as thereafter adjusted under Section 3.4.
"COMPANY" means Ashworth, Inc., a Delaware corporation.
"DIVIDEND EQUIVALENT" means a right granted by the Company under Section
6.6 to a holder of a Stock Option, Stock Appreciation Right or other Award
denominated in shares of Common Stock to receive from the Company during the
Applicable Dividend Period payments equivalent to the amount of dividends
payable to holders of the number of shares of Common Stock underlying such Stock
Option, Stock Appreciation Right, or other Award.
"EFFECTIVE DATE" means December 14, 1999 which is the date this Plan was
adopted by the Board.
"ELIGIBLE PERSON" includes directors, officers, employees, consultants
and advisors of the Company or of any Affiliated Entity.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE ACT REGISTERED COMPANY" means that the Company has any class
of any equity security registered pursuant to Section 12 of the Exchange Act.
"EXPIRATION DATE" means the tenth (10th) anniversary of the Effective
Date.
A-20
<PAGE> 41
"FAIR MARKET VALUE" of a share of the Company's capital stock as of a
particular date means: (i) if the stock is listed on an established stock
exchange or exchanges (including for this purpose, the Nasdaq National Market),
the arithmetic mean of the highest and lowest sale prices of the stock for the
trading day immediately preceding such date on the primary exchange upon which
the stock trades, as measured by volume, as published in The Wall Street
Journal, or, if no sale price was quoted for such date, then as of the next
preceding date on which such a sale price was quoted; or (ii) if the stock is
not then listed on an exchange or the Nasdaq National Market, the average of the
closing bid and asked prices per share for the stock in the over-the-counter
market on such date (in the case of (i) or (ii), subject to adjustment as and if
necessary and appropriate to set an exercise price not less than 100% of the
fair market value of the stock on the date an Award is granted); or (iii) if the
stock is not then listed on an exchange or quoted in the over-the-counter
market, an amount determined in good faith by the Administrator, provided,
however, that (A) when appropriate, the Administrator in determining Fair Market
Value of capital stock of the Company may take into account such other factors
as it may deem appropriate under the circumstances, and (B) if the stock is
traded on the Nasdaq SmallCap Market and both sales prices and bid and asked
prices are quoted or available, the Administrator may elect to determine Fair
Market Value under either clause (i) or (ii) above. Notwithstanding the
foregoing, the Fair Market Value of capital stock for purposes of grants of
Incentive Stock Options must be determined in compliance with applicable
provisions of the IRC. The Fair Market Value of rights or property other than
capital stock of the Company means the fair market value thereof as determined
by the Administrator on the basis of such factors as it may deem appropriate.
"INCENTIVE STOCK OPTION" means a Stock Option that qualifies as an
incentive stock option under Section 422 of the IRC.
"IRC" means the Internal Revenue Code of 1986, as amended.
"JUST CAUSE DISMISSAL" means a termination of a Recipient's employment
for any of the following reasons: (i) the Recipient violates any reasonable rule
or regulation of the Board, the Company's President or Chief Executive Officer
or the Recipient's superiors that results in damage to the Company or any
Affiliated Entity or which, after written notice to do so, the Recipient fails
to correct within a reasonable time not exceeding 15 days; (ii) any willful
misconduct or gross negligence by the Recipient in the responsibilities assigned
to the Recipient; (iii) any willful failure to perform the Recipient's job as
required to meet the objectives of the Company or any Affiliated Entity; (iv)
any wrongful conduct of a Recipient which has an adverse impact on the Company
or any Affiliated Entity or which constitutes a misappropriation of assets of
the Company or any Affiliated Entity; (v) the Recipient does any of the things
described in Section 5.15; or (vi) any other conduct that the Administrator
reasonably determines constitutes Just Cause for Dismissal; provided, however,
that if a Recipient is party to an employment agreement with the Company or any
Affiliated Entity providing for just cause dismissal (or some comparable
concept) of Recipient from Recipient's employment with the Company or any
Affiliated Entity, "Just Cause Dismissal" for purposes of this Plan will have
the same meaning as ascribed thereto or to such comparable concept in such
employment agreement.
"NONQUALIFIED STOCK OPTION" means a Stock Option that is not an
Incentive Stock Option.
"OTHER STOCK-BASED BENEFITS" means an Award granted under Section 6.10.
"PARENT CORPORATION" means any Parent Corporation as defined in Section
424(e) of the IRC.
A-21
<PAGE> 42
"PERFORMANCE AWARD" means an Award under Section 6.2, payable in cash,
Common Stock or a combination thereof, that vests and becomes payable over a
period of time upon attainment of performance criteria established in connection
with the grant of the Award.
"PERFORMANCE-BASED COMPENSATION" means performance-based compensation as
described in Section 162(m) of the IRC. If the amount of compensation an
Eligible Person will receive under any Award is not based solely on an increase
in the value of Common Stock after the date of grant or award, the
Administrator, in order to qualify an Award as performance-based compensation
under Section 162(m) of the IRC, can condition the grant, award, vesting, or
exercisability of such an Award on the attainment of a preestablished, objective
performance goal. For this purpose, a preestablished, objective performance goal
may include one or more of the following performance criteria: (a) cash flow,
(b) earnings per share (including earnings before interest, taxes, and
amortization), (c) return on equity, (d) total Shareholder return, (e) return on
capital, (f) return on assets or net assets, (g) income or net income, (h)
operating income or net operating income, (i) operating margin, (j) return on
operating revenue, and (k) any other similar performance criteria.
"PERMANENT DISABILITY" means that the Recipient becomes physically or
mentally incapacitated or disabled so that the Recipient is unable to perform
substantially the same services as the Recipient performed prior to incurring
such incapacity or disability (the Company, at its option and expense, being
entitled to retain a physician to confirm the existence of such incapacity or
disability, and the determination of such physician to be binding upon the
Company and the Recipient), and such incapacity or disability continues for a
period of three (3) consecutive months or six (6) months in any 12-month period
or such other period(s) as may be determined by the Administrator with respect
to any Award, provided that for purposes of determining the period during which
an Incentive Stock Option may be exercised pursuant to Section 6.1(e), Permanent
Disability shall mean "permanent and total disability" as defined in Section
22(e) of the IRC.
"PERSON" means any person, entity or group, within the meaning of
Section 13(d) or 14(d) of the Exchange Act, but excluding (i) the Company and
its subsidiaries, (ii) any employee stock ownership or other employee benefit
plan maintained by the Company and (iii) an underwriter or underwriting
syndicate that has acquired the Company's securities solely in connection with a
public offering thereof.
"PHANTOM STOCK" means an Award granted under Section 6.9.
"PLAN" means this 2000 Equity Incentive Plan of the Company.
"PLAN TERM" means the period during which this Plan remains in effect
(commencing the Effective Date and ending on the Expiration Date).
"PURCHASE PRICE" means the purchase price (if any) to be paid by a
Recipient for Restricted Stock as determined by the Administrator (which price
shall be at least equal to the minimum price required under applicable laws and
regulations for the issuance of Common Stock which is nontransferable and
subject to a substantial risk of forfeiture until specific conditions are met).
"RECIPIENT" means a person who has received an Award.
"REORGANIZATION" means any merger, consolidation or other
reorganization.
A-22
<PAGE> 43
"RESTRICTED STOCK" means Common Stock that is the subject of an Award
made under Section 6.3 and that is nontransferable and subject to a substantial
risk of forfeiture until specific conditions are met, as set forth in this Plan
and in any statement evidencing the grant of such Award.
"RETIREMENT" of a Recipient means the Recipient's resignation from the
Company or any Affiliated Entity after reaching age 60 and at least five years
of full-time employment by the Company or any Affiliated Entity, without any
circumstances that would justify a Just Cause Dismissal of the Recipient.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHAREHOLDER AGREEMENT" has the meaning set forth in Section 5.6.
"SIGNIFICANT STOCKHOLDER" is an individual who, at the time a Stock
Option is granted to such individual under this Plan, owns more than ten percent
(10%) of the combined voting power of all classes of stock of the Company or of
any Parent Corporation or Subsidiary Corporation (after application of the
attribution rules set forth in Section 424(d) of the IRC).
"STOCK APPRECIATION RIGHT" or "SAR" means a right granted under Section
6.4 to receive a payment that is measured with reference to the amount by which
the Fair Market Value of a specified number of shares of Common Stock
appreciates from a specified date, such as the date of grant of the SAR, to the
date of exercise.
"STOCK BONUS" means an issuance or delivery of unrestricted or
restricted shares of Common Stock under Section 6.7 as a bonus for services
rendered or for any other valid consideration under applicable law.
"STOCK PAYMENT" means a payment in shares of the Company's Common Stock
under Section 6.5 to replace all or any portion of the compensation or other
payment (other than base salary) that would otherwise become payable to the
Recipient in cash.
"STOCK OPTION" means a right to purchase stock of the Company granted
under Section 6.1 of this Plan.
"STOCK SALE" means a sale of Common Stock to an Eligible Person under
Section 6.8.
"SUBSIDIARY CORPORATION" means any Subsidiary Corporation as defined in
Section 424(f) of the IRC.
A-23
<PAGE> 44
EXHIBIT A TO
ASHWORTH, INC.
2000 EQUITY INCENTIVE PLAN
NOTICE OF EXERCISE
Ashworth, Inc.
RE: STOCK OPTION
Notice is hereby given that I elect to purchase the number of shares (the
"SHARES") set forth below pursuant to the stock option referenced below at the
exercise price applicable thereto:
Option Grant Date: _______________
Total Number of Shares
Underlying Original Option: _______________
Number of Shares for which
Option has been previously
exercised: _______________
Exercise Price Per Share: _______________
Number of Shares Being
Acquired With This Exercise: _______________
A check in the amount of the aggregate price of the shares being
purchased is attached.
I hereby confirm that such shares are being acquired by me for my
own account for investment purposes, and not with a view to, or for resale in
connection with, any distribution thereof. I will not sell or dispose of my
Shares in violation of the Securities Act of 1933, as amended, or any applicable
federal or state securities laws. Further, I understand that the exemption from
taxable income at the time of exercise is dependent upon my holding such stock
for a period of at least one year from the date of exercise and two years from
the date of grant of the Option.
I understand that the certificate representing the Shares will
bear a restrictive legend within the contemplation of the Securities Act and as
required by such other state or federal law or regulation applicable to the
issuance or delivery of the Shares.
I agree to provide to the Company such additional documents or
information as may be required pursuant to the Company's 2000 Equity Incentive
Plan.
--------------------------------
(signature)
--------------------------------
(name of Optionee)
A-24
<PAGE> 45
ASHWORTH, INC.
NOTICE OF OPTION GRANT
This Notice of Option Grant will confirm that as of __________, ____,
Ashworth, Inc. (the "Company") granted a stock option to you pursuant to the
Company's 2000 Equity Incentive Plan (the "Plan") upon the following terms and
conditions:
Option Grant Date: ___________, _____
Type of Option: Incentive
Maximum Number of
Shares of Common
Stock Issuable Upon
Exercise of Option: __________
Exercise Price: $_____ per share
Vesting Schedule:
Expiration Date: ___________, _____
In addition to the terms described herein, this award is subject to the
terms and conditions of the Plan, a copy of which is attached hereto and
incorporated herein by reference.
SALE, TRANSFER OR HYPOTHECATION OF THE OPTION REFERRED TO ABOVE AND
SHARES ISSUABLE UNDER THIS OPTION ARE SUBJECT TO RESTRICTIONS UNDER THE PLAN AND
APPLICABLE LAW.
ASHWORTH, INC.
By: _________________________________
Name: _________________________________
Title: _________________________________
A-25
<PAGE> 46
ASHWORTH, INC.
2000 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "AGREEMENT") is made effective as of the
Option Grant Date set forth below, by and between Ashworth, Inc., a Delaware
corporation (the "COMPANY"), and _________________________ ("OPTIONEE"). Terms
not otherwise defined in this Agreement shall have the meanings ascribed to them
in the Company's 2000 Equity Incentive Plan (the "PLAN"). The parties agree as
follows:
1. GOVERNING PLAN. Optionee has received a copy of the Plan. This Agreement is
subject in all respects to the applicable provisions of the Plan, which are
incorporated herein by reference. In the case of any conflict between the
provisions of the Plan and this Agreement, the provisions of the Plan shall
control.
2. GRANT OF OPTION. The Company hereby grants to Optionee a stock option (the
"OPTION") to purchase shares of the Company's Common Stock upon the following
terms and conditions:
Option Grant Date: ____________________
Type of Option
(Incentive/Nonqualified):
Maximum Number of Shares of Common
Stock Issuable Upon Exercise of ____________________
Option:
Purchase Price Per Share: $___________________
Vesting Schedule:
3. GOVERNING LAW. This Agreement shall be governed by, interpreted under, and
construed and enforced in accordance with the internal laws, and not the laws
pertaining to conflicts or choice of laws, of the State of California applicable
to agreements made or to be performed wholly within the State of California. IN
WITNESS WHEREOF, the Company and Optionee have executed this Agreement effective
as of the Option Grant Date.
The Company: Optionee:
By: ________________________________ __________________________________
Its:________________________________ Name: ____________________________
A-26
<PAGE> 47
PROXY ASHWORTH, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Terence W. Tsang and Halina Balys as proxies
with the power to appoint their substitutes and hereby authorizes them to
represent and vote, as designated below, all of the shares of common stock of
Ashworth, Inc., held by the undersigned on February 1, 2000, at the annual
meeting of stockholders to be held on Friday March 24, 2000, or any adjournment
thereof, with like effect as if the undersigned were personally present and
voting upon the following matters.
1. ELECT TWO DIRECTORS TO SERVE UNTIL THE ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD IN THE YEAR 2003 AND UNTIL SUCCESSORS HAVE BEEN DULY ELECTED AND
QUALIFIED.
[ ] FOR JOHN M. HANSON, JR.
[ ] FOR RANDALL L. HERREL, SR.
[ ] WITHHOLD AUTHORITY TO VOTE FOR JOHN M. HANSON, JR.
[ ] WITHHOLD AUTHORITY TO VOTE FOR RANDALL L. HERREL, SR.
2. ADOPT THE 2000 EQUITY INCENTIVE PLAN
[ ] FOR ADOPTION OF THE 2000 EQUITY INCENTIVE PLAN.
[ ] AGAINST ADOPTION OF THE 2000 EQUITY INCENTIVE PLAN.
3. TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF JOHN M. HANSON, JR. AND RANDALL L. HERREL, SR. AS DIRECTORS,
AND FOR ADOPTION OF THE 2000 EQUITY INCENTIVE PLAN.
THIS PROXY CONFERS DISCRETIONARY AUTHORITY WITH RESPECT TO MATTERS NOT KNOWN OR
DETERMINED AT THE TIME OF THE MAILING OF THE NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS TO THE UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement furnished herewith and directs that his or her
votes be cast by the above named proxies in the manner directed herein.
Dated , 2000
------------------------------------
Signatures(s) of Stockholder(s)
Signature should agree with the name(s) printed hereon. Executors,
administrators, trustees, guardians and attorneys should so indicate when
signing. Attorneys should submit powers of attorney.
PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED PRE-ADDRESSED ENVELOPE. THE
GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE
ANNUAL MEETING, OR TO SUBMIT A LATER DATED REVOCATION OR AMENDMENT TO THIS PROXY
ON ANY OF THE ISSUES SET FORTH ABOVE.
