<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ____
Commission file number 000-18908
------------------------
IN FOCUS SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Oregon 93-0932102
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
27700B SW Parkway Avenue, Wilsonville, Oregon 97070
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 503-685-8888
------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock without par value 22,197,341
(Class) (Outstanding at April 29, 1998)
<PAGE>
IN FOCUS SYSTEMS, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
- ------------------------------ ----
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets - March 31, 1998 and
December 31, 1997 2
Consolidated Statements of Operations - Three Months
Ended March 31, 1998 and 1997 3
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 1998 and 1997 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk 9
PART II - OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
</TABLE>
1
<PAGE>
IN FOCUS SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 18,528 $ 37,950
Marketable securities - held to maturity 10,521 7,220
Accounts receivable, net of allowances of $4,674 76,245 87,845
and $4,835
Inventories, net 50,518 32,120
Income taxes receivable 2,703 310
Deferred income taxes 1,247 1,247
Other current assets 2,964 2,589
-------- --------
Total Current Assets 162,726 169,281
Marketable securities - held to maturity 6,505 3,500
Property and equipment, net of accumulated
depreciation of $24,435 and $21,769 15,099 15,507
Deferred income taxes 516 516
Other assets, net 2,134 1,104
-------- --------
Total Assets $ 186,980 $ 189,908
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 46,474 $ 47,818
Payroll and related benefits payable 2,043 3,493
Marketing cooperative payable 1,543 1,176
Other current liabilities 4,301 4,392
-------- --------
Total Current Liabilities 54,361 56,879
Shareholders' Equity:
Common stock, 30,000,000 shares authorized;
shares issued and outstanding: 22,186,693
and 21,931,728 53,677 51,733
Additional paid-in capital 12,320 11,278
Retained earnings 66,622 70,018
-------- --------
Total Shareholders' Equity 132,619 133,029
-------- --------
Total Liabilities and Shareholders' Equity $ 186,980 $ 189,908
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
2
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IN FOCUS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
------- -------
<S> <C> <C>
Revenue $ 70,474 $ 64,764
Cost of sales 56,368 45,997
------- -------
Gross profit 14,106 18,767
Operating expenses:
Marketing and sales 11,202 6,964
Engineering 5,940 3,998
General and administrative 2,160 1,766
------- -------
19,302 12,728
------- -------
Income (loss) from operations (5,196) 6,039
Other income (expense):
Interest expense - (17)
Interest income 311 515
Other, net 41 32
------- -------
352 530
------- -------
Income (loss) before (provision for) benefit
from income taxes (4,844) 6,569
(Provision for) benefit from income taxes 1,448 (2,169)
------- -------
Net income (loss) (3,396) 4,400
------- -------
------- -------
Basic net income (loss) per share $ (0.15) $ 0.21
------- -------
------- -------
Diluted net income (loss) per share $ (0.15) $ 0.20
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
IN FOCUS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (3,396) $ 4,400
Adjustments to reconcile net income (loss) to
net cash flows provided by (used in)
operating activities:
Depreciation and amortization 2,672 2,108
Other non-cash (income) expense (18) 4
(Increase) decrease in:
Accounts receivable, net 11,600 (573)
Inventories, net (18,398) (6,009)
Income taxes receivable (2,393) 1,305
Other current assets (375) (1,279)
Increase (decrease) in:
Income taxes payable - 656
Accounts payable (1,344) 7,350
Payroll and related benefits payable (1,450) (303)
Marketing cooperative payable 367 (810)
Other current liabilities (91) (419)
------- -------
Net cash provided by (used in)
operating activities (12,826) 6,430
Cash flows from investing activities:
Purchase of marketable securities-held to maturity (7,806) (2,498)
Maturity of marketable securities-held to maturity 1,500 2,261
Payments for purchase of property and equipment (2,257) (2,023)
Other assets, net (1,019) 279
------- -------
Net cash used in investing activities (9,582) (1,981)
Cash flows from financing activities:
Proceeds from sale of common stock 1,944 942
Income tax benefit of non-qualified stock option
exercises and disqualifying dispositions 1,042 353
------- -------
Net cash provided by financing
activities 2,986 1,295
Increase (decrease) in cash and cash equivalents (19,422) 5,744
Cash and cash equivalents:
Beginning of period 37,950 33,935
------- -------
End of period $ 18,528 $ 39,679
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
IN FOCUS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The financial information included herein for the three-month periods ended
March 31, 1998 and 1997 is unaudited; however, such information reflects all
adjustments consisting only of normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of the financial
position, results of operations and cash flows for the interim periods. The
financial information as of December 31, 1997 is derived from In Focus Systems,
Inc.'s (the Company's) 1997 Annual Report on Form 10-K. The interim consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's 1997 Annual
Report on Form 10-K.
The results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full year.
NOTE 2. INVENTORIES
Inventories are valued at the lower of cost (using average costs, which
approximates the first in, first-out (FIFO) method), or market, and include
materials, labor and manufacturing overhead.
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
Raw materials and components $11,818 $11,774
Work-in-process 1,408 2,240
Finished goods 37,292 18,106
------- -------
$50,518 $32,120
------- -------
------- -------
</TABLE>
NOTE 3. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosure of cash flow information is as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
-------- --------
<S> <C> <C>
Cash paid during the period for income taxes $154 $86
Cash paid during the period for interest - 16
</TABLE>
NOTE 4. EARNINGS PER SHARE
Beginning December 31, 1997, basic earnings per share (EPS) and diluted EPS are
computed using the methods prescribed by Statement of Financial Accounting
Standard No. 128, EARNINGS PER SHARE (SFAS 128). Basic EPS is calculated using
the weighted average number of common shares outstanding for the period and
diluted EPS is computed using the weighted average number of common shares and
dilutive common equivalent shares outstanding. Prior period amounts have been
restated to conform with the presentation requirements of SFAS 128.
5
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Following is a reconciliation of basic EPS and diluted EPS:
<TABLE>
<CAPTION>
Three Months Ended March 31, 1998 1997
- ---------------------------- ----------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Per
BASIC EPS Share Share
Income Shares Amount Income Shares Amount
Income (loss) available to Common
Shareholders $ (3,396) 22,041 $ (0.15) $4,400 21,487 $ 0.21
--------- ------
DILUTED EPS
Effect of dilutive stock options - - - 626
--------------------- -----------------
Income (loss) available to Common
Shareholders $ (3,396) 22,041 $ (0.15) $4,400 22,113 $ 0.20
--------- ------
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS
Statements in this Form 10-Q which the Company considers to be forward-looking
are denoted with an *, and the following cautionary language applies to all such
statements, as well as any other statements in this Form 10-Q which the reader
may consider to be forward-looking in nature. Investors are cautioned that all
forward-looking statements involve risks and uncertainties and several factors
could cause actual results to differ materially from those in the
forward-looking statements. The Company, from time to time, may make
forward-looking statements relating to anticipated gross margins, availability
of products manufactured on behalf of the Company, backlog, new product
introductions and future capital expenditures. The following factors, among
others, could cause actual results to differ from those indicated in the
forward-looking statements: 1) in regard to gross margins, uncertainties
associated with market acceptance of and demand for the Company's products,
impact of competitive products and their pricing and dependence on third party
suppliers; 2) in regard to product availability and backlog, uncertainties
associated with manufacturing capabilities and dependence on third party
suppliers; 3) in regard to new product introductions, uncertainties associated
with the development of technology and the establishment of full manufacturing
capabilities, dependence on third party suppliers and intellectual property
rights; and 4) in regard to future capital expenditures, uncertainties
associated with new product introductions.
RESULTS OF OPERATIONS
Revenue increased to $70.4 million in the first quarter of 1998 compared to
$64.8 million in the first quarter of 1997, but decreased from $96.8 million in
the fourth quarter of 1997. The Company's revenue in the first quarter of 1998
was derived virtually 100 percent from products manufactured in-house, 69
percent of which were products that were introduced within the last six months.
The Company's revenues, and financial performance, were adversely affected in
the first quarter of 1998 by the following factors: 1) quarter end order rates
in the North American audio visual dealer and two tier wholesale channels fell
significantly from historical quarter ending order rates; 2) inventory levels
increased in the reseller channels due to slower sell through; and 3) extremely
aggressive competitive pricing in the conference room and personal projector
market segments.
6
<PAGE>
The Company introduced and began shipping three new products in the first
quarter of 1998: 1) the LP225, a low cost SVGA amorphous TFT projector aimed at
the education and low end business markets; 2) the LP725, a high bright 750
lumen, 12 pound SVGA polysilicon projector aimed at the conference room
environment; and 3) the LP740, the industry's first reflective silicon based
SXGA projector aimed at super high-resolution business applications.
During the first quarter of 1998, International sales represented 57 percent of
total revenue, including 13 percent from Asia Pacific countries, compared to 46
percent international revenue in the first quarter of 1997.
The Asian market grew at the same rate as the industry as a whole during 1997
and it is now the third largest market in the Company's industry. The Company
has historically had very little market share in the Asian market and sees the
growth in the Asian market as an opportunity to expand its revenue base in Japan
and China.* Sales to most Asian companies have been, and continue to be,
prepaid or guaranteed by letters of credit, thereby reducing receivables risk.
The Company has a sales, service and support branch office in Singapore, but no
operating subsidiaries in Asian countries.
The data video projector industry has experienced 20 to 25 percent average sales
price (ASP) reductions per year over the last two years. Many of the Company's
competitors are headquartered in Japan. The Company expects similar ASP
reductions to occur in the industry in 1998.* Late in the first quarter of
1998, a series of increasingly competitive price reductions from a number of its
competitors caused the Company to adjust its pricing downward, beyond original
expectations for the first quarter, in order to stimulate orders.
The Company's parts contracts with Asian companies are denoted in U.S. dollars
and contain clauses for price adjustments when there are significant
fluctuations in currency rates. Accordingly, for purchases beginning the first
day of the next quarter, parts costs are adjusted based upon changes in local
currencies relative to the U.S. dollar.
Because there are multiple competitive products for the Company's resellers to
choose from, the Company does not operate with a large backlog. Instead, the
Company's customers generally order products for immediate delivery and the
Company must respond to competitive prices and ship the product quickly or risk
losing the order. However, as a result of orders from customers on credit hold
and orders for newly introduced products, at March 31, 1998, the Company had
backlog of approximately $24.0 million, compared to approximately $8.6 million
at March 31, 1997 and $14.9 million at December 31, 1997. Given current supply
and demand estimates, it is anticipated that a majority of the current backlog
will turn over by the end of the second quarter of 1998.* There is minimal
seasonal influence relating to the Company's order backlog. The stated backlog
is not necessarily indicative of Company sales for any future period nor is a
backlog any assurance that the Company will realize a profit from filling the
orders.
The Company achieved gross margins of 20.0 percent in the first quarter of 1998
compared to 29.0 percent in the first quarter of 1997 and 27.6 percent in the
fourth quarter of 1997. The decreases are primarily attributable to: 1) an
aggressive competitive pricing environment; 2) lower product mix of higher
margin products; 3) accelerated price
7
<PAGE>
reductions to end of life the LP720 and LP730; 4) price protection to help
product sell through in the channel; and 5) reduced product shipments
contributing to higher fixed costs per unit. The Company expects the
competitive pricing environment will continue for the foreseeable future.*
Accordingly, the Company is continuing its ongoing efforts to reduce
manufacturing costs by working closely with its suppliers to reduce direct
material costs, designing products with extensible platforms that use new and
lower cost technologies and manufacturing higher volume products offshore. In
addition, the Company continues to focus on adding value to projectors that use
its own engine designs in order to become less reliant on more expensive
out-sourced engines.
Marketing and sales expense increased to $11.2 million (15.6 percent of revenue)
in the first quarter of 1998 compared to $7.0 million (10.8 percent of revenue)
in the first quarter of 1997. The increase is primarily a result of
expenditures in the first quarter of 1998 to build demand for the LP420 in
two-tier wholesale distribution and adding sales and service infrastructure
around the world, particularly in Europe and Japan.
Engineering expense increased to $5.9 million (8.4 percent of revenue) in the
first quarter of 1998 from $4.0 million (6.2 percent of revenue) in the first
quarter of 1997. This increase is primarily a result of timing for new product
releases under development as well as a restructuring charge in the first
quarter of 1998 in order to create a more efficient organization.
General and administrative expense increased to $2.2 million (3.1 percent of
revenue) in the first quarter of 1998 from $1.8 million (2.7 percent of revenue)
in the first quarter of 1997. The increase is primarily attributable to a
restructuring charge taken during the first quarter of 1998.
The total restructuring charge in the first quarter of 1998 was approximately
$1.1 million.
Loss from operations was $5.2 million in the first quarter of 1998 compared to
income from operations of $6.0 million (9.3 percent of revenue) in the first
quarter of 1997, as a result of decreased sales and gross margins and the
increased operating expenses as indicated above.
Income taxes are based on an estimated rate of 29.9 percent compared to 32.9
percent in the first quarter of 1997 and 29.1 percent for the year ended
December 31, 1997. The decrease from the first quarter of 1997 is primarily a
result of a larger benefit related to the Company's foreign sales corporation.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998 working capital was $108.4 million, including $18.5 million of
cash and cash equivalents and $10.5 million of marketable securities. In the
first quarter of 1998, working capital decreased by $4.0 million and the current
ratio remained constant at 3.0:1 at March 31, 1998 and December 31, 1997. Cash
and cash equivalents decreased $19.4 million primarily due to cash used in
operations of $12.8 million, the net purchase of $6.3 million of marketable
securities and $2.3 million for purchases of property and equipment, offset by
$1.9 million provided by the sale of common stock through the exercise of
8
<PAGE>
employee stock options and $1.0 million provided by the income tax benefit of
non-qualified stock option exercises and disqualifying dispositions.
Accounts receivable decreased $11.6 million to $76.2 million at March 31, 1998
compared to $87.8 million at December 31, 1997 primarily as a result of lower
than expected shipments in March 1998; accordingly cash receipts exceeded
revenues for the quarter and receivables decreased. The Company's day's sales
outstanding increased to 98 days at March 31, 1998 compared to 81 days at
December 31, 1997 as a result of lower average sales per day in the first
quarter of 1998 combined with slower than expected cash receipts from the
Company's channel partners. At March 31, 1998, 77 percent of the Company's
accounts receivable were current, 9 percent were 30 days or less past due and 14
percent were beyond 30 days past due.
Inventories increased $18.4 million to $50.5 million at March 31, 1998 from
$32.1 million at December 31, 1997 primarily due to an increase in finished
goods as a result of lower than anticipated shipments in March 1998 and, to a
lesser degree, new product introduction delays late in the quarter. As a result
of the above, annualized inventory turns were approximately 5.5 times for the
quarter ended March 31, 1998 compared to approximately 10.4 times for the fourth
quarter of 1997 on an annualized basis.
The $2.3 million of purchases of property, plant and equipment were primarily
for new product tooling, engineering design and test equipment and information
systems infrastructure. Total expenditures for property and equipment in 1998
are expected to total approximately $10.0 million, primarily for new product
tooling, operations and quality test equipment and information systems
infrastructure.*
FACTORS THAT MAY EFFECT FUTURE RESULTS OF OPERATIONS
The Company has begun the process of making organizational changes that
include a 10 percent executive pay cut, a closing of the slides manufacturing
portion of the Genigraphics business and several other cost containment
measures. These actions resulted in the Company laying off 12 percent of its
workforce, thereby reducing annual compensation by approximately $2.8 million
and reducing operating expenses by approximately $2.5 million per quarter
going forward.*
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits filed as a part of this report are listed below and this list is
intended to constitute the exhibit index.
EXHIBIT NO.
3 1990 Restated Articles of Incorporation
10 In Focus Systems, Inc. 1998 Stock Incentive Plan
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended March 31, 1998.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 29, 1998 IN FOCUS SYSTEMS, INC.
By: /s/ John V. Harker
-------------------------------
John V. Harker
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Michael D. Yonker
-------------------------------
Michael D. Yonker
Vice President, Information Services,
Chief Financial Officer, Treasurer and
Secretary (Principal Financial and
Accounting Officer)
10
<PAGE>
EXHIBIT 3
1990 RESTATED
ARTICLES OF INCORPORATION
OF
IN FOCUS SYSTEMS, INC.
Pursuant to the Oregon Business Corporation Act, the undersigned
corporation adopts the following 1990 Restated Articles of Incorporation,
EFFECTIVE DECEMBER 29, 1990 AT 12:01 A.M., which shall supersede the original
Articles of Incorporation and all prior amendments and restatements thereto.
ARTICLE I
The name of this Corporation is IN FOCUS SYSTEMS, INC. and its duration
shall be perpetual.
ARTICLE II
The Corporation is organized for purposes of:
(1) Developing, manufacturing, and marketing visual display and
presentation products utilizing state-of-the-art liquid crystal display
technology; and
(2) Engaging in any other lawful activity for which corporations may
be organized under the Oregon Business Corporation Act.
ARTICLE III
The aggregate number of shares which the Corporation shall have authority
to issue is 30,000,000 shares of Common Stock.
ARTICLE IV
The address of the registered office of the Corporation is:
121 S.W. Morrison
Eleventh Floor
Page 1 - 1990 Restated Articles of Incorporation
<PAGE>
Portland, Oregon 97204
and the name of its registered agent at such address is Stephen J. Connolly.
ARTICLE V
The address where the Division may mail notices:
Stephen J. Connolly, Esq.
121 S.W. Morrison
Eleventh Floor
Portland, Oregon 97204
ARTICLE VI
To the fullest extent permitted by the Oregon Business Corporation Act,
as it exists on the date hereof or may hereafter be amended or be restricted
by other applicable law then in effect, this Corporation shall indemnify any
person who has been made, or is threatened to be made, a party to an action,
suit, or proceeding, whether civil, criminal, administrative, investigative,
or otherwise (including an action, suit, or proceeding by or in the right of
the Corporation) by reason of the fact that the person is or was a director
or officer of the Corporation, or a fiduciary within the meaning of the
Employee Retirement Income Security Act of 1974 with respect to any employee
benefit plan of the Corporation, or serves or served at the request of the
Corporation as a director or officer, or as a fiduciary of an employee
benefit plan, of another corporation, partnership, joint venture, trust, or
other enterprise. This Article VI shall not be deemed exclusive of any other
provisions for indemnification of directors, officers and fiduciaries that
may be included in any statute, bylaw, agreement, resolution of shareholders
or directors or otherwise, both as to action in any official capacity and
action in another capacity while holding office.
ARTICLE VII
The Corporation elects to waive preemptive rights and no shareholder shall
have any preemptive or preferential right
Page 2 - 1990 Restated Articles of Incorporation
<PAGE>
to subscribe to or otherwise acquire any shares of stock of the Corporation,
or any obligations or securities convertible into or carrying options or
warrants to purchase shares of stock of the Corporation, whether now or
hereafter authorized and whether or not the issuance or sale of any such
shares, obligations, or securities would adversely affect such shareholder's
proportionate voting power, other than such rights, if any, as the Board of
Directors in its discretion from time to time may grant, and at such price as
the Board of Directors may fix.
ARTICLE VIII
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for conduct as a
director, provided that this Article VIII shall not eliminate the liability
of a director for any act or omission for which such elimination of liability
is not permitted under the Oregon Business Corporation Act. No amendment to
the Oregon Business Corporation Act that further limits the acts or omissions
for which elimination of liability is permitted shall affect the liability of
a director for any act or omission which occurs prior to the effective date
of such amendment.
The undersigned officer declares under penalty of perjury that he has
examined the foregoing and, to the best of his knowledge and belief, it is
true, correct and complete.
DATED this 28th day of December, 1990, effective December 29, 1990 at
12:01 a.m.
IN FOCUS SYSTEMS, INC.
By: /s/
------------------------------------
Joseph I. Martin, Secretary
Person to contact about this filing:
Page 3 - 1990 Restated Articles of Incorporation
<PAGE>
Stephen J. Connolly, Esq.
GARVEY, SCHUBERT & BARER
121 S.W. Morrison
Eleventh Floor
Portland, Oregon 97204
Telephone: (503) 228-3939
Page 4 - 1990 Restated Articles of Incorporation
<PAGE>
EXHIBIT A
TO
1990 RESTATED
ARTICLES OF INCORPORATION
OF
IN FOCUS SYSTEMS, INC.
Article III of the 1990 Restated Articles of Incorporation of In Focus
Systems, Inc. is amended to read as follows:
ARTICLE III
THE AGGREGATE NUMBER OF SHARES WHICH THE CORPORATION
SHALL HAVE AUTHORITY TO ISSUE IS 50,000,000 SHARES OF
COMMON STOCK.
<PAGE>
EXHIBIT 10
IN FOCUS SYSTEMS, INC.
1998 STOCK INCENTIVE PLAN
1. STATEMENT OF PURPOSE.
The principal purposes of this Stock Incentive Plan ("Plan") are to
secure to In Focus Systems, Inc. (the "Company") the advantages of the
incentive inherent in stock ownership on the part of employees, officers,
directors, and consultants responsible for the continued success of the
Company and to create in such individuals a proprietary interest in, and a
greater concern for, the welfare of the Company through the grant of options
to acquire shares of the common stock of the Company ("Common Stock") and
through the award of restricted Common Stock. Such grants or awards of
options and of stock pursuant to this Plan shall be referred to as "Awards."
Each incentive stock option ("ISO") granted hereunder is intended to
constitute an "incentive stock option," as such term is defined in Section
422 of the Internal Revenue Code of 1986, as the same may be amended from
time to time (the "Code"), and this Plan and each such ISO is intended to
comply with all of the requirements of said Section 422 and of all other
provisions of the Code applicable to incentive stock options and to plans
issuing the same. Each nonstatutory stock option ("Non-ISO") granted
hereunder is intended to constitute a nonstatutory stock option that does not
comply with the requirements of Section 422 of the Code. ISO's and Non-ISO's
shall sometimes hereinafter be referred to collectively as "Options". This
Plan is expected to benefit shareholders by enabling the Company to attract
and retain personnel of the highest caliber by offering to them an
opportunity to share in any increase in the value of the Common Stock to
which such personnel have contributed.
2. ADMINISTRATION.
2.1 The Plan shall be administered by the Board of Directors of
the Company ("Board") or a committee or committees (which term includes
subcommittees) appointed by, and consisting of two or more members of, the
Board (hereinafter, "Plan Administrator"). If and so long as the Common
Stock is registered under Section 12(b) or 12(g) of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), the Board shall consider in
selecting the Plan Administrator and the membership of any committee acting
as Plan Administrator of the Plan with respect to any persons subject or
likely to become subject to Section 16 under the Exchange Act the provisions
regarding (a) "outside directors," as contemplated by Section 162(m) of the
Code, and (b) "nonemployee directors," as contemplated by Rule 16b-3 under
the Exchange Act. The Board may delegate the responsibility for
administering the Plan with respect to designated classes of eligible persons
to different committees, subject to such limitations as the Board deems
appropriate. Committee members shall serve for such term as the Board may
determine, subject to removal by the Board at any time.
2.2 Except for the terms and conditions explicitly set forth in
the Plan, the Plan Administrator shall have exclusive authority, in its
discretion, to determine all matters relating to awards under the Plan,
including the selection of individuals to be granted Awards, the type of
Awards, the number of shares of Common Stock subject to an Award, all terms,
conditions, restrictions and limitations, if any, of an Award, and the terms
of any instrument that evidences the Award. The Plan Administrator shall
also have exclusive authority to interpret the Plan and may from time to time
adopt, and change, rules and regulations of general application
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for the Plan's administration. The Plan Administrator's interpretation of
the Plan and its rules and regulations, and all actions taken and
determinations made by the Plan Administrator pursuant to the Plan, shall be
conclusive and binding on all parties involved or affected. The Plan
Administrator may delegate administrative duties to such of the Company's
officers as it so determines.
3. ELIGIBILITY.
3.1 ISO's may be granted to any employee of the Company or of an
Affiliate of the Company, as defined in Section 3.2 below. Non-ISO's may be
granted to any employee, officer or director (whether or not also an
employee), or consultant of the Company or of an Affiliate of the Company.
Each employee, officer, director, or consultant selected by the Plan
Administrator to receive an Option shall sometimes hereinafter be referred to
as an "Optionee".
3.2 As used in this Plan, an "Affiliate" of a corporation shall
refer to a "parent corporation" of such corporation as described in Section
424(e) of the Code or a "subsidiary corporation" of such corporation as
described in Section 424(f) of the Code.
3.3 An Optionee who is not an employee of the Company or of an
Affiliate of the Company shall not be eligible to receive an ISO hereunder
and no ISO's shall be granted to any such non-employee Optionee.
3.4 No Option shall be granted hereunder to any Optionee unless
the Plan Administrator shall have determined, based on the advice of counsel,
that the grant of such option (and the exercise thereof by the Optionee) will
not violate the securities law of the state where the Optionee resides.
4. SHARES SUBJECT TO THE PLAN.
4.1 Subject to adjustment from time to time as provided in Section
10, a maximum of one million five hundred thousand (1,500,000) shares of
Common Stock shall be available for issuance under the Plan; in addition, if
subsequent to the 1998 Annual Meeting of the Company's shareholders the
Company repurchases any shares of Common Stock (whether on the open market,
pursuant to option exercises or otherwise), then additional shares of Common
Stock may be issued pursuant to the Plan, provided that the number of such
additional shares shall not exceed the lesser of (i) the number of shares so
repurchased, or (ii) one million five hundred thousand (1,500,000) shares.
Shares issued under the Plan shall be drawn from authorized and unissued
shares.
4.2 Upon exercise of an Option, the number of shares of Common
Stock thereafter available hereunder and under the Option shall decrease by
the number of shares of Common Stock as to which such Option was exercised;
provided that if such shares are pledged to secure a promissory note given in
payment of the Option Price for such shares and, as a result of a default on
such note, the pledged shares are returned to the Company, then such shares
shall again be available for the purposes of this Plan.
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4.3 Any shares of Common Stock made subject to an Award granted
hereunder that cease to be subject to the Award (other than by reason of
exercise or payment of the Award to the extent it is exercised for or settled
in shares) shall again be available for issuance in connection with future
Awards under this Plan.
4.4 The Company shall at all times during the term of this Plan
reserve and keep available such number of shares as shall be sufficient to
satisfy the requirements of the Plan.
4.5 Subject to any adjustment as provided in Section 10, if and so
long as the Common Stock is registered under Section 12 of the Exchange Act,
not more than four hundred thousand (400,000) shares of Common Stock may be
made subject to Awards under the Plan to any one individual in the aggregate
in any one fiscal year of the Company, except the Company may make additional
one-time grants of up to one million (1,000,000) shares to a newly hired
individual, such limitation to be applied in a manner consistent with the
requirements of, and only to the extent required for compliance with, the
exclusion from the limitation on deductibility of compensation under Section
162(m) of the Code.
5. OPTION TERMS.
5.1 The Plan Administrator shall specify the following terms to be
contained in each Option granted to an Optionee hereunder, which Option shall
be executed by the Company and such Optionee:
5.1.1 Whether such Option is an ISO or a Non-ISO;
5.1.2 The number of shares of Common Stock subject to
purchase pursuant to such Option;
5.1.3 The date on which the grant of such Option shall be
effective (the "Date of Grant");
5.1.4 The period of time during which such Option shall be
exercisable, which shall in no event be more than ten (10) years following
its Date of Grant for ISO's; provided, however, that if an ISO is granted to
an Optionee who on the Date of Grant owns, either directly or indirectly
within the meaning of Section 424(d) of the Code, more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company or
an Affiliate of the Company, the period of time during which such Option
shall be exercisable shall in no event be more than five (5) years following
its Date of Grant;
5.1.5 The price at which such Option shall be exercisable
by the Optionee (the "Option Price"); provided, however, that the Option
Price for all Options shall be not less than the fair market value, as
defined in Section 5.2 below, on the Date of Grant of the shares of Common
Stock subject thereto; and provided further that, if such Option is granted
to an Optionee who on the Date of Grant owns, either directly or indirectly
within the meaning of Section 424(d) of the Code, more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company or
an Affiliate of the Company, then the Option Price specified in such Option
shall be at least one hundred ten percent (110%) of the fair market value, on
the Date of Grant, of the Common Stock subject thereto;
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5.1.6 Any vesting schedule upon which the exercise of an
Option is contingent; provided that the Plan Administrator shall have
complete discretion with respect to the terms of any vesting schedule upon
which the exercise of an Option is contingent, including, without limitation,
discretion (a) to allow full and immediate vesting upon grant of such Option,
(b) to permit partial vesting in stated percentage amounts based on the
length of the holding period of such Option, or (c) to permit full vesting
after a stated holding period has passed; and
5.1.7 Such other terms and conditions as the Plan
Administrator deems advisable and as are consistent with the purpose of this
Plan.
5.2 Fair market value shall be determined as follows:
5.2.1 If the Company's Common Stock is publicly traded at
the time an Option is granted hereunder, fair market value shall be
determined as of the date of grant and shall mean:
(a) The average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which
the Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; or
(b) The last reported sale price (on that date) of the Common
Stock on the NASDAQ National Market System, if the Common Stock is not
then traded on a national securities exchange; or
(c) The closing bid price (or average of bid prices) last quoted
on such date by an established quotation service for over-the-counter
securities, if the Common Stock is not reported on the NASDAQ National
Market System.
5.2.2 If the Common Stock is not publicly traded at the
time an Option is granted hereunder, fair market value shall be deemed to be
the fair value of the Common Stock as determined by the Plan Administrator
after taking into consideration all factors that it deems appropriate,
including, without limitation, recent sale and offer prices of the Common
Stock in private transactions negotiated at arm's length.
5.3 No Option shall be granted hereunder during the suspension of
this Plan or after the termination of this Plan pursuant to Section 12.2.
Except as expressly provided herein, nothing contained in this Plan shall
require that the terms and conditions of Options granted hereunder be uniform.
5.4 Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Options under the Plan in substitution for options
issued under other plans, or assume under the Plan awards issued under other
plans, if the other plans are or were plans of other acquired entities
("Acquired Entities") (or the parent of the Acquired Entity) and the new
Option is substituted, or the old option is assumed, by reason of a merger,
consolidation, acquisition of property or of stock, reorganization or
liquidation (the "Acquisition Transaction"). In the event that a written
agreement pursuant to which the Acquisition Transaction is completed is
approved by the Board and said agreement sets forth the terms and conditions
of the substitution for or assumption of outstanding awards of the Acquired
Entity, said terms and
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conditions shall be deemed to be the action of the Plan Administrator without
any further action by the Plan Administrator, and the persons holding such
Options shall be deemed to be Optionees.
6. LIMITATION ON GRANTS OF ISO'S.
In the event that the aggregate fair market value of Common Stock and other
stock with respect to which ISO's granted to an Optionee hereunder or incentive
stock options granted to such Optionee under any other plan of the Company or
any of its Affiliates are exercisable for the first time during any calendar
year, exceeds the maximum permitted under Section 422(d) of the Code, then to
the extent of such excess, such ISO's shall be treated as Non-ISO's.
7. EXERCISE OF OPTION.
7.1 Subject to any limitations or conditions imposed upon an
Option pursuant to Section 5 above, an Optionee may exercise an Option or any
part thereof (unless partial exercise is specifically prohibited by the terms
of the Option), by giving written notice thereof to the Company at its
principal place of business accompanied by payment as described in Section
7.2.
7.2 The exercise price for shares purchased under an Option shall
be paid in full to the Company by delivery of consideration equal to the
Option Price for the whole number of shares as to which it is exercised.
Such consideration must be paid in cash or by check, or, in the Plan
Administrator's discretion, a combination of cash and/or check and/or one or
both of the following alternative forms: (a) tendering (either actually or,
if and so long as the Common Stock is registered under Section 12(b) or 12(g)
of the Exchange Act, by attestation) Common Stock already owned by the
Optionee for at least six (6) months (or any shorter period necessary to
avoid a charge to the Company's earnings for financial reporting purposes)
having a fair market value on the day prior to the exercise date equal to the
aggregate Option Price or (b) if and so long as the Common Stock is
registered under Section 12(b) or 12(g) of the Exchange Act, delivery of a
properly executed exercise notice, together with irrevocable instructions, to
(i) a brokerage firm, that may from time to time be designated by the Company
in its discretion, to deliver to the Company the aggregate amount of sale or
loan proceeds to pay the Option Price and any withholding tax obligations
that may arise in connection with the exercise and (ii) the Company, to
deliver the certificates for such purchased shares directly to such brokerage
firm, all in accordance with the regulations of the Federal Reserve Board.
In addition, the exercise price for shares purchased under an Option may be
paid, either singly or in combination with one or more of the alternative
forms of payment authorized by this Section 7.2, by (y) a promissory note; or
(z) such other consideration as the Plan Administrator may permit. Any
promissory note delivered in connection with exercise of an Option shall bear
interest at a rate specified by the Plan Administrator but in no case less
than the rate required to avoid imputation of interest (taking into account
any exceptions) for federal income tax purposes.
7.3 As soon as practicable after exercise of an option in
accordance with Sections 7.1 and 7.2 above, the Company shall issue a stock
certificate evidencing the Common Stock with respect to which the Option has
been exercised. Until the issuance (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the
Company) of such stock certificate, no right to vote or receive dividends or
any other rights as a
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shareholder shall exist with respect to such Common Stock, notwithstanding
the exercise of the Option. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 10 below.
7.4 The amount to be paid by the Optionee upon exercise shall be
the full Option Price together with the amount of any taxes required to be
withheld with respect to the grant or exercise of the Option. Subject to the
Plan and to applicable law, the Plan Administrator, in its sole discretion,
may permit such withholding obligations to be paid, in whole or in part, by
electing to have the Company withhold shares of Common Stock or by
transferring shares of Common Stock to the Company, in such amounts as are
equivalent to the fair market value of the withholding obligation.
8. TRANSFERABILITY AND POST-TERMINATION EXERCISES.
8.1 Except as provided otherwise in this Section 8, no Option
shall be transferable or exercisable by any person other than the Optionee to
whom such Option was originally granted.
8.2 The Plan Administrator shall establish and set forth in each
instrument that evidences an Option whether the Option will continue to be
exercisable and the terms and conditions of such exercise, if the Optionee
ceases to be employed by or provide services to the Company or its
Affiliates, which may be waived or modified by the Plan Administrator. If
not so established and subject to Section 8.3, the Option will be exercisable
in accordance with the following terms, which may be waived or modified by
the Plan Administrator:
8.2.1 In case of termination of Optionee's employment or
services other than by reason of death, the Option shall be exercisable, to
the extent of the number of shares purchasable at the date of termination,
only within three months after the date the Optionee ceases to be an employee
or consultant of the Company or Affiliate, but no later than the remaining
term of the Option.
8.2.2 Any Option exercisable at the time of the Optionee's
death may be exercised to the extent of the number of shares purchasable at
the date of death, by the personal representative of the Optionee's estate or
the person(s) to whom the Optionee's rights under the Option have passed by
will or applicable laws of descent and distribution at any time or from time
to time within one year after the date of death, but in no event later than
the remaining term of the Option.
8.2.3 Any portion of an Option not exercisable on the date
of termination of the Optionee's employment or services shall terminate on
such date, unless the Plan Administrator determines otherwise.
8.2.4 Subject to Section 8.3, the effect of a
Company-approved leave of absence on terms and conditions of an Option shall
be determined by the Plan Administrator in its sole discretion. A transfer
of services or employment between or among the Company and subsidiaries shall
not be considered a termination of employment or services.
8.2.5 To the extent exercisable, a Non-ISO may be exercised
during the Optionee's lifetime by the Optionee's guardian or legal
representative.
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8.3 To the extent required by Section 422 of the Code, ISO's shall
be subject to the following additional terms and conditions: To qualify for
ISO tax treatment, an Option designated as an ISO must be exercised within
three months after termination of employment for reasons other than death,
except that in the case of termination of employment due to total disability,
such Option must be exercised within one year after such termination.
Employment shall not be deemed to continue beyond the first 90 days of a
leave of absence unless the Optionee's reemployment rights are guaranteed by
statute or contract. For purposes of this Section 8.3, "total disability"
shall have the meaning given to such term in the Company's long-term
disability plan, as such plan is in effect on the date of determination.
8.4 In the event that a qualified domestic relations order, as
defined by Section 414(p) of the Code or Title I of the Employee Retirement
Income Security Act or the rules thereunder, mandates the transfer of any
Option that could have been exercised immediately prior to the issuance of
such order, such Option shall pass to the person or persons entitled thereto
pursuant to the order and shall be exercisable by such person or persons in
accordance with the terms thereof.
8.5 The Plan Administrator may, in its discretion, authorize all
or a portion of the Non-ISO's granted to an Optionee to be on terms which
permit transfer by such Optionee to (i) the spouse, children or grandchildren
of the Optionee ("Immediate Family Members"), (ii) a trust or trusts for the
exclusive benefit of such Immediate Family Members, or (iii) a partnership in
which such Immediate Family Members are the only partners, provided that (x)
there may be no consideration for any such transfer, (y) the stock option
agreement pursuant to which such Options are granted must be approved by the
Plan Administrator and must expressly provide for transferability in a manner
consistent with this Section, and (z) subsequent transfers of transferred
Options are prohibited except those in accordance with Section 8 of the Plan.
The Plan Administrator may, in its discretion, in permitting transferability,
impose additional conditions in the Option Agreement consistent with this
section, including without limitation imposition of a post-exercise holding
period on transferees. Following transfer, any such Options shall continue to
be subject to the same terms and conditions as were applicable immediately
prior to transfer; provided, the events of termination of employment of
Sections 8 and 9 hereof shall continue to be applied with respect to the
original Optionee, following which the Options shall be exercisable by the
transferee only to the extent and for the periods specified. The Company
disclaims any obligation to provide notice to a transferee of early
termination of the Option due to termination of employment or otherwise.
Notwithstanding a transfer pursuant to the foregoing, the original Optionee
will remain subject to applicable withholding taxes upon exercise. No
transfer will be effective until written notice of transfer is delivered to
the Company. The Company reserves the right to approve transfers hereunder.
8.6 In order to obtain certain tax benefits afforded to ISO's
under Section 422 of the Code, the Optionee must hold the shares issued upon
exercise of an ISO for two years after the grant date of the ISO and one year
from the date of exercise. An Optionee may be subject to the alternative
minimum tax at the time of exercise of an ISO. The Plan Administrator may
require an Optionee to give the Company prompt notice of any disposition of
shares acquired by the exercise of an ISO prior to expiration of such holding
periods.
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9. TERMINATION OF OPTIONS.
To the extent not earlier exercised, an Option shall terminate at the
earliest of the following dates:
9.1 The termination date specified for such Option in the
respective Option Agreement;
9.2 As specified in Section 8 above:
9.3 The date of any sale, transfer, or hypothecation, or any
attempted sale, transfer or hypothecation, of such Option in violation of
Section 8 above;
9.4 The date specified in Section 10.2 below for such termination
in the event of a Terminating Event; or
9.5 At the discretion of the Plan Administrator, immediately upon
determination by the Plan Administrator that the Optionee has (i) made
unauthorized disclosure of confidential information relating to the Company,
(ii) failed to assign to the Company any invention which the Optionee is
obligated to assign to the Company pursuant to written agreement or
otherwise, or (iii) breached the terms of any written agreement in effect
between the Company and the Optionee relating to confidentiality,
nondisclosure or ownership of inventions.
10. ADJUSTMENTS.
10.1 In the event of a material alteration in the capital
structure of the Company on account of a recapitalization, stock split,
reverse stock split, stock dividend, or otherwise, then the Plan
Administrator shall make such adjustments to this Plan and to the Awards then
outstanding and thereafter granted hereunder as the Plan Administrator
determines to be appropriate and equitable under the circumstances, so that
the proportionate interest of each holder shall, to the extent practicable,
be maintained as before the occurrence of such event. Such adjustments may
include, without limitation (a) a change in the number or kind of shares of
stock of the Company covered by such Awards, and (b) a change in the Option
Price payable per share; provided, however, that the aggregate Option Price
applicable to the unexercised portion of existing Options shall not be
altered, it being intended that any adjustments made with respect to such
Options shall apply only to the price per share and the number of shares
subject thereto. For purposes of this Section 10.1, neither (i) the issuance
of additional shares of stock of the Company in exchange for adequate
consideration (including services), nor (ii) the conversion of outstanding
preferred shares of the Company into Common Stock shall be deemed material
alterations of the capital structure of the Company. In the event the Plan
Administrator shall determine that the nature of a material alteration in the
capital structure of the Company is such that it is not practical or feasible
to make appropriate adjustments to this Plan or to the Awards granted
hereunder, such event shall be deemed a Terminating Event as defined in
Section 10.2 below.
10.2 All Options granted hereunder shall terminate upon the
occurrence of any of the following events ("Terminating Events"): (a) the
dissolution or liquidation of the
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Company; or (b) a material change in the capital structure of the Company
that is subject to this Section 10.2 by virtue of the last sentence of
Section 10.1 above.
10.3 All Options granted hereunder shall become immediately
exercisable, without regard to any contingent vesting provision to which such
Options may have otherwise been subject, in the event of a reorganization (as
defined in Section 10.4), which results in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity) less than a majority of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such reorganization.
10.4 In the event of a reorganization as defined in this Section
10.4 in which the Company is not the surviving or acquiring company, or in
which the Company is or becomes a wholly-owned subsidiary of another company
after the effective date of the reorganization, then the plan or agreement
respecting the reorganization shall include appropriate terms providing for
the assumption of each Option granted hereunder, or the substitution of an
option therefor, such that no "modification" of any such Option occurs under
Section 424 of the Code. For purposes of Section 10.3 and this Section 10.4,
reorganization shall mean any statutory merger, statutory consolidation, sale
of all or substantially all of the assets of the Company, or sale, pursuant
to an agreement with the Company, of securities of the Company pursuant to
which the Company is or becomes a wholly-owned subsidiary of another
corporation after the effective date of the reorganization.
10.5 The Plan Administrator shall have the right to accelerate the
date of exercise of any installment of any option; provided, however, that,
without the consent of the Optionee with respect to any Option, the Plan
Administrator shall not accelerate the date of any installment of any Option
granted to an employee as an ISO (and not previously converted into a Non-ISO
pursuant to Section 13 below) if such acceleration would violate the annual
vesting limitation contained in Section 422(d) of the Code, as described in
Section 6 above.
10.6 Adjustments and determinations under this Section 10 shall be
made by the Plan Administrator (upon the advice of counsel), whose decisions
as to what adjustments or determination shall be made, and the extent
thereof, shall be final, binding, and conclusive.
11. STOCK AWARDS.
11.1 GRANT OF STOCK AWARDS. The Plan Administrator is authorized
to make awards of Common Stock on such terms and conditions and subject to
such restrictions, if any (which may be based on continuous service with the
Company or the achievement of performance goals related to operating profit
as a percentage of revenues, revenue and profit growth, profit-related return
ratios, such as return on equity, or cash flow, where such goals may be
stated in absolute terms or relative to comparison companies), as the Plan
Administrator shall determine, in its sole discretion, which terms,
conditions and restrictions shall be set forth in the instrument evidencing
the award ("Stock Award"). The terms, conditions and restrictions that the
Plan Administrator shall have the power to determine shall include, without
limitation, the manner in which shares subject to Stock Awards are held
during the periods they are subject to restrictions and the circumstances
under which forfeiture of restricted stock shall occur by reason of
termination of the holder's services.
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11.2 ISSUANCE OF SHARES. Upon the satisfaction of any terms,
conditions and restrictions prescribed in respect to a Stock Award, or upon
the holder's release from any terms, conditions and restrictions of a Stock
Award, as determined by the Plan Administrator, the Company shall deliver, as
soon as practicable, to the holder or, in the case of the holder's death, to
the personal representative of the holder's estate or as the appropriate
court directs, a stock certificate for the appropriate number of shares of
Common Stock.
11.3 WAIVER OF RESTRICTIONS. Notwithstanding any other provisions
of the Plan, the Plan Administrator may, in its sole discretion, waive the
forfeiture period and any other terms, conditions or restrictions on any
restricted stock under such circumstances and subject to such terms and
conditions as the Plan Administrator shall deem appropriate.
11.4 PAYMENT. Stock Awards under the Plan may be settled through
cash payments, delivery of Common Stock or granting of awards or combinations
thereof as the Plan Administrator shall determine. Any award settlement,
including payment deferrals, may be subject to such conditions, restrictions
and contingencies as the Plan Administrator shall determine. The Plan
Administrator may permit or require deferral of any award payment, subject to
rules and procedures as it may establish, which may include provisions for
payment or crediting of interest, or dividend equivalents.
12. TERMINATION AND AMENDMENT OF PLAN.
12.1 The Plan may be amended only by the Board as it shall deem
advisable; however, to the extent required for compliance with Section 422 of
the Code or any applicable law or regulation, shareholder approval will be
required for any amendment that will (a) increase the total number of shares
as to which Awards may be granted under the Plan, (b) modify the class of
persons eligible to receive Awards, or (c) otherwise require shareholder
approval under any applicable law or regulation.
12.2 The Company's shareholders or the Board may suspend or
terminate the Plan at any time. The Plan will have no fixed expiration date;
provided, however, that no ISO may be granted more than ten (10) years after
the earlier of the Plan's adoption by the Board and approval by the
shareholders.
12.3 The amendment or termination of the Plan shall not, without
the consent of the Optionee under the Plan, impair or diminish any rights or
obligations under any Option theretofore granted under the Plan. Any change
or adjustment to an outstanding ISO shall not, without the consent of the
holder, be made in a manner so as to constitute a "modification" that would
cause such ISO to fail to continue to qualify as an incentive stock option.
13. CONVERSION OF ISO'S INTO NON-ISO'S.
At the written request of any ISO Optionee, the Plan Administrator may in its
discretion take such actions as may be necessary to convert such Optionee's
ISO's (or any installments or portions of installments thereof) that have not
been exercised on the date of conversion into Non-ISO's at any time prior to
the expiration of such ISO's, regardless of whether the Optionee is an
employee of the Company or of an Affiliate of the Company at the time of such
conversion. Such actions may include, but shall not be limited to, extending
the exercise period or reducing
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the exercise price of the appropriate installments of such ISO's. At the
time of such conversion, the Plan Administrator, with the consent of the
Optionee, may impose such conditions on the exercise of the resulting
Non-ISO's as the Plan Administrator in its discretion may determine, provided
that such conditions shall not be inconsistent with this Plan. Nothing in
this Plan shall be deemed to give any Optionee the right to have such
Optionee's ISO's converted into Non-ISO's, and no such conversion shall occur
until and unless the Plan Administrator takes appropriate action. The Plan
Administrator, with the consent of the Optionee, may also terminate any
portion of any ISO that has not been exercised at the time of such conversion.
14. CONDITIONS UPON ISSUANCE OF SHARES.
14.1 Shares shall not be issued pursuant to the exercise of any
Award unless the exercise of such Award and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended
("Securities Act"), the Exchange Act, any applicable state securities law,
the rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the shares may then be listed or otherwise traded,
and such compliance has been confirmed by counsel for the Company. The
Company shall be under no obligation to any participants to register for
offering or resale or to qualify for an exemption under the Securities Act,
or to register or qualify under state securities laws, any shares of
Company's stock issued under the Plan or to continue in effect any
registrations or qualifications if made. The Company may issue certificates
for shares with such legends and subject to such restrictions on transfer as
counsel for the Company deems necessary or desirable for compliance with
federal and state securities laws.
14.2 As a condition to the exercise of any Option, the Company may
require the participant exercising such Option to represent and warrant at
the time of any such exercise that the shares are being purchased only for
investment and without any present intention to sell or distribute such
shares if, in the opinion of counsel for the Company, such representations
and warranties are required by any relevant provision of law.
14.3 The Company's inability to obtain authority from any
regulatory body having jurisdiction, which authority the Company's counsel
has determined to be necessary to the lawful issuance and sale of any shares
hereunder, shall relieve the Company of any liability with respect to the
failure to issue or sell such shares.
15. USE OF PROCEEDS.
Proceeds from the sale of Common Stock pursuant to the exercise of Options
granted hereunder shall constitute general funds of the Company and shall be
used for general corporate purposes.
16. NOTICES.
All notices, requests, demands and other communications required or permitted
to be given under this Plan and the Awards granted hereunder shall be in
writing and shall be either served personally on the party to whom notice is
to be given (in which case notice shall be deemed to have been duly given on
the date of such service), or mailed to the party to whom notice is to be
given, by first class mail, registered or certified, return receipt
requested, postage prepaid, and
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addressed to the party at his or its most recent known address, in which case
such notice shall be deemed to have been duly given on the third (3rd) postal
delivery day following the date of such mailing.
17. MISCELLANEOUS PROVISIONS.
17.1 Optionees shall be under no obligation to exercise Options
granted hereunder.
17.2 Nothing contained in this Plan shall obligate the Company to
retain an Optionee or holder of a Stock Award as an employee, officer,
director, or consultant for any period, nor shall this Plan interfere in any
way with the right of the Company to reduce such person's compensation.
17.3 The provisions of this Plan and each Award hereunder shall be
binding upon such holder, the Qualified Successor or Guardian, and the heirs,
successors, and assigns.
17.4 This Plan is intended to constitute an "unfunded" plan and
nothing herein shall require the Company to segregate any monies or other
property or shares of Common Stock or create any trusts or deposits, and no
Optionee or holder shall have rights greater than a general unsecured
creditor of the Company.
17.5 It is the Company's intention that, if and so long as any of
the Company's equity securities are registered pursuant to Section 12(b) or
12(g) of the Exchange Act, the Plan shall comply in all respects with Rule
16b-3 under the Exchange Act and, if any Plan provision is later found not to
be in compliance with such Rule 16b-3, the provision shall be deemed null and
void, and in all events the Plan shall be construed in favor of its meeting
the requirements of Rule 16b-3. Notwithstanding anything in the Plan to the
contrary, the Board, in its sole discretion, may bifurcate the Plan so as to
restrict, limit or condition the use of any provision of the Plan to
Optionees who are officers or directors subject to Section 16 of the Exchange
Act without so restricting, limiting or conditioning the Plan with respect to
other Optionees. Additionally, in interpreting and applying the provisions
of the Plan, any Option granted as an ISO pursuant to the Plan shall, to be
extent permitted by law, be construed as an "incentive stock option" within
the meaning of Section 422 of the Code.
17.6 Where the context so requires, references herein to the
singular shall include the plural, and vice versa, and references to a
particular gender shall include either or both genders.
17.7 This Plan and any agreements hereunder shall be administered,
interpreted and enforced under the internal laws of the State of Oregon
without regard to conflicts of laws thereof.
18. EFFECTIVE DATE OF PLAN AND AMENDMENTS.
This Plan was initially adopted by the Board of Directors on December 16,
1997 and approved by the shareholders on April 22, 1998.
12
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