<PAGE>
As filed with the Securities and Exchange Commission on March 29, 1999
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________
COST-U-LESS, INC.
(Exact name of Registrant as specified in its charter)
Washington 91-1615590
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
12410 S.E. 32nd Street
Bellevue, Washington 98005
(Address of principal executive offices, including zip code)
COST-U-LESS, INC. 1998 STOCK INCENTIVE COMPENSATION PLAN
COST-U-LESS, INC. AMENDED AND RESTATED 1989 STOCK OPTION PLAN
COST-U-LESS, INC. 401(k) RETIREMENT PLAN
(Full title of the plans)
MICHAEL J. ROSE
Chief Executive Officer and President
Cost-U-Less, Inc.
12410 S.E. 32nd Street
Bellevue, Washington 98005
(425) 644-4241
(Name, address and telephone number, including area code, of agent for service)
______________________
Copy to:
MICHAEL E. STANSBURY
Perkins Coie LLP
1201 Third Avenue, 40th Floor
Seattle, Washington 98101-3099
______________________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------------
Title of Securities Number to Be Proposed Maximum Proposed Maximum Amount of
to Be Registered Registered(1) Offering Price Aggregate Offering Price Registration Fee
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value
per share, subject to outstanding
options under the Cost-U-Less, Inc. 176,364 $ 2.87(2) $ 506,164.68(2) $ 140.72
Amended and Restated 1989 Stock
Option Plan
----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value per
share, under the Cost-U-Less, Inc.
1998 Stock Incentive Compensation 675,907 $5.875(3) $3,970,953.60(3) $1,103.93
Plan
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value per
share, under the 100,000 $5.875(3) $ 587,500.00(3) $ 163.33
Cost-U-Less, Inc. 401(k)
Retirement Plan(4)
===================================================================================================================================
TOTAL: 952,271 $5,064,618.20(3) $1,408.00
===================================================================================================================================
</TABLE>
(1) Together with an indeterminate number of additional shares which may be
necessary to adjust the number of shares reserved for issuance pursuant to
such employee benefit plans as the result of any future stock split, stock
dividend or similar adjustment of the Registrant's outstanding Common
Stock.
(2) Based upon the weighted average exercise prices of options granted as of
the date of filing this Registration Statement.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended. The
price per share is estimated to be $5.875 based on the average of the high
($6.00) and low ($5.750) sales prices for the Common Stock on March 25,
1999 as reported on the Nasdaq National Market.
(4) Pursuant to Rule 416(c) under the Securities Act of 1933, as amended, this
Registration Statement covers an indeterminate amount of interests to be
offered or sold pursuant to the Cost-U-Less, Inc. 401(k) Retirement Plan.
<PAGE>
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange Commission
(the "Commission") are hereby incorporated by reference in this Registration
Statement:
(a) The Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998;
(b) All other reports filed by the Registrant pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), since the end of the fiscal year covered by the Annual Report on Form 10-
K referred to in (a) above; and
(c) The description of the Registrant's Common Stock contained in the
Registration Statement on Form 8-A filed on June 29, 1998, under Section 12(g)
of the Exchange Act, including any amendments or reports filed for the purpose
of updating such description.
All documents filed by the Registrant pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date hereof and prior to the filing of a
post-effective amendment which indicates that the securities offered hereby have
been sold or which deregisters the securities covered hereby then remaining
unsold shall also be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof commencing on the respective
dates on which such documents are filed.
Item 4. DESCRIPTION OF SECURITIES
Not applicable.
Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act authorize a court to award, or a corporation's board of
directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). Section 10 of the Registrant's Restated Bylaws provides for
indemnification of the Registrant's directors, officers, employees and agents to
the maximum extent permitted by Washington law.
Section 23B.08.320 of the Washington Business Corporation Act authorizes a
corporation to limit a director's liability to the corporation or its
shareholders for monetary damages for acts or omissions as a director, except in
certain circumstances involving intentional misconduct, self-dealing or illegal
corporate loans or distributions, or any transactions from which the director
personally receives a benefit in money, property or services to which the
director is not entitled. Article 8 of the Registrant's Restated Articles of
Incorporation contains provisions implementing, to the fullest extent permitted
by Washington law, such limitations on a director's liability to the Registrant
and its shareholders.
Officers and directors of the Registrant are covered by insurance (with
certain exceptions and certain limitations) that indemnifies them against losses
and liabilities arising from certain alleged "wrongful acts," including alleged
errors or misstatements, or certain other alleged wrongful acts or omissions
constituting neglect or breach of duty.
II-1
<PAGE>
Item 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
Item 8. EXHIBITS
Exhibit
Number Description
------------ ------------------------------------------------------------
5.1 Opinion of Perkins Coie LLP
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Perkins Coie LLP (included in opinion filed as
Exhibit 5.1)
24.1 Power of Attorney (see signature page)
99.1 Cost-U-Less, Inc. 1998 Stock Incentive Compensation Plan
99.2 Cost-U-Less, Inc. Amended and Restated 1989 Stock Option Plan
(incorporated by reference to Exhibit 10.2 to the Registration
Statement on Form S-1)
Item 9. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in this Registration
Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if the
- -------- -------
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefits plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bellevue, State of Washington, on the 26th day of
March, 1999.
COST-U-LESS, INC.
/s/ MICHAEL J. ROSE
---------------------------------------------
By: Michael J. Rose, Chairman of the Board,
Chief Executive Officer and President
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes
Michael J. Rose and Allan C. Youngberg, or either of them, as attorneys-in-fact
with full power of substitution, to execute in the name and on the behalf of
each person, individually and in each capacity stated below, and to file, any
and all amendments to this Registration Statement, including any and all post-
effective amendments.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on the 26th day of March, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ MICHAEL J. ROSE Chairman of the Board, Chief Executive Officer and President
- ------------------------------------- (Principal Executive Officer)
Michael J. Rose
/s/ ALLAN C. YOUNGBERG Executive Vice President, Chief Financial Officer, Secretary
- ------------------------------------- and Treasurer (Principal Financial and Accounting Officer)
Allan C. Youngberg
/s/ ASHLEY EMBERSON-BAIN Director
- -------------------------------------
Ashley Emberson-Bain
/s/ DAVID A. ENGER Director
- -------------------------------------
David A. Enger
/s/ DONALD L. GEVIRTZ Director
- -------------------------------------
Donald L. Gevirtz
/s/ WAYNE V. KEENER Director
- -------------------------------------
Wayne V. Keener
/s/ GARY W. NETTLES Director
- -------------------------------------
Gary W. Nettles
/s/ GEORGE C. TEXTOR Director
- -------------------------------------
George C. Textor
</TABLE>
II-3
<PAGE>
COST-U-LESS, INC. 401(k) RETIREMENT PLAN
Pursuant to the requirements of the Securities Act, the trustees (or other
persons who administer the Cost-U-Less, Inc. 401(k) Retirement Plan) have duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Bellevue, State of
Washington on the 26th day of March, 1999.
COST-U-LESS, INC. 401(k) RETIREMENT PLAN
By: /s/ ALLEN C. YOUNGBERG
-----------------------------------
Name: Allen C. Youngberg
---------------------------------
Title: Vice President CFO
--------------------------------
II-4
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
------------ ------------------------------------------------------------
5.1 Opinion of Perkins Coie LLP
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Perkins Coie LLP (included in opinion filed as
Exhibit 5.1)
24.1 Power of Attorney (see signature page)
99.1 Cost-U-Less, Inc. 1998 Stock Incentive Compensation Plan
99.2 Cost-U-Less, Inc. Amended and Restated 1989 Stock Option Plan
(incorporated by reference to Exhibit 10.2 to the Registration
Statement on Form S-1)
<PAGE>
EXHIBIT 5.1
Perkins Coie LLP
A LAW PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
1201 THIRD AVENUE, 40TH FLOOR, SEATTLE, WASHINGTON 98101-3099
TELEPHONE: 206 583-8888 FACSIMILE: 206 583-8500
March 26, 1999
Cost-U-Less, Inc.
12410 S.E. 32nd Street
Bellevue, Washington 98005
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as counsel to you in connection with the preparation of a
Registration Statement on Form S-8 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act"), which you are filing with the
Securities and Exchange Commission with respect to 952,271 shares of Common
Stock, par value $.001 per share (the "Shares"), which may be issued as follows:
675,907 shares pursuant to the Cost-U-Less, Inc. 1998 Stock Incentive
Compensation Plan; 176,364 shares pursuant to the Cost-U-Less, Inc. Amended and
Restated 1989 Stock Option Plan; and 100,000 shares pursuant to the Cost-U-Less,
Inc. 401(k) Retirement Plan (the "Plans").
Based upon and subject to the foregoing, we are of the opinion that any
original issuance Shares that may be issued pursuant to the Plans have been duly
authorized and that, upon the due execution by the Company and the registration
by its registrar of such Shares and the sale thereof by the Company in
accordance with the terms of the Plans, and the receipt of consideration
therefor in accordance with the terms of the Plans, such Shares will be validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ PERKINS COIE LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
___________________________________________________________
We consent to the reference in the Registration Statement (Form S-8) pertaining
to the 1998 Stock Incentive Compensation Plan, the Amended and Restated 1989
Stock Option Plan, and the 401(k) Retirement Plan for Cost-U-Less, Inc. and to
the incorporation by reference therein of our report dated March 5, 1999, with
respect to the consolidated financial statements and schedules of Cost-U-Less,
Inc. included in its Annual Report (Form 10-K) for the fiscal year ended
December 27, 1998, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Seattle, Washington
March 26, 1999
<PAGE>
EXHIBIT 99.1
COST-U-LESS
1998 STOCK INCENTIVE COMPENSATION PLAN
SECTION 1. PURPOSE
The purpose of the Cost-U-Less 1998 Stock Incentive Compensation Plan (the
"Plan") is to enhance the long-term shareholder value of Cost-U-Less, a
Washington corporation (the "Company"), by offering opportunities to employees,
directors, officers, consultants, agents, advisors and independent contractors
of the Company and its Subsidiaries (as defined in Section 2) to participate in
the Company's growth and success, and to encourage them to remain in the service
of the Company and its Subsidiaries and to acquire and maintain stock ownership
in the Company.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth
below:
2.1 Award
"Award" means an award or grant made pursuant to the Plan, including,
without limitation, awards or grants of Options and Stock Awards, or any
combination of the foregoing.
2.2 Board
"Board" means the Board of Directors of the Company.
2.3 Cause
"Cause" means dishonesty, fraud, misconduct, unauthorized use or disclosure
of confidential information or trade secrets, or conviction or confession of a
crime punishable by law (except minor violations), in each case as determined by
the Plan Administrator, and its determination shall be conclusive and binding.
2.4 Code
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.5 Common Stock
"Common Stock" means the common stock, par value $.01 per share, of the
Company.
2.6 Corporate Transaction
"Corporate Transaction" means any of the following events:
(a) Consummation of any merger or consolidation of the Company in
which the Company is not the continuing or surviving corporation, or
pursuant to which shares of the Common Stock are converted into cash,
securities or other property, if following such merger or consolidation the
holders of the Company's outstanding voting securities immediately prior to
such merger or consolidation own less than 66-2/3% of the outstanding
voting securities of the surviving corporation;
<PAGE>
(b) Consummation of any sale, lease, exchange or other transfer in one
transaction or a series of related transactions of all or substantially all
of the Company's assets other than a transfer of the Company's assets to a
majority-owned subsidiary corporation (as the term "subsidiary corporation"
is defined in Section 8.3) of the Company;
(c) Approval by the holders of the Common Stock of any plan or
proposal for the liquidation or dissolution of the Company; or
(d) Acquisition by a person, within the meaning of Section 3(a)(9) or
of Section 13(d)(3) (as in effect on the date of adoption of the Plan) of
the Exchange Act of a majority or more of the Company's outstanding voting
securities (whether directly or indirectly, beneficially or of record).
Ownership of voting securities shall take into account and shall include
ownership as determined by applying Rule 13d-3(d)(1)(i) (as in effect on the
date of adoption of the Plan) under the Exchange Act.
2.7 Disability
"Disability" means "disability" as that term is defined for purposes of
Section 22(e)(3) of the Code.
2.8 Exchange Act
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.9 Fair Market Value
"Fair Market Value" shall be as established in good faith by the Plan
Administrator or (a) if the Common Stock is listed on the Nasdaq National
Market, the closing selling price for the Common Stock as reported by the Nasdaq
National Market for a single trading day or (b) if the Common Stock is listed on
the New York Stock Exchange or the American Stock Exchange, the closing selling
price for the Common Stock as such price is officially quoted in the composite
tape of transactions on such exchange for a single trading day. If there is no
such reported price for the Common Stock for the date in question, then such
price on the last preceding date for which such price exists shall be
determinative of the Fair Market Value.
2.10 Good Reason
"Good Reason" means the occurrence of any of the following events or
conditions and the failure of the Successor Corporation to cure such event or
condition within 30 days after receipt of written notice by the Holder:
(a) a change in the Holder's status, title, position or
responsibilities (including reporting responsibilities) that, in the Holder's
reasonable judgment, represents a substantial reduction in the status, title,
position or responsibilities as in effect immediately prior thereto; the
assignment to the Holder of any duties or responsibilities that, in the Holder's
reasonable judgment, are materially inconsistent with such status, title,
position or responsibilities; or any removal of the Holder from or failure to
reappoint or reelect the Holder to any of such positions, except in connection
with the termination of the Holder's employment for Cause, for Disability or as
a result of his or her death, or by the Holder other than for Good Reason;
(b) a reduction in the Holder's annual base salary;
(c) the Successor Corporation's requiring the Holder (without the
Holder's consent) to be based at any place outside a 35-mile radius of his or
her place of employment prior to a Corporate Transaction, except for reasonably
required travel on the Successor Corporation's business that is not materially
greater than such travel requirements prior to the Corporate Transaction;
<PAGE>
(d) the Successor Corporation's failure to (i) continue in effect any
material compensation or benefit plan (or the substantial equivalent thereof) in
which the Holder was participating at the time of a Corporate Transaction,
including, but not limited to, the Plan, or (ii) provide the Holder with
compensation and benefits substantially equivalent (in terms of benefit levels
and/or reward opportunities) to those provided for under each material employee
benefit plan, program and practice as in effect immediately prior to the
Corporate Transaction;
(e) any material breach by the Successor Corporation of its
obligations to the Holder under the Plan or any substantially equivalent plan of
the Successor Corporation; or
(f) any purported termination of the Holder's employment or services
for Cause by the Successor Corporation that does not comply with the terms of
the Plan or any substantially equivalent plan of the Successor Corporation.
2.11 Grant Date
"Grant Date" means the date the Plan Administrator adopted the granting
resolution or a later date designated in a resolution of the Plan Administrator
as the date an Award is to be granted.
2.12 Holder
"Holder" means (a) the person to whom an Award is granted; (b) for a Holder
who has died, the personal representative of the Holder's estate, the person(s)
to whom the Holder's rights under the Award have passed by will or by the
applicable laws of descent and distribution, or the beneficiary designated in
accordance with Section 10; or (c) the person(s) to whom an Award has been
transferred in accordance with Section 10.
2.13 Incentive Stock Option
"Incentive Stock Option" means an Option to purchase Common Stock granted
under Section 7 with the intention that it qualify as an "incentive stock
option" as that term is defined in Section 422 of the Code.
2.14 Nonqualified Stock Option
"Nonqualified Stock Option" means an Option to purchase Common Stock
granted under Section 7 other than an Incentive Stock Option.
2.15 Option
"Option" means the right to purchase Common Stock granted under Section 7.
2.16 Plan Administrator
"Plan Administrator" means the Board or any committee of the Board
designated to administer the Plan under Section 3.1.
2.17 Restricted Stock
"Restricted Stock" means shares of Common Stock granted under Section 9,
the rights of ownership of which are subject to restrictions prescribed by the
Plan Administrator.
2.18 Securities Act
"Securities Act" means the Securities Act of 1933, as amended.
<PAGE>
2.19 Stock Award
"Stock Award" means an Award granted under Section 9.
2.20 Subsidiary
"Subsidiary," except as provided in Section 8.3 in connection with
Incentive Stock Options, means any entity that is directly or indirectly
controlled by the Company or in which the Company has a significant ownership
interest, as determined by the Plan Administrator, and any entity that may
become a direct or indirect parent of the Company.
2.21 Successor Corporation
"Successor Corporation" has the meaning set forth in Section 11.2.
SECTION 3. ADMINISTRATION
3.1 Plan Administrator
The Plan shall be administered by the Board or a committee or committees
(which term includes subcommittees) appointed by, and consisting of two or more
members of, the Board (the "Plan Administrator"). If and so long as the Common
Stock is registered under Section 12(b) or 12(g) of the Exchange Act, the Board
shall consider in selecting the Plan Administrator and the membership of any
committee acting as Plan Administrator, with respect to any persons subject or
likely to become subject to Section 16 of 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
consisting of two or more members of the Board, 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.
3.2 Administration and Interpretation by the Plan Administrator
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 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.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 Authorized Number of Shares
Subject to adjustment from time to time as provided in Section 11.1, a
maximum of 500,000/1/ shares of Common Stock shall be available for issuance
under the Plan (except that any shares of Common Stock that, as of
- ----------------------
/1/ This number reflects the adjustment pursuant to the 1:3.38773 reverse stock
split.
<PAGE>
the date of shareholder approval of the Plan, are available for issuance under
the Company's 1989 Stock Option Plan, as amended (the "Option Plan"), (or that
thereafter become available for issuance under the Option Plan in accordance
with its terms as in effect on such date) and that are not issued under that
plan shall be added to the aggregate number of shares available for issuance
under the Plan). Shares issued under the Plan shall be drawn from authorized and
unissued shares or shares now held or subsequently acquired by the Company.
4.2 Reuse of Shares
Any shares of Common Stock that have been made subject to an Award 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 grants of Awards under the
Plan.
SECTION 5. ELIGIBILITY
Awards may be granted under the Plan to those officers, directors and
employees of the Company and its Subsidiaries as the Plan Administrator from
time to time selects. Awards may also be made to consultants, agents, advisors
and independent contractors who provide services to the Company and its
Subsidiaries.
SECTION 6. AWARDS
6.1 Form and Grant of Options
The Plan Administrator shall have the authority, in its sole discretion, to
determine the type or types of Awards to be made under the Plan. Such Awards
may include, but are not limited to, Incentive Stock Options, Nonqualified Stock
Options and Stock Awards. Awards may be granted singly or in combination.
6.2 Acquired Company Option Awards
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Awards under the Plan in substitution for awards 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 Award is
substituted, or the old award 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
conditions shall be deemed to be the action of the Plan Administrator without
any further action by the Plan Administrator, except as may be required for
compliance with Rule 16b-3 under the Exchange Act, and the persons holding such
Awards shall be deemed to be Holders.
SECTION 7. AWARDS OF OPTIONS
7.1 Grant of Options
The Plan Administrator is authorized under the Plan, in its sole
discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock
Options, which shall be appropriately designated.
7.2 Option Exercise Price
The exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date with respect to
Incentive Stock Options and not less than 85% of the Fair Market Value of the
Common Stock on the Grant Date with respect to Nonqualified Stock Options.
<PAGE>
7.3 Term of Options
The term of each Option shall be as established by the Plan Administrator
or, if not so established, shall be 10 years from the Grant Date.
7.4 Exercise of Options
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option the time at which or the installments in which the
Option shall vest and become exercisable, which provisions may be waived or
modified by the Plan Administrator at any time. If not so established in the
instrument evidencing the Option, the Option will vest and become exercisable
according to the following schedule, which may be waived or modified by the Plan
Administrator at any time:
Period of Holder's Continuous
Employment or Service With the
Company or Its Subsidiaries Percent of Total Option
From the Option Grant Date That Is Vested and Exercisable
--------------------------- --------------------------------
After 1 year 20%
After 2 years 40%
After 3 years 60%
After 4 years 80%
After 5 years 100%
To the extent that the right to purchase shares has accrued thereunder, an
Option may be exercised from time to time by written notice to the Company, in
accordance with procedures established by the Plan Administrator, setting forth
the number of shares with respect to which the Option is being exercised and
accompanied by payment in full as described in Section 7.5. The Plan
Administrator may determine at any time that an Option may not be exercised as
to less than 100 shares at any one time (or the lesser number of remaining
shares covered by the Option).
7.5 Payment of Exercise Price
The exercise price for shares purchased under an Option shall be paid in
full to the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased. Such consideration
must be paid in cash or by check or, unless the Plan Administrator in its sole
discretion determines otherwise, either at the time the Option is granted or at
any time before it is exercised, a combination of cash and/or check (if any) and
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
Holder for at least six 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
exercise 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
designated by the Company to deliver promptly to the Company the aggregate
amount of sale or loan proceeds to pay the Option exercise 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, to the extent permitted by the Plan Administrator
in its sole discretion, 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 7.5, by (y) a full-recourse
promissory note delivered pursuant to Section 12 or (z) such other consideration
as the Plan Administrator may permit.
<PAGE>
7.6 Post-Termination Exercises
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 a Holder ceases to be employed by,
or to provide services to, the Company or its Subsidiaries, which provisions may
be waived or modified by the Plan Administrator at any time. If not so
established in the instrument evidencing the Option, the Option will be
exercisable according to the following terms and conditions, which may be waived
or modified by the Plan Administrator at any time.
In the case of termination of the Holder's employment or services other
than by reason of death or Cause, the Option shall be exercisable, to the extent
of the number of shares purchasable by the Holder at the date of such
termination, only (a) within one year after the date of termination of the
Holder's employment or services if such termination is coincident with
Disability or (b) within three months after the date of termination of the
Holder's employment or services if such termination is for any reason other than
Disability, but in no event later than the remaining term of the Option.
Any Option exercisable at the time of the Holder's death may be exercised,
to the extent of the number of shares purchasable by the Holder at the date of
the Holder's death, by the personal representative of the Holder's estate, the
person(s) to whom the Holder's rights under the Option have passed by will or
the applicable laws of descent and distribution or the beneficiary designated
pursuant to Section 10 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.
In the case of termination of the Holder's employment or services for
Cause, the Option shall automatically terminate upon first notification to the
Holder of such termination, unless the Plan Administrator determines otherwise.
If a Holder's employment or services with the Company are suspended pending an
investigation of whether the Holder shall be terminated for Cause, all the
Holder's rights under any Option likewise shall be suspended during the period
of investigation.
Any portion of an Option that is not exercisable on the date of termination
of the Holder's employment or services shall terminate on such date, unless the
Plan Administrator determines otherwise.
A transfer of employment or services between or among the Company and its
Subsidiaries shall not be considered a termination of employment or services.
The effect of a Company-approved leave of absence on the terms and conditions of
an Option shall be determined by the Plan Administrator, in its sole discretion.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
To the extent required by Section 422 of the Code, Incentive Stock Options
shall be subject to the following additional terms and conditions:
8.1 Dollar Limitation
To the extent the aggregate Fair Market Value (determined as of the Grant
Date) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time during any calendar year (under the Plan and all
other stock option plans of the Company) exceeds $100,000, such portion in
excess of $100,000 shall be treated as a Nonqualified Stock Option. In the
event the Holder holds two or more such Options that become exercisable for the
first time in the same calendar year, such limitation shall be applied on the
basis of the order in which such Options are granted.
8.2 10% Shareholders
If an individual owns more than 10% of the total voting power of all
classes of the Company's stock, then the exercise price per share of an
Incentive Stock Option shall not be less than 110% of the Fair Market Value of
<PAGE>
the Common Stock on the Grant Date and the Option term shall not exceed five
years. The determination of 10% ownership shall be made in accordance with
Section 422 of the Code.
8.3 Eligible Employees
Individuals who are not employees of the Company or one of its parent
corporations or subsidiary corporations may not be granted Incentive Stock
Options. For purposes of this Section 8.3, "parent corporation" and "subsidiary
corporation" shall have the meanings attributed to those terms for purposes of
Section 422 of the Code.
8.4 Term
The term of an Incentive Stock Option shall not exceed 10 years.
8.5 Exercisability
To qualify for Incentive Stock Option tax treatment, an Option designated
as an Incentive Stock Option 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
Holder's reemployment rights are guaranteed by statute or contract. For
purposes of this Section 8.5, "total disability" shall mean a mental or physical
impairment of the Holder that is expected to result in death or that has lasted
or is expected to last for a continuous period of 12 months or more and that
causes the Holder to be unable, in the opinion of the Company and two
independent physicians, to perform his or her duties for the Company and to be
engaged in any substantial gainful activity. Total disability shall be deemed
to have occurred on the first day after the Company and the two independent
physicians have furnished their opinion of total disability to the Plan
Administrator.
8.6 Taxation of Incentive Stock Options
In order to obtain certain tax benefits afforded to Incentive Stock Options
under Section 422 of the Code, the Holder must hold the shares issued upon the
exercise of an Incentive Stock Option for two years after the Grant Date of the
Incentive Stock Option and one year from the date of exercise. A Holder may be
subject to the alternative minimum tax at the time of exercise of an Incentive
Stock Option. The Holder shall give the Company prompt notice of any
disposition of shares acquired by the exercise of an Incentive Stock Option
prior to the expiration of such holding periods.
8.7 Promissory Notes
The amount of any promissory note delivered pursuant to Section 13 in
connection with an Incentive Stock 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 to the
imputed interest rules) for federal income tax purposes.
SECTION 9. STOCK AWARDS
9.1 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), 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. The terms, conditions and restrictions that the Plan
Administrator shall have the power to determine shall include, without
limitation, the
<PAGE>
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.
9.2 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 release, 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, the appropriate number of
shares of Common Stock.
9.3 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.
SECTION 10. ASSIGNABILITY
No Option granted under the Plan may be assigned or transferred by the
Holder other than by will or by the applicable laws of descent and distribution,
and, during the Holder's lifetime, such Awards may be exercised only by the
Holder. Notwithstanding the foregoing, and to the extent permitted by Section
422 of the Code, the Plan Administrator, in its sole discretion, may permit such
assignment, transfer and exercisability and may permit a Holder of such Awards
to designate a beneficiary who may exercise the Award or receive compensation
under the Award after the Holder's death; provided, however, that any Award so
assigned or transferred shall be subject to all the same terms and conditions
contained in the instrument evidencing the Award.
SECTION 11. ADJUSTMENTS
11.1 Adjustment of Shares
In the event that, at any time or from time to time, a stock dividend,
stock split, spin-off, combination or exchange of shares, recapitalization,
merger, consolidation, distribution to shareholders other than a normal cash
dividend, or other change in the Company's corporate or capital structure
results in (a) the outstanding shares, or any securities exchanged therefor or
received in their place, being exchanged for a different number or class of
securities of the Company or of any other corporation or (b) new, different or
additional securities of the Company or of any other corporation being received
by the holders of shares of Common Stock of the Company, then the Plan
Administrator shall make proportional adjustments in (i) the maximum number and
kind of securities subject to the Plan as set forth in Section 4.1 and (ii) the
number and kind of securities that are subject to any outstanding Award and the
per share price of such securities, without any change in the aggregate price to
be paid therefor. The determination by the Plan Administrator as to the terms
of any of the foregoing adjustments shall be conclusive and binding.
Notwithstanding the foregoing, a Corporate Transaction shall not be governed by
this Section 11.1 but shall be governed by Section 11.2.
11.2 Corporate Transaction
(a) Except as otherwise provided in the instrument that evidences the
Award, in the event of any Corporate Transaction, each Award that is at the time
outstanding shall automatically accelerate so that each such Award shall,
immediately prior to the specified effective date for the Corporate Transaction,
become 100% vested and exercisable.
<PAGE>
(b) Such Award shall not so accelerate, however, if and to the extent that
such Award is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation or parent thereof (the "Successor
Corporation") or to be replaced with a comparable award for the purchase of
shares of the capital stock of the Successor Corporation. The determination of
Award comparability shall be made by the Plan Administrator, and its
determination shall be conclusive and binding. Any such Awards granted to an
"executive officer" (as that term is defined for purposes of Section 16 of the
Exchange Act) of the Company that are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time shall be accelerated in
the event that the Holder's employment or services should subsequently terminate
within two years following such Corporate Transaction, unless such employment or
services are terminated by the Successor Corporation for Cause or by the Holder
voluntarily without Good Reason. The acceleration will not occur if, in the
opinion of the Company's outside accountants, it would render unavailable
"pooling of interest" accounting for a Corporate Transaction that would
otherwise qualify for such accounting treatment.
(c) All such Options shall terminate and cease to remain outstanding
immediately following the consummation of the Corporate Transaction, except to
the extent assumed by the Successor Corporation.
11.3 Further Adjustment of Options
Subject to Section 11.2, the Plan Administrator shall have the discretion,
exercisable at any time before a sale, merger, consolidation, reorganization,
liquidation or change in control of the Company, as defined by the Plan
Administrator, to take such further action as it determines to be necessary or
advisable, and fair and equitable to Holders, with respect to Awards. Such
authorized action may include (but shall not be limited to) establishing,
amending or waiving the type, terms, conditions or duration of, or restrictions
on, Awards so as to provide for earlier, later, extended or additional time for
exercise and other modifications, and the Plan Administrator may take such
actions with respect to all Holders, to certain categories of Holders or only to
individual Holders. The Plan Administrator may take such action before or after
granting Awards to which the action relates and before or after any public
announcement with respect to such sale, merger, consolidation, reorganization,
liquidation or change in control that is the reason for such action.
11.4 Limitations
The grant of Awards will in no way affect the Company's right to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
SECTION 12. WITHHOLDING
The Company may require the Holder to pay to the Company the amount of any
withholding taxes that the Company is required to withhold with respect to the
grant, exercise, payment or settlement of any Award. In such instances, the
Plan Administrator may, in its discretion and subject to the Plan and applicable
law, permit the Holder to satisfy withholding obligations, in whole or in part,
by paying cash, 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. The Company
shall have the right to withhold from any shares of Common Stock issuable
pursuant to an Award or from any cash amounts otherwise due or to become due
from the Company to the Holder an amount equal to such taxes. The Company may
also deduct from any Award any other amounts due from the Holder to the Company
or a Subsidiary.
SECTION 13. LOANS, INSTALLMENT PAYMENTS AND LOAN GUARANTEES
To assist a Holder (including a Holder who is an officer or a director of
the Company) in acquiring shares of Common Stock pursuant to an Award granted
under the Plan, the Plan Administrator, in its sole discretion, may authorize,
either at the Grant Date or at any time before the acquisition of Common Stock
pursuant to the Award, (a) the extension of a loan to the Holder by the Company,
(b) the payment by the Holder of the purchase price, if
<PAGE>
any, of the Common Stock in installments, or (c) the guarantee by the Company of
a loan obtained by the Holder from a third party. The terms of any loans,
installment payments or loan guarantees, including the interest rate and terms
of repayment, will be subject to the Plan Administrator's discretion; provided,
however, that repayment of any Company loan to the Holder shall be secured by
delivery of a full-recourse promissory note for the loan amount executed by the
Holder, together with any other form of security determined by the Plan
Administrator. The maximum credit available is the purchase price, if any, of
the Common Stock acquired, plus the maximum federal and state income and
employment tax liability that may be incurred in connection with the
acquisition.
SECTION 14. AMENDMENT AND TERMINATION OF PLAN
14.1 Amendment of Plan
The Plan may be amended only by the Board in such respects 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 Options may be granted under the Plan or that may be issued as Stock
Awards, (b) modify the class of persons eligible to receive Options, or (c)
otherwise require shareholder approval under any applicable law or regulation.
14.2 Termination of Plan
The Board may suspend or terminate the Plan at any time. The Plan will
have no fixed expiration date; provided, however, that no Incentive Stock
Options may be granted more than 10 years after the earlier of the Plan's
adoption by the Board and approval by the shareholders.
14.3 Consent of Holder
Subject to the requirements of Section 422 of the Code with respect to
Incentive Stock Options and to the terms and conditions and within the
limitations of the Plan, the Plan Administrator may modify or amend outstanding
Awards granted under the Plan. The modification or amendment of an outstanding
Award, or the amendment or termination of the Plan, shall not, without the
consent of the Holder, impair or diminish any of the Holder's rights or any of
the obligations of the Company under such Award. Except as otherwise provided
in the Plan, no outstanding Award shall be terminated without the consent of the
Holder. Unless the Holder agrees otherwise, any changes or adjustments made to
outstanding Incentive Stock Options granted under the Plan shall be made in such
a manner so as not to constitute a "modification" as defined in Section 424(h)
of the Code and so as not to cause any Incentive Stock Option issued hereunder
to fail to continue to qualify as an "incentive stock option" as defined in
Section 422(b) of the Code.
SECTION 15. GENERAL
15.1 Award Agreements
Awards granted under the Plan shall be evidenced by a written agreement
that shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and that are not inconsistent with the
Plan.
15.2 Continued Employment or Services; Rights in Awards
None of the Plan, participation in the Plan or any action of the Plan
Administrator taken under the Plan shall be construed as giving any person any
right to be retained in the employ of the Company or limit the Company's right
to terminate the employment or services of any person.
<PAGE>
15.3 Registration; Certificates for Shares
The Company shall be under no obligation to any Holder to register for
offering or resale or to qualify for exemption under the Securities Act, or to
register or qualify under state securities laws, any shares of Common Stock,
security or interest in a security paid or issued under, or created by, the
Plan, or to continue in effect any such registrations or qualifications if made.
The Company may restrict the exercise of any Option and may adopt exercise
control restrictions in order to maintain any exemption requirements of federal
or state securities laws. The Company may refuse the exercise of any Option for
which an exemption from registration under federal and state securities laws is
unavailable. The Company may issue certificates for shares with such legends
and subject to such restrictions on transfer and stop-transfer instructions as
counsel for the Company deems necessary or desirable for compliance by the
Company with federal and state securities laws.
Inability of the Company to obtain, from any regulatory body having
jurisdiction, the authority deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any shares hereunder or the unavailability of an
exemption from registration for the issuance and sale of any shares hereunder
shall relieve the Company of any liability in respect of the nonissuance or sale
of such shares as to which such requisite authority shall not have been
obtained.
15.4 No Rights as a Shareholder
No Option shall entitle the Holder to any dividend, voting or other right
of a shareholder unless and until the date of issuance under the Plan of the
shares that are the subject of such Option, free of all applicable restrictions.
15.5 Compliance With Laws and Regulations
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 Holders 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 Holders. Additionally, in
interpreting and applying the provisions of the Plan, any Option granted as an
Incentive Stock Option pursuant to the Plan shall, to the extent permitted by
law, be construed as an "incentive stock option" within the meaning of Section
422 of the Code.
15.6 No Trust or Fund
The Plan is intended to constitute an "unfunded" plan. Nothing contained
herein shall require the Company to segregate any monies or other property, or
shares of Common Stock, or to create any trusts, or to make any special deposits
for any immediate or deferred amounts payable to any Holder, and no Holder shall
have any rights that are greater than those of a general unsecured creditor of
the Company.
15.7 Severability
If any provision of the Plan or any Award is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Award under any law deemed applicable by the Plan
Administrator, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without, in
the Plan Administrator's determination, materially altering the intent of the
Plan or the Award, such provision shall be stricken as to such jurisdiction,
person or Award, and the remainder of the Plan and any such Award shall remain
in full force and effect.
SECTION 16. EFFECTIVE DATE
The Plan's effective date is the date on which it is adopted by the Board,
so long as it is approved by the Company's shareholders at any time within 12
months of such adoption.
