SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant[X]
Filed by a Party other than the Registrant[ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
BRAZOS SPORTSWEAR, INC.
(Name of Registrant as Specified In Its Charter)
-------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies: _______
2) Aggregate number of securities to which transaction applies: _________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
_____________________________
4) Proposed maximum aggregate value of transaction: $_______________
5) Total fee paid: $__________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ________________
2) Form, Schedule or Registration Statement No.: _________________
3) Filing Party: _________________
4) Date Filed: __________________
<PAGE>
BRAZOS SPORTSWEAR, INC.
3860 VIRGINIA AVENUE
CINCINNATI, OHIO 45227
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 16, 1997
Notice is hereby given that the annual meeting of the stockholders of
Brazos Sportswear, Inc. (the "Company") will be held at the offices of Equus
II Incorporated ("Equus II") at 2929 Allen Parkway, Suite 2500, Houston, Texas
77019 on Tuesday, September 16, 1997, at 10:00 a.m., Houston Time, for the
following purposes:
1. To elect a board of six directors to serve, until the next annual
meeting of stockholders or until their successors are elected and qualify,
or subject to adoption of the Charter Amendment (defined below), for the
relevant term established for the respective classes of directors or until
their successors are elected and qualified;
2. To consider and act upon the adoption of an amendment to the
Company's Restated Certificate of Incorporation to establish a classified
board of directors (the "Charter Amendment");
3. To consider and act upon the adoption of the 1997 Incentive Plan
(the "Plan"); and
4. To consider and act upon such other business as may properly be
presented to the meeting.
A record of stockholders has been taken as of the close of business on
August 18, 1997, and only those stockholders of record on that date will be
entitled to notice of and to vote at the meeting. A list of stockholders will be
available at the offices of the Company commencing September 5, 1997, and may be
inspected during normal business hours before the annual meeting.
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED STAMPED ENVELOPE WHICH HAS
BEEN PROVIDED FOR YOUR CONVENIENCE. THE PROMPT RETURN OF PROXIES WILL ENSURE A
QUORUM AND SAVE THE COMPANY THE EXPENSE OF FURTHER SOLICITATION.
By Order of the Board of Directors,
F. CLAYTON CHAMBERS,
SECRETARY
August 25, 1997
<PAGE>
BRAZOS SPORTSWEAR, INC.
3860 VIRGINIA AVENUE
CINCINNATI, OHIO 45227
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is being mailed to stockholders commencing on or about
August 25, 1997, in connection with the solicitation by the board of directors
of Brazos Sportswear, Inc. (the "Company") of proxies to be voted at the
annual meeting of stockholders to be held at the offices of Equus II
Incorporated ("Equus II"), 2929 Allen Parkway, Houston, Texas 77019 on
September 16, 1997, and any adjournment thereof, for the purposes set forth in
the accompanying notice. Proxies will be voted in accordance with the directions
specified thereon and otherwise in accordance with the judgment of the persons
designated as the holders of the proxies. Proxies marked as abstaining on any
matter to be acted on by the stockholders will be treated as present at the
annual meeting for purposes of determining a quorum but will not be counted as
votes cast on such matters. Any proxy on which no direction is specified will be
voted for the election of each of the directors nominated by the Company named
herein, or otherwise in accordance with the judgment of the person specified
thereon. A stockholder may revoke a proxy by delivering to the Company written
notice of revocation, delivering to the Company a proxy signed on a later date
or voting in person at the annual meeting.
OUTSTANDING VOTING SECURITIES
As of August 18, 1997, the record date for the determination of
stockholders entitled to vote at the annual meeting, there were 4,403,715 shares
of the common stock ("Common Stock") of the Company outstanding. Each share of
common stock entitles the holder to one vote on all matters presented at the
meeting. In addition, as of August 18, 1997, there were 2,682,787 shares of the
Series B-2 preferred stock of the Company ("Series B-2 Preferred Stock")
outstanding. The shares of Series B-2 Preferred Stock vote with the Common Stock
based on the number of shares of Common Stock into which such preferred stock is
then convertible. As of August 18, 1997, each share of Series B-2 Preferred
Stock is convertible into approximately .0909 shares of Common Stock, which on
an as-converted basis represents an aggregate of 243,889 shares of Common Stock.
ELECTION OF DIRECTORS
At the meeting, six nominees are to be elected, each director to hold
office until the next annual meeting of the stockholders, or if the Charter
Amendment is adopted, as set forth in the table below, or until his successor is
elected and qualified. The persons named in the accompanying proxy have been
designated by the board of directors and, unless authority is withheld, they
intend to vote for the election of the nominees named below to the board of
directors. Each of the nominees has previously served as a director of the
Company. If any nominee should become unavailable for election, the proxy may be
voted for a substitute nominee selected by the persons named in the proxy, or
the board may be reduced accordingly; however, the board of directors is not
aware of any circumstances likely to render any nominee unavailable.
The Charter Amendment, if approved by the stockholders, creates a
classified board of directors consisting of three classes. Each class is to be
as nearly equal in size as is practicable and each presently consists of two
directors. At the annual meeting, two directors will be elected to each of Class
I, Class II and Class III positions, with each Class I Director holding office
until the third annual meeting of stockholders following his election, each
Class II Director holding office until the second annual meeting of stockholders
following his election, and each Class III Director holding office until the
first annual meeting of stockholders following his election. Each director
elected after the initial term of any Class will be elected for a three-year
term.
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INFORMATION REGARDING THE NOMINEES
The following table contains certain information with respect to the
persons who have been nominated to serve as directors of the Company:
DIRECTOR
NAME POSITION AGE SINCE
---- -------- ---- ---------
CLASS I DIRECTORS WHOSE TERM (IF ELECTED AND THE CHARTER AMENDMENT APPROVED)
WILL EXPIRE IN 2000
Randall B. Hale........ Director and chairman of the board 34 1997
J. Ford Taylor......... Director, president, and chief 40 1997
executive officer
CLASS II DIRECTORS WHOSE TERM (IF ELECTED AND THE CHARTER AMENDMENT APPROVED)
WILL EXPIRE IN 1999
Nolan Lehmann.......... Director 53 1997
F. Clayton Chambers.... Director, vice president, chief 37 1997
financial officer, secretary and
treasurer
CLASS III DIRECTORS WHOSE TERM (IF ELECTED AND THE CHARTER AMENDMENT APPROVED)
WILL EXPIRE IN 1998
Alan B. Elenson........ Director and president of Plymouth 47 1997
Mills Facility
Michael S. Chadwick.... Director 45 1997
For certain information regarding the beneficial ownership of the Common
Stock by each of the nominees, see "Other Information -- Principal
Stockholders."
RANDALL B. HALE. Mr. Hale has been a director and chairman of the board of
the Company since March 1997, at which time BSI Holdings, Inc. ("BSI") merged
into the Company, and the Company changed its name to Brazos Sportswear, Inc. He
has served as a vice president of Equus II and Equus Capital Management Company
("Equus") since 1992 and a director of Equus since 1996. From 1985 to 1992, he
was employed by Andersen Worldwide. Mr. Hale is a director of American
Residential Services, Inc. and is also a director of numerous privately-owned
companies. Mr. Hale is a certified public accountant.
J. FORD TAYLOR. Mr. Taylor has been a president, chief executive officer
and a director of the Company since March 1997, and beginning in 1996 held the
same positions with BSI. He was president of BSI's decorated sportswear
operations from 1995 until 1996 and vice president -- operations of its
decorated sportswear operations from 1993 until 1995. Mr. Taylor served as
president of BSI's CC Creations and Red Oak facility in College Station, Texas
from 1990 to 1993. He founded CC Creations in 1982 which he owned and operated
before its acquisition by BSI.
NOLAN LEHMANN. Mr. Lehmann has been a director of the Company since 1997.
He has served as a director and president of Equus since 1980, and as a director
and president of Equus II since inception. Before joining Equus, Mr. Lehmann
served in a number of executive management positions with Service Corporation
International from 1973 to 1980. Mr. Lehmann is also a director of Allied Waste
Industries, Inc., American Residential Services, Inc., Drypers Corporation and
Garden Ridge Corporation. In addition, he serves as a director of several
privately-owned companies. Mr. Lehmann is a certified public accountant.
F. CLAYTON CHAMBERS. Mr. Chambers has been a director of the Company since
1997. He has served as vice president, chief financial officer, treasurer and
secretary of BSI from January 1995 until March 1997 and has served the Company
in the same capacity since that date, and previously served as a consultant to
BSI beginning in May 1994. Mr. Chambers was a principal in the firm of Chadwick,
Chambers & Associates, Inc., an investment and merchant banking firm located in
Houston, Texas, from 1988 until 1994. He was employed by Lovett Mitchell Webb &
Garrison, an investment banking firm, from 1986 until 1987.
2
<PAGE>
ALAN B. ELENSON. Mr. Elenson has been a director of the Company since
1997. He founded Plymouth Mills, Inc. ("Plymouth") in 1975 and owned and
operated Plymouth before its acquisition by BSI in August 1996. Mr. Elenson is
president of the Company's Plymouth Mills operations.
MICHAEL S. CHADWICK. Mr. Chadwick has been a director of the Company or
its predecessors since 1997. He is a senior vice president and a managing
director of the corporate finance department of Sanders Morris Mundy, a
Houston-based financial services and investment banking firm ("SMM"). From
1988 to 1994, Mr. Chadwick served as president of Chadwick, Chambers &
Associates, Inc., an investment and merchant banking firm located in Houston,
Texas. Mr. Chadwick presently serves on the Board of Directors of Watermarc Food
Management Company and Blue Dolphin Energy Company, both publicly traded
corporations, and Moody-Price, Inc., a privately-owned corporation.
VOTE REQUIRED FOR ELECTION AND RECOMMENDATION
The six nominees or, if the Charter Amendment is adopted, the two nominees
in each Class, for election as directors at the annual meeting who receive the
greatest number of votes cast for election by the holders of Common Stock
(including Common Stock resulting from the deemed conversion of the Series B-2
Preferred Stock as of the record date) of record shall be the duly elected
directors upon completion of the vote tabulation at the annual meeting, provided
a majority of the outstanding shares as of the record date are present in person
or by proxy at the meeting. Votes will be tabulated and the results certified by
the election inspector appointed by the Company who is required to resolve
impartially any interpretive questions as to the conduct of the vote. Under
applicable provisions of the Company's bylaws, any proxy containing an
abstention from voting for any nominee will be sufficient to represent the
shares at the meeting for purposes of determining whether a quorum is present,
but will count neither as a vote for nor against any nominee with respect to
whom the holder has abstained from voting. In tabulating votes, a record will be
made of the number of shares voted for each nominee, the number of shares with
respect to which authority to vote for that nominee has been withheld, and the
number of shares held of record by broker-dealers and present at the meeting but
not voting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL SIX NOMINEES OF THE
COMPANY TO THE BOARD OF DIRECTORS.
BOARD AND COMMITTEE ACTIVITY, STRUCTURE AND COMPENSATION
During 1996, the board of directors convened on seven regularly scheduled
occasions. Committees of the board held meetings as follows: audit committee --
four meetings and compensation committee -- five meetings. Each director
attended at least 75% of all meetings of the board and all committees on which
he served during the year.
The Company's operations are managed under the broad supervision and
direction of the board of directors, which has the ultimate responsibility for
the establishment and implementation of the Company's general operating
philosophy, objectives, goals and policies. Pursuant to delegated authority,
certain board functions are discharged by the standing committees of the board.
The compensation committee is responsible for the formulation and adoption of
all executive compensation, benefit and insurance programs, subject to full
board approval where legally required, and supervises the administration of all
executive compensation and benefit programs, including the establishment of
specific criteria against which all annual performance based benefits are to be
measured. The audit committee assists the board in assuring that the accounting
and reporting practices of the Company are in accordance with all applicable
requirements. The current members of the compensation committee are Messrs.
Hale, Lehmann and Chadwick, and the current members of the audit committee are
Messrs. Hale, Chambers and Chadwick. The board of directors does not presently
maintain a nominating committee; stockholders who may wish to suggest
individuals for possible future consideration for board positions should direct
recommendations to the board of directors at the Company's principal offices.
Directors not employed by the Company ("Non-Employee Directors") receive
compensation of $16,000 annually for service on the board plus reimbursement of
expenses in attending meetings. In
3
<PAGE>
addition, if the Incentive Plan is approved by the stockholders, each current
Non-Employee Director and those subsequently elected for the first time will
receive a one-time grant of options to purchase 15,000 shares of Common Stock
(20,000 shares for the chairman of the board), and beginning with the Company's
1998 annual meeting, the Company anticipates that each Non-Employee Director
will receive an additional grant of options to purchase 5,000 shares of Common
Stock on the date of each stockholder vote regarding election of directors. All
such options will be granted at an exercise price per share equal to the fair
market value of a share of Common Stock on the date of grant.
OTHER INFORMATION
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock at August 18, 1997, by (i) all
directors, (ii) the chief executive officer and other executive officers, (iii)
each person who beneficially owns more than five percent of the Company's common
stock, and (iv) all directors and executive officers as a group.
NUMBER OF PERCENT
NAME SHARES OF CLASS
---- ------------ ---------
Equus II Incorporated................ 2,888,303(1) 56.3%
2929 Allen Parkway, Suite 2500
Houston, Texas 77019
Allied Investment Corporation........ 342,938 7.8%
Allied Investment Corporation II
1666 K Street, N.W., Suite 901
Washington, D.C. 20006
Bank of America NW, N.A., d/b/a
Seafirst Bank........................ 307,552 7.0%
820 A Street, Suite 250
P.O. Box 1493
Tacoma, Washington 98401
George Warny......................... 267,416(2) 6.0%
215 Flag Lake Drive
Clute, Texas 77531
Samuel T. McKnight................... 225,686(3) 5.1%
215 Flag Lake Drive
Clute, Texas 77531
Alan B. Elenson...................... 232,575(4) 5.0%
330 Tompkins Avenue
Staten Island, New York 10304
J. Ford Taylor....................... 225,811(5) 5.0%
3860 Virginia Avenue
Cincinnati, Ohio 45227
F. Clayton Chambers.................. 251,546(6) 5.7%
3860 Virginia Avenue
Cincinnati, Ohio 45227
Michael S. Chadwick.................. 268,436(7) 6.0%
3100 Texas Commerce Tower
Houston, Texas 77002
Randall B. Hale...................... 2,923,467(8)(9) 56.6%
Nolan Lehmann........................ 2,912,781(10)(8) 56.4%
All directors and executive officers
as a group (six persons)........... 3,926,313(1)(4)-(10) 69.3%
- ------------
(1) Includes 170,839 shares which may be acquired upon exercise of warrants
and 557,156 shares issuable upon conversion of preferred stock.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
4
<PAGE>
(2) Includes 6,824 shares which may be acquired upon exercise of warrants and
37,737 shares issuable upon conversion of preferred stock. Includes
106,116 shares as to which Mr. Warny serves as trustee and as to which
Mr. Warny disclaims beneficial ownership. Excludes 90,990 shares held by
trusts for the benefit of Mr. Warny's children and for which Mr. McKnight
serves as trustee and as to which Mr. Warny disclaims beneficial
ownership.
(3) Includes 33,084 shares issuable upon conversion of preferred stock and
includes 90,990 shares to which Mr. McKnight serves as trustee and as to
which Mr. McKnight disclaims beneficial ownership. Excludes 106,116
shares held by trusts for the benefit of Mr. McKnight's children and for
which Mr. Warny serves as trustee and as to which Mr. McKnight disclaims
beneficial ownership.
(4) Includes 232,575 shares that may be acquired upon exercise of warrants
and options. Includes 226,896 shares held jointly with, or separately by,
Joann Elenson, Mr. Elenson's spouse.
(5) Includes 96,213 shares that may be acquired upon exercise of warrants and
options and 30,504 shares issuable upon conversion of preferred stock.
Includes 121,296 shares held jointly by Sandra Taylor, Mr. Taylor's
spouse.
(6) Includes 27,963 shares that may be acquired upon exercise of warrants and
options and 22,186 shares issuable upon conversion of preferred stock of
which 5,041 shares and 2,438 shares upon conversion are held in trust for
Mr. Chambers' children.
(7) Includes 37,367 shares that may be acquired upon exercise of warrants and
options and 24,626 shares issuable upon conversion of preferred stock.
(8) Includes 2,888,303 shares beneficially owned by Equus II; each holder
disclaims beneficial ownership of such shares.
(9) Includes 35,164 shares that may be acquired upon exercise of options.
(10) Includes 24,478 shares that may be acquired upon exercise of options.
EXECUTIVE OFFICER AND SIGNIFICANT EMPLOYEE TENURE AND IDENTIFICATION
The executive officers and significant employees serve at the pleasure of
the board of directors and are subject to annual appointment by the board at its
first meeting following the annual meeting of stockholders. Certain information
concerning significant employees of the Company who are not also current members
of the board of directors and nominees is set forth below:
ROBERT C. KLEIN. Mr. Klein has been president of the Morning Sun facility
since 1997. He served as president and chief executive officer of Morning Sun,
Inc. ("Morning Sun") before its acquisition by the Company in July 1997. From
1978 until 1993, Mr. Klein served in a variety of positions within
manufacturing, merchandising and sales at Jantzen, Inc., a division of VF Corp.,
and was vice president of womenswear before he left Jantzen, Inc. to join
Morning Sun.
LAURENCE E. CRABB. Mr. Crabb has been president of the Premier facility
since 1997. He founded Premier Sports Group, Inc. ("Premier") in 1986 and
owned and operated Premier before its acquisition by the Company. Mr. Crabb was
employed by Jansport from 1982 until 1986, where he had expanded
responsibilities for merchandising and sourcing production throughout Asia, with
an emphasis in China. He was employed by Levi Strauss and Company from 1977
until 1982, where he was responsible for sourcing production throughout Asia.
R. WAYNE HATCHER. Mr. Hatcher has been president of the CC Creations and
Red Oak facility since 1996. From 1985 to 1995, he served in a managerial
position with BSI and in 1995 was promoted to vice-president -- operations of
the CC Creations and Red Oak facility. Mr. Hatcher was employed by Robinson
Company, a screen printer, from 1981 to 1985 and by a retail sporting goods and
wholesale sportswear store, Purvis Sportswear, from 1972 to 1981.
SAMUEL T. MCKNIGHT. Mr. McKnight has been president of the Company's Blank
Distribution Division since 1974. He founded Gulf Coast Sportswear, Inc., the
predecessor of BSI, in 1974. From 1972 to 1974 Mr. McKnight served as president
of M & M Designs, a shirt printing company.
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<PAGE>
DEBORAH S. WILLIAMS. Ms. Williams has been president of the Company's
Cincinnati facility since 1996. She served as vice president of purchasing of
that facility from 1994 until 1996. From 1990 to 1994 Ms. Williams served as
director of purchasing of Velva Sheen, an operating division of American
Marketing Industries, Inc., which was acquired in November 1994 by the Company.
EMPLOYMENT AGREEMENTS
The Company has no employment agreements with any of the persons who served
as the Company's named executive officers at any time during its year ending
December 31, 1996. Each of Mr. William S. Wiley and Ms. L. Kaye Counts and
Sandra L. Teufel ceased their employment with the Company effective March 14,
1997, April 22, 1997 and December 31, 1996, respectively. In connection with
their termination, Mr. Wiley, Ms. Counts and Ms. Teufel received one-time
severance payments of $100,000, $50,000 and $37,500, respectively.
EXECUTIVE COMPENSATION
The following table reflects all forms of compensation for services to the
Company for the periods indicated of each individual who was (i) the chief
executive officer at any time during the period or (ii) an executive officer at
December 31, 1996 whose annual compensation exceeded $100,000 (collectively, the
"Named Executives"). The share information gives effect to the five-for-one
reverse split pursuant to the Company's reincorporation in Delaware in March
1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION STOCK
--------------------- OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (SHARES) COMPENSATION(5)
- ---------------------------------------- --------- ---------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
William S. Wiley(1)..................... 1996 $ 300,000 -0- -0- -0-
Chairman 1995 75,000 -0- -0- -0-
1994 -0- -0- -0- -0-
L. Kaye Counts(2)....................... 1996 $ 175,000 -0- -0- $2,400
Executive vice president 1995 175,000 $ 29,752 -0- 2,068
and chief operating officer 1994 150,000 50,000 400 1,650
Sandra L. Teufel(3)..................... 1996 $ 250,000 $ 65,524 -0- $2,400
Senior vice president -- sales 1995 200,000 60,000 10,900 2,400
and marketing 1994 160,384 65,000 5,000 2,460
Charles Stempler........................ 1996 $ 115,769 -0- 1,000 -0-
Vice president -- purchasing 1995 10,577 -0- -0- -0-
1994 -0- -0- -0- -0-
Michael Kovacs(4)....................... 1996 $ 100,000 -0- -0- $1,650
Vice president -- manufacturing 1995 85,385 -0- -0- 1,431
1994 77,060 -0- 3,600 1,291
</TABLE>
- ------------
(1) Ceased employment March 14, 1997.
(2) Ceased employment April 22, 1997.
(3) Ceased employment December 31, 1996.
(4) Ceased employment June 4, 1997.
(5) Annual contributions by the Company to a defined contribution plan (401(k)
plan).
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<PAGE>
OPTION GRANTS
The following sets forth information concerning stock option grants during
1996 to the Named Executives. The share information gives effect to the
five-for-one reverse split pursuant to the Company's reincorporation in Delaware
in March 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZED
----------------------------------------------------- VALUE AT ASSUMED
PERCENTAGE ANNUAL RATES OF
OF TOTAL STOCK PRICE
OPTIONS APPRECIATION FOR
GRANTED TO OPTION TERM(1)
OPTIONS EMPLOYEES EXERCISE EXPIRATION --------------------
NAME GRANTED(2) IN 1996 PRICE DATE(3) 5% 10%
- ------------------------------------- ----------- ----------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Charles Stempler..................... 1,000 47.6% $ 14.375 3/3/2007 $ 9,040 $ 22,910
</TABLE>
- ------------
(1) Potential values stated are the result of using the SEC method of
calculations of 5% and 10% appreciation in value from the date of grant to
the end of the option term. Such assumed rates of appreciation and potential
realizable values are not necessarily indicative of the appreciation, if
any, which may be realized in future periods.
(2) The options were granted for a term of 10 years, subject to earlier
termination in certain events related to termination of employment.
(3) The options were 50% exercisable on March 1, 1997 and will be 100%
exercisable on March 1, 1998.
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth information with respect to the unexercised
options to purchase shares of Common Stock for each of the Named Executives held
by them at December 31, 1996. None of the Named Executives exercised any stock
options during 1996, and no In-the-Money stock options were outstanding as of
December 31, 1996. The share information contained in the table gives effect to
the five-for-one reverse split pursuant to the Company's reincorporation in
Delaware in March 1997.
NUMBER OF UNEXERCISED OPTIONS
AT DECEMBER 31, 1996
(SHARES)
------------------------------
NAME EXERCISABLE UNEXERCISABLE
- ------------------------------------- ------------ --------------
L. Kaye Counts....................... 13,600 -0-
Sandra L. Teufel..................... 16,367 -0-
Charles Stempler..................... -0- 1,000
Michael Kovacs....................... 4,600 1,000
BOARD REPORT ON EXECUTIVE COMPENSATION
On March 14, 1997, the Company merged with BSI Holdings, Inc. ("BSI"). In
connection with the merger, all incumbent directors and executive officers of
the Company resigned, and as of the closing of the transaction, persons formerly
associated with BSI filled all company board and executive officer positions. As
such, the Board Report on Executive Compensation is provided by the
newly-appointed board of directors, which is unable to describe the prior
board's compensation policies or bases for the level of compensation provided to
the former chief executive officer or any of the other Named Executives for
1996.
The board of directors is of the view that base compensation for executive
officers should afford a reasonable degree of financial security and flexibility
to those individuals who are regarded by the board as acceptably discharging the
levels and types of responsibility implicit in the various executive positions.
The board of directors also believes that properly designed and administered
cash bonus and stock-based incentives for executives' closely align the
executive's economic interests with those of stockholders and provide a direct
continuing focus upon the goal of constantly striving to increase long-term
stockholder value. These fundamental policies will be the basis of compensation
for executives in 1997.
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<PAGE>
The foregoing report is given by the entire board since the members of the
compensation committee of the board during 1996 are no longer directors of the
Company.
Randall B. Hale
J. Ford Taylor
Nolan Lehmann
Michael S. Chadwick
Alan Elenson
F. Clayton Chambers
COMMON STOCK PERFORMANCE GRAPH
The following graph illustrates the yearly percentage change in the
cumulative total shareholder return on the Company's common stock, compared with
the cumulative total return on (i) the Standard & Poor's 500 Stock Index (the
"Standard & Poor's 500") and (ii) the Standard and Poor's Textiles Stock Index
(the "Textiles Index"), for the five years ended December 31, 1996:
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
Brazos Sportswear, Inc. 100 73 146 95 64 41
Standard & Poors 500 100 108 118 120 165 203
Textiles Index 100 106 80 79 89 122
In all cases, the cumulative total return assumes, as contemplated by
Securities and Exchange Commission rules, that any cash dividends on the common
stock of each entity included in the data presented above were reinvested in
that security.
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
In August 1996, Brazos, Inc. ("Brazos") entered into a financial advisory
agreement with SMM in connection with the merger (the "Sun Merger") of BSI
Holdings, Inc. ("BSI") into the Company, formerly Sun Sportswear, Inc. Mr.
Chadwick is a senior vice president and a managing director of SMM and has been
a director of the Company or its predecessors since 1989. The agreement provided
for a
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<PAGE>
success fee of approximately $160,000 based on the transaction price of the Sun
Merger in addition to $100,000 previously paid in financial advisory fees.
In April 1997, the Company entered into a financial advisory agreement with
SMM pursuant to which SMM agreed to provide certain financial advisory services
to the Company. The agreement provides for payments to SMM in the amount of
$10,000 per month, for a period of 12 months, but the Company has the right to
terminate the agreement after the cumulative payment to SMM of $60,000. SMM was
also entitled to receive a lump sum success fee of $50,000 in connection with
the Company's acquisition of all of the capital stock of SolarCo. Inc., the
parent of Morning Sun (the "Morning Sun Acquisition"). In connection with the
public offering of 10 1/2% of Senior Notes due 2007 (the "Offering"), SMM
received an amount equal to the product of 0.25% multiplied by the gross
proceeds of the Offering, which amounted to $250,000. SMM agreed to forego,
after completion of the Offering, the $50,000 contingent lump sum success fee
payable by the Company in connection with the Morning Sun Acquisition.
Pursuant to an asset purchase agreement consummated in August 1996, the
Company acquired substantially all of the assets of Plymouth for approximately
$36 million (the "Plymouth Acquisition"). Upon consummation of the Plymouth
Acquisition, Mr. Elenson, the controlling shareholder of Plymouth, became a
director of BSI. As part of the purchase price for the acquisition of Plymouth's
assets, the Company agreed to pay certain contingent consideration of $8.2
million, including $2.95 million aggregate principal amount of junior
subordinated debentures maturing March 1999 and cash payments of $2.3 million
(paid in October 1996) and $2.95 million (which was paid upon consummation of
the Offering). The Company also issued to Plymouth junior subordinated
debentures in the principal amounts of $3.0 million and $4.5 million that
provide for periodic interest payments and that mature in December 1997 and
December 2003, respectively. Upon consummation of the Sun Merger, the $3.0
million junior subordinated debenture was repaid in full. Upon consummation of
the Offering, the $2.95 million junior subordinated debenture, the $2.95 million
contingent payment amount and the $4.5 million debenture were repaid in full.
To finance the Plymouth Acquisition, Brazos issued 2,500,000 shares of its
preferred stock and the Company issued warrants to purchase 66,511 shares of the
Company's common stock, at an exercise price of $.01 per share, for aggregate
consideration of $2,500,000. The Brazos preferred stock has been converted into
the same number of shares of Series B-2 Preferred Stock. The Company warrants
were exercised prior to the Sun Merger. Equus II holds 1,200,000 shares of
Series B-2 Preferred Stock. Equus II also received warrants to purchase 30,261
shares of the Company's common stock at an exercise price of $4.62 per share.
In connection with the Plymouth Acquisition, SMM received warrants to
purchase 20,168 shares of the Company's common stock at an exercise price of
$4.62 per share. Of these warrants, 6,065 were assigned by SMM to Mr. Chadwick.
Mr. Chadwick holds 100,000 shares of Series B-2 Preferred Stock and exercised a
warrant to purchase 4,034 shares. Mr. Taylor (together with his spouse) and each
of Messrs. Warny and McKnight holds 75,000 shares of Series B-2 Preferred Stock
and exercised a warrant to purchase 3,025 shares of the Company's common stock
(with the warrant purchased by Mr. McKnight issued in the name of a trust for
the benefit of his children). Mr. Chambers holds 50,000 shares of Series B-2
Preferred Stock and exercised a warrant to purchase 2,016 shares of the
Company's common stock. In addition, Mr. Chambers, as trustee for two trusts
created for the benefit of his two children, holds 25,000 shares of Series B-2
Preferred Stock and exercised a warrant to purchase 1,008 shares of Company
common stock.
In connection with the Plymouth Acquisition, the following subordinated
debt of Brazos was converted into shares of BSI Series B preferred stock: Equus
II converted subordinated notes in the amount of $3,350,000 and $178,500 into
3,528,500 shares; each of Messrs. Warny and McKnight converted subordinated
notes in the amount of $234,392 and $29,750 into 264,142 shares; Mr. Chadwick
converted subordinated notes in the amount of $75,000 and $29,750 into 104,750
shares; Mr. Chambers converted subordinated notes in the amount of $75,000 and
$29,750 into 104,750 shares; and J. Ford and Sandra Taylor converted a note in
the amount of $190,000 into 190,000 shares. All of these shares were
subsequently exchanged for the same number of shares of Series B-1 Preferred
Stock pursuant to the Sun Merger.
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In connection with the Sun Merger, the Company issued 2,000,000 shares of
Series B-3 Preferred Stock and warrants to purchase 36,000 shares of the
Company's common stock, at an exercise price of $50.00 per share, for aggregate
consideration of $2,000,000. These shares of preferred stock were subsequently
converted into the same number of shares of Series B-3 Preferred Stock of the
Company pursuant to the Sun Merger. The Company's warrants were converted into
warrants to purchase 272,968 shares of the Company's common stock at an exercise
price of $6.59 per share in connection with the Sun Merger. Equus II purchased
1,030,000 shares of Series B-3 Preferred Stock and a warrant to purchase 140,578
shares of the Company's common stock at a purchase price of approximately $1.0
million. Mr. Taylor (together with his spouse) and each of Messrs. Chadwick,
Chambers and Warny purchased 50,000 shares of Series B-3 Preferred Stock and a
warrant to purchase 6,824 shares of the Company's common stock at a price of
$50,000.
Brazos leases a 88,625 square foot office and production facility in
College Station, Texas, from a partnership whose owners include corporations in
which Equus II and Messrs. Taylor, Chambers, Chadwick, McKnight and Warny have
an ownership interest. The two leases are for a ten-year term expiring 2002 and
provide for aggregate monthly lease payments of $18,500.
Management is of the opinion that all the transactions described were on
terms at least as favorable as could have been obtained from unaffiliated third
parties.
CHANGE IN CONTROL
On March 14, 1997, the Company, formerly Sun Sportswear, Inc., a Washington
corporation ("Sun"), consummated a merger (the "Merger") with BSI Holdings, Inc.
("BSI"), with the Company being the surviving corporation. Following the Merger,
Sun was reincorporated in Delaware under the name of Brazos Sportswear, Inc.
(the "Reincorporation"). Pursuant to the Merger and Reincorporation, the former
directors of BSI, with the addition of one executive officer of BSI, became and
currently serve as the directors of the Company. In addition, Equus II, formerly
the majority stockholder of BSI, acquired beneficial ownership of 57.6% of the
Common Stock of the Company. As of August 18, 1997, Equus II beneficially owned
56.3% of the Company's Common Stock. Equus II received its beneficial ownership
in the Company's Common Stock based on its prior holdings of BSI capital stock
and Sun capital stock surrendered in the Merger and Reincorporation,
respectively. Prior to the Merger and Reincorporation, Bank of America NW, N.A.,
doing business as Seafirst Bank, was Sun's majority stockholder.
AUDITORS
On May 12, 1997, the Company determined, pursuant to the authority and
approval of the board of directors, to dismiss Price Waterhouse LLP ("Price
Waterhouse"), the Company's independent accountants, who were previously
engaged as the independent accountant to audit the financial statements of the
Company. Price Waterhouse's report on the Company's financial statements for
each of the last two fiscal years did not contain an adverse opinion or a
disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit
scope, or accounting principles. During the Company's two most recent fiscal
years and subsequent interim period preceding the replacement of Price
Waterhouse, there were no disagreements with Price Waterhouse on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreement(s), if not resolved to the satisfaction
of Price Waterhouse, would have caused them to make a reference to the subject
matter of the disagreement(s) in connection with its report. The Company has
authorized Price Waterhouse to respond fully to any inquiries by Arthur Andersen
LLP.
On May 12, 1997, pursuant to the authority and approval of the Company's
board of directors, Arthur Andersen LLP ("Arthur Andersen") was selected as
the Company's independent accountants to audit the consolidated statements of
the Company for fiscal 1997. Arthur Andersen was previously engaged as the
independent accountant to audit the consolidated financial statements of BSI.
While management anticipates that the Company's relationship with Arthur
Andersen will continue to be maintained during 1997, no formal action is
proposed to be taken at the annual meeting with respect to
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the continued employment of Arthur Andersen inasmuch as no such action is
legally required. Representatives of Arthur Andersen, but not Price Waterhouse,
plan to attend the annual meeting and will be available to answer appropriate
questions. Its representatives also will have an opportunity to make a statement
at the meeting if they so desire, although it is not expected that any statement
will be made.
The audit committee of the board of directors assists the board in assuring
that the accounting and reporting practices of the Company are in accordance
with all applicable requirements. The committee reviews with the auditors the
scope of the proposed audit work and meets with the auditors to discuss matters
pertaining to the audit and any other matter which the committee or the auditors
may wish to discuss. In addition, the audit committee would recommend the
appointment of new auditors to the board of directors if future circumstances
were to indicate that such action is desirable.
LIMITATION ON INCORPORATION BY REFERENCE
Notwithstanding any reference in prior or future filings of the Company
with the Securities and Exchange Commission which purports to incorporate this
proxy statement by reference into another filing, such incorporation does not
include any material included herein under the captions "Other Information --
Compensation Committee Report on Executive Compensation" or "Other
Information -- Common Stock Performance Graph."
SECTION 16(a) -- BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors and persons who own more than 10% of
a registered class of the Company's equity securities, to file reports of
ownership and changes of ownership with the Commission. With respect to the year
ended December 31, 1996, the Company believes that all filing requirements
applicable to the Company's executive officers, directors and 10% shareholders
have been met.
PROPOSAL TO ADOPT CHARTER AMENDMENT
BACKGROUND AND REASONS
The proposed Charter Amendment, if approved by the stockholders, would
establish a classified board of directors. A classified board will significantly
extend the time required to effect a change in control of the Company's board of
directors and may discourage hostile takeover bids for the Company. Currently, a
change in control of the Company's board of directors can be made by
stockholders holding a plurality of the votes cast at a single annual meeting.
If the Company implements a classified board of directors, it will take at least
two annual meetings for even a majority of stockholders to make a change in
control of the board of directors, because only a minority of the directors will
be elected at each meeting.
Under Delaware law, directors chosen to fill vacancies on a classified
board hold office until the next election of the class for which such directors
were chosen, and until their successors are elected and qualified. Delaware law
also provides that, unless the certificate of incorporation provides otherwise,
directors serving on a classified board of directors may be removed only for
cause. The Company's Certificate of Incorporation does not provide otherwise.
Accordingly, if the proposed Charter Amendment is approved by the stockholders,
conforming by-laws provisions will be implemented. Presently, all directors of
the Company are elected annually and all of the directors may be removed, with
or without cause, by a majority vote of the outstanding shares of the Company's
Common Stock. Cumulative voting is not authorized by the Company's Restated
Certificate of Incorporation.
The classified board proposal is designed to assure continuity and
stability in the Company's board of directors' leadership and policies. Although
management has not experienced any problems with such continuity in the past, it
wishes to ensure that this experience will continue. The board of directors also
believes that the proposed Charter Amendment will assist the board of directors
in protecting the interests of the Company's stockholders in the event of an
unsolicited offer for the Company.
Because of the additional time required to change control of the Company's
board of directors, the proposed Charter Amendment will tend to perpetuate
present management. Without the ability to obtain
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immediate control of the board of directors, a takeover bidder will not be able
to take action to remove other potential impediments to its acquisition of the
Company, including the ability of the Company's board of directors to issue
preferred stock of the Company without further stockholder action. Because the
proposed Charter Amendment will increase the amount of time required for a
takeover bidder to obtain control of the Company without the cooperation of the
board of directors, even if the takeover bidder were to acquire a majority of
the Company's outstanding stock, it will tend to discourage certain tender
offers, perhaps including some tender offers that stockholders may feel would be
in their best interests. The proposed Charter Amendment will also make it more
difficult for the stockholders to change the composition of the Company's board
of directors even if the stockholders believe such a change would be desirable.
PROPOSED CHARTER AMENDMENT
The Charter Amendment, if approved by the stockholders, creates a
classified board of directors consisting of three classes. Each class is to be
as nearly equal in size as is practicable and each presently is to consist of
two directors. At the annual meeting, two directors will be elected to each of
Class I, Class II and Class III positions, with each Class I Director holding
office until the third annual meeting of stockholders following his election,
each Class II Director holding office until the second annual meeting of
stockholders following his election, and each Class III Director holding office
until the first annual meeting of stockholders following his election. Each
director elected after the initial term of any Class will be elected for a
three-year term.
REQUIRED AFFIRMATIVE VOTE AND RECOMMENDATION
The affirmative vote of the holders of a majority of the shares of the
Company's common stock (including shares of Common Stock resulting from the
deemed conversion of the Series B-2 Preferred Stock as of the record date)
outstanding and entitled to vote at the annual meeting is required to adopt the
Charter Amendment. The board of directors of the Company has declared the
Charter Amendment advisable and believes it is in the best interest of the
Company and its stockholders.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT ITS
STOCKHOLDERS VOTE FOR THE CHARTER AMENDMENT.
PROPOSAL TO ADOPT 1997 INCENTIVE PLAN
GENERAL
Effective July 2, 1997, the board of directors adopted the 1997 Incentive
Plan (the "Incentive Plan") and is submitting the Incentive Plan for the
approval of the Company's stockholders at the meeting. The Incentive Plan is an
amendment and restatement of the BSI 1995 Stock Incentive Plan (the "BSI
Plan") and the Sun 1989 Employee Stock Option Plan (the "Sun Plan"). On March
14, 1997, BSI merged with and into Sun, and Sun subsequently reincorporated in
Delaware under the name Brazos Sportswear, Inc. The Incentive Plan appears as
APPENDIX A to this proxy statement. The full text of the Incentive Plan is
incorporated herein by this reference, and the following summary is qualified in
its entirety by reference to the text of such Plan.
The board of directors believes that the adoption and approval of the
Incentive Plan is necessary as a result of the stage of development of the
Company, the number of its employees and its need to attract and retain key
personnel. The board of directors believes that the Incentive Plan will allow
the Company to continue to emphasize equity-based compensation in structuring
compensation packages for key employees, and to provide equity interests in the
Company to non-employee directors and consultants when deemed appropriate. The
board of directors believes that an emphasis on equity-based compensation will
yield the greatest benefit for the stockholders, as the compensation is directly
dependent on the return on stockholders' investments.
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SUMMARY OF THE INCENTIVE PLAN
SHARES SUBJECT TO INCENTIVE PLAN. Under the Incentive Plan, the Company may
issue Incentive Awards covering an aggregate of the greater of (a) 750,000
shares of Common Stock and (b) 12.5% of the number of shares of Common Stock
issued and outstanding on the last day of each calendar quarter. No more than
750,000 shares of Common Stock shall be available for Incentive Stock Options.
At present, there are outstanding Options covering 571,285 shares of Common
Stock, leaving 178,655 shares of Common Stock available for issuance as
Incentive Awards under the Incentive Plan.
Any shares of Common Stock which were issued and have been forfeited or
were subject to Incentive Awards under the Plan which have expired or terminated
for any reason will remain available for issuance with respect to the granting
of Incentive Awards during the term of the Incentive Plan, except as may
otherwise be provided by applicable law. Shares of Common Stock received by the
Company in connection with the exercise of an Incentive Award shall also be
available for issuance under the Incentive Plan. The number and kind of
securities which may be issued under the Incentive Plan and pursuant to then
outstanding Incentive Awards are subject to adjustments to prevent enlargement
or dilution of rights resulting from stock dividends, stock splits,
recapitalizations, reorganizations or similar transactions.
ADMINISTRATION. The Incentive Plan is administered by the Committee
appointed by the board of directors, which is currently composed of Messrs.
Nolan Lehmann and Michael S. Chadwick. The Committee solely consists of
directors each of whom is (i) an "outside director" under Section 162(m) of
the Code and (ii) a "non-employee director" under Rule 16b-3 of the Exchange
Act. Subject to the express provisions of the Incentive Plan, the Committee is
authorized to, among other things, determine those eligible individuals to whom
Incentive Awards may be granted, grant Incentive Awards to individuals eligible
to participate in the Incentive Plan and determine the terms and conditions
(which need not be identical) of each Incentive Award. The Incentive Plan does
not prescribe any factors to be considered by the Committee in determining the
individual participants and types of Incentive Awards granted. The Committee
also interprets, construes and administers the Incentive Plan and any related
incentive agreements; and makes all of the determinations necessary or advisable
with respect to the Incentive Plan or any Incentive Award granted thereunder.
All decisions and determinations of the Committee are final and binding on all
parties.
Under the terms of the Incentive Plan, the Company will indemnify members
of the Committee against any cost, expenses or liability arising out of any
action, omission or determination relating to the Incentive Plan, unless such
action, omission or determination was taken or made with gross negligence or
willful misconduct.
ELIGIBILITY. Key employees, including officers (whether or not they are
directors), directors who are not employees, and consultants of the Company and
its subsidiaries are eligible to participate in the Incentive Plan.
TYPES OF INCENTIVE AWARDS. Under the Incentive Plan, the Committee
designated by the Board of Directors may grant (i) incentive stock options
("ISOs") as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), (ii) "nonstatutory" stock options ("NSOs"), (iii)
stock appreciation rights ("SARs"), (iv) shares of restricted stock, (v)
performance shares and performance units, (vi) other stock-based awards, and
(vii) supplemental tax bonuses (collectively, "Incentive Awards"). ISOs and
NSOs are sometimes referred to collectively herein as "Options". A summary of
the most significant features of the Incentive Awards and their tax consequences
to participants and the Company is set out below.
GENERAL TERMS AND TAX INFORMATION RELATING TO INCENTIVE AWARDS. The
material terms of the Incentive Award, as determined by the Committee in its
discretion is reflected in an agreement (the "Incentive Agreement") between
the participant and the Company. A summary of the most significant features of
the Incentive Awards and their tax consequences to participants who are United
States persons and the Company is set out below.
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INCENTIVE AND NONSTATUTORY STOCK OPTIONS. Except in limited cases
involving certain 10% stockholders or where the terms of the grant specify
otherwise, ISOs and NSOs must be exercised within ten years of the grant date.
ISOs may only be granted to employees and the exercise price of each ISO granted
may not be less than 100% (110% in the case of certain 10% shareholders) of the
fair market value of a share of Common Stock on the date of grant. The Committee
will have the discretion to determine the exercise price of each NSO granted
under the Incentive Plan; however, a NSO that is intended to qualify as
performance based compensation to an officer subject to Section 162(m) of the
Code must be granted with an exercise price equal to 100% of the fair market
value of a share of Common Stock on the grant date. To the extent that the
aggregate fair market value of shares of Common Stock with respect to which ISOs
are exercisable for the first time by any employee during any calendar year
exceeds $100,000, such options must be treated as NSOs.
The exercise price of each Option is payable in cash upon the exercise of
the Option or, in the discretion of the Committee and upon such terms and
conditions as it may deem appropriate, through the delivery of shares of Common
Stock owned by the Option holder and valued at their fair market value, by
withholding shares which would otherwise be acquired on the exercise of the
Option and having an aggregate fair market value equal to the total exercise
price or in a combination of the foregoing. The ability to pay the Option price
in surrendered or withheld shares of Common Stock will, if permitted by the
Committee, enable an Option holder to engage in a stock-for-stock exercise of an
Option and thereby exercise the Option with little or no cash investment.
If a participant's employment or other service with the Company is
terminated other than for Cause (as defined in the Incentive Plan), or by reason
of Disability (as defined in the Incentive Plan) or death, his vested Options,
whether ISOs or NSOs, shall remain exercisable for 60 days after such
termination. If a participant's employment or other service with the Company is
terminated by reason of Disability or death, his vested Options, whether ISOs or
NSOs, shall remain exercisable for one year following such termination. If an
employee's employment with the Company is terminated due to his retirement at or
after attaining age 65, his vested NSOs shall remain exercisable for six months,
and his vested ISOs shall remain exercisable for three months, following such
termination. No Option shall be exercisable after the expiration of its term, in
any case. If a participant's employment or other service with the Company is
terminated for Cause, all outstanding Options, whether vested or otherwise,
shall expire at the commencement of business on the date of such termination.
The Committee, in its discretion, may prescribe time periods different than
those set out in the foregoing provisions of this paragraph for the exercise of
Options following a participant's termination of employment or other service.
Such rights shall be reflected in the Incentive Agreement evidencing the
participant's Incentive Award.
Upon a Change in Control of the Company as defined in the Plan (a "Change
in Control"), all outstanding Options become immediately exercisable. These
provisions in the Incentive Plan providing for accelerated vesting upon a Change
in Control could in some circumstances have the effect of an "antitakeover"
defense because, as a result of these provisions, a Change in Control of the
Company could be more difficult or costly. This, however, is not the Company's
intention in adopting the Incentive Plan, as the purpose of the Plan is to
attract and retain qualified individuals to contribute to the future success of
the Company.
An employee who is a participant in the Incentive Plan will not recognize
any income at the time an ISO is granted, nor on the qualified exercise of an
ISO. If a participant does not dispose of the shares acquired by exercise of an
ISO within two years after the grant date of the ISO and one year after the
exercise of the ISO, the exercise is qualified and the gain or loss (if any) on
a subsequent sale will be a long-term capital gain or loss. Such gain or loss
equals the difference between the sum of the sales proceeds and the exercise
price of the Common Stock sold. The Company is not entitled to a tax deduction
as a result of the grant or qualified exercise of an ISO. However, if the shares
acquired upon the exercise of an ISO are disposed of at a gain prior to the
above one-year and two-year holding periods and the fair market value of the
shares at the time of exercise exceeds the exercise price, the exercise is not
qualified and special rules apply that require the participant to recognize
ordinary income (at least in part) at the time of such
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disposition. The Company is generally entitled to a tax deduction at the same
time and in the same amount as the ordinary income recognized by the participant
from such disposition.
Although the qualified exercise of an ISO will not produce ordinary taxable
income to the participant, it will produce an increase in the participant's
alternative minimum taxable income and may result in an alternative minimum tax
liability.
An optionee will not recognize any income for federal income tax purposes
at the time a NSO is granted, nor will the Company be entitled to a deduction at
that time. However, when any part of a NSO is exercised, the optionee will
recognize ordinary income in an amount equal to the difference between the fair
market value of the shares received and the exercise price of the NSO, and the
Company will generally recognize a corresponding tax deduction in the same
amount at the same time.
STOCK APPRECIATION RIGHTS (SARs). Upon exercise of a SAR, the holder
thereof will receive a number of shares of the Common Stock or cash, or a
combination thereof, as the Committee determines in the Incentive Agreement, the
aggregate value of which equals the amount by which the fair market value per
share of the Common Stock on the date of exercise exceeds the exercise price of
the SAR, multiplied by the number of shares underlying the exercised portion of
the SAR. A SAR may be granted in tandem with an Option or granted independently
of an Option. The grant price per share of any SAR will be established by the
Committee but must equal at least 100% of the fair market value of a share of
Common Stock on the date the SAR is granted. The term of each SAR will be fixed
by the Committee, but not extending beyond ten years from the date of grant.
SARs will be subject to such terms and conditions and will be exercisable at
such times as determined by the Committee. The value of an SAR may be paid in
cash, in shares of Common Stock, or in some combination, as determined by the
Committee. The Committee, in its discretion, will establish a participant's
right to exercise an SAR in the event the participant's employment is
terminated, such rights to be reflected in the participant's Incentive
Agreement. Upon a Change in Control of the Company, all outstanding SARs which
have not vested will fully vest automatically.
The exercise of a SAR will result in the recognition of ordinary income by
the participant on the date of exercise in the amount of cash, and/or the fair
market value on such date of the shares of Common Stock, acquired pursuant to
the exercise. The Company will generally be entitled to a tax deduction at the
same time and in the same amount as the ordinary income recognized by the
participant upon exercise of the SAR.The tax treatment of a SAR is the same
whether the SAR is exercised in conjunction with an ISO or a NSO.
RESTRICTED STOCK. A restricted stock award consists of a grant of Common
Stock to a participant, which is subject to substantial risk of forfeiture and
the transfer of which is subject to restrictions which lapse upon the passage of
time, the achievement of performance goals or upon the occurrence of other
events as determined by the Committee. This period of restriction is established
by the Committee at the time of grant. Unless otherwise designated by the
Committee, during the period of restriction a shareholder of restricted shares
will have all other rights of a shareholder, including the right to vote the
shares and receive the dividends paid thereon. The Committee, in its discretion,
will establish a participant's rights to receive restricted stock in the event
the participant's employment is terminated prior to vesting, such rights to be
reflected in the participant's Incentive Agreement. If vesting does not occur,
shares of restricted stock are forfeited. Upon a Change in Control of the
Company, all shares of restricted stock which have not vested or been forfeited
will vest automatically.
A participant will not recognize any income for federal tax purposes at the
time shares of restricted stock are granted or issued, nor will the Company be
entitled to a tax deduction at that time. However, when either the transfer
restriction or the forfeiture risk lapses, such as on vesting, the participant
will recognize ordinary income in an amount equal to the fair market value of
the shares of restricted stock on the date on which they vest. A participant may
file an appropriate election under Section 83(b) of the Code with the Internal
Revenue Service within 30 days of the issue date of the restricted stock (the
"Election"), which results in the participant's receipt of deemed ordinary
income in an amount equal to the fair market value of the shares of restricted
stock on the date on which they are issued. However, if a participant files the
Election and the restricted stock is subsequently forfeited, such participant is
not allowed a tax deduction for
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the amount previously reported as ordinary income due to the Election. Gain or
loss (if any) from a disposition of restricted stock after the participant
recognizes any ordinary income (whether by vesting or an Election) will
generally constitute short- or long-term capital gain or loss. The Company will
generally be entitled to a corresponding tax deduction at the time the
participant recognizes ordinary income on the restricted stock, whether by
vesting or an Election, in the same amount as the ordinary income recognized by
the participant.
PERFORMANCE UNITS AND PERFORMANCE SHARES. Performance units and
performance shares may be granted to eligible individuals at any time as
determined by the Committee. The Committee will have discretion to establish the
initial number and value of such units and shares, the performance period, and
the other material terms of the units or shares as reflected in the
participant's Incentive Agreement. The Committee will establish performance
goals in its discretion which, depending on the level of performance achieved,
will determine the number and/or value of performance units/shares earned. Where
an award is intended to meet the requirements for the performance-based
exception to the deductibility limit imposed by Section 162(m) of the Code, the
performance goals will be based on the performance measures prescribed in
regulations issued under Section 162(m). The value of a performance share or
unit (whether or not vested) is paid immediately on the occurrence of a Change
in Control of the Company.
There are no tax consequences to the Company or the participant upon the
grant of performance shares or units. Upon payout of the shares or units, the
participant will recognize taxable ordinary income in the amount of the payout
and the Company will receive a corresponding tax deduction in the same amount
and at the same time.
OTHER STOCK-BASED AWARDS. Other Stock-Based Awards, payable in Common
Stock, may be granted by the Committee and may be payable at such times and
subject to such conditions as the Committee determines, in its discretion, as
reflected in the participant's Incentive Agreement. In order to enable the
Company and the Committee to respond quickly to significant developments in
applicable tax and other legislation and regulations and to trends in executive
compensation practices, the Incentive Plan also authorizes the Committee to
grant other stock-based awards to individuals eligible to participate in the
Incentive Plan. Other stock-based awards will consist of awards that are valued
in whole or in part by reference to, or otherwise based on, the Company's Common
Stock. Subject to the terms of the Incentive Plan, the Committee may determine
any terms and conditions of other stock-based awards. Payment or settlement of
other stock-based awards will be in cash or in shares of the Company's Common
Stock or in any combination thereof as the Committee determines in its
discretion.
Generally, a participant will not realize any income upon the grant of
other stock-based awards. Upon the payment of other stock-based awards, a
participant will realize compensation taxable as ordinary income, and the
Company will be entitled to a corresponding tax deduction in the same amount and
at the same time. However, if any such shares are subject to substantial
restrictions, such as a requirement of continued employment or the attainment of
certain performance objectives, the participant will not recognize income and
the Company will not be entitled to a deduction until the restrictions lapse,
unless the participant elects otherwise by filing an Election (as described
under "Restricted Stock" above). The amount of the participant's ordinary
taxable income and the Company's deduction will generally be the fair market
value of the shares at the time the restrictions lapse.
SUPPLEMENTAL TAX BONUSES. The Committee may grant, in connection with a
grant of an Incentive Award, a supplemental tax bonus, payable when the
participant is required to recognize ordinary income for federal income tax
purposes with respect to such Incentive Award. Receipt of any such bonus will
result in ordinary income to the participant and generally a corresponding tax
deduction to the Company at the same time and for the same amount.
OTHER TAX CONSIDERATIONS. Upon accelerated exercisability of Options and
accelerated lapsing of restrictions upon Restricted Stock or other Incentive
Awards in connection with a Change in Control of the Company, certain amounts
associated with such Incentive Awards could, depending upon the individual
circumstances of the recipient participant, constitute "excess parachute
payments" under the golden parachute provisions of Section 280G of the Code.
Pursuant to these provisions, a participant will be subject
16
<PAGE>
to a 20% excise tax on any "excess parachute payment" (as defined in Section
280G of the Code) and the Company will be denied any deduction with respect to
such excess parachute payment. The limit on the deductibility of compensation
under Section 162(m) of the Code is also reduced by the amount of any excess
parachute payments. Whether amounts constitute excess parachute payments depends
upon, among other things, the value of the Incentive Awards accelerated and the
past compensation of the participant.
Taxable compensation earned by certain named executive officers subject to
Section 162(m) of the Code in respect of Options, Restricted Stock, performance
shares or units, or other applicable Incentive Awards is intended to constitute
qualified "performance-based compensation". The Company should, therefore, be
entitled to a tax deduction for compensation paid in the same amount as ordinary
income is recognized by the officer without any reduction under the limitations
of Section 162(m) on deductible compensation paid to such officers.
The foregoing federal income tax information is a summary only and does not
purport to be a complete statement of the relevant provisions of the Code. The
effect of any state or local taxes is not addressed.
INCENTIVE AWARDS NONTRANSFERABLE. No Incentive Award may be assigned,
transferred, pledged, or otherwise encumbered by a participant, other than by
will or by the laws of descent and distribution. An Incentive Award may be
exercised during the Participants lifetime only by the participant or the
participant's legal representative.
AMENDMENT AND TERMINATION. The Company's board of directors may amend or
terminate the Incentive Plan at any time, except that the Incentive Plan may not
be modified or amended, without shareholder approval, if such amendment would
(i) increase the number of shares of Common Stock which may be issued
thereunder, except in connection with a recapitalization or reclassification of
the Common Stock, (ii) amend the eligibility requirements for individuals to
participate in the Incentive Plan, (iii) increase the maximum limits on
Incentive Awards that may be issued to certain named executive officers pursuant
to Section 162(m) of the Code, (iv) extend the term of the Incentive Plan, or
(v) decrease the authority granted to the Committee under the Incentive Plan in
contravention of Rule 16b-3 under the Exchange Act. No termination or amendment
of the Incentive Plan shall adversely affect in any material way any outstanding
Incentive Award previously granted to a participant without his consent.
REQUIRED AFFIRMATIVE VOTE AND RECOMMENDATION
The affirmative vote of the holders of a majority of the shares of Common
Stock (including shares of Common Stock resulting from the deemed conversion of
the Series B-2 Preferred Stock) entitled to vote at the meeting, represented in
person or by proxy, is required to approve the adoption of the Incentive Plan.
By affording key management employees, directors and consultants of the Company
and its subsidiaries an opportunity to acquire or increase their proprietary
interests in the Company, and by thus encouraging such individuals to become
owners of the Company's Common Stock, the Company seeks to motivate, retain and
attract those highly competent individuals upon whose judgment, initiative,
leadership and continued efforts the success of the Company in large measure
depends.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT ITS
STOCKHOLDERS VOTE FOR THE APPROVAL OF THE INCENTIVE PLAN.
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OTHER MATTERS
The annual report to stockholders covering the year ended December 31, 1996
either has been mailed to each stockholder entitled to vote at the annual
meeting or accompanies this proxy statement.
Any stockholder who wishes to submit a proposal for action to be included
in the proxy statement and form of proxy relating to the Company's 1998 annual
meeting of stockholders is required to submit such proposal to the Company on or
before March 15, 1998.
The cost of soliciting proxies in the accompanying form will be borne by
the Company. In addition to solicitations by mail, several regular employees of
the Company may, if necessary to assure the presence of a quorum, solicit
proxies in person or by telephone.
The persons designated as proxies to vote shares at the meeting intend to
exercise their judgment in voting such shares on other matters that may properly
come before the meeting. Management does not expect that any matters other than
those referred to in this proxy statement will be presented for action at the
meeting.
By Order of the Board of Directors,
F. CLAYTON CHAMBERS,
SECRETARY
August 25, 1997
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FRONT SIDE OF PROXY
BRAZOS SPORTSWEAR, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
SEPTEMBER 16, 1997
PROXY The undersigned hereby appoints J. Ford Taylor or F.
FOR Clayton Chambers, or either of them, each with power of
ANNUAL substitution, attorneys and proxies of the undersigned
MEETING to vote all shares of common stock or Series B-2
OF Preferred Stock of Brazos Sportswear, Inc. ("Company")
STOCKHOLDERS which the undersigned is entitled to vote at the annual
SEPTEMBER 16, 1997 meeting of stockholders to be held on September 16, 1997
at the offices of Equus II Incorporated, 2929 Allen
Parkway, Suite 2500, Houston, Texas 77019 at 10:00 a.m.,
Houston time, and at any adjournments.
1. [ ] FOR the election (except as indicated below) as directors of
Randall B. Hale, J. Ford Taylor, Nolan Lehmann, F. Clayton Chambers,
Alan B. Elenson and Michael S. Chadwick.
INSTRUCTION: TO WITHHOLD TO VOTE FOR ANY NOMINEE, WRITE THAT NOMINEE'S NAME
BELOW:
- --------------------------------------------------------------------------------
[ ] WITHHOLD authority to vote for all nominees listed above.
2. Proposal to adopt the Charter Amendment.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to adopt the 1997 Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(PLEASE DATE AND SIGN ON REVERSE SIDE)
- --------------------------------------------------------------------------------
BACK SIDE OF PROXY
4. In their discretion, upon such other matters (including procedural and
other matters relating to the conduct of the meeting) as properly come
before the meeting and any adjournment.
As described in the Notice of Annual Meeting of Stockholders, receipt of
which is hereby acknowledged.
This proxy will be voted in accordance with the specifications made hereon.
If no contrary specification is made, it will be voted "FOR" Proposals 1, 2 and
3.
Dated this ______ day of _____ , 1997
-------------------------------------
-------------------------------------
Signature(s) of Stockholder
Please sign exactly as your name
appears on your stock certificate.
When signing as executor,
administrator, trustee or other
representative, please give your
full title. All joint owners
should sign.
PLEASE DATE, SIGN AND MAIL YOUR PROXY PROMPTLY. PLEASE DO NOT FOLD THIS PROXY.
<PAGE>
APPENDIX A
TO PROXY STATEMENT
BRAZOS SPORTSWEAR, INC.
1997 INCENTIVE PLAN
AS AN AMENDMENT AND RESTATEMENT OF THE BSI HOLDINGS, INC.
1995 INCENTIVE PLAN AND THE SUN SPORTSWEAR, INC.
1989 EMPLOYEE STOCK OPTION PLAN,
EFFECTIVE JULY 2, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1.
GENERAL PROVISIONS RELATING TO
PLAN GOVERNANCE, COVERAGE AND BENEFITS.................................1
1.1 Amendment and Restatement........................................1
1.2 Purpose..........................................................1
1.3 Definitions......................................................2
(a) Appreciation...............................................2
(b) Authorized Officer.........................................2
(c) Board......................................................2
(d) Cause......................................................2
(e) Change in Control..........................................2
(f) Code.......................................................3
(g) Committee..................................................3
(h) Common Stock...............................................3
(i) Company....................................................3
(j) Consultant.................................................3
(k) Covered Employee...........................................4
(l) Deferred Stock.............................................4
(m) Disability.................................................4
(n) Employee...................................................4
(o) Employment.................................................4
(p) Exchange Act...............................................5
(q) Fair Market Value..........................................5
(r) Grantee....................................................5
(s) Incentive Award............................................5
(t) Incentive Agreement........................................5
(u) Incentive Stock Option.....................................5
(v) Independent SAR............................................6
(w) Insider....................................................6
(x) Nonstatutory Stock Option..................................6
(y) Option Price...............................................6
(z) Other Stock-Based Award....................................6
(aa) Outside Director...........................................6
(bb) Parent.....................................................6
(cc) Performance-Based Exception................................6
(dd) Performance Period.........................................6
(ee) Performance Share or Performance Unit......................6
(ff) Plan.......................................................6
(gg) Restricted Stock...........................................6
(hh) Restricted Stock Award.....................................7
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(ii) Restriction Period.........................................7
(jj) Retirement.................................................7
(kk) Share......................................................7
(ll) Share Pool.................................................7
(mm) Spread.....................................................7
(nn) Stock Appreciation Right or SAR............................7
(oo) Stock Option or Option.....................................7
(pp) Subsidiary.................................................7
(qq) Supplemental Payment.......................................7
(rr) Tandem SAR.................................................7
1.4 Plan Administration..............................................8
(a) Authority of the Committee.................................8
(b) Meetings...................................................8
(c) Decisions Binding..........................................8
(d) Modification of Outstanding Incentive Awards...............8
(e) Delegation of Authority....................................9
(f) Expenses of Committee......................................9
(g) Surrender of Previous Incentive Awards.....................9
(h) Indemnification............................................9
1.5 Shares of Common Stock Available for Incentive Awards............9
1.6 Share Pool Adjustments for Awards and Payouts...................11
1.7 Common Stock Available. .......................................11
1.8 Participation...................................................11
(a) Eligibility...............................................11
(b) Incentive Stock Option Eligibility........................12
1.9 Types of Incentive Awards.......................................12
SECTION 2.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS...........................12
2.1 Grant of Stock Options..........................................12
2.2 Stock Option Terms..............................................13
(a) Written Agreement.........................................13
(b) Number of Shares..........................................13
(c) Exercise Price............................................13
(d) Term......................................................13
(e) Exercise..................................................13
(f) Incentive Stock Options...................................13
2.3 Stock Option Exercises..........................................14
(a) Method of Exercise and Payment............................14
(b) Restrictions on Share Transferability.....................15
(c) Notification with respect to Incentive Stock Options......15
(d) Proceeds of Option Exercise...............................15
2.4 Stock Appreciation Rights in Tandem with Nonstatutory Stock
Options.........................................................15
(a) Grant.....................................................15
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(b) General Provisions........................................15
(c) Exercise..................................................15
(d) Settlement................................................16
2.5 Stock Appreciation Rights Independent of Nonstatutory Stock
Options.........................................................16
(a) Grant.....................................................16
(b) General Provisions........................................16
(c) Exercise..................................................16
(d) Settlement................................................16
2.6 Reload Options..................................................16
2.7 Supplemental Payment on Exercise of Nonstatutory Stock Options
or Stock Appreciation Rights....................................17
SECTION 3.
RESTRICTED STOCK......................................................17
3.1 Award of Restricted Stock.......................................17
(a) Grant.....................................................17
(b) Immediate Transfer Without Immediate Delivery of
Restricted Stock..........................................17
3.2 Restrictions....................................................18
(a) Forfeiture of Restricted Stock............................18
(b) Issuance of Certificates..................................18
(c) Removal of Restrictions...................................19
3.3 Delivery of Shares of Common Stock..............................19
3.4 Supplemental Payment on Vesting of Restricted Stock.............19
SECTION 4.
PERFORMANCE UNITS AND PERFORMANCE SHARES..............................20
4.1 Performance Based Awards........................................20
(a) Grant.....................................................20
(b) Performance Criteria......................................20
(c) Modification..............................................20
(d) Payment...................................................20
(e) Special Rule for Covered Employees........................21
4.2 Supplemental Payment on Vesting of Performance Units or
Performance Shares..............................................21
SECTION 5.
OTHER STOCK-BASED AWARDS..............................................21
5.1 Grant of Other Stock-Based Awards...............................21
5.2 Other Stock-Based Award Terms...................................22
(a) Written Agreement.........................................22
(b) Purchase Price............................................22
(c) Performance Criteria and Other Terms......................22
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(d) Payment...................................................22
(e) Dividends.................................................22
SECTION 6.
PROVISIONS RELATING TO PLAN PARTICIPATION.............................23
6.1 Plan Conditions.................................................23
(a) Incentive Agreement.......................................23
(b) No Right to Employment....................................23
(c) Securities Requirements...................................23
6.2 Transferability.................................................24
(a) Non-Transferable Awards and Options.......................24
(b) Ability to Exercise Rights................................24
6.3 Rights as a Stockholder.........................................24
(a) No Stockholder Rights.....................................24
(b) Representation of Ownership...............................24
6.4 Listing and Registration of Shares of Common Stock..............24
6.5 Change in Stock and Adjustments.................................25
(a) Changes in Law or Circumstances...........................25
(b) Exercise of Corporate Powers..............................25
(c) Recapitalization of the Company...........................25
(d) Reorganization of the Company.............................26
(e) Issue of Common Stock by the Company......................26
6.6 Termination of Employment, Death, Disability and Retirement.....26
(a) Termination of Employment.................................26
(b) Termination of Employment for Cause.......................27
(c) Retirement................................................27
(d) Disability or Death.......................................27
(e) Continuation..............................................28
6.7 Change in Control...............................................28
6.8 Exchange of Incentive Awards....................................30
6.9 Financing.......................................................30
SECTION 7.
GENERAL...............................................................30
7.1 Effective Date and Grant Period.................................30
7.2 Funding and Liability of Company................................30
7.3 Withholding Taxes...............................................31
(a) Tax Withholding...........................................31
(b) Share Withholding.........................................31
(c) Incentive Stock Options...................................31
(d) Loans.....................................................31
7.4 No Guarantee of Tax Consequences................................32
7.5 Designation of Beneficiary by Participant.......................32
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7.6 Deferrals.......................................................32
7.7 Amendment and Termination.......................................32
7.8 Requirements of Law.............................................33
7.9 Rule 16b-3 Securities Law Compliance............................33
7.10 Compliance with Code Section 162(m).............................33
7.11 Successors......................................................33
7.12 Miscellaneous Provisions........................................34
7.13 Severability....................................................34
7.14 Gender, Tense and Headings......................................34
7.15 Governing Law...................................................34
v
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BRAZOS SPORTSWEAR, INC.
1997 INCENTIVE PLAN
SECTION 1.
GENERAL PROVISIONS RELATING TO
PLAN GOVERNANCE, COVERAGE AND BENEFITS
1.1 AMENDMENT AND RESTATEMENT
BSI Holdings, Inc. adopted and approved the BSI Holdings, Inc.1995 Stock
Incentive Plan (the "BSI Plan"). Effective March 14, 1997, BSI Holdings, Inc.
amended the BSI Plan to allow the assumption of the outstanding stock options
under the BSI Plan, under the Sun Sportswear, Inc. 1989 Employee Stock Option
Plan (the "Sun Plan"), pursuant to the terms of that certain Plan and Agreement
of Merger dated November 13, 1996, as amended, between BSI Holdings, Inc. and
Sun Sportswear, Inc. (the "Merger Agreement"). On March 14, 1997, BSI Holdings,
Inc. merged with Sun and subsequently reincorporated as Brazos Sportswear, Inc.,
a Delaware corporation (the "Company"). The Company now desires to adopt this
Brazos Sportswear, Inc. 1997 Incentive Plan (the "Plan") as an amendment and
restatement, in their entireties, of the BSI Plan and the Sun Plan, effective as
of July 2, 1997. All stock options previously granted under the BSI Plan and the
Sun Plan shall be assumed and continued for all purposes under this Plan.
1.2 PURPOSE
The purpose of the Plan is to foster and promote the long-term financial
success of the Company and its Subsidiaries and to increase stockholder value
by: (a) encouraging the commitment of selected key Employees, Consultants and
Outside Directors, (b) motivating superior performance of key Employees,
Consultants and Outside Directors by means of long-term performance related
incentives, (c) encouraging and providing key Employees, Consultants and Outside
Directors with a program for obtaining ownership interests in the Company which
link and align their personal interests to those of the Company's stockholders,
(d) attracting and retaining key Employees, Consultants and Outside Directors by
providing competitive incentive compensation opportunities, and (e) enabling key
Employees, Consultants and Outside Directors to share in the long-term growth
and success of the Company.
The Plan provides for payment of various forms of incentive compensation
and, therefore, is not intended to be a plan that is subject to the Employee
Retirement Income Security Act of 1974, as amended (ERISA). The Plan shall be
interpreted, construed and administered consistent with its status as a plan
that is not subject to ERISA.
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Subject to approval by the Company's stockholders pursuant to SECTION 7.1,
the Plan shall become effective as of July 2, 1997 (the "EFFECTIVE DATE"). The
Plan, as an amendment and restatement of the BSI Plan and the Sun Plan, shall
commence on the Effective Date, and shall remain in effect, subject to the right
of the Board to amend or terminate the Plan at any time pursuant to SECTION
7.13, until all Shares subject to the Plan have been purchased or acquired
according to its provisions. However, in no event may an Incentive Award be
granted under the Plan after the expiration of ten (10) years from the Effective
Date. Any Incentive Award granted prior to the Effective Date will be subject to
the subsequent receipt of stockholder approval of the Plan.
1.3 DEFINITIONS
The following terms shall have the meanings set forth below:
(a) APPRECIATION. The difference between the option exercise price
per share of the Nonstatutory Stock Option to which a Tandem SAR relates
and the Fair Market Value of a share of Common Stock on the date of
exercise of the Tandem SAR.
(b) AUTHORIZED OFFICER. The Chairman of the Board or the Chief
Executive Officer of the Company or any other senior officer of the
Company to whom either of them delegate the authority to execute any
Incentive Agreement for and on behalf of the Company. No officer or
director shall be an Authorized Officer with respect to any Incentive
Agreement for himself.
(c) BOARD. The Board of Directors of the Company.
(d) CAUSE. When used in connection with the termination of a
Grantee's Employment, shall mean the termination of the Grantee's
Employment by the Company by reason of (i) the conviction of the Grantee
by a court of competent jurisdiction as to which no further appeal can be
taken of a crime involving moral turpitude or a felony; (ii) the proven
commission by the Grantee of an act of fraud upon the Company; (iii) the
willful and proven misappropriation of any funds or property of the
Company by the Grantee; (iv) the willful, continued and unreasonable
failure by the Grantee to perform the material duties assigned to him; (v)
the knowing engagement by the Grantee in any direct, material conflict of
interest with the Company without compliance with the Company's conflict
of interest policy, if any, then in effect; (vi) the knowing engagement by
the Grantee, without the written approval of the Board, in any activity
which competes with the business of the Company or which would result in a
material injury to the business, reputation or goodwill of the Company; or
(vii) the knowing and intentional engagement in any activity which would
constitute a material violation of the provisions of the Company's
policies and procedures manual, if any, then in effect.
(e) CHANGE IN CONTROL. Any of the events described in and subject to
SECTION 6.7.
2
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(f) CODE. The Internal Revenue Code of 1986, as amended, and the
regulations and other authority promulgated thereunder by the appropriate
governmental authority. References herein to any provision of the Code
shall refer to any successor provision thereto.
(g) COMMITTEE. A committee appointed by the Board consisting of not
less than two directors who fulfill the "non-employee director"
requirements of Rule 16b-3 under the Exchange Act and the "outside
director" requirements of Section 162(m) of the Code. Without limitation,
the Committee may be the Compensation Committee of the Board, or any
subcommittee of the Compensation Committee, provided that the members of
the Committee satisfy the requirements of the previous sentence. The Board
shall have the power to fill vacancies on the Committee arising by
resignation, death, removal or otherwise. The Board, in its sole
discretion, may bifurcate the powers and duties of the Committee among one
or more separate committees, or retain all powers and duties of the
Committee in a single Committee. The members of the Committee shall serve
at the discretion of the Board.
Notwithstanding the preceding paragraph of this definition, the term
"Committee" as used in the Plan may also, as to any given Incentive Award,
refer to the Board to the extent that the Board, in its discretion, elects
to grant the Incentive Award including, without limitation, the grant of
an Incentive Award to an Outside Director who is a member of the
Committee. In the case of such a grant by the Board, the Board shall have
all the powers and responsibilities of the Committee hereunder as to the
Incentive Award so granted, and any actions as to such Incentive Award may
be acted upon only by the Board (unless it otherwise designates in its
discretion). If and when the Board exercises its authority to act in the
capacity as the Committee hereunder, it shall so designate in writing with
respect to any action that it undertakes in its designated capacity as the
Committee. The Board shall not act in the capacity as the Committee
hereunder with respect to any particular action under the Plan to the
extent that doing so would cause an Employee to fail to qualify for an
exemption from liability under Section 16(b) of the Exchange Act, violate
the rules of any stock exchange on which the Common Stock is then listed
or traded, or result in the non-deductibility of compensation pursuant to
Section 162(m) of the Code.
(h) COMMON STOCK. The common stock of the Company, $.001 par value
per share, and any class of common stock into which such common shares may
hereafter be converted, reclassified or recapitalized.
(i) COMPANY. Brazos Sportswear, Inc., a corporation organized under
the laws of the State of Delaware, and any successor in interest thereto.
(j) CONSULTANT. An independent agent, consultant, attorney or other
individual who is not an Outside Director or employee of the Company (or
any Parent or Subsidiary) and who, in the opinion of the Committee, is in
a position to contribute materially to the growth or financial success of
the Company (or any Parent or Subsidiary).
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(k) COVERED EMPLOYEE. A named executive officer who is one of the
group of covered employees as defined in Section 162(m) of the Code and
Treasury Regulation ss. 1.162-27(c) (or its successor).
(l) DEFERRED STOCK. Shares of Common Stock to be issued or
transferred to a Grantee under an Other Stock-Based Award granted pursuant
to SECTION 5 at the end of a specified deferral period, as set forth in
the Incentive Agreement pertaining thereto.
(m) DISABILITY. As determined by the Committee in its discretion
exercised in good faith, a physical or mental condition of the Employee
that would entitle him to payment of disability income payments under the
Company's long term disability insurance policy or plan for employees, as
then effective, if any; or in the event that the Grantee is not covered,
for whatever reason, under the Company's long-term disability insurance
policy or plan, "Disability" means a permanent and total disability as
defined in Section 22(e)(3) of the Code. A determination of Disability may
be made by a physician selected or approved by the Committee and, in this
respect, the Grantee shall submit to an examination by such physician upon
request.
(n) EMPLOYEE. Any employee of the Company (or any Parent or
Subsidiary) within the meaning of Section 3401(c) of the Code who, in the
opinion of the Committee, is one of a select group of executive officers,
other officers, or other key personnel of the Company (or any Parent or
Subsidiary), who is in a position to contribute materially to the growth
and development and to the financial success of the Company (or any Parent
or Subsidiary), including, without limitation, officers who are members of
the Board.
(o) EMPLOYMENT. Employment by the Company (or any Parent or
Subsidiary), or by any corporation issuing or assuming an Incentive Award
in any transaction described in Section 424(a) of the Code, or by a parent
corporation or a subsidiary corporation of such corporation issuing or
assuming such Incentive Award, as the parent-subsidiary relationship shall
be determined at the time of the corporate action described in Section
424(a) of the Code. In this regard, neither the transfer of a Grantee from
Employment by the Company to Employment by any Parent or Subsidiary, nor
the transfer of a Grantee from Employment by any Parent or Subsidiary to
Employment by the Company, shall be deemed to be a termination of
Employment of the Grantee. Moreover, the Employment of a Grantee shall not
be deemed to have been terminated because of absence from active
Employment on account of temporary illness or during authorized vacation
or during temporary leaves of absence from active Employment granted for
reasons of professional advancement, education, health, or government
service, or during military leave for any period (if the Grantee returns
to active Employment within 90 days after the termination of military
leave), or during any period required to be treated as a leave of absence
by virtue of any applicable statute or agreement.
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Unless otherwise provided in the Incentive Agreement, the term
"Employment" for purposes of the Plan will also include compensatory
services performed by a Consultant for the Company (or any Parent or
Subsidiary) as well as membership on the Board by an Outside Director.
(p) EXCHANGE ACT. The Securities Exchange Act of 1934, as amended.
(q) FAIR MARKET VALUE. The fair market value of one share of Common
Stock on the date in question, which is deemed to be (i) the closing sales
price on the immediately preceding business day of a share of Common Stock
as reported on the principal securities exchange on which Shares are then
listed or admitted to trading, or (ii) if not so reported, the average of
the closing bid and asked prices for a Share on the immediately preceding
business day as quoted on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), or (iii) if not quoted on NASDAQ,
the average of the closing bid and asked prices for a Share as quoted by
the National Quotation Bureau's "Pink Sheets" or the National Association
of Securities Dealers' OTC Bulletin Board System. If there was no public
trade of Common Stock on the date in question, Fair Market Value shall be
determined by reference to the last preceding date on which such a trade
was so reported.
If the Common Stock is not traded in accordance with clauses (i),
(ii) or (iii) of the preceding paragraph at the time a determination of
its Fair Market Value is required to be made hereunder, the determination
of Fair Market Value for purposes of the Plan shall be made by the
Committee in its discretion exercised in good faith. In this respect, the
Committee may rely on such financial data, valuations or experts as it
deems advisable under the circumstances.
(r) GRANTEE. Any Employee, Consultant or Outside Director who is
granted an Incentive Award under the Plan.
(s) INCENTIVE AWARD. A grant of an award under the Plan to a
Grantee, including any Nonstatutory Stock Option, Incentive Stock Option,
Reload Option, Stock Appreciation Right, Restricted Stock Award,
Performance Unit, Performance Share, or Other Stock-Based Award, as well
as any Supplemental Payment.
(t) INCENTIVE AGREEMENT. The written agreement entered into between
the Company and the Grantee setting forth the terms and conditions
pursuant to which an Incentive Award is granted under the Plan, as such
agreement is further defined in SECTION 6.1(A).
(u) INCENTIVE STOCK OPTION. A Stock Option granted by the Committee
to an Employee under SECTION 2 which is designated by the Committee as an
Incentive Stock Option and intended to qualify as an Incentive Stock
Option under Section 422 of the Code.
5
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(v) INDEPENDENT SAR. A Stock Appreciation Right described in SECTION
2.5.
(w) INSIDER. An individual who is, on the relevant date, an officer,
director or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of
the Exchange Act, all as defined under Section 16 of the Exchange Act.
(x) NONSTATUTORY STOCK OPTION. A Stock Option granted by the
Committee to a Grantee under SECTION 2 which is not designated by the
Committee as an Incentive Stock Option.
(y) OPTION PRICE. The exercise price at which a Share may be
purchased by the Grantee of a Stock Option.
(z) OTHER STOCK-BASED AWARD. An award granted by the Committee to a
Grantee under SECTION 5.1 that is valued in whole or in part by reference
to, or is otherwise based upon, Common Stock.
(aa) OUTSIDE DIRECTOR. A member of the Board who is not, at the time
of grant of an Incentive Award, an employee of the Company or any Parent
or Subsidiary.
(bb) PARENT. Any corporation (whether now or hereafter existing)
which constitutes a "parent" of the Company, as defined in Section 424(e)
of the Code.
(cc) PERFORMANCE-BASED EXCEPTION. The performance-based exception
from the tax deductibility limitations of Section 162(m) of the Code, as
prescribed in Code ss. 162(m) and Treasury Regulation ss. 1.162-27(e) (or
its successor).
(dd) PERFORMANCE PERIOD. A period of time determined by the
Committee over which performance is measured for the purpose of
determining a Grantee's right to and the payment value of any Performance
Unit, Performance Share or Other Stock-Based Award.
(ee) PERFORMANCE SHARE OR PERFORMANCE UNIT. An Incentive Award
representing a contingent right to receive cash or shares of Common Stock
(which may be Restricted Stock) at the end of a Performance Period and
which, in the case of Performance Shares, is denominated in Common Stock,
and, in the case of Performance Units, is denominated in cash values.
(ff) PLAN. The Brazos Sportswear, Inc.1997 Incentive Plan as set
forth herein and as it may be amended from time to time.
(gg) RESTRICTED STOCK. Shares of Common Stock issued or transferred
to a Grantee pursuant to SECTION 3.
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(hh) RESTRICTED STOCK AWARD. An authorization by the Committee to
issue or transfer Restricted Stock to a Grantee.
(ii) RESTRICTION PERIOD. The period of time determined by the
Committee and set forth in the Incentive Agreement during which the
transfer of Restricted Stock by the Grantee is restricted.
(jj) RETIREMENT. The voluntary termination of Employment from the
Company or any Parent or Subsidiary constituting retirement for age on any
date after the Employee attains the normal retirement age of 65 years, or
such other age as may be designated by the Committee in the Employee's
Incentive Agreement..
(kk) SHARE. A share of the Common Stock of the Company.
(ll) SHARE POOL. The number of shares authorized for issuance under
SECTION 1.4, as adjusted for awards and payouts under SECTION 1.5 and as
adjusted for changes in corporate capitalization under SECTION 6.5.
(mm) SPREAD. The difference between the exercise price per Share
specified in any Independent SAR grant and the Fair Market Value of a
Share on the date of exercise of the Independent SAR.
(nn) STOCK APPRECIATION RIGHT OR SAR. A Tandem SAR described in
SECTION 2.4 or an Independent SAR described in SECTION 2.5.
(oo) STOCK OPTION OR OPTION. Pursuant to SECTION 2, (i) an Incentive
Stock Option granted to an Employee, or (ii) a Nonstatutory Stock Option
granted to an Employee, Consultant or Outside Director, whereunder the
Grantee has the right to purchase Shares of Common Stock. In accordance
with Section 422 of the Code, no Consultant or Outside Director shall be
granted an Incentive Stock Option.
(pp) SUBSIDIARY. Any corporation (whether now or hereafter existing)
which constitutes a "subsidiary" of the Company, as defined in Section
424(f) of the Code.
(qq) SUPPLEMENTAL PAYMENT. Any amount, as described in SECTIONS 2.7,
3.5, 4.2 AND/OR 5.2, dedicated to payment of income taxes that are payable
by the Grantee on an Incentive Award.
(rr) TANDEM SAR. A Stock Appreciation Right that is granted in
connection with a related Stock Option pursuant to SECTION 2.4, the
exercise of which shall require forfeiture of the right to purchase a
Share under the related Stock Option (and when a Share is purchased under
the Stock Option, the Tandem SAR shall similarly be canceled).
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1.4 PLAN ADMINISTRATION
(a) AUTHORITY OF THE COMMITTEE. Except as may be limited by law and
subject to the provisions herein, the Committee shall have full power to
(i) select Grantees who shall participate in the Plan; (ii) determine the
sizes, duration and types of Incentive Awards; (iii) determine the terms
and conditions of Incentive Awards and Incentive Agreements; (iv)
determine whether any Shares subject to Incentive Awards will be subject
to any restrictions on transfer; (v) construe and interpret the Plan and
any Incentive Agreement or other agreement entered into under the Plan;
and (vi) establish, amend, or waive rules for the Plan's administration.
Further, the Committee shall make all other determinations which may be
necessary or advisable for the administration of the Plan.
(b) MEETINGS. The Committee shall designate a chairman from among
its members who shall preside at all of its meetings, and shall designate
a secretary, without regard to whether that person is a member of the
Committee, who shall keep the minutes of the proceedings and all records,
documents, and data pertaining to its administration of the Plan. Meetings
shall be held at such times and places as shall be determined by the
Committee and the Committee may hold telephonic meetings. The Committee
may take any action otherwise proper under the Plan by the affirmative
vote, taken with or without a meeting, of a majority of its members. The
Committee may authorize any one or more of their members or any officer of
the Company to execute and deliver documents on behalf of the Committee.
(c) DECISIONS BINDING. All determinations and decisions made by the
Committee shall be made in its discretion pursuant to the provisions of
the Plan, and shall be final, conclusive and binding on all persons
including the Company, its shareholders, Employees, Grantees, and their
estates and beneficiaries. The Committee's decisions and determinations
with respect to any Incentive Award need not be uniform and may be made
selectively among Incentive Awards and Grantees, whether or not such
Incentive Awards are similar or such Grantees are similarly situated.
(d) MODIFICATION OF OUTSTANDING INCENTIVE AWARDS. Subject to the
stockholder approval requirements of SECTION 7.7 if applicable, the
Committee may, in its discretion, provide for the extension of the
exercisability of an Incentive Award, accelerate the vesting or
exercisability of an Incentive Award, eliminate or make less restrictive
any restrictions contained in an Incentive Award, waive any restriction or
other provisions of an Incentive Award, or otherwise amend or modify an
Incentive Award in any manner that is either (i) not adverse to the
Grantee to whom such Incentive Award was granted or (ii) consented to by
such Grantee. The Committee may grant an Incentive Award to an individual
who it expects to become an Employee within the next six months, with such
Incentive Award being subject to such individual actually becoming an
Employee within such time period, and subject to such other terms and
conditions as may be established by the Committee in its discretion.
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(e) DELEGATION OF AUTHORITY. The Committee may delegate to the Chief
Executive Officer and to other senior officers of the Company its duties
under this Plan pursuant to such conditions or limitations as the
Committee may establish from time to time, except that the Committee may
not delegate to any person the authority to grant Incentive Awards to, or
take other action with respect to, Grantees who are subject to Section 16
of the Exchange Act or Section 162(m) of the Code.
(f) EXPENSES OF COMMITTEE. The Committee may employ legal counsel,
including, without limitation, independent legal counsel and counsel
regularly employed by the Company, and other agents as the Committee may
deem appropriate for the administration of the Plan. The Committee may
rely upon any opinion or computation received from any such counsel or
agent. All expenses incurred by the Committee in interpreting and
administering the Plan, including, without limitation, meeting expenses
and professional fees, shall be paid by the Company.
(g) SURRENDER OF PREVIOUS INCENTIVE AWARDS. The Committee may, in
its absolute discretion, grant Incentive Awards to Grantees on the
condition that such Grantees surrender to the Committee for cancellation
such other Incentive Awards (including, without limitation, Incentive
Awards with higher exercise prices) as the Committee directs. Incentive
Awards granted on the condition precedent of surrender of outstanding
Incentive Awards shall not count against the limits set forth in SECTION
1.4 until such time as such previous Incentive Awards are surrendered and
cancelled.
(h) INDEMNIFICATION. Each person who is or was a member of the
Committee, or of the Board, shall be indemnified by the Company against
and from any damage, loss, liability, cost and expense that may be imposed
upon or reasonably incurred by him in connection with or resulting from
any claim, action, suit, or proceeding to which he may be a party or in
which he may be involved by reason of any action taken or failure to act
under the Plan, except for any such act or omission constituting willful
misconduct or gross negligence. Such person shall be indemnified by the
Company for all amounts paid by him in settlement thereof, with the
Company's approval, or paid by him in satisfaction of any judgment in any
such action, suit, or proceeding against him, provided he shall give the
Company an opportunity, at its own expense, to handle and defend the same
before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such persons may be entitled under the
Company's Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or
hold them harmless.
1.5 SHARES OF COMMON STOCK AVAILABLE FOR INCENTIVE AWARDS
Subject to adjustment under SECTION 6.5, there shall be available for
Incentive Awards under this Plan granted wholly or partly in Common Stock
(including rights or Options that may be
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exercised for or settled in Common Stock) an aggregate of the greater of (a)
750,000 Shares of Common Stock and (b) 12.5% of the number of Shares of Common
Stock issued and outstanding on the last day of each calendar quarter. No more
than 750,000 Shares of Common Stock shall be available for Incentive Stock
Options. The number of Shares of Common Stock that are the subject of Incentive
Awards under this Plan, that are forfeited or terminated, expire unexercised,
are settled in cash in lieu of Common Stock or in a manner such that all or some
of the Shares covered by an Incentive Award are not issued to a Grantee or are
exchanged for Incentive Awards that do not involve Common Stock, shall again
immediately become available for Incentive Awards hereunder. The Committee may
from time to time adopt and observe such procedures concerning the counting of
Shares against the Plan maximum as it may deem appropriate. The Board and the
appropriate officers of the Company shall from time to time take whatever
actions are necessary to file any required documents with governmental
authorities, stock exchanges and transaction reporting systems to ensure that
Shares are available for issuance pursuant to Incentive Awards.
Unless and until the Committee determines that a particular Incentive
Award granted to a Covered Employee is not intended to comply with the
Performance-Based Exception, the following rules shall apply to grants of
Incentive Awards to Covered Employees:
(a) Subject to adjustment as provided in SECTION 6.5, the maximum
aggregate number of Shares of Common Stock (including Stock Options, SARs,
Restricted Stock, Performance Units and Performance Shares paid out in
Shares, or Other Stock-Based Awards paid out in Shares) that may be
granted or that may vest, as applicable, in any calendar year pursuant to
any Incentive Award held by any individual Covered Employee shall be two
million (2,000,000) Shares.
(b) The maximum aggregate cash payout (including SARs, Performance
Units and Performance Shares paid out in cash, or Other Stock-Based Awards
paid out in cash) with respect to Incentive Awards granted in any calendar
year which may be made to any Covered Employee shall be five million
dollars ($5,000,000).
(c) With respect to any Stock Option or Stock Appreciation Right
granted to a Covered Employee that is canceled or repriced, the number of
Shares subject to such Stock Option or Stock Appreciation Right shall
continue to count against the maximum number of Shares that may be the
subject of Stock Options or Stock Appreciation Rights granted to such
Covered Employee hereunder and, in this regard, such maximum number shall
be determined in accordance with Section 162(m) of the Code.
(d) The limitations of subsections (a), (b) and (c) above shall be
construed and administered so as to comply with the Performance-Based
Exception.
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1.6 SHARE POOL ADJUSTMENTS FOR AWARDS AND PAYOUTS.
The following Incentive Awards and payouts shall reduce, on a one Share
for one Share basis, the number of Shares authorized for issuance under the
Share Pool:
(a) Stock Option;
(b) SAR (except a Tandem SAR);
(c) Restricted Stock;
(d) A payout of a Performance Share in Shares;
(e) A payout of a Performance Unit in Shares; and
(f) A payout of an Other Stock-Based Award in Shares.
The following transactions shall restore, on a one Share for one Share
basis, the number of Shares authorized for issuance under the Share Pool:
(a) A Payout of an SAR, Tandem SAR, Restricted Stock Award, or Other
Stock-Based Award in the form of cash;
(b) A cancellation, termination, expiration, forfeiture, or lapse
for any reason (with the exception of the termination of a Tandem SAR upon
exercise of the related Stock Option, or the termination of a related
Stock Option upon exercise of the corresponding Tandem SAR) of any Shares
subject to an Incentive Award; and
(c) Payment of an Option Price with previously acquired Shares or by
withholding Shares which otherwise would be acquired on exercise (i.e.,
the Share Pool shall be increased by the number of Shares turned in or
withheld as payment of the Option Price).
1.7 COMMON STOCK AVAILABLE.
The Common Stock available for issuance or transfer under the Plan shall
be made available from Shares now or hereafter (i) held in the treasury of the
Company, (ii) authorized but unissued shares, or (iii) shares to be purchased or
acquired by the Company. No fractional shares shall be issued under the Plan;
payment for fractional shares shall be made in cash.
1.8 PARTICIPATION
(a) ELIGIBILITY. The Committee shall from time to time designate
those Employees, Consultants and/or Outside Directors, if any, to be
granted Incentive Awards
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under the Plan, the type of Incentive Awards granted, the number of
Shares, Stock Options, rights or units, as the case may be, which shall be
granted to each such person, and any other terms or conditions relating to
the Incentive Awards as it may deem appropriate to the extent consistent
with the provisions of the Plan. A Grantee who has been granted an
Incentive Award may, if otherwise eligible, be granted additional
Incentive Awards at any time.
(b) INCENTIVE STOCK OPTION ELIGIBILITY. No Consultant or Outside
Director shall be eligible for the grant of any Incentive Stock Option. In
addition, no Employee shall be eligible for the grant of any Incentive
Stock Option who owns or would own immediately before the grant of such
Incentive Stock Option, directly or indirectly, stock possessing more than
ten percent (10%) of the total combined voting power of all classes of
stock of the Company, or any Parent or Subsidiary. This restriction does
not apply if, at the time such Incentive Stock Option is granted, the
Incentive Stock Option exercise price is at least one hundred and ten
percent (110%) of the Fair Market Value on the date of grant and the
Incentive Stock Option by its terms is not exercisable after the
expiration of five (5) years from the date of grant. For the purpose of
the immediately preceding sentence, the attribution rules of Section
424(d) of the Code shall apply for the purpose of determining an
Employee's percentage ownership in the Company or any Parent or
Subsidiary. This paragraph shall be construed consistent with the
requirements of Section 422 of the Code.
1.9 TYPES OF INCENTIVE AWARDS
The types of Incentive Awards under the Plan are Stock Options, Stock
Appreciation Rights and Supplemental Payments as described in SECTION 2,
Restricted Stock and Supplemental Payments as described in SECTION 3,
Performance Units, Performance Shares and Supplemental Payments as described in
SECTION 4, Other Stock-Based Awards and Supplemental Payments as described in
SECTION 5, or any combination of the foregoing.
SECTION 2.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 GRANT OF STOCK OPTIONS
The Committee is authorized to grant Stock Options to Employees,
Consultants and/or Outside Directors in accordance with the terms and conditions
of the Plan, and with such additional terms and conditions, not inconsistent
with the provisions of the Plan, as the Committee shall determine in its
discretion. Successive grants may be made to the same Grantee whether or not any
Stock Option previously granted to such person remains unexercised.
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2.2 STOCK OPTION TERMS
(a) WRITTEN AGREEMENT. Each grant of an Stock Option shall be
evidenced by a written Incentive Agreement. Among its other provisions,
each Incentive Agreement shall set forth the extent to which the Grantee
shall have the right to exercise the Stock Option following termination of
the Grantee's Employment. Such provisions shall be determined in the
discretion of the Committee, shall be included in the Grantee's Incentive
Agreement, need not be uniform among all Stock Options issued pursuant to
the Plan.
(b) NUMBER OF SHARES. Each Stock Option shall specify the number of
Shares of Common Stock to which it pertains.
(c) EXERCISE PRICE. The exercise price per Share of Common Stock
under each Stock Option shall be determined by the Committee; provided,
however, that in the case of an Incentive Stock Option, such exercise
price shall not be less than 100% of the Fair Market Value per Share on
the date the Incentive Stock Option is granted. To the extent that the
Stock Option is intended to qualify for the Performance-Based Exception,
the exercise price shall not be less than 100% of the Fair Market Value
per Share on the date the Stock Option is granted. Each Stock Option shall
specify the method of exercise which shall be consistent with the
requirements of SECTION 2.3(A).
(d) TERM. The Committee shall fix the term of each Stock Option
which shall be not more than ten (10) years from the date of grant. In the
event no term is fixed, such term shall be ten (10) years from the date of
grant.
(e) EXERCISE. The Committee shall determine the time or times at
which a Stock Option may be exercised in whole or in part. Each Stock
Option may specify the required period of continuous Employment and/or the
performance objectives to be achieved before the Stock Option or portion
thereof will become exercisable. Each Stock Option, the exercise of which,
or the timing of the exercise of which, is dependent, in whole or in part,
on the achievement of designated performance objectives, may specify a
minimum level of achievement in respect of the specified performance
objectives below which no Stock Options will be exercisable and a method
for determining the number of Stock Options that will be exercisable if
performance is at or above such minimum but short of full achievement of
the performance objectives. All such terms and conditions shall be set
forth in the Incentive Agreement.
(f) INCENTIVE STOCK OPTIONS. Notwithstanding any contrary provision
in the Plan, to the extent that the aggregate Fair Market Value
(determined as of the time the Incentive Stock Option is granted) of the
Shares of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by any Grantee during any single calendar
year (under the Plan and any other stock option plans of the Company and
its Subsidiaries or Parent) exceeds the sum of $100,000, such Incentive
Stock Option shall be treated as a
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Nonstatutory Stock Option, and not an Incentive Stock Option, but all
other terms and provisions of such Stock Option shall remain unchanged.
This paragraph shall be applied by taking Incentive Stock Options into
account in the order in which they are granted.
2.3 STOCK OPTION EXERCISES
(a) METHOD OF EXERCISE AND PAYMENT. Stock Options shall be exercised
by the delivery of a signed written notice of exercise to the Company as
of a date set by the Company in advance of the effective date of the
proposed exercise. The notice shall set forth the number of Shares with
respect to which the Option is to be exercised, accompanied by full
payment for the Shares.
The Option Price upon exercise of any Stock Option shall be payable
to the Company in full either: (i) in cash or its equivalent, or (ii)
subject to prior approval by the Committee, by tendering previously
acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price (provided that the Shares which
are tendered by an Insider, if applicable, must have been held by the
Insider for at least six (6) months prior to their tender to satisfy the
Option Price), or (iii) subject to prior approval by the Committee, by
withholding Shares which otherwise would be acquired on exercise having an
aggregate Fair Market Value at the time of exercise equal to the total
Option Price, or (iv) subject to prior approval by the Committee, by a
combination of (i), (ii), and (iii) above. Any payment in Shares of Common
Stock shall be effected by the delivery of such Shares to the Secretary of
the Company, duly endorsed in blank or accompanied by stock powers duly
executed in blank, together with any other documents as the Secretary
shall require from time to time.
The Committee also may allow (i) "cashless exercise" as permitted
under Federal Reserve Board's Regulation T, 12 CFR Part 220 (or its
successor), and subject to applicable securities law restrictions and tax
withholdings, or (ii) by any other means which the Committee, in its
discretion, determines to be consistent with the Plan's purpose and
applicable law.
As soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to or on behalf of
the Grantee, in the name of the Grantee or other appropriate recipient,
Share certificates for the number of Shares purchased under the Stock
Option. Such delivery shall be effected for all purposes when a stock
transfer agent of the Company shall have deposited such certificates in
the United States mail, addressed to Grantee or other appropriate
recipient.
During the lifetime of a Grantee, each Option granted to him shall
be exercisable only by the Grantee or a broker-dealer acting on his behalf
pursuant to a cashless exercise under the foregoing provisions of this
SECTION 2.3(A). No Option shall be assignable or transferable by Grantee
otherwise than by will or by the laws of descent and distribution.
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(b) RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose
such restrictions on any Shares acquired pursuant to the exercise of a
Stock Option as it may deem advisable, including, without limitation,
restrictions under (i) any buy/sell agreement or right of first refusal,
(ii) any applicable federal securities laws, (iii) the requirements of any
stock exchange or market upon which such Shares are then listed and/or
traded, or (iv) any blue sky or state securities law applicable to such
Shares.
(c) NOTIFICATION WITH RESPECT TO INCENTIVE STOCK OPTIONS.
Notwithstanding any other provision of the Plan, a Grantee who disposes of
Shares of Common Stock acquired upon the exercise of an Incentive Stock
Option by a sale or exchange either (i) within two (2) years after the
date of the grant of the Incentive Stock Option under which the Shares
were acquired or (ii) within one (1) year after the transfer of such
Shares to him pursuant to exercise, shall promptly notify the Company of
such disposition, the amount realized and his adjusted basis in such
Shares.
(d) PROCEEDS OF OPTION EXERCISE. The proceeds received by the
Company from the sale of Shares pursuant to Stock Options exercised under
the Plan shall be used for general corporate purposes.
2.4 STOCK APPRECIATION RIGHTS IN TANDEM WITH NONSTATUTORY STOCK OPTIONS
(a) GRANT. The Committee may, at the time of grant of a Nonstatutory
Stock Option, or at any time thereafter during the term of the
Nonstatutory Stock Option, grant Stock Appreciation Rights with respect to
all or any portion of the Shares of Common Stock covered by such
Nonstatutory Stock Option. A Stock Appreciation Right in tandem with a
Nonstatutory Stock Option is referred to herein as a "TANDEM SAR."
(b) GENERAL PROVISIONS. The terms and conditions of each Tandem SAR
shall be evidenced by an Incentive Agreement. The Option Price per Share
of a Tandem SAR shall be fixed in the Incentive Agreement and shall not be
less than one hundred percent (100%) of the Fair Market Value of a Share
on the grant date of the Nonstatutory Stock Option to which it relates.
(c) EXERCISE. A Tandem SAR may be exercised at any time the
Nonstatutory Stock Option to which it relates is then exercisable, but
only to the extent such Nonstatutory Stock Option is exercisable, and
shall otherwise be subject to the conditions applicable to such
Nonstatutory Stock Option. When a Tandem SAR is exercised, the
Nonstatutory Stock Option to which it relates shall terminate to the
extent of the number of Shares with respect to which the Tandem SAR is
exercised. Similarly, when a Nonstatutory Stock Option is exercised, the
Tandem SARs relating to the Shares covered by such Nonstatutory Stock
Option exercise shall terminate. Any Tandem SAR which is outstanding on
the last day of the term of the related Nonstatutory Stock Option shall be
automatically exercised on such
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date for cash, without the need for any action by the Grantee, to the
extent of any Appreciation.
(d) SETTLEMENT. Upon exercise of a Tandem SAR, the holder shall
receive, for each Share with respect to which the Tandem SAR is exercised,
an amount equal to the Appreciation. The Appreciation shall be payable in
cash, Common Stock, or a combination of both, as specified in the
Incentive Agreement (or in the discretion of the Committee if not so
specified). The Appreciation shall be paid within 30 calendar days of the
exercise of the Tandem SAR. The number of Shares of Common Stock which
shall be issuable upon exercise of a Tandem SAR shall be determined by
dividing (1) by (2), where (1) is the number of Shares as to which the
Tandem SAR is exercised multiplied by the Appreciation in such shares and
(2) is the Fair Market Value of a Share on the exercise date.
2.5 STOCK APPRECIATION RIGHTS INDEPENDENT OF NONSTATUTORY STOCK OPTIONS
(a) GRANT. The Committee may grant Stock Appreciation Rights
independent of Nonstatutory Stock Options ("INDEPENDENT SARS").
(b) GENERAL PROVISIONS. The terms and conditions of each Independent
SAR shall be evidenced by an Incentive Agreement. The exercise price per
share of Common Stock shall be not less than one hundred percent (100%) of
the Fair Market Value of a Share of Common Stock on the date of grant of
the Independent SAR. The term of an Independent SAR shall be determined by
the Committee.
(c) EXERCISE. Independent SARs shall be exercisable at such time and
subject to such terms and conditions as the Committee shall specify in the
Incentive Agreement for the Independent SAR grant.
(d) SETTLEMENT. Upon exercise of an Independent SAR, the holder
shall receive, for each Share specified in the Independent SAR grant, an
amount equal to the Spread. The Spread shall be payable in cash, Common
Stock, or a combination of both, in the discretion of the Committee or as
specified in the Incentive Agreement. The Spread shall be paid within 30
calendar days of the exercise of the Independent SAR. The number of Shares
of Common Stock which shall be issuable upon exercise of an Independent
SAR shall be determined by dividing (1) by (2), where (1) is the number of
Shares as to which the Independent SAR is exercised multiplied by the
Spread in such Shares and (2) is the Fair Market Value of a Share on the
exercise date.
2.6 RELOAD OPTIONS
At the discretion of the Committee, the Grantee may be granted under an
Incentive Agreement, replacement Stock Options that permit the Grantee to
purchase an additional number
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of Shares equal to the number of previously owned Shares surrendered by the
Grantee to pay all or a portion of the Option Price upon exercise of his Stock
Options.
2.7 SUPPLEMENTAL PAYMENT ON EXERCISE OF NONSTATUTORY STOCK OPTIONS OR STOCK
APPRECIATION RIGHTS
The Committee, either at the time of grant or as of the time of exercise
of any Nonstatutory Stock Option or Stock Appreciation Right, may provide in the
Incentive Agreement for a Supplemental Payment by the Company to the Grantee
with respect to the exercise of any Nonstatutory Stock Option or Stock
Appreciation Right. The Supplemental Payment shall be in the amount specified by
the Committee, which amount shall not exceed the amount necessary to pay the
federal and state income tax payable with respect to both the exercise of the
Nonstatutory Stock Option and/or Stock Appreciation Right and the receipt of the
Supplemental Payment, assuming the holder is taxed at either the maximum
effective income tax rate applicable thereto or at a lower tax rate as deemed
appropriate by the Committee. The Committee shall have the discretion to grant
Supplemental Payments that are payable solely in cash or Supplemental Payments
that are payable in cash, Common Stock, or a combination of both, as determined
by the Committee at the time of payment.
SECTION 3.
RESTRICTED STOCK
3.1 AWARD OF RESTRICTED STOCK
(a) GRANT. In consideration of the performance of Employment by any
Grantee who is an Employee, Consultant or Outside Director, Shares of
Restricted Stock may be awarded under the Plan by the Committee with such
restrictions during the Restriction Period as the Committee may designate
in its discretion, any of which restrictions may differ with respect to
each particular Grantee. Restricted Stock shall be awarded for no
additional consideration or such additional consideration as the Committee
may determine, which consideration may be less than, equal to or more than
the Fair Market Value of the shares of Restricted Stock on the grant date.
The terms and conditions of each grant of Restricted Stock shall be
evidenced by an Incentive Agreement.
(b) IMMEDIATE TRANSFER WITHOUT IMMEDIATE DELIVERY OF RESTRICTED
STOCK. Unless otherwise specified in the Grantee's Incentive Agreement,
each Restricted Stock Award shall constitute an immediate transfer of the
record and beneficial ownership of the Shares of Restricted Stock to the
Grantee in consideration of the performance of services as an Employee,
Consultant or Outside Director, as applicable, entitling such Grantee to
all voting and other ownership rights in such Shares.
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As specified in the Incentive Agreement, a Restricted Stock Award
may limit the Grantee's dividend rights during the Restriction Period in
which the shares of Restricted Stock are subject to a "substantial risk of
forfeiture" (within the meaning given to such term under Code Section 83)
and restrictions on transfer. In the Incentive Agreement, the Committee
may apply any restrictions to the dividends that the Committee deems
appropriate. Without limiting the generality of the preceding sentence, if
the grant or vesting of Shares of Restricted Stock granted to a Covered
Employee is designed to comply with the requirements of the
Performance-Based Exception, the Committee may apply any restrictions it
deems appropriate to the payment of dividends declared with respect to
such Shares of Restricted Stock, such that the dividends and/or the Shares
of Restricted Stock maintain eligibility for the Performance-Based
Exception. In the event that any dividend constitutes a derivative
security or an equity security pursuant to the rules under Section 16 of
the Exchange Act, such dividend shall be subject to a vesting period equal
to the remaining vesting period of the Shares of Restricted Stock with
respect to which the dividend is paid.
Shares awarded pursuant to a grant of Restricted Stock may be issued
in the name of the Grantee and held, together with a stock power endorsed
in blank, by the Committee or Company (or their delegates) or in trust or
in escrow pursuant to an agreement satisfactory to the Committee, as
determined by the Committee, until such time as the restrictions on
transfer have expired. All such terms and conditions shall be set forth in
the particular Grantee's Incentive Agreement. The Company or Committee (or
their delegates) shall issue to the Grantee a receipt evidencing the
certificates held by it which are registered in the name of the Grantee.
3.2 RESTRICTIONS
(a) FORFEITURE OF RESTRICTED STOCK. Restricted Stock awarded to a
Grantee may be subject to the following restrictions until the expiration
of the Restriction Period: (i) a restriction that constitutes a
"substantial risk of forfeiture" (as defined in Code Section 83), or a
restriction on transferability; (ii) unless otherwise specified by the
Committee in the Incentive Agreement, the Restricted Stock that is subject
to restrictions which are not satisfied shall be forfeited and all rights
of the Grantee to such Shares shall terminate; and (iii) any other
restrictions that the Committee determines in advance are appropriate,
including, without limitation, rights of repurchase or first refusal in
the Company or provisions subjecting the Restricted Stock to a continuing
substantial risk of forfeiture in the hands of any transferee. Any such
restrictions shall be set forth in the particular Grantee's Incentive
Agreement.
(b) ISSUANCE OF CERTIFICATES. Reasonably promptly after the date of
grant with respect to Shares of Restricted Stock, the Company shall cause
to be issued a stock certificate, registered in the name of the Grantee to
whom such Shares of Restricted Stock were granted, evidencing such Shares;
provided, however, that the Company shall not cause
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to be issued such a stock certificate unless it has received a stock power
duly endorsed in blank with respect to such Shares. Each such stock
certificate shall bear the following legend:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK
REPRESENTED HEREBY ARE SUBJECT TO THE RESTRICTIONS, TERMS AND
CONDITIONS (INCLUDING FORFEITURE AND RESTRICTIONS AGAINST TRANSFER)
CONTAINED IN THE BRAZOS SPORTSWEAR, INC. 1997 INCENTIVE PLAN AND AN
INCENTIVE AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER OF
SUCH SHARES AND BRAZOS SPORTSWEAR, INC. A COPY OF THE PLAN AND
INCENTIVE AGREEMENT ARE ON FILE IN THE OFFICE OF THE SECRETARY OF
BRAZOS SPORTSWEAR, INC.
Such legend shall not be removed from the certificate evidencing such
Shares of Restricted Stock until such Shares vest pursuant to the terms of
the Incentive Agreement.
(c) REMOVAL OF RESTRICTIONS. The Committee, in its discretion, shall
have the authority to remove any or all of the restrictions on the
Restricted Stock if it determines that, by reason of a change in
applicable law or another change in circumstance arising after the grant
date of the Restricted Stock, such action is appropriate.
3.3 DELIVERY OF SHARES OF COMMON STOCK
Subject to withholding taxes under SECTION 7.3 and to the terms of the
Incentive Agreement, a stock certificate evidencing the Shares of Restricted
Stock with respect to which the restrictions in the Incentive Agreement have
been satisfied shall be delivered to the Grantee or other appropriate recipient
free of restrictions. Such delivery shall be effected for all purposes when the
Company shall have deposited such certificate in the United States mail,
addressed to the Grantee or other appropriate recipient.
3.4 SUPPLEMENTAL PAYMENT ON VESTING OF RESTRICTED STOCK
The Committee, either at the time of grant or vesting of Restricted Stock,
may provide for a Supplemental Payment by the Company to the holder in an amount
specified by the Committee, which amount shall not exceed the amount necessary
to pay the federal and state income tax payable with respect to both the vesting
of the Restricted Stock and receipt of the Supplemental Payment, assuming the
Grantee is taxed at either the maximum effective income tax rate applicable
thereto or at a lower tax rate as deemed appropriate by the Committee. The
Committee shall have the discretion to grant Supplemental Payments that are
payable solely in cash or Supplemental Payments that are payable in cash, Common
Stock, or a combination of both, as determined by the Committee at the time of
payment.
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SECTION 4.
PERFORMANCE UNITS AND PERFORMANCE SHARES
4.1 PERFORMANCE BASED AWARDS
(a) GRANT. The Committee is authorized to grant Performance Units
and Performance Shares to selected Grantees who are Employees or
Consultants. Each grant of Performance Units and/or Performance Shares
shall be evidenced by an Incentive Agreement in such amounts and upon such
terms as shall be determined by the Committee. The Committee may make
grants of Performance Units or Performance Shares in such a manner that
more than one Performance Period is in progress concurrently. For each
Performance Period, the Committee shall establish the number of
Performance Units or Performance Shares and their contingent values which
may vary depending on the degree to which performance criteria established
by the Committee are met.
(b) PERFORMANCE CRITERIA. At the beginning of each Performance
Period, the Committee shall (i) establish for such Performance Period
specific financial or non-financial performance objectives that the
Committee believes are relevant to the Company's business objectives; (ii)
determine the value of a Performance Unit or the number of Shares under a
Performance Share grant relative to performance objectives; and (iii)
notify each Grantee in writing of the established performance objectives
and, if applicable, the minimum, target, and maximum value of Performance
Units or Performance Shares for such Performance Period.
(c) MODIFICATION. If the Committee determines, in its discretion
exercised in good faith, that the established performance measures or
objectives are no longer suitable to the Company's objectives because of a
change in the Company's business, operations, corporate structure, capital
structure, or other conditions the Committee deems to be appropriate, the
Committee may modify the performance measures and objectives to the extent
it considers to be necessary. The Committee shall determine whether any
such modification would cause the Performance Unit or Performance Share to
fail to qualify for the Performance-Based Exception.
(d) PAYMENT. The basis for payment of Performance Units or
Performance Shares for a given Performance Period shall be the achievement
of those performance objectives determined by the Committee at the
beginning of the Performance Period as specified in the Grantee's
Incentive Agreement. If minimum performance is not achieved for a
Performance Period, no payment shall be made and all contingent rights
shall cease. If minimum performance is achieved or exceeded, the value of
a Performance Unit or Performance Share may be based on the degree to
which actual performance exceeded the preestablished minimum performance
standards. The amount of payment shall be determined by multiplying the
number of Performance Units or Performance Shares granted at the
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beginning of the Performance Period times the final Performance Unit or
Performance Share value. Payments shall be made, in the discretion of the
Committee as specified in the Incentive Agreement, solely in cash or
Common Stock, or a combination of cash and Common Stock, following the
close of the applicable Performance Period.
(e) SPECIAL RULE FOR COVERED EMPLOYEES. The Committee may establish
performance goals applicable to Performance Units or Performance Shares
awarded to Covered Employees in such a manner as shall permit payments
with respect thereto to qualify for the Performance-Based Exception. If a
Performance Unit or Performance Share granted to a Covered Employee is
intended to comply with the Performance-Based Exception, the Committee in
establishing performance goals shall be guided by Treasury Regulation ss.
1.162-27(e)(2) (or its successor).
4.2 SUPPLEMENTAL PAYMENT ON VESTING OF PERFORMANCE UNITS OR PERFORMANCE SHARES
The Committee, either at the time of grant or at the time of vesting of
Performance Units or Performance Shares, may provide for a Supplemental Payment
by the Company to the Grantee in an amount specified by the Committee, which
amount shall not exceed the amount necessary to pay the federal and state income
tax payable with respect to both the vesting of such Performance Units or
Performance Shares and receipt of the Supplemental Payment, assuming the Grantee
is taxed at either the maximum effective income tax rate applicable thereto or
at a lower tax rate as seemed appropriate by the Committee. The Committee shall
have the discretion to grant Supplemental Payments that are payable in cash,
Common Stock, or a combination of both, as determined by the Committee at the
time of payment.
SECTION 5.
OTHER STOCK-BASED AWARDS
5.1 GRANT OF OTHER STOCK-BASED AWARDS
Other Stock-Based Awards may be awarded by the Committee to selected
Grantees that are denominated or payable in, valued in whole or in part by
reference to, or otherwise related to, Shares of Common Stock, as deemed by the
Committee to be consistent with the purposes of the Plan and the goals of the
Company. Other types of Stock-Based Awards include, without limitation, Deferred
Stock, purchase rights, Shares of Common Stock awarded which are not subject to
any restrictions or conditions, convertible or exchangeable debentures, other
rights convertible into Shares, Incentive Awards valued by reference to the
value of securities of or the performance of a specified Subsidiary, division or
department, and settlement in cancellation of rights of any person with a vested
interest in any other plan, fund, program or arrangement that is or was
sponsored, maintained or participated in by the Company or any Parent or
Subsidiary. As is the case with other Incentive Awards, Other
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Stock-Based Awards may be awarded either alone or in addition to or in tandem
with any other Incentive Awards.
5.2 OTHER STOCK-BASED AWARD TERMS
(a) WRITTEN AGREEMENT. The terms and conditions of each grant of an
Other Stock-Based Award shall be evidenced by an Incentive Agreement.
(b) PURCHASE PRICE. Except to the extent that an Other Stock-Based
Award is granted in substitution for an outstanding Incentive Award or is
delivered upon exercise of a Stock Option, the amount of consideration
required to be received by the Company shall be either (i) no
consideration other than services actually rendered (in the case of
authorized and unissued shares) or to be rendered, or (ii) in the case of
an Other Stock-Based Award in the nature of a purchase right,
consideration (other than services rendered or to be rendered) at least
equal to 50% of the Fair Market Value of the Shares covered by such grant
on the date of grant.
(c) PERFORMANCE CRITERIA AND OTHER TERMS. In its discretion, the
Committee may specify such criteria, periods or goals for vesting in Other
Stock-Based Awards and payment thereof to the Grantee as it shall
determine; and the extent to which such criteria, periods or goals have
been met shall be determined by the Committee. All terms and conditions of
Other Stock-Based Awards shall be determined by the Committee and set
forth in the Incentive Agreement. The Committee may also provide for a
Supplemental Payment similar to such payment as described in SECTION 4.2.
(d) PAYMENT. Other Stock-Based Awards may be paid in Shares of
Common Stock or other consideration related to such Shares, in a single
payment or in installments on such dates as determined by the Committee,
all as specified in the Incentive Agreement.
(e) DIVIDENDS. The Grantee of an Other Stock-Based Award shall be
entitled to receive, currently or on a deferred basis, dividends or
dividend equivalents with respect to the number of Shares covered by the
Other Stock-Based Award, as determined by the Committee and set forth in
the Incentive Agreement. The Committee may also provide in the Incentive
Agreement that such amounts (if any) shall be deemed to have been
reinvested in additional Common Stock.
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SECTION 6.
PROVISIONS RELATING TO PLAN PARTICIPATION
6.1 PLAN CONDITIONS
(a) INCENTIVE AGREEMENT. Each Grantee to whom an Incentive Award is
granted shall be required to enter into an Incentive Agreement with the
Company, in such a form as is provided by the Committee. The Incentive
Agreement shall contain specific terms as determined by the Committee, in
its discretion, with respect to the Grantee's particular Incentive Award.
Such terms need not be uniform among all Grantees or any
similarly-situated Grantees. The Incentive Agreement may include, without
limitation, vesting, forfeiture and other provisions particular to the
particular Grantee's Incentive Award, as well as, for example, provisions
to the effect that the Grantee (i) shall not disclose any confidential
information acquired during Employment with the Company, (ii) shall abide
by all the terms and conditions of the Plan and such other terms and
conditions as may be imposed by the Committee, (iii) shall not interfere
with the employment or other service of any employee, (iv) shall not
compete with the Company or become involved in a conflict of interest with
the interests of the Company, (v) shall forfeit an Incentive Award if
terminated for Cause, (vi) shall not be permitted to make an election
under Section 83(b) of the Code when applicable, and (vii) shall be
subject to any other agreement between the Grantee and the Company
regarding Shares that may be acquired under an Incentive Award including,
without limitation, an agreement restricting the transferability of Shares
by Grantee. An Incentive Agreement shall include such terms and conditions
as are determined by the Committee, in its discretion, to be appropriate
with respect to any individual Grantee. The Incentive Agreement shall be
signed by the Grantee to whom the Incentive Award is made and by an
Authorized Officer.
(b) NO RIGHT TO EMPLOYMENT. Nothing in the Plan or any instrument
executed pursuant to the Plan shall create any Employment rights
(including without limitation, rights to continued Employment) in any
Grantee or affect the right of the Company to terminate the Employment of
any Grantee at any time without regard to the existence of the Plan.
(c) SECURITIES REQUIREMENTS. The Company shall be under no
obligation to effect the registration pursuant to the Securities Act of
1933 of any Shares of Common Stock to be issued hereunder or to effect
similar compliance under any state laws. Notwithstanding anything herein
to the contrary, the Company shall not be obligated to cause to be issued
or delivered any certificates evidencing Shares pursuant to the Plan
unless and until the Company is advised by its counsel that the issuance
and delivery of such certificates is in compliance with all applicable
laws, regulations of governmental authorities, and the requirements of any
securities exchange on which Shares are traded. The Committee may require,
as a condition of the issuance and delivery of certificates evidencing
Shares of Common Stock pursuant to the terms hereof, that the recipient of
such Shares make such
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covenants, agreements and representations, and that such certificates bear
such legends, as the Committee, in its discretion, deems necessary or
desirable.
6.2 TRANSFERABILITY
(a) NON-TRANSFERABLE AWARDS AND OPTIONS. No Incentive Award and no
right under the Plan, contingent or otherwise, will be (i) assignable,
saleable, or otherwise transferable by a Grantee except by will or by the
laws of descent and distribution, or (ii) subject to any encumbrance,
pledge, lien, assignment or charge of any nature.
No transfer by will or by the laws of descent and distribution shall
be effective to bind the Company unless the Committee has been furnished
with a copy of the deceased Grantee's enforceable will or such other
evidence as the Committee deems necessary to establish the validity of the
transfer. Any attempted transfer in violation of this SECTION 6.2(A) shall
be void and ineffective.
(b) ABILITY TO EXERCISE RIGHTS. Subject to a beneficiary designation
pursuant to SECTION 7.5, only the Grantee (or his legal guardian in the
event of Grantee's Disability), or in the event of his death, his estate,
may exercise Stock Options, receive cash payments and deliveries of
Shares, and otherwise assume the rights of the Grantee.
6.3 RIGHTS AS A STOCKHOLDER
(a) NO STOCKHOLDER RIGHTS. Except as otherwise provided in SECTION
3.1(B) for grants of Restricted Stock, a Grantee of an Incentive Award (or
a permitted transferee of such Grantee) shall have no rights as a
stockholder with respect to any Shares of Common Stock until the issuance
of a stock certificate for such Shares.
(b) REPRESENTATION OF OWNERSHIP. In the case of the exercise of an
Incentive Award by a person or estate acquiring the right to exercise such
Incentive Award by reason of the death or Disability of a Grantee, the
Committee may require reasonable evidence as to the ownership of such
Incentive Award or the authority of such person and may require such
consents and releases of taxing authorities as the Committee may deem
advisable.
6.4 LISTING AND REGISTRATION OF SHARES OF COMMON STOCK
The exercise of any Incentive Award granted hereunder shall only be
effective at such time as counsel to the Company shall have determined that the
issuance and delivery of Shares of Common Stock pursuant to such exercise is in
compliance with all applicable laws, regulations of governmental authorities and
the requirements of any securities exchange on which Shares of Common Stock are
traded. The Committee may, in its discretion, defer the effectiveness of any
exercise of an Incentive Award in order to allow the issuance of Shares of
Common Stock to be made pursuant to registration or an exemption from
registration or other methods for compliance
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available under federal or state securities laws. The Committee shall inform the
Grantee in writing of its decision to defer the effectiveness of the exercise of
an Incentive Award. During the period that the effectiveness of the exercise of
an Incentive Award has been deferred, the Grantee may, by written notice to the
Committee, withdraw such exercise and obtain the refund of any amount paid with
respect thereto.
6.5 CHANGE IN STOCK AND ADJUSTMENTS
(a) CHANGES IN LAW OR CIRCUMSTANCES. Subject to SECTION 6.7 which
only applies in the event of a Change in Control, in the event of any
change in applicable laws or any change in circumstances which results in
or would result in any dilution of the rights granted under the Plan, or
which otherwise warrants equitable adjustment because it interferes with
the intended operation of the Plan, then, if the Committee should
determine, in its discretion, that such change equitably requires an
adjustment in the number or kind of shares of stock or other securities or
property theretofore subject, or which may become subject, to issuance or
transfer under the Plan or in the terms and conditions of outstanding
Incentive Awards, such adjustment shall be made in accordance with such
determination. Such adjustments may include changes with respect to (i)
the aggregate number of Shares that may be issued under the Plan, (ii) the
number of Shares subject to Incentive Awards, and (iii) the price per
Share for outstanding Incentive Awards. Any adjustment of an Incentive
Stock Option under this paragraph shall be made only to the extent not
constituting a "modification" within the meaning of Section 424(h)(3) of
the Code unless otherwise agreed to by the Grantee in writing. The
Committee shall give notice to each applicable Grantee of such adjustment
which shall be effective and binding.
(b) EXERCISE OF CORPORATE POWERS. The existence of the Plan or
outstanding Incentive Awards hereunder shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any
or all adjustments, recapitalization, reorganization or other changes in
the Company's capital structure or its business or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred
or prior preference stocks ahead of or affecting the Common Stock or the
rights thereof, or the dissolution or liquidation of the Company, or any
sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding whether of a similar character or
otherwise.
(c) RECAPITALIZATION OF THE COMPANY. Subject to SECTION 6.7, if
while there are Incentive Awards outstanding, the Company shall effect any
subdivision or consolidation of Shares of Common Stock or other capital
readjustment, the payment of a stock dividend, stock split, combination of
Shares, recapitalization or other increase or reduction in the number of
Shares outstanding, without receiving compensation therefor in money,
services or property, then the number of Shares available under the Plan
and the number of Incentive Awards which may thereafter be exercised shall
(i) in the event of an increase in the number of Shares outstanding, be
proportionately increased and the Fair Market Value of the
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Incentive Awards awarded shall be proportionately reduced; and (ii) in the
event of a reduction in the number of Shares outstanding, be
proportionately reduced, and the Fair Market Value of the Incentive Awards
awarded shall be proportionately increased. The Committee shall take such
action and whatever other action it deems appropriate so that the
aggregate Option Price payable to the Company and the value of each
outstanding Option to the Grantee shall not be changed.
(d) REORGANIZATION OF THE COMPANY. Subject to SECTION 6.7, if the
Company is reorganized, merged or consolidated, or is a party to a plan of
exchange with another corporation, pursuant to which reorganization,
merger, consolidation or exchange, stockholders of the Company receive any
Shares of Common Stock or other securities or property, or if the Company
should distribute securities of another corporation to its stockholders,
each Grantee shall be entitled to receive, in lieu of the number of
unexercised Incentive Awards previously awarded, the number of Stock
Options, Stock Appreciation Rights, Performance Shares, Restricted Stock
shares, or Other Stock-Based Awards, with a corresponding adjustment to
the Fair Market Value of said Incentive Awards, to which such holder would
have been entitled pursuant to the terms of the corporate agreement, if
immediately prior to such corporate action, such Grantee had been the
holder of record of a number of Shares equal to the number of the
unexercised Incentive Awards previously awarded to him. For this purpose,
Restricted Stock shall be treated the same as unrestricted outstanding
Shares of Common Stock. In this regard, the Committee shall take whatever
other action it deems appropriate to preserve the rights of Grantees
holding outstanding Incentive Awards.
(e) ISSUE OF COMMON STOCK BY THE COMPANY. Except as hereinabove
expressly provided in this SECTION 6.5 and subject to SECTION 6.7, the
issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or
for labor or services, either upon direct sale or upon the exercise of
rights or warrants to subscribe therefor, or upon any conversion of shares
or obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number of, or Fair Market Value of, any
Incentive Awards then outstanding under previous Incentive Awards;
provided, however, in such event, Grantees of Restricted Stock shall be
treated the same as the holders of outstanding unrestricted Shares of
Common Stock.
6.6 TERMINATION OF EMPLOYMENT, DEATH, DISABILITY AND RETIREMENT
(a) TERMINATION OF EMPLOYMENT. Unless otherwise expressly provided
in the Grantee's Incentive Agreement, if the Grantee's Employment is
terminated for any reason other than due to his death, Disability,
Retirement or for Cause, any non-vested portion of any Stock Option or
other applicable Incentive Award at the time of such termination shall
automatically expire and terminate and no further vesting shall occur. In
such event, except as otherwise expressly provided in his Incentive
Agreement, the Grantee shall be entitled to
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exercise his rights only with respect to the portion of the Incentive
Award that was vested as of the termination date for a period that shall
end on the earlier of (i) the expiration date set forth in the Incentive
Agreement with respect to the vested portion of such Incentive Award or
(ii) the date that occurs sixty (60) calendar days after his termination
date.
(b) TERMINATION OF EMPLOYMENT FOR CAUSE. Unless otherwise expressly
provided in the Grantee's Incentive Agreement, in the event of the
termination of a Grantee's Employment for Cause, all vested and non-vested
Stock Options and other Incentive Awards granted to such Grantee shall
expire, and shall not be exercisable, as of the commencement of business
on the date of such termination.
(c) RETIREMENT. Unless otherwise expressly provided in the Grantee's
Incentive Agreement, upon the Retirement of any Employee who is a Grantee:
(i) any non-vested portion of any outstanding Option or other
Incentive Award shall immediately terminate and no further vesting
shall occur; and
(ii) any vested Option or other Incentive Award shall expire
on the earlier of (A) the expiration date set forth in the Incentive
Agreement for such Incentive Award; or (B) the expiration of (1) six
months after the date of Retirement in the case of any Incentive
Award other than an Incentive Stock Option, or (2) three months
after the date of Retirement in the case of an Incentive Stock
Option.
(d) DISABILITY OR DEATH. Unless otherwise expressly provided in the
Grantee's Incentive Agreement, upon termination of Employment as a result
of the Grantee's Disability or death:
(i) any nonvested portion of any outstanding Option or other
applicable Incentive Award shall immediately terminate upon
termination of Employment, as applicable, and no further vesting
shall occur; and
(ii) any vested Incentive Award shall expire upon the earlier
of either (A) the expiration date set forth in the Incentive
Agreement or (B) the first anniversary of the Grantee's termination
of Employment, as applicable, as a result of his Disability or
death.
In the case of any vested Incentive Stock Option held by an Employee
following termination of Employment, notwithstanding the definition of
"Disability" in SECTION 1.2, whether the Employee has incurred a
"Disability" for purposes of determining the length of the Option exercise
period following termination of Employment under this paragraph (d) shall
be determined by reference to Section 22(e)(3) of the Code to the extent
required by Section 422(c)(6) of the Code. The Committee shall determine
whether a Disability for purposes of this paragraph (d) has occurred.
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(e) CONTINUATION. Subject to the conditions and limitations of the
Plan and applicable law and regulation in the event that a Grantee ceases
to be an Employee, Outside Director or Consultant, as applicable, for
whatever reason, the Committee and Grantee may mutually agree with respect
to any outstanding Option or other Incentive Award then held by the
Grantee (i) for an acceleration or other adjustment in any vesting
schedule applicable to the Incentive Award, (ii) for a continuation of the
exercise period following termination for a longer period than is
otherwise provided under such Incentive Award, or (iii) to any other
change in the terms and conditions of the Incentive Award. In the event of
any such change to an outstanding Inventive Award, a written amendment to
the Grantee's Incentive Agreement shall be required.
6.7 CHANGE IN CONTROL
Notwithstanding any contrary provision in the Plan, in the event of a
Change in Control (as defined below), the following actions shall automatically
occur as of the Change in Control date unless expressly provided otherwise in
the Grantee's Incentive Agreement:
(a) all of the Stock Options and Stock Appreciation Rights then
outstanding shall become 100% vested and immediately and fully
exercisable;
(b) all of the restrictions and conditions of any Restricted Stock
and any Other Stock-Based Awards then outstanding shall be deemed
satisfied, and the Restriction Period with respect thereto shall be deemed
to have expired, as of the date of the Change in Control; and
(c) all of the Performance Shares, Performance Units and any Other
Stock-Based Awards shall become fully vested, deemed earned in full, and
promptly paid within thirty (30) days to the affected Grantees without
regard to payment schedules and notwithstanding that the applicable
performance cycle, retention cycle or other restrictions and conditions
have not been completed or satisfied.
Notwithstanding any other provision of this Plan, unless expressly
provided otherwise in the Grantee's Incentive Agreement, the provisions of this
SECTION 6.7 may not be terminated, amended, or modified to adversely affect any
Incentive Award theretofore granted under the Plan without the prior written
consent of the Grantee with respect to his outstanding Incentive Awards.
For all purposes of this Plan, a "CHANGE IN CONTROL" of the Company shall
mean:
(a) The acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "PERSON")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of twenty percent (20%) or more of the total
voting power of all the Company's then outstanding securities entitled to
vote generally in the election of directors to the Board; provided,
however, that
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for purposes of this subsection (a), the following acquisitions shall not
constitute a Change in Control: (i) any acquisition by the Company or its
Parent or Subsidiaries, (ii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or its Parent or
Subsidiaries, or (iii) any acquisition consummated with the prior approval
of the Board.
(b) During the period of two consecutive calendar years, individuals
who at the beginning of such period constitute the Board, and any new
director(s) whose election by the Board or nomination for election by the
Company's shareholders was approved by a vote of at least two-thirds of
the directors then still in office, who either were directors at the
beginning of the two-year period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority of the Board; or
(c) The Company becomes a party to a merger, plan of reorganization,
consolidation or share exchange in which either (i) the Company will not
be the surviving corporation or (ii) the Company will be the surviving
corporation and any outstanding shares of the Company's common stock will
be converted into shares of any other company (other than a
reincorporation or the establishment of a holding company involving no
change of ownership of the Company) or other securities, cash or other
property (excluding payments made solely for fractional shares); or
(d) The shareholders of the Company approve a merger, plan of
reorganization, consolidation or share exchange with any other
corporation, and immediately following such merger, plan of
reorganization, consolidation or share exchange the holders of the voting
securities of the Company outstanding immediately prior thereto hold
securities representing fifty percent (50%) or less of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger, plan of reorganization,
consolidation or share exchange; PROVIDED, HOWEVER, that notwithstanding
the foregoing, no Change in Control shall be deemed to have occurred if
one-half (1/2) or more of the members of the Board of the Company or such
surviving entity immediately after such merger, plan of reorganization,
consolidation or share exchange is comprised of persons who served as
directors of the Company immediately prior to such merger, plan of
reorganization, consolidation or share exchange or who are otherwise
designees of the Company; or
(e) Upon approval by the Company's stockholders of a complete
liquidation and dissolution of the Company or the sale or other
disposition of all or substantially all of the assets of the Company other
than to a Parent or Subsidiary; or
(f) Any other event that a majority of the Board, in its sole
discretion, shall determine constitutes a Change in Control.
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Notwithstanding the occurrence of any of the foregoing events of this
SECTION 6.7 which result in a Change in Control, the Board may determine in its
discretion, if it deems it to be in the best interest of the Company, that an
event or events otherwise constituting a Change in Control shall not be
considered a Change in Control. Such determination shall be effective only if it
is made by the Board prior to the occurrence of an event that otherwise would be
or probably would lead to a Change in Control; or after such event if made by
the Board a majority of which is composed of directors who were members of the
Board immediately prior to the event that otherwise would be or probably would
lead to a Change in Control.
6.8 EXCHANGE OF INCENTIVE AWARDS
The Committee may, in its discretion, permit any Grantee to surrender
outstanding Incentive Awards in order to exercise or realize his rights under
other Incentive Awards or in exchange for the grant of new Incentive Awards, or
require holders of Incentive Awards to surrender outstanding Incentive Awards
(or comparable rights under other plans or arrangements) as a condition
precedent to the grant of new Incentive Awards.
6.9 FINANCING
The Company may extend and maintain, or arrange for and guarantee, the
extension and maintenance of financing to any Grantee to purchase Shares
pursuant to exercise of an Incentive Award upon such terms as are approved by
the Committee in its discretion.
SECTION 7.
GENERAL
7.1 EFFECTIVE DATE AND GRANT PERIOD
This Plan is adopted by the Board effective as of July 2, 1997 (the
"EFFECTIVE DATE"), subject to the approval of the stockholders of the Company by
July 1, 1998. If the requisite stockholder approval is not obtained, then the
Plan and any Incentive Awards granted hereunder shall become null and void and
of no force or effect. Unless sooner terminated by the Board, no Incentive Award
shall be granted under the Plan after ten (10) years from the Effective Date.
7.2 FUNDING AND LIABILITY OF COMPANY
No provision of the Plan shall require the Company, for the purpose of
satisfying any obligations under the Plan, to purchase assets or place any
assets in a trust or other entity to which contributions are made, or otherwise
to segregate any assets. In addition, the Company shall not be required to
maintain separate bank accounts, books, records or other evidence of the
existence of a segregated or separately maintained or administered fund for
purposes of the Plan. Although
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bookkeeping accounts may be established with respect to Grantees who are
entitled to cash, Common Stock or rights thereto under the Plan, any such
accounts shall be used merely as a bookkeeping convenience. The Company shall
not be required to segregate any assets that may at any time be represented by
cash, Common Stock or rights thereto. The Plan shall not be construed as
providing for such segregation, nor shall the Company, the Board or the
Committee be deemed to be a trustee of any cash, Common Stock or rights thereto.
Any liability or obligation of the Company to any Grantee with respect to an
Incentive Award shall be based solely upon any contractual obligations that may
be created by this Plan and any Incentive Agreement, and no such liability or
obligation of the Company shall be deemed to be secured by any pledge or other
encumbrance on any property of the Company. Neither the Company, the Board nor
the Committee shall be required to give any security or bond for the performance
of any obligation that may be created by the Plan.
7.3 WITHHOLDING TAXES
(a) TAX WITHHOLDING. The Company shall have the power and the right
to deduct or withhold, or require a Grantee to remit to the Company, an
amount sufficient to satisfy federal, state, and local taxes, domestic or
foreign, required by law or regulation to be withheld with respect to any
taxable event arising as a result of the Plan or an Incentive Award
hereunder.
(b) SHARE WITHHOLDING. With respect to tax withholding required upon
the exercise of Stock Options or SARs, upon the lapse of restrictions on
Restricted Stock, or upon any other taxable event arising as a result of
any Incentive Awards, Grantees may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or in part, by
having the Company withhold Shares having a Fair Market Value on the date
the tax is to be determined equal to the minimum statutory total tax which
could be imposed on the transaction. All such elections shall be made in
writing, signed by the Grantee, and shall be subject to any restrictions
or limitations that the Committee, in its discretion, deems appropriate.
(c) INCENTIVE STOCK OPTIONS. With respect to Shares received by a
Grantee pursuant to the exercise of an Incentive Stock Option, if such
Grantee disposes of any such Shares within (i) two years from the date of
grant of such Option or (ii) one year after the transfer of such shares to
the Grantee, the Company shall have the right to withhold from any salary,
wages or other compensation payable by the Company to the Grantee an
amount sufficient to satisfy federal, state and local tax withholding
requirements attributable to such disqualifying disposition.
(d) LOANS. The Committee may provide for loans, on either a short
term or demand basis, from the Company to a Grantee who is an Employee or
Consultant to permit the payment of taxes required by law.
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7.4 NO GUARANTEE OF TAX CONSEQUENCES
Neither the Company nor the Committee makes any commitment or guarantee
that any federal, state or local tax treatment will apply or be available to any
person participating or eligible to participate hereunder.
7.5 DESIGNATION OF BENEFICIARY BY PARTICIPANT
Each Grantee may, from time to time, name any beneficiary or beneficiaries
(who may be named contingently or successively) to whom any benefit under the
Plan is to be paid in case of his death before he receives any or all of such
benefit. Each such designation shall revoke all prior designations by the same
Grantee, shall be in a form prescribed by the Committee, and will be effective
only when filed by the Grantee in writing with the Committee during the
Grantee's lifetime. In the absence of any such designation, benefits remaining
unpaid at the Grantee's death shall be paid to the Grantee's estate.
7.6 DEFERRALS
The Committee may permit a Grantee to defer such Grantee's receipt of the
payment of cash or the delivery of Shares that would, otherwise be due to such
Grantee by virtue of the lapse or waiver of restrictions with respect to
Restricted Stock, or the satisfaction of any requirements or goals with respect
to Performance Units, Performance Shares or Other Stock-Based Awards. If any
such deferral election is permitted, the Committee shall, in its discretion,
establish rules and procedures for such payment deferrals to the extent
consistent with the Code.
7.7 AMENDMENT AND TERMINATION
The Board shall have complete power and authority to terminate or amend
the Plan at any time; provided, however, that the Board shall not, without the
approval of the stockholders of the Company within the time period required by
applicable law, (a) except as provided in SECTION 6.5, increase the maximum
number of Shares which may be issued under the Plan pursuant to SECTION 1.4, (b)
amend the requirements as to the class of Employees eligible to purchase Common
Stock under the Plan, (c) increase the maximum limits on Incentive Awards to
Covered Employees as set for compliance with the Performance-Based Exception,
(d) extend the term of the Plan, or (e) decrease the authority granted to the
Committee under the Plan in contravention of Rule 16b-3 under the Exchange Act.
No termination, amendment, or modification of the Plan shall adversely
affect in any material way any outstanding Incentive Award previously granted to
a Grantee under the Plan, without the written consent of such Grantee or other
designated holder of such Incentive Award.
In addition, to the extent that the Committee determines that (a) the
listing for qualification requirements of any national securities exchange or
quotation system on which the Company's
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Common Stock is then listed or quoted, or (b) the Code (or regulations
promulgated thereunder), require stockholder approval in order to maintain
compliance with such listing requirements or to maintain any favorable tax
advantages or qualifications, then the Plan shall not be amended in such respect
without approval of the Company's stockholders.
7.8 REQUIREMENTS OF LAW
The granting of Incentive Awards and the issuance of Shares under the Plan
shall be subject to all applicable laws, rules, and regulations, and to such
approvals by any governmental agencies or national securities exchanges as may
be required. Certificates evidencing shares of Common Stock delivered under this
Plan (to the extent that such shares are so evidenced) may be subject to such
stop transfer orders and other restrictions as the Committee may deem advisable
under the rules and regulations of the Securities and Exchange Commission, any
securities exchange or transaction reporting system upon which the Common Stock
is then listed or to which it is admitted for quotation, and any applicable
federal or state securities law. The Committee may cause a legend or legends to
be placed upon such certificates (if any) to make appropriate reference to such
restrictions.
7.9 RULE 16B-3 SECURITIES LAW COMPLIANCE
With respect to Insiders, transactions under the Plan are intended to
comply with all applicable conditions of Rule 16b-3 under the Exchange Act. Any
ambiguities or inconsistencies in the construction of an Incentive Award or the
Plan shall be interpreted to give effect to such intention. However, to the
extent any provision of the Plan or action by the Committee fails to so comply,
it shall be deemed null and void to the extent permitted by law and deemed
advisable by the Committee in its discretion.
7.10 COMPLIANCE WITH CODE SECTION 162(M)
Unless otherwise determined by the Committee with respect to any
particular Incentive Award, it is extended that the Plan comply fully with and
meet all the requirements of Section 162(m) of the Code so that any applicable
types of Incentive Awards that are granted to Covered Employees shall qualify
for the Performance-Based Exception. If any provision of the Plan or an
Incentive Agreement would disqualify the Plan or would not otherwise permit the
Plan or Incentive Award to comply with the Performance-Based Exception as so
intended, such provision shall be construed or deemed amended to conform to the
requirements of the Performance-Based Exception to the extent permitted by
applicable law and deemed advisable by the Committee; provided that no such
construction or amendment shall have an adverse effect on the prior grant of an
Incentive Award or the economic value to a Grantee of any outstanding Incentive
Award.
7.11 SUCCESSORS
All obligations of the Company under the Plan with respect to Incentive
Awards granted hereunder shall be binding on any successor to the Company,
whether the existence of such
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successor is the result of a direct or indirect purchase, merger, consolidation,
or otherwise, of all or substantially all of the business and/or assets of the
Company.
7.12 MISCELLANEOUS PROVISIONS
(a) No Employee, Consultant, Outside Director, or other person shall
have any claim or right to be granted an Incentive Award under the Plan.
Neither the Plan, nor any action taken hereunder, shall be construed as
giving any Employee, Consultant, or Outside Director any right to be
retained in the Employment or other service of the Company or any Parent
or Subsidiary.
(b) No Shares of Common Stock shall be issued hereunder unless
counsel for the Company is then reasonably satisfied that such issuance
will be in compliance with federal and state securities laws, if
applicable.
(c) The expenses of the Plan shall be borne by the Company.
(d) By accepting any Incentive Award, each Grantee and each person
claiming by or through him shall be deemed to have indicated his
acceptance of the Plan.
7.13 SEVERABILITY
In the event that any provision of this Plan shall be held illegal,
invalid or unenforceable for any reason, such provision shall be fully
severable, but shall not affect the remaining provisions of the Plan, and the
Plan shall be construed and enforced as if the illegal, invalid, or
unenforceable provision was not included herein.
7.14 GENDER, TENSE AND HEADINGS
Whenever the context so requires, words of the masculine gender used
herein shall include the feminine and neuter, and words used in the singular
shall include the plural. Section headings as used herein are inserted solely
for convenience and reference and constitute no part of the interpretation or
construction of the Plan.
7.15 GOVERNING LAW
The Plan shall be interpreted, construed and constructed in accordance
with the laws of the State of Delaware, except as superseded by applicable the
laws of the United States.
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IN WITNESS WHEREOF, Brazos Sportswear, Inc. has caused this Plan to be
duly executed in its name and on its behalf by its duly authorized officer, to
be effective as of July 2, 1997.
BRAZOS SPORTSWEAR, INC.
By: /s/ F. CLAYTON CHAMBERS
Name: F. CLAYTON CHAMBERS
Title: VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
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