<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 2, 1998
REGISTRATION NO. 333-______
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
EAGLE HARDWARE & GARDEN, INC.
------------------------------
(EXACT NAME OF ISSUER AS SPECIFIED IN ITS CHARTER)
WASHINGTON 91-1465348
---------- ----------
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
981 POWELL AVENUE S.W., RENTON, WASHINGTON 98055
------------------------------------------- -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE: (425) 227-5740
--------------
EAGLE HARDWARE & GARDEN, INC. 1991 STOCK OPTION PLAN
----------------------------------------------------
AND
---
EAGLE HARDWARE & GARDEN, INC. DIRECTORS' NONQUALIFIED STOCK OPTION PLAN
------------------------------------------------------------------------
AND
---
EAGLE HARDWARE & GARDEN, INC. EMPLOYEE STOCK PURCHASE PLAN
----------------------------------------------------------
(FULL TITLES OF THE PLANS)
RICHARD T. TAKATA
PRESIDENT AND CHIEF EXECUTIVE OFFICER
EAGLE HARDWARE & GARDEN, INC.
981 POWELL AVENUE S.W.
RENTON, WASHINGTON 98055
-------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
(425) 227-5740
--------------
(TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF MAXIMUM MAXIMUM AMOUNT OF
SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER OFFERING PRICE FEE (1)
SHARE (1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK 3,350,000
WITHOUT PAR VALUE SHARES $17.75 $59,462,500.00 $17,541.44
- --------------------------------------------------------------------------------
</TABLE>
(1) THE PROPOSED MAXIMUM OFFERING PRICE PER SHARE AND THE REGISTRATION FEE WERE
CALCULATED IN ACCORDANCE WITH RULE 457(h) UNDER THE SECURITIES ACT OF 1933 BASED
ON THE AVERAGE OF THE HIGH AND LOW PRICES FOR EAGLE HARDWARE & GARDEN, INC.
COMMON STOCK ON MAY 27, 1998, AS QUOTED BY THE NATIONAL ASSOCIATION
OF SECURITIES DEALERS AUTOMATED QUOTATION NATIONAL MARKET SYSTEM, WHICH WAS
$17.75 PER SHARE.
(2) EARLIER REGISTRATION STATEMENT (REGISTRATION STATEMENT NO. 33-50983)
COVERING EAGLE HARDWARE & GARDEN, INC. COMMON STOCK IS INCORPORATED BY
REFERENCE.
PAGE 1 OF 39 PAGES
EXHIBIT INDEX IS LOCATED ON PAGE II-5.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION
STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed or to be filed with the Commission by the
Registrant are incorporated by reference in this registration statement.
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
January 30, 1998, filed with the Commission pursuant to Section 13(a)
of the Exchange Act of 1934, as amended (the "Exchange Act").
(b) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the filing of the Form 10-K referred to in (a)
above.
(c) The description of the Registrant's Common Stock contained in a
registration statement on Form 8-A filed pursuant to Section 12 of the
Exchange Act (Registration No. 0-19830).
(d) All documents filed by the Registrant pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior
to the termination of the offering of the common stock pursuant to the
Plans described herein shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such
documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
None.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Washington Business Corporation Act (Sections 23B.08.500 through
23B.08.600 of the Revised Code of Washington) authorizes a court to award, or a
corporation's Board of Directors to grant, indemnity to directors and officers
in terms sufficiently broad to permit such indemnification under certain
circumstances for liabilities arising under the Securities Act of 1933, as
amended. Article VIII of the Registrant's Restated Articles of Incorporation,
and Article IX of the Registrant's Bylaws, provides for indemnification of its
directors, officers, employees and other agents.
II-1
<PAGE>
The Washington Business Corporation Act includes a provision (Section
23B.08.320 of the Revised Code of Washington) that permits a corporation to
limit a director's liability to the corporation or its shareholders for monetary
damages for his acts or omissions as a director, except for those acts or
omissions involving intentional misconduct or a knowing violation of law,
certain unlawful distributions or a transaction whereby the director received a
personal benefit to which he was not legally entitled. Article VII of the
Registrant's Restated Articles of Incorporation contains provisions
implementing, to the fullest extent, the allowed limitations on a director's
liability to the Registrant or its shareholders.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<S> <C>
5.1 Opinion of Summit Law Group, P.L.L.C.
10.1 Eagle Hardware & Garden, Inc. 1991 Stock Option Plan
10.2 Eagle Hardware & Garden, Inc. Directors Nonqualified Stock Option Plan
10.3 Eagle Hardware & Garden, Inc. Employee Stock Purchase Plan
23.1 Consent of Summit Law Group, P.L.L.C. (See Exhibit 5.1)
23.2 Consent of Ernst & Young LLP, Independent Auditors
24 Power of Attorney (See page II-4 of this Registration Statement)
</TABLE>
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement;
II-2
<PAGE>
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934, (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Renton, State of Washington, on the 2nd day of
June, 1998.
EAGLE HARDWARE & GARDEN, INC.
By: /s/ RICHARD T. TAKATA
---------------------------------
President, Chief Executive Officer and
Director (Principal Executive Officer)
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints David J.
Heerensperger and Richard T. Takata, or either of them, his true and lawful
attorney-in-fact and agent, with the power of substitution and resubstitution,
for him in his name, place and stead, in any and all capacities, to sign any or
all amendments to this Registration Statement, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact and his agent or his substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated above.
Signature Title
--------- -----
/s/ DAVID J. HEERENSPERGER Chairman
- ------------------------------
David J. Heerensperger
/s/ RICHARD T. TAKATA President, Chief Executive Officer and
- ------------------------------ Director (Principal Executive Officer)
Richard T. Takata
/s/ RONALD P. MACCARONE Executive Vice President -- Finance and
- ------------------------------ Chief Financial Officer (Principal Financial
Ronald P. Maccarone and Accounting Officer)
/s/ RONALD D. CROCKETT Director
- ------------------------------
Ronald D. Crockett
/s/ HARLAN D. DOUGLASS Director
- ------------------------------
Harlan D. Douglass
/s/ HERMAN SARKOWSKY Director
- ------------------------------
Herman Sarkowsky
/s/ THEODORE M. WIGHT Director
- ------------------------------
Theodore M. Wight
II-4
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Number Exhibit Sequential
- -------------- ------- Page No.
----------
<S> <C> <C>
5.1 Opinion of Summit Law Group, P.L.L.C. II-7
10.1 Eagle Hardware & Garden, Inc. 1991 Stock Option Plan II-10
10.2 Eagle Hardware & Garden, Inc. Directors Nonqualified Stock Option Plan II-22
10.3 Eagle Hardware & Garden, Inc. Employee Stock Purchase Plan II-30
23.1 Consent of Summit Law Group, P.L.L.C. (See Exhibit 5.1)
23.2 Consent of Ernst & Young LLP, Independent Auditors II-39
24 Power of Attorney (see page II-4 of this Registration Statement)
</TABLE>
II-5
<PAGE>
EXHIBIT 5.1
OPINION OF SUMMIT LAW GROUP, P.L.L.C.
II-6
<PAGE>
June 2, 1998
Eagle Hardware & Garden, Inc.
981 Powell Avenue S.W.
Renton, Washington 98055
Re: Registration Statement on Form S-8 under the
--------------------------------------------
Securities Act of 1933, as amended
----------------------------------
Ladies and Gentlemen:
Eagle Hardware & Garden, Inc., a Washington corporation (the "Company"),
has requested our opinion with respect to certain matters relating to the
registration statement on Form S-8 (the "Registration Statement") which the
Company will be filing with the Securities and Exchange Commission in connection
with the registration under the Securities Act of 1933, as amended, of 3,350,000
shares (the "Shares") of common stock, without par value (the "Common Stock"),
issuable by the Company: (1) upon the exercise of options to purchase shares
granted pursuant to the Company's 1991 Stock Option Plan (the "1991 Plan"), (2)
upon the exercise of options to purchase shares granted pursuant to the
Company's Directors' Nonqualified Stock Option Plan (the "Directors' Plan") or
(3) upon the exercise of options to purchase shares granted pursuant to the
Company's Employee Stock Purchase Plan (the "Employee Stock Purchase Plan,"
collectively with the 1991 Plan and the Directors' Plan, the "Plans"). The
options granted under each of the Plans are collectively referred to herein as
the "Options."
We have assumed the authenticity of all records, documents and instruments
submitted to us as originals, the genuineness of all signatures, the legal
capacity of natural persons and the authenticity and conformity to the originals
of all records, documents and instruments submitted to us as copies. We have
based our opinion upon our review of the following records, documents,
instruments and certificates and such additional certificates relating to
factual matters as we have deemed necessary and appropriate for our opinion:
1. The Articles of Incorporation of the Company, certified by the
Washington Secretary of State as of June 1, 1998, and certified to us
by an officer of the Company as being complete, unamended and in full
force and effect as of the date of this opinion;
II-7
<PAGE>
2. A Certificate of Existence/Authorization relating to the Company
issued by the Secretary of State of the State of Washington, dated as
of June 1, 1998;
3. The Bylaws of the Company, certified to us by an officer of the
Company as being complete, unamended and in full force and effect as
of the date of this opinion;
4. Records certified to us by an officer of the Company as constituting
all records of proceedings and of actions of the Board and
shareholders of the Company relating to the adoption and amendment of
the Plans, and reservation and issuance of shares under the Plans;
5. The Plans; and
6. A certificate of an officer of the Company, dated as of the date of
this opinion, stating that no dissolution proceedings have been
commenced with respect to the Company.
This opinion is limited to the laws of the State of Washington and we
disclaim any opinion as to the laws of any other jurisdiction. We further
disclaim any opinion as to any statute, rule, regulation, ordinance, order or
other promulgation of any regional or local governmental body or as to any
related judicial or administrative opinion.
Based upon the foregoing and subject to the assumptions and qualifications
expressed herein, it is our opinion that the reservation for issuance of the
Shares upon the exercise of the Options granted pursuant to the Plans has been
duly authorized and, upon exercise of the Options and payment of the purchase
price for the Shares and issuance and delivery of the Shares pursuant to the
terms of the Plans, the Shares will be validly issued, fully paid and
non-assessable.
Our opinion is qualified to the extent that in the event of a stock split,
share dividend or other reclassification of the Common Stock effected subsequent
to the date hereof, the number of shares of Common Stock issuable upon the
exercise of Options may be adjusted automatically, as set forth in the terms of
the Plans, such that the number of such shares may exceed the number of
Company's remaining authorized, but unissued shares of Common Stock at the time
the Options are exercised.
We expressly disclaim any obligation to advise you of any developments in
areas covered by this opinion that occur after the date of this opinion.
We hereby authorize and consent to the use of this opinion as Exhibit 5.1
to the Registration Statement.
Very truly yours,
SUMMIT LAW GROUP, P.L.L.C.
II-8
<PAGE>
EXHIBIT 10.1
EAGLE HARDWARE & GARDEN, INC.
1991 STOCK OPTION PLAN
II-9
<PAGE>
EAGLE HARDWARE & GARDEN, INC.
1991 STOCK OPTION PLAN
This Stock Option Plan (the "Plan") provides for the grant of options to
acquire shares of Common Stock, without par value (the "Common Stock"), of Eagle
Hardware & Garden, Inc., a Washington corporation (the "Company"). Stock options
granted under this Plan that qualify under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), are referred to in this Plan as
"Incentive Stock Options." Incentive Stock Options and stock options that do not
qualify under Section 422 of the Code ("Non-Qualified Stock Options") granted
under this Plan are referred to as "Options."
1. PURPOSES.
The purposes of this Plan are to retain the services of valued key
employees and consultants of the Company, and such other persons as the Plan
Administrator shall select in accordance with Section 3 below, to encourage such
persons to acquire a greater proprietary interest in the Company, thereby
strengthening their incentive to achieve the objectives of the shareholders of
the Company, and to serve as an aid and inducement in the hiring of new
employees, consultants and other persons selected by the Plan Administrator.
2. ADMINISTRATION.
This Plan shall be administered by the Board of Directors of the
Company (the "Board"), except that the Board may, in its discretion, establish a
committee composed of members of the Board or other persons to administer this
Plan, which committee (the "Committee") may be an executive, compensation or
other committee, including a separate committee especially created for this
purpose. The Committee shall have such of the powers and authority vested in the
Board hereunder as the Board may delegate to it (including the power and
authority to interpret any provision of this Plan or of any Option). The members
of any such Committee shall serve at the discretion of the Board. The Board,
and/or the Committee if one has been established by the Board, are referred to
in this Plan as the "Plan Administrator." Following registration of any of the
Company's securities under Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), no person shall serve as a member of the Plan
Administrator if his or her service would disqualify this Plan from eligibility
under Securities and Exchange Commission Rule 16b-3, as amended from time to
time, or any successor rule or regulatory requirements; PROVIDED, that the
Plan Administrator shall consist of at least the minimum number of
persons required by Securities and Exchange Commission Rule 16b-3, as amended,
or any successor rule or regulatory requirements.
II-10
<PAGE>
Subject to the provisions of this Plan, and with a view to effecting
its purpose, the Plan Administrator shall have sole authority, in its absolute
discretion, to (a) construe and interpret this Plan; (b) define the terms used
in this Plan; (c) prescribe, amend and rescind rules and regulations relating to
this Plan; (d) correct any defect, supply any omission or reconcile any
inconsistency in this Plan; (e) determine the individuals to whom Options shall
be granted under this Plan and whether the Option is an Incentive Stock Option
or a NonQualified Stock Option; (f) determine the time or times at which Options
shall be granted under this Plan; (g) determine the number of shares of Common
Stock subject to each Option, the exercise price of each Option, the duration of
each Option and the times at which each Option shall become exercisable; (h)
determine all other terms and conditions of Options; and (i) make all other
determinations necessary or advisable for the administration of this Plan. All
decisions, determinations and interpretations made by the Plan Administrator
shall be binding and conclusive on all participants in this Plan and on their
legal representatives, heirs and beneficiaries.
3. ELIGIBILITY.
Incentive Stock Options may be granted to any individual who, at the
time the Option is granted, is an employee of the Company or any Related
Corporation (as defined below), including employees who are directors of the
Company ("Employees"). Non-Qualified Stock Options may be granted to Employees
and to such other persons other than directors who are not Employees as the Plan
Administrator shall select. Options may be granted in substitution for
outstanding Options of another corporation in connection with the merger,
consolidation, acquisition of property or stock or other reorganization between
such other corporation and the Company or any subsidiary of the Company. Options
also may be granted in exchange for outstanding Options. Any person to whom an
Option is granted under this Plan is referred to as an "Optionee."
As used in this Plan, the term "Related Corporation," when referring
to a subsidiary corporation, shall mean any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company if, at the time
of the granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock of one of the
other corporations in such chain. When referring to a parent corporation, the
term "Related Corporation" shall mean any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company if, at the time of
granting of the Option, each of the corporations other than the Company owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock of one of the other corporations in such chain.
II-11
<PAGE>
4. STOCK.
Subject to approval of the Plan by shareholders of the Company,
options to purchase a maximum of 700,000 shares of the Company's authorized but
unissued, or required, common stock may be issued pursuant to the Plan LESS any
shares issuable upon the exercise of Options granted pursuant to the Company's
Directors' Nonqualified Stock Option Plan; PROVIDED, that any shares of Common
Stock received or withheld by the Company as payment for shares of Common Stock
purchased upon exercise of Options pursuant to Section 5(i) below shall be added
to the number of such shares as to which Options may be granted. The number of
shares with respect to which Options may be granted hereunder is subject to
adjustment as set forth in Section 5(m) below. In the event that any outstanding
Option expires or is terminated for any reason, the shares of Common Stock
allocable to the unexercised portion of such Option may again be subject to an
option to the same Optionee or to a different person eligible under Section 3 of
this Plan.
5. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted under this Plan shall be evidenced by a written
agreement approved by the Plan Administrator (the "Agreement"). Agreements may
contain such additional provisions, not inconsistent with this Plan, as the Plan
Administrator in its discretion may deem advisable. All Options also shall
comply with the following requirements:
(a) NUMBER OF SHARES AND TYPE OF OPTION.
Each Agreement shall state the number of shares of Common Stock to
which it pertains and whether the Option is intended to be an Incentive Stock
Option or a Non-Qualified Stock option. In the absence of action to the contrary
by the Plan Administrator in connection with the grant of an Option, all Options
shall be Non-Qualified Stock Options. The aggregate fair market value
(determined at the Date of Grant, as defined below) of the stock with respect to
which Incentive Stock Options are exercisable for the first time by the Optionee
during any calendar year (granted under this Plan and all other Incentive Stock
Option plans of the Company, a Related Corporation or a predecessor corporation)
shall not exceed $100,000, or such other limit as may be prescribed by the Code
as it may be amended from time to time. Any Option which exceeds the annual
limit shall not be void but rather shall be a Non-Qualified Stock Option.
(b) DATE OF GRANT.
Each Agreement shall state the date the Plan Administrator has deemed
to be the effective date of the Option for purposes of this Plan (the "Date of
Grant").
II-12
<PAGE>
(c) OPTION PRICE.
Each Agreement shall state the price per share of Common Stock at
which it is exercisable. The exercise price shall be fixed by the Plan
Administrator at whatever price the Plan Administrator may determine in the
exercise of its sole discretion; PROVIDED, that the per share exercise price for
any Option granted following the effective date of registration of any of the
Company's securities under Section 12 of the Securities Exchange Act of 1934
shall not be less than the fair market value per share of the Common Stock at
the Date of Grant as determined by the Plan Administrator in good faith;
PROVIDED FURTHER, that the per share exercise price for an Incentive Stock
Option shall not be less than the fair market value per share of the Common
Stock at the Date of Grant as determined by the Plan Administrator in good
faith; PROVIDED FURTHER, that with respect to Incentive Stock Options granted to
greater-than-ten percent (>10%) shareholders of the Company (as determined with
reference to Section 424(d) of the Code), the exercise price per share shall not
be less than one hundred ten percent (110%) of the fair market value per share
of the Common Stock at the Date of Grant; and, PROVIDED FURTHER, that Incentive
Stock Options granted in substitution for outstanding Options of another
corporation in connection with the merger, consolidation, acquisition of
property or stock or other reorganization involving such other corporation and
the Company or any subsidiary of the Company may be granted with an exercise
price equal to the exercise price for the substituted Option of the other
corporation, subject to any adjustment consistent with the terms of the
transaction pursuant to which the substitution is to occur.
(d) DURATION OF OPTIONS.
At the time of the grant of the Option, the Plan Administrator shall
designate, subject to paragraph 5(g) below, the expiration date of the Option,
which date shall not be later than ten (10) years from the Date of Grant in the
case of Incentive Stock Options; PROVIDED, that the expiration date of any
Incentive Stock Option granted to a greater-than-ten percent (>10%) shareholder
of the Company (as determined with reference to Section 424(d) of the Code)
shall not be later than five (5) years from the Date of Grant. In the absence of
action to the contrary by the Plan Administrator in connection with the grant of
a particular Option, and except in the case of Incentive Stock Options as
described above, all Options granted under this Plan shall expire ten (10) years
from the Date of Grant.
II-13
<PAGE>
(e) VESTING SCHEDULE.
No Option shall be exercisable until it has vested. The vesting
schedule for each Option shall be specified by the Plan Administrator at the
time of grant of the Option; PROVIDED, that if no vesting schedule is specified
at the time of grant, the Option shall vest according to the following schedule:
<TABLE>
<CAPTION>
Percentage of
Number of Years Total Option to
Following Date of Grant be Exercisable
----------------------- --------------
<S> <C>
1 20%
2 40%
3 60%
4 80%
5 100%
</TABLE>
(f) ACCELERATION OF VESTING.
The vesting of one or more outstanding Options may be accelerated by
the Plan Administrator at such times and in such amounts as it shall determine
in its sole discretion. If an Employee Optionee's employment terminates by
reason of death or Disability (as defined in Section 5(g) below), any Option
held by such Employee Optionee who has been Continuously Employed by the Company
or Related Corporation for a minimum of two (2) years shall become fully vested
and exercisable and may thereafter be exercised during the term of the Option
set forth in Section 5(g) below. "Continuously Employed" shall mean the absence
of any interruption or termination of service. Continuous Employment with the
Company or Related Corporation shall not be considered interrupted in the case
of sick leave, military leave or any other leave of absence approved by the
Company or Related Corporation or in the case of transfers between locations of
the Company or between the Company, Related Corporations or their successors,
provided that the Optionee continues to be an employee of the Company or any
Related Corporation. The vesting of Options also shall be accelerated under the
circumstances described in Sections 5(m) and 5(n) below.
(g) TERM OF OPTION.
Vested Options shall terminate, to the extent not previously
exercised, upon the occurrence of the first of the following events: (i) the
expiration of the Option, as designated by the Plan Administrator in accordance
with Section 5(d) above; (ii) the expiration of ninety (90) days from the date
of an Optionee's termination of employment or contractual relationship with the
Company or any Related Corporation for any reason whatsoever other than death or
Disability (as defined below) unless, in the case of a Non-Qualified Stock
Option, the exercise period is extended by the Plan Administrator until a date
not later than the expiration date of the Option; or (iii) the expiration of one
(1) year from (A) the date of death of the Optionee or (B) cessation of an
Optionee's employment or contractual relationship by reason of Disability (as
defined below) unless, in the case of a Non-Qualified Stock Option, the exercise
period is extended by the Plan Administrator until a date not later than the
expiration date of the Option. If an Optionee's employment or contractual
relationship is terminated by death, any Option held by the Optionee shall be
exercisable only by the person or persons to whom such Optionee's rights under
such Option shall pass by the Optionee's will or by the laws of descent and
distribution of the state or
II-14
<PAGE>
county of the Optionee's domicile at the time of death. "Disability" shall mean
that a person is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment that can be expected
to result in death or that has lasted or can be expected to last for a
continuous period of not less than twelve (12) months. The Plan Administrator
shall determine whether an Optionee has incurred a Disability on the basis of
medical evidence acceptable to the Plan Administrator. Upon making a
determination of Disability, the Committee shall, for purposes of the Plan,
determine the date of an Optionee's termination of employment or contractual
relationship.
Unless accelerated in accordance with Section 5(f) above, unvested
Options shall terminate immediately upon termination of employment of the
Optionee by the Company for any reason whatsoever, including death or
Disability.
If, in the case of an Incentive Stock Option, an Optionee's
relationship with the Company changes (e.g., from an Employee to a non-Employee,
such as a consultant), such change shall not constitute a termination of an
Optionee's employment with the Company but rather the Optionee's Incentive Stock
Option. For purposes of this subsection 5(g), transfer of employment between or
among the Company and/or any Related Corporation shall not be deemed to
constitute a termination of employment with the Company or any Related
Corporation. For purposes of this subsection 5(g), employment shall be deemed to
continue while the Optionee is on military leave, sick leave or other bona fide
leave of absence (as determined by the Plan Administrator). The foregoing
notwithstanding, with respect to Incentive Stock Options, employment shall not
be deemed to continue beyond the first ninety (90) days of such leave, unless
the Optionee's re-employment rights are guaranteed by statute or by contract.
(h) EXERCISE OF OPTIONS.
Options shall be exercisable, either all or in part, at any time after
vesting, until termination; PROVIDED, that after registration of any of the
Company's securities under Section 12 of the Exchange Act, Optionee must comply
with the six (6) month holding period requirements of Section 16(b) of the
Exchange Act and Rule 16b-3 thereunder. If less than all of the shares included
in the vested portion of any Option are purchased, the remainder may be
purchased at any subsequent time prior to the expiration of the Option term. No
portion of any option for less than fifty (50) shares (as adjusted pursuant to
Section 5(m) below) may be exercised; PROVIDED, that if the vested portion of
any Option is less than fifty (50) shares, it may be exercised with respect to
all shares for which it is vested. Only whole shares may be issued pursuant to
an Option, and to the extent that an Option covers less than one (1) share, it
is unexercisable. Options or portions thereof may be exercised by giving to the
Company an executed notice of election to exercise, which notice shall specify
the number of shares to be purchased, and be accompanied by payment in the
amount of the aggregate exercise price for the Common Stock so purchased, which
payment shall be in the form specified in Section 5(i) below. The Company shall
not be obligated to issue, transfer or deliver a certificate of Common Stock to
any Optionee, or to his personal representative, until the aggregate exercise
price has been paid for all shares for which the Option shall have been
exercised and adequate provision has been made by the Optionee for satisfaction
of any tax withholding obligations associated with such exercise. During the
lifetime of an Optionee, Options are exercisable only by the Optionee.
(i) PAYMENT UPON EXERCISE OF OPTION.
II-15
<PAGE>
Upon the exercise of any Option, the aggregate exercise price shall be
paid to the Company in cash or by certified or cashier's check. In addition,
upon approval of the Plan Administrator, an Optionee may pay for all or any
portion of the aggregate exercise price by (i) delivering to the Company shares
of Common Stock previously held by such Optionee, (ii) having shares withheld
from the amount of shares of Common Stock to be received by the Optionee, (iii)
delivering an irrevocable subscription agreement obligating the Optionee to take
and pay for the shares of Common Stock to be purchased within one (1) year of
the date of such exercise or (iv) complying with any other payment mechanisms as
the Plan Administrator may approve from time to time. The shares of Common Stock
received or withheld by the Company as payment for shares of Common Stock
purchased upon the exercise of Options shall have a fair market value at the
date of exercise (as determined by the Plan Administrator) equal to the
aggregate exercise price (or portion thereof) to be paid by the Optionee upon
such exercise.
(j) RIGHTS AS A SHAREHOLDER.
An Optionee shall have no rights as a shareholder with respect to any
shares covered by an Option until such Optionee becomes a record holder of such
shares, irrespective of whether such Optionee has given notice of exercise.
Subject to the provisions of Sections 5(m) and 5(n) hereof, no rights shall
accrue to an Optionee and no adjustments shall be made on account of dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights declared on, or created in, the Common Stock for
which the record date is prior to the date the Optionee becomes a record holder
of the shares of Common Stock covered by the Option, irrespective of whether
such Optionee has given notice of exercise.
(k) TRANSFER OF OPTION.
Options granted under this Plan and the rights and privileges
conferred by this Plan may not be transferred, assigned, pledged or hypothecated
in any manner (whether by operation of law or otherwise) other than by will or
by applicable laws of descent and distribution, as defined by the Code, or the
Employee Retirement Income Security Act, or the rules and regulations
thereunder, and shall not be subject to execution, attachment or similar
process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of any Option or of any right or privilege conferred by this Plan
contrary to the provisions hereof, or upon the sale, levy or any attachment or
similar process upon the rights and privileges conferred by this Plan, such
Option shall thereupon terminate and become null and void.
(l) SECURITIES REGULATION AND TAX WITHHOLDING.
II-16
<PAGE>
(1) Shares shall not be issued with respect to an Option
unless the exercise of such Option and the issuance and delivery of such shares
shall comply with all relevant provisions of law, including, without limitation,
any applicable state securities laws, the Securities Act of 1933, as amended,
the Exchange Act, as amended, the rules and regulations thereunder and the
requirements of any stock exchange upon which such shares may then be listed,
and such issuance shall be further subject to the approval of counsel for the
Company with respect to such compliance, including the availability of an
exemption from registration for the issuance and sale of such shares. The
inability of the Company to obtain from any regulatory body the authority deemed
by the Company to be necessary for the lawful issuance and sale of any shares
under this Plan, or the unavailability of an exemption from registration for the
issuance and sale of any shares under this Plan, shall relieve the Company of
any liability with respect to the non-issuance or sale of such shares.
As a condition to the exercise of an Option, the Plan Administrator
may require the Optionee to represent and warrant in writing at the time of such
exercise that the shares are being purchased only for investment and without any
then-present intention to sell or distribute such shares. At the option of the
Plan Administrator, a stop-transfer order against such shares may be placed on
the stock books and records of the Company, and a legend indicating that the
stock may not be pledged, sold or otherwise transferred unless an opinion of
counsel is provided stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on the certificates representing
such shares in order to assure an exemption from registration. The Plan
Administrator also may require such other documentation as may from time to time
be necessary to comply with federal and state securities laws. THE COMPANY HAS
NO OBLIGATION TO UNDERTAKE REGISTRATION OF OPTIONS OR THE SHARES OF STOCK
ISSUABLE UPON THE EXERCISE OF OPTIONS.
(2) As a condition to the exercise of any Option granted
under this Plan, the Optionee shall make such arrangements as the Plan
Administrator may require for the satisfaction of any federal, state or local
withholding tax obligations that may arise in connection with such exercise.
(3) The issuance, transfer or delivery of certificates of
Common Stock pursuant to the exercise of Options may be delayed, at the
discretion of the Plan Administrator, until the Plan Administrator is satisfied
that the applicable requirements of the federal and state securities laws and
the withholding provisions of the Code have been met.
(m) STOCK DIVIDEND. REORGANIZATION OR LIQUIDATION.
(1) If (i) the Company shall at any time be involved in a
transaction described in Section 424(a) of the Code (or any successor provision)
or any "corporate transaction" described in the regulations thereunder; (ii) the
Company shall declare a dividend payable in, or shall subdivide or combine, its
Common Stock or (iii) any other event with substantially the same effect shall
occur, the Plan Administrator shall, with respect to each outstanding Option,
proportionately adjust the number of shares of Common Stock and/or the exercise
price per share so as to preserve the rights of the Optionee substantially
proportionate to the rights of the Optionee prior to such event, and to the
extent that such action shall include an increase or decrease in the number of
shares of Common Stock subject to outstanding Options, the number of shares
available under Section 4 above shall automatically be increased or decreased,
as the case may be, proportionately, without further action on the part of the
Plan Administrator, the Company or the Company's shareholders.
II-17
<PAGE>
(2) If the Company is liquidated or dissolved, the Plan
Administrator shall allow the holders of any outstanding Options to exercise all
or any part of the unvested portion of the Options held by them; PROVIDED, that
such Options must be exercised prior to the effective date of such liquidation
or dissolution. If the Option holders do not exercise their Options prior to
such effective date, each outstanding Option shall terminate as of the effective
date of the liquidation or dissolution.
(3) The foregoing adjustments in the shares subject to
Options shall be made by the Plan Administrator, or by any successor
administrator of this Plan, or by the applicable terms of any assumption or
substitution document.
(4) The grant of an Option shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge,
consolidate or dissolve, to liquidate or to sell or transfer all or any part of
its business or assets.
(n) CHANGE IN CONTROL: DECLARATION OF EXTRAORDINARY DIVIDEND.
(1) CHANGE IN CONTROL. If at any time there is a Change in
Control (as defined below) of the Company, all Options shall accelerate and
become fully vested and immediately exercisable for the duration of the Option
term. For purposes of this subsection (n)(1), "Change in Control" shall mean
either one of the following: (i) When any "person," as such term is used in
sections 13(d) and 14(d) of the Exchange Act (other than a shareholder of the
Company on the date of this Plan, the Company, a Subsidiary or an employee
benefit plan of the Company, including any trustee of such plan acting as
trustee) becomes, after the date of this Plan, the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding securities; or (ii) the
occurrence of a transaction requiring shareholder approval, and involving the
sale of all or substantially all of the assets of the Company or the merger of
the Company with or into another corporation.
(2) DECLARATION OF EXTRAORDINARY DIVIDEND. If at any time
the Company declares an Extraordinary Dividend (as defined below), all Options
shall accelerate and thereupon become fully vested and immediately exercisable
for the duration of the Option term. For purposes of this subsection (n)(2),
"Extraordinary Dividend" shall mean a cash dividend payable to holders of record
of the Common Stock in an amount in excess of ten percent (10%) of the then fair
market value of the Company's Common Stock. The fair market value of the
Company's Common Stock shall be determined in good faith by the Board.
6. EFFECTIVE DATE; TERM.
II-18
<PAGE>
This Plan shall be effective as of the date it is approved by the
Board. Incentive Stock Options may be granted by the Plan Administrator from
time to time thereafter until ten (10) years after such approval. Non-Qualified
Stock Options may be granted until this Plan is terminated by the Board in its
sole discretion. Termination of this Plan shall not terminate any Option granted
prior to such termination. Any Incentive Stock Options granted by the Plan
Administrator prior to the approval of this Plan by a majority of the
shareholders of the Company shall be granted subject to ratification of this
Plan by the shareholders of the Company within twelve (12) months after this
Plan is adopted by the Board, and if shareholder ratification is not obtained,
each and every Incentive Stock Option shall become a Non-Qualified Stock Option.
7. NO OBLIGATIONS TO EXERCISE OPTION.
The grant of an Option shall impose no obligation upon the Optionee to
exercise such Option.
8. NO RIGHT TO OPTIONS OR TO EMPLOYMENT.
The grant of any options under this Plan shall be exclusively within
the discretion of the Plan Administrator, and nothing contained in this Plan
shall be construed as giving any person any right to participate under this
Plan. The Plan shall not confer on any Optionee any right with respect to
continuation of any employment or contractual relationship with the Company or
any Related Corporation, nor shall it interfere in any way with the Company's
or, where applicable, a Related Corporation's right to terminate any Optionee's
employment or contractual relationship at any time, which right is hereby
reserved.
9. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock
issued upon the exercise of Options shall be used for general corporate
purposes, unless otherwise directed by the Board.
10. INDEMNIFICATION OF PLAN ADMINISTRATOR.
In addition to all other rights of indemnification they may have as
members of the Board, members of the Plan Administrator shall be indemnified by
the Company for all reasonable expenses and liabilities of any type or nature,
including reasonable attorneys' fees, incurred in connection with any action,
suit or proceeding to which they or any of them are a party by reason of, or in
connection with, this Plan or any Option granted under this Plan, and against
all amounts paid by them in settlement thereof (provided that such settlement is
approved by independent legal counsel selected by the Company), except to the
extent that such expenses relate to matters for which it is adjudged that such
Plan Administrator member is liable for willful misconduct; PROVIDED, that
within fifteen (15) days after the institution of any such action, suit or
proceeding, the Plan Administrator member involved therein shall, in writing,
notify the Company of such action, suit or proceeding, so that the Company may
have the opportunity to make appropriate arrangements to prosecute or defend the
same.
11. AMENDMENT OF PLAN.
II-19
<PAGE>
The Plan Administrator may, at any time, modify, amend or terminate
this Plan and options granted under this Plan, including, without limitation,
such modifications or amendments as are necessary to maintain compliance with
applicable statutes, rules or regulations; PROVIDED, that no amendment with
respect to an outstanding Option shall be made over the objection of the
Optionee thereof; and PROVIDED FURTHER, that, following registration of any of
the Company's securities under Section 12 of the Exchange Act, the approval of
the holders of a majority of the Company's outstanding shares of voting capital
stock represented at a meeting at which a quorum is present is required within
twelve (12) months before or after the adoption by the Plan Administrator of any
amendment that will permit the granting of Options to a class of persons other
than those currently eligible to receive Options under this Plan or that would
cause this Plan to no longer comply with Securities and Exchange Commission Rule
16b-3, as amended, or any successor rule or other regulatory requirements.
Without limiting the generality of the foregoing, the Plan Administrator may
modify grants to persons who are eligible to receive Options under this Plan who
are foreign nationals or employed outside the United States to recognize
differences in local law, tax policy or custom.
Approved by the Company's Board of Directors as of .
----------
- -------------------------
Corporate Secretary
Approved by the Company's Shareholders as of .
----------
- -------------------------
Corporate Secretary
II-20
<PAGE>
EXHIBIT 10.2
EAGLE HARDWARE & GARDEN, INC.
DIRECTORS' NONQUALIFIED STOCK OPTION PLAN
II-21
<PAGE>
EAGLE HARDWARE & GARDEN, INC.
DIRECTORS' NONQUALIFIED STOCK OPTION PLAN
This Nonqualified Stock Option Plan (the "Plan") provides for the
grant of options to acquire shares of Common Stock, without par value (the
"Common Stock"), of Eagle Hardware & Garden, Inc., a Washington corporation (the
"Company"). Stock options granted under this Plan (the "Options" or "Option")
are intended to be nonstatutory stock options under the Internal Revenue Code of
1986, as amended (the "Code").
1. PURPOSE.
The purpose of this Plan is to compensate certain directors of the
Company (the "Optionees" or "Optionee").
2. ELIGIBILITY.
Persons eligible to receive options under this Plan shall be all
directors of the Company who are not otherwise employed by the Company or any
Related Corporation, as defined below (the "Directors" or "Director"). Options
may be granted in substitution for outstanding Options of another corporation in
connection with the merger, consolidation, acquisition of property or stock or
other reorganization between such other corporation and the Company or any
subsidiary of the Company. Options also may be granted in exchange for
outstanding Options.
As used in this Plan, the term "Related Corporation," when referring
to a subsidiary corporation, shall mean any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company if, at the time
of the granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock of one of the
other corporations in such chain. When referring to a parent corporation, the
term "Related Corporation" shall mean any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company if, at the time of
granting of the Option, each of the corporations other than the Company owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock of one of the other corporations in such chain.
3. STOCK.
Subject to approval of the Plan by shareholders of the Company, each
current Director of the Company, and each individual who subsequently becomes a
Director of the Company, who is not otherwise an employee of the Company or any
Related Corporation shall automatically be issued options to acquire 20,000
shares of the Company's authorized but unissued, or reacquired, Common Stock.
Options to purchase a maximum of 700,000 shares of Common Stock in the aggregate
may be issued pursuant to the Plan LESS any shares issuable upon the exercise of
Options granted under the Company's 1991 Stock Option Plan. The number of
options available for a grant hereunder is subject to adjustment as set forth in
Section 4(k) hereof. In the event that any outstanding Option expires or is
terminated for any reason, those shares of Common Stock allocable to the
unexercised portion of such Option may be subject to one or more other Options
issued pursuant to the Plan.
II-22
<PAGE>
4. TERMS AND CONDITIONS OF OPTIONS.
Each Option shall be evidenced by a written agreement (the
"Agreement") in the form approved by the Company. Agreements may contain such
additional provisions, not inconsistent herewith, as the Company in its
discretion may deem advisable. All Options shall also comply with the following
requirements:
(a) NUMBER OF SHARES.
Each Agreement shall state the number of shares to which it pertains.
(b) DATE OF GRANT.
Each Option shall state the date the Company and the Director entered
into the Agreement (the "Date of Grant"), which shall be the date the Company's
Board of Directors of the Company (the "Board") approves this Plan or, in the
case of new Directors, the date the individual becomes a Director, whichever is
applicable.
(c) OPTION PRICE.
The exercise price for all Options granted hereunder shall be the fair
market value on Date of Grant. Such fair market value shall be the closing price
at which it was traded on a national securities exchange or the last sale price
quoted on the National Association of Securities Dealers Automated Quotation
System or any successor or substantially similar market thereto on the Date of
Grant. If the Common Stock shall be traded on more than one such market, the
exercise price shall be determined on the basis of the most active market. If no
such market exists, the exercise price shall be established at fair market value
based on the most recent arms-length transaction occurring within eighteen (18)
months preceding the Date of Grant by or among the Company or any
greater-than-ten-percent (>10%) shareholders of the Company or, if unavailable,
by a qualified appraiser selected by the Company.
(d) VESTING SCHEDULE.
All Options shall vest according to the following schedule:
<TABLE>
<CAPTION>
Percentage of
Number of Years Total Option to
Following Date of Grant be Exercisable
----------------------- ---------------
<S> <C>
1 33 1/3%
2 33 1/3%
3 33 1/3%
</TABLE>
(e) ACCELERATION OF VESTING.
Options granted pursuant to the Plan shall become immediately vested
and fully exercisable upon the Director's termination as a director of the
Company by reason of the death or
II-23
<PAGE>
Disability (as defined in Section 4(f) below) of the Director. The vesting of
Options shall also be accelerated under the circumstances described in Sections
4(l) and 4(m) below.
(f) TERMINATION OF OPTION.
A vested Option shall terminate, to the extent not previously
exercised, upon the occurrence of the first of the following events:
(i) ten (10) years from the Date of Grant;
(ii) the expiration of ninety (90) days from the date of
Optionee's termination as a Director of the Company for any reason other
than death or Disability (as defined below); or
(iii) the expiration of one (1) year from the date of death
of Optionee or the cessation of Optionee's service as a Director by reason
of Disability (as defined below).
"Disability" shall mean that a person is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or that has lasted or can be
expected to last for a continuous period of not less than twelve (12) months. If
Optionee's service as a Director is terminated by death, any Option held by
Optionee shall be exercisable only by the person or persons to whom such
Optionee's rights under such Option shall pass by Optionee's will or by the laws
of descent and distribution of the state or country of Optionee's domicile at
the time of death. Each unvested Option granted pursuant hereto shall terminate
upon Optionee's termination as a Director for any reason whatsoever, including
death or Disability.
(g) EXERCISE OF OPTIONS.
Options shall be exercisable, either all or in part, at any time after
vesting. If less than all of the shares included in the vested portion of any
Option are purchased, the remainder may be purchased at any subsequent time
prior to the expiration of the Option term. No portion of any Option of less
than one (1) share (as adjusted pursuant to Section 4(l) hereof) may be
exercised; PROVIDED, that if the vested portion of any Option is less than fifty
(50) shares, it may be exercised with respect to all shares for which it is
vested. Only whole shares may be issued pursuant to an Option, and to the extent
that an Option covers less than one share, it is unexercisable. Options or
portions thereof may be exercised by giving to the Company an executed notice of
election to exercise, which notice shall specify the number of shares to be
purchased, and be accompanied by payment in the amount of the aggregate option
price for the Common Stock so purchased and in the form specified in Section
4(h) below. The Company shall not be obligated to issue, transfer or deliver a
certificate of Common Stock to any Director, or to his personal representative,
until the aggregate option price has been paid for all shares for which the
Option shall have been exercised and adequate provision has been made by the
Optionee for the satisfaction of any tax withholding obligations associated with
such exercise. During the lifetime of an Optionee, Options are exercisable only
by Optionee.
(h) PAYMENT UPON EXERCISE OF OPTION.
II-24
<PAGE>
Upon exercise of any Option, the aggregate option price shall be paid
to the Company in cash or by certified or cashier's check. Alternatively, a
Director may pay for all or any portion of the aggregate option exercise price
(i) by delivering to the Company shares of Common Stock previously held by such
Director, (ii) having shares withheld from the amount of shares of Common Stock
to be received by the Director or (iii) delivering an irrevocable subscription
agreement obligating the Director to take and pay for the shares of common Stock
to be purchased within one (1) year of the date of exercise. The shares of
Common Stock received or withheld by the Company as payment for shares of Common
Stock purchased upon the exercise of Options shall have a fair market value at
the date of exercise (as determined in accordance with Section 4(c) hereof)
equal to the aggregate option exercise price (or portion thereof) to be paid by
the Director upon exercise.
(i) RIGHTS AS A SHAREHOLDER.
An Optionee shall have no rights as a shareholder with respect to any
shares covered by the Option until such Optionee becomes a record holder of such
shares, irrespective of whether such Optionee has given notice of exercise.
Subject to the provisions of Sections 4(l) and 4(m) below, no rights shall
accrue to an Optionee and no adjustments shall be made on account of dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights declared on, or created in, the Common Stock for
which the record date is prior to the date the Optionee becomes a record holder
of the shares of Common Stock covered by the Option, irrespective of whether
such Optionee has given notice of exercise.
(j) TRANSFER OF OPTION.
Options granted under this Plan and the rights and privileges
conferred by this Plan may not be transferred, assigned, pledged or hypothecated
in any manner (whether by operation of law or otherwise) other than by will or
by applicable laws of descent and distribution, as defined by the Code, or the
Employee Retirement Income Security Act, or the rules and regulations
thereunder, and shall not be subject to execution, attachment or similar
process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of any Option or of any right or privilege conferred by this Plan
contrary to the provisions hereof, or upon the sale, levy or any attachment or
similar process upon the rights and privileges conferred by this Plan, such
Option shall thereupon terminate and become null and void.
(k) SECURITIES REGULATION AND TAX WITHHOLDING.
(1) Shares shall not be issued with respect to an Option
unless the exercise of such Option and the issuance and delivery of such shares
shall comply with all relevant provisions of law, including, without limitation,
any applicable state securities laws, the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, as amended, the rules and regulations
thereunder and the requirements of any stock exchange upon which such shares may
then be listed, and such issuance shall be further subject to the approval of
counsel for the Company with respect to such compliance, including the
availability of an exemption from registration for the issuance and sale of such
shares. The inability of the Company to obtain from any regulatory body the
authority deemed by the Company to be necessary for the lawful issuance and sale
of any shares under this Plan, or the unavailability of an exemption from
registration for the issuance and sale of any shares under this Plan, shall
relieve the Company of any liability with respect to the non-issuance or sale of
such shares.
II-25
<PAGE>
As a condition to the exercise of an Option, the Company may require
the Optionee to represent and warrant in writing at the time of such exercise
that the shares are being purchased only for investment and without any
then-present intention to sell or distribute such shares. At the option of the
Company, a stop-transfer order against such shares may be placed on the stock
books and records of the Company, and a legend indicating that the stock may not
be pledged, sold or otherwise transferred unless an opinion of counsel is
provided stating that such transfer is not in violation of any applicable law or
regulation, may be stamped on the certificates representing such shares in order
to assure an exemption from registration. The Company also may require such
other documentation as may from time to time be necessary to comply with federal
and state securities laws. THE COMPANY HAS NO OBLIGATION TO UNDERTAKE
REGISTRATION OF OPTIONS OR THE SHARES OF STOCK ISSUABLE UPON THE EXERCISE OF
OPTIONS.
(2) As a condition to the exercise of any Option granted
under this Plan, the Optionee shall make such arrangements as the Company may
require for the satisfaction of any federal, state or local withholding tax
obligations that may arise in connection with such exercise.
(3) The issuance, transfer or delivery of certificates of
Common Stock pursuant to the exercise of Options may be delayed, at the
discretion of the Board, until the Company is satisfied that the applicable
requirements of the federal and state securities laws and the withholding
provisions of the Code have been met.
(l) STOCK DIVIDEND REORGANIZATION OR LIQUIDATION.
(1) If (i) the Company shall at any time be involved in a
transaction described in Section 424(a) of the Code (or any successor provision)
or any "corporate transaction" described in the regulations thereunder; (ii) the
Company shall declare a dividend payable in, or shall subdivide or combine, its
Common Stock or (iii) any other event with substantially the same effect shall
occur, the number of shares of Common Stock and/or the exercise price per share
of each outstanding Option shall be proportionately adjusted so as to preserve
the rights of the Optionee substantially proportionate to the rights of the
Optionee prior to such event, and to the extent that such action shall include
an increase or decrease in the number of shares of Common Stock subject to
outstanding Options, the number of shares available under Section 4 of this Plan
shall automatically be increased or decreased, as the case may be,
proportionately, without further action on the part of the Company or the
Company's shareholders.
(2) If the Company is liquidated or dissolved, the holders
of any outstanding Options may exercise all or any part of the unvested portion
of the Options held by them; PROVIDED, that such Options must be exercised prior
to the effective date of such liquidation or dissolution. If the Option holders
do not exercise their Options prior to such effective date, each outstanding
Option shall terminate as of the effective date of the liquidation or
dissolution.
(3) The grant of an Option shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge,
consolidate or dissolve, to liquidate or to sell or transfer all or any part of
its business or assets.
II-26
<PAGE>
(m) CHANCE IN CONTROL; DECLARATION OF EXTRAORDINARY DIVIDEND.
(1) CHANGE IN CONTROL. If at any time there is a Change in
Control (as defined below) of the Company, all Options shall accelerate and
become fully vested and immediately exercisable for the duration of the Option
term. For purposes of this subsection (n)(1), "Change in Control" shall mean
either one of the following: (i) When any "person," as such term is used in
sections 13(d) and 14(d) of the Exchange Act (other than a shareholder of the
Company on the date of this Plan, the Company, a Subsidiary or an employee
benefit plan of the Company, including any trustee of such plan acting as
trustee) becomes, after the date of this Plan, the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding securities; or (ii) the
occurrence of a transaction requiring shareholder approval, and involving the
sale of all or substantially all of the assets of the Company or the merger of
the Company with or into another corporation.
(2) DECLARATION OF EXTRAORDINARY DIVIDEND. If at any time
the Company declares an Extraordinary Dividend (as defined below), all Options
shall accelerate and thereupon become fully vested and immediately exercisable
for the duration of the Option term. For purposes of this subsection (n)(2),
"Extraordinary Dividend" shall mean a cash dividend payable to holders of record
of the Common Stock in an amount in excess of ten percent (10%) of the then fair
market value of the Company's Common Stock. The fair market value of the
Company's Common Stock shall be determined in good faith by the Board.
5. EFFECTIVE DATE: TERM.
Subject to approval of this Plan by shareholders of the Company, this
Plan shall be effective as of the date it is approved by the Board and Options
may be issued from time to time thereafter until this Plan is terminated by the
Company. Termination of this Plan shall not terminate any Option granted prior
to such termination.
6. NO OBLIGATIONS TO EXERCISE OPTION.
The granting of an Option shall impose no obligation upon the Optionee
to exercise such Option.
7. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock,
pursuant to the exercise of Options granted hereunder, will be used for general
corporate purposes.
8. INDEMNIFICATION OF BOARD.
In addition to all other rights or indemnification they may have as
directors of the Company or as members of the Board, members of the Board shall
be indemnified by the Company for all reasonable expenses and liabilities of any
type and nature, including reasonable attorneys' fees, incurred in connection
with any action, suit or proceeding to which they or any of them are a party by
reason of, or in connection with, the Plan or any Option granted hereunder, and
against all amounts paid
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by them in settlement thereof (provided such settlement is approved by
independent legal counsel selected by the Company), except to the extent that
such expenses relate to matters for which it is adjudged that such Board members
are liable for willful misconduct; PROVIDED, that within fifteen (15) days after
the institution of any such action, suit or proceeding, member(s) of the Board
shall, in writing, notify the Company of such action, suit or proceeding, so
that the Company may have the opportunity to make appropriate arrangements to
prosecute or defend the same.
9. AMENDMENT OF PLAN.
The Company may, at any time, modify, amend or terminate this Plan and
Options granted under this Plan, including, without limitation, such
modifications or amendments as are necessary to maintain compliance with
applicable statutes, rules or regulations; PROVIDED, that no amendment with
respect to an outstanding Option shall be made over the objection of the
Optionee thereof; and PROVIDED FURTHER, that after registration of any of the
Company's securities under Section 12 of the Securities Exchange Act of 1934, as
amended: (i) the approval of the holders of a majority of the Company's
outstanding shares of voting capital stock represented at a meeting at which a
quorum is present is required within twelve (12) months before or after the
adoption by the Board of any amendment that will permit the granting of Options
to a class of persons other than those currently eligible to receive Options
under this Plan or that would cause this Plan to no longer comply with
Securities and Exchange Commission Rule 16b-3, as amended, or any successor rule
or other regulatory requirements; and (ii) this Plan shall not be amended more
than once every six (6) months, other than to comport with changes in the Code,
the Employee Retirement Security Act, or the rules thereunder.
Approved by Board of Company:
Approved by Shareholders of Company:
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EXHIBIT 10.3
EAGLE HARDWARE & GARDEN, INC.
EMPLOYEE STOCK PURCHASE PLAN
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EAGLE HARDWARE & GARDEN, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. DEFINITIONS
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means common stock, no par value, of the Company.
"Company" means Eagle Hardware & Garden, Inc., a Washington corporation and
any Participating Subsidiaries.
"Compensation" means regular straight time earnings plus compensation for
overtime, incentive bonuses and other additional compensation, except to the
extent that any such item is specifically excluded by the Plan Administrator.
"ESPP" means this Eagle Hardware & Garden, Inc. Employee Stock Purchase
Plan.
"Fair Market Value" of the Common Stock as of any day means the closing
price (rounded to the next highest cent in the case of fractions of a cent) of
the Common Stock as reported on such day or, if such day is not a trading day of
the Nasdaq Stock Market, the next trading day as reported by the Nasdaq Stock
Market. If the Common Stock of the Company is not admitted to trading on any of
the aforesaid dates for which closing prices of the stock are to be determined,
then reference shall be made to the fair market value of the stock on that date,
as determined on such basis as shall be established or specified for the purpose
by the Plan Administrator.
"Participant" means an employee of the Company or a Participating
Subsidiary who is regularly scheduled to work a minimum of fifteen (15) hours
per week, who has met the eligibility requirements in Section 7 and has filed an
Enrollment Agreement and such other documents as are required under Section 8.
"Participating Subsidiary" means any corporation which is a "subsidiary
corporation" of the Company within the meaning of Code Section 424(e) and is
designated as a participant in the Plan by the Plan Administrator.
"Plan Administrator" means the Board of Directors of the Company, or any
committee established pursuant to Section 4 to administer the ESPP.
"Purchase Period" means a six-month period commencing on January 1 or July
1.
"Purchase Date" means the last business day of a Purchase Period.
2. PURPOSE
The purpose of this ESPP is to enable Participants to acquire a larger
personal proprietary interest in the Company, and to encourage Participants to
remain in the employ of the Company and have a personal interest in the success
of the Company. This ESPP is intended to constitute an "employee stock purchase
plan" as defined in Code Section 423, and shall be interpreted and administered
to further that intent.
This ESPP is intended to provide Common Stock for investment and not for
resale. The Company does not, however, intend to restrict or influence the
conduct of any Participant's affairs. A Participant, therefore, may sell Common
Stock that is purchased under this ESPP at any time, subject to compliance with
any applicable federal or state tax and securities laws. THE EMPLOYEE ASSUMES
THE RISK OF ANY MARKET FLUCTUATIONS IN THE PRICE OF THE SHARES.
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3. GOVERNMENTAL REGULATIONS
The Company's obligation to sell and deliver shares of Common Stock under
the ESPP is subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of such shares.
4. ADMINISTRATION
Primary authority for administration of the Plan is held by the Board of
Directors, but the Board of Directors, in its discretion, may establish a
committee composed of members of the Board of Directors or employees of the
Company to administer the Plan which shall have such of the power and authority
vested in the Board of Directors under the Plan as the Board of Directors may
delegate to it, including the power and authority to interpret any provision of
the Plan. The Board of Directors or any committee established pursuant to this
Section 4 is referred to herein as the "Plan Administrator." It is the
intention of the Company that the ESPP and the administration hereof comply in
all respects with Section 16(b) of the Securities Exchange Act of 1934 and
Section 423(b) of the Code.
5. STOCK SUBJECT TO THE ESPP
There are reserved for issuance under the ESPP 1,200,000 shares of Common
Stock which may be purchased by Participants pursuant to the ESPP, subject to
adjustment as provided in Section 17.
6. PURCHASE PERIODS
This ESPP will be administered based on semiannual Purchase Periods
commencing January 1 or July 1. The first Purchase Period will begin on July 1,
1998 and end on December 31, 1998.
7. ELIGIBILITY
Any employee who has completed ninety (90) days employment and who is
employed on the date his or her participation is to begin shall be eligible to
participate in Purchase Periods beginning after such ninety (90) day period.
For purposes of participation in the ESPP, a person on leave of absence
shall be deemed to be an employee for the first ninety (90) days of such leave
of absence and such person's employment shall be deemed to have terminated at
the close of business on the 90th day of such leave of absence unless such
person shall have returned to regular full-time or part-time employment (as the
case may be) prior to the close of business on such 90th day. Termination by
the Company of a person's leave of absence, other than termination of such leave
of absence on return to full time or part time employment, shall terminate a
person's employment for all purposes of the ESPP and shall terminate such
person's participation in the ESPP and right to purchase shares of stock
pursuant to the ESPP.
8. PARTICIPATION
An eligible employee may become a Participant by completing, signing and
filing an Enrollment Agreement authorizing payroll deductions and any other
necessary papers with the Company at least ten (10) days prior to the
commencement of the particular Purchase Period in which he or she wishes to
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participate. Participation in one Purchase Period under the Plan shall neither
limit, nor require, participation in any other Purchase Period.
9. PAYROLL DEDUCTIONS
At the time a Participant files his or her Enrollment Agreement, he or she
may elect to have from 1% to 15% (in whole percentage points) of his or her
Compensation deducted and applied to the purchase of shares of Common Stock
pursuant to this ESPP. An amount equal to the elected percentage of the
Participant's Compensation will be deducted on each regular pay day falling
within the Purchase Period. All amounts will be deducted from a Participant's
Compensation on an after-tax basis. No interest will be paid on payroll
deductions accumulated under the ESPP. A Participant may discontinue
participation or withdraw from the ESPP as provided in Section 12, but may not
alter the amount of his or her payroll deductions or make any other changes
during a Purchase Period.
If a Participant goes on a leave of absence, such Participant shall have
the right, subject to the provisions of Section 7, to elect: (a) to withdraw
his or her accumulated payroll deductions pursuant to Section 12; (b) to
discontinue payroll deductions but remain a Participant in the ESPP during such
leave of absence, or (c) remain a Participant in the ESPP during such leave of
absence, authorizing deductions to be made from payments by the Company to the
Participant during such leave of absence and undertaking to make cash payments
to the Company at the end of each payroll period to the extent that amounts
payable by the Company to such Participant are insufficient to meet such
Participant's authorized Plan deductions.
10. PURCHASE OF COMMON STOCK
On the Purchase Date, a Participant's accumulated payroll deductions will,
subject to the limitations in Section 11 and the termination provisions of
Section 16, be applied toward the purchase of shares of Common Stock at a
purchase price equal to the lesser of:
(a) 85% of the Fair Market Value of the Common Stock on the first business
day of the Purchase Period; or
(b) 85% of the Fair Market Value of the Common Stock on the Purchase Date,
in either event rounded to the nearest whole cent.
Shares of Common Stock may be purchased under the ESPP only with a
Participant's accumulated payroll deductions. Fractional shares can be
purchased. The Company will return to the Participant any portion of a
Participant's accumulated payroll deductions not used for the purchase of Common
Stock at the end of a Purchase Period unless the Participant has advised the
Company otherwise by reexecuting an Enrollment Agreement before the commencement
of the succeeding Purchase Period to have the balance carried over to be applied
to the purchase of Common Stock in such Purchase Period; provided the
Participant is participating in the ESPP during that Purchase Period.
11. LIMITATIONS ON SHARE PURCHASES
During any Purchase Period the maximum number of shares of Common Stock
that may be purchased by a Participant may not exceed 1,000 shares. During any
calendar year, the maximum value
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of the Common Stock that may be purchased by a Participant under the ESPP is
$25,000, said value to be determined on the basis of the Fair Market Value of
the Common Stock on the first business day of the Purchase Period and in
accordance with the requirements of Code Section 423(b)(8). The foregoing
limitation is intended to and shall be interpreted in such a manner as will
comply with Code Section 423(b)(8). In addition, no Participant shall be
permitted to subscribe for any shares under the ESPP if such Participant,
immediately after such subscription, owns shares that account for (including all
shares that may be purchased under outstanding subscriptions under the ESPP and
any other outstanding options to purchase shares of Common Stock) five percent
(5%) or more of the total combined voting power or value of all classes of
shares of the Company or its subsidiaries, taking into account the stock
ownership rules in Code Section 424(d).
12. WITHDRAWAL AND DISCONTINUANCE
A Participant may withdraw from the ESPP, in whole but not in part, at any
time prior to the last business day of each offering by completing the
"discontinue and withdraw" section of an ESPP Change Notice and delivering the
ESPP Change Notice to the Company, in which event the Company will refund the
entire balance of his accumulated payroll deductions as soon as practicable
thereafter.
To re-enter the ESPP, a Participant who has previously withdrawn must file
a new Enrollment Agreement in accordance with Section 8. His re-entry into the
ESPP cannot, however, become effective before the beginning of the next Purchase
Period following his withdrawal.
A Participant may elect to discontinue his payroll deductions during the
course of a particular Purchase Period, at any time prior to the last day of the
pay period (pay periods end on the Friday before each pay day) during such
Purchase Period, by completing the "discontinue" section of an ESPP Change
Notice and delivering the ESPP Change Notice to the Company, and such election
will not constitute a withdrawal for purpose of this Section 12. In the event
that a Participant elects to discontinue his payroll deductions pursuant to this
Section 12, the Participant will continue to participate in such Purchase Period
and will be entitled to purchase from the Company such number of full shares of
Common Stock as set forth in and in accordance with Section 10.
13. ISSUANCE OF COMMON STOCK TO CUSTODIAL ACCOUNTS
The shares of Common Stock purchased by a Participant will be issued
electronically by the Company's transfer agent to the Participant's custodial
account as soon as practicable after each Purchase Date. Common Stock purchased
under the ESPP will be issued only in the name of the Participant (or, if his
authorization so designates, in the name of the Participant and another person
of legal age as joint tenants with rights of survivorship). The custodial
account of Participants shall be maintained by a bank, broker-dealer or similar
custodian appointed by the Plan Administrator that has agreed to hold such
shares for the accounts of the respective Participants. Fees and expenses of
the bank, broker-dealer or similar custodian shall be paid by the Company or
allocated among the respective Participants in such manner as the Plan
Administrator determines. A Participant or his legal representative may sell
Common Stock from his custodial account at any time; however, any sale within
two (2) years of the first day of the Purchase Period and one (1) year of the
Purchase Date will be treated by the Company as a disqualifying disposition
under the Code and be reported on the Participant's tax Form W-2.
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14. WITHHOLDING TAXES
In connection with the purchase of shares of Common Stock under the ESPP,
the Company (a) shall not issue a certificate for such shares until it has
received payment from the Participant of any required withholding tax in cash or
by the retention or acceptance upon delivery thereof by the Participant of
shares of Common Stock sufficient in Fair Market Value to cover the amount of
such withholding tax and (b) shall have the right to retain or sell without
notice, or to demand surrender of, shares of Common Stock in value sufficient to
cover any withholding tax. The Company shall have the right to withhold from
any payroll deductions made by the Participant under the ESPP an amount equal to
any required withholding tax. In either case, the Company shall make payment
(or reimburse itself for payment made) to the appropriate taxing authority of an
amount in cash equal to the amount of such withholding tax, remitting any
balance to the Participant. For purposes of this Section 14, the value of
shares of Common Stock so retained or surrendered shall be equal to the Fair
Market Value of such shares on the date that the amount of the withholding tax
is to be determined (the "Tax Date"), and the value of shares of Common Stock so
sold shall be the actual net sale price per share (after deduction of
commissions) received by the Company. Notwithstanding the foregoing, the
Participant may elect, subject to approval by the Plan Administrator, to satisfy
the obligation to pay any withholding tax, in whole or in part, by providing the
Company with funds sufficient to enable the Company to pay such withholding tax
or by having the Company retain or accept upon delivery thereof by the
Participant shares of Common Stock sufficient in Fair Market Value to cover the
amount of such withholding tax. Each election by a Participant to have shares
retained or to deliver shares for this purpose must be in writing and made on or
prior to the Tax Date.
15. TRANSFERABILITY
A Participant's rights under the ESPP, including rights to accumulated
payroll deductions, may not be pledged, assigned, encumbered or otherwise
transferred for any reason other than by will or the laws of descent and
distribution. Any such attempt will be treated as an election by the
Participant to withdraw from the ESPP.
16. TERMINATING EVENTS
Upon (a) the dissolution or liquidation of the Company, (b) a merger or
other reorganization of the Company with one or more corporations as a result of
which the Company will not be a surviving corporation, (c) the sale of all or
substantially all of the assets of the Company or a material division of the
Company, (d) a sale or other transfer, pursuant to a tender offer or otherwise,
of more than fifty percent (50%) of the then outstanding shares of Common Stock
of the Company, (e) an acquisition by the Company resulting in an extraordinary
expansion of the Company's business or the addition of a material new line of
business, or (f) any exchange that is subject to this Section 16 (any of such
events is herein referred to as a "Terminating Event"), the Plan Administrator
may but shall not be required to:
(a) make provision for the continuation of the Participants' rights under
the ESPP on such terms and conditions as the Plan Administrator determines to be
appropriate and equitable, including where applicable, but not limited to, an
arrangement for the substitution on an equitable basis, for each share of Common
Stock that could otherwise be purchased at the end of the Purchase Period in
progress at the time of the Terminating Event, of any consideration payable with
respect to each then outstanding share of Common Stock in connection with the
Terminating Event; or
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(b) terminate all rights of Participants under the ESPP for such Purchase
Period and --
(i) return to the Participants all of their payroll deductions for such
Purchase Period; and
(ii) for each share of Common Stock, if any, that could otherwise be
purchased under the ESPP by a Participant at the end of such Purchase Period
(determined by assuming that payroll deductions at the rate elected by the
Participant were continued to the end of the Purchase Period and used to
purchase shares based on the Fair Market Value of the Common Stock on the first
day of the Purchase Period) and with respect to which (A) the purchase price at
which such share could be purchased (determined with reference only to the Fair
Market Value of the Common Stock on the first day of the Purchase Period) is
exceeded by (B) the Fair Market Value on the date of the Terminating Event of a
share of Common Stock, as determined by the Plan Administrator, pay to the
Participant an amount equal to such excess.
The Plan Administrator shall make all determinations necessary or advisable
in connection with Terminating Events, and its determinations shall, in the
absence of fraud or patent mistake, be conclusive and binding on all persons
with any interest in the ESPP.
17. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of any changes in the outstanding stock of the Company by
reason of stock dividends, stock splits, recapitalizations, mergers,
consolidations, combinations or exchanges of shares, split-ups, split-offs,
spin-offs, liquidations or other similar changes in capitalization, or any
distribution to stockholders other than cash dividends, the Plan Administrator
shall make such adjustments, if any, in light of the change or distribution as
the Plan Administrator in its sole discretion shall determine to be appropriate
in the number and class of shares and the purchase prices of the Common Stock
which may be purchased by Participants during the current Purchase Period. In
the event of any such change in the outstanding Common Stock of the Company, the
aggregate number and class of shares available under the ESPP and the maximum
number of shares which may be purchased and their purchase price shall be
appropriately adjusted by the Plan Administrator.
Upon the happening of an event specified in this Section 17, the class and
aggregate number of shares available under the ESPP, as set forth in Section 5
shall be appropriately adjusted to reflect the event. Notwithstanding the
foregoing, such adjustments shall be made only to the extent that the Plan
Administrator, based on advice of counsel for the Company, determines that such
adjustments will not constitute a change requiring shareholder approval under
Code Section 423(b)(2).
18. TERMINATION OF EMPLOYEE'S RIGHTS
Subject to the provisions of Section 20, a Participant's rights under the
ESPP will terminate if he or she for any reason (including death, disability or
voluntary or involuntary termination of employment) ceases to be an employee of
the Company. To the extent that the rights of a Participant terminate in
accordance with this Section 18, any of the Participant's accumulated payroll
deductions will be promptly returned to the Participant or in the case of the
Participant's death, to his or her beneficiary as provided in Section 19 below.
The ESPP does not, directly or indirectly, create any right for the benefit
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of any employee or class of employees to preferentially purchase any Common
Stock under the ESPP, or create in any employee or class of employees any right
with respect to continuation of employment by the Company, and it shall not be
deemed to interfere in any way with the Company's right to terminate, or
otherwise modify, an employee's employment at any time.
19. DESIGNATION OF BENEFICIARY
A Participant may designate a beneficiary who is to receive any accumulated
payroll deductions upon the Participant's death. Such designation may be
changed by the Participant at any time by completing the "beneficiary
designation" section of an ESPP Change Notice and delivering the ESPP Change
Notice to the Plan Administrator. Upon the death of a Participant and upon
receipt by the Company of proof of identity, the Company shall deliver such
accumulated payroll deductions to such beneficiary. In the event of the death
of a Participant and in the absence of a beneficiary validly designated under
the Plan who is living at the time of such Participant's death, the Company
shall deliver such accumulated payroll deductions to the executor or personal
representative of the Participant's estate or if no executor or personal
representative has been appointed (to the knowledge of the Company), the
Company, in its discretion, may deliver such accumulated payroll deductions to
the spouse or to any one or more dependents of the Participant as the Company
may designate. No beneficiary shall, prior to the death of the Participant by
whom he or she has been designated, acquire any interest in the Participant's
accumulated payroll deductions.
20. TERMINATION AND AMENDMENTS TO ESPP
The ESPP may be terminated at any time by the Plan Administrator but,
except as provided in Section 16, such termination shall not affect the rights
of Participants under the ESPP for the Purchase Period in progress at the time
of termination. The ESPP will terminate in any case when all or substantially
all of the unissued shares of Common Stock reserved for the purposes of the ESPP
have been purchased. If at any time shares of Common Stock reserved for the
purpose of the ESPP remain available for purchase but not in sufficient number
to satisfy all then unfilled purchase requirements, the available shares shall
be apportioned among Participants in proportion to the respective amounts of
their accumulated payroll deductions, and the ESPP shall terminate. Upon such
termination or any other termination of the ESPP, all accumulated payroll
deductions not used to purchase shares of Common Stock will be refunded to the
Participants entitled thereto. The ESPP may be terminated, modified or amended
by the shareholders of the Company. The Board of Directors of the Company may
also terminate this ESPP, or modify or amend the ESPP in such respects as it
shall deem advisable in order to conform to any change in any law or regulation
applicable thereto, or in other respects; however, to the extent required by
applicable law or regulation, shareholder approval will be required for any
amendment which will (a) increase the total number of shares which may be issued
under the ESPP, (b) change the class of persons eligible to purchase Common
Stock under the ESPP, (c) materially increase the benefits accruing to
Participants under the ESPP, or (d) otherwise require shareholder approval under
any applicable law or regulation.
21. INFORMATION TO PARTICIPANTS
A Participant in the ESPP shall not have any rights as a shareholder of the
Company on account of shares of Common Stock that may be purchased under the
ESPP prior to the time such shares are actually purchased by and issued to the
Participant. Notwithstanding the foregoing, the Company shall
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deliver to each Participant under the ESPP who does not otherwise receive such
materials (a) a copy of the Company's annual financial statements, together with
management's discussion and analysis of financial condition and results of
operations for the fiscal year, and (b) a copy of all reports, proxy statements
and other communications distributed to the Company's security holders
generally.
22. APPROVAL OF SHAREHOLDERS
The ESPP will become effective July 1, 1998; subject to approval by the
holders of a majority of the shares of the Company present or represented by
proxy at an annual meeting of the shareholders of the Company held after the
date on which the ESPP is adopted by the Board of Directors of the Company and
on or before July 1, 1999. The ESPP shall also be subject to approval by the
shareholders of the Company in a manner that complies with Section 423(b)(2) of
the Code. If the ESPP is not so approved, it shall not become effective, and
all payroll deductions of Participants accumulated under the ESPP will be
promptly returned to the Participants.
Date Approved by Board of Directors: April 1, 1998.
Date Approved by Shareholders: May 28, 1998.
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EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
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Exhibit 23.2
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the Eagle Hardware & Garden, Inc. 1991 Stock Option
Plan, Directors' Nonqualified Stock Option Plan, and Employee Stock Purchase
Plan of our report dated February 27, 1998, with respect to the consolidated
financial statements of Eagle Hardware & Garden, Inc. incorporated by
reference in its Annual Report (Form 10-K) for the year ended January 30,
1998, filed with the Securities and Exchange Commission.
Seattle, Washington
June 1, 1998 ERNST & YOUNG LLP
