SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Definitive proxy statement
[X] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
FUNCO, INC
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of June 16, 1998
(or as indicated below), with respect to the stock ownership of all persons
known by the Company to be beneficial owners of more than five percent of its
outstanding shares of Common Stock, each director, each nominee for director,
each of the Named Executive Officers and all directors and executive officers of
the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OR IDENTITY OF GROUP BENEFICIALLY OWNED OUTSTANDING SHARES
- ----------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
David R. Pomije......................................... 1,775,631(1) 28.4%
10120 West 76th Street
Minneapolis, MN 55344
SAFECO Asset Management Company......................... 519,400(2) 8.4%
601 Union Street
Suite 2500
Seattle, WA 98101-4074
Woodland Partners LLC................................... 377,700(3) 6.1%
60 South Sixth Street
Suite 3750
Minneapolis, MN 55402
Crestone Capital Management, Inc. ...................... 360,580 5.8%
7720 Belleview Avenue
Suite 220
Englewood, CO 80111-2614
Stanley A. Bodine....................................... 165,157(4) 2.6%
Richard T. Guidera...................................... 11,500(5) Less than 1%
George E. Mileusnic..................................... 24,500(6) Less than 1%
Patrick J. Ferrell...................................... 8,000(7) Less than 1%
Jeffrey R. Gatesmith.................................... 74,411(8) 1.2%
Robert M. Hiben......................................... 61,256(9) 1.0%
All directors and executive officers as a group
(7 persons)......................................... 2,120,455(10) 32.7%
- ------------------------
</TABLE>
(1) Includes 52,181 shares issuable upon exercise of currently exercisable
options and options exercisable within 60 days of the record date
("currently exercisable options").
(2) Based on Schedule 13G dated February 10, 1998, filed jointly by SAFECO
Common Stock Trust ("CST"), SAFECO Asset Management Company ("AMC") and
SAFECO Corporation ("SAFECO"). AMC, a subsidiary of SAFECO, is an
investment adviser and has shared voting and dispositive power over all
of such shares, including shares held by CST, an investment company.
(3) Based on Schedule 13G dated February 4, 1998, filed by Woodland Partners
LLC, which has sole voting power over 320,400 shares and shared voting
power over 57,300 shares.
(4) Includes 99,255 shares issuable upon exercise of currently exercisable
options.
(5) Includes 6,500 shares issuable upon exercise of currently exercisable
options.
(6) Includes 11,000 shares issuable upon exercise of currently exercisable
options.
(7) Includes 7,000 shares issuable upon exercise of currently exercisable
options.
(8) Includes 55,161 shares issuable upon exercise of currently exercisable
options.
(9) Includes 49,506 shares issuable upon exercise of currently exercisable
options.
(10) Includes 280,603 shares issuable upon exercise of currently exercisable
options.
<PAGE>
FUNCO, INC.
1993 STOCK OPTION PLAN
TABLE OF CONTENTS
ITEM DESCRIPTION PAGE
SECTION 1 Purpose; Definitions....................................... 2
SECTION 2 Administration............................................. 4
SECTION 3 Stock Subject to Plan...................................... 5
SECTION 4 Eligibility................................................ 5
SECTION 5 Stock Options.............................................. 5
SECTION 6 Change in Control Provisions............................... 8
SECTION 7 Amendments and Termination................................. 10
SECTION 8 Unfunded Status of Plan.................................... 11
SECTION 9 General Provisions......................................... 11
SECTION 10 Effective Date of Plan..................................... 12
SECTION 11 Term of Plan............................................... 13
SECTION 12 Applicability to Grants under Other Company Plans.......... 13
<PAGE>
FUNCO, INC.
1993 STOCK OPTION PLAN
SECTION 1. Purpose; Definitions.
The purpose of the Funco, Inc. 1993 Stock Option Plan (the "Plan") is to
enable Funco, Inc. (the "Company") to attract, retain, and reward employees of
the Company and its Parents, Subsidiaries, and Affiliates, and strengthen the
mutuality of interests between such employees and the Company's shareholders, by
offering such employees an opportunity to purchase stock of the Company and
participate in its growth.
In addition to definitions that may be contained elsewhere in this Plan,
for purposes of the Plan, the following terms shall be defined as set forth
below:
a. "Affiliate" means any entity other than the Company and its
Parents and Subsidiaries that is designated by the Board as a
participating employer under the Plan, provided that the Company directly
or indirectly owns at least 20% of the combined voting power of all
classes of stock of such entity or at least 20% of the ownership
interests in such entity.
b. "Option Agreement" means any written agreement, contract, or
other instrument or document evidencing any Option granted by the
Committee hereunder and signed by both the Company and the Participant.
c. "Board" means the Board of Directors of the Company.
d. "Code" means the internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
e. "Committee" means the Committee referred to in Section 2 of the
Plan. If at any time no Committee shall be in office, then the functions
of the Committee specified in the Plan shall be exercised by the Board.
f. "Company" means Funco, inc., a corporation organized under the
laws of the State of Minnesota, or any successor corporation.
g. "Disability" means disability as determined under procedures
established by the Committee for purposes of this Plan or, as applied to
Incentive Stock Options, as defined in Section 22(e)(3) of the Code.
h. "Disinterested Person" shall have the meaning set forth in Rule
16b-3 as promulgated by the Securities and Exchange Commission (the
"Commission") under the Exchange Act, or any successor definition adopted
by the Commission.
<PAGE>
i. "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
j. "Fair Market Value" means as of any given date, unless
otherwise determined by the Committee in good faith, the average for the
preceding five business days of the closing sale prices of the Stock as
reported on The National Association of Securities Dealers, Inc.
Small-Cap Market ("NASDAQ") or, if the Stock is then traded on the
NASDAQ/National Market System ("NASDAQ/NMS") or on a national securities
exchange, the average for the preceding five business days of the closing
price of the Stock on NASDAQ/NMS or such exchange.
k. "incentive Stock Option" means any Stock Option intended to be
and designated as an "Incentive Stock Option" within the meaning of
Section 422 of the Code.
l. "Nonqualified Stock Option" means any Stock Option that is not
an Incentive Stock Option.
m. "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of
the granting of an Option, each of the corporations other than the
Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the
chain.
n. "Participant" means an employee of the Company or any
Subsidiary, Parent, or Affiliate of the Company who is selected by the
Committee to receive an Option under the Plan.
o. "Plan" means this Funco, Inc. 1993 Stock Option Plan, as
hereafter amended from time to time.
p. "Stock" means the Common Stock, $.01 par value per share, of
the Company.
q. "Stock Option" or "Option" means any option to purchase shares
of Stock granted pursuant to Section 5 hereof.
r. "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the
time of the granting of an Option, each of the corporations other than
the last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of
the other corporations in the chain.
In addition, the terms "Change in Control," "Potential Change in
Control," and "Change in Control Price" shall have the meanings set forth,
respectively, in Sections 6(b), (c), and (d) below.
<PAGE>
SECTION 2. Administration.
The Plan shall be administered by a Committee of not fewer than two
members of the Board, who shall be appointed by and serve at the pleasure of the
Board. Each member of the Committee shall qualify as a Disinterested Person. The
functions of the Committee specified in the Plan shall be exercised by the
Board, if and to the extent that no Committee exists that has the authority to
so administer the Plan. As to the selection of and grants of Options to persons
who are not subject to Section 16 of the Exchange Act, the Committee may
delegate any or all of its responsibilities to members of the Company's
administration. The selection of and grants of Options to persons who are
subject to Section 16 of the Exchange Act shall be made in a manner that
satisfies the disinterested administration requirement of Rule 16b-3 under the
Exchange Act, or any successor rule.
The Committee shall have full power and authority, consistent with the
provisions of the Plan and subject to such orders or resolutions not
inconsistent with the provisions of the Plan as may be adopted by the Board:
(i) to select the employees of the Company and any Parent, Subsidiary,
or Affiliate to whom Options may from time to time be granted
hereunder;
(ii) to determine the type or types of Options to be granted to
employees hereunder;
(iii) to determine the number of shares of Stock to be covered by each
Option granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Option granted hereunder;
(v) to determine whether, to what extent, and under what circumstances
an Option may be exercised by cash. Stock, or other property or
canceled or suspended;
(vi) to interpret and administer the Plan and any instrument or
agreement entered into thereunder;
(vii) to establish such rules and regulations and appoint such agents as
it shall deem appropriate for proper administration of the Plan;
and
(viii) to make any other determination and take any other action that the
Committee deems necessary or desirable for administration of the
Plan.
Members of the Board and of the Committee acting under the Plan shall be
fully protected in relying in good faith upon the advice of counsel and shall
incur no liability except for gross negligence or willful misconduct in the
performance of their duties.
<PAGE>
Decisions of the Committee shall be made in the Committee's sole
discretion and shall be final, conclusive, and binding on all persons, including
the Company, any Participant, any shareholder, and any employee of the Company
or any Parent, Subsidiary, or Affiliate.
SECTION 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for
distribution under the Plan shall initially be 348,750 shares of Stock, which
number shall be increased annually effective May 1 by a number of shares equal
to l% of the number of shares of the Company outstanding at the end of the prior
fiscal year. Such shares may consist, in whole or in part, of authorized and
unissued shares or treasury shares. The number of shares of Stock available for
incentive Stock Options shall be 348,750.
If any shares of Stock subject to an Option are not issued to a
Participant because the Option is not exercised or is otherwise forfeited or
terminates without Stock being issued to the Participant, such shares shall
again be available for distribution in connection with future Options under the
Plan.
In the event of any merger, reorganization, consolidation,
recapitalization. Stock dividend. Stock split, or other change in corporate
structure affecting the Stock, such substitution or adjustment shall be made in
the aggregate number of shares reserved for issuance under the Plan and in the
number and option price of shares subject to outstanding Options granted under
the Plan as may be determined to be appropriate by the Board, in its sole
discretion, provided that the number of shares subject to any Option shall
always be a whole number.
SECTION 4. Eligibility.
Except as otherwise provided herein, officers, management, or highly
compensated employees of the Company and any Subsidiary, Parent, or Affiliate
(but excluding members of the Committee and David R. Pomije) are eligible to be
granted Options under the Plan. The Committee shall have the exclusive authority
to determine what constitutes management or a "highly compensated employee" and
in making such a determination shall take into consideration guidelines
established by the Department of Labor and court decisions as to what
constitutes a "select group of management or highly compensated employees."
SECTION 5. Stock Options.
Stock Options granted under the Plan may be of two types; (i) Incentive
Stock Options and (ii) Nonqualified Stock Options.
Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
<PAGE>
a. Exercise Price. Except as provided in Section 5 (i), the
exercise price per share of Stock purchasable under a Stock Option shall
be determined by the Committee at the time of grant but shall be not less
than 85% of the Fair Market Value of the Stock on the date of grant.
b. Option Term. Except as provided in Section 5(i) hereof, the
term of each Stock Option shall be fixed by the Committee.
c. Exercisability. Stock Options shall be exercisable at such time
or times and subject to such terms and conditions as shall be determined
by the Committee at or after grant; provided, however, that, except as
provided in Sections 5(f), (g), and (h) and Section 6, unless otherwise
determined by the Committee at or after grant, no Stock Option shall be
exercisable prior to the first anniversary date of the granting of the
Option. If the Committee provides, in its sole discretion, that any Stock
Option is exercisable only in installments, the Committee may waive such
installment exercise provisions at any time at or after grant in whole or
in part, based on such factors as the Committee shall determine, in its
sole discretion.
d. Method of Exercise. Subject to whatever installment exercise
provisions apply under Section 5(c). Stock Options may be exercised in
whole or in part at any time during the option period.
Payment of the exercise price may be made by check, note (if
approved by the Board), or such other instrument or method as the
Committee may accept. As determined by the Committee, in its sole
discretion, at or after grant, payment in full or in part may also be
made in the form of Stock already owned by the optionee (based on the
Fair Market Value of the Stock on the date the Option is exercised, as
determined by the Committee). With the prior approval of the Committee,
the exercise price of an Option may be paid through the delivery of Stock
acquired by successive exercises of the Option ("pyramiding").
No shares of Stock shall be issued until full payment therefor has been
made. An optionee shall generally have the rights to dividends or other
rights of a shareholder with respect to shares subject to the Option
after the optionee has given written notice of exercise, has paid in full
for such Stock, and, if requested, has given the representation described
in Section 9(a).
e. Nontransferability of Options. Subject to Section 5(i), no
Stock Option shall be transferable by the optionee otherwise than by will
or by the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act ("ERISA"), or the rules
thereunder, and all Stock Options shall be exercisable during the
optionee's lifetime only by the optionee.
<PAGE>
f. Termination by Death. Subject to Section 5(i), if an optionee's
employment by the Company or any Subsidiary, Parent, or Affiliate
terminates by reason of death, any Stock Option held by such optionee may
thereafter be exercised, to the extent such option was exercisable at the
time of death or on such accelerated basis as the Committee may determine
at or after grant (or as may be determined in accordance with procedures
established by the Committee), by the legal representative of the
optionee's estate or by any person who acquired the Option by will or the
laws of descent and distribution, for a period of one year (or such other
period as the Committee may specify at grant) from the date of such death
or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
g. Termination by Reason of Disability. Subject to Section 5(i),
if an optionee's employment by the Company or any Subsidiary, Parent, or
Affiliate terminates by reason of Disability, any Stock Option held by
such optionee may thereafter be exercised by the optionee, to the extent
it was exercisable at the time of termination or on such accelerated
basis as the Committee may determine at or after grant (or as may be
determined in accordance with procedures established by the Committee),
for a period of one year (or such other period as the Committee may
specify at grant) from the date of such termination of employment or
until the expiration of the stated term of such Stock Option, whichever
period is the shorter; provided, however, that, if the optionee dies
within such one-year period (or such other period as the Committee shall
specify at grant), any unexercised Stock Option held by such optionee
shall thereafter be exercisable to the extent to which it was exercisable
at the time of death for a period of one year from the date of such death
or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
h. Other Termination. Subject to Section 5(i), unless otherwise
determined by the Committee (or pursuant to procedures established by the
Committee) at or after grant, if an optionee's employment by the Company
or any Subsidiary, Parent, or Affiliate terminates for any reason other
than death or Disability, the Stock Option shall be exercisable, to the
extent otherwise then exercisable, for the lesser of three months from
the date of termination of employment or the balance of such Stock
Option's term.
i. Incentive Stock Options. Anything in the Plan to the contrary
notwithstanding,--no~term of this Plan relating to Incentive Stock
Options shall be interpreted, amended, or altered, nor shall any
discretion or authority granted under the Plan be so exercised, so as to
disqualify the Plan under Section 422 of the Code or, without the consent
of the optionee(s) affected, to disqualify any Incentive Stock Option
under such Section 422.
To the extent required for "incentive stock option" status under
Section 422 of the Code (taking into account applicable Internal Revenue
Service regulations and pronouncements and court decisions), the Plan
shall be deemed to provide:
(i) that Incentive Stock Options may be granted only to
employees of the Company or any Parent or Subsidiary of the
Company;
<PAGE>
(ii) that the exercise price of any incentive Stock Option shall
not be less than 100% of the Fair Market Value of the Stock
as of the date of grant (110% for an optionee who owns
stock possessing more than 10% of the voting power of all
classes of stock of the Company or of a Parent or
Subsidiary);
(iii) that the maximum term of exercise for any Incentive Stock
Option shall not exceed ten years (five years in the case
of an optionee who owns stock possessing more than 10% of
the voting power of all classes of stock of the Company or
of a Parent or Subsidiary); and
(iv) that Incentive Stock Options shall not be transferable by
the optionee otherwise than by will or the laws of descent
and distribution and shall be exercisable, during the
optionee's lifetime, only by the optionee.
To the extent permitted under Section 422 of the Code or
applicable regulations thereunder or any applicable Internal Revenue
Service pronouncements:
(i) if a Participant's employment is terminated by reason of
death or Disability and the portion of any Incentive Stock
Option that becomes exercisable during the post-termination
period specified in Section 5(f) or (g) hereof exceeds the
$100,000 limitation contained in Section 422(d) of the
Code, such excess shall be treated as a Nonqualified Stock
Option; and
(ii) if the exercise of an Incentive Stock Option is accelerated
by reason of a Change in Control or Potential Change in
Control, any portion of such Option that exceeds the
$100,000 limitation contained in Section 422(d) of the Code
shall be treated as a Nonqualified Stock Option.
j. No Tandem Options. Options consisting of both an Incentive
Stock Option and a Nonqualified Stock Option shall not be granted under
the Plan.
SECTION 6. Change in Control Provisions.
a. Impact of Event. In the event of:
(i) a "Change in Control" as defined in Section 6(b) or
(ii) a "Potential Change in Control" as defined in Section 6(c),
but only if and to the extent so determined by the
Committee or the Board at or after grant (subject to any
right of approval expressly reserved by the Committee or
the Board at the time of such determination), the following
acceleration and valuation provisions shall apply:
<PAGE>
(A) Any Option, if so provided in the related Option
Agreement, shall become fully exercisable and
vested.
(B) The value of all outstanding Options shall, unless
otherwise determined by the Committee in its sole
discretion at or after grant but prior to any Change
in Control, be cashed out on the basis of the
"Change in Control Price" as defined in Section 6(d)
as of the date such Change in Control or Potential
Change in Control is determined to have occurred or
such other date as the Committee may determine prior
to the Change in Control.
b. Definition of "Change in Control." For purposes of Section
6(a), a "Change in Control" means the happening of any of the following:
(i) When any "person" as defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) of
the Exchange Act, but excluding the Company or any
Subsidiary or Parent or any employee benefit plan sponsored
or maintained by the Company or any Subsidiary or Parent
(including any trustee of such plan acting as trustee),
directly or indirectly, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act, as amended
from time to time), of securities of the Company
representing 20 percent or more of the combined voting
power of the Company's then outstanding securities;
(ii) When, during any period of 24 consecutive months during the
existence of the Plan, the individuals who, at the
beginning of such period, constitute the Board (the
"Incumbent Directors") cease for any reason other than
death to constitute at least a majority thereof; provided,
however, that a director who was not a director at the
beginning of such 24-month period shall be deemed to have
satisfied such 24-month requirement (and be an Incumbent
Director) if such director was elected by, or on the
recommendation of, or with the approval of, at least 60% of
the directors who then qualified as Incumbent Directors
either actually (because they were directors at the
beginning of such 24-month period) or by prior operation of
this Section 6(b)(ii); or
(iii) The approval by the shareholders of an acquisition of the
Company by an entity other than the Company or a Subsidiary
or Parent through purchase of assets, or by merger, or
otherwise.
c. Definition of Potential Change in Control. For purposes of
Section 6(a), a "Potential Change in Control" means the happening of any
one of the following:
(i) The approval by the Board of an agreement by the Company,
the consummation of which would result in a Change in
Control of the Company as defined in Section 6(b); or
<PAGE>
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person, or group (other than the
Company or a Subsidiary or Parent or any Company employee
benefit plan (including any trustee of such plan acting as
such trustee)) of securities of the Company representing 5%
or more of the combined voting power of the Company's
outstanding securities and the adoption by the Board of a
resolution to the effect that a Potential Change in Control
of the Company has occurred for purposes of this Plan.
d. Change in control Price. For purposes of this Section 6,
"Change in Control Price" means the highest price per share paid in any
transaction reported on NASDAQ or, if the Company's Stock is listed on
NASDAQ/NMS or on a national securities exchange, NASDAQ/NMS or such
exchange, or paid or offered in any bona fide transaction related to the
potential or actual Change in Control of the Company at any time during
the 60-day period immediately preceding the occurrence of the Change in
Control (or, where applicable, the occurrence of the Potential Change in
Control event), in each case as determined by the Committee, except that,
in the case of Incentive Stock Options, such price shall be based only on
transactions reported for the date on which a cashout occurs under
Section 6(a)(B).
SECTION 7. Amendments and Termination.
The Board may amend, alter, discontinue, or terminate the Plan, or any
portion thereof, but no amendment, alteration, or discontinuation shall be made
which would impair the vested rights of a Participant under any Option
theretofore granted, without the Participant's consent, or which, without the
approval of the Company's shareholders, would:
a. except as expressly provided in this Plan, increase the total
number of shares reserved for the purpose of the Plan;
b. decrease the option price of any Incentive Stock Option to less
than 100% of the Fair Market Value on the date of grant;
c. permit the issuance of Stock prior to payment in full
therefore;
d. change the employees or class of employees eligible to
participate in the Plan;
e. extend the maximum option period under Section 5(i) of the
Plan.
The Committee may amend the terms of any Option theretofore granted,
prospectively or retroactively, but, subject to Section 3 above, no such
amendment shall impair the vested rights of any holder without the holder's
consent. The Committee may also substitute new Stock Options for previously
granted Stock Options (on a one-for-one or other basis), including previously
granted Stock Options having higher option exercise prices.
<PAGE>
Subject to the above provisions, the Board shall have broad authority to
amend the Plan to take into account changes in applicable securities and tax
laws and accounting rules, as well as other developments.
SECTION 8. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of the
Company, in its sole discretion, the Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Stock or payments in lieu of or with respect to Options hereunder;
provided, however, that, unless the Committee otherwise determines with the
consent of the affected Participant, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
SECTION 9. General Provisions.
a. The Committee may require each person purchasing shares
pursuant to a Stock Option to represent to and agree with the Company in
writing that the Participant is acquiring the shares without a view to
distribution thereof. The certificates for such shares may include any
legend which the Committee deems appropriate to reflect any restrictions
on transfer.
All certificates for shares of Stock or other securities delivered
under the Plan shall be subject to such stock transfer orders and other
restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange
Commission, any over-the-counter market on which the Stock is quoted, any
stock exchange upon which the Stock is then listed, and any applicable
federal or state securities law, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference
to such restrictions.
b. The Committee may at any time offer to buy out for a payment in
cash or Stock an Option previously granted, based on such terms and
conditions as the Committee shall establish and communicate to the
Participant at the time that such offer is made.
c. Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements
may be either generally applicable or applicable only in specific cases.
d. The adoption of the Plan shall not confer upon any employee of
the Company or any Subsidiary, Parent, or Affiliate any right to
continued employment with the Company or a Subsidiary, Parent, or
Affiliate, as the case may be, nor shall it interfere in any way with the
right of the Company or a Subsidiary, Parent, or Affiliate to terminate
the
<PAGE>
employment of any of its employees at any time.
e. No later than the date as of which an amount first becomes
includible in the gross income of the Participant for federal income tax
purposes with respect to any Option under the Plan, the Participant shall
pay to the Company, or make arrangements satisfactory to the Committee
regarding the payment of any federal, state, or local taxes of any kind
required by law to be withheld with respect to such amount. Unless
otherwise determined by the Committee, withholding obligations may be
settled with Stock, including Stock that is part of the Option that gives
rise to the withholding requirement. The obligations of the Company under
the Plan shall be conditional on such payment or arrangements, and the
Company and any Subsidiary, Parent, or Affiliate shall, to the extent
permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the Participant.
f. Election by any Participant subject to Section 16 of the
Exchange Act to satisfy tax withholding consequences by using Stock
acquired as part of the Option exercise giving rise to the tax
consequences shall be made during the period described in Rule 16b-3(e)
under the Exchange Act for the exercise of stock appreciation rights.
g. To the extent that federal laws (such as the Code, the Exchange
Act, or the Employee Retirement Income Security Act of 1974) do not
otherwise control, the Plan and all Options granted and actions taken
hereunder shall be governed by and construed in accordance with the laws
of the State of Minnesota.
h. No rights granted hereunder may be assigned, transferred,
pledged, or hypothecated (whether by operation of law or-otherwise) or be
subject to execution, attachment, or similar process. Any attempted
assignment, transfer, pledge, hypothecation, or other disposition or levy
of attachment or similar process upon any such right will be null and
void and without effect.
i. If any term, provision, or portion of this Plan or any Option
granted hereunder shall be deemed unenforceable or in violation of
applicable law, such term, provision, or portion of the Plan or the
Option shall be deemed severable from all other terms, provisions, or
portions of this Plan or the Option or any other Options granted
hereunder, which shall otherwise continue in full force and effect.
j. All Participants subject to Section 16 of the Exchange Act
shall be required to hold shares of Stock received upon exercise of an
Option granted pursuant to this Plan for six months from the date of
grant of the Option prior to any disposition of the Stock.
SECTION 10. Effective Date of Plan.
The Plan shall be effective as of May 28, 1993, subject to the approval
of the Plan by a majority of the votes cast by the holders of the Company's
Common Stock at a meeting held within twelve months of such date. Any grants
made under the Plan prior to such approval shall
<PAGE>
be effective when made (unless otherwise specified by the Committee at the time
of grant), but shall be conditioned on, and subject to, such approval of the
Plan by such shareholders.
SECTION 11. Term of Plan
No Incentive Stock Option shall be granted pursuant to the Plan on or
after the tenth anniversary of the date of adoption of the Plan, but Incentive
Stock Options granted prior to such tenth anniversary may extend beyond that
date. Nonqualified Stock Options may be granted at any time and for any period
unless otherwise provided by the Plan.
SECTION 12. Applicability to Grants under Other Company Plans.
Subject to approval of the Plan by the Shareholders as set forth in
Section 10 hereof, no further options shall be granted under the Employee
Incentive Stock Option Plan adopted January 2, 1992, which shall remain in
effect until all options granted pursuant thereto have been exercised or have
expired or been terminated by their terms.
The undersigned hereby certifies the foregoing constitutes the 1993 Stock
Option Plan of Funco, Inc. as adopted by the Board of Directors on May 28, 1993
and which is to be submitted for approval by the shareholders at the next annual
meeting of the shareholders on or about August 17, 1993.
FUNCO, INC.
By
----------------------------------------
David R. Pomije
Its Chief Executive Officer, President and
Secretary
Dated: May 28, 1993
<PAGE>
Amendment to the
Funco, Inc. 1993 Stock Option Plan
The Funco, Inc. 1993 Stock Option Plan dated May 28, 1993 ("Plan") is amended,
effective June 15, 1994, by the revision of Section 4 of the Plan in its
entirety to read as follows:
"SECTION 4. Eligibility.
Except as otherwise proved herein, officers, management, or highly
compensated employees of the Company and any Subsidiary, Parent, or
Affiliate (but excluding members of the Committee) are eligible to be
granted Options under the Plan. The Committee shall have the exclusive
authority to determine what constitutes management or a "highly
compensated employee" and in making such a determination shall take into
consideration guidelines established by the Department of Labor and court
decisions as to what constitutes a "select group of management or highly
compensated employees."
The Plan is further amended, effective June 15, 1994, by the addition of a new
paragraph at the end of Section 7 thereof to read as follows:
"All Options which are granted pursuant to an amendment to the Plan
requiring shareholder approval, and prior to the date on which such
amendment is approved by a majority of the voting stock of the Company
represented in person or by proxy at a duly held stockholders' meeting,
shall be effective when granted but contingent upon such approval. If
such approval is not received within 12 months after the earlier of the
effective date of the amendment or the date on which such amendment is
adopted by the Board, any such Options shall be void, and of no force or
effect."
Except as stated above, the Plan remains in full force and effect.
Amendment adopted June 15, 1994
<PAGE>
Amendment to the
Funco, Inc. 1993 Stock Option Plan
Pursuant to the terms of the 1993 Stock Option Plan, dated May 28, 1993, as
amended ("Plan"), of Funco, Inc. (the "Company"), there are currently reserved
for issuance pursuant to such Plan 523,182 shares of Common Stock of the
Company. In order to increase such authorized number of shares of Common Stock
by 300,000, the Plan is hereby amended, subject to shareholder approval,
effective August 2, 1996 by the revision of paragraph 1 of Section 3 of the Plan
to read in its entirety as follows:
"SECTION 3. Stock subject to Plan.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be, effective August 2, 1996, increased
by 300,000 shares to 823,182 shares of Stock, which number shall be
increased annually on May 1st, by an amount equal to 1% of the number of
shares of Stock outstanding as of the end of the most recently ended
fiscal year. Such shares may consist, in whole or in part, of authorized
and unissued shares or treasury shares. The number of shares of Stock
available for Incentive Stock Options shall be limited to 648,750."
Except as stated above, the Plan remains in full force and effect.
Amendment adopted August 2, 1996
<PAGE>
Amendment to the
Funco, Inc. 1993 Stock Option Plan
Pursuant to the terms of the 1993 Stock Option Plan, dated May 28, 1993, as
amended ("Plan"), of Funco, Inc. (the "Company"), there are currently reserved
for issuance pursuant to such Plan 945,595 shares of Common Stock of the
Company. In order to increase such authorized number of shares of Common Stock
by 300,000, the Plan is hereby amended, subject to shareholder approval,
effective July 31, 1998 by the revision of paragraph 1 of Section 3 of the Plan
to read in its entirety as follows:
"SECTION 3. Stock subject to Plan.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be, effective July 31, 1998, increased
by 300,000 shares to 1,245,595 shares of Stock, which number shall be
increased annually on May 1st, by an amount equal to 1% of the number of
shares of Stock outstanding as of the end of the most recently ended
fiscal year. Such shares may consist, in whole or in part, of authorized
and unissued shares or treasury shares. The number of shares of Stock
available for Incentive Stock Options shall be limited to 948,750."
Except as stated above, the Plan remains in full force and effect.
Amendment Adopted July 31, 1998
