<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 13, 2000
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
STROUDS, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 95-4107241
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
780 SOUTH NOGALES STREET 91748
CITY OF INDUSTRY, CALIFORNIA (Zip Code)
(Address of principal executive offices)
----------------
THE SECOND AMENDED AND RESTATED 1994 EQUITY PARTICIPATION PLAN OF
STROUDS, INC.
----------------
CHARLES R. CHINNI
CHIEF EXECUTIVE OFFICER
STROUDS, INC.
780 SOUTH NOGALES STREET
CITY OF INDUSTRY, CALIFORNIA 91748
(626) 912-2866
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPY TO:
PAUL D. TOSETTI, ESQ.
LATHAM & WATKINS
633 WEST FIFTH STREET, SUITE 4000
LOS ANGELES, CALIFORNIA 90071
(213) 485-1234
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------- -------------------- -------------------- -------------------- --------------------
PROPOSED
AMOUNT PROPOSED MAXIMUM
OF SHARES MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(3) FEE
- -------------------------------- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Common Stock,
$0.0001 par value (including
the Preferred Share Purchase
Rights attached thereto)(4)
671,604 $2.06 $1,383,504.24 $365.25
1,328,396 $2.13 $2,829,483.48 $746.98
--------- -------
Total 2,000,000 $1,112.23
---------
- -------------------------------- -------------------- -------------------- -------------------- --------------------
</TABLE>
(1) Covers 2,000,000 additional shares available for issuance under The
Second Amended and Restated 1994 Equity Participation Plan (the "Plan")
which was approved by the shareholders of the registrant on January 26,
2000. The Plan authorizes the issuance of a maximum of 3,680,000
shares. However, the offer and
<PAGE>
sale of 1,680,000 of the shares, which have been or may be issued upon
exercise of options under the Plan, have previously been registered
pursuant to Form S-8 Registration Statement Nos. 33-87608, 33-87610 and
333-58539. The newly registered shares are comprised of: (A) 671,604
shares issuable at an exercise price of $2.06 pursuant to options
outstanding under the Plan; and (B) 1,328,396 shares that are not yet
subject to outstanding options under the Plan. Pursuant to Rule 416
under the Securities Act of 1933, as amended, the amount registered
hereunder includes an indeterminate number of shares of our common
stock that may be issued in accordance with the provisions of the Plan,
as amended in the event of any change in the outstanding shares of our
common stock, including a stock dividend or stock split.
(2) The Proposed Maximum Offering Price Per Share is based upon: (A) the
exercise price per share ($2.06) of outstanding options for 671,604
shares; and (B) for the remaining 1,328,396 shares, the average of
the high and low sales price ($2.13) on April 11, 2000 for the
registrant's common stock as reported on the Nasdaq, pursuant to
rule 457(h) of the Securities Act.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 of the Securities Act.
(4) Shares of our common stock being registered hereby are accompanied by
preferred share purchase rights. Until the occurrence of specific
prescribed events, such rights are not exercisable, are evidenced by
the certificates for our common stock and will be transferred along
with and only with our common stock. Upon the occurrence of such
prescribed events, separate rights certificates will be issued
representing one right for each share of common stock held, subject to
adjustment pursuant to anti-dilution provisions.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
This Registration Statement on Form S-8 registers the offer and sale of
an additional 2,000,000 shares of Common Stock of Strouds, Inc. (the "Company")
for issuance under the Plan. The contents of the prior Registration Statements
on Form S-8 of the Company relating to the Plan, File Nos.
33-87608, 33-87610 and 333-58539, are incorporated herein by reference.
Item 3. Incorporation of Documents by Reference
The following documents filed with the Securities and Exchange
Commission (the "Commission") by the Strouds, Inc., a Delaware corporation (the
"Company"), are incorporated by reference as of their respective dates in this
Registration Statement on Form S-8 (the "Registration Statement"):
(a) The Company's Annual Report on Form 10-K and Form 10-K/A for
the fiscal year ended February 27, 1999;
(b) The Company's Quarterly Reports on Form 10-Q for the quarters
ended May 29, 1999, August 28, 1999 and November 27, 1999;
(c) The Company's Proxy Statements dated (i) May 28, 1999 relating
to the Annual Meeting of Stockholders held on June 30, 1999
and (ii) December 13, 1999 relating to the Special Meeting of
Stockholders held on January 26, 2000;
(d) The Company's Current Reports on Form 8-K dated February 1,
2000;
(e) The Company's Prospectus dated October 11, 1994, filed in
connection with the Registration Statement referred to in Item
3(f) below pursuant to Rule 424(b) under the Securities Act of
1933, as amended (the "Securities Act");
(f) Description of the Company's Common Stock contained in the
Company's Registration Statement on Form S-1 filed with the
Commission on July 29, 1994 (Registration No. 33-82090), as
amended by Amendment No. 1 filed with the Commission on
September 13, 1994, Amendment No. 2 filed with the Commission
on October 5, 1994 and a Prospectus dated October 11, 1994
filed with the Commission on October 13, 1994; and
(g) Description of the Company's preferred share purchase rights
contained in the Company's Current Reports on Form 8-K dated
December 1, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Securities Exchange Act of 1934, as amended, after the date
of this Registration Statement and prior to
2
<PAGE>
the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, are incorporated by reference in this Registration Statement and are a
part hereof from the date of filing such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Registration Statement.
Item 8. Exhibits
The following is a list of exhibits filed as part of this Registration
Statement, which are incorporated herein:
*4.1 The Second Amended and Restated 1994 Equity Participation Plan
of Strouds, Inc.
*5.1 Opinion of Latham & Watkins
*23.1 Consent of KPMG LLP
*23.2 Consent of Latham & Watkins (included as part of Exhibit 5.1)
*24.1 Power of Attorney (included on the signature page of this
Registration Statement)
- ---------------------------
*Filed herewith
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Company 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 Industry, State of California, on this 13th day
of April 2000.
STROUDS, INC.
By: /s/ Charles R. Chinni
---------------------
Charles R. Chinni
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Charles Chinni and Wilfred C. Stroud and each or either of them, his true and
lawful attorney-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act, as amended, and to file the same, with
exhibits and schedules thereto, and other documents in connection therewith,
with the Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
necessary or desirable to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all
3
<PAGE>
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-8 has been signed below by the following
persons in their capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Chairman of the Board, President, Chief April 13, 2000
Executive Officer and Director
/s/ Charles R. Chinni (Principal Executive Officer)
-----------------------------------
Charles R. Chinni
/s/ Wilfred C. Stroud Director and Chairman Emeritus April 13, 2000
-----------------------------------
Wilfred C. Stroud
/s/ Robert M. Menar Chief Operating Officer and Director April 13, 2000
-----------------------------------
Robert M. Menar
/s/ Larry R. Bemis Director April 13, 2000
-----------------------------------
Larry R. Bemis
/s/ Dale D. Achabal Director April 13, 2000
-----------------------------------
Dale D. Achabal
/s/ Marco F. Weiss Director April 13, 2000
-----------------------------------
Marco F. Weiss
/s/ Richard F. Clayton Director April 1, 2000
-----------------------------------
Richard F. Clayton
/s/ Marshall Geller Director April 13, 2000
-----------------------------------
Marshall Geller
</TABLE>
4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
------- ----
<S> <C> <C>
*4.1 The Second Amended and Restated 19994 Equity Participation Plan
of Strouds, Inc.
*5.1 Opinion of Latham & Watkins
*23.1 Consent of KPMG LLP
*23.2 Consent of Latham & Watkins (included as part of Exhibit 5.1)
*24.1 Power of Attorney (included on the signature page of this
Registration Statement)
</TABLE>
---------------------------
*Filed herewith
5
<PAGE>
EXHIBIT 4.1
THE SECOND AMENDED AND RESTATED
1994 EQUITY PARTICIPATION PLAN
OF
STROUDS, INC.
Strouds, Inc., a Delaware corporation, has adopted The Second Amended
and Restated 1994 Equity Participation Plan of Strouds, Inc. (the "Plan"),
effective October 20, 1999, for the benefit of its eligible employees,
Consultants and directors. The Plan consists of two plans, one for the benefit
of key Employees (as such term is defined below) and Consultants (as such term
is defined below) and one for the benefit of Independent Directors (as such term
is defined below).
The purposes of this Plan are as follows:
(1) To amend and restate The Amended and Restated 1994 Equity
Participation Plan of New Stroud's Inc. (the "Old Plan"), thereby canceling and
replacing the Old Plan and any other preceding plans.
(2) To provide an additional incentive for directors, key
Employees and Consultants to further the growth, development and financial
success of the Company by personally benefiting through the ownership of Company
stock and/or rights which recognize such growth, development and financial
success.
(3) To enable the Company to obtain and retain the services of
directors, key Employees and Consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company and/or rights which will reflect the growth, development and financial
success of the Company.
ARTICLE I.
DEFINITIONS
1.1 GENERAL. Wherever the following terms are used in this Plan they
shall have the meaning specified below, unless the context clearly indicates
otherwise.
1.2 AWARD LIMIT. "Award Limit" shall mean 1,000,000 shares of Common
Stock.
1.3 BOARD. "Board" shall mean the Board of Directors of the Company.
1.4 CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.5 COMMITTEE. "Committee" shall mean the Compensation Committee of the
Board, or a subcommittee of the Board, appointed as provided in Section 9.1.
1.6 COMMON STOCK. "Common Stock" shall mean the common stock of the
Company, par value $.0001 per share, and any equity security of the Company
issued or authorized to be issued in the future, but excluding any warrants,
options or other rights to purchase Common Stock. Debt securities of the Company
convertible into Common Stock shall be deemed equity securities of the Company.
1.7 COMPANY. "Company" shall mean Strouds, Inc., a Delaware
corporation.
1.8 CONSULTANT. "Consultant" shall mean any consultant or adviser if:
(i) the consultant or adviser renders bona fide services to the Company; (ii)
the services rendered by the consultant or adviser are not in connection with
the offer or sale of securities in a capital-raising transaction and do not
directly or indirectly promote or maintain a market for the Company's
securities; and (iii) the consultant or adviser is a natural person who has
contracted directly with the Company to render such services.
1.9 DEFERRED STOCK. "Deferred Stock" shall mean Common Stock awarded
under Article VII of this Plan.
1.10 DIRECTOR. "Director" shall mean a member of the Board.
1.11 DIVIDEND EQUIVALENT. "Dividend Equivalent" shall mean a right to
receive the equivalent
6
<PAGE>
value (in cash or Common Stock) of dividends paid on Common Stock, awarded under
Article VII of this Plan.
1.12 EMPLOYEE. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.
1.13 EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
1.14 FAIR MARKET VALUE. "Fair Market Value" of a share of Common Stock
as of a given date shall be (i) the closing price of a share of Common Stock on
the principal exchange on which shares of Common Stock are then trading, on the
date of grant, or if shares were not traded on such date, then on the closest
preceding date on which a trade occurred, or (ii) if Common Stock is not traded
on an exchange, the mean between the closing representative bid and asked prices
for the Common Stock on such date as reported by NASDAQ or, if NASDAQ is not
then in existence, by its successor quotation system; or (iii) if Common Stock
is not publicly traded, the Fair Market Value of a share of Common Stock as
established by the Committee (or the Board, in the case of Options granted to
Independent Directors) acting in good faith.
1.15 GRANTEE. "Grantee" shall mean an Employee or Consultant granted a
Performance Award, Dividend Equivalent, Stock Payment or Stock Appreciation
Right, or an award of Deferred Stock, under this Plan.
1.16 INCENTIVE STOCK OPTION. "Incentive Stock Option" shall mean an
option which conforms to the applicable provisions of Section 422 of the Code
and which is designated as an Incentive Stock Option by the Committee.
1.17 INDEPENDENT DIRECTOR. "Independent Director" shall mean a member
of the Board who is not an Employee of the Company.
1.18 NON-QUALIFIED STOCK OPTION. "Non-Qualified Stock Option" shall
mean an Option which is not designated as an Incentive Stock Option by the
Committee.
1.19 OPTION. "Option" shall mean a stock option granted under Article
III of this Plan. An Option granted under this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option;
PROVIDED, HOWEVER, that Options granted to Independent Directors and Consultants
shall be Non-Qualified Stock Options.
1.20 OPTIONEE. "Optionee" shall mean an Employee, Consultant or
Independent Director granted an Option under this Plan.
1.21 PERFORMANCE AWARD. "Performance Award" shall mean a cash bonus,
stock bonus or other performance or incentive award that is paid in cash, Common
Stock or a combination of both, awarded under Article VII of this Plan.
1.22 PLAN. "Plan" shall mean The Second Amended and Restated 1994
Equity Participation Plan of Strouds, Inc.
1.23 RESTRICTED STOCK. "Restricted Stock" shall mean Common Stock
awarded under Article VI of this Plan.
1.24 RESTRICTED STOCKHOLDER. "Restricted Stockholder" shall mean an
Employee or Consultant granted an award of Restricted Stock under Article VI of
this Plan.
1.25 RULE 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under
the Exchange Act, as such Rule may be amended from time to time.
1.26 STOCK APPRECIATION RIGHT. "Stock Appreciation Right" shall mean a
stock appreciation right granted under Article VIII of this Plan.
1.27 STOCK OPTION AGREEMENT. "Stock Option Agreement" shall mean a
Stock Option Agreement or a certificate as each is defined in Section 4.1.
1.28 STOCK PAYMENT. "Stock Payment" shall mean (i) a payment in the
form of shares of Common Stock, or (ii) an option or other right to purchase
shares of Common Stock, as part of a deferred compensation arrangement, made in
lieu of all or any portion of the compensation, including without
7
<PAGE>
limitation, salary, bonuses and commissions, that would otherwise become payable
to a key Employee or Consultant in cash, awarded under Article VII of this Plan.
1.29 SUBSIDIARY. "Subsidiary" shall mean any corporation in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing 50 percent or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
1.30 TERMINATION OF CONSULTANCY. "Termination of Consultancy" shall
mean the time when the engagement of Optionee, Grantee or Restricted Stockholder
as a Consultant to the Company or a Subsidiary is terminated for any reason,
with or without cause, including without limitation, resignation, discharge,
death or retirement; but excluding terminations where there is a simultaneous
commencement of employment with the Company or any Subsidiary. The Committee, in
its absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Consultancy, including, but not by way of limitation,
the question of whether a Termination of Consultancy resulted from a discharge
for good cause, and all questions of whether particular leaves of absence
constitute Terminations of Employment. Notwithstanding any other provision of
this Plan, the Company or any Subsidiary has an absolute and unrestricted right
to terminate a Consultant's service at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided otherwise in writing.
1.31 TERMINATION OF DIRECTORSHIP. "Termination of Directorship"
shall mean the time when an Optionee who is an Independent Director ceases to be
a Director for any reason, including, but not by way of limitation, a
termination by resignation, failure to be elected, death or retirement. The
Board, in its sole and absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Directorship.
1.32 TERMINATION OF EMPLOYMENT "Termination of Employment" shall
mean the time when the employee-employer relationship between the Optionee,
Grantee or Restricted Stockholder and the Company or any Subsidiary is
terminated for any reason, including, but not by way of limitation, a
termination by resignation, discharge, death, disability or retirement; but
excluding (i) terminations where there is a simultaneous reemployment,
continuing employment of an Optionee, Grantee or Restricted Stockholder by the
Company or any Subsidiary, (ii) at the discretion of the Committee, terminations
which result in a temporary severance of the employee-employer relationship, and
(iii) at the discretion of the Committee, terminations which are followed by the
simultaneous establishment of a consulting relationship by the Company or a
Subsidiary with the former employee. The Committee, in its absolute discretion,
shall determine the effect of all matters and questions relating to Termination
of Employment, including, but not by way of limitation, the question of whether
a Termination of Employment resulted from a discharge for good cause, and all
questions of whether particular leaves of absence constitute Terminations of
Employment; PROVIDED, HOWEVER, that, with respect to Incentive Stock Options, a
leave of absence, change in status from an employee to an independent contractor
or other change in the employee-employer relationship shall constitute a
Termination of Employment if, and to the extent that, such leave of absence,
change in status or other change interrupts employment for the purposes of
Section 422(a)(2) of the Code and the then applicable regulations and revenue
rulings under said Section. Notwithstanding any other provision of this Plan,
the Company or any Subsidiary has an absolute and unrestricted right to
terminate an Employee's employment at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided otherwise in writing.
ARTICLE II.
SHARES SUBJECT TO PLAN
2.1 SHARES SUBJECT TO PLAN.
(a) The shares of stock subject to Options, awards of Restricted Stock,
Performance Awards, Dividend Equivalents, awards of Deferred Stock, Stock
Payments or Stock Appreciation Rights shall be Common Stock, par value $.0001
per share. The aggregate number of shares which may be issued upon exercise of
such options or rights or upon any such awards under the Plan shall not exceed
three million-six hundred-eighty thousand (3,680,000). The shares of Common
Stock issuable upon exercise of such options or rights or upon any such awards
may be either previously authorized but unissued shares or treasury shares.
(b) The maximum number of shares which may be subject to Options or
Stock Appreciation Rights granted under the Plan to any individual in any
calendar year shall not exceed the Award Limit. To the extent required by
Section 162(m) of the Code, shares subject to Options which are cancelled
continue to be counted against the Award Limit.
2.2 UNEXERCISED OPTIONS AND OTHER RIGHTS. If any Option, or other right
to acquire shares of Common Stock under any other award under this Plan, expires
or is cancelled without having been fully exercised, the number of shares
subject to such Option or other right but as to which such Option or other right
was not exercised prior to its expiration or cancellation may again be optioned,
granted or awarded
8
<PAGE>
hereunder, subject to the limitations of Section 2.1.
ARTICLE III.
GRANTING OF OPTIONS
3.1 ELIGIBILITY. Subject to the Award Limit, any Employee or Consultant
selected by the Committee pursuant to Section 3.4(a)(i) shall be eligible to be
granted an Option. Each Independent Director of the Company shall be eligible to
be granted Options at the times and in the manner set forth in Section 3.4(d).
3.2 DISQUALIFICATION FOR STOCK OWNERSHIP. No person may be granted an
Incentive Stock Option under this Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
then existing Subsidiary unless such Incentive Stock Option conforms to the
applicable provisions of Section 422 of the Code.
3.3 QUALIFICATION OF INCENTIVE STOCK OPTIONS. No Incentive Stock Option
shall be granted unless such Option, when granted, qualifies as an "incentive
stock option" under Section 422 of the Code. No Incentive Stock Option shall be
granted to any person who is not an Employee.
3.4 GRANTING OF OPTIONS.
(a) The Committee shall from time to time, in its absolute discretion,
and subject to the applicable limitations of this Plan:
(i) Determine which Employees are key Employees and select
from among the key Employees or Consultants (including Employees or
Consultants who have previously received Options or other awards under
this Plan) such of them as in its opinion should be granted Options;
(ii) Subject to the Award Limit, determine the number of
shares to be subject to such Options granted to the selected key
Employees or Consultants;
(iii) Determine whether such Options are to be Incentive Stock
Options or Non-Qualified Stock Options and whether such Options are to
qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options,
consistent with this Plan; provided, however, that the terms and
conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the
Code.
(b) Upon the selection of a key Employee or Consultant to be granted an
Option, the Committee shall instruct the Secretary of the Company to issue the
Option and may impose such conditions on the grant of the Option as it deems
appropriate.
(c) Any Incentive Stock Option granted under this Plan may be modified
by the Committee to disqualify such option from treatment as an "incentive stock
option" under Section 422 of the Code.
(d) During the term of the Plan, each person who is an Independent
Director as of the date of the initial public offering of Common Stock
automatically shall be granted an option to purchase ten thousand (10,000)
shares of Common Stock (subject to adjustment as provided in Section 10.3) on
the date of such initial public offering. When a person is initially elected to
the Board following the date of the initial public offering of Common Stock and
is then an Independent Director, each such new Independent Director
automatically shall (i) be granted an Option to purchase ten thousand (10,000)
shares of Common Stock (subject to adjustment as provided in Section 10.3) on
the date of his or her election to the Board, and (ii) an Option to purchase
10,000 shares of Common Stock (subject to adjustment as provided in Section
10.3) on the date of each annual meeting of stockholders after such initial
election at which the Independent Director is re-elected to the Board. Members
of the Board who are Employees who subsequently retire from the Company and
remain on the Board will not receive an Option grant pursuant to Section
3.4(d)(i) of the preceding sentence, but to the extent that they are otherwise
eligible, will receive, after retirement from the Company, Options as described
in clause (ii) of the preceding sentence. All of the foregoing Option grants
authorized by this Section 3.4(d) are subject to stockholder approval of the
Plan.
ARTICLE IV.
9
<PAGE>
TERMS OF OPTIONS
4.1 OPTION AGREEMENT. Each Option shall be evidenced by either a
written Stock Option Agreement, which shall be executed by the Optionee and an
authorized officer of the Company and which shall contain such terms and
conditions as the Committee (or the Board, in the case of Options granted to
Independent Directors) shall determine, consistent with this Plan, or a
certificate which shall be executed by an authorized officer of the Company and
which shall contain certain basic terms and conditions of the Option as the
Committee (or the Board, in the case of Options granted to Independent Directors
shall determine, consistent with this Plan). Stock Option Agreements evidencing
Options intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may
be necessary to meet the applicable provisions of Section 162(m) of the Code.
Stock Option Agreements evidencing Incentive Stock Options shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 422 of the Code.
4.2 OPTION PRICE. The price per share of the shares subject to each
Option shall be equal to 100% the Fair Market Value of a share of Common Stock
on the date the Option is granted and in the case of Incentive Stock Options
such price shall not be less than the greater of: (i) 100% of the Fair Market
Value of a share of Common Stock on the date the Option is granted, or (ii) 110%
of the fair market value of a share of Common Stock on the date such Option is
granted in the case of an individual then owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary.
4.3 OPTION TERM. The term of an Option, other than an Option granted to
an Independent Director, shall be set by the Committee in its discretion;
PROVIDED, HOWEVER, that, (a) in the case of Incentive Stock Options, the term
shall not be more than ten (10) years from the date the Incentive Stock Option
is granted, or five (5) years from such date if the Incentive Stock Option is
granted to an individual then owning (within the meaning of Section 424(d) of
the Code) more than 10% of the total combined voting power of all classes of
stock of the Company or any Subsidiary and (b) in the case of a Non-Qualified
Stock Option, the term shall not be more than ten (10) years and one (1) day
from the date the Non-Qualified Stock Option is granted. In the case of an
Option granted to an Independent Director, the term of each such Option shall be
ten years without variation or acceleration hereunder, except as provided in
Section 10.4.
4.4 OPTION VESTING.
(a) The period during which the right to exercise an Option in whole or
in part vests in the Optionee shall be set by the Committee and the Committee
may determine that an Option may not be exercised in whole or in part for a
specified period after it is granted; PROVIDED, HOWEVER, that no Option granted
to a person subject to Section 16 of the Exchange Act shall be exercisable until
at least six months have elapsed from (but excluding) the date on which the
Option was granted. At any time after grant of an Option, the Committee (or the
Board) may, in its sole discretion and subject to whatever terms and conditions
it selects, accelerate the period during which an Option vests. Notwithstanding
the foregoing, all Options granted to Independent Directors shall become
exercisable in cumulative annual installments of 25% on each of the first,
second, third and fourth anniversaries of the date of Option grant and any
Option granted to an Independent Director shall become immediately exercisable
in full upon the retirement of the Independent Director in accordance with the
Company's retirement policy applicable to Directors.
(b) No portion of an Option which is unexercisable at Termination of
Employment, Termination of Directorship or Termination of a Consultancy, as
applicable, shall thereafter become exercisable, except as may be otherwise
provided by the Committee with respect to Options granted to Employees or
Consultants, either in the Stock Option Agreement or in a resolution adopted
following the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by an Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any Subsidiary) exceeds
$100,000, such Options shall be treated as Non-Qualified Options to the extent
required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking Options into account in the order in which
they were granted. For purposes of this Section 4.4(c), the Fair Market Value of
stock shall be determined as of the time the Option with respect to such stock
is granted.
4.5 CONSIDERATION. In consideration of the granting of an Option, the
Optionee shall agree, in the written Stock Option Agreement, to remain in the
employ of (or to consult for or to serve as an Independent Director of, as
applicable) the Company or any Subsidiary for a period of at least one year
after the Option is granted (or until the next annual meeting of stockholders of
the Company, in the case of an Independent Director). Nothing in this Plan or in
any Stock Option Agreement hereunder shall
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confer upon any Optionee any right to continue in the employ of, or as a
Consultant for, the Company or any Subsidiary, or as a director of the Company,
or shall interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Optionee at
any time for any reason whatsoever, with or without good cause.
ARTICLE V.
EXERCISE OF OPTIONS
5.1 PARTIAL EXERCISE. An exercisable Option may be exercised in whole
or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Committee (or the Board, in the case of Options
granted to Independent Directors) may require that, by the terms of the Option,
a partial exercise be with respect to a minimum number of shares.
5.2 MANNER OF EXERCISE. All or a portion of an exercisable Option shall
be deemed exercised upon delivery of all of the following to the Secretary of
the Company or his office:
(a) A written notice complying with the applicable rules established by
the Committee or the Board stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Optionee or other person then
entitled to exercise the Option or such portion;
(b) Such representations and documents as the Committee or the Board,
in its absolute discretion, deems necessary or advisable to effect compliance
with all applicable provisions of the Securities Act of 1933, as amended, and
any other federal or state securities laws or regulations. The Committee or
Board may, in its absolute discretion, also take whatever additional actions it
deems appropriate to effect such compliance including, without limitation,
placing legends on share certificates and issuing stop-transfer notices to
agents and registrars;
(c) In the event that the Option shall be exercised pursuant to Section
10.1 by any person or persons other than the Optionee, appropriate proof of the
right of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is exercised. However, at
the discretion of the Committee (or the Board, in the case of Options granted to
Independent Directors), the terms of the Option may (i) allow a delay in payment
up to thirty (30) days from the date the Option, or portion thereof, is
exercised; (ii) allow payment, in whole or in part, through the delivery of
shares of Common Stock owned by the Optionee, duly endorsed for transfer to the
Company with a Fair Market Value on the date of delivery equal to the aggregate
exercise price of the Option or exercised portion thereof; (iii) allow payment,
in whole or in part, through the surrender of shares of Common Stock then
issuable upon exercise of the Option having a Fair Market Value on the date of
Option exercise equal to the aggregate exercise price of the Option or exercised
portion thereof; (iv) allow payment, in whole or in part, through the delivery
of property of any kind which constitutes good and valuable consideration; (v)
allow payment, in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Committee or the Board, or (vi) allow payment
through any combination of the consideration provided in the foregoing
subparagraphs (ii), (iii), (iv) and (v). In the case of a promissory note, the
Committee or the Board may also prescribe the form of such note and the security
to be given for such note. The Option may not be exercised, however, by delivery
of a promissory note or by a loan from the Company when or where such loan or
other extension of credit is prohibited by law.
5.3 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The Company shall not
be required to issue or deliver any certificate or certificates for shares of
stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations of
the Securities and Exchange Commission or any other governmental regulatory body
which the Committee or Board shall, in its absolute discretion, deem necessary
or advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee or Board shall, in its absolute
discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise
of the Option as the
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Committee or Board may establish from time to time for reasons of administrative
convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.
5.4 RIGHTS AS STOCKHOLDERS. The holders of Options shall not be, nor
have any of the rights or privileges of, stockholders of the Company in respect
of any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.
5.5 OWNERSHIP AND TRANSFER RESTRICTIONS. The Committee (or Board, in
the case of Options granted to Independent Directors), in its absolute
discretion, may impose such restrictions on the ownership and transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction shall be set forth in the respective Stock Option Agreement
and may be referred to on the certificates evidencing such shares. The Committee
may require the Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(i) two years from the date of granting such Option to such Employee or (ii) one
year after the transfer of such shares to such Employee. The Committee may
direct that the certificates evidencing shares acquired by exercise of an Option
refer to such requirement to give prompt notice of disposition.
ARTICLE VI.
AWARD OF RESTRICTED STOCK
6.1 AWARD OF RESTRICTED STOCK.
(a) The Committee shall from time to time, in its absolute discretion:
(i) Select from among the key Employees or Consultants
(including Employees or Consultants who have previously received other
awards under this Plan) such of them as in its opinion should be
awarded Restricted Stock; and
(ii) Determine the purchase price, if any, and other terms and
conditions applicable to such Restricted Stock, consistent with this
Plan.
(b) The Committee shall establish the purchase price, if any, and form
of payment for Restricted Stock; PROVIDED, HOWEVER, that such purchase price
shall be no less than the par value of the Common Stock to be purchased. In all
cases, legal consideration shall be required for each issuance of Restricted
Stock.
(c) Upon the selection of a key Employee or Consultant to be awarded
Restricted Stock, the Committee shall instruct the Secretary of the Company to
issue such Restricted Stock and may impose such conditions on the issuance of
such Restricted Stock as it deems appropriate.
6.2 RESTRICTED STOCK AGREEMENT. Restricted Stock shall be issued only
pursuant to a written Restricted Stock Agreement, which shall be executed by the
selected key Employee or Consultant and an authorized officer of the Company and
which shall contain such terms and conditions as the Committee shall determine,
consistent with this Plan.
6.3 CONSIDERATION. As consideration for the issuance of Restricted
Stock, in addition to payment of any purchase price, the Restricted Stockholder
shall agree, in the written Restricted Stock Agreement, to remain in the employ
of, or to consult for, the Company or any Subsidiary for a period of at least
one year after the Restricted Stock is issued. Nothing in this Plan or in any
Restricted Stock Agreement hereunder shall confer on any Restricted Stockholder
any right to continue in the employ of, or as a Consultant for, the Company or
any Subsidiary or shall interfere with or restrict in any way the rights of the
Company and any Subsidiary, which are hereby expressly reserved, to discharge
any Restricted Stockholder at any time for any reason whatsoever, with or
without good cause.
6.4 RIGHTS AS STOCKHOLDERS. Upon delivery of the shares of Restricted
Stock to the escrow holder pursuant to Section 6.7, the Restricted Stockholder
shall have, unless otherwise provided by the Committee, all the rights of a
stockholder with respect to said shares, subject to the restrictions in his
Restricted Stock Agreement, including the right to receive all dividends and
other distributions paid or made with respect to the shares; PROVIDED, HOWEVER,
that in the discretion of the Committee, any extraordinary distributions with
respect to the Common Stock shall be subject to the restrictions set forth in
Section 6.5.
6.5 RESTRICTION. All shares of Restricted Stock issued under this Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock
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splits or any other form of recapitalization) shall, in the terms of each
individual Restricted Stock Agreement, be subject to such restrictions as the
Committee shall provide, which restrictions may include, without limitation,
restrictions concerning voting rights and transferability and restrictions based
on duration of employment with the Company, Company performance and individual
performance; PROVIDED, HOWEVER, that no share of Restricted Stock granted to a
person subject to Section 16 of the Exchange Act shall be sold, assigned or
otherwise transferred until at least six months have elapsed from (but
excluding) the date on which the Restricted Stock was issued, and PROVIDED,
FURTHER, that by a resolution adopted after the Restricted Stock is issued, the
Committee may, on such terms and conditions as it may determine to be
appropriate, remove any or all of the restrictions imposed by the terms of the
Restricted Stock Agreement. Restricted Stock may not be sold or encumbered until
all restrictions are terminated or expire. Unless provided otherwise by the
Committee, if no consideration was paid by the Restricted Stockholder upon
issuance, a Restricted Stockholder's rights in unvested Restricted Stock shall
lapse upon Termination of Employment or, if applicable, upon the termination of
his consulting relationship with the Company.
6.6 REPURCHASE OF RESTRICTED STOCK. The Committee shall provide in the
terms of each individual Restricted Stock Agreement that the Company shall have
the right to repurchase from the Restricted Stockholder the Restricted Stock
then subject to restrictions under the Restricted Stock Agreement immediately
upon a Termination of Employment or, if applicable, upon a termination of any
consulting relationship between the Restricted Stockholder and the Company, at a
cash price per share equal to the price paid by the Restricted Stockholder for
such Restricted Stock; PROVIDED, HOWEVER, that provision may be made that no
such right of repurchase shall exist in the event of a Termination of Employment
or Termination of Consultancy without cause, or following a change in control of
the Company or because of the Restricted Stockholder's retirement, death or
disability, or otherwise.
6.7 ESCROW. The Secretary of the Company or such other escrow holder as
the Committee may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Restricted Stock Agreement with respect to the shares evidenced by such
certificate expire or shall have been removed.
6.8 LEGEND. In order to enforce the restrictions imposed upon shares of
Restricted Stock hereunder, the Committee shall cause a legend or legends to be
placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Restricted Stock Agreements, which legend or
legends shall make appropriate reference to the conditions imposed thereby.
ARTICLE VII.
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
DEFERRED STOCK, STOCK PAYMENTS
7.1 PERFORMANCE AWARDS. Any key Employee or Consultant selected by the
Committee may be granted one or more Performance Awards. The value of such
Performance Awards may be linked to the market value, book value, net profits or
other measure of the value of Common Stock or other specific performance
criteria determined appropriate by the Committee, in each case on a specified
date or dates or over any period or periods determined by the Committee, or may
be based upon the appreciation in the market value, book value, net profits or
other measure of the value of a specified number of shares of Common Stock over
a fixed period or periods determined by the Committee. In making such
determinations, the Committee shall consider (among such other factors as it
deems relevant in light of the specific type of award) the contributions,
responsibilities and other compensation of the particular key Employee or
Consultant.
7.2 DIVIDEND EQUIVALENTS. Any key Employee or Consultant selected by
the Committee may be granted Dividend Equivalents based on the dividends
declared on Common Stock, to be credited as of dividend payment dates, during
the period between the date an Option, Stock Appreciation Right, Deferred Stock
or Performance Award is granted, and the date such Option, Stock Appreciation
Right, Deferred Stock or Performance Award is exercised, vests or expires, as
determined by the Committee. Such Dividend Equivalents shall be converted to
cash or additional shares of Common Stock by such formula and at such time and
subject to such limitations as may be determined by the Committee.
7.3 STOCK PAYMENTS. Any key Employee or Consultant selected by the
Committee may receive Stock Payments in the manner determined from time to time
by the Committee. The number of shares shall be determined by the Committee and
may be based upon the Fair Market Value, book value, net profits or other
measure of the value of Common Stock or other specific performance criteria
determined appropriate by the Committee on the date such Stock Payment is made
or on any date thereafter.
7.4 DEFERRED STOCK. Any key Employee or Consultant selected by the
Committee may be granted an award of Deferred Stock in the manner determined
from time to time by the Committee. The number of shares of Deferred Stock shall
be determined by the Committee and may be linked to the market value, book
value, net profits or other measure of the value of Common Stock or other
specific performance criteria determined appropriate by the Committee, in each
case on a specified date or dates
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or over any period or periods determined by the Committee. Common Stock
underlying a Deferred Stock award will not be issued until the Deferred Stock
award has vested, pursuant to a vesting schedule or performance criteria set by
the Committee. Unless otherwise provided by the Committee, a Grantee of Deferred
Stock shall have no rights as a Company stockholder with respect to such
Deferred Stock until such time as the award has vested and the Common Stock
underlying the award has been issued.
7.5 PERFORMANCE AWARD AGREEMENT, DIVIDEND EQUIVALENT AGREEMENT,
DEFERRED STOCK AGREEMENT, STOCK PAYMENT AGREEMENT. Each Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment shall be
evidenced by a written agreement, which shall be executed by the Grantee and an
authorized Officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan.
7.6 TERM. The term of a Performance Award, Dividend Equivalent, award
of Deferred Stock and/or Stock Payment shall be set by the Committee in its
discretion.
7.7 EXERCISE UPON TERMINATION OF EMPLOYMENT. A Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment is exercisable
only while the Grantee is an Employee or Consultant; provided that the Committee
may determine that the Performance Award, Dividend Equivalent, award of Deferred
Stock and/or Stock Payment may be exercised subsequent to Termination of
Employment or Termination of Consultancy without cause, or following a change in
control of the Company, or because of the Grantee's retirement, death or
disability, or otherwise.
7.8 PAYMENT ON EXERCISE. Payment of the amount determined under Section
7.1 or 7.2 above shall be in cash, in Common Stock or a combination of both, as
determined by the Committee. To the extent any payment under this Article VII is
effected in Common Stock, it shall be made subject to satisfaction of all
provisions of Section 5.3.
7.9 CONSIDERATION. In consideration of the granting of a Performance
Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment, the
Grantee shall agree, in a written agreement, to remain in the employ of, or to
consult for, the Company or any Subsidiary for a period of at least one year
after such Performance Award, Dividend Equivalent, award of Deferred Stock
and/or Stock Payment is granted. Nothing in this Plan or in any agreement
hereunder shall confer on any Grantee any right to continue in the employ of, or
as a Consultant for, the Company or any Subsidiary or shall interfere with or
restrict in any way the rights of the Company and any Subsidiary, which are
hereby expressly reserved, to discharge any Grantee at any time for any reason
whatsoever, with or without good cause.
ARTICLE VIII.
STOCK APPRECIATION RIGHTS
8.1 GRANT OF STOCK APPRECIATION RIGHTS. Subject to the Award Limit, a
Stock Appreciation Right may be granted to any key Employee or Consultant
selected by the Committee. A Stock Appreciation Right may be granted (i) in
connection and simultaneously with the grant of an Option, (ii) with respect to
a previously granted Option, or (iii) independent of an Option. A Stock
Appreciation Right shall be subject to such terms and conditions not
inconsistent with this Plan as the Committee shall impose, and shall be
evidenced by a written Stock Appreciation Right Agreement, which shall be
executed by the Grantee and an authorized officer of the Company. The Committee,
in its discretion, may determine whether a Stock Appreciation Right is to
qualify as performance-based compensation as described in Section 162(m)(4)(C)
of the Code and Stock Appreciation Right Agreements evidencing Stock
Appreciation Rights intended to so qualify shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code.
8.2 COUPLED STOCK APPRECIATION RIGHTS A Coupled Stock Appreciation
Right ("CSAR") shall be related to a particular Option and shall be exercisable
only when and to the extent the related Option is exercisable.
(a) A CSAR may be granted to the Grantee for no more than the number of
shares subject to the simultaneously or previously granted Option to which it is
coupled.
(b) A CSAR shall entitle the Grantee (or other person entitled to
exercise the Option pursuant to this Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the extent
then exercisable pursuant to its terms) and to receive from the Company in
exchange therefor an amount determined by multiplying the difference obtained by
subtracting the Option exercise price from the Fair Market Value of a share of
Common Stock on the date of exercise of the CSAR by the number of shares of
Common Stock with respect to which the CSAR shall have been exercised, subject
to any limitations the Committee may impose.
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8.3 INDEPENDENT STOCK APPRECIATION RIGHTS.
(a) An Independent Stock Appreciation Right ("ISAR") shall be unrelated
to any Option and shall have a term set by the Committee. An ISAR shall be
exercisable in such installments as the Committee may determine. An ISAR shall
cover such number of shares of Common Stock as the Committee may determine;
PROVIDED, HOWEVER, that no ISAR granted to a person subject to Section 16 of the
Exchange Act shall be exercisable until at least six months have elapsed from
(but excluding) the date on which the Option was granted. The exercise price per
share of Common Stock subject to each ISAR shall be set by the Committee. An
ISAR is exercisable only while the Grantee is an Employee or Consultant;
provided that the Committee may determine that the ISAR may be exercised
subsequent to Termination of Employment or Termination of Consultancy without
cause, or following a change in control of the Company, or because of the
Grantee's retirement, death or disability, or otherwise.
(b) An ISAR shall entitle the Grantee (or other person entitled to
exercise the ISAR pursuant to this Plan) to exercise all or a specified portion
of the ISAR (to the extent then exercisable pursuant to its terms) and to
receive from the Company an amount determined by multiplying the difference
obtained by subtracting the exercise price per share of the ISAR from the Fair
Market Value of a share of Common Stock on the date of exercise of the ISAR by
the number of shares of Common Stock with respect to which the ISAR shall have
been exercised, subject to any limitations the Committee may impose.
8.4 PAYMENT AND LIMITATIONS ON EXERCISE.
(a) Payment of the amount determined under Section 8.2(c) and 8.3(b)
above shall be in cash, in Common Stock (based on its Fair Market Value as of
the date the Stock Appreciation Right is exercised) or a combination of both, as
determined by the Committee. To the extent such payment is effected in Common
Stock it shall be made subject to satisfaction of all provisions of Section 5.3
hereinabove pertaining to Options.
(b) Grantees of Stock Appreciation Rights who are subject to Section 16
of the Exchange Act may, in the discretion of the Board or Committee, be
required to comply with any timing or other restrictions under Rule 16b-3
applicable to the settlement or exercise of a Stock Appreciation Right.
8.5 CONSIDERATION. In consideration of the granting of a Stock
Appreciation Right, the Grantee shall agree, in the written Stock Appreciation
Right Agreement, to remain in the employ of, or to consult for, the Company or
any Subsidiary for a period of at least one year after the Stock Appreciation
Right is granted. Nothing in this Plan or in any Stock Appreciation Right
Agreement hereunder shall confer on any Grantee any right to continue in the
employ of, or as a Consultant for, the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Grantee at any
time for any reason whatsoever, with or without good cause.
ARTICLE IX.
ADMINISTRATION
9.1 COMPENSATION COMMITTEE. The Compensation Committee (or a
subcommittee of the Board assuming the functions of the Committee under this
Plan) shall consist of two or more Independent Directors appointed by and
holding office at the pleasure of the Board, each of whom is both a
"disinterested person" as defined by Rule 16b-3 and an "outside director" for
purposes of Section 162(m) of the Code. Appointment of Committee members shall
be effective upon acceptance of appointment. Committee members may resign at any
time by delivering written notice to the Board. Vacancies in the Committee may
be filled by the Board.
9.2 DUTIES AND POWERS OF COMMITTEE. It shall be the duty of the
Committee to conduct the general administration of this Plan in accordance with
its provisions. The Committee shall have the power to interpret this Plan and
the agreements pursuant to which Options, awards of Restricted Stock or Deferred
Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments are granted or awarded, and to adopt such rules for the
administration, interpretation, and application of this Plan as are consistent
therewith and to interpret, amend or revoke any such rules. Notwithstanding the
foregoing, the full Board, acting by a majority of its members in office, shall
conduct the general administration of the Plan with respect to Options granted
to Independent Directors. Any such grant or award under this Plan need not be
the same with respect to each Optionee, Grantee or Restricted Stockholder. Any
such interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under this Plan except with respect to
matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations
or rules issued thereunder, are required to be determined in the sole discretion
of the Committee.
9.3 MAJORITY RULE. The Committee shall act by a majority of its members
in attendance at a
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meeting at which a quorum is present or by a memorandum or other written
instrument signed by all members of the Committee.
9.4 COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS. Members
of the Committee shall receive such compensation for their services as members
as may be determined by the Board. All expenses and liabilities which members of
the Committee incur in connection with the administration of this Plan shall be
borne by the Company. The Committee may, with the approval of the Board, employ
attorneys, Consultants, accountants, appraisers, brokers, or other persons. The
Committee, the Company and the Company's officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon all Optionees, Grantees,
Restricted Stockholders, the Company and all other interested persons. No
members of the Committee or Board shall be personally liable for any action,
determination or interpretation made in good faith with respect to this Plan,
Options, awards of Restricted Stock or Deferred Stock, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments, and all members of
the Committee shall be fully protected by the Company in respect of any such
action, determination or interpretation.
ARTICLE X.
MISCELLANEOUS PROVISIONS
10.1 NOT TRANSFERABLE. Options, Restricted Stock awards, Deferred
Stock awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws of descent
and distribution, unless and until such rights or awards have been exercised, or
the shares underlying such rights or awards have been issued, and all
restrictions applicable to such shares have lapsed. No Option, Restricted Stock
award, Deferred Stock award, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment or interest or right therein shall be
liable for the debts, contracts or engagements of the Optionee, Grantee or
Restricted Stockholder or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect.
During the lifetime of the Optionee or Grantee, only he may exercise an
Option or other right or award (or any portion thereof) granted to him under the
Plan. After the death of the Optionee or Grantee, any exercisable portion of an
Option or other right or award may, prior to the time when such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement or other
agreement, be exercised by his personal representative or by any person
empowered to do so under the deceased Optionee's or Grantee's will or under the
then applicable laws of descent and distribution.
10.2 AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN. This Plan
may be wholly or partially amended or otherwise modified, suspended or
terminated at any time or from time to time by the Committee. However, without
approval of the Company's stockholders given within twelve months before or
after the action by the Committee, no action of the Committee may, except as
provided in Section 10.3, increase the limits imposed in Section 2.1 on the
maximum number of shares which may be issued under this Plan or modify the Award
Limit, and no action of the Committee may be taken that would otherwise require
stockholder approval as a matter of applicable law, regulation or rule. No
amendment, suspension or termination of this Plan shall, without the consent of
the holder of Options, Restricted Stock awards, Deferred Stock awards,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments, alter or impair any rights or obligations under any Options,
Restricted Stock awards, Deferred Stock awards, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments theretofore granted
or awarded, unless the award itself otherwise expressly so provides. No Options,
Restricted Stock, Deferred Stock, Performance Awards, Stock Appreciation Rights,
Dividend Equivalents or Stock Payments may be granted or awarded during any
period of suspension or after termination of this Plan, and in no event may any
Incentive Stock Option be granted under this Plan after the first to occur of
the following events:
(a) The expiration of ten years from the date the Plan is adopted by
the Board; or
(b) The expiration of ten years from the date the Plan is approved by
the Company's stockholders under Section 10.5.
10.3 CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY. In the event
that the outstanding shares of Common Stock are hereafter changed into or
exchanged for cash or a different number or kind of shares or other securities
of the Company, or of another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock splitup, stock
dividend, or combination of shares, appropriate adjustments shall be made by the
Committee in the number and kind of shares for which Options, Restricted Stock
awards, Performance Awards, Stock Appreciation Rights, Dividend
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Equivalents, Deferred Stock awards or Stock Payments may be granted, including
adjustments of the limitations in Section 2.1 on the maximum number and kind of
shares which may be issued and of the Award limit described in Section 1.2, and
appropriate adjustments shall be made by the Board in the number and kind of
shares for the purchase of which Options are granted to Independent Directors
under Section 3.4(d).
In the event of such a change or exchange, subject to the other
provisions of this Plan, the Committee (or the Board, in the case of Options
granted to Independent Directors) shall also make an appropriate and equitable
adjustment in the number and kind of shares as to which all outstanding Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments, or portions thereof then unexercised, shall be exercisable and in the
number and kind of shares of outstanding Restricted Stock or Deferred Stock.
Such adjustment shall be made with the intent that after the change or exchange
of shares, each Optionee's and each Grantee's and each Restricted Stockholder's
proportionate interest shall be maintained as before the occurrence of such
event. Such adjustment in an outstanding Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent or Stock Payment may include a necessary
or appropriate corresponding adjustment in Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent or Stock Payment exercise price, but
shall be made without change in the total price applicable to the Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment, or the unexercised portion thereof (except for any change in the
aggregate price resulting from rounding-off of share quantities or prices).
Where an adjustment of the type described above is made to an Incentive
Stock Option under this Section, the adjustment will be made in a manner which
will not be considered a "modification" under the provisions of subsection
424(h)(3) of the Code.
Notwithstanding the foregoing, in the event of such a reorganization,
merger, consolidation, recapitalization, reclassification, stock splitup, stock
dividend or combination, or other adjustment or event which results in shares of
Common Stock being exchanged for or converted into cash, securities or other
property, the Company will have the right to terminate this Plan as of the date
of the exchange or conversion, in which case all options, rights and other
awards under this Plan shall become the right to receive such cash, securities
or other property, net of any applicable exercise price.
In the event of a "spin-off" or other substantial distribution of
assets of the Company which has a material diminutive effect upon the Fair
Market Value of the Company's Common Stock, the Committee (or the Board, in the
case of Options granted to Independent Directors) may in its discretion make an
appropriate and equitable adjustment to the Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent or Stock Payment exercise price to
reflect such diminution.
10.4 MERGER OF THE COMPANY. In the event of the merger or
consolidation of the Company with or into another corporation, the exchange of
all or substantially all of the assets of the Company for the securities of
another corporation, the acquisition by another corporation or person of all or
substantially all of the Company's assets or 80% or more of the Company's then
outstanding voting stock, or the liquidation or dissolution of the Company:
(a) At the discretion of the Committee (or the Board, in the case of
Options granted to Independent Directors), the terms of an Option, Performance
Award, Stock Appreciation Right, Dividend Equivalent or Stock Payment may
provide that it cannot be exercised after such event.
(b) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee (or the Board, in the case of Options granted to
Independent Directors) may provide either by the terms of such Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment or by a resolution adopted prior to the occurrence of such event that,
for a specified period of time prior to such event, such Option, Performance
Award, Stock Appreciation Right, Dividend Equivalent or Stock Payment shall be
exercisable as to all shares covered thereby, notwithstanding anything to the
contrary in this Plan or in the provisions of such Option, Performance Award,
Stock Appreciation Right, Dividend Equivalent or Stock Payment.
(c) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee (or the Board, in the case of Options granted to
Independent Directors) may provide either by the terms of such Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment or by a resolution adopted prior to the occurrence of such event that
upon such event, such Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment shall be assumed by the successor
corporation, or a parent or subsidiary thereof, or shall be substituted for by
similar
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options, rights or awards covering the stock of the successor corporation, or a
parent or subsidiary thereof, with appropriate adjustments as to the number and
kind of shares and prices.
(d) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide either by the terms of a Restricted Stock
award or Deferred Stock award or by a resolution adopted prior to the occurrence
of such event that, for a specified period of time prior to such event, the
restrictions imposed under a Restricted Stock Agreement or a Deferred Stock
Agreement upon some or all shares of Restricted Stock or Deferred Stock may be
terminated, and, in the case of Restricted Stock, some or all shares of such
Restricted Stock may cease to be subject to repurchase under Section 6.6 after
such event.
(e) None of the foregoing discretionary terms of this Section 10.4
shall be permitted with respect to Options granted under Section 3.4(d) to
Independent Directors to the extent that such discretion would be inconsistent
with the requirements of Rule 16b-3.
10.5 APPROVAL OF PLAN BY STOCKHOLDERS. This Plan will be submitted
for the approval of the Company's stockholders within twelve months after the
date of the Board's initial adoption of this Plan. Options, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments may be granted
and Restricted Stock or Deferred Stock may be awarded prior to such stockholder
approval, provided that such Options, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments shall not be exercisable and such
Restricted Stock or Deferred Stock shall not vest prior to the time when this
Plan is approved by the stockholders, and provided further that if such approval
has not been obtained at the end of said twelve-month period, all Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments previously granted and all Restricted Stock or Deferred Stock
previously awarded under this Plan shall thereupon be cancelled and become null
and void.
10.6 TAX WITHHOLDING. The Company shall be entitled to require
payment in cash or deduction from other compensation payable to each Optionee,
Grantee or Restricted Stockholder of any sums required by federal, state or
local tax law to be withheld with respect to the issuance, vesting or exercise
of any Option, Restricted Stock, Deferred Stock, Performance Award, Stock
Appreciation Right, Dividend Equivalent or Stock Payment. The Committee (or the
Board, in the case of Options granted to Independent Directors) may in its
discretion and in satisfaction of the foregoing requirement allow such Optionee,
Grantee or Restricted Stockholder to elect to have the Company withhold shares
of Common Stock (or allow the return of shares of Common Stock) having a Fair
Market Value equal to the sums required to be withheld. Notwithstanding any
other provision of this Plan, the number of shares of Common Stock otherwise
issuable upon the exercise of an Option which may be withheld in order to
satisfy the Optionee's federal and state income and payroll tax liabilities with
respect to the exercise or vesting of the Option shall be limited to the number
of shares which have a Fair Market Value equal to the aggregate amount of such
liabilities based on the minimum statutory withholding rates for federal and
state tax income and payroll tax purposes that are applicable to such
supplemental taxable income.
10.7 LOANS. The Committee may, in its discretion, extend one or
more loans to key Employees in connection with the exercise or receipt of an
Option, Performance Award, Stock Appreciation Right, Dividend Equivalent or
Stock Payment granted under this Plan, or the issuance of Restricted Stock or
Deferred Stock awarded under this Plan. The terms and conditions of any such
loan shall be set by the Committee.
10.8 LIMITATIONS APPLICABLE TO SECTION 16 PERSONS AND
PERFORMANCE-BASED COMPENSATION. Notwithstanding any other provision of this
Plan, any Option, Performance Award, Stock Appreciation Right, Dividend
Equivalent or Stock Payment granted, or Restricted Stock or Deferred Stock
awarded, to a key Employee or Director who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule, and this Plan shall be deemed amended to the
extent necessary to conform to such limitations. Furthermore, notwithstanding
any other provision of this Plan, any Option or Stock Appreciation Right
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall be subject to any additional limitations set
forth in Section 162(m) of the Code (including any amendment to Section 162(m)
of the Code) or any regulations or rulings issued thereunder that are
requirements for qualification as performance-based compensation as described in
Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the
extent necessary to conform to such requirements.
10.9 EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS. The
adoption of this Plan shall not affect any other compensation or incentive plans
in effect for the Company or any Subsidiary. Nothing in this Plan shall be
construed to limit the right of the Company (i) to establish any other forms of
incentives or compensation for Employees, Directors or Consultants of the
Company or any Subsidiary or (ii) to grant or assume options or other rights
otherwise than under this Plan in connection with any proper corporate purpose
including but not by way of limitation, the grant or assumption of
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options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any corporation,
partnership, firm or association.
10.10 COMPLIANCE WITH LAWS. This Plan, the granting and vesting of
Options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments under this
Plan and the issuance and delivery of shares of Common Stock and the payment of
money under this Plan or under Options, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments granted or Restricted Stock or
Deferred Stock awarded hereunder are subject to compliance with all applicable
federal and state laws, rules and regulations (including but not limited to
state and federal securities law and federal margin requirements) and to such
approvals by any listing, regulatory or governmental authority as may, in the
opinion of counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the Company as the
Company may deem necessary or desirable to assure compliance with all applicable
legal requirements. To the extent permitted by applicable law, the Plan,
Options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.
10.11 TITLES. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of this Plan.
10.12 GOVERNING LAW. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.
ARTICLE XI.
LIMITATIONS
11.1 NO FURTHER AWARDS. Notwithstanding any provisions in
Articles VI, VII, VIII or otherwise contained in the Plan, from and after May
20, 1998, the Board shall be prohibited from granting any awards of (i)
restricted stock, (ii) performance awards, (iii) stock payments (iv) deferred
stock or (v) stock appreciation rights.
11.2 NO REPRICING. Notwithstanding any provisions in the Plan, from
and after May 20, 1998, the Board or the Compensation Committee shall be
prohibited from any further repricing of Options.
* * *
I hereby certify that the foregoing Second Amended and Restated 1994
Equity Participation Plan of Strouds, Inc. was duly adopted by the Board of
Directors of Strouds, Inc. on October 20 1999 and approved at the Special
Stockholders Meeting on January 26, 2000.
Executed on this 26th day of January 26, 2000.
By: /s/ Linda Mcnamara
--------------------
Linda McNamara
ASSISTANT SECRETARY
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EXHIBIT 5.1
LATHAM & WATKINS
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
(213) 485-1234
April 13, 2000
Strouds, Inc.
780 South Nogales Street
City of Industry, California 91748
Re: Strouds, Inc.
REGISTRATION STATEMENT ON FORM S-8
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form
S-8 (the "Registration Statement"), which you intend to file with the Securities
and Exchange Commission in connection with the registration under the Securities
Act of 1933, as amended, of (i) 2,000,000 shares of Common Stock, par value
$.0001 per share (the "Shares"), to be sold by Strouds, Inc., a Delaware
corporation (the "Company"), under The Second Amended and Restated 1994 Equity
Participation Plan of Strouds (the Plan") and (ii) the preferred share purchase
rights of the Company issuable together with the Shares (the "Rights").
In our capacity as your special counsel in connection with such
registration, we are familiar with the proceedings taken and proposed to be
taken by the Company in connection with the authorization, issuance and sale of
the Shares and the issuance of the Rights, and for the purposes of this opinion,
have assumed such proceedings will be timely completed in the manner presently
proposed. In addition, we have made such legal and factual examinations and
inquiries, including an examination of originals or copies certified or
otherwise identified to our satisfaction of such documents, corporate records
and instruments, as we have deemed necessary or appropriate for purposes of this
opinion.
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, and the
conformity to authentic original documents of all documents submitted to us as
copies.
We are opining herein as to the effect on the subject transaction only
of the General Corporation Law of the State of Delaware, including statutory and
reported decisional law thereunder, and we express no opinion with respect to
the applicability thereto, or the effect thereon, of the laws of any other
jurisdiction or, in the case of Delaware, any other laws, or as to any matters
of municipal law or the laws of any local agencies within any state.
Subject to the foregoing and in reliance thereon, it is our opinion
that (i) the Shares have been duly authorized, and upon the issuance of the
Shares under the terms of the Plan and delivery and payment therefor of legal
consideration in excess of the aggregate par value of the Shares issued, the
Shares will be validly issued, fully paid and nonassessable and (ii) when the
Rights issuable together with the Shares to be issued pursuant to the Plan have
been issued in accordance with the Rights Agreement, dated November 17, 1995, as
amended on January 31, 2000, between the Company and American Stock Transfer &
Trust Company, as Rights Agent (the "Rights Agreement"), such Rights will be
validly issued and will be binding obligations of the Company entitled to the
benefits of the Rights Agreement.
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We consent to your filing this opinion as an exhibit to the
Registration Statement.
Very truly yours,
LATHAM & WATKINS
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Strouds, Inc.:
We consent to the use of our reports incorporated herein by reference in the
registration statement on Form S-8 of Strouds, Inc. of our report dated April
14, 1999, relating to the balance sheets as of February 27, 1999 and February
28, 1998 and the related statements of operations, stockholders' equity, and
cash flows for each of the years in the three-year period ended February 27,
1999, which reports appear in the Form 10-K and Form 10-K/A filed by Strouds,
Inc. on May 26, 1999 and September 9, 1999, respectively.
KPMG LLP
Los Angeles, California
April 6, 2000
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