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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
<TABLE>
<CAPTION>
Check the appropriate box:
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to
Rule 14a-11(c) or Rule 14a-12
</TABLE>
SPORTSLINE USA, 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
SPORTSLINE USA [LOGO]
6340 N.W. 5th Way
Fort Lauderdale, Florida 33309
--------------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 19, 1999
---------------------------------
To the stockholders of
SportsLine USA, Inc.
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Special Meeting") of SportsLine USA, Inc., a Delaware corporation (the
"Company"), will be held at 10:00 a.m., local time, on Friday, November 19,
1999, at the Fort Lauderdale Marriott North, 6650 North Andrews Avenue, Fort
Lauderdale, Florida 33309, for the following purposes:
(1) To approve a proposal to amend the Company's Certificate of
Incorporation to change the name of the Company to SportsLine.com,
Inc.;
(2) To approve an amendment to the 1997 Incentive Compensation Plan (the
"Incentive Plan") to increase the number of shares available for
issuance thereunder from 3,000,000 to 5,500,000; and
(3) To approve an amendment to the 1997 Employee Stock Purchase Plan (the
"Purchase Plan") to increase the number of shares available for
issuance thereunder from 500,000 to 1,000,000.
The Board of Directors has fixed the close of business on September 27,
1999 as the record date for determining those stockholders entitled to notice
of, and to vote at, the Special Meeting and any adjournments or postponements
thereof. Only stockholders of record at the close of business on that date will
be entitled to notice of and to vote at the Special Meeting.
All stockholders are cordially invited to attend the Special Meeting in
person. However, to assure your representation at the meeting, you are urged to
sign and return the enclosed proxy as soon as possible in the enclosed
self-addressed envelope. Any stockholder attending the meeting may vote in
person even if he or she returned a proxy. However, if a stockholder's shares
are held of record by a broker, bank or other nominee and the stockholder wishes
to vote at the meeting, the stockholder must obtain from the record holder a
proxy issued in his or her name.
By Order of the Board of Directors,
Kenneth W. Sanders
Secretary
Fort Lauderdale, Florida
October 8, 1999
<PAGE>
SPORTSLINE USA, INC.
6340 N.W. 5th Way
Fort Lauderdale, Florida 33309
---------------------------------------
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
---------------------------------------
INTRODUCTION
Date, Time and Place of Special Meeting
The Company's Board of Directors is furnishing this Proxy Statement to
solicit proxies for use at the Special Meeting of Stockholders to be held on
Friday, November 19, 1999, at 10:00 a.m., local time, at the Fort Lauderdale
Marriott North, 6650 North Andrews Avenue, Fort Lauderdale, Florida 33309, and
at any adjournments or postponements thereof.
Record Date and Mailing Date
The close of business on September 27, 1999 is the record date for the
determination of stockholders entitled to notice of and to vote at the Special
Meeting. We intend to mail this proxy statement and the accompanying proxy card
on or about October 12, 1999, to all stockholders entitled to vote at the
meeting.
Number of Shares Outstanding
As of the close of business on the Record Date, 23,553,836 shares of
Common Stock were issued and outstanding. Each such share is entitled to one
vote on all matters to be presented at the Special Meeting.
VOTING AT THE SPECIAL MEETING
Procedures for Voting by Proxy
If you properly sign, return and do not revoke your proxy, the persons
named as proxies will vote your shares according to the instructions you have
specified on the proxy card. If you sign and return your proxy card but do not
specify how the persons appointed as proxies are to vote your shares, your proxy
will be voted FOR the change of the name of the Company from SportsLine USA,
Inc. to SportsLine.com, Inc., FOR the amendment of the Incentive Plan to
increase the number of shares available for issuance from 3,000,000 to 5,500,000
and FOR the amendment of the Purchase Plan to increase the number of shares
available for issuance from 500,000 to 1,000,000. You can revoke your proxy by
delivering to the Secretary of the Company, at the Company's address as listed
above, either a written revocation of your proxy or a duly executed proxy
bearing a later date or by attending the meeting and voting in person.
Requirements for Stockholder Approval
A quorum will be present if a majority of the outstanding shares of
Common Stock are present in person or by valid proxy. We will count abstentions
and broker non-votes, which are described below, in determining whether a quorum
exists. To approve the amendment to the Certificate of Incorporation, a majority
of the outstanding shares of Common Stock entitled to vote on the matter must
vote in favor of the proposed amendment. To approve the amendments to the
Incentive Plan and the Purchase Plan, the number of shares of Common Stock voted
in person or by proxy at the Special Meeting in favor of the proposals must
exceed the number of shares of Common Stock voted against the proposals.
<PAGE>
Effect of Abstentions
A stockholder who is present in person or by proxy at the Special
Meeting and who abstains from voting on any or all proposals will be included in
the number of stockholders present at the Special Meeting for the purpose of
determining the presence of a quorum. Abstentions do not count as votes in favor
of or against a given matter, however, as the affirmative vote of the holders of
a majority of the common stock outstanding on the record date is required to
adopt the proposed amendment to the Certificate of Incorporation, abstentions
are effectively equivalent to votes against the proposal.
Effect of Broker Non-votes
Brokers who hold shares for the accounts of their clients may vote
these shares either as directed by their clients or in their own discretion if
permitted by the exchange or other organization of which they are members.
Companies listing their securities on the New York Stock Exchange are permitted
to vote their clients' proxies in their own discretion as to the amendments of
the Certificate of Incorporation. Proxies that brokers do not vote on one or
more proposals but that they do vote on others are referred to as "broker
non-votes" with respect to the proposal(s) not voted upon. Broker non-votes are
included in determining the presence of a quorum. A broker non-vote, however,
does not count as a vote in favor of or against a particular proposal for which
the broker has no discretionary voting authority, however, as the affirmative
vote of the holders of a majority of the common stock outstanding on the record
date is required to adopt the proposed amendment to the Certificate of
Incorporation, broker non-votes are effectively equivalent to votes against the
proposal.
SOLICITATION OF PROXIES
The Company will pay the cost of proxy solicitation. Our directors,
officers and employees may, without additional compensation, solicit proxies by
personal interview, telephone, fax, or otherwise. We will direct brokerage firms
or other custodians, nominees or fiduciaries to forward our soliciting material
to the beneficial owners of common stock held of record by these institutions
and will reimburse them for the reasonable out-of-pocket expenses they incur in
connection with this process. In addition, the Company has engaged the firm of
Corporate Investor Communications, Inc. to assist in the solicitation of
proxies, to which it will pay a fee of approximately $5,000 and has agreed to
reimburse it for its reasonable expenses.
2
<PAGE>
SECURITY OWNERSHIP
The following table sets forth information with respect to the beneficial
ownership of the Company's Common Stock as of August 31, 1999, unless otherwise
noted, by (a) each person known to the Company to own beneficially more than 5
percent of the Company's outstanding Common Stock, (b) each director who owns
any such shares, (c) each Named Executive Officer who owns any such shares (see
"Executive Compensation--Summary Compensation Table"), and (d) the directors and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned (2)
----------------------
Name and Address of Beneficial Owner (1) Shares Percent
- ---------------------------------------- ------ -------
<S> <C> <C> <C>
CBS Corporation (3)...................................................... 4,540,000 18.6%
Massachusetts Financial Services Company (4)............................. 2,451,107 10.4
Thomas Cullen (5)........................................................ 1,606,652 6.8
MediaOne Interactive Services, Inc....................................... 1,595,852 6.8
Michael Levy (6)......................................................... 1,351,437 5.7
Andrew Nibley (7)........................................................ 436,672 1.9
James C. Walsh (8)....................................................... 171,000 *
Joseph Lacob (9)......................................................... 98,574 *
Mark J. Mariani (10)..................................................... 87,785 *
Kenneth Sanders (11)..................................................... 74,087 *
Andrew S. Sturner (12)................................................... 65,154 *
Dan Leichtenschlag (13).................................................. 43,800 *
Richard B. Horrow (14)................................................... 35,750 *
Gerry Hogan (15)......................................................... 31,000 *
Michael P. Schulhof (16)................................................. 20,416 *
Sean McManus............................................................. -- *
Fredric G. Reynolds...................................................... -- *
All directors and executive officers as a group (14 persons) (17) 4,021,697 16.2
</TABLE>
- -------------------
* Less than 1%.
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified is c/o SportsLine USA, Inc., 6340 N.W. 5th Way, Fort Lauderdale,
Florida 33309. Except as otherwise indicated, such beneficial owners have
sole voting and investment power with respect to all shares of Common Stock
owned by them, except to the extent such power may be shared with a spouse.
(2) The number of shares of Common Stock deemed outstanding as of August 31,
1999 includes (i) 23,541,100 shares of Common Stock outstanding, and (ii)
an aggregate of 1,348,513 shares issuable pursuant to options and warrants
held by the respective person or group which may be exercised within 60
days thereafter ("presently exercisable stock options" and "presently
exercisable warrants," respectively), as set forth below. Pursuant to the
rules of the Securities and Exchange Commission, presently exercisable
stock options and presently exercisable warrants are deemed to be
outstanding and to be beneficially owned by the person or group holding
such options or warrants for the purpose of computing the percentage
ownership of such person or group, but are not treated as outstanding for
the purpose of computing the percentage ownership of any other person or
group.
(3) Reflects (i) 3,660,000 shares held of record and (ii) 880,000 shares
subject to presently exercisable warrants. Does not include any additional
shares of Common Stock and warrants to purchase Common Stock to be issued
to CBS after August 31, 1999 pursuant to the CBS agreement. The address of
CBS is 51 West 52nd Street, New York, New York 10019.
(4) This disclosure of Massachusetts Financial Services Company ("MFS") is
based solely upon information set forth in MFS's Schedule 13G/A dated
February 11, 1999. The address of MFS is 500 Boylston Street, Boston, MA
02116.
(Footnotes continued on next page)
3
<PAGE>
(Footnotes continued from previous page)
(5) Reflects (i) 800 shares held of record, (ii) 10,000 shares issuable upon
exercise of presently exercisable stock options and (iii) 1,595,852 shares
held of record by MediaOne of which Mr. Cullen is President. Mr. Cullen
disclaims beneficial ownership of the shares held of record by MediaOne
except to the extent of his pecuniary interest therein. The address of
MediaOne and Mr. Cullen is 9000 East Nichols, Englewood, Colorado 80112.
(6) Reflects (i) 1,235,292 shares held of record by Mr. Levy and (ii) 116,145
shares issuable upon exercise of presently exercisable stock options.
Excludes 643,855 shares issuable upon exercise of stock options held by Mr.
Levy not exercisable within 60 days.
(7) Reflects (i) 11,000 shares issuable upon exercise of presently exercisable
stock options and (ii) 425,672 shares held of record by Reuters NewMedia of
which Mr. Nibley is a director and President. Excludes 2,000 shares
issuable upon exercise of stock options held by Mr. Nibley not exercisable
within 60 days. Mr. Nibley disclaims beneficial ownership of the shares
owned by Reuters NewMedia except to the extent of his pecuniary interest
therein. The address of Reuters NewMedia and Mr.
Nibley is 1700 Broadway, New York, New York 10019.
(8) Reflects (i) 154,000 shares held of record by Mr. Walsh, (ii) 11,000 shares
issuable upon exercise of presently exercisable stock options and (iii)
6,000 shares held of record by the children of Mr. Walsh. Excludes 2,000
shares issuable upon exercise of stock options held by Mr. Walsh not
exercisable within 60 days.
(9) Reflects (i) 79,293 shares held of record by Mr. Lacob, (ii) 9,281 shares
held of record by a trust for the benefit of Mr. Lacob's children for which
Mr. Lacob disclaims beneficial ownership and (iii) 10,000 shares issuable
upon exercise of presently exercisable stock options.
(10) Reflects (i) 6,327 shares held of record by Mr. Mariani and (ii) 81,458
shares issuable upon exercise of presently exercisable stock options.
Excludes 198,542 shares issuable upon exercise of stock options held by Mr.
Mariani not exercisable within 60 days.
(11) Reflects (i) 5,130 shares held of record by Mr. Sanders and (ii) 68,957
shares issuable upon exercise of presently exercisable stock options.
Excludes 206,043 shares issuable upon exercise of stock options held by Mr.
Sanders not exercisable within 60 days.
(12) Reflects (i) 4,948 shares held of record by Mr. Sturner and (ii) 60,206
shares subject to presently exercisable stock options. Excludes 214,794
shares issuable upon exercise of stock options held by Mr. Sturner not
exercisable within 60 days.
(13) Reflects (i) 5,762 shares held of record by Mr. Leichtenschlag, (ii) 5,707
shares held of record by Mr. Leichtenschlag's wife, (iii) 30,081 shares
subject to presently exercisable stock options held by Mr. Leichtenschlag
and (iv) 2,250 shares subject to presently exercisable stock options held
by Mr. Leichtenschlag's wife. Excludes 135,544 shares issuable upon
exercise of stock options held by Mr. Leichtenschlag not exercisable within
60 days.
(14) Reflects (i) 16,750 shares held of record by Mr. Horrow, (ii) 3,000 shares
owned by a corporation wholly-owned by Mr. Horrow, (iii) 5,000 shares
subject to presently exercisable warrants and (iv) 11,000 shares issuable
upon exercise of presently exercisable stock options. Excludes 5,000 shares
issuable upon exercise of warrants and 2,000 shares issuable upon exercise
of stock options held by Mr. Horrow that are not exercisable within 60
days.
(15) Reflects (i) 20,000 shares issuable upon exercise of presently exercisable
warrants and (ii) 11,000 shares issuable upon exercise of presently
exercisable stock options. Excludes 20,000 shares issuable upon exercise of
warrants and 2,000 shares issuable upon exercise of stock options held by
Mr. Hogan that are not exercisable within 60 days.
(16) Reflects 20,416 shares issuable upon exercise of presently exercisable
options. Excludes 12,584 shares issuable upon exercise of stock options
held by Mr. Schulhof that are not exercisable within 60 days.
(17) Includes the information in the notes herein, as applicable. Reflects (i)
3,553,184 shares held of record, (ii) 443,513 shares subject to presently
exercisable stock options and (iii) 25,000 shares subject to presently
exercisable warrants. Excludes (i) 1,419,362 shares issuable upon exercise
of stock options and (ii) 25,000 shares issuable upon exercise of warrants
not exercisable within 60 days.
4
<PAGE>
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY TO
SPORTSLINE.COM, INC.
(Proposal No. 1)
The Board of Directors has unanimously adopted resolutions approving,
declaring advisable and recommending adoption by the Stockholders of an
amendment to the Company's Certificate of Incorporation to change the name of
the Company from SportsLine USA, Inc. to SportsLine.com, Inc.
The Board of Directors believes that the change in name will assist in the
marketing of the Company's brand and service as the proposed name more
accurately reflects the Company's global nature by not containing the word "USA"
and serves to emphasize that the Company is a pure-play sports Internet company.
If the name change is approved, current Company stock certificates will
remain valid and no exchange of certificates will be required, unless and until
the securities are sold or transferred.
Under Delaware law, the amendment to the Certificate of Incorporation
would become effective upon Stockholder approval and the filing of the amendment
with the Secretary of State of the State of Delaware. The Amendment to the
Certificate of Incorporation will be filed as soon as reasonably practicable
after the approval of this proposal by the Stockholders. If this proposal is
approved, Article I of the Company's Certificate of Incorporation will be
amended to read as follows:
"The name of the corporation is SportsLine.com, Inc. (hereinafter called
the "Company")."
The affirmative vote of the holders of a majority of the common stock
outstanding on the record date is required to adopt the proposed amendment to
the Certificate of Incorporation. As a result, abstentions and broker non-votes
are effectively equivalent to votes against this proposal. Unless otherwise
instructed, properly executed proxies that are timely received and not
subsequently revoked, but not marked, will be voted in favor of the proposed
amendment to the Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF THE PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION.
5
<PAGE>
AMENDMENT OF THE 1997 INCENTIVE COMPENSATION PLAN
(Proposal No. 2)
The Company's stockholders are being asked to approve an amendment to
the Company's 1997 Incentive Compensation Plan (the "Incentive Plan") to
increase the number of shares of Common Stock issuable thereunder from 3,000,000
to 5,500,000. Stock options are the principal vehicle used by the Company for
the payment of long-term compensation, to provide a stock-based incentive to
improve the Company's financial performance and to assist in the recruitment,
retention and motivation of professional, managerial and other personnel. As of
August 31, 1999, 2,336 shares remained available for issuance pursuant to the
Incentive Plan. Accordingly, the Board of Directors feels the proposed amendment
to the Incentive Plan is in the best interest of the Company and is necessary
for the Company to remain competitive in its compensation practices.
The affirmative vote of a majority of the votes of Common Stock present
in person or by proxy at the Special Meeting and entitled to vote will be
required for approval of the proposal to amend the Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL
TO AMEND THE INCENTIVE PLAN.
Summary Description of the Incentive Plan
General. The purpose of the Incentive Plan is to assist the Company in
attracting, motivating, retaining and rewarding high-quality executives and
other employees, officers, directors and independent contractors (collectively,
"Participants") by enabling such persons to acquire or increase a proprietary
interest in the Company in order to strengthen the mutuality of interests
between such persons and the Company's shareholders, and providing such persons
with annual and long term performance incentives to expend their maximum efforts
in the creation of shareholder value. Pursuant to the Incentive Plan, the
Company may grant Participants stock options, stock appreciation rights,
restricted stock, deferred stock, other stock-related awards and performance or
annual incentive awards that may be settled in cash, stock or other property
(collectively, "Awards").
Before adoption of the amendment of the Incentive Plan, the total number
of shares of Common Stock subject to the granting of Awards under the Incentive
Plan was: (i) 3,000,000 shares, plus (ii) the number of shares with respect to
Awards previously granted under the Incentive Plan that terminate without being
exercised, expire, are forfeited or canceled, and the number of shares of Common
Stock that are surrendered in payment of any Awards or any tax withholding
requirements. As of August 31, 1999, options to purchase 2,870,575 shares were
outstanding under the Incentive Plan, 127,089 shares had been issued pursuant to
the exercise of stock options granted under such plan and 2,336 shares remained
available for future grants. In addition, options to purchase 556,000 shares
have been granted under the Incentive Plan subject to the approval of the
amendment to the Incentive Plan by the Company's stockholders.
Administration. The Incentive Plan is presently administered by the
Compensation Committee. However, except as otherwise required to comply with
Rule 16b-3 of the Exchange Act, or Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), the Board of Directors may exercise any power
or authority granted to the Compensation Committee. The Compensation Committee
or the Board of Directors (hereinafter, the "Committee") is authorized to select
eligible persons to receive Awards, determine the type, number and other terms
and conditions of, and all other matters relating to, Awards, prescribe Award
agreements (which need not be identical for each Participant) and rules and
regulations for the administration of the Plan, construe and interpret the Plan
and Award agreements and correct defects, supply omissions or reconcile
inconsistencies therein, and to make all other decisions and determinations as
the Compensation Committee or the Board may deem necessary or advisable for the
administration of the Plan.
6
<PAGE>
Awards. The following is a description of the types of Awards that may be
granted under the Incentive Plan:
Stock Options and Stock Appreciation Rights. The Committee is
authorized to grant stock options, including incentive and non-qualified
stock options, and stock appreciation rights ("SARs") entitling the
Participant to receive the amount by which the fair market value of a
share of Common Stock on the date of exercise exceeds the grant price of
the SAR. The exercise price per share subject to an option and the grant
price of a SAR are determined by the Committee, but must not be less than
the fair market value of a share of Common Stock on the date of grant.
Each option is exercisable after the period or periods specified in the
related option agreement, but no option may be exercised after the
expiration of ten years from the date of grant. Options granted to an
individual who owns (or is deemed to own) at least 10% of the total
combined voting power of all classes of stock of the Company must have an
exercise price of at least 110% of the fair market value of the Common
Stock on the date of grant and a term of no more than five years. Options
may be exercised by payment of the exercise price in cash, shares of
Common Stock, outstanding Awards or other property having a fair market
value equal to the exercise price, as the Committee may determine from
time to time.
Restricted and Deferred Stock. The Committee is authorized to grant
restricted stock and deferred stock. Restricted stock is a grant of shares
of Common Stock which may not be sold or disposed of, and which may be
forfeited in the event of certain terminations of employment, prior to the
end of a restricted period specified by the Committee. A Participant
granted restricted stock generally has all the rights of a shareholder of
the Company, unless otherwise determined by the Committee. An Award of
deferred stock confers upon the Participant the right to receive shares of
Common Stock at the end of a specified deferral period, subject to
possible forfeiture of the Award in the event of certain terminations of
employment prior to the end of a specified restricted period. Prior to
settlement, an Award of deferred stock carries no voting or dividend
rights. The restricted or deferral period for restricted stock or deferred
stock Awards may not be less than three years unless the Award is subject
to performance conditions, in which case the period will not be less than
one year.
Bonus Stock and Awards in Lieu of Cash Obligations. The Committee is
authorized to grant shares of Common Stock as a bonus, free of
restrictions, or to grant shares of Common Stock or other Awards in lieu
of cash under the Incentive Plan, subject to such terms as the Committee
may specify.
Other Stock-Based Awards. The Committee is authorized to grant Awards
that are denominated or payable in, valued by reference to, or otherwise
based on or related to shares of Common Stock. Such Awards might include
convertible or exchangeable debt securities, other rights convertible or
exchangeable into shares of Common Stock, purchase rights for shares of
Common Stock, Awards with value and payment contingent upon performance by
the Company or any other factors designated by the Committee, and Awards
valued by reference to the book value of shares of Common Stock or the
value of securities of or the performance of specified subsidiaries or
business units.
The Committee determines the terms and conditions of such Awards.
The right of a Participant to exercise or receive a grant or settlement of
an Award, and the timing thereof, may be subject to such performance conditions
(including subjective individual goals) as may be specified by the Committee. In
addition, the Incentive Plan authorizes specific annual incentive Awards, which
represent a conditional right to receive cash, shares of Common Stock or other
Awards upon achievement of certain pre-established performance goals and
subjective individual goals during a specified fiscal year.
Awards may be settled in the form of cash, shares of Common Stock, other
Awards or other property in the discretion of the Committee. The Committee may
condition any payment relating to an Award on the withholding of taxes and may
provide that a portion of any shares of Common Stock or other property to be
distributed will be withheld (or previously acquired shares of Common Stock or
other property surrendered by the Participant) to satisfy withholding and other
tax obligations. Awards granted under the Incentive Plan generally may not be
pledged or otherwise encumbered and are not transferable except by will or by
the laws of descent and distribution, or to a designated beneficiary upon the
Participant's death, except that the
7
<PAGE>
Committee may, in its discretion, permit transfers for estate planning or other
purposes subject to any applicable restrictions.
The Incentive Plan also provides that each non-employee director who is
not affiliated with or a designee of a beneficial owner of more than 5% of the
Common Stock will receive (i) for those directors elected or appointed after the
completion of the Company's initial public offering, an option to purchase
12,000 shares of Common Stock on the date of his or her election or appointment
and (ii) for all directors, on the date of the Company's annual meeting of
shareholders, an option to purchase 3,000 shares of Common Stock. Such options
have a term of 10 years and become exercisable at the rate of 25% per year
commencing on the first anniversary of the date of grant; provided, however,
that the options shall be fully exercisable in the event that, while serving as
a director, the non-employee director dies, suffers a "disability," or "retires"
(within the meaning of such terms as defined in the Incentive Plan). The per
share exercise price of options granted to non-employee directors will be equal
to the fair market value of a share of Common Stock on the date such option is
granted. Unless otherwise extended in the sole discretion of the Compensation
Committee, the unexercised portion of any formula option grant will become null
and void (i) three months after the date on which the non-employee director
ceases to be a director for any reason other than the non-employee director's
willful misconduct or negligence, disability, death or retirement, (ii)
immediately in the event of the non-employee director's willful misconduct or
negligence, (iii) at the expiration of its original term if the non-employee
ceases to be a director by reason or his or her retirement, or (iv) one year
after the non-employee director ceases to be a director by reason of his or her
disability or death.
In lieu of the grant of options to non-employee directors under the
Incentive Plan set forth in the preceding paragraph, on June 15, 1999, each
director of the Company, with the exception of Michael Levy, the Company's
President and Chief Executive Officer, and Fredric G. Reynolds and Sean McManus,
each of whom sit on the Board of Directors as representatives of CBS
Corporation, was granted options to purchase 10,000 shares of Common Stock under
the Company's 1995 Stock Option Plan at an exercise price equal to the fair
market value of the Common Stock on such date. The options have a term of 10
years and are exercisable immediately.
If and to the extent provided in any Award, upon a Change in Control (as
defined in the Incentive Plan), (i) any Award carrying a right to exercise that
was not previously exercisable and vested will become fully exercisable and
vested; (ii) certain SARs will become exercisable for amounts, in cash,
determined by reference to highest price per share paid (including extraordinary
dividends) in the transaction triggering the Change in Control; (iii) the
restrictions, deferral of settlement, and forfeiture conditions applicable to
any other Award will lapse and such Awards will be deemed fully vested as of the
time of the Change in Control; and (iv) the performance goals and other
conditions of any outstanding Award will be deemed to be met if and to the
extent so provided by the Committee in the Award agreement relating to such
Award. A "Change in Control" means: (A) the acquisition by any person or group
of beneficial ownership of 25% or more of the Common Stock outstanding or 25% or
more of the combined voting power of the Company's outstanding voting
securities; (B) approval by the Company's shareholders of a reorganization,
merger, consolidation or other form of corporate transaction or series of
transactions, in each case, with respect to which persons who were the
shareholders of the Company immediately prior thereto do not, immediately
thereafter, own more than 50% of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities, or a liquidation or
dissolution of the Company or the sale of all or substantially all of the
Company's assets (any such event being referred to as a "Corporate
Transaction"); or (C) a change in the composition of the Board of Directors such
that individuals who, as of the date of the Incentive Plan, constituted the
Board of Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors, provided that any person becoming a
director whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the Directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Securities Exchange Act) will be considered as though such person were
a member of the Incumbent Board. An
8
<PAGE>
acquisition or Corporate Transaction unanimously approved by the Incumbent Board
will not constitute a Change in Control for purposes of the Incentive Plan.
Eligibility. Awards may be granted to officers, directors, employees and
independent contractors of the Company or any of its subsidiaries. A Participant
may not be granted Awards relating to more than 250,000 shares of Common Stock
which during any fiscal year. The Incentive Plan also contains a limits on the
maximum amount that may be earned as a cash Award in any fiscal year by any one
Participant and on the aggregate market value of shares subject to all incentive
stock options that may be granted to a Participant during any calendar year. As
of August 31, 1999, approximately 380 persons were eligible to participate in
the Incentive Plan.
Amendment and Termination. The Board may amend, alter, suspend,
discontinue or terminate the Incentive Plan or the Committee's authority to
grant Awards without further stockholder approval, except stockholder approval
must be obtained for any amendment or alteration if such approval is required by
law or regulation or under the rules of any stock exchange or quotation system
on which shares of Common Stock are then listed or quoted. Unless earlier
terminated by the Board, the Incentive Plan will terminate at such time as no
shares of Common Stock remain available for issuance under the Incentive Plan
and the Company has no further rights or obligations with respect to outstanding
Awards under the Incentive Plan.
Federal Income Tax Effects. The Incentive Plan is not qualified under the
provisions of Section 401(a) of the Code, nor is it subject to any of the
provisions of the Employee Retirement Income Security Act of 1974, as amended.
Nonqualified Stock Options. On exercise of a nonqualified stock
option granted under the Incentive Plan, an optionee (other than an
officer or director of the Company) will recognize ordinary income equal
to the excess, if any, of the fair market value on the date of exercise of
the option of the shares of Common Stock acquired on exercise over the
exercise price. That income will be subject to the withholding of Federal
income tax. The optionee's tax basis in those shares will be equal to
their fair market value on the date of exercise of the option, and his
holding period for those shares will begin on that date.
If an optionee pays for shares of Common Stock on exercise of an
option by delivering shares of the Company's Common Stock, the optionee
will not recognize gain or loss on the shares delivered, even if their
fair market value at the time of exercise differs from the optionee's tax
basis in them. The optionee, however, otherwise will be taxed on the
exercise of the option in the manner described above as if he had paid the
exercise price in cash. If a separate identifiable stock certificate is
issued for that number of shares equal to the number of shares delivered
on exercise of the option, the optionee's tax basis in the shares
represented by that certificate will be equal to his tax basis in the
shares delivered, and his holding period for those shares will include his
holding period for the shares delivered. The optionee's tax basis and
holding period for the additional shares received on exercise of the
option will be the same as if the optionee had exercised the option solely
in exchange for cash.
The Company will be entitled to a deduction for Federal income tax
purposes equal to the amount of ordinary income taxable to the optionee,
provided that amount constitutes an ordinary and necessary business
expense for the Company and is reasonable in amount, and either the
employee includes that amount in income or the Company timely satisfies
its reporting requirements with respect to that amount.
Incentive Stock Options. The Incentive Plan provides for the grant of
stock options that qualify as "incentive stock options" as defined in
section 422 of the Code to employees of the Company or its subsidiaries.
Under the Code, an optionee generally is not subject to tax upon the grant
or exercise of an incentive stock option. In addition, if the optionee
holds a share received on exercise of an incentive stock option for at
least two years from the date the option was granted and at least one year
from the date the option was exercised (the "Required Holding Period"),
the difference, if any, between the amount realized on a sale or other
taxable disposition of that share and the holder's tax basis in that share
will be long-term capital gain or loss. If, however, an optionee disposes
of a share acquired on exercise of an incentive stock option before the
end of the Required Holding Period (a "Disqualifying
9
<PAGE>
Disposition"), the optionee generally will recognize ordinary income in
the year of the Disqualifying Disposition equal to the excess, if any, of
the fair market value of the share on the date the incentive stock option
was exercised over the exercise price. If, however, the Disqualifying
Disposition is a sale or exchange on which a loss, if realized, would be
recognized for Federal income tax purposes, and if the sales proceeds are
less than the fair market value of the share on the date of exercise of
the option, the amount of ordinary income the optionee recognizes will not
exceed the gain, if any, realized on the sale. If the amount realized on a
Disqualifying Disposition exceeds the fair market value of the share on
the date of exercise of the option, that excess will be short-term or
long-term capital gain, depending on whether the holding period for the
share exceeds one year.
An optionee who exercises an incentive stock option by delivering
shares of Common Stock acquired previously pursuant to the exercise of an
incentive stock option before the expiration of the Required Holding
Period for those shares is treated as making a Disqualifying Disposition
of those shares. This rule prevents "pyramiding" the exercise of an
incentive stock option (that is, exercising an incentive stock option for
one share and using that share, and others so acquired, to exercise
successive incentive stock options) without the imposition of current
income tax.
For purposes of the alternative minimum tax, the amount by which the
fair market value of a share of Common Stock acquired on exercise of an
incentive stock option exceeds the exercise price of that option generally
will be an item of adjustment included in the optionee's alternative
minimum taxable income for the year in which the option is exercised. If,
however, there is a Disqualifying Disposition of the share in the year in
which the option is exercised, there will be no item of adjustment with
respect to that share. If there is a Disqualifying Disposition in a later
year, no income with respect to the Disqualifying Disposition is included
in the optionee's alternative minimum taxable income for that year. In
computing alternative minimum taxable income, the tax basis of a share
acquired on exercise of an incentive stock option is increased by the
amount of the item of adjustment taken into account with respect to that
share for alternative minimum tax purposes in the year the option is
exercised.
Awards Granted Under the Incentive Plan. As of August 31, 1999,
nonqualified stock options to purchase an aggregate of 2,997,664 shares of
Common Stock had been granted under the Incentive Plan (including options that
have been exercised, but excluding cancelled options), at exercise prices
ranging from $1.96 to $57.8125 per share (the fair market value of the Common
Stock as of the dates of grant). In addition, subject to approval by the
stockholders of the Company of the amendment to the Incentive Plan, the Company
granted options to purchase an aggregate of 300,000 shares of Common Stock to
the current executive officers of the Company at an exercise price of $31.75 per
share on June 15, 1999, 200,000 options to Michael Levy in connection with the
amendment of his employment agreement at an exercise price of $17.00 per share
on August 10, 1999 and 56,000 options to other employees of the Company. Of the
foregoing, options to purchase an aggregate of 1,526,000 shares of Common Stock
had been granted to current executive officers of the Company as a group,
options to purchase an aggregate of 35,000 shares of Common Stock had been
granted to non-employee directors of the Company as a group, and options to
purchase an aggregate of 1,992,664 shares of Common Stock had been granted to
all other employees.
Awards under the Incentive Plan have been and will be granted primarily to
persons who possess a capacity to contribute significantly to the Company's
successful performance. Because the persons to whom grants of Awards are to be
made will be determined from time to time by the Committee in its discretion, it
is impossible at this time to indicate the precise number, name or positions of
persons who will hereafter receive Awards or the number of shares for which
Awards will be granted, except to the extent already granted.
10
<PAGE>
AMENDMENT OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN
(Proposal No. 3)
The Company's stockholders are being asked to approve an amendment to
the Company's 1997 Employee Stock Purchase Plan (the "Purchase Plan") to
increase the number of shares of Common Stock issuable thereunder from 500,000
to 1,000,000. As of August 31, 1999, 116,687 shares remained available for
issuance pursuant to the Purchase Plan.
The Board of Directors believes that the proposed amendment to the
Purchase Plan is in the best interest of the Company and is necessary for the
Company to remain competitive in its compensation practices and to attract,
retain and motivate the highly skilled and talented personnel essential to the
Company's continued growth and success.
The affirmative vote of a majority of the votes of Common Stock present
in person or by proxy at the Special Meeting and entitled to vote will be
required for approval of the proposal to amend the Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL
TO AMEND THE PURCHASE PLAN.
General Description of the Purchase Plan
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" under section 423 of the Code. Each participant in the Purchase Plan is
granted a purchase right to acquire shares of Common Stock at semi-annual
intervals, during 12-month offering periods commencing on or about January 1 of
each year, with the exception of the first period, which commenced on November
13, 1997 and ended on December 31, 1998. The purchase price for the shares under
the Purchase Plan is paid by each participating employee through periodic
payroll deductions and/or lump sum payments not to exceed 25% of the
participant's total annual compensation. The purchase price per share will be
equal to 85% of the lower of (i) the fair market value of the Common Stock at
the beginning of the offering period or, if greater, the fair market value of
the Common Stock on the date the participant enrolls in the Purchase Plan, or
(ii) the fair market value per share of the Common Stock on the date of purchase
of the shares. Each offering period consists of two consecutive six-month
purchase periods. Generally, participants in the Purchase Plan purchase shares
on the last day of the six month periods.
The Plan is administered by the Board of Directors and/or by a duly
appointed committee with powers specified by the Board (hereinafter referred to
as the "Board"). All questions of interpretation of the Purchase Plan are
determined by the Board, and such determinations are final and binding. Subject
to the provisions of the Purchase Plan, the Board determines all relevant terms
and conditions of Purchase rights provided that all Participants have the same
rights and privileges within the meaning of section 423(b) of the Code.
Any employee of the Company and its subsidiaries can participate in the
Plan as long as they work more than 20 hours a week and more than five months in
any calendar year. However, in accordance with Section 423 of the Code, no
employee shall be granted a right to purchase shares under the Purchase Plan (i)
if, immediately after given such right, the employee would own stock and/or hold
outstanding options to purchase stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
Subsidiary of the Company, or (ii) which permits such employee's rights to
purchase stock under all employee stock purchase plans of the Company and its
Subsidiaries intended to qualify under Section 423 of the Code to accrue at a
rate which exceeds $25,000 of fair market value of stock (determined at the time
such option is granted) for each calendar year in which such option is
outstanding at any time.
To participate in the Plan, eligible employees must authorize
withholdings from their payroll before the start of a six month purchase period.
This withholding may not exceed 25% of the employee's compensation during any
period. No participant may purchase more than 2,000 shares during any six-month
purchase period or shares with a fair market value at the offering date
exceeding $25,000 for each calendar year in which the participant participates
in the Purchase Plan. Generally, if an employee's participation in the plan
11
<PAGE>
ends, all amounts withheld for that employee for the current offering period are
refunded to the employee. No interest is paid on the amounts withheld.
As of the most recent completed purchase period, ended June 30, 1999,
251 employees were participants in the Purchase Plan and an aggregate of 383,313
shares of Common Stock had been purchased under the Purchase Plan. Of these
shares, the current executive officers have purchased an aggregate of 27,244
shares of Common Stock and all other employees have purchased an aggregate of
356,069 shares of Common Stock.
Summary of Federal Income Tax Consequences of the Purchase Plan
The following summary is intended only as a general guide as to the
United States federal income tax consequences under current law of participation
in the Purchase Plan and does not attempt to describe all possible federal or
other tax consequences of such participation or tax consequences based on
particular circumstances.
Generally, there are no tax consequences to an employee of either
becoming a participant in the Purchase Plan or purchasing shares under the
Purchase Plan. The tax consequences of a disposition of shares vary depending on
the period such stock is held before its disposition. If a participant disposes
of shares within two years of the Offering Date or within one year of the
Purchase Date on which the shares are acquired (a "disqualifying disposition"),
the participant recognizes ordinary income in the year of disposition in an
amount equal to the excess, if any, of the fair market value of the shares on
the Purchase Date over the purchase price. The participant's adjusted basis in
the shares is the sum of the purchase price plus the amount of ordinary income
recognized. Any additional gain or resulting loss recognized by the participant
from the disposition of the shares is a capital gain or loss. If the participant
disposes of shares more than two years after the Offering Date and more than one
year after the Purchase Date on which the shares are acquired, the participant
recognizes ordinary income in the year of disposition in an amount equal to the
lesser of (i) 15% of the fair market value of the shares on the Offering Date of
the Offering in which the shares were acquired or (ii) the amount by which the
fair market value of the shares on the date of disposition exceeded the purchase
price. Any additional gain recognized by the participant in excess of the
participant's adjusted basis is capital gain. If the fair market value of the
shares on the date of disposition is less than the purchase price, the
participant recognizes no ordinary income and the loss is a capital loss.
A capital gain or loss will be long-term if the participant holds the
shares for more than twelve months and short-term if the participant holds the
shares for twelve months or less. Presently long-term capital gains are subject
to a maximum federal income tax rate of 28%.
If the participant disposes of the shares in a disqualifying
disposition the Company should be entitled to a deduction equal to the amount of
ordinary income recognized by the participant as a result of the disposition,
subject to the deduction limit under section 162 (m) of the Code. In all other
cases, no deduction is allowed to the Company.
12
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all compensation awarded to, earned by
or paid for services rendered to the Company in all capacities during the years
ended December 31, 1996, 1997 and 1998 by the Company's Chief Executive Officer
and its other executive officers (the "Named Executive Officers").
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation (1) Awards
--------------------------------------- ------------------
Securities All Other
Name and Principal Position Year Salary Bonus Underlying Options Compensation
- --------------------------- ---- ------ ----- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Michael Levy ........................ 1998 $306,250 $105,000 175,000 $25,097 (2)
Chairman, President and 1997 206,787 75,000 150,000 23,027 (2)
Chief Executive Officer 1996 167,887 50,000 -- 22,922 (2)
Mark J. Mariani ..................... 1998 197,917 50,000 100,000 --
President, Sales and Marketing 1997 165,066 25,000 20,000 --
1996 112,243 10,000 80,000 8,205 (3)
Andrew S. Sturner ................... 1998 178,125 50,000 130,000 --
President, Corporate and Business 1997 127,500 20,000 30,000 --
Development 1996 101,934 10,000 -- --
Kenneth W. Sanders .................. 1998 225,000 56,000 100,000 1,716 (3)
Senior Vice President and 1997 72,717 15,000 100,000 47,579 (3)
Chief Financial Officer (4)
Dan Leichtenschlag .................. 1998 124,375 27,000 30,000 --
Senior Vice President of 1997 102,500 10,000 44,000 --
Operations 1996 83,750 5,000 6,000 --
</TABLE>
- -----------------
(1) The column for "Other Annual Compensation" has been omitted because there
is no compensation required to be reported in such column. The aggregate
amount of perquisites and other personal benefits provided to each Named
Executive Officer is less than 10% of the total annual salary and bonus
of such officer.
(2) Represents premiums paid for life and disability insurance policies for
the benefit of Mr. Levy.
(3) Represents reimbursement of relocation and moving expenses.
(4) Mr. Sanders joined the Company in September 1997.
13
<PAGE>
Stock Option Grants
The following table sets forth information concerning the grant of
stock options made during 1998 to each Named Executive Officer.
<TABLE>
<CAPTION>
Option Grants In Fiscal Year 1998
Individual Grants Potential Realizable
-------------------------------------------------------- Value at Assumed
Number of % of Total Annual Rates of Stock
Securities Options Price Appreciation for
Underlying Granted to Exercise Option Term(2)
Options Employees Price -----------------------
Name Date of Grant Granted(1) in Fiscal Year ($/share) Expiration Date 5%($) 10%($)
---- ------------- ---------- -------------- --------- --------------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Michael Levy 09/16/98 175,000 8.84% 14.0625 09/14/2008 $1,547,670 $3,922,101
Mark J. Mariani 06/11/98(3) 40,000 2.02 14.0625 06/10/2008 342,845 863,321 (4)
09/16/98 30,000 1.52 14.0625 09/14/2008 265,315 672,360
12/31/98 30,000 1.52 15.5625 12/31/2008 293,615 744,079
Andrew S. Sturner 06/11/98(3) 30,000 1.52 14.0625 06/10/2008 257,134 647,491 (4)
09/16/98 70,000 3.54 14.0625 09/14/2008 619,068 1,568,840
12/31/98 30,000 1.52 15.5625 12/31/2008 293,615 744,079
Kenneth W. Sanders 06/11/98(3) 40,000 2.02 14.0625 06/10/2008 342,845 863,321 (4)
09/16/98 30,000 1.52 14.0625 09/14/2008 265,315 672,360
12/31/98 30,000 1.52 15.5625 12/31/2008 293,615 744,079
Dan Leichtenschlag 06/11/98(3) 20,000 1.01 14.0625 06/10/2008 176,876 448,240 (4)
12/31/98 10,000 0.51 15.5625 12/31/2008 97,872 248,026
</TABLE>
- -------------------------
(1) All such options were granted under the Incentive Plan and become
exercisable in installments over four years. Under the Incentive Plan,
these options will become immediately exercisable in the event of certain
change of control transactions involving the Company.
(2) In accordance with the rules of the Commission, the potential realizable
values for such options shown in the table are based on assumed rates of
stock price appreciation of 5% and 10% compounded annually from the date
the respective options were granted to their expiration date. These
assumed rates of appreciation do not represent the Company's estimate or
projection of the appreciation of shares of Common Stock of the Company.
(3) The indicated options were initially granted on June 11, 1998 with an
exercise price of $29.44 per share. Such options were repriced on
September 16, 1998 with the terms described in this table.
(4) The potential realizable values for these options are based on assumed
rates of stock price appreciation of 5% and 10% compounded annually from
September 16, 1998, the date these options were repriced, to their
expiration date.
Stock Option Exercises and Fiscal Year-End Value Table
The following table sets forth information concerning (i) options
exercised during 1998 by the Named Executive Officers and (ii) the number and
value of unexercised stock options held by the Named Executive Officers at
fiscal year-end, based on a value per share of Common Stock of $15.5625, the
closing sale price of the Common Stock on the Nasdaq National Market System on
December 31, 1998.
<TABLE>
<CAPTION>
Options Exercised in 1998 and Fiscal Year-End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
Shares December 31, 1998 December 31, 1998
Acquired on Value ----------------- -----------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael Levy -- -- 37,500 287,500 $283,594 $1,113,281
Mark J. Mariani 10,000 $349,300 49,166 140,834 691,399 610,476
Andrew S. Sturner -- -- 45,000 155,000 608,938 389,438
Kenneth W. Sanders -- -- 51,666 148,334 390,724 470,526
Dan Leichtenschlag 5,000 158,437 21,333 63,667 211,146 313,666
</TABLE>
14
<PAGE>
Employment Agreements
Mr. Levy is employed by the Company under an employment agreement,
which was amended in August 1999, pursuant to which he will serve as the
Company's Chairman of the Board, President and Chief Executive Officer through
December 31, 2003, subject to extension or renewal. Mr. Levy will receive an
annual base salary of at least $300,000, an annual bonus equal to 50% of his
base salary for each fiscal year for which the Company achieves its budgeted
EBITDA target, as approved by the Compensation Committee, and such other bonuses
as may be awarded from time to time by the Board or the Compensation Committee.
During each calendar year, beginning in 2000, the Company will grant Mr. Levy
options to purchase at least 175,000 shares of Common Stock at exercise prices
to be determined at the time of grant. Effective August 10, 1999, the Company
also granted Mr. Levy options to purchase 200,000 shares of Common Stock at an
exercise price of $17.00 per share, which options will vest and become
exercisable when the Company achieves positive EBITDA. If Mr. Levy's employment
is terminated by the Company other than by reason of death, Disability (as
defined in the agreement) or Cause (as defined in the agreement), or by Mr. Levy
for Good Reason (generally defined as a material breach by the Company of the
agreement), the Company will pay Mr. Levy within five days of such termination
the sum of his accrued base salary and vacation pay through the date of
termination, a pro rata portion of his most recent bonus plus an amount equal to
the greater of two times his current annual base salary or the amount of base
salary that would have been payable to him for the remainder of the term of the
agreement. In addition, all unvested stock options held by Mr. Levy at the time
his employment is terminated will immediately vest and be exercisable for one
year following the date of termination or, if earlier, until the then scheduled
expiration date(s) of such options. During his employment and for a period of
two years after termination, Mr. Levy is prohibited from competing with the
Company or soliciting employees or former employees of the Company.
In August 1999, the Company entered into an employment agreement with
Kenneth W. Sanders (its Senior Vice President and Chief Financial Officer). The
agreement is for a term of three years, through August 31, 2002, subject to
extension or renewal. Mr. Sanders will receive an annual base salary of at least
$270,000, an annual bonus equal to 50% of his base salary for each fiscal year
for which the Company achieves its budgeted EBITDA target, as approved by the
Compensation Committee, and such other bonuses as may be awarded from time to
time by the Board or the Compensation Committee. During each calendar year,
beginning in 2000, the Company will grant Mr. Sanders options to purchase at
least 50,000 shares of Common Stock at exercise prices to be determined at the
time of grant. If Mr. Sanders' employment is terminated by the Company other
than by reason of death, Disability (as defined) or Cause (as defined), or by
Mr. Sanders for Good Reason (generally defined as a material breach by the
Company of the agreement), the Company will continue to pay Mr. Sanders his base
salary for six months (or for one year, if the termination is within one year
following a change in control, as defined in the agreement). In addition, all
unvested stock options held by Mr. Sanders at the time his employment is
terminated will immediately vest and be exercisable for one year following the
date of termination or, if earlier, until the then scheduled expiration date(s)
of such options. During his employment and for a period of two years after
termination, Mr. Sanders is prohibited from competing with the Company or
soliciting employees or former employees of the Company.
The Company has also entered into an agreement with each of Mark J.
Mariani (its President Sales and Marketing) and Andrew S. Sturner (its
President, Corporate and Business Development), whereby the Company has agreed
to provide each of Messrs. Mariani and Sturner with certain compensation in the
event any of such person's employment is terminated by the Company without
Cause. If any of such person's employment is terminated without Cause, the
Company will continue to pay Messrs. Mariani and Sturner, as applicable, an
amount equal to the installments of such person's base salary (at the rate in
effect immediately prior to the date of termination) that would have been paid
to such person had such employment not been so terminated for a period of (i)
six months if such termination is either prior to a change of control or more
than one year after a change of control or (ii) one year if such termination is
within one year following a change of control. In addition, all unvested stock
options held by Messrs. Mariani or Sturner, as applicable, at the time such
employment is terminated will immediately vest and become exercisable for a
period of one year following the date of termination. The Company currently is
negotiating employment agreements with each of Messrs. Mariani and Sturner and
with Dan Leichtenschlag (its Senior Vice President of Operations).
15
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is comprised of Gerry Hogan, Michael Levy
and Sean McManus. Mr. Levy is an executive officer of the Company. Mr. Levy does
not participate in discussions or decisions regarding his own compensation or
performance appraisals.
Director Compensation
The Company reimburses its directors for out-of-pocket expenses
incurred in connection with their rendering of services as directors. The
Company currently does not pay cash fees to its directors for attendance at
meetings. Non-employee directors are eligible to receive options under the 1997
Plan.
On June 11, 1998, the Compensation Committee granted an option to
purchase 3,000 shares of common stock to each of Messrs. Hogan, Horrow, Nibley,
Schulhof and Walsh at an exercise price of $29.44 per share. As a result of a
significant decline in the market price of the Company's Common Stock during the
third quarter of 1998, the Compensation Committee of the Board of Directors
amended these options on September 16, 1998 to reduce their exercise prices to
the market value of the Common Stock on such date ($14.0625 per share). None of
the other terms of the options so amended were affected.
OTHER MATTERS
No other matters will be discussed at the Special Meeting.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2000 Annual
Meeting of Stockholders must be received at the Company's principal executive
offices no later than January 17, 2000 in order to be included in the proxy
statement and form of proxy relating to that meeting.
16
<PAGE>
APPENDIX A
SPORTSLINE USA, INC.
6340 N.W. 5th Way
Fort Lauderdale, Florida 33309
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
The undersigned holder of Common Stock of SportsLine USA, Inc., a
Delaware corporation (the "Company"), hereby appoints Michael Levy and Kenneth
W. Sanders, and each of them, as proxies for the undersigned, each with full
power of substitution, for and in the name of the undersigned to act for the
undersigned and to vote, as designated on the reverse side of this proxy card,
all of the shares of stock of the Company that the undersigned is entitled to
vote at the Special Meeting of Stockholders, to be held on November 19, 1999 at
10:00 a.m., local time, at the Fort Lauderdale Marriott North, 6650 North
Andrews Avenue, Fort Lauderdale, Florida 33309, and at any adjournments or
postponements thereof.
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. Approval and adoption of the proposed amendment to the Certificate of
Incorporation to change the name of the company from SportsLine USA, Inc. to
SportsLine.com, Inc.
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE AMENDMENT
TO THE CERTIFICATE OF INCORPORATION TO CHANGE THE NAME OF THE COMPANY
FROM SPORTSLINE USA, INC. TO SPORTSLINE.COM, INC.
2. Approval of Amendment to the 1997 Incentive Compensation Plan to increase
the number of shares available for issuance to 5,500,000.
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE AMENDMENT
TO THE 1997 INCENTIVE COMPENSATION PLAN TO INCREASE THE NUMBER OF
SHARES AVAILABLE FOR ISSUANCE TO [AMOUNT] SHARES.
3. Approval of Amendment to the 1997 Employee Stock Purchase Plan to increase
the number of shares available for issuance to 1,000,000.
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE AMENDMENT
TO THE 1997 INCENTIVE COMPENSATION PLAN TO INCREASE THE NUMBER OF
SHARES AVAILABLE FOR ISSUANCE TO [AMOUNT] SHARES.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION AND "FOR" THE
AMENDMENTS TO THE 1997 INCENTIVE COMPENSATION PLAN AND THE 1997 EMPLOYEE STOCK
PURCHASE PLAN.
<PAGE>
PLEASE MARK, SIGN AND DATE THIS PROXY CARD AND PROMPTLY RETURN IT IN THE
ENVELOPE PROVIDED. NO POSTAGE NECESSARY IF MAILED WITHIN THE UNITED STATES.
The undersigned hereby acknowledges receipt of (i) the Notice of the
Special Meeting and (ii) the Proxy Statement.
DATE____________________________________________________________________________
SIGNATURE_______________________________________________________________________
SIGNATURE (If held jointly)_____________________________________________________
Note: Please sign exactly as your name appears hereon and mail it promptly even
though you may plan to attend the meeting. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If
partnership, please sign in the partnership name by authorized person.
<PAGE>
APPENDIX B
SPORTSLINE USA, INC.
1997 Incentive Compensation Plan
(As Amended September 1999)
<PAGE>
<TABLE>
<CAPTION>
SPORTSLINE USA, INC.
1997 Incentive Compensation Plan
<S> <C>
1. Purpose..................................................................................................1
2. Definitions..............................................................................................1
3. Administration...........................................................................................4
(a) Authority of the Committee......................................................................4
(b) Manner of Exercise of Committee Authority.......................................................5
(c) Limitation of Liability.........................................................................5
4. Stock Subject to Plan....................................................................................5
(a) Limitation on Overall Number of Shares Subject to Awards........................................5
(b) Application of Limitations......................................................................6
5. Eligibility; Per-Person Award Limitations................................................................6
6. Specific Terms of Awards.................................................................................6
(a) General.........................................................................................6
(b) Options.........................................................................................6
(c) Stock Appreciation Rights.......................................................................8
(d) Restricted Stock................................................................................9
(e) Deferred Stock.................................................................................10
(f) Bonus Stock and Awards in Lieu of Obligations..................................................11
(g) Dividend Equivalents...........................................................................11
(h) Other Stock-Based Awards.......................................................................11
7. Certain Provisions Applicable to Awards.................................................................11
(a) Stand-Alone, Additional, Tandem, and Substitute Awards.........................................11
(b) Term of Awards.................................................................................12
(c) Form and Timing of Payment Under Awards; Deferrals.............................................12
(d) Exemptions from Section 16(b) Liability........................................................12
8. Performance and Annual Incentive Awards.................................................................13
(a) Performance Conditions.........................................................................13
(b) Performance Awards Granted to Designated Covered Employees.....................................13
(c) Annual Incentive Awards Granted to Designated Covered Employees................................14
(d) Written Determinations.........................................................................15
(e) Status of Section 8(b) and Section 8(c) Awards Under Code Section 162(m).......................16
9. Change in Control.......................................................................................16
(a) Effect of "Change in Control.".................................................................16
(b) Definition of "Change in Control...............................................................17
(c) Definition of "Change in Control Price.".......................................................17
10. General Provisions......................................................................................18
(a) Compliance With Legal and Other Requirements...................................................18
(b) Limits on Transferability; Beneficiaries.......................................................18
(c) Adjustments....................................................................................18
(d) Taxes..........................................................................................19
(e) Changes to the Plan and Awards.................................................................19
(i)
<PAGE>
(f) Limitation on Rights Conferred Under Plan......................................................20
(g) Unfunded Status of Awards; Creation of Trusts..................................................20
(h) Nonexclusivity of the Plan.....................................................................21
(i) Payments in the Event of Forfeitures; Fractional Shares........................................21
(j) Governing Law..................................................................................21
(k) Plan Effective Date and Stockholder Approval; Termination of Plan..............................21
</TABLE>
(ii)
<PAGE>
SPORTSLINE USA, INC.
1997 Incentive Compensation Plan
1. Purpose. The purpose of this 1997 Incentive Compensation Plan (the
"Plan") is to assist SportsLine USA, Inc. (the "Company") and its subsidiaries
in attracting, motivating, retaining and rewarding high-quality executives and
other employees, officers, Directors and independent contractors enabling such
persons to acquire or increase a proprietary interest in the Company in order to
strengthen the mutuality of interests between such persons and the Company's
stockholders, and providing such persons with annual and long term performance
incentives to expend their maximum efforts in the creation of shareholder value.
The Plan is also intended to qualify certain compensation awarded under the Plan
for tax deductibility under Section 162(m) of the Code (as hereafter defined) to
the extent deemed appropriate by the Committee (or any successor committee) of
the Board of Directors of the Company.
2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof.
(a) "Annual Meeting Date" shall mean the date of the annual
meeting of the Company's stockholders at which the Directors are elected.
(b) "Annual Incentive Award" means a conditional right granted
to a Participant under Section 8(c) hereof to receive a cash payment, Stock or
other Award, unless otherwise determined by the Committee, after the end of a
specified fiscal year.
(c) "Award" means any Option, SAR (including Limited SAR),
Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual
Incentive Award, together with any other right or interest granted to a
Participant under the Plan.
(d) "Beneficiary" means the person, persons, trust or trusts
which have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b)
hereof. If, upon a Participant's death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(e) "Beneficial Owner", "Beneficially Owning" and "Beneficial
Ownership" shall have the meanings ascribed to such terms in Rule 13d-3 under
the Exchange Act and any successor to such Rule.
(f) "Board" means the Company's Board of Directors.
<PAGE>
(g) "Change in Control" means Change in Control as defined
with related terms in Section 9 of the Plan.
(h) "Change in Control Price" means the amount calculated in
accordance with Section 9(c) of the Plan.
(i) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, including regulations thereunder and successor provisions and
regulations thereto.
(j) "Committee" means a committee designated by the Board to
administer the Plan; provided, however, that the Committee shall consist solely
of at least two directors, each of whom shall be (i) a "non-employee director"
within the meaning of Rule 16b-3 under the Exchange Act, unless administration
of the Plan by "non-employee directors" is not then required in order for
exemptions under Rule 16b-3 to apply to transactions under the Plan, and (ii) an
"outside director" within the meaning of Section 162(m) of the Code, unless
administration of the Plan by "outside directors" is not then required in order
to qualify for tax deductibility under Section 162(m) of the Code.
(k) "Corporate Transaction" means a Corporate Transaction as
defined in Section 9(b)(i) of the Plan.
(l) "Covered Employee" means an Eligible Person who is a
Covered Employee as specified in Section 8(e) of the Plan.
(m) "Deferred Stock" means a right, granted to a Participant
under Section 6(e) hereof, to receive Stock, cash or a combination thereof at
the end of a specified deferral period.
(n) "Director" means a member of the Board.
(o) "Disability" means a permanent and total disability
(within the meaning of Section 22(e) of the Code), as determined by a medical
doctor satisfactory to the Committee.
(p) "Dividend Equivalent" means a right, granted to a
Participant under Section 6(g) hereof, to receive cash, Stock, other Awards or
other property equal in value to dividends paid with respect to a specified
number of shares of Stock, or other periodic payments.
(q) "Effective Date" means the effective date of the Plan,
which shall be March 1, 1997.
(r) "Eligible Person" means each Executive Officer of the
Company (as defined under the Exchange Act) and other officers, Directors and
employees of the Company or of any Subsidiary, and independent contractors with
the Company or any Subsidiary. The foregoing notwithstanding, (i) only employees
of the Company or any Subsidiary shall be an Eligible Persons for purposes of
receiving any Incentive Stock Options and (ii) no independent contractor shall
be an Eligible Person for purposes of receiving any Awards other than Options
under Section 6(b) of the Plan. An employee on leave of absence may be
considered as still in the employ of the Company or a Subsidiary for purposes of
eligibility for participation in the Plan.
2
<PAGE>
(s) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, including rules thereunder and successor
provisions and rules thereto.
(t) "Executive Officer" means an executive officer of the
Company as defined under the Exchange Act.
(u) "Fair Market Value" means the fair market value of Stock,
Awards or other property as determined by the Committee or the Board, or under
procedures established by the Committee or the Board. Unless otherwise
determined by the Committee or the Board, the Fair Market Value of Stock as of
any given date shall be the closing sale price per share reported on a
consolidated basis for stock listed on the principal stock exchange or market on
which Stock is traded on the date as of which such value is being determined or,
if there is no sale on that date, then on the last previous day on which a sale
was reported.
(v) ""Formula Grants" means the Formula Grant Options granted
to Non-Employee Directors pursuant to Section 6(b)(iv) of the Plan.
(w) "Incentive Stock Option" or "ISO" means any Option
intended to be designated as an incentive stock option within the meaning of
Section 422 of the Code or any successor provision thereto.
(x) "Incumbent Board" means the Incumbent Board as defined in
Section 9(b)(ii) of the Plan.
(y) "Initial Grant Date" means the date on which a
Non-Employee Director is first elected or appointed as a Director.
(z) "Limited SAR" means a right granted to a Participant under
Section 6(c) hereof.
(aa) "Non-Employee Director" shall mean a member of the Board
who is not an employee of the Company or any subsidiary.
(bb) "Option" means a right granted to a Participant under
Section 6(b) hereof, to purchase Stock or other Awards at a specified price
during specified time periods.
(cc) "Other Stock-Based Awards" means Awards granted to a
Participant under Section 6(h) hereof.
(dd) "Parent Corporation" means any corporation (other than
the Company) in an unbroken chain of corporations ending with the Company, if
each of the corporations in the chain (other than the Company) owns stock
possessing 50% or more of the combined voting power of all classes of stock in
one of the other corporations in the chain.
(ee) "Participant" means a person who has been granted an
Award under the Plan which remains outstanding, including a person who is no
longer an Eligible Person.
3
<PAGE>
(ff) "Performance Award" means a right, granted to a Eligible
Person under Section 8 hereof, to receive Awards based upon performance criteria
specified by the Committee or the Board.
(gg) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, and shall include a "group" as defined in Section 13(d) thereof.
(hh) "Restricted Stock" means Stock granted to a Participant
under Section 6(d) hereof, that is subject to certain restrictions and to a risk
of forfeiture.
(ii) "Retire" or "Retirement" means termination of service as
a Director after having attained at least age 62 and having served as a Director
for at least 5 years, other than by reason of death, Disability or the
Director's wilful misconduct or negligence.
(jj) "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and
Rule 16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act
(kk) "Stock" means the Company's Common Stock, and such other
securities as may be substituted (or resubstituted) for Stock pursuant to
Section 10(c) hereof.
(ll) "Stock Appreciation Rights" or "SAR" means a right
granted to a Participant under Section 6(c) hereof.
(mm) "Subsidiary" means any corporation or other entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of the then outstanding securities or interests
of such corporation or other entity entitled to vote generally in the election
of directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% or more of the assets on liquidation or
dissolution.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered
by the Committee; provided, however, that except as otherwise expressly provided
in this Plan or in order to comply with Code Section 162(m) or Rule 16b-3 under
the Exchange Act, the Board may exercise any power or authority granted to the
Committee under this Plan. The Committee or the Board shall have full and final
authority, in each case subject to and consistent with the provisions of the
Plan, to select Eligible Persons to become Participants, grant Awards, determine
the type, number and other terms and conditions of, and all other matters
relating to, Awards, prescribe Award agreements (which need not be identical for
each Participant) and rules and regulations for the administration of the Plan,
construe and interpret the Plan and Award agreements and correct defects, supply
omissions or reconcile inconsistencies therein, and to make all other decisions
and determinations as the Committee or the Board may deem necessary or advisable
for the administration of the Plan. In exercising any discretion granted to the
Committee or the Board under the Plan or pursuant to any Award, the Committee or
the Board
4
<PAGE>
shall not be required to follow past practices, act in a manner consistent with
past practices, or treat any Eligible Person in a manner consistent with the
treatment of other Eligible Persons.
(b) Manner of Exercise of Committee Authority. The Committee,
and not the Board, shall exercise sole and exclusive discretion on any matter
relating to a Participant then subject to Section 16 of the Exchange Act with
respect to the Company to the extent necessary in order that transactions by
such Participant shall be exempt under Rule 16b-3 under the Exchange Act. Any
action of the Committee or the Board shall be final, conclusive and binding on
all persons, including the Company, its subsidiaries, Participants,
Beneficiaries, transferees under Section 10(b) hereof or other persons claiming
rights from or through a Participant, and stockholders. The express grant of any
specific power to the Committee or the Board, and the taking of any action by
the Committee or the Board, shall not be construed as limiting any power or
authority of the Committee or the Board. The Committee or the Board may delegate
to officers or managers of the Company or any subsidiary, or committees thereof,
the authority, subject to such terms as the Committee or the Board shall
determine, (i) to perform administrative functions, (ii) with respect to
Participants not subject to Section 16 of the Exchange Act, to perform such
other functions as the Committee or the Board may determine, and (iii) with
respect to Participants subject to Section 16, to perform such other functions
of the Committee or the Board as the Committee or the Board may determine to the
extent performance of such functions will not result in the loss of an exemption
under Rule 16b-3 otherwise available for transactions by such persons, in each
case to the extent permitted under applicable law and subject to the
requirements set forth in Section 8(d). The Committee or the Board may appoint
agents to assist it in administering the Plan.
(c) Limitation of Liability. The Committee and the Board, and
each member thereof, shall be entitled to, in good faith, rely or act upon any
report or other information furnished to him or her by any executive officer,
other officer or employee of the Company or a Subsidiary, the Company's
independent auditors, consultants or any other agents assisting in the
administration of the Plan. Members of the Committee and the Board, and any
officer or employee of the Company or a subsidiary acting at the direction or on
behalf of the Committee or the Board, shall not be personally liable for any
action or determination taken or made in good faith with respect to the Plan,
and shall, to the extent permitted by law, be fully indemnified and protected by
the Company with respect to any such action or determination.
4. Stock Subject to Plan.
(a) Limitation on Overall Number of Shares Subject to Awards.
Subject to adjustment as provided in Section 10(c) hereof, the total number of
shares of Stock reserved and available for delivery in connection with Awards
under the Plan shall be the sum of (i) 5,500,000, plus (ii) the number of shares
with respect to Awards previously granted under the Plan that terminate without
being exercised, expire, are forfeited or canceled, and the number of shares of
Stock that are surrendered in payment of any Awards or any tax withholding with
regard thereto. Any shares of Stock delivered under the Plan may consist, in
whole or in part, of authorized and unissued shares or treasury shares. Subject
to adjustment as provided in Section 10(c) hereof, in no event shall the
aggregate number of shares of Stock which may be issued pursuant to ISOs exceed
1,500,000 shares.
5
<PAGE>
(b) Application of Limitations. The limitation contained in
Section 4(a) shall apply not only to Awards that are settleable by the delivery
of shares of Stock but also to Awards relating to shares of Stock but settleable
only in cash (such as cash-only SARs). The Committee or the Board may adopt
reasonable counting procedures to ensure appropriate counting, avoid double
counting (as, for example, in the case of tandem or substitute awards) and make
adjustments if the number of shares of Stock actually delivered differs from the
number of shares previously counted in connection with an Award.
5. Eligibility; Per-Person Award Limitations. Awards may be granted
under the Plan only to Eligible Persons. In each fiscal year during any part of
which the Plan is in effect, an Eligible Person may not be granted Awards
relating to more than 250,000 shares of Stock, subject to adjustment as provided
in Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g),
6(h), 8(b) and 8(c). In addition, the maximum amount that may be earned as an
Annual Incentive Award or other cash Award in any fiscal year by any one
Participant shall be $2,000,000, and the maximum amount that may be earned as a
Performance Award or other cash Award in respect of a performance period by any
one Participant shall be $5,000,000.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions
set forth in this Section 6. In addition, the Committee or the Board may impose
on any Award or the exercise thereof, at the date of grant or thereafter
(subject to Section 10(e)), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee or the Board
shall determine, including terms requiring forfeiture of Awards in the event of
termination of employment by the Participant and terms permitting a Participant
to make elections relating to his or her Award. The Committee or the Board shall
retain full power and discretion to accelerate, waive or modify, at any time,
any term or condition of an Award that is not mandatory under the Plan. Except
in cases in which the Committee or the Board is authorized to require other
forms of consideration under the Plan, or to the extent other forms of
consideration must be paid to satisfy the requirements of Delaware law, no
consideration other than services may be required for the grant (but not the
exercise) of any Award.
(b) Options. The Committee and the Board each is authorized to
grant Options to Participants on the following terms and conditions:
(i) Exercise Price. The exercise price per share of
Stock purchasable under an Option shall be determined by the
Committee or the Board, provided that such exercise price
shall not, in the case of Incentive Stock Options, be less
than 100% of the Fair Market Value of the Stock on the date of
grant of the Option and shall not, in any event, be less than
the par value of a share of Stock on the date of grant of such
Option. If an employee owns or is deemed to own (by reason of
the attribution rules applicable under Section 424(d) of the
Code) more than 10% of the combined voting power of all
classes of stock of the Company or any Parent Corporation and
an Incentive Stock Option is granted to such employee, the
option price of such Incentive Stock Option (to the extent
required
6
<PAGE>
by the Code at the time of grant) shall be no less than 110%
of the Fair Market Value of the Stock on the date such
Incentive Stock Option is granted.
(ii) Time and Method of Exercise. The Committee or
the Board shall determine the time or times at which or the
circumstances under which an Option may be exercised in whole
or in part (including based on achievement of performance
goals and/or future service requirements), the time or times
at which Options shall cease to be or become exercisable
following termination of employment or upon other conditions,
the methods by which such exercise price may be paid or deemed
to be paid (including in the discretion of the Committee or
the Board a cashless exercise procedure), the form of such
payment, including, without limitation, cash, Stock, other
Awards or awards granted under other plans of the Company or
any subsidiary, or other property (including notes or other
contractual obligations of Participants to make payment on a
deferred basis), and the methods by or forms in which Stock
will be delivered or deemed to be delivered to Participants.
(iii) ISOs. The terms of any ISO granted under the
Plan shall comply in all respects with the provisions of
Section 422 of the Code. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to ISOs
(including any SAR in tandem therewith) shall be interpreted,
amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify
either the Plan or any ISO under Section 422 of the Code,
unless the Participant has first requested the change that
will result in such disqualification. Thus, if and to the
extent required to comply with Section 422 of the Code,
Options granted as Incentive Stock Options shall be subject to
the following special terms and conditions:
(A) the Option shall not be exercisable more
than ten years after the date such Incentive Stock Option is
granted; provided, however, that if a Participant owns or is
deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10% of the combined voting power
of all classes of stock of the Company or any Parent
Corporation and the Incentive Stock Option is granted to such
Participant, the term of the Incentive Stock Option shall be
(to the extent required by the Code at the time of the grant)
for no more than five years from the date of grant; and
(B) The aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is
granted) of the shares of stock with respect to which
Incentive Stock Options granted under the Plan and all other
option plans of the Company or its Parent Corporation during
any calendar year exercisable for the first time by the
Participant during any calendar year shall not (to the extent
required by the Code at the time of the grant) exceed
$100,000.
(iv) Formula Grants of Options to Non-Employee
Directors. Each Non-Employee Director, other than a
Non-Employee Director who is, or is an affiliate or
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<PAGE>
designee of, a Beneficial Owner of more than 5% of the Company
Voting Securities Outstanding (as defined in Section 9(b)(i)),
shall receive on such Non-Employee Director's Initial Grant
Date an Option to purchase 12,000 shares of Stock. In
addition, each Non-Employee Director shall receive on each
Annual Meeting Date thereafter, an Option to purchase 3,000
shares of Stock. Options granted to Non-Employee Directors
pursuant to this Section shall be for a term of 10 years and
shall become exercisable at the rate of 25% per year
commencing on the first anniversary of the date on which the
Option is granted; provided, however, that the Options shall
be fully exercisable in the event that, while serving as a
Director, the Non-Employee Director dies, suffers a
Disability, or Retires. The per share exercise price of all
Options granted to Non-Employee Directors pursuant to this
paragraph (iv) shall be equal to the Fair Market Value of a
share of Stock on the date such Option is granted. Unless
otherwise extended in the sole discretion of the Committee,
the unexercised portion of any Option granted pursuant to this
paragraph (iv) shall become null and void (V) three months
after the date on which such Non-Employee Director ceases to
be a Director of the Company for any reason other than the
Non-Employee Director's wilful misconduct or negligence,
Disability, death or Retirement, (W) immediately in the event
of the Non-Employee Director's wilful misconduct or
negligence, (X) one year after the Non-Employee Director
ceases to be a Director by reason of his Disability, (Y) at
the expiration of its original term, if the Non-Employee
Director ceases to be a Director by reason of his Retirement,
and (Z) twelve months after the date of the Non-Employee
Director's death in the event that such death occurs prior to
the time the Option otherwise would become null and void
pursuant to this sentence.
(c) Stock Appreciation Rights. The Committee and the Board
each is authorized to grant SAR's to Participants on the following terms and
conditions:
(i) Right to Payment. A SAR shall confer on the
Participant to whom it is granted a right to receive, upon
exercise thereof, the excess of (A) the Fair Market Value of
one share of stock on the date of exercise (or, in the case of
a "Limited SAR" that may be exercised only in the event of a
Change in Control, the Fair Market Value determined by
reference to the Change in Control Price, as defined under
Section 9(c) hereof), over (B) the grant price of the SAR as
determined by the Committee or the Board. The grant price of
an SAR shall not be less than the Fair Market Value of a share
of Stock on the date of grant except as provided under Section
7(a) hereof.
(ii) Other Terms. The Committee or the Board shall
determine at the date of grant or thereafter, the time or
times at which and the circumstances under which a SAR may be
exercised in whole or in part (including based on achievement
of performance goals and/or future service requirements), the
time or times at which SARs shall cease to be or become
exercisable following termination of employment or upon other
conditions, the method of exercise, method of settlement, form
of consideration payable in settlement, method by or forms in
which Stock will be delivered or deemed to be delivered to
Participants, whether or not a SAR shall be in tandem or in
combination with any other Award, and any other terms and
conditions of any SAR. Limited SARs that may only be
8
<PAGE>
exercised in connection with a Change in Control or other
event as specified by the Committee or the Board, may be
granted on such terms, not inconsistent with this Section
6(c), as the Committee or the Board may determine. SARs and
Limited SARs may be either freestanding or in tandem with
other Awards.
(d) Restricted Stock. The Committee and the Board each is
authorized to grant Restricted Stock to Participants on the following terms and
conditions:
(i) Grant and Restrictions. Restricted Stock shall be
subject to such restrictions on transferability, risk of
forfeiture and other restrictions, if any, as the Committee or
the Board may impose, which restrictions may lapse separately
or in combination at such times, under such circumstances
(including based on achievement of performance goals and/or
future service requirements), in such installments or
otherwise, as the Committee or the Board may determine at the
date of grant or thereafter. Except to the extent restricted
under the terms of the Plan and any Award agreement relating
to the Restricted Stock, a Participant granted Restricted
Stock shall have all of the rights of a stockholder, including
the right to vote the Restricted Stock and the right to
receive dividends thereon (subject to any mandatory
reinvestment or other requirement imposed by the Committee or
the Board). During the restricted period applicable to the
Restricted Stock, subject to Section 10(b) below, the
Restricted Stock may not be sold, transferred, pledged,
hypothecated, margined or otherwise encumbered by the
Participant.
(ii) Forfeiture. Except as otherwise determined by
the Committee or the Board at the time of the Award, upon
termination of a Participant's employment during the
applicable restriction period, the Participant's Restricted
Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the Company; provided that the
Committee or the Board may provide, by rule or regulation or
in any Award agreement, or may determine in any individual
case, that restrictions or forfeiture conditions relating to
Restricted Stock shall be waived in whole or in part in the
event of terminations resulting from specified causes, and the
Committee or the Board may in other cases waive in whole or in
part the forfeiture of Restricted Stock.
(iii) Certificates for Stock. Restricted Stock
granted under the Plan may be evidenced in such manner as the
Committee or the Board shall determine. If certificates
representing Restricted Stock are registered in the name of
the Participant, the Committee or the Board may require that
such certificates bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such
Restricted Stock, that the Company retain physical possession
of the certificates, and that the Participant deliver a stock
power to the Company, endorsed in blank, relating to the
Restricted Stock.
(iv) Dividends and Splits. As a condition to the
grant of an Award of Restricted Stock, the Committee or the
Board may require that any cash dividends
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paid on a share of Restricted Stock be automatically
reinvested in additional shares of Restricted Stock or applied
to the purchase of additional Awards under the Plan. Unless
otherwise determined by the Committee or the Board, Stock
distributed in connection with a Stock split or Stock
dividend, and other property distributed as a dividend, shall
be subject to restrictions and a risk of forfeiture to the
same extent as the Restricted Stock with respect to which such
Stock or other property has been distributed.
(e) Deferred Stock. The Committee and the Board each is
authorized to grant Deferred Stock to Participants, which are rights to receive
Stock, cash, or a combination thereof at the end of a specified deferral period,
subject to the following terms and conditions:
(i) Award and Restrictions. Satisfaction of an Award
of Deferred Stock shall occur upon expiration of the deferral
period specified for such Deferred Stock by the Committee or
the Board (or, if permitted by the Committee or the Board, as
elected by the Participant). In addition, Deferred Stock shall
be subject to such restrictions (which may include a risk of
forfeiture) as the Committee or the Board may impose, if any,
which restrictions may lapse at the expiration of the deferral
period or at earlier specified times (including based on
achievement of performance goals and/or future service
requirements), separately or in combination, in installments
or otherwise, as the Committee or the Board may determine.
Deferred Stock may be satisfied by delivery of Stock, cash
equal to the Fair Market Value of the specified number of
shares of Stock covered by the Deferred Stock, or a
combination thereof, as determined by the Committee or the
Board at the date of grant or thereafter. Prior to
satisfaction of an Award of Deferred Stock, an Award of
Deferred Stock carries no voting or dividend or other rights
associated with share ownership.
(ii) Forfeiture. Except as otherwise determined by
the Committee or the Board, upon termination of a
Participant's employment during the applicable deferral period
thereof to which forfeiture conditions apply (as provided in
the Award agreement evidencing the Deferred Stock), the
Participant's Deferred Stock that is at that time subject to
deferral (other than a deferral at the election of the
Participant) shall be forfeited; provided that the Committee
or the Board may provide, by rule or regulation or in any
Award agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Deferred
Stock shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the
Committee or the Board may in other cases waive in whole or in
part the forfeiture of Deferred Stock.
(iii) Dividend Equivalents. Unless otherwise
determined by the Committee or the Board at date of grant,
Dividend Equivalents on the specified number of shares of
Stock covered by an Award of Deferred Stock shall be either
(A) paid with respect to such Deferred Stock at the dividend
payment date in cash or in shares of unrestricted Stock having
a Fair Market Value equal to the amount of such dividends, or
(B) deferred with respect to such Deferred Stock and the
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amount or value thereof automatically deemed reinvested in
additional Deferred Stock, other Awards or other investment
vehicles, as the Committee or the Board shall determine or
permit the Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The
Committee and the Board each is authorized to grant Stock as a bonus, or to
grant Stock or other Awards in lieu of Company obligations to pay cash or
deliver other property under the Plan or under other plans or compensatory
arrangements, provided that, in the case of Participants subject to Section 16
of the Exchange Act, the amount of such grants remains within the discretion of
the Committee to the extent necessary to ensure that acquisitions of Stock or
other Awards are exempt from liability under Section 16(b) of the Exchange Act.
Stock or Awards granted hereunder shall be subject to such other terms as shall
be determined by the Committee or the Board.
(g) Dividend Equivalents. The Committee and the Board each is
authorized to grant Dividend Equivalents to a Participant entitling the
Participant to receive cash, Stock, other Awards, or other property equal in
value to dividends paid with respect to a specified number of shares of Stock,
or other periodic payments. Dividend Equivalents may be awarded on a
free-standing basis or in connection with another Award. The Committee or the
Board may provide that Dividend Equivalents shall be paid or distributed when
accrued or shall be deemed to have been reinvested in additional Stock, Awards,
or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee or the Board may
specify.
(h) Other Stock-Based Awards. The Committee and the Board each
is authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, Stock,
as deemed by the Committee or the Board to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase rights
for Stock, Awards with value and payment contingent upon performance of the
Company or any other factors designated by the Committee or the Board, and
Awards valued by reference to the book value of Stock or the value of securities
of or the performance of specified subsidiaries or business units. The Committee
or the Board shall determine the terms and conditions of such Awards. Stock
delivered pursuant to an Award in the nature of a purchase right granted under
this Section 6(h) shall be purchased for such consideration, paid for at such
times, by such methods, and in such forms, including, without limitation, cash,
Stock, other Awards or other property, as the Committee or the Board shall
determine. Cash awards, as an element of or supplement to any other Award under
the Plan, may also be granted pursuant to this Section 6(h).
7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards.
Awards granted under the Plan may, in the discretion of the Committee or the
Board, be granted either alone or in addition to, in tandem with, or in
substitution or exchange for, any other Award or any award granted under another
plan of the Company, any subsidiary, or any business entity to be acquired by
the Company or a subsidiary, or any other right of a Participant to receive
payment from the Company or any subsidiary. Such additional, tandem, and
substitute or exchange Awards may be granted at any time. If an Award is granted
in substitution or exchange for another Award or award, the Committee or the
Board shall require the surrender of such other Award or award in consideration
for the grant of the new Award. In addition, Awards may
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<PAGE>
be granted in lieu of cash compensation, including in lieu of cash amounts
payable under other plans of the Company or any subsidiary, in which the value
of Stock subject to the Award is equivalent in value to the cash compensation
(for example, Deferred Stock or Restricted Stock), or in which the exercise
price, grant price or purchase price of the Award in the nature of a right that
may be exercised is equal to the Fair Market Value of the underlying Stock minus
the value of the cash compensation surrendered (for example, Options granted
with an exercise price "discounted" by the amount of the cash compensation
surrendered).
(b) Term of Awards. The term of each Award shall be for such
period as may be determined by the Committee or the Board; provided that in no
event shall the term of any Option or SAR exceed a period of ten years (or such
shorter term as may be required in respect of an ISO under Section 422 of the
Code).
(c) Form and Timing of Payment Under Awards; Deferrals.
Subject to the terms of the Plan and any applicable Award agreement, payments to
be made by the Company or a subsidiary upon the exercise of an Option or other
Award or settlement of an Award may be made in such forms as the Committee or
the Board shall determine, including, without limitation, cash, Stock, other
Awards or other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may be
accelerated, and cash paid in lieu of Stock in connection with such settlement,
in the discretion of the Committee or the Board or upon occurrence of one or
more specified events (in addition to a Change in Control). Installment or
deferred payments may be required by the Committee or the Board (subject to
Section 10(e) of the Plan) or permitted at the election of the Participant on
terms and conditions established by the Committee or the Board. Payments may
include, without limitation, provisions for the payment or crediting of a
reasonable interest rate on installment or deferred payments or the grant or
crediting of Dividend Equivalents or other amounts in respect of installment or
deferred payments denominated in Stock.
(d) Exemptions from Section 16(b) Liability. It is the intent
of the Company that this Plan comply in all respects with applicable provisions
of Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary to ensure that neither
the grant of any Awards to nor other transaction by a Participant who is subject
to Section 16 of the Exchange Act is subject to liability under Section 16(b)
thereof (except for transactions acknowledged in writing to be non-exempt by
such Participant). Accordingly, if any provision of this Plan or any Award
agreement does not comply with the requirements of Rule 16b-3 or Rule
16a-1(c)(3) as then applicable to any such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to the applicable
requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such Participant shall
avoid liability under Section 16(b). In addition, the purchase price of any
Award conferring a right to purchase Stock shall be not less than any specified
percentage of the Fair Market Value of Stock at the date of grant of the Award
then required in order to comply with Rule 16b-3.
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8. Performance and Annual Incentive Awards.
(a) Performance Conditions. The right of a Participant to
exercise or receive a grant or settlement of any Award, and the timing thereof,
may be subject to such performance conditions as may be specified by the
Committee or the Board. The Committee or the Board may use such business
criteria and other measures of performance as it may deem appropriate in
establishing any performance conditions, and may exercise its discretion to
reduce the amounts payable under any Award subject to performance conditions,
except as limited under Sections 8(b) and 8(c) hereof in the case of a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m). If and to the extent required under Code Section 162(m), any
power or authority relating to a Performance Award or Annual Incentive Award
intended to qualify under Code Section 162(m), shall be exercised by the
Committee and not the Board.
(b) Performance Awards Granted to Designated Covered
Employees. If and to the extent that the Committee determines that a Performance
Award to be granted to an Eligible Person who is designated by the Committee as
likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Code Section 162(m), the grant, exercise and/or
settlement of such Performance Award shall be contingent upon achievement of
preestablished performance goals and other terms set forth in this Section 8(b).
(i) Performance Goals Generally. The performance
goals for such Performance Awards shall consist of one or more
business criteria and a targeted level or levels of
performance with respect to each of such criteria, as
specified by the Committee consistent with this Section 8(b).
Performance goals shall be objective and shall otherwise meet
the requirements of Code Section 162(m) and regulations
thereunder including the requirement that the level or levels
of performance targeted by the Committee result in the
achievement of performance goals being "substantially
uncertain." The Committee may determine that such Performance
Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of
the performance goals must be achieved as a condition to
grant, exercise and/or settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to
any one Participant or to different Participants.
(ii) Business Criteria. One or more of the following
business criteria for the Company, on a consolidated basis,
and/or specified subsidiaries or business units of the Company
(except with respect to the total stockholder return and
earnings per share criteria), shall be used exclusively by the
Committee in establishing performance goals for such
Performance Awards: (1) total stockholder return; (2) such
total stockholder return as compared to total return (on a
comparable basis) of a publicly available index such as, but
not limited to, the Standard & Poor's 500 Stock Index or the
Nasdaq Composite Index; (3) net income; (4) pretax earnings;
(5) earnings before interest expense, taxes, depreciation and
amortization; (6) pretax operating earnings after interest
expense and before bonuses, service fees, and extraordinary or
special items; (7) operating margin; (8) earnings per share;
(9) return on equity; (10) return on capital; (11)
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<PAGE>
return on investment; (12) operating earnings; (13) working
capital or inventory; and (14) ratio of debt to stockholders'
equity. One or more of the foregoing business criteria shall
also be exclusively used in establishing performance goals for
Annual Incentive Awards granted to a Covered Employee under
Section 8(c) hereof that are intended to qualify as
"performance-based compensation" under Code Section 162(m).
(iii) Performance Period; Timing For Establishing
Performance Goals. Achievement of performance goals in respect
of such Performance Awards shall be measured over a
performance period of up to ten years, as specified by the
Committee. Performance goals shall be established not later
than 90 days after the beginning of any performance period
applicable to such Performance Awards, or at such other date
as may be required or permitted for "performance-based
compensation" under Code Section 162(m).
(iv) Performance Award Pool. The Committee may
establish a Performance Award pool, which shall be an unfunded
pool, for purposes of measuring Company performance in
connection with Performance Awards. The amount of such
Performance Award pool shall be based upon the achievement of
a performance goal or goals based on one or more of the
business criteria set forth in Section 8(b)(ii) hereof during
the given performance period, as specified by the Committee in
accordance with Section 8(b)(iii) hereof. The Committee may
specify the amount of the Performance Award pool as a
percentage of any of such business criteria, a percentage
thereof in excess of a threshold amount, or as another amount
which need not bear a strictly mathematical relationship to
such business criteria.
(v) Settlement of Performance Awards; Other Terms.
Settlement of such Performance Awards shall be in cash, Stock,
other Awards or other property, in the discretion of the
Committee. The Committee may, in its discretion, reduce the
amount of a settlement otherwise to be made in connection with
such Performance Awards. The Committee shall specify the
circumstances in which such Performance Awards shall be paid
or forfeited in the event of termination of employment by the
Participant prior to the end of a performance period or
settlement of Performance Awards.
(c) Annual Incentive Awards Granted to Designated Covered
Employees. If and to the extent that the Committee determines that an Annual
Incentive Award to be granted to an Eligible Person who is designated by the
Committee as likely to be a Covered Employee should qualify as
"performance-based compensation" for purposes of Code Section 162(m), the grant,
exercise and/or settlement of such Annual Incentive Award shall be contingent
upon achievement of preestablished performance goals and other terms set forth
in this Section 8(c).
(i) Annual Incentive Award Pool. The Committee may
establish an Annual Incentive Award pool, which shall be an
unfunded pool, for purposes of measuring Company performance
in connection with Annual Incentive Awards.
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The amount of such Annual Incentive Award pool shall be based
upon the achievement of a performance goal or goals based on
one or more of the business criteria set forth in Section
8(b)(ii) hereof during the given performance period, as
specified by the Committee in accordance with Section
8(b)(iii) hereof. The Committee may specify the amount of the
Annual Incentive Award pool as a percentage of any such
business criteria, a percentage thereof in excess of a
threshold amount, or as another amount which need not bear a
strictly mathematical relationship to such business criteria.
(ii) Potential Annual Incentive Awards. Not later
than the end of the 90th day of each fiscal year, or at such
other date as may be required or permitted in the case of
Awards intended to be "performance-based compensation" under
Code Section 162(m), the Committee shall determine the
Eligible Persons who will potentially receive Annual Incentive
Awards, and the amounts potentially payable thereunder, for
that fiscal year, either out of an Annual Incentive Award pool
established by such date under Section 8(c)(i) hereof or as
individual Annual Incentive Awards. In the case of individual
Annual Incentive Awards intended to qualify under Code Section
162(m), the amount potentially payable shall be based upon the
achievement of a performance goal or goals based on one or
more of the business criteria set forth in Section 8(b)(ii)
hereof in the given performance year, as specified by the
Committee; in other cases, such amount shall be based on such
criteria as shall be established by the Committee. In all
cases, the maximum Annual Incentive Award of any Participant
shall be subject to the limitation set forth in Section 5
hereof.
(iii) Payout of Annual Incentive Awards. After the
end of each fiscal year, the Committee shall determine the
amount, if any, of (A) the Annual Incentive Award pool, and
the maximum amount of potential Annual Incentive Award payable
to each Participant in the Annual Incentive Award pool, or (B)
the amount of potential Annual Incentive Award otherwise
payable to each Participant. The Committee may, in its
discretion, determine that the amount payable to any
Participant as a final Annual Incentive Award shall be reduced
from the amount of his or her potential Annual Incentive
Award, including a determination to make no final Award
whatsoever. The Committee shall specify the circumstances in
which an Annual Incentive Award shall be paid or forfeited in
the event of termination of employment by the Participant
prior to the end of a fiscal year or settlement of such Annual
Incentive Award.
(d) Written Determinations. All determinations by the
Committee as to the establishment of performance goals, the amount of any
Performance Award pool or potential individual Performance Awards and as to the
achievement of performance goals relating to Performance Awards under Section
8(b), and the amount of any Annual Incentive Award pool or potential individual
Annual Incentive Awards and the amount of final Annual Incentive Awards under
Section 8(c), shall be made in writing in the case of any Award intended to
qualify under Code Section 162(m). The Committee may not delegate any
responsibility relating to such
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Performance Awards or Annual Incentive Awards if and to the extent required to
comply with Code Section 162(m).
(e) Status of Section 8(b) and Section 8(c) Awards Under Code
Section 162(m). It is the intent of the Company that Performance Awards and
Annual Incentive Awards under Section 8(b) and 8(c) hereof granted to persons
who are designated by the Committee as likely to be Covered Employees within the
meaning of Code Section 162(m) and regulations thereunder shall, if so
designated by the Committee, constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Sections 8(b), (c), (d) and (e), including
the definitions of Covered Employee and other terms used therein, shall be
interpreted in a manner consistent with Code Section 162(m) and regulations
thereunder. The foregoing notwithstanding, because the Committee cannot
determine with certainty whether a given Participant will be a Covered Employee
with respect to a fiscal year that has not yet been completed, the term Covered
Employee as used herein shall mean only a person designated by the Committee, at
the time of grant of Performance Awards or an Annual Incentive Award, as likely
to be a Covered Employee with respect to that fiscal year. If any provision of
the Plan or any agreement relating to such Performance Awards or Annual
Incentive Awards does not comply or is inconsistent with the requirements of
Code Section 162(m) or regulations thereunder, such provision shall be construed
or deemed amended to the extent necessary to conform to such requirements.
9. Change in Control.
(a) Effect of "Change in Control." If and to the extent
provided in the Award, in the event of a "Change in Control," as defined in
Section 9(b), the following provisions shall apply:
(i) Any Award carrying a right to exercise that was
not previously exercisable and vested shall become fully
exercisable and vested as of the time of the Change in
Control, subject only to applicable restrictions set forth in
Section 10(a) hereof;
(ii) Limited SARs (and other SARs if so provided by
their terms) shall become exercisable for amounts, in cash,
determined by reference to the Change in Control Price;
(iii) The restrictions, deferral of settlement, and
forfeiture conditions applicable to any other Award granted
under the Plan shall lapse and such Awards shall be deemed
fully vested as of the time of the Change in Control, except
to the extent of any waiver by the Participant and subject to
applicable restrictions set forth in Section 10(a) hereof; and
(iv) With respect to any such outstanding Award
subject to achievement of performance goals and conditions
under the Plan, such performance goals and other conditions
will be deemed to be met if and to the extent so provided by
the Committee in the Award agreement relating to such Award.
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(b) Definition of "Change in Control. A "Change in Control"
shall be deemed to have occurred upon:
(i) An acquisition by any Person of Beneficial
Ownership of the shares of Common Stock of the Company then outstanding (the
"Company Common Stock Outstanding") or the voting securities of the Company then
outstanding entitled to vote generally in the election of directors (the
"Company Voting Securities Outstanding") if such acquisition of Beneficial
Ownership results in the Person's Beneficially Owning 25% or more of the Company
Common Stock outstanding or 25% or more of the combined voting power of the
Company Voting Securities Outstanding; or
(ii) Approval by the shareholders of the Company of a
reorganization, merger, consolidation or other form of corporate transaction or
series of transactions, in each case, with respect to which persons who were the
shareholders of the Company immediately prior to such reorganization, merger or
consolidation or other transaction do not, immediately thereafter, own more than
50% of the combined voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated company's then outstanding
voting securities, or a liquidation or dissolution of the Company or the sale of
all or substantially all of the assets of the Company (unless such
reorganization, merger, consolidation or other corporate transaction,
liquidation, dissolution or sale (any such event being referred to as a
"Corporate Transaction") is subsequently abandoned); or
(iii) A change in the composition of the Board such
that individuals who, as of the date hereof, constitute the Board (as of
the date hereof the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
Directors of the Company, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Securities Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the Incumbent
Board.
Notwithstanding the provisions set forth in subparagraphs (i) and (ii)
of this Section 9(b), any acquisition or consummation of a Corporate Transaction
unanimously approved by the Incumbent Board shall not constitute a Change in
Control for purposes of the Plan.
(c) Definition of "Change in Control Price." The "Change in
Control Price" means an amount in cash equal to the higher of (i) the amount of
cash and fair market value of property that is the highest price per share paid
(including extraordinary dividends) in any Corporate Transaction triggering the
Change in Control under Section 9(b)(i) hereof or any liquidation of shares
following a sale of substantially all of the assets of the Company, or (ii) the
highest Fair Market Value per share at any time during the 60-day period
preceding and the 60-day period following the Change in Control.
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10. General Provisions.
(a) Compliance With Legal and Other Requirements. The Company
may, to the extent deemed necessary or advisable by the Committee or the Board,
postpone the issuance or delivery of Stock or payment of other benefits under
any Award until completion of such registration or qualification of such Stock
or other required action under any federal or state law, rule or regulation,
listing or other required action with respect to any stock exchange or automated
quotation system upon which the Stock or other Company securities are listed or
quoted, or compliance with any other obligation of the Company, as the Committee
or the Board, may consider appropriate, and may require any Participant to make
such representations, furnish such information and comply with or be subject to
such other conditions as it may consider appropriate in connection with the
issuance or delivery of Stock or payment of other benefits in compliance with
applicable laws, rules, and regulations, listing requirements, or other
obligations. The foregoing notwithstanding, in connection with a Change in
Control, the Company shall take or cause to be taken no action, and shall
undertake or permit to arise no legal or contractual obligation, that results or
would result in any postponement of the issuance or delivery of Stock or payment
of benefits under any Award or the imposition of any other conditions on such
issuance, delivery or payment, to the extent that such postponement or other
condition would represent a greater burden on a Participant than existed on the
90th day preceding the Change in Control.
(b) Limits on Transferability; Beneficiaries. No Award or
other right or interest of a Participant under the Plan, including any Award or
right which constitutes a derivative security as generally defined in Rule
16a-1(c) under the Exchange Act, shall be pledged, hypothecated or otherwise
encumbered or subject to any lien, obligation or liability of such Participant
to any party (other than the Company or a Subsidiary), or assigned or
transferred by such Participant otherwise than by will or the laws of descent
and distribution or to a Beneficiary upon the death of a Participant, and such
Awards or rights that may be exercisable shall be exercised during the lifetime
of the Participant only by the Participant or his or her guardian or legal
representative, except that Awards and other rights (other than ISOs and SARs in
tandem therewith) may be transferred to one or more Beneficiaries or other
transferees during the lifetime of the Participant, and may be exercised by such
transferees in accordance with the terms of such Award, but only if and to the
extent such transfers and exercises are permitted by the Committee or the Board
pursuant to the express terms of an Award agreement (subject to any terms and
conditions which the Committee or the Board may impose thereon, and further
subject to any prohibitions or restrictions on such transfers pursuant to Rule
16b-3). A Beneficiary, transferee, or other person claiming any rights under the
Plan from or through any Participant shall be subject to all terms and
conditions of the Plan and any Award agreement applicable to such Participant,
except as otherwise determined by the Committee or the Board, and to any
additional terms and conditions deemed necessary or appropriate by the Committee
or the Board.
(c) Adjustments. In the event that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects the Stock
such that a substitution or adjustment is determined by the Committee or the
Board to be appropriate in
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order to prevent dilution or enlargement of the rights of Participants under the
Plan, then the Committee or the Board shall, in such manner as it may deem
equitable, substitute or adjust any or all of (i) the number and kind of shares
of Stock which may be delivered in connection with Awards granted thereafter,
(ii) the number and kind of shares of Stock by which annual per-person Award
limitations are measured under Section 5 hereof, (iii) the number and kind of
shares of Stock subject to or deliverable in respect of outstanding Awards and
(iv) the exercise price, grant price or purchase price relating to any Award
and/or make provision for payment of cash or other property in respect of any
outstanding Award. In addition, the Committee (and the Board if and only to the
extent such authority is not required to be exercised by the Committee to comply
with Code Section 162(m)) is authorized to make adjustments in the terms and
conditions of, and the criteria included in, Awards (including Performance
Awards and performance goals, and Annual Incentive Awards and any Annual
Incentive Award pool or performance goals relating thereto) in recognition of
unusual or nonrecurring events (including, without limitation, events described
in the preceding sentence, as well as acquisitions and dispositions of
businesses and assets) affecting the Company, any Subsidiary or any business
unit, or the financial statements of the Company or any Subsidiary, or in
response to changes in applicable laws, regulations, accounting principles, tax
rates and regulations or business conditions or in view of the Committee's
assessment of the business strategy of the Company, any Subsidiary or business
unit thereof, performance of comparable organizations, economic and business
conditions, personal performance of a Participant, and any other circumstances
deemed relevant; provided that no such adjustment shall be authorized or made if
and to the extent that such authority or the making of such adjustment would
cause Options, SARs, Performance Awards granted under Section 8(b) hereof or
Annual Incentive Awards granted under Section 8(c) hereof to Participants
designated by the Committee as Covered Employees and intended to qualify as
"performance-based compensation" under Code Section 162(m) and the regulations
thereunder to otherwise fail to qualify as "performance-based compensation"
under Code Section 162(m) and regulations thereunder.
(d) Taxes. The Company and any Subsidiary is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee or the Board may deem advisable to enable the Company
and Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.
(e) Changes to the Plan and Awards. The Board may amend,
alter, suspend, discontinue or terminate the Plan, or the Committee's authority
to grant Awards under the Plan without the consent of stockholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company's stockholders not later than the annual
meeting next following such Board action if such stockholder approval is
required by any federal or state law or regulation (including, without
limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any stock
exchange or automated quotation system on which the Stock may then be
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listed or quoted, and the Board may otherwise, in its discretion, determine to
submit other such changes to the Plan to stockholders for approval; provided
that, without the consent of an affected Participant, no such Board action may
materially and adversely affect the rights of such Participant under any
previously granted and outstanding Award. The Committee or the Board may waive
any conditions or rights under, or amend, alter, suspend, discontinue or
terminate any Award theretofore granted and any Award agreement relating
thereto, except as otherwise provided in the Plan; provided that, without the
consent of an affected Participant, no such Committee or the Board action may
materially and adversely affect the rights of such Participant under such Award.
Notwithstanding anything in the Plan to the contrary, if any right under this
Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee or the Board may modify or adjust the right
so that pooling of interest accounting shall be available, including the
substitution of Stock having a Fair Market Value equal to the cash otherwise
payable hereunder for the right which caused the transaction to be ineligible
for pooling of interest accounting. Notwithstanding anything herein to the
contrary, the provisions of Section 6(b)(iv) of this Plan which govern formula
grants of Options to Non-Employee Directors, shall not be amended more than once
every six months other than to comport with changes to the Code or the rules
promulgated thereunder or the Employee Retirement Income Security Act of 1974,
as amended, or the rules promulgated thereunder, or with rules promulgated by
the Securities and Exchange Commission, unless such limit on amendments is not
required under Rule 16b-3 or other applicable law.
(f) Limitation on Rights Conferred Under Plan. Neither the
Plan nor any action taken hereunder shall be construed as (i) giving any
Eligible Person or Participant the right to continue as an Eligible Person or
Participant or in the employ of the Company or a Subsidiary; (ii) interfering in
any way with the right of the Company or a Subsidiary to terminate any Eligible
Person's or Participant's employment at any time, (iii) giving an Eligible
Person or Participant any claim to be granted any Award under the Plan or to be
treated uniformly with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company unless and until
the Participant is duly issued or transferred shares of Stock in accordance with
the terms of an Award.
(g) Unfunded Status of Awards; Creation of Trusts. 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 or
obligation to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Stock, other Awards
or other property, or make other arrangements to meet the Company's obligations
under the Plan. Such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Committee or the Board
may specify and in accordance with applicable law.
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(h) Nonexclusivity of the Plan. Neither the adoption of the
Plan by the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board or a committee thereof to adopt such other incentive arrangements as it
may deem desirable including incentive arrangements and awards which do not
qualify under Code Section 162(m).
(i) Payments in the Event of Forfeitures; Fractional Shares.
Unless otherwise determined by the Committee or the Board, in the event of a
forfeiture of an Award with respect to which a Participant paid cash or other
consideration, the Participant shall be repaid the amount of such cash or other
consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee or the Board shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
(j) Governing Law. The validity, construction and effect of
the Plan, any rules and regulations under the Plan, and any Award agreement
shall be determined in accordance with the laws of the State of Delaware without
giving effect to principles of conflicts of laws, and applicable federal law.
(k) Plan Effective Date and Stockholder Approval; Termination
of Plan. The Plan shall become effective on the Effective Date, subject to
subsequent approval within 12 months of its adoption by the Board by
stockholders of the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Code Sections 162(m) and 422, Rule
16b-3 under the Exchange Act, applicable stock exchange requirements, and other
laws, regulations, and obligations of the Company applicable to the Plan. Awards
may be granted subject to stockholder approval, but may not be exercised or
otherwise settled in the event stockholder approval is not obtained. The Plan
shall terminate at such time as no shares of Common Stock remain available for
issuance under the Plan and the Company has no further rights or obligations
with respect to outstanding Awards under the Plan.
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APPENDIX C
SPORTSLINE USA, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide incentive for present
and future employees of the Company and any Designated Subsidiary to acquire a
proprietary interest (or increase an existing proprietary interest) in the
Company through the purchase of Common Stock. It is the Company's intention that
the Plan qualify as an "employee stock purchase plan" under Section 423 of the
Code. Accordingly, the provisions of the Plan shall be administered, interpreted
and construed in a manner consistent with the requirements of that section of
the Code.
2. Definitions.
(a) "Applicable Percentage" means the percentage specified in
Section 8, subject to adjustment by the Committee as provided in Section 8.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended, and any successor thereto.
(d) "Committee" means the committee appointed by the Board to
administer the Plan as described in Section 13 of the Plan or, if no such
Committee is appointed, the Board.
(e) "Common Stock" means the Company's common stock, par value
$0.01 per share.
(f) "Company" means SPORTSLINE USA, INC., a Delaware
corporation.
(g) "Compensation" means, with respect to each Participant for
each pay period, the full base salary, overtime and other wages paid to such
Participant by the Company or a Designated Subsidiary. Except as otherwise
determined by the Committee, "Compensation" does not include: (i) commissions or
bonuses; (ii) any amounts contributed by the Company or a Designated Subsidiary
to any pension plan; (iii) any automobile or relocation allowances (or
reimbursement for any such expenses); (iv) any amounts paid as a starting bonus
or finder's fee; (v) any amounts realized from the exercise of any stock options
or incentive awards; (vi) any amounts paid by the Company or a Designated
Subsidiary for other fringe benefits, such as health and welfare,
hospitalization and group life insurance benefits, or perquisites, or paid in
lieu of such benefits; or (vii) other similar forms of extraordinary
compensation.
(h) "Continuous Status as an Employee" means the absence of
any interruption or termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of a leave of
absence agreed to in writing by the Company or the Designated Subsidiary that
employs the Employee, provided that such leave is for a period of not
<PAGE>
more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
(i) "Designated Subsidiaries" means the Subsidiaries that have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(j) "Employee" means any person, including an Officer, whose
customary employment with the Company or one of its Designated Subsidiaries is
at least twenty (20) hours per week and more than five (5) months in any
calendar year.
(k) "Entry Date" means the first day of each Exercise Period.
(l) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(m) "Exercise Date" means the last business day ending on or
before June 30, 1998, and the last business day ending on or before each
December 31 and June 30 thereafter.
(n) "Exercise Period" means, for any Offering Period, each
period commencing on the Offering Date and on the day after each Exercise Date,
and terminating on the immediately following Exercise Date.
(o) "Exercise Price" means the price per share of Common Stock
offered in a given Offering Period determined as provided in Section 8.
(p) "Fair Market Value" means, with respect to a share of
Common Stock, the Fair Market Value as determined under Section 7(b).
(q) "First Offering Date" means the commencement date of the
initial public offering contemplated by the Registration Statement on Form S-1
filed by the Company with the Securities and Exchange Commission.
(r) "Offering Date" means the first business day of each
Offering Period; provided, that in the case of an individual who becomes
eligible to become a Participant under Section 3 after the first business day of
an Offering Period, the term "Offering Date" shall mean the first business day
of the Exercise Period coinciding with or next succeeding the day on which that
individual becomes eligible to become a Participant. Options granted after the
first day of an Offering Period will be subject to the same terms as the options
granted on the first business day of such Offering Period except that they will
have a different grant date (thus, potentially, a different exercise price) and,
because they expire at the same time as the options granted on the first
business day of such Offering Period, a shorter term.
(s) "Offering Period" means (i) with respect to the first
Offering Period, the period beginning on the First Offering Date and ending on
December 31, 1998, and (ii) with respect to each Offering Period thereafter, and
subject to adjustment as provided in Section 4, the 12 month period beginning on
the business day immediately succeeding the end of the preceding Offering
Period.
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(t) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 under the Exchange Act and the rules and
regulations promulgated thereunder.
(u) "Participant" means an Employee who has elected to
participate in the Plan by filing an Enrollment Agreement with the Company as
provided in Section 5 of the Plan.
(v) "Plan" shall mean this 1997 Employee Stock Purchase Plan.
(w) "Plan Contributions" means, with respect to each
Participant, the payroll deductions withheld from the Compensation of the
Participant and contributed to the Plan for the Participant as provided in
Section 6 of the Plan and any other amounts contributed to the Plan for the
Participant in accordance with the terms of the Plan.
(x) "Subsidiary" shall mean any corporation, domestic or
foreign, of which the Company owns, directly or indirectly, 50% or more of the
total combined voting power of all classes of stock, and that otherwise
qualifies as a "subsidiary corporation" within the meaning of Section 424(f) of
the Code.
3. Eligibility.
(a) Any Employee who is employed by the Company as of the
Offering Date of a given Offering Period shall be eligible to become a
Participant as of any Entry Date within that Offering Period under the Plan,
subject to the requirements of Section 5(a) and the limitations imposed by
Section 423(b) of the Code.
(b) Notwithstanding any provision of the Plan to the contrary,
no Participant shall be granted an option under the Plan (i) if, immediately
after the grant, such Participant (or any other person whose stock would be
attributed to such Participant pursuant to Section 424(d) of the Code) would own
stock and/or hold outstanding options to purchase stock possessing 5% or more of
the total combined voting power or value of all classes of stock of the Company
or of any Subsidiary of the Company, or (ii) which permits such Participant's
rights to purchase stock under all employee stock purchase plans of the Company
and its Subsidiaries intended to qualify under Section 423 of the Code to accrue
at a rate which exceeds $25,000 of fair market value of stock (determined at the
time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. Offering Periods. The Plan shall be implemented by a series of
consecutive Offering Periods. The first Offering Period shall commence on the
First Offering Date, the second Offering Period shall commence on January 1,
1999, and succeeding Offering Periods shall commence on or about the January 1
that occurs every 12 months thereafter (or at such other time or times as may be
determined by the Committee). The Committee shall have the power to change the
duration and/or the frequency of Offering Periods with respect to future
offerings without stockholder approval if such change is announced at least
fifteen (15) days prior to the scheduled beginning of the first Offering Period
to be affected.
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5. Election to Participate.
(a) An eligible Employee may elect to participate in the Plan
commencing on any Entry Date by completing an Enrollment Agreement on the form
provided by the Company and filing the Enrollment Agreement with the Company on
or prior to such Entry Date, unless a later time for filing the Enrollment
Agreement is set by the Committee for all eligible Employees with respect to a
given offering. The Enrollment Agreement shall set forth the percentage of the
Participant's Compensation that is to be withheld by payroll deduction pursuant
to the Plan.
(b) Except as otherwise determined by the Committee under
rules applicable to all Participants, payroll deductions for a Participant shall
commence on the first payroll following the Entry Date on which the Participant
elects to participate in accordance with Section 5(a) and shall end on the last
payroll in the Offering Period, unless sooner terminated by the Participant as
provided in Section 11.
(c) Unless a Participant elects otherwise prior to the last
Exercise Date of an Offering Period, such Participant shall be deemed (i) to
have elected to participate in the immediately succeeding Offering Period (and,
for purposes of such Offering Period such Participant's "Entry Date" shall be
deemed to be the first day of such Offering Period) and (ii) to have authorized
the same payroll deduction for such immediately succeeding Offering Period as
was in effect for such Participant immediately prior to the commencement of such
succeeding Offering Period.
6. Participant Contributions.
(a) Except as otherwise authorized by the Committee pursuant
to Section 6(d) below, all Participant contributions to the Plan shall be made
only by payroll deductions. At the time a Participant files the Enrollment
Agreement with respect to an Offering Period, the Participant may authorize
payroll deductions to be made on each payroll date during the portion of the
Offering Period that he or she is a Participant in an amount not less than 1%
and not more than 25% of the Participant's Compensation on each payroll date
during the portion of the Offering Period that he or she is a Participant (or
subsequent Offering Periods as provided in Section 5(c)). The amount of payroll
deductions shall be a whole percentage (i.e., 1%, 2%, 3%, etc.) of the
Participant's Compensation.
(b) A Participant may discontinue his or her participation in
the Plan as provided in Section 11, or may decrease or increase the rate or
amount of his or her payroll deductions during such Offering Period (within the
limitations of Section 6(a) above) by completing and filing with the Company a
new Enrollment Agreement authorizing a change in the rate or amount of payroll
deductions; provided, that a Participant may not change the rate or amount of
his or her payroll deductions more than once in any Exercise Period. The change
in rate or amount shall be effective with the first full payroll period
following ten (10) business days after the Company's receipt of the new
Enrollment Agreement.
(c) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
Participant's payroll deductions may be decreased to 0% at such time during any
Exercise Period which is scheduled to end during the
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current calendar year that the aggregate of all payroll deductions accumulated
with respect to such Exercise Period and any other Exercise Period ending within
the same calendar year equal to the product of $25,000 multiplied by the
Applicable Percentage for the calendar year. Payroll deductions shall recommence
at the rate provided in the Participant's enrollment agreement at the beginning
of the following Exercise Period which is scheduled to end in the following
calendar year, unless terminated by the Participant as provided in Section 11.
(d) Notwithstanding anything to the contrary in the foregoing,
but subject to the limitations set forth in Section 3(b), the Committee may
permit Participants to make additional contributions to the Plan subject to such
terms and conditions as the Committee may in its discretion determine. All such
additional contributions shall be made in a manner consistent with the
provisions of Section 423 of the Code or any successor thereto, and shall be
held in Participants' accounts and applied to the purchase of shares of Common
Stock pursuant to options granted under this Plan in the same manner as payroll
deductions contributed to the Plan as provided above.
(e) All Plan Contributions made for a Participant shall be
deposited in the Company's general corporate account and shall be credited the
Participant's account under the Plan. No interest shall accrue or be credited
with respect to a Participant's Plan Contributions. All Plan Contributions
received or held by the Company may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate or otherwise set
apart such Plan Contributions from any other corporate funds.
7. Grant of Option.
(a) On a Participant's Entry Date, subject to the limitations
set forth in Sections 3(b) and 12(a), the Participant shall be granted an option
to purchase on each subsequent Exercise Date during the Offering Period in which
such Entry Date occurs (at the Exercise Price determined as provided in Section
8 below) a number of shares of Common Stock determined by dividing such
Participant's Plan Contributions accumulated prior to such Exercise Date and
retained in the Participant's account as of such Exercise Date by the lower of
(i) the Applicable Percentage of the greater of (A) the Fair Market Value of a
share of Common Stock on the Offering Date or (B) the Fair Market Value of a
share of Common Stock on the Entry Date on which the Employee elects to become a
Participant within the Offering Period, or (ii) the Applicable Percentage of the
Fair Market Value of a share of Common Stock on such Exercise Date; provided,
that the maximum number of shares an Employee may purchase during any Exercise
Period shall be (i) during calendar year 1998, 6,250 shares and (ii) thereafter,
2,000 shares. The Fair Market Value of a share of Common Stock shall be
determined as provided in Section 7(b).
(b) The Fair Market Value of a share of Common Stock on a
given date shall be determined by the Committee in its discretion; provided,
that if there is a public market for the Common Stock, the Fair Market Value per
share shall be either (i) the closing price of the Common Stock on such date
(or, in the event that the Common Stock is not traded on such date, on the
immediately preceding trading date), as reported by the National Association of
Securities Dealers Automated Quotation (Nasdaq) National Market System, (ii) if
such price is not reported, the average of the bid and asked prices for the
Common Stock on such date (or, in the event that the Common Stock is not traded
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<PAGE>
on such date, on the immediately preceding trading date), as reported by Nasdaq,
(iii) in the event the Common Stock is listed on a stock exchange, the closing
price of the Common Stock on such exchange on such date (or, in the event that
the Common Stock is not traded on such date, on the immediately preceding
trading date), as reported in The Wall Street Journal, or (iv) if no such
quotations are available for a date within a reasonable time prior to the
valuation date, the value of the Common Stock as determined by the Committee
using any reasonable means. For purposes of the First Offering Date, the Fair
Market Value of a share of Common Stock shall be the Price to Public as set
forth in the final prospectus filed by the Company with the Securities and
Exchange Commission pursuant to Rule 424 under the Securities Act of 1933, as
amended.
8. Exercise Price. The Exercise Price per share of Common Stock
offered to each Participant in a given Offering Period shall be the lower of:
(i) the Applicable Percentage of the greater of (A) the Fair Market Value of a
share of Common Stock on the Offering Date or (B) the Fair Market Value of a
share of Common Stock on the Entry Date on which the Employee elects to become a
Participant within the Offering Period or (ii) the Applicable Percentage of the
Fair Market Value of a share of Common Stock on the Exercise Date. The
Applicable Percentage with respect to each Offering Period shall be 85%, unless
and until such Applicable Percentage is increased by the Committee, in its sole
discretion, provided that any such increase in the Applicable Percentage with
respect to a given Offering Period must be established not less than fifteen
(15) days prior to the Offering Date thereof.
9. Exercise of Options. Unless the Participant withdraws from the Plan
as provided in Section 11, the Participant's option for the purchase of shares
will be exercised automatically on each Exercise Date, and the maximum number of
full shares subject to such option shall be purchased for the Participant at the
applicable Exercise Price with the accumulated Plan Contributions then credited
the Participant's account under the Plan. During a Participant's lifetime, a
Participant's option to purchase shares hereunder is exercisable only by the
Participant.
10. Delivery. As promptly as practicable after each Exercise Date, the
Company shall credit to each Participant's account the shares purchased upon
exercise of such Participant's option. As promptly as practicable after receipt
of a written request of a Participant (or the Participant's beneficiary), as
appropriate, the Company shall deliver to the Participant (or the Participant's
beneficiary) a certificate or certificates representing shares held in the
Participant's account. Any amount remaining to the credit of a Participant's
account after the purchase of shares by such Participant on an Exercise Date, or
which is insufficient to purchase a full share of Common Stock, shall be carried
over to the next Exercise Period if the Participant continues to participate in
the Plan or, if the Participant does not continue to participate, shall be
returned to the Participant.
11. Withdrawal; Termination of Employment.
(a) A Participant may withdraw from the Plan at any time by
giving written notice to the Company. All of the Plan Contributions credited to
the Participant's account and not yet invested in Common Stock will be paid to
the Participant as soon as administratively practicable. After receipt of the
Participant's notice of withdrawal, the Participant's option to purchase shares
pursuant to the Plan automatically will be terminated, and no further payroll
deductions for the purchase of shares will be made for the Participant's
account. Payroll deductions will not resume on behalf of a Participant who has
withdrawn from the Plan (a "Former Participant") unless the Former Participant
enrolls in a subsequent Offering Period in accordance with Section 5(a).
(b) Upon termination of the Participant's Continuous Status as
an Employee prior to any Exercise Date for any reason, including retirement or
death, the Plan Contributions credited to
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the Participant's account and not yet invested in Common Stock will be returned
to the Participant or, in the case of death, to the Participant's beneficiary as
determined pursuant to Section 14, and the Participant's option to purchase
shares under the Plan will automatically terminate.
(c) A Participant's withdrawal from an Offering Period will
not have any effect upon the Participant's eligibility to participate in
succeeding Offering Periods or in any similar plan which may hereafter be
adopted by the Company.
12. Stock.
(a) The maximum number of shares of Common Stock that shall be
made available for sale under the Plan shall be One Million (1,000,000) shares,
subject to adjustment as provided in Section 17. Shares of Common Stock subject
to the Plan may be newly issued shares or shares reacquired in private
transactions or open market purchases. If and to the extent that any right to
purchase reserved shares shall not be exercised by any Participant for any
reason or if such right to purchase shall terminate as provided herein, shares
that have not been so purchased hereunder shall again become available for the
purpose of the Plan unless the Plan shall have been terminated, but all shares
sold under the Plan, regardless of source, shall be counted against the
limitation set forth above.
(b) A Participant will have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a Participant under the Plan
will be registered in the name of the Participant or in the name of the
Participant and his or her spouse, as requested by the Participant.
13. Administration.
(a) The Plan shall be administered by the Committee. The
Committee shall have the authority to interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to the Plan, and to make all other
determinations necessary or advisable for the administration of the Plan. The
administration, interpretation, or application of the Plan by the Committee
shall be final, conclusive and binding upon all persons.
(b) Notwithstanding the provisions of Subsection (a) of this
Section 13, in the event that Rule 16b-3 promulgated under the Exchange Act or
any successor provision thereto ("Rule 16b-3") provides specific requirements
for the administrators of plans of this type, the Plan shall only be
administered by such body and in such a manner as shall comply with the
applicable requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no
discretion concerning decisions regarding the Plan shall be afforded to any
person that is not "disinterested" as that term is used in Rule 16b-3.
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14. Designation of Beneficiary.
(a) A Participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
Participant's account under the Plan in the event of the Participant's death
subsequent to an Exercise Date on which the Participant's option hereunder is
exercised but prior to delivery to the Participant of such shares and cash. In
addition, a Participant may file a written designation of a beneficiary who is
to receive any cash from the Participant's account under the Plan in the event
of the Participant's death prior to the exercise of the option.
(b) A Participant's beneficiary designation may be changed by
the Participant at any time by written notice. In the event of the death of a
Participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such Participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the Participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the Participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
15. Transferability. Neither Plan Contributions credited to a
Participant's account nor any rights to exercise any option or receive shares of
Common Stock under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will or the laws of descent and
distribution, or as provided in Section 14). Any attempted assignment, transfer,
pledge or other distribution shall be without effect, except that the Company
may treat such act as an election to withdraw funds in accordance with Section
11.
16. Participant Accounts. Individual accounts will be maintained for
each Participant in the Plan to account for the balance of his Plan
Contributions and options issued and shares purchased under the Plan. Statements
of account will be given to Participants semi-annually in due course following
each Exercise Date. The statements will set forth the amounts of payroll
deductions, the per share purchase price, the number of shares purchased and the
remaining cash balance, if any.
17. Adjustments Upon Changes in Capitalization; Corporate Transactions.
(a) If the outstanding shares of Common Stock are increased or
decreased, or are changed into or are exchanged for a different number of kind
of shares, as a result of one or more reorganizations, restructurings,
recapitalizations, reclassifications, stock splits, reverse stock splits, stock
dividends or the like, upon authorization of the Committee, appropriate
adjustments shall be made in the number and/or kind of shares, and the per-share
option price thereof, which may be issued in the aggregate and to any
Participant upon exercise of options granted under the Plan.
(b) In the event of the proposed dissolution or liquidation of
the Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. In the event of a proposed sale of all or substantially all of the
Company's assets, or the merger of the Company with or into another corporation
(each, a "Sale Transaction"), each option under the Plan shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Committee determines, in
the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Exercise Period then in progress by setting a new
Exercise Date (the
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"New Exercise Date"). If the Committee shortens the Exercise Period then in
progress in lieu of assumption or substitution in the event of a Sale
Transaction, the Committee shall notify each Participant in writing, at least
ten (10) days prior to the New Exercise Date, that the exercise date for such
Participant's option has been changed to the New Exercise Date and that such
Participant's option will be exercised automatically on the New Exercise Date,
unless prior to such date the Participant has withdrawn from the Plan as
provided in Section 11. For purposes of this Section 17(b), an option granted
under the Plan shall be deemed to have been assumed if, following the Sale
Transaction, the option confers the right to purchase, for each share of option
stock subject to the option immediately prior to the Sale Transaction, the
consideration (whether stock, cash or other securities or property) received in
the Sale Transaction by holders of Common Stock for each share of Common Stock
held on the effective date of the Sale Transaction (and if such holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock); provided, that
if the consideration received in the Sale Transaction was not solely common
stock of the successor corporation or its parent (as defined in Section 424(e)
of the Code), the Committee may, with the consent of the successor corporation
and the Participant, provide for the consideration to be received upon exercise
of the option to be solely common stock of the successor corporation or its
parent equal in fair market value to the per share consideration received by the
holders of Common Stock in the Sale Transaction.
(c) In all cases, the Committee shall have sole discretion to
exercise any of the powers and authority provided under this Section 17, and the
Committee's actions hereunder shall be final and binding on all Participants. No
fractional shares of stock shall be issued under the Plan pursuant to any
adjustment authorized under the provisions of this Section 17.
18. Amendment of the Plan. The Board or the Committee may at any time,
or from time to time, amend the Plan in any respect; provided, that (i) no such
amendment may make any change in any option theretofore granted which adversely
affects the rights of any Participant and (ii) the Plan may not be amended in
any way that will cause rights issued under the Plan to fail to meet the
requirements for employee stock purchase plans as defined in Section 423 of the
Code or any successor thereto. To the extent necessary to comply with Rule 16b-3
under the Exchange Act, Section 423 of the Code, or any other applicable law or
regulation), the Company shall obtain shareholder approval of any such
amendment.
19. Termination of the Plan.
The Plan and all rights of Employees hereunder shall terminate on the
earliest of:
(a) the Exercise Date that Participants become entitled to
purchase a number of shares greater than the number of reserved shares remaining
available for purchase under the Plan;
(b) such date as is determined by the Board in its discretion;
or
(c) the last Exercise Date immediately preceding the tenth
(10th) anniversary of the Plan's effective date.
In the event that the Plan terminates under circumstances described in
Section 19(a) above, reserved shares remaining as of the termination date shall
be sold to Participants on a pro rata basis.
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20. Notices. All notices or other communications by a Participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
21. Effective Date. Subject to adoption of the Plan by the Board, the
Plan shall become effective on the First Exercise Date. The Board shall submit
the Plan to the shareholders of the Company for approval within twelve months
after the date the Plan is adopted by the Board. If such shareholder approval is
not obtained, the Plan and all rights of Participants under the Plan shall be
null and void and shall have no effect.
22. Conditions Upon Issuance of Shares.
(a) The Plan, the grant and exercise of options to purchase
shares under the Plan, and the Company's obligation to sell and deliver shares
upon the exercise of options to purchase shares shall be subject to compliance
with all applicable federal, state and foreign laws, rules and regulations and
the requirements of any stock exchange on which the shares may then be listed.
(b) The Company may make such provisions as it deems
appropriate for withholding by the Company pursuant to federal or state tax laws
of such amounts as the Company determines it is required to withhold in
connection with the purchase or sale by a Participant of any Common Stock
acquired pursuant to the Plan. The Company may require a Participant to satisfy
any relevant tax requirements before authorizing any issuance of Common Stock to
such Participant.
23. Expenses of the Plan. All cost and expenses incurred in
administering the Plan shall be paid by the Company, except that any stamp
duties or transfer taxes applicable to participation in the Plan may be charged
to the account of such Participant by the Company.
24. No Employment Rights. The Plan does not, directly or indirectly,
create any right for the benefit of any employee or class of employees to
purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the Company,
and it shall not be deemed to interfere in any way with the Company's right to
terminate, or otherwise modify, an employee's employment at any time.
25. Applicable Law. The laws of the State of Delaware shall govern all
matter relating to this Plan except to the extent (if any) superseded by the
laws of the United States.
26. Additional Restrictions of Rule 16b-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
As amended September 1999
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