<PAGE> 1
INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
AMBASSADORS INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------------
<PAGE> 2
AMBASSADORS INTERNATIONAL, INC.
DWIGHT D. EISENHOWER BUILDING
110 SOUTH FERRALL STREET
SPOKANE, WASHINGTON 99202
April 14, 1999
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders (the
"Annual Meeting") of Ambassadors International, Inc. (the "Company"), which will
be held at 10:00 a.m., local time, on May 14, 1999, at the Company's offices at
1071 Camelback Street, Newport Beach, California 92660. All holders of the
Company's outstanding common stock as of the close of business on April 8, 1999,
are entitled to vote at the Annual Meeting. Enclosed is a copy of the Notice of
Annual Meeting of Stockholders, Proxy Statement and Proxy.
We hope you will be able to attend the Annual Meeting. Whether or not you
expect to attend, it is important that you complete, sign, date and return the
Proxy in the enclosed envelope in order to make certain that your shares will be
represented at the Annual Meeting.
Sincerely,
/s/ JEFFREY D. THOMAS
Jeffrey D. Thomas
Secretary
<PAGE> 3
AMBASSADORS INTERNATIONAL, INC.
DWIGHT D. EISENHOWER BUILDING
110 SOUTH FERRALL STREET
SPOKANE, WASHINGTON 99202
------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 1999
------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Ambassadors International, Inc., a Delaware corporation (the
"Company"), will be held at 10:00 a.m., local time, on May 14, 1999, at the
Company's offices at 1071 Camelback Street, Newport Beach, California 92660, for
the following purposes:
1. To elect two (2) Class III directors to hold office for a three-year
term and until their respective successors are elected and qualified.
2. To approve and adopt an amendment to the Amended and Restated 1995
Equity Participation Plan of Ambassadors International, Inc.
3. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent accountants for the year ending December 31, 1999.
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 8, 1999, as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting and all adjourned meetings thereof.
By Order of the Board of Directors
/s/ JEFFREY D. THOMAS
Jeffrey D. Thomas
Secretary
Dated: April 14, 1999
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE RETURN ENVELOPE
FURNISHED FOR THAT PURPOSE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO
ATTEND THE ANNUAL MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY
REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT.
<PAGE> 4
AMBASSADORS INTERNATIONAL, INC.
DWIGHT D. EISENHOWER BUILDING
110 SOUTH FERRALL STREET
SPOKANE, WASHINGTON 99202
------------------------------
PROXY STATEMENT
------------------------------
GENERAL INFORMATION
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Ambassadors International, Inc. (the
"Company") for use at the Annual Meeting of Stockholders (the "Annual Meeting")
to be held at 10:00 a.m., local time, on May 14, 1999, at the Company's offices
at 1071 Camelback Street, Newport Beach, California 92660, and at any
adjournment thereof. When such proxy is properly executed and returned, the
shares it represents will be voted in accordance with any directions noted
thereon. Any stockholder giving a proxy has the power to revoke it at any time
before it is voted by written notice to the Secretary of the Company or by
issuance of a subsequent proxy. In addition, a stockholder attending the Annual
Meeting may revoke his or her proxy and vote in person if he or she desires to
do so, but attendance at the Annual Meeting will not of itself revoke the proxy.
At the close of business on April 8, 1999, the record date for determining
stockholders entitled to notice of and to vote at the Annual Meeting, the
Company had issued and outstanding 9,726,435 shares of Common Stock, $0.01 par
value per share ("Common Stock"). Each share of Common Stock entitles the holder
of record thereof to one vote on any matter coming before the Annual Meeting.
Only stockholders of record at the close of business on April 8, 1999 are
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
The enclosed Proxy, when properly signed, also confers discretionary
authority with respect to amendments or variations to the matters identified in
the Notice of Annual Meeting and with respect to other matters which may be
properly brought before the Annual Meeting. At the time of printing this Proxy
Statement, the management of the Company is not aware of any other matters to be
presented for action at the Annual Meeting. If, however, other matters which are
not now known to the management should properly come before the Annual Meeting,
the proxies hereby solicited will be exercised on such matters in accordance
with the best judgment of the proxyholders.
Shares represented by executed and unrevoked proxies will be voted in
accordance with the instructions contained therein or, in the absence of such
instructions, in accordance with the recommendations of the Board of Directors.
Neither abstentions nor broker non-votes will be counted for the purposes of
determining whether any of the proposals has been approved by the stockholders
of the Company, although they will be counted for purposes of determining the
presence of a quorum.
The election of directors requires a plurality of the votes cast by the
holders of the Company's Common Stock. A "plurality" means that the individuals
who receive the largest number of affirmative votes cast are elected as
directors up to the maximum number of directors to be chosen at the Annual
Meeting.
The Company will pay the expenses of soliciting proxies for the Annual
Meeting, including the cost of preparing, assembling, and mailing the proxy
solicitation materials. Proxies may be solicited personally, by mail, by telex,
or by telephone, by directors, officers, and regular employees of the Company
who will not be additionally compensated therefor. It is anticipated that this
Proxy Statement and accompanying Proxy will be mailed on or about April 14, 1999
to all stockholders entitled to vote at the Annual Meeting.
The matters to be considered and acted upon at the Annual Meeting are
referred to in the preceding notice and are more fully discussed below.
<PAGE> 5
ELECTION OF DIRECTORS
(ITEM 1 OF THE PROXY CARD)
The Company has a classified Board of Directors, which is divided into
three classes, consisting of two Class I Directors, two Class II Directors, and
two Class III Directors. At each annual meeting of stockholders, directors are
elected for a term of three years to succeed those directors whose terms expire
on the annual meeting dates. The term of the two Class III Directors, Rafer L.
Johnson and John C. Spence, will expire at this year's Annual Meeting. The term
of the two Class II Directors, John A. Ueberroth and James L. Easton, will
expire at the Annual Meeting of Stockholders to be held in 2000. The term of the
two Class I Directors, Peter V. Ueberroth and Richard D. C. Whilden, will expire
at the Annual Meeting of Stockholders to be held in 2001.
At this year's Annual Meeting, two Class III Directors are to be elected.
Management's nominees for election at the Annual Meeting as Class III Directors
are Rafer L. Johnson and John C. Spence. The enclosed Proxy will be voted in
favor of these individuals unless other instructions are given. If elected, the
nominees will serve as directors until the Company's Annual Meeting of
Stockholders in the year 2002, and until their successors are elected and
qualified. If either nominee declines to serve or becomes unavailable for any
reason, or if a vacancy occurs before the election (although management knows of
no reason to anticipate that this will occur), the proxies may be voted for such
substitute nominees as management may designate.
If a quorum is present and voting, the two nominees for Class III Directors
receiving the highest number of votes will be elected as Class III Directors.
Abstentions and shares held by brokers that are present, but not voted because
the brokers were prohibited from exercising discretionary authority, i.e.,
"broker non-votes," will be counted as present for purposes of determining if a
quorum is present.
The table below sets forth for the current directors, including the Class
III nominees to be elected at this meeting, certain information with respect to
age and background.
<TABLE>
<CAPTION>
DIRECTOR
NAME POSITION WITH COMPANY AGE SINCE
- ---- --------------------- --- --------
<S> <C> <C> <C>
Class III Directors currently standing for re-election:
Rafer L. Johnson..................................... Director 63 1995
John C. Spence....................................... Director 69 1995
Class II Directors whose term expires at the Annual
Meeting to be held in 2000:
John A. Ueberroth.................................... President and Chief 55 1995
Executive Officer
James L. Easton...................................... Director 63 1995
Class I Directors whose term expires at the Annual Meeting
to be held in 2001:
Peter V. Ueberroth................................... Chairman of the Board 61 1995
Richard D. C. Whilden................................ Director 65 1995
</TABLE>
BUSINESS EXPERIENCE
Directors and Nominees for Directors
Class III Directors
-------------------
Rafer L. Johnson has served as a director of the Company since 1995. Mr.
Johnson is a World and Olympic record holder in the decathlon. Mr. Johnson
devotes a substantial amount of his time to mentally and physically handicapped
children and adults. He has been associated with California Special Olympics
since its inception in 1969, served as the President of its Board of Directors
for ten years, and currently is Chairman of its Board of Governors. He has been
appointed to national and international foundations and Presidential
Commissions, with a concentration on youth development. Mr. Johnson also is
National Head Coach for
2
<PAGE> 6
Special Olympics International and a member of its Board of Directors, and, in
addition, serves on a variety of special boards and committees in the world of
sports and community services.
John C. Spence has served as a director of the Company since 1995. He is
also a director of American Physicians Network, a manager of cardiology
networks, with an emphasis on disease management and congestive heart failure.
Since August 1998, he has been a director and President of, and a consultant to,
Catheter Innovations, Inc., a manufacturer of catheter I.V. devices. From April
1993 to January 1998, Mr. Spence was President of Avco Insurance Services, a
provider of credit and credit related insurance to financial institutions, and
served as its Chairman until his retirement in April 1998. From October 1990 to
April 1993, he was President of Endovascular Instruments, Inc., a manufacturer
of medical devices. Prior to that time, Mr. Spence was an independent
consultant.
Class I Directors
-----------------
Peter V. Ueberroth has served as Chairman of the Board of the Company since
1995. Since 1989, Mr. Ueberroth has served as Managing Director of The
Contrarian Group, a business management company. From 1984 to 1989, Mr.
Ueberroth served as the sixth Commissioner of Major League Baseball. From 1979
to 1984, he served as President and Chief Executive Officer of the Los Angeles
Olympic Organizing Committee. Mr. Ueberroth founded First Travel Corporation in
1962, and sold it to the Carlson Travel Group in 1979. Mr. Ueberroth currently
serves as a director of The Coca-Cola Company, CB Commercial Real Estate
Services Group, Inc., Promus Hotel Corp., and Transamerica Corporation.
Richard D. C. Whilden has served as a director of the Company since 1995.
Since 1990, Mr. Whilden has been a principal of The Contrarian Group, a business
management company. Since September 1996, he has also served as Chairman of the
Board, and from March 1998 to March 1999, he served as President and Chief
Executive Officer, of Internet Travel Network ("ITN"), an Internet software
service bureau, in which the Company has a minority interest. From April 1993 to
August 1994, Mr. Whilden was the Chairman of the Board of Directors of Caliber
Bank in Phoenix, Arizona and, from December 1993 to August 1994, he was the
Chief Executive Officer, President and Chairman of the Board of Directors of the
bank's holding company, Independent Bankcorp of Arizona, Inc. In addition, Mr.
Whilden remained as a director of the holding company and of the bank until they
were sold in 1995. From 1959 to 1989, Mr. Whilden was employed by TRW, Inc.,
during which time he served as Executive Vice President from 1984 to 1989.
Class II Directors
------------------
John A. Ueberroth has served as President, Chief Executive Officer and a
director of the Company since 1995 and as President of Ambassadors Performance
Group, Inc. since April 1999. Since 1989, Mr. Ueberroth has been a principal of
The Contrarian Group, a business management company. From 1990 to 1993, he
served as Chairman and Chief Executive Officer of Hawaiian Airlines. From 1980
to 1989, Mr. Ueberroth served as President of Carlson Travel Group. In addition,
Mr. Ueberroth has served as Chairman of the Travel Industry Association of
America (1986-1987) and President of the United States Tour Operator Association
(1987-1988). He is currently a member of the Board of Directors of ITN, in which
the Company has a minority interest. Since January 1999, Mr. Ueberroth has also
served as a director of Scheduled Airlines Traffic Offices, Inc. ("SatoTravel"),
in which the Company has purchased a minority interest.
James L. Easton has served as a director of the Company since 1995. Since
1973, Mr. Easton has served as Chairman and President of Jas. D. Easton, Inc.
and Easton Sports Inc., a diversified international sporting goods company. He
is one of only two United States citizens to serve as a member of the
International Olympic Committee. He also serves as President of Federation
Internationale de Tir a l'Arc (FITA-International Archery Federation), is a
member of the Board of Visitors of John E. Anderson Graduate School of
Management at the University of California at Los Angeles, and is an Executive
Board Member of the Salt Lake City Organizing Committee and the U.S. Olympic
Committee.
3
<PAGE> 7
Executive Officers
------------------
Jeffrey D. Thomas, age 32, has served as Chief Financial Officer, Vice
President of Finance and Secretary of the Company since January 1996, and from
October 1995 to December 1995 he was Assistant Vice President of Finance of the
Company. Mr. Thomas also serves as President (since August 1996) of Ambassadors
Education Group, Inc., and Vice President, Secretary and Treasurer (since
January 1996) of Ambassadors Performance Group, Inc., both wholly-owned
subsidiaries of the Company. From July 1994 to October 1995, Mr. Thomas was
Director of Business Development for Adia Personnel Services, one of the largest
personnel companies in the world. From September 1993 to July 1994, Mr. Thomas
was employed by The Contrarian Group, a business management company, and from
1989 to 1993 he was a consultant for Corporate Decisions, Inc., an international
business consulting firm. Since January 1999, Mr. Thomas has also served as a
director of SatoTravel, in which the Company has purchased a minority interest.
Ronald L. Merriman, age 54, served as Executive Vice President of the
Company and President of Ambassadors Performance Group, Inc. from August 1997
until March 1999. From 1967 to August 1997, Mr. Merriman was with KPMG Peat
Marwick ("KPMG"), the international accounting and consulting firm, where he was
a partner from July 1977 to August 1997, and served on KPMG's National
Management Committee from October 1990 to August 1997. Mr. Merriman also served
as KPMG's National and International Managing Partner -- Health Care from July
1993 to August 1997, and as Area Managing Partner for the Western Region from
October 1990 to June 1993. Previously, he served on KPMG's Board of Directors
and as International Partner-In-Charge of KPMG's transportation and tourism
business.
There are no arrangements or understandings known to the Company between
any of the directors or nominees for director of the Company and any other
person pursuant to which any such person was or is to be elected a director.
John A. Ueberroth and Peter V. Ueberroth are brothers. Jeffrey D. Thomas is
the son-in-law of Peter V. Ueberroth. Other than these relationships, there are
no family relationships among the directors and executive officers of the
Company.
THE BOARD RECOMMENDS A VOTE FOR RAFER L. JOHNSON AND FOR JOHN C. SPENCE AS
CLASS III DIRECTORS.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
There were seven meetings of the Board of Directors, four of which were
regularly scheduled meetings, and the Board of Directors took action by
unanimous written consent without a meeting an additional three times during
1998. James L. Easton attended fewer than 75% of the meetings of the Board of
Directors during 1998. The Board of Directors has authorized an Audit Committee
and a Compensation Committee. The members of each committee are nominated by the
majority vote of the Board of Directors. There is no nominating committee.
Audit Committee
The Audit Committee makes recommendations for selection of the Company's
independent public accountants, reviews with the independent public accountants
the plans and results of the audit engagement, approves professional services
provided by the independent public accountants, reviews the independence of the
independent public accountants, considers the range of audit and any non-audit
fees, and reviews the adequacy of the Company's internal accounting controls and
financial management practices. The Audit Committee consists of Messrs. John A.
Ueberroth, Spence and Johnson. There were two meetings of the Audit Committee
during 1998.
Compensation Committee
The Compensation Committee is responsible for determining compensation for
the Company's executive officers and for administering the Company's Amended and
Restated 1995 Equity Participation Plan (the "Incentive Plan"). The Compensation
Committee consists of Messrs. Peter V. Ueberroth, Easton and
4
<PAGE> 8
Whilden. There were two meetings of the Compensation Committee, and the
Compensation Committee took action by unanimous written consent without meeting
an additional three times, during 1998. See "Report of Compensation Committee on
Executive Compensation."
DIRECTOR COMPENSATION
Each of the Company's non-employee directors receives fees of $10,000 per
year plus $1,000 per board meeting attended. In addition, each director is
reimbursed for certain out-of-pocket expenses incurred in connection with
attendance at board and committee meetings. Pursuant to the Incentive Plan, each
of the Company's non-employee directors, on the date they are first elected to
the Board, receives a grant of non-qualified stock options to purchase 10,000
shares of the Company's Common Stock at the fair market value of the Common
Stock on the date of grant. The directors' options vest in equal annual
installments over a four year period.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth the compensation for the Chief Executive
Officer and each of the executive officers whose individual remuneration
exceeded $100,000 for the fiscal year ended December 31, 1998 (the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION SECURITIES
----------------------------- RESTRICTED UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) STOCK AWARDS($) OPTIONS
- --------------------------- ---- --------- -------- --------------- ----------
<S> <C> <C> <C> <C> <C>
John A. Ueberroth.................... 1998 170,000 -- -- --
President, Chief Executive Officer 1997 180,000 -- -- --
1996 71,952 -- -- --
Jeffrey D. Thomas.................... 1998 120,000 180,000 -- --
Executive Vice President, Chief
Financial 1997 120,000 90,000 -- 50,000(1)
Officer and Secretary 1996 101,780 40,720 -- 25,000(1)
Ronald L. Merriman(2)................ 1998 120,000 70,000 -- --
Executive Vice President 1997 46,293 -- 437,500(3) 100,000(1)
1996 n/a n/a n/a n/a
</TABLE>
- ------------------------------
(1) The stock options were granted under the Incentive Plan.
(2) Mr. Merriman's employment with the Company commenced in August 1997.
(3) Mr. Merriman was granted the right to receive 50,000 shares of Common Stock,
which shares vest in four equal annual installments beginning on January 1,
1998. The value of the Company's Common Stock on the date of grant was $8.75
per share. Upon Mr. Merriman's resignation in March 1999, the right to
receive the unvested 25,000 shares of Common Stock (with a value of $218,750
included above) lapsed.
OPTION GRANTS
There were no stock option grants to any of the Named Executive Officers
during the fiscal year ended December 31, 1998.
5
<PAGE> 9
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information regarding unexercised options
held by the Named Executive Officers. No options were exercised during the
fiscal year ended December 31, 1998:
AGGREGATED OPTION EXERCISE IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
OPTIONS AT VALUE OF IN-THE-MONEY
FISCAL YEAR END OPTIONS AT FISCAL YEAR END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------------------- --------------------------
<S> <C> <C>
John A. Ueberroth.................................. 0 $0
Jeffrey D. Thomas.................................. 43,750/56,250 $165,375/86,375
Ronald L. Merriman................................. 25,000/75,000 $150,000/450,000
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Peter V. Ueberroth, Easton and Whilden served as the members of the
Compensation Committee during 1998. During 1998, John A. Ueberroth, President
and Chief Executive Officer of the Company, served as a director of ITN. Richard
D. C. Whilden, who at the time was President and Chief Executive Officer of ITN,
served on the Compensation Committee of the Company's Board of Directors. ITN is
a nonpublic corporation in which the Company made an investment in April 1996.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
This Compensation Committee Report discusses the components of the
Company's executive officer compensation policies and programs and describes the
bases upon which compensation is determined by the Compensation Committee with
respect to the executive officers of the Company, including the Named Executive
Officers.
The Compensation Committee reviews and approves salaries, bonuses, benefits
and other compensation for executive officers and key employees of the Company,
and it also administers the Incentive Plan. The Compensation Committee is
composed of three non-employee directors.
Compensation Philosophy. The Compensation Committee endeavors to ensure
that the compensation programs for the executive officers of the Company and its
subsidiaries are effective in attracting and retaining key executives
responsible for the success of the Company and are administered with the
long-term interests of the Company and its stockholders in mind. The
Compensation Committee seeks to align total compensation for senior management
with corporate performance by linking directly executive compensation to
individual and team contributions, continuous improvements in corporate
performance and stockholder value.
The Compensation Committee takes into account various qualitative and
quantitative indicators of corporate and individual performance in determining
the level and composition of compensation for the executive officers. The
Compensation Committee considers such corporate performance measures as net
income, earnings per share and cash flow, and may vary its quantitative
measurements from employee to employee and from year to year. The Compensation
Committee also appreciates the importance of achievements that may be difficult
to quantify, and accordingly recognizes qualitative factors, such as superior
individual performance, new responsibilities or positions within the Company,
leadership ability and overall contributions to the Company.
In order to attract and retain highly qualified executives in the areas in
which the Company does business and in recognition of the overall
competitiveness of the market for highly qualified executive talent, the
Compensation Committee also evaluates the total compensation of the executive
officers in light of information regarding the compensation practices and
corporate financial performance of other companies in the travel and incentive
program businesses.
6
<PAGE> 10
In implementing its compensation program for executive officers, the
Compensation Committee seeks to achieve a balance between compensation and the
Company's annual and long-term budgets and business objectives, encourage
executive performance in furtherance of stated Company goals, provide variable
compensation based on the performance of the Company, create a stake in the
executive officer's efforts by encouraging stock ownership in the Company, and
align executive remuneration with the interests of the Company's stockholders.
Compensation Program Components. The Compensation Committee regularly
reviews the Company's compensation program to ensure that pay levels and
incentive opportunities are competitive with the market and reflect the
performance of the Company. The particular elements of the compensation program
for executive officers consist of the following:
Base Salary. Base salaries for executive officers are established at levels
considered appropriate in light of the duties and scope of responsibilities of
each executive officer's position, and the experience the individual brings to
the position. Salaries are reviewed periodically and adjusted as warranted to
reflect sustained individual performance. Base salaries are kept within a
competitive range for each position, reflecting both job performance and market
forces.
Annual Bonus. There is no formula program for the granting of bonuses, as
the Compensation Committee does not believe that this is in the best interests
of the stockholders. However, the Compensation Committee considers the granting
of annual cash bonuses to the executive officers and grants bonuses when they
believe it is warranted. The primary purpose of any such bonus is to reward
individual efforts in helping the Company achieve specific budget and
performance goals and to adjust overall compensation to remain competitive and
continue to retain qualified management. However, bonuses, when granted, relate
to the Company's annual budget and overall performance.
Long-Term Incentive Compensation. The Company's long-term incentive program
consists of periodic grants of stock options, which are made at the discretion
of the Compensation Committee under the Incentive Plan. Decisions made by the
Compensation Committee regarding the amount of the grant and other discretionary
aspects of the grant take into consideration Company performance, individual
performance and experience, competitive forces to attract and retain senior
management, and the nature and terms of grants made in prior years. Under the
Incentive Plan, in addition to options, the Compensation Committee may also
grant, in its discretion, stock appreciation rights and restricted stock, and
may make other awards.
Chief Executive Officer's Compensation. The Chief Executive Officer ("CEO")
of the Company heads a group of senior management officers who participate in a
common set of compensation criteria linked, in part, to the performance of the
Company. The compensation of the CEO is determined by the Compensation Committee
based upon its assessment of the Company's financial performance and
nonfinancial factors which the Compensation Committee believes have an influence
upon the Company's overall performance and its ability to remain competitive,
including without limitation individual performance, level of experience,
compensation paid to other executive officers of the Company and compensation
paid to other CEOs of companies with which the Company competes. The
Compensation Committee exercises its judgment in evaluating and weighing these
various criteria, and such evaluation and weighing of criteria may vary at
different times.
Summary. The Compensation Committee believes that the total compensation
program for executive officers of the Company is focused on increasing value for
the Company's stockholders, by attracting and retaining the best qualified
people as senior management and enhancing corporate performance. Furthermore,
the Compensation Committee believes that executive compensation levels of the
Company are competitive with the compensation programs provided by other
corporations with which the Company competes. The foregoing report has been
approved by all the members of the Compensation Committee.
COMPENSATION COMMITTEE
James L. Easton
Richard D. C. Whilden
Peter V. Ueberroth
7
<PAGE> 11
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return since the Company's Common Stock became publicly traded on August 3,
1995, with the Nasdaq Market Index and a peer group comprised of companies in
the travel and incentive programs businesses with which the Company generally
competes. The peer group is comprised of the following companies: Caribiner
International, Inc. and Intrav, Inc. The graph assumes that $100 was invested on
August 3, 1995 in the Company's Common Stock, at the initial public offering
price of $9.00 per share, and in each of the indexes mentioned above, and that
all dividends were reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG AMBASSADORS INTERNATIONAL, INC.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
8/3/95 12/31/95 12/31/96 12/31/97 12/31/98
------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Ambassadors International, Inc...................... 100.0 108.3 104.2 216.7 169.9
Peer Group.......................................... 100.0 87.2 108.0 192.3 60.6
Nasdaq Market Index................................. 100.0 102.7 127.7 156.2 220.3
</TABLE>
COMPENSATION PLANS AND ARRANGEMENTS
Amended and Restated 1995 Equity Participation Plan
In August 1995, the Company adopted the Incentive Plan to attract and
retain directors, officers, key employees and consultants. An aggregate of
600,000 shares of the Common Stock (or their equivalent in other equity
securities), subject to adjustment for stock splits, stock dividends and similar
events, were authorized for issuance upon exercise of options, stock
appreciation rights ("SARs"), and other awards, or as restricted or deferred
stock awards under the Incentive Plan. Pursuant to a resolution adopted by the
Board of Directors on February 20, 1998 and approved by the Company's
stockholders at the 1998 Annual Meeting on May 15, 1998, the Incentive Plan was
amended and restated to increase the number of shares available under the
8
<PAGE> 12
Incentive Plan from 600,000 shares to 900,000 shares. No other change was made
to the terms of the Incentive Plan.
Pursuant to a resolution adopted by the Board of Directors on February 22,
1999, and subject to the approval of the Company's stockholders at the Annual
Meeting, the Incentive Plan is proposed to be further amended (the "1999
Amendment") to increase the number of shares of available under the Incentive
Plan from 900,000 shares to 1,400,000 shares. See "AMENDMENT TO AMENDED AND
RESTATED 1995 EQUITY PARTICIPATION PLAN (Item 2 of the Proxy Card)." No other
change is being proposed to the terms of the Incentive Plan. References to the
Incentive Plan in this Proxy Statement include the Amended and Restated 1995
Equity Participation Plan, as proposed to be further amended by the 1999
Amendment.
The following is a summary of the terms of the Incentive Plan.
The Compensation Committee administers the Incentive Plan and determines to
whom options, SARs, restricted stock, and other awards are to be granted and the
terms and conditions, including the number of shares and the period of
exercisability, thereof, except that outside directors are automatically granted
options pursuant to a formula discussed below.
The Incentive Plan authorizes the grant or issuance of various options and
other awards to employees and consultants. The terms of each option or award are
set forth in separate agreements. In addition, non-employee directors (including
the directors who administer the plan) are eligible to receive non-discretionary
grants of non-qualified stock options ("NQSOs") under the Incentive Plan
pursuant to a formula. Pursuant to such formula, each of the Company's
non-employee directors received, prior to the Company's initial public offering
in August 1995, and all non-employee directors who join the Board of Directors
after the Company's initial public offering receive, upon election, a grant of
NQSOs to purchase 10,000 shares of the Company's Common Stock at the then fair
market value per share.
NQSOs may be granted to an employee or consultant for any term specified by
the Compensation Committee and provide for the right to purchase Common Stock at
a specified price which, except with respect to NQSOs intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue Code
(the "Code"), may be less than fair market value on the date of grant (but not
less than par value), and may become exercisable (in the discretion of the
Compensation Committee) in one or more installments after the grant date. NQSOs
granted to non-employee directors become exercisable in cumulative annual
installments of 25% on each of the first, second, third and fourth anniversaries
of the date of option grant, and the term of each such option is ten years
without variation or acceleration under the Incentive Plan, except that any
option granted to a non-employee director becomes immediately exercisable in
full upon the retirement of the non-employee director in accordance with the
Company's retirement policy applicable to directors.
Incentive stock options may be granted only to employees and, if granted,
will be designed to comply with the provisions of the Code and will be subject
to restrictions contained in the Code, including having an exercise price equal
to at least 100% of the fair market value of the Common Stock on the grant date
and a ten year restriction on their term, but may be subsequently modified to
disqualify them from treatment as an incentive stock option.
SARs may be granted to employees and consultants and may be granted in
connection and simultaneously with the grant of an option, with respect to a
previously granted option or independent of an option. Participants may receive
dividend equivalents representing the value of the dividends per share paid by
the Company, calculated with reference to the number of shares covered by the
stock options, SARs or performance awards held by the participant.
Performance awards may be granted by the Compensation Committee to
employees and consultants and may include bonus or "phantom" stock awards that
provide for payments based upon increases in the price of the Company's Common
Stock over a predetermined period.
Restricted stock may be sold to employees and consultants at various prices
(but not below par value) and made subject to such restrictions as may be
determined by the Compensation Committee. Deferred stock
9
<PAGE> 13
may be awarded to employees and consultants, typically without payment of
consideration, but subject to vesting conditions based on continued employment
or on performance criteria established by the Compensation Committee. Whereas
purchasers of restricted stock will have voting rights and will receive
dividends prior to the time when the restrictions lapse, recipients of deferred
stock generally will have no voting or dividend rights prior to the time when
vesting conditions are satisfied. Stock payments may be awarded to employees and
consultants and the number of shares shall be determined by the Compensation
Committee and may be based upon the fair market value, book value, net profits
or other measure of the value of Common Stock or other specific performance
criteria.
Payments for the shares purchased upon the exercise of options may be in
cash or, at the discretion of the Compensation Committee (or the Board, in the
case of NQSOs granted to non-employee directors), with shares of Common Stock
owned by the optionee (or issuable upon exercise of the option) or with other
lawful consideration, including services rendered.
No restricted stock, deferred stock, option, SAR or other right to acquire
Common Stock granted under the Incentive Plan may be assigned or transferred by
the grantee, except by will or the laws of intestate succession, although such
shares or the shares underlying such rights may be transferred if all applicable
restrictions have lapsed. During the lifetime of the holder of any option or
right, the option or right may be exercised only by the holder.
The Compensation Committee has the right to accelerate, in whole or in
part, from time to time, including upon a change in control of the Company,
conditionally or unconditionally, the right to exercise any option or other
award granted under the Incentive Plan; provided, however, such acceleration
shall not be permitted with respect to NQSOs granted to non-employee directors
to the extent that such discretion would be inconsistent with the requirements
of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
Amendments to the Incentive Plan to increase the number of shares as to
which options, SARs, restricted stock and other awards may be granted (except
for adjustments resulting from stock splits, stock dividends and similar events)
require the approval of the Company's stockholders. See "AMENDMENT TO AMENDED
AND RESTATED 1995 EQUITY PARTICIPATION PLAN (Item 2 of the Proxy Card)"
regarding the proposal to adopt the 1999 Amendment to increase the number of
shares available under the Incentive Plan from 900,000 shares to 1,400,000
shares.
The provisions of the Incentive Plan relating to options granted to
non-employee directors may not be amended more than once in any six-month period
other than to comport with changes in the Code, the Employee Retirement Income
Security Act, or the respective rules thereunder. In all other respects the
Incentive Plan can be amended, modified, suspended or terminated by the
Compensation Committee, unless such action would otherwise require stockholder
approval as a matter of applicable law, regulation or rule. Amendments of the
Incentive Plan will not, without the consent of the participant, affect such
person's rights under an award previously granted, unless the award itself
otherwise expressly so provides. The Incentive Plan will terminate after the
earlier of the expiration of ten years from the date the Incentive Plan was
adopted by the Board or the expiration of ten years from the date the Plan was
approved by the Company's stockholders.
During the fiscal year ended December 31, 1998, options to purchase a total
of 247,100 shares of Common Stock were granted under the Incentive Plan, of
which options to purchase 642,189 shares of Common Stock were outstanding and
options to purchase 33,779 shares of Common Stock were forfeited at December 31,
1998. The exercise prices of the outstanding options range from $8.25 to $29.25
and all options granted have a term of ten years from the date of grant and vest
in equal annual installments over a four-year period.
Profit Sharing Plan
Effective January 1, 1993, the Company established a noncontributory profit
sharing plan (the "Profit Sharing Plan"), available to employees of the Company
who have completed two years of service and have reached the age of 21 and who
are not governed by a collective bargaining agreement under which the
10
<PAGE> 14
retirement benefits have been the subject of good faith bargaining, unless such
agreement expressly provides for the participation in this Plan. The Profit
Sharing Plan provides full vesting upon eligibility and permits employees to
direct the investment of the accounts. Contributions by the Company are
determined at the discretion of the Board of Directors. The amount allocated to
each participant's account is proportionately based on the employee's
compensation compared to the total compensation for all participants in the
group. Employees become 100% vested in their accounts immediately upon the
effective date of participation. Participants' vested accounts are distributable
upon the participant's disability, death, retirement or termination of
employment. Distributions are subject to income taxes which may be deferred or
reduced by various methods.
During 1996, the assets of the Profit Sharing Plan were transferred into a
new 401(k) Profit-Sharing Plan (the "401(k) Plan"). Employees are eligible to
participate in the 401(k) Plan upon one year of service and 21 years of age.
Employees may contribute up to 15% of their salary, subject to the maximum
contribution allowed by the Internal Revenue Service. The Company's matching
contribution is discretionary based upon approval by management. Employees are
100% vested in their contributions and vest in Company matching contributions
equally over four years. During the year ended December 31, 1998, the Company
contributed approximately $81,000 to the 401(k) Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the amount of shares of the Company
beneficially owned as of February 28, 1999 by the Named Executive Officers, each
person known by the Company to own beneficially more than 5% of the outstanding
shares of the Company's outstanding Common Stock, and all directors and
executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL CLASS OF
OWNERSHIP OF COMMON
NAME OF BENEFICIAL OWNER COMMON STOCK(1) STOCK
- ------------------------ ----------------- ----------
<S> <C> <C>
Peter V. Ueberroth(2)....................................... 1,353,575 13.9%
John A. Ueberroth(3)........................................ 1,341,585 13.8%
Jeffrey D. Thomas(4)........................................ 155,100 1.6%
Ronald L. Merriman(5)....................................... 50,000 *
James L. Easton(6).......................................... 7,500 *
John C. Spence(7)........................................... 8,500 *
Rafer L. Johnson(8)......................................... 7,500 *
Richard D. C. Whilden(9).................................... 11,120 *
All Directors and Executive Officers of the Company as a
group (8 people).......................................... 2,934,880 29.9%
5% STOCKHOLDERS
- ---------------
The Kaufmann Fund, Inc.(10)................................. 940,000 9.7%
T. Rowe Price Associates, Inc.(11).......................... 852,200 8.8%
Wellington Management Co., LLP(12).......................... 631,400 6.4%
</TABLE>
- ------------------------------
* Less than 1%
(1) Includes shares issuable upon the exercise of options or warrants that are
exercisable within 60 days of the date of this Proxy Statement. The shares
underlying such options or warrants are deemed to be outstanding for the
purpose of computing the percentage of outstanding stock owned by such
persons individually and by each group of which they are a member, but are
not deemed to be outstanding for the purpose of computing the percentage
ownership of any other person.
(2) Chairman of the Board of the Company. These shares are held in a family
trust of which Mr. Ueberroth is a co-trustee. Mr. Ueberroth's address is
1071 Camelback Street, Newport Beach, CA 92660.
(3) President and Chief Executive Officer of the Company. Mr. Ueberroth's
address is 1071 Camelback Street, Newport Beach, CA 92660.
(4) Executive Vice President, Secretary and Chief Financial Officer of the
Company. Consists of 111,350 shares of Common Stock held in a family trust
and 43,750 shares of Common Stock issuable upon exercise of employee stock
options. Mr. Thomas' address is 110 South Ferrall Street, Spokane, WA
99202.
11
<PAGE> 15
(5) Executive Vice President of the Company. Consists of 25,000 shares of
Common Stock underlying a restrictive stock award to Mr. Merriman, which
shares have vested, and 25,000 shares of Common Stock issuable upon
exercise of employee stock options. Mr. Merriman resigned his positions
with the Company in March 1999. Mr. Merriman's address is 1071 Camelback
Street, Newport Beach, CA 92660.
(6) Director. Consists of 7,500 shares of Common Stock issuable upon exercise
of director options. Mr. Easton's address is 7855 Haskell Avenue, Van Nuys,
CA 91406.
(7) Director. Includes 7,500 shares of Common Stock issuable upon exercise of
director options. Mr. Spence's address is 25 Via Lucca, Irvine, CA 92612.
(8) Director. Consists of 7,500 shares of Common Stock issuable upon exercise
of director options. Mr. Johnson's address is 6071 Bristol Parkway, #100,
Culver City, CA 90230.
(9) Director. Includes 7,500 shares of Common Stock issuable upon exercise of
director options. Mr. Whilden's address is 106 So. Poinsettia Avenue,
Manhattan Beach, CA 90266.
(10) The address of The Kaufmann Fund, Inc. is 140 East 45th Street, 43rd Floor,
New York, NY 10017.
(11) As reported in a Schedule 13G filed with the Securities and Exchange
Commission by T. Rowe Price Associates, Inc., whose address is 100 East
Pratt Street, Baltimore, MD 21202. According to such Schedule 13G, these
securities are owned by various individual and institutional investors,
including T. Rowe Price New Horizon Funds, Inc. (which owns 500,000
shares), for which T. Rowe Price Associates, Inc. serves as an investment
advisor with sole power to direct investments and/or vote the securities.
T. Rowe Price Associates, Inc. expressly disclaims that it is the
beneficial owner of such securities.
(12) As reported in a Schedule 13G filed with the Securities and Exchange
Commission by Wellington Management Co., LLP, whose address is 75 State
Street, Boston, MA 02109. According to such Schedule 13G, these securities
are held by Wellington Management Co., LLP in its capacity as an investment
adviser with the shared power to dispose of and/or vote the securities, and
are owned of record by clients of Wellington Management Co., LLP.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors and persons who beneficially own more than 10% of a registered
class of the Company's Common Stock to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
("Commission"). Such officers, directors, and stockholders are required by
Commission regulations to furnish the Company with copies of all such reports
that they file. Based solely upon the Company's review of such forms furnished
to the Company during the fiscal year ended December 31, 1998, and written
representations from certain reporting persons, the Company believes that all
filing requirements applicable to the Company's executive officers, directors
and more than 10% stockholders have been complied with.
AMENDMENT TO AMENDED AND RESTATED
1995 EQUITY PARTICIPATION PLAN
(ITEM 2 OF THE PROXY CARD)
The Incentive Plan was originally adopted by the Company, and approved by
the stockholders of the Company, in August 1995. On February 20, 1998, the Board
of Directors unanimously adopted, and on May 15, 1998 the Company's stockholders
approved, an amendment to the Incentive Plan, which was restated in its
entirety. The purpose of this amendment was to increase the number of shares of
the Company's Common Stock available for issuance thereunder from 600,000 shares
to 900,000 shares.
The Incentive Plan currently permits options to be granted covering up to
900,000 shares of Common Stock. The Board of Directors proposes to further amend
the Incentive Plan, pursuant to the 1999 Amendment, to provide for another
increase in the number of shares of Common Stock reserved for issuance
thereunder, from 900,000 shares to 1,400,000 shares. No other change is being
proposed to the terms of the Incentive Plan. As of February 28, 1999,
approximately 69% of the shares of Common Stock reserved for issuance under the
Incentive Plan were subject to outstanding options leaving only 277,487 shares
of Common Stock reserved for issuance under the Incentive Plan. The Board of
Directors believes that the proposed increase in the number of shares of Common
Stock available for issuance as provided in the Incentive Plan will provide the
Compensation Committee with greater flexibility in the administration of the
Incentive Plan and is appropriate in light of the growth of the Company and the
addition of new employees who will be subject to the Incentive Plan. The
increase in the number of shares authorized for issuance as provided in the
Incentive Plan would represent approximately 5% of the issued and outstanding
shares of Common Stock of the Company as of February 28, 1999.
12
<PAGE> 16
The principal features of the Incentive Plan are summarized above under
"Compensation Plans and Arrangements -- Amended and Restated 1995 Equity
Participation Plan." That summary is not intended to be complete and reference
should be made to the Incentive Plan itself for a complete understanding of its
terms and provisions. A copy of the Incentive Plan, as proposed to be amended by
the 1999 Amendment, is set forth in Exhibit "A" to this Proxy Statement.
THE BOARD RECOMMENDS A VOTE FOR ADOPTION OF THE PROPOSED AMENDMENT TO THE
AMENDED AND RESTATED 1995 EQUITY PARTICIPATION PLAN.
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
(ITEM 3 OF THE PROXY CARD)
The Board of Directors has selected PricewaterhouseCoopers LLP
("PricewaterhouseCoopers") as the Company's independent accountants for the year
ending December 31, 1999, and has further directed that management submit the
selection of independent accountants for ratification by the stockholders at the
Annual Meeting. PricewaterhouseCoopers has no financial interest in the Company
and neither it nor any member or employee of the firm has had any connection
with the Company in the capacity of promoter, underwriter, voting trustee,
director, officer or employee. The Delaware General Corporation Law does not
require the ratification of the selection of independent accountants by the
Company's stockholders, but in view of the importance of the financial
statements to the stockholders, the Board of Directors deems it advisable that
the stockholders pass upon such selection. A representative of
PricewaterhouseCoopers is not expected to be present at the Annual Meeting.
In the event the stockholders fail to ratify the selection of
PricewaterhouseCoopers, the Audit Committee will reconsider whether or not to
retain the firm. Even if the selection is ratified, the Audit Committee and the
Board of Directors in their discretion may direct the appointment of a different
independent accounting firm at any time during the year if they determine that
such a change would be in the best interests of the Company and its
stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF RATIFICATION OF THE
SELECTION OF THE INDEPENDENT ACCOUNTANTS.
OTHER BUSINESS
The Company does not know of any other business to be presented to the
Annual Meeting and does not intend to bring any other matters before such
meeting. If any other matters properly do come before the Annual Meeting,
however, the persons named in the accompanying Proxy are empowered, in the
absence of contrary instructions, to vote according to their best judgment.
STOCKHOLDER PROPOSALS
Any proposals of security holders which are intended to be presented at
next year's annual meeting must be received by the Company at its principal
executive offices on or before December 17, 1999, in order to be considered for
inclusion in the Company's proxy materials relating to that meeting.
13
<PAGE> 17
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission is available upon written request and without
charge to stockholders by writing to Jeffrey D. Thomas, Chief Financial Officer,
Ambassadors International, Inc., Dwight D. Eisenhower Building, 110 South
Ferrall Street, Spokane, Washington 99202.
By Order of the Board of Directors
/s/ JEFFREY D. THOMAS
Jeffrey D. Thomas
Secretary
Spokane, Washington
April 14, 1999
PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED REPLY ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
14
<PAGE> 18
EXHIBIT A
THE AMENDED AND RESTATED
1995 EQUITY PARTICIPATION PLAN
OF
AMBASSADORS INTERNATIONAL, INC.
(INCLUDING PROPOSED 1999 AMENDMENT)
Ambassadors International, Inc., a Delaware corporation, has adopted The
Amended and Restated 1995 Equity Participation Plan of Ambassadors
International, Inc. (the "Plan"), effective May 15, 1998, for the benefit of its
eligible employees, consultants and directors. The Plan consists of two plans,
one for the benefit of key Employees (as such term is defined below) and
consultants and one for the benefit of Independent Directors (as such term is
defined below).
The purposes of this Plan are as follows:
(1) To provide an additional incentive for directors, key Employees
and consultants to further the growth, development and financial success of
the Company by personally benefiting through the ownership of Company stock
and/or rights which recognize such growth, development and financial
success.
(2) To enable the Company to obtain and retain the services of
directors, key Employees and consultants considered essential to the long
range success of the Company by offering them an opportunity to own stock
in the Company and/or rights which will reflect the growth, development and
financial success of the Company.
ARTICLE I
DEFINITIONS
1.1 General. Wherever the following terms are used in this Plan they shall
have the meaning specified below, unless the context clearly indicates
otherwise.
1.2 Award Limit. "Award Limit" shall mean 100,000 shares of Common Stock.
1.3 Board. "Board" shall mean the Board of Directors of the Company.
1.4 Code. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.5 Committee. "Committee" shall mean the Compensation Committee of the
Board, or a subcommittee of the Board, appointed as provided in Section 9.1.
1.6 Common Stock. "Common Stock" shall mean the common stock of the
Company, par value $0.01 per share, and any equity security of the Company
issued or authorized to be issued in the future, but excluding any warrants,
options or other rights to purchase Common Stock. Debt securities of the Company
convertible into Common Stock shall be deemed equity securities of the Company.
1.7 Company. "Company" shall mean Ambassadors International, Inc., a
Delaware corporation.
1.8 Deferred Stock. "Deferred Stock" shall mean Common Stock awarded under
Article VII of this Plan.
1.9 Director. "Director" shall mean a member of the Board.
1.10 Dividend Equivalent. "Dividend Equivalent" shall mean a right to
receive the equivalent value (in cash or Common Stock) of dividends paid on
Common Stock awarded under Article VII of this Plan.
1.11 Employee. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.
A-1
<PAGE> 19
1.12 Exchange Act. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
1.13 Fair Market Value. "Fair Market Value" of a share of Common Stock as
of a given date shall be (i) the mean between the highest and lowest selling
price of a share of Common Stock on the principal exchange on which shares of
Common Stock are then trading, if any, on such date, or if shares were not
traded on such date, then on the closest preceding date on which a trade
occurred, or (ii) if Common Stock is not traded on an exchange, the mean between
the closing representative bid and asked prices for the Common Stock on such
date as reported by NASDAQ or, if NASDAQ is not then in existence, by its
successor quotation system; or (iii) if Common Stock is not publicly traded, the
Fair Market Value of a share of Common Stock as established by the Committee (or
the Board, in the case of Options granted to Independent Directors) acting in
good faith.
1.14 Grantee. "Grantee" shall mean an Employee or consultant granted a
Performance Award, Dividend Equivalent, Stock Payment or Stock Appreciation
Right, or an award of Deferred Stock, under this Plan.
1.15 Incentive Stock Option. "Incentive Stock Option" shall mean an option
which conforms to the applicable provisions of Section 422 of the Code and which
is designated as an Incentive Stock Option by the Committee.
1.16 Independent Director. "Independent Director" shall mean a member of
the Board who is not an Employee of the Company.
1.17 Non-Qualified Stock Option. "Non-Qualified Stock Option" shall mean
an Option which is not designated as an Incentive Stock Option by the Committee.
1.18 Option. "Option" shall mean a stock option granted under Article III
of this Plan. An Option granted under this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option;
provided, however, that Options granted to Independent Directors and consultants
shall be Non-Qualified Stock Options.
1.19 Optionee. "Optionee" shall mean an Employee, consultant or
Independent Director granted an Option under this Plan.
1.20 Performance Award. "Performance Award" shall mean a cash bonus, stock
bonus or other performance or incentive award that is paid in cash, Common Stock
or a combination of both, awarded under Article VII of this Plan.
1.21 Plan. "Plan" shall mean The Amended and Restated 1995 Equity
Participation Plan of Ambassadors International, Inc.
1.22 Restricted Stock. "Restricted Stock" shall mean Common Stock awarded
under Article VI of this Plan.
1.23 Restricted Stockholder. "Restricted Stockholder" shall mean an
Employee or consultant granted an award of Restricted Stock under Article VI of
this Plan.
1.24 Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended from time to time.
1.25 Stock Appreciation Right. "Stock Appreciation Right" shall mean a
stock appreciation right granted under Article VIII of this Plan.
1.26 Stock Payment. "Stock Payment" shall mean (i) a payment in the form
of shares of Common Stock, or (ii) an option or other right to purchase shares
of Common Stock, as part of a deferred compensation arrangement, made in lieu of
all or any portion of the compensation, including without limitation, salary,
bonuses and commissions, that would otherwise become payable to a key Employee
or consultant in cash, awarded under Article VII of this Plan.
A-2
<PAGE> 20
1.27 Subsidiary. "Subsidiary" shall mean any corporation in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock possessing
50 percent or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
1.28 Termination of Consultancy. "Termination of Consultancy" shall mean
the time when the engagement of Optionee, Grantee or Restricted Stockholder as a
Consultant to the Company or a Subsidiary is terminated for any reason, with or
without cause, including without limitation, resignation, discharge, death or
retirement; but excluding terminations where there is a simultaneous
commencement of employment with the Company or any Subsidiary. The Committee, in
its absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Consultancy, including, but not by way of limitation,
the question of whether a Termination of Consultancy resulted from a discharge
for good cause, and all questions of whether particular leaves of absence
constitute Terminations of Employment. Notwithstanding any other provision of
this Plan, the Company or any Subsidiary has an absolute and unrestricted right
to terminate a consultant's service at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided otherwise in writing.
1.29 Termination of Directorship. "Termination of Directorship" shall mean
the time when an Optionee who is an Independent Director ceases to be a Director
for any reason, including, but not by way of limitation, a termination by
resignation, failure to be elected, death or retirement. The Board, in its sole
and absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Directorship.
1.30 Termination of Employment. "Termination of Employment " shall mean
the time when the employee-employer relationship between the Optionee, Grantee
or Restricted Stockholder and the Company or any Subsidiary is terminated for
any reason, including, but not by way of limitation, a termination by
resignation, discharge, death, disability or retirement; but excluding (i)
terminations where there is a simultaneous reemployment, continuing employment
of an Optionee, Grantee or Restricted Stockholder by the Company or any
Subsidiary, (ii) at the discretion of the Committee, terminations which result
in a temporary severance of the employee-employer relationship, and (iii) at the
discretion of the Committee, terminations which are followed by the simultaneous
establishment of a consulting relationship by the Company or a Subsidiary with
the former employee. The Committee, in its absolute discretion, shall determine
the effect of all matters and questions relating to Termination of Employment,
including, but not by way of limitation, the question of whether a Termination
of Employment resulted from a discharge for good cause, and all questions of
whether particular leaves of absence constitute Terminations of Employment;
provided, however, that, with respect to Incentive Stock Options, a leave of
absence, change in status from an employee to an independent contractor or other
change in the employee-employer relationship shall constitute a Termination of
Employment if, and to the extent that such leave of absence, change in status or
other change interrupts employment for the purposes of Section 422(a)(2) of the
Code and the then applicable regulations and revenue rulings under said Section.
Notwithstanding any other provision of this Plan, the Company or any Subsidiary
has an absolute and unrestricted right to terminate an Employee's employment at
any time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.
ARTICLE II
SHARES SUBJECT TO PLAN
2.1 Shares Subject to Plan.
(a) The shares of stock subject to Options, awards of Restricted Stock,
Performance Awards, Dividend Equivalents, awards of Deferred Stock, Stock
Payments or Stock Appreciation Rights shall be Common Stock, initially shares of
the Company's Common Stock, par value $0.01 per share. The aggregate number of
such shares which may be issued upon exercise of such options or rights or upon
any such awards under the Plan shall not exceed One Million Four Hundred
Thousand (1,400,000). The shares of Common Stock
A-3
<PAGE> 21
issuable upon exercise of such options or rights or upon any such awards may be
either previously authorized but unissued shares or treasury shares.
(b) The maximum number of shares which may be subject to Options or Stock
Appreciation Rights granted under the Plan to any individual in any calendar
year shall not exceed the Award Limit. To the extent required by Section 162(m)
of the Code, shares subject to Options which are cancelled continue to be
counted against the Award Limit and if, after grant of an Option, the price of
shares subject to such Option is reduced, the transaction is treated as a
cancellation of the Option and a grant of a new Option and both the Option
deemed to be canceled and the Option deemed to be granted are counted against
the Award Limit. Furthermore, to the extent required by Section 162(m) of the
Code, if, after grant of a Stock Appreciation Right, the base amount on which
stock appreciation is calculated is reduced to reflect a reduction in the Fair
Market Value of the Company's Common Stock, the transaction is treated as a
cancellation of the Stock Appreciation Right and a grant of a new Stock
Appreciation Right and both the Stock Appreciation Right deemed to be canceled
and the Stock Appreciation Right deemed to be granted are counted against the
Award Limit.
2.2 Unexercised Options and Other Rights. If any Option, or other right to
acquire shares of Common Stock under any other award under this Plan, expires or
is cancelled without having been fully exercised, the number of shares subject
to such Option or other right but as to which such Option or other right was not
exercised prior to its expiration or cancellation may again be optioned, granted
or awarded hereunder, subject to the limitations of Section 2.1.
ARTICLE III
GRANTING OF OPTIONS
3.1 Eligibility. Subject to the Award Limit, any Employee or consultant
selected by the Committee pursuant to Section 3.4(a)(i) shall be eligible to be
granted an Option. Each Independent Director of the Company shall be eligible to
be granted Options at the times and in the manner set forth in Section 3.4(d).
3.2 Disqualification for Stock Ownership. No person may be granted an
Incentive Stock Option under this Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
then existing Subsidiary unless such Incentive Stock Option conforms to the
applicable provisions of Section 422 of the Code.
3.3 Qualification of Incentive Stock Options. No Incentive Stock Option
shall be granted unless such Option, when granted, qualifies as an "incentive
stock option" under Section 422 of the Code. No Incentive Stock Option shall be
granted to any person who is not an Employee.
3.4 Granting of Options.
(a) The Committee shall from time to time, in its absolute discretion,
and subject to the applicable limitations of this Plan:
(i) Determine which Employees are key Employees and select from
among the key Employees or consultants (including Employees or
consultants who have previously received Options or other awards under
this Plan) such of them as in its opinion should be granted Options;
(ii) Subject to the Award Limit, determine the number of shares to
be subject to such Options granted to the selected key Employees or
consultants;
(iii) Determine whether such Options are to be Incentive Stock
Options or Non-Qualified Stock Options and whether such Options are to
qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options, consistent
with this Plan; provided, however, that the terms and conditions of
Options intended to qualify as performance-based
A-4
<PAGE> 22
compensation as described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the
Code.
(b) Upon the selection of a key Employee or consultant to be granted
an Option, the Committee shall instruct the Secretary of the Company to
issue the Option and may impose such conditions on the grant of the Option
as it deems appropriate. Without limiting the generality of the preceding
sentence, the Committee may, in its discretion and on such terms as it
deems appropriate, require as a condition on the grant of an Option to an
Employee or consultant that the Employee or consultant surrender for
cancellation some or all of the unexercised Options, awards of Restricted
Stock or Deferred Stock, Performance Awards, Stock Appreciation Rights,
Dividend Equivalents or Stock Payments or other rights which have been
previously granted to him under this Plan or otherwise. An Option, the
grant of which is conditioned upon such surrender, may have an option price
lower (or higher) than the exercise price of such surrendered Option or
other award, may cover the same (or a lesser or greater) number of shares
as such surrendered Option or other award, may contain such other terms as
the Committee deems appropriate, and shall be exercisable in accordance
with its terms, without regard to the number of shares, price, exercise
period or any other term or condition of such surrendered Option or other
award.
(c) Any Incentive Stock Option granted under this Plan may be modified
by the Committee to disqualify such option from treatment as an "incentive
stock option" under Section 422 of the Code.
(d) Each person who is an Independent Director as of the date of the
initial public offering of Common Stock automatically shall be granted an
option to purchase ten thousand (10,000) shares of Common Stock (subject to
adjustment as provided in Section 10.3) on the date of such initial public
offering. When a person is initially elected to the Board following the
date of the initial public offering of Common Stock and is then an
Independent Director, each such new Independent Director automatically
shall be granted an Option to purchase ten thousand (10,000) shares of
Common Stock (subject to adjustment as provided in Section 10.3) on the
date of his or her election to the Board. Members of the Board who are
Employees who subsequently retire from the Company and remain on the Board
will not receive an Option grant pursuant to this Section 3.4(d). All the
foregoing Option grants authorized by this Section 3.4(d) are subject to
stockholder approval of the Plan.
ARTICLE IV
TERMS OF OPTIONS
4.1 Option Agreement. Each Option shall be evidenced by a written Stock
Option Agreement, which shall be executed by the Optionee and an authorized
officer of the Company and which shall contain such terms and conditions as the
Committee (or the Board, in the case of Options granted to Independent
Directors) shall determine, consistent with this Plan. Stock Option Agreements
evidencing Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code. Stock Option Agreements evidencing Incentive Stock Options
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.
4.2 Option Price. The price per share of the shares subject to each Option
shall be set by the Committee; provided, however, that such price shall be no
less than the par value of a share of Common Stock, and in the case of Options
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code, as well as Options granted to Independent Directors,
such price shall be no less than 100% of the Fair Market Value of a share of
Common Stock on the date the Option is granted and in the case of Incentive
Stock Options such price shall not be less than the greater of: (i) 100% of the
Fair Market Value of a share of Common Stock on the date the Option is granted,
or (ii) 110% of the Fair Market Value of a share of Common Stock on the date
such Option is granted in the case of an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary.
A-5
<PAGE> 23
4.3 Option Term. The term of an Option (other than an Option granted to an
Independent Director) shall be set by the Committee in its discretion; provided,
however, that, in the case of Incentive Stock Options, the term shall not be
more than ten (10) years from the date the Incentive Stock Option is granted, or
five (5) years from such date if the Incentive Stock Option is granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary.
4.4 Option Vesting.
(a) The period during which the right to exercise an Option in whole or in
part vests in the Optionee shall be set by the Committee and the Committee may
determine that an Option may not be exercised in whole or in part for a
specified period after it is granted; provided, however, that no Option granted
to a person subject to Section 16 of the Exchange Act shall be exercisable until
at least six months have elapsed from (but excluding) the date on which the
Option was granted. At any time after grant of an Option, the Committee (or the
Board) may, in its sole discretion and subject to whatever terms and conditions
it selects, accelerate the period during which an Option vests. Notwithstanding
the foregoing, all Options granted to Independent Directors shall become
exercisable in cumulative annual installments of 25% on each of the first,
second, third and fourth anniversaries of the date of Option grant, and the term
of each such Option shall be ten years without variation or acceleration
hereunder, except as provided in Section 10.4 and except that any Option granted
to an Independent Director shall become immediately exercisable in full upon the
retirement of the Independent Director in accordance with the Company's
retirement policy applicable to Directors.
(b) No portion of an Option which is unexercisable at Termination of
Employment, Termination of Directorship or Termination of a Consultancy, as
applicable, shall thereafter become exercisable, except as may be otherwise
provided by the Committee with respect to Options granted to Employees or
consultants, either in the Stock Option Agreement or in a resolution adopted
following the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by an Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any Subsidiary) exceeds
$100,000, such Options shall be treated as Non-Qualified Options to the extent
required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking Options into account in the order in which
they were granted. For purposes of this Section 4.4(c), the Fair Market Value of
stock shall be determined as of the time the Option with respect to such stock
is granted.
4.5 Consideration. In consideration of the granting of an Option, the
Optionee shall agree, in the written Stock Option Agreement, to remain in the
employ of (or to consult for or to serve as an Independent Director of, as
applicable) the Company or any Subsidiary for a period of at least one year
after the Option is granted (or until the next annual meeting of stockholders of
the Company, in the case of an Independent Director). Nothing in this Plan or in
any Stock Option Agreement hereunder shall confer upon any Optionee any right to
continue in the employ of, or as a consultant for, the Company or any
Subsidiary, or as a director of the Company, or shall interfere with or restrict
in any way the rights of the Company and any Subsidiary, which are hereby
expressly reserved, to discharge any Optionee at any time for any reason
whatsoever, with or without good cause.
ARTICLE V
EXERCISE OF OPTIONS
5.1 Partial Exercise. An exercisable Option may be exercised in whole or
in part. However, an Option shall not be exercisable with respect to fractional
shares and the Committee (or the Board, in the case of Options granted to
Independent Directors) may require that, by the terms of the Option, a partial
exercise be with respect to a minimum number of shares.
A-6
<PAGE> 24
5.2 Manner of Exercise. All or a portion of an exercisable Option shall be
deemed exercised upon delivery of all of the following to the Secretary of the
Company or his office:
(a) A written notice complying with the applicable rules established by the
Committee or the Board stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Optionee or other person then
entitled to exercise the Option or such portion;
(b) Such representations and documents as the Committee or the Board, in
its absolute discretion, deems necessary or advisable to effect compliance with
all applicable provisions of the Securities Act of 1933, as amended, and any
other federal or state securities laws or regulations. The Committee or Board
may, in its absolute discretion, also take whatever additional actions it deems
appropriate to effect such compliance including, without limitation, placing
legends on share certificates and issuing stop-transfer notices to agents and
registrars;
(c) In the event that the Option shall be exercised pursuant to Section
10.1 by any person or persons other than the Optionee, appropriate proof of the
right of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the shares with
respect to which the Option, or portion thereof, is exercised. However, at the
discretion of the Committee (or the Board, in the case of Options granted to
Independent Directors), the terms of the Option may (i) allow a delay in payment
up to thirty (30) days from the date the Option, or portion thereof, is
exercised; (ii) allow payment, in whole or in part, through the delivery of
shares of Common Stock owned by the Optionee, duly endorsed for transfer to the
Company with a Fair Market Value on the date of delivery equal to the aggregate
exercise price of the Option or exercised portion thereof; (iii) subject to the
timing requirements of Section 5.3, allow payment, in whole or in part, through
the surrender of shares of Common Stock then issuable upon exercise of the
Option having a Fair Market Value on the date of Option exercise equal to the
aggregate exercise price of the Option or exercised portion thereof; (iv) allow
payment, in whole or in part, through the delivery of property of any kind which
constitutes good and valuable consideration; (v) allow payment, in whole or in
part, through the delivery of a full recourse promissory note bearing interest
(at no less than such rate as shall then preclude the imputation of interest
under the Code) and payable upon such terms as may be prescribed by the
Committee or the Board, or (vi) allow payment through any combination of the
consideration provided in the foregoing subparagraphs (ii), (iii), (iv) and (v).
In the case of a promissory note, the Committee or the Board may also prescribe
the form of such note and the security to be given for such note. The Option may
not be exercised, however, by delivery of a promissory note or by a loan from
the Company when or where such loan or other extension of credit is prohibited
by law.
5.3 Certain Timing Requirements. At the discretion of the Committee (or
Board, in the case of Options granted to Independent Directors), shares of
Common Stock issuable to the Optionee upon exercise of the Option may be used to
satisfy the Option exercise price or the tax withholding consequences of such
exercise, in the case of persons subject to Section 16 of the Exchange Act, only
(i) during the period beginning on the third business day following the date of
release of the quarterly or annual summary statement of sales and earnings of
the Company and ending on the twelfth business day following such date or (ii)
pursuant to an irrevocable written election by the Optionee to use shares of
Common Stock issuable to the Optionee upon exercise of the Option to pay all or
part of the Option price or the withholding taxes made at least six months prior
to the payment of such Option price or withholding taxes.
5.4 Conditions to Issuance of Stock Certificates. The Company shall not be
required to issue or deliver any certificate or certificates for shares of stock
purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on which
such class of stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations of
the Securities and Exchange Commission or any other
A-7
<PAGE> 25
governmental regulatory body which the Committee or Board shall, in its absolute
discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee or Board shall, in its absolute
discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise of
the Option as the Committee or Board may establish from time to time for reasons
of administrative convenience; and
(e) The receipt by the Company of full payment for such shares, including
payment of any applicable withholding tax.
5.5 Rights as Stockholders. The holders of Options shall not be, nor have
any of the rights or privileges of, stockholders of the Company in respect of
any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.
5.6 Ownership and Transfer Restrictions. The Committee (or Board, in the
case of Options granted to Independent Directors), in its absolute discretion,
may impose such restrictions on the ownership and transferability of the shares
purchasable upon the exercise of an Option as it deems appropriate. Any such
restriction shall be set forth in the respective Stock Option Agreement and may
be referred to on the certificates evidencing such shares. The Committee may
require the Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(i) two years from the date of granting such Option to such Employee or (ii) one
year after the transfer of such shares to such Employee. The Committee may
direct that the certificates evidencing shares acquired by exercise of an Option
refer to such requirement to give prompt notice of disposition.
ARTICLE VI
AWARD OF RESTRICTED STOCK
6.1 Award of Restricted Stock.
(a) The Committee shall from time to time, in its absolute discretion:
(i) Select from among the key Employees or consultants (including
Employees or consultants who have previously received other awards under
this Plan) such of them as in its opinion should be awarded Restricted
Stock; and
(ii) Determine the purchase price, if any, and other terms and
conditions applicable to such Restricted Stock, consistent with this Plan.
(b) The Committee shall establish the purchase price, if any, and form of
payment for Restricted Stock; provided, however, that such purchase price shall
be no less than the par value of the Common Stock to be purchased. In all cases,
legal consideration shall be required for each issuance of Restricted Stock.
(c) Upon the selection of a key Employee or consultant to be awarded
Restricted Stock, the Committee shall instruct the Secretary of the Company to
issue such Restricted Stock and may impose such conditions on the issuance of
such Restricted Stock as it deems appropriate.
6.2 Restricted Stock Agreement. Restricted Stock shall be issued only
pursuant to a written Restricted Stock Agreement, which shall be executed by the
selected key Employee or consultant and an authorized officer of the Company and
which shall contain such terms and conditions as the Committee shall determine,
consistent with this Plan.
6.3 Consideration. As consideration for the issuance of Restricted Stock,
in addition to payment of any purchase price, the Restricted Stockholder shall
agree, in the written Restricted Stock Agreement, to remain in the employ of, or
to consult for, the Company or any Subsidiary for a period of at least one year
after the
A-8
<PAGE> 26
Restricted Stock is issued. Nothing in this Plan or in any Restricted Stock
Agreement hereunder shall confer on any Restricted Stockholder any right to
continue in the employ of, or as a consultant for, the Company or any Subsidiary
or shall interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Restricted
Stockholder at any time for any reason whatsoever, with or without good cause.
6.4 Rights as Stockholders. Upon delivery of the shares of Restricted
Stock to the escrow holder pursuant to Section 6.7, the Restricted Stockholder
shall have, unless otherwise provided by the Committee, all the rights of a
stockholder with respect to said shares, subject to the restrictions in his
Restricted Stock Agreement, including the right to receive all dividends and
other distributions paid or made with respect to the shares; provided,
however,that in the discretion of the Committee, any extraordinary distributions
with respect to the Common Stock shall be subject to the restrictions set forth
in Section 6.5.
6.5 Restriction. All shares of Restricted Stock issued under this Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Restricted Stock
Agreement, be subject to such restrictions as the Committee shall provide, which
restrictions may include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of employment with
the Company, Company performance and individual performance; provided, however,
that no share of Restricted Stock granted to a person subject to Section 16 of
the Exchange Act shall be sold, assigned or otherwise transferred until at least
six months have elapsed from (but excluding) the date on which the Restricted
Stock was issued, and provided, further, that by a resolution adopted after the
Restricted Stock is issued, the Committee may, on such terms and conditions as
it may determine to be appropriate, remove any or all of the restrictions
imposed by the terms of the Restricted Stock Agreement. Restricted Stock may not
be sold or encumbered until all restrictions are terminated or expire. Unless
provided otherwise by the Committee, if no consideration was paid by the
Restricted Stockholder upon issuance, a Restricted Stockholder's rights in
unvested Restricted Stock shall lapse upon Termination of Employment or, if
applicable, upon the termination of his consulting relationship with the
Company.
6.6 Repurchase of Restricted Stock. The Committee shall provide in the
terms of each individual Restricted Stock Agreement that the Company shall have
the right to repurchase from the Restricted Stockholder the Restricted Stock
then subject to restrictions under the Restricted Stock Agreement immediately
upon a Termination of Employment or, if applicable, upon a termination of any
consulting relationship between the Restricted Stockholder and the Company, at a
cash price per share equal to the price paid by the Restricted Stockholder for
such Restricted Stock; provided, however, that provision may be made that no
such right of repurchase shall exist in the event of a Termination of Employment
or Termination of Consultancy without cause, or following a change in control of
the Company or because of the Restricted Stockholder's retirement, death or
disability, or otherwise.
6.7 Escrow. The Secretary of the Company or such other escrow holder as
the Committee may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Restricted Stock Agreement with respect to the shares evidenced by such
certificate expire or shall have been removed.
6.8 Legend. In order to enforce the restrictions imposed upon shares of
Restricted Stock hereunder, the Committee shall cause a legend or legends to be
placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Restricted Stock Agreements, which legend or
legends shall make appropriate reference to the conditions imposed thereby.
ARTICLE VII
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
DEFERRED STOCK, STOCK PAYMENTS
7.1 Performance Awards. Any key Employee or consultant selected by the
Committee may be granted one or more Performance Awards. The value of such
Performance Awards may be linked to the market value,
A-9
<PAGE> 27
book value, net profits or other measure of the value of Common Stock or other
specific performance criteria determined appropriate by the Committee, in each
case on a specified date or dates or over any period or periods determined by
the Committee, or may be based upon the appreciation in the market value, book
value, net profits or other measure of the value of a specified number of shares
of Common Stock over a fixed period or periods determined by the Committee. In
making such determinations, the Committee shall consider (among such other
factors as it deems relevant in light of the specific type of award) the
contributions, responsibilities and other compensation of the particular key
Employee or consultant.
7.2 Dividend Equivalents. Any key Employee or consultant selected by the
Committee may be granted Dividend Equivalents based on the dividends declared on
Common Stock, to be credited as of dividend payment dates, during the period
between the date an Option, Stock Appreciation Right, Deferred Stock or
Performance Award is granted, and the date such Option, Stock Appreciation
Right, Deferred Stock or Performance Award is exercised, vests or expires, as
determined by the Committee. Such Dividend Equivalents shall be converted to
cash or additional shares of Common Stock by such formula and at such time and
subject to such limitations as may be determined by the Committee.
7.3 Stock Payments. Any key Employee or consultant selected by the
Committee may receive Stock Payments in the manner determined from time to time
by the Committee. The number of shares shall be determined by the Committee and
may be based upon the Fair Market Value, book value, net profits or other
measure of the value of Common Stock or other specific performance criteria
determined appropriate by the Committee on the date such Stock Payment is made
or on any date thereafter.
7.4 Deferred Stock. Any key Employee or consultant selected by the
Committee may be granted an award of Deferred Stock in the manner determined
from time to time by the Committee. The number of shares of Deferred Stock shall
be determined by the Committee and may be linked to the market value, book
value, net profits or other measure of the value of Common Stock or other
specific performance criteria determined appropriate by the Committee, in each
case on a specified date or dates or over any period or periods determined by
the Committee. Common Stock underlying a Deferred Stock award will not be issued
until the Deferred Stock award has vested, pursuant to a vesting schedule or
performance criteria set by the Committee. Unless otherwise provided by the
Committee, a Grantee of Deferred Stock shall have no rights as a Company
stockholder with respect to such Deferred Stock until such time as the award has
vested and the Common Stock underlying the award has been issued.
7.5 Performance Award Agreement, Dividend Equivalent Agreement, Deferred
Stock Agreement, Stock Payment Agreement. Each Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment shall be evidenced by a
written agreement, which shall be executed by the Grantee and an authorized
Officer of the Company and which shall contain such terms and conditions as the
Committee shall determine, consistent with this Plan.
7.6 Term. The term of a Performance Award, Dividend Equivalent award of
Deferred Stock and/or Stock Payment shall be set by the Committee in its
discretion.
7.7 Exercise Upon Termination of Employment. A Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment is exercisable only
while the Grantee is an Employee or consultant; provided that the Committee may
determine that the Performance Award, Dividend Equivalent, award of Deferred
Stock and/or Stock Payment may be exercised subsequent to Termination of
Employment or Termination of Consultancy without cause, or following a change in
control of the Company, or because of the Grantee's retirement, death or
disability, or otherwise.
7.8 Payment on Exercise. Payment of the amount determined under Section
7.1 or 7.2 above shall be in cash, in Common Stock or a combination of both, as
determined by the Committee. To the extent any payment under this Article VII is
effected in Common Stock, it shall be made subject to satisfaction of all
provisions of Section 5.4.
7.9 Consideration. In consideration of the granting of a Performance
Award, Dividend Equivalent award of Deferred Stock and/or Stock Payment, the
Grantee shall agree, in a written agreement, to remain in the employ of, or to
consult for, the Company or any Subsidiary for a period of at least one year
after such
A-10
<PAGE> 28
Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock
Payment is granted. Nothing in this Plan or in any agreement hereunder shall
confer on any Grantee any right to continue in the employ of, or as a consultant
for, the Company or any Subsidiary or shall interfere with or restrict in any
way the rights of the Company and any Subsidiary, which are hereby expressly
reserved, to discharge any Grantee at any time for any reason whatsoever, with
or without good cause.
ARTICLE VIII
STOCK APPRECIATION RIGHTS
8.1 Grant of Stock Appreciation Rights. Subject to the Award Limit, a
Stock Appreciation Right may be granted to any key Employee or consultant
selected by the Committee. A Stock Appreciation Right may be granted (i) in
connection and simultaneously with the grant of an Option, (ii) with respect to
a previously granted Option, or (iii) independent of an Option. A Stock
Appreciation Right shall be subject to such terms and conditions not
inconsistent with this Plan as the Committee shall impose, and shall be
evidenced by a written Stock Appreciation Right Agreement, which shall be
executed by the Grantee and an authorized officer of the Company. The Committee,
in its discretion, may determine whether a Stock Appreciation Right is to
qualify as performance-based compensation as described in Section 162(m)(4)(C)
of the Code and Stock Appreciation Right Agreements evidencing Stock
Appreciation Rights intended to so qualify shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code. Without limiting the generality of the foregoing, the
Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition of the grant of a Stock Appreciation Right to an Employee
or consultant that the Employee or consultant surrender for cancellation some or
all of the unexercised Options, awards of Restricted Stock or Deferred Stock,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments, or other rights which have been previously granted to him under this
Plan or otherwise. A Stock Appreciation Right, the grant of which is conditioned
upon such surrender, may have an exercise price lower (or higher) than the
exercise price of the surrendered Option or other award, may cover the same (or
a lesser or greater) number of shares as such surrendered Option or other award,
may contain such other terms as the Committee deems appropriate, and shall be
exercisable in accordance with its terms, without regard to the number of
shares, price, exercise period or any other term or condition of such
surrendered Option or other award.
8.2 Coupled Stock Appreciation Rights.
(a) A Coupled Stock Appreciation Right ("CSAR") shall be related to a
particular Option and shall be exercisable only when and to the extent the
related Option is exercisable.
(b) A CSAR may be granted to the Grantee for no more than the number of
shares subject to the simultaneously or previously granted Option to which it is
coupled.
(c) A CSAR shall entitle the Grantee (or other person entitled to exercise
the Option pursuant to this Plan) to surrender to the Company unexercised a
portion of the Option to which the CSAR relates (to the extent then exercisable
pursuant to its terms) and to receive from the Company in exchange therefor an
amount determined by multiplying the difference obtained by subtracting the
Option exercise price from the Fair Market Value of a share of Common Stock on
the date of exercise of the CSAR by the number of shares of Common Stock with
respect to which the CSAR shall have been exercised, subject to any limitations
the Committee may impose.
8.3 Independent Stock Appreciation Rights.
(a) An Independent Stock Appreciation Right ("ISAR") shall be unrelated to
any Option and shall have a term set by the Committee. An ISAR shall be
exercisable in such installments as the Committee may determine. An ISAR shall
cover such number of shares of Common Stock as the Committee may determine;
provided, however, that no ISAR granted to a person subject to Section 16 of the
Exchange Act shall be exercisable until at least six months have elapsed from
(but excluding) the date on which the Option was granted. The exercise price per
share of Common Stock subject to each ISAR shall be set by the Committee.
A-11
<PAGE> 29
An ISAR is exercisable only while the Grantee is an Employee or consultant;
provided that the Committee may determine that the ISAR may be exercised
subsequent to Termination of Employment or Termination of Consultancy without
cause, or following a change in control of the Company, or because of the
Grantee's retirement, death or disability, or otherwise.
(b) An ISAR shall entitle the Grantee (or other person entitled to exercise
the ISAR pursuant to this Plan) to exercise all or a specified portion of the
ISAR (to the extent then exercisable pursuant to its terms) and to receive from
the Company an amount determined by multiplying the difference obtained by
subtracting the exercise price per share of the ISAR from the Fair Market Value
of a share of Common Stock on the date of exercise of the ISAR by the number of
shares of Common Stock with respect to which the ISAR shall have been exercised,
subject to any limitations the Committee may impose.
8.4 Payment and Limitations on Exercise.
(a) Payment of the amount determined under Section 8.2(c) and 8.3(b) above
shall be in cash, in Common Stock (based on its Fair Market Value as of the date
the Stock Appreciation Right is exercised) or a combination of both, as
determined by the Committee. To the extent such payment is effected in Common
Stock it shall be made subject to satisfaction of all provisions of Section 5.4
hereinabove pertaining to Options.
(b) Grantees of Stock Appreciation Rights who are subject to Section 16 of
the Exchange Act may, in the discretion of the Board or Committee, be required
to comply with any timing or other restrictions under Rule 16b-3 applicable to
the settlement or exercise of a Stock Appreciation Right.
8.5 Consideration. In consideration of the granting of a Stock
Appreciation Right, the Grantee shall agree, in the written Stock Appreciation
Right Agreement, to remain in the employ of, or to consult for, the Company or
any Subsidiary for a period of at least one year after the Stock Appreciation
Right is granted. Nothing in this Plan or in any Stock Appreciation Right
Agreement hereunder shall confer on any Grantee any right to continue in the
employ of, or as a consultant for, the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Grantee at any
time for any reason whatsoever, with or without good cause.
ARTICLE IX
ADMINISTRATION
9.1 Compensation Committee. The Compensation Committee (or a subcommittee
of the Board assuming the functions of the Committee under this Plan) shall
consist of two or more Independent Directors appointed by and holding office at
the pleasure of the Board, each of whom is both a "disinterested person" as
defined by Rule 16b-3 and an "outside director" for purposes of Section 162(m)
of the Code. Appointment of Committee members shall be effective upon acceptance
of appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by the Board.
9.2 Duties and Powers of Committee. It shall be the duty of the Committee
to conduct the general administration of this Plan in accordance with its
provisions. The Committee shall have the power to interpret this Plan and the
agreements pursuant to which Options, awards of Restricted Stock or Deferred
Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments are granted or awarded, and to adopt such rules for the
administration, interpretation, and application of this Plan as are consistent
therewith and to interpret, amend or revoke any such rules. Notwithstanding the
foregoing, the full Board, acting by a majority of its members in office, shall
conduct the general administration of the Plan with respect to Options granted
to Independent Directors. Any such grant or award under this Plan need not be
the same with respect to each Optionee, Grantee or Restricted Stockholder. Any
such interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under this Plan except with respect to
matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations
or rules issued thereunder, are required to be determined in the sole discretion
of the Committee.
A-12
<PAGE> 30
9.3 Majority Rule. The Committee shall act by a majority of its members in
attendance at a meeting at which a quorum is present or by a memorandum or other
written instrument signed by all members of the Committee.
9.4 Compensation: Professional Assistance; Good Faith Actions. Members of
the Committee shall receive such compensation for their services as members as
may be determined by the Board. All expenses and liabilities which members of
the Committee incur in connection with the administration of this Plan shall be
borne by the Company. The Committee may, with the approval of the Board, employ
attorneys, consultants, accountants, appraisers, brokers, or other persons. The
Committee, the Company and the Company's officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon all Optionees, Grantees,
Restricted Stockholders, the Company and all other interested persons. No
members of the Committee or Board shall be personally liable for any action,
determination or interpretation made in good faith with respect to this Plan,
Options, awards of Restricted Stock or Deferred Stock, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments, and all members of
the Committee shall be fully protected by the Company in respect of any such
action, determination or interpretation.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Not Transferable. Options, Restricted Stock awards, Deferred Stock
awards, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments under this Plan may not be sold, pledged, assigned, or
transferred in any manner other than by will or the laws of descent and
distribution, unless and until such rights or awards have been exercised, or the
shares underlying such rights or awards have been issued, and all restrictions
applicable to such shares have lapsed. No Option, Restricted Stock award,
Deferred Stock award, Performance Award, Stock Appreciation Right, Dividend
Equivalent or Stock Payment or interest or right therein shall be liable for the
debts, contracts or engagements of the Optionee, Grantee or Restricted
Stockholder or his successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by operation of
law by judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect.
During the lifetime of the Optionee or Grantee, only he may exercise an
Option or other right or award (or any portion thereof) granted to him under the
Plan. After the death of the Optionee or Grantee, any exercisable portion of an
Option or other right or award may, prior to the time when such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement or other
agreement, be exercised by his personal representative or by any person
empowered to do so under the deceased Optionee's or Grantee's will or under the
then applicable laws of descent and distribution.
10.2 Amendment, Suspension or Termination of this Plan. This Plan may be
wholly or partially amended or otherwise modified, suspended or terminated at
any time or from time to time by the Committee. However, without approval of the
Company's stockholders given within twelve months before or after the action by
the Committee, no action of the Committee may, except as provided in Section
10.3, increase the limits imposed in Section 2.1 on the maximum number of shares
which may be issued under this Plan or modify the Award Limit, and no action of
the Committee may be taken that would otherwise require stockholder approval as
a matter of applicable law, regulation or rule. Notwithstanding the foregoing,
the provisions of this Plan relating to formula Option grants to Independent
Directors, including the amount, price and timing thereof, shall not be amended
more than once in any six-month period other than to comport with changes, in
the Code, the Employee Retirement Income Security Act, or the respective rules
thereunder. No amendment, suspension or termination of this Plan shall, without
the consent of the holder of Options, Restricted Stock awards, Deferred Stock
awards, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments, alter or impair any rights or obligations under any Options,
Restricted Stock
A-13
<PAGE> 31
awards, Deferred Stock awards, Performance Awards, Stock Appreciation Rights,
Dividend Equivalents or Stock Payments theretofore granted or awarded, unless
the award itself otherwise expressly so provides. No Options, Restricted Stock,
Deferred Stock, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments may be granted or awarded during any period of
suspension or after termination of this Plan, and in no event may any Incentive
Stock Option be granted under this Plan after the first to occur of the
following events:
(a) The expiration of ten years from the date the Plan is adopted by the
Board; or
(b) The expiration of ten years from the date the Plan is approved by the
Company's stockholders under Section 10.5.
10.3 Changes in Common Stock or Assets of the Company. In the event that
the outstanding shares of Common Stock are hereafter changed into or exchanged
for cash or a different number or kind of shares or other securities of the
Company, or of another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock splitup, stock
dividend, or combination of shares, appropriate adjustments shall be made by the
Committee in the number and kind of shares for which Options, Restricted Stock
awards, Performance Awards, Stock Appreciation Rights, Dividend Equivalents,
Deferred Stock awards or Stock Payments may be granted, including adjustments of
the limitations in Section 2.1 on the maximum number and kind of shares which
may be issued and of the Award limit described in Section 1.2, and appropriate
adjustments shall be made by the Board in the number and kind of shares for the
purchase of which Options are granted to Independent Directors under Section
3.4(d).
In the event of such a change or exchange, subject to the other provisions
of this Plan, the Committee (or the Board, in the case of Options granted to
Independent Directors) shall also make an appropriate and equitable adjustment
in the number and kind of shares as to which all outstanding Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments, or portions thereof then unexercised, shall be exercisable and in the
number and kind of shares of outstanding Restricted Stock or Deferred Stock.
Such adjustment shall be made with the intent that after the change or exchange
of shares, each Optionee's and each Grantee's and each Restricted Stockholder's
proportionate interest shall be maintained as before the occurrence of such
event. Such adjustment in an outstanding Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent or Stock Payment may include a necessary
or appropriate corresponding adjustment in Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent or Stock Payment exercise price, but
shall be made without change in the total price applicable to the Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment, or the unexercised portion thereof (except for any change in the
aggregate price resulting from rounding-off of share quantities or prices).
Where an adjustment of the type described above is made to an Incentive
Stock Option under this Section, the adjustment will be made in a manner which
will not be considered a "modification" under the provisions of subsection
424(h)(3) of the Code.
Notwithstanding the foregoing, in the event of such a reorganization,
merger, consolidation, recapitalization, reclassification, stock splitup, stock
dividend or combination, or other adjustment or event which results in shares of
Common Stock being exchanged for or converted into cash, securities or other
property, the Company will have the right to terminate this Plan as of the date
of the exchange or conversion, in which case all options, rights and other
awards under this Plan shall become the right to receive such cash, securities
or other property, net of any applicable exercise price.
In the event of a "spin-off" or other substantial distribution of assets of
the Company which has a material diminutive effect upon the Fair Market Value of
the Company's Common Stock, the Committee (or the Board, in the case of Options
granted to Independent Directors) may in its discretion make an appropriate and
equitable adjustment to the Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment exercise price to reflect such diminution.
10.4 Merger of the Company. In the event of the merger or consolidation of
the Company with or into another corporation, the exchange of all or
substantially all of the assets of the Company for the securities of
A-14
<PAGE> 32
another corporation, the acquisition by another corporation or person of all or
substantially all of the Company's assets or 80% or more of the Company's then
outstanding voting stock or the liquidation or dissolution of the Company:
(a) At the discretion of the Committee (or the Board, in the case of
Options granted to Independent Directors), the terms of an Option, Performance
Award, Stock Appreciation Right, Dividend Equivalent or Stock Payment may
provide that it cannot be exercised after such event.
(b) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee (or the Board, in the case of Options granted to
Independent Directors) may provide either by the terms of such Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment or by a resolution adopted prior to the occurrence of such event that,
for a specified period of time prior to such event, such Option, Performance
Award, Stock Appreciation Right, Dividend Equivalent or Stock Payment shall be
exercisable as to all shares covered thereby, notwithstanding anything to the
contrary in this Plan or in the provisions of such Option, Performance Award,
Stock Appreciation Right, Dividend Equivalent or Stock Payment.
(c) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee (or the Board, in the case of Options granted to
Independent Directors) may provide either by the terms of such Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment or by a resolution adopted prior to the occurrence of such event that
upon such event, such Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment shall be assumed by the successor
corporation, or a parent or subsidiary thereof, or shall be substituted for by
similar options, rights or awards covering the stock of the successor
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices.
(d) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide either by the terms of a Restricted Stock
award or Deferred Stock award or by a resolution adopted prior to the occurrence
of such event that, for a specified period of time prior to such event, the
restrictions imposed under a Restricted Stock Agreement or a Deferred Stock
Agreement upon some or all shares of Restricted Stock or Deferred Stock may be
terminated, and, in the case of Restricted Stock, some or all shares of such
Restricted Stock may cease to be subject to repurchase under Section 6.6 after
such event.
(e) None of the foregoing discretionary terms of this Section 10.4 shall be
permitted with respect to Options granted under Section 3.4(d) to Independent
Directors to the extent that such discretion would be inconsistent with the
requirements of Rule 16b-3.
10.5 Approval of Plan by Stockholders. This Plan will be submitted for the
approval of the Company's stockholders within twelve months after the date of
the Board's initial adoption of this Plan, Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments may be granted and
Restricted Stock or Deferred Stock may be awarded prior to such stockholder
approval, provided that such Options, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments shall not be exercisable and such
Restricted Stock or Deferred Stock shall not vest prior to the time when this
Plan is approved by the stockholders, and provided further that if such approval
has not been obtained at the end of said twelve-month period, all Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments previously granted and all Restricted Stock or Deferred Stock
previously awarded under this Plan shall thereupon be cancelled and become null
and void.
10.6 Tax Withholding. The Company shall be entitled to require payment in
cash or deduction from other compensation payable to each Optionee, Grantee or
Restricted Stockholder of any sums required by federal, state or local tax law
to be withheld with respect to the issuance, vesting or exercise of any Option,
Restricted Stock, Deferred Stock, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment. Subject to the timing requirements of
Section 5.3, the Committee (or the Board, in the case of Options granted to
Independent Directors) may in its discretion and in satisfaction of the
foregoing requirement allow such Optionee, Grantee or Restricted Stockholder to
elect to have the Company withhold
A-15
<PAGE> 33
shares of Common Stock (or allow the return of shares of Common Stock) having a
Fair Market Value equal to the sums required to be withheld.
10.7 Loans. The Committee may, in its discretion, extend one or more loans
to key Employees in connection with the exercise or receipt of an Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment granted under this Plan, or the issuance of Restricted Stock or Deferred
Stock awarded under this Plan. The terms and conditions of any such loan shall
be set by the Committee.
10.8 Limitations Applicable to Section 16 Persons and Performance-Based
Compensation. Notwithstanding any other provision of this Plan, any Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment granted, or Restricted Stock or Deferred Stock awarded, to a key
Employee or Director who is then subject to Section 16 of the Exchange Act shall
be subject to any additional limitations set forth in any applicable exemptive
rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3
of the Exchange Act) that are requirements for the application of such exemptive
rule, and this Plan shall be deemed amended to the extent necessary to conform
to such limitations. Furthermore, notwithstanding any other provision of this
Plan, any Option or Stock Appreciation Right intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall be subject to any additional limitations set forth in Section 162(m) of
the Code (including any amendment to Section 162(m) of the Code) or any
regulations or rulings issued thereunder that are requirements for qualification
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and this Plan shall be deemed amended to the extent necessary to conform
to such requirements.
10.9 Effect of Plan Upon Options and Compensation Plans. The adoption of
this Plan shall not affect any other compensation or incentive plans in effect
for the Company or any Subsidiary. Nothing in this Plan shall be construed to
limit the right of the Company (i) to establish any other forms of incentives or
compensation for Employees, Directors or consultants of the Company or any
Subsidiary or (ii) to grant or assume options or other rights otherwise than
under this Plan in connection with any proper corporate purpose including, but
not by way of limitation, the grant or assumption of options in connection with
the acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, firm or association.
10.10 Compliance with Laws. This Plan, the granting and vesting of
Options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments under this
Plan and the issuance and delivery of shares of Common Stock and the payment of
money under this Plan or under Options, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments granted or Restricted Stock or
Deferred Stock awarded hereunder are subject to compliance with all applicable
federal and state laws, rules and regulations (including but not limited to
state and federal securities law and federal margin requirements) and to such
approvals by any listing, regulatory or governmental authority as may, in the
opinion of counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the Company as the
Company may deem necessary or desirable to assure compliance with all applicable
legal requirements. To the extent permitted by applicable law, the Plan,
Options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.
10.11 Titles. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of this Plan.
10.12 Governing Law. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.
A-16
<PAGE> 34
PROXY
AMBASSADORS INTERNATIONAL, INC.
110 So. Ferrall Street
Spokane, WA 99202
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Peter V. Ueberroth and John A. Ueberroth as
Proxies, each with the power to appoint his substitute, and hereby authorizes
each of them to represent and to vote, as designated below, all the shares of
the Common Stock of Ambassadors International, Inc. (the "Company") held of
record by the undersigned as of the close of business on April 8, 1999, at the
Annual Meeting of Stockholders to be held on May 14, 1999 and at any
adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY USING THE ENCLOSED
ENVELOPE. IF YOUR ADDRESS IS INCORRECTLY SHOWN, PLEASE PRINT CHANGES.
- -------------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
<PAGE> 35
Please mark ___
your votes as
indicated in X
this example. ___
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
WITHHOLD
FOR ALL FOR ALL FOR AGAINST ABSTAIN
1. Election of Class III Directors: 2. Approval of certain amendments to
Rafer L. Johnson and John C. Spence [ ] [ ] the Company's Amended and Restated [ ] [ ] [ ]
1995 Equity Participation Plan,
To withhold authority to vote for any described in the accompanying
individual nominee, write the nominee's Proxy Statement.
name on the line provided below:
FOR AGAINST ABSTAIN
3. Ratification of the selection of
PricewaterhouseCoopers LLP [ ] [ ] [ ]
____________________________________________ as the Company's independent
auditors.
4. In their discretion, the Proxies
are authorized to vote upon such
other business as may properly
come before the Annual Meeting or
any adjournment thereof.
All other proxies heretofore given by the undersigned to
vote shares of the Common Stock of the Company, which the
undersigned would be entitled to vote if personally present
at the Annual Meeting of Stockholders or any adjournment or
postponement thereof, are hereby expressly revoked.
Please date this Proxy and sign it exactly as your name or
names appear above. When shares are held by joint tenants,
both should sign. When signing as an attorney, executor,
administrator, trustee or guardian, please give your full
title as such. If shares are held by a corporation, please
sign in full corporate name by the President or other
authorized officer. If shares are held by a partnership,
please sign in full partnership name by an authorized
person.
Signature(s) ______________________________________________________________________________________ Dated: __________________, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
</TABLE>
