HAMPSHIRE GROUP, LIMITED
1992 STOCK OPTION PLAN
(Amended and Restated as of February 8, 2000)
ARTICLE I.
Purpose
This 1992 Stock Option Plan, as amended and restated effective February 8,
2000 (the "Plan") is intended as an incentive to improve the performance and
encourage the continued employment of eligible employees of Hampshire Group,
Limited (the "Company") participating in the Plan, by means of increasing their
proprietary interest in the Company's long-term success through stock ownership
and by affording them the opportunity for additional compensation related to the
value of the Company's stock.
The word "Company", when used in the Plan with reference to employment,
shall include subsidiaries of the Company. The word "subsidiary", when used in
the Plan, shall mean any subsidiary of the Company within the meaning of Section
424(f) of the Internal Revenue Code of 1986, as it may be amended from time to
time (the "Code").
It is intended that certain options granted under the Plan will qualify as
"incentive stock options" under Section 422 of the Code.
ARTICLE II.
Administration
The Plan shall be administered by a Stock Option Committee (the
"Committee") appointed by the Board of Directors of the Company (the "Board")
from among its members and shall consist of not less than two members thereof
who are (and shall remain Committee members only so long as they remain)
"non-employee directors" as defined in Rule l6b-3 under the Securities Exchange
Act of 1934 (the "Exchange Act"). Subject to the provisions of the Plan, the
Committee shall have sole authority, in its absolute discretion: (a) to
determine which of the eligible employees of the Company and its subsidiaries
shall be granted options; (b) to authorize the granting of both incentive stock
options and non-qualified stock options; (c) to determine the times when options
shall be granted and the number of shares to be subject to options; (d) to
determine the option price of the shares subject to each option, which price
shall be not less than the minimum specified in ARTICLE V; (e) to determine the
time or times when each option becomes exercisable, the duration of the exercise
period and any other restrictions on the exercise of options issued hereunder;
(f) to prescribe the form or forms of the option agreements under the Plan
(which forms shall be consistent with the terms of the Plan but need not be
identical and may contain such terms as the Committee may deem appropriate to
carry out the purposes of the Plan); (g) to adopt, amend and rescind such rules
and regulations as, in its opinion, may be advisable in the administration of
the Plan; and (h) to construe and interpret the Plan, the rules and regulations
and the option agreements under the Plan and to make all other determinations
deemed necessary or advisable for the administration of the Plan. All decisions,
determinations and interpretations of the Committee shall be final and binding
on all optionees.
ARTICLE III.
Stock
The stock to be subject to options granted under the Plan shall be shares
of authorized but unissued Common Stock of the Company or previously issued
shares of Common Stock reacquired by the Company and held in its treasury (the
"Stock"). Under the Plan, the total number of shares of Stock which may be
purchased pursuant to options granted hereunder shall not exceed, in the
aggregate, 1,250,000 shares, except as such number of shares shall be adjusted
in accordance with the provisions of ARTICLE X hereof. Under the Plan, Options
for no more than 50,000 shares of Stock may be granted to any individual
employee during any calendar year that the Plan is in effect, except as such
number shall be adjusted in accordance with the provisions of ARTICLE X hereof.
The number of shares of Stock available for grant of options under the Plan
shall be decreased by the sum of the number of shares with respect to which
options have been issued and are then outstanding and the number of shares
issued upon exercise of options. In the event that any outstanding option under
the Plan for any reason expires, is terminated, or is canceled prior to the end
of the period during which options may be granted, the shares of Stock called
for by the unexercised portion of such option may again be subject to an option
under the Plan.
ARTICLE IV.
Eligibility of Participants
Subject to ARTICLE VII, officers and other key employees of the Company or
of its subsidiaries (excluding any person who is a member of the Committee)
shall be eligible to participate in the Plan.
ARTICLE V.
Option Price
Subject to ARTICLE VII, the option price of each option granted under the
Plan shall be determined by the Committee; provided, however, that in the case
of each incentive stock option granted under the Plan, the option price shall be
not less than the fair market value of the Stock at the time the option was
granted. In no event shall the option price of any option be less than the par
value per share of Stock on the date an option is granted.
If the Company's Common Stock is quoted on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") the fair market value
shall be deemed to be the mean between the last quoted bid and asked prices on
NASDAQ on the date immediately preceding the date on which the option is
granted, or if not quoted on that day, then on the last preceding date on which
such stock is quoted. If the Company's Common Stock is listed on one or more
national securities exchanges, the fair market value shall be deemed to be the
mean between the highest and lowest sale prices reported on the principal
national securities exchange on which such stock is listed and traded on the
date immediately preceding the date on which the option is granted, or, if there
is no such sale on that date, then on the last preceding date on which such a
sale was reported. If the Company's Common Stock is not quoted on NASDAQ or
listed on an exchange, or representative quotes are not otherwise available, the
fair market value of the Stock shall mean the amount determined by the Committee
to be the fair market value based upon a good faith attempt to value the Stock
accurately and computed in accordance with applicable regulations of the
Internal Revenue Service.
ARTICLE VI.
Exercise and Terms of Options
The Committee shall determine the dates after which options may be
exercised, in whole or in part. If an option is exercisable in installments,
installments or portions thereof which are exercisable and not exercised shall
remain exercisable.
Any other provision of the Plan notwithstanding and subject to ARTICLE VII,
(i) no option which is not an incentive stock option shall be exercised after
the date ten years and one month from the date of grant of such option, and no
option which is an incentive stock option shall be exercised after the date
which is ten years from the date of grant of such option (in each case, a
"Termination Date"), and (ii) in the event the Company files a registration
statement under the Securities Act of 1933 (the "Securities Act") for the
initial public offering of its equity securities, no option granted under the
Plan shall be exercisable during the 180-day period (or such longer period
required by the underwriter of such initial public offering) immediately
following the effective date of such registration statement.
Stock options granted hereunder to employees may provide that if, prior to
the Termination Date, an optionee shall cease to be employed by the Company or a
subsidiary thereof (otherwise than by reason of death or disability within the
meaning of Section 22(e)(3) of the Code), the option will remain exercisable for
a period not extending beyond three months after the date of cessation of
employment to the extent it was exercisable at the time of cessation of
employment. If, prior to the Termination Date, an optionee shall cease to be
employed by the Company or any subsidiary thereof by reason of a disability
within the meaning of Section 22(e)(3) of the Code, options granted hereunder
may provide that they will remain exercisable for a period not extending beyond
one year after the date of cessation of employment to the extent exercisable at
the time of cessation of employment. In no event, however, shall an option be
exercisable after the Termination Date. In the event of the death of an optionee
prior to the Termination Date while employed by the Company or a subsidiary
thereof or while entitled to exercise an option pursuant to the preceding two
sentences, options granted hereunder may provide that they will remain
exercisable at any time prior to the Termination Date, but in no event later
than one year from the date of death, by the person or persons to whom the
optionee's rights under the option would pass by will or the applicable laws of
descent and distribution to the extent that the optionee was entitled to
exercise it on the date of death. Notwithstanding the foregoing provisions of
this paragraph, stock options granted hereunder shall provide that no option
shall be exercisable after the optionee's cessation of employment, unless at the
time of exercise the Certificate of Incorporation or the By-laws of the Company
do not limit ownership of Common Stock of the Company to selected persons,
including employees of the Company.
ARTICLE VII.
Special Provisions Applicable to Incentive Stock Options Only
Notwithstanding anything contained in the Plan to the contrary, to the
extent the aggregate fair market value (determined at the time the option is
granted) of the Stock with respect to which incentive stock options may be
exercisable for the first time by an optionee during any calendar year (under
this Plan and any other stock option plan of the Company and any parent or
subsidiary thereof) exceeds $100,000, such options shall not be treated as
incentive stock options. No incentive stock option may be granted to an
individual who, at the time the option is granted, owns directly, or indirectly
within the meaning of Sections 422(b)(6) and 424(d) of the Code, stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or of any parent or subsidiary thereof, unless
such option (i) has an option price of at least 110 percent of the fair market
value of the Stock on the date of the grant of such option; and (ii) such option
cannot be exercised more than five years after the date it is granted.
If Stock acquired by an employee through the exercise of an incentive stock
option granted under the Plan is disposed of within two years following the date
of grant or one year following the acquisition of such Stock by the employee (a
"disqualifying disposition"), the holder of such Stock shall, immediately prior
to such disqualifying disposition, notify the Company in writing of the date and
terms of such disposition and provide such other information regarding the
disposition as the Company may reasonably require.
ARTICLE VIII.
Payment for Shares
Payment for shares of Stock acquired pursuant to an option granted
hereunder shall be made in full, upon exercise of the option, by certified or
bank cashier's check payable to the order of the Company, by the surrender to
the Company of shares of its Common Stock or by any combination thereof. The
form of payment shall be at the election of the optionee. The Company in its
discretion, and subject to any reasonable procedures required by its registrars
and transfer agents, may credit or apply shares of Common Stock held by the
optionee and identified to the Company toward payment of the applicable option
exercise price without actual surrender of the certificate representing such
shares and may cause to be issued to the optionee certificates for shares
representing the balance of the shares to be issued upon exercise of the option.
The Company may, in its discretion, require that an optionee pay to the Company,
at the time of exercise, such amount as the Company deems necessary to satisfy
its obligation to withhold Federal, state, or local income or other taxes
incurred by reason of the exercise or the transfer of shares thereupon.
ARTICLE IX.
Restrictions on Options and Stock Acquired Through Options
No option shall be transferable, except by will or the laws of descent and
distribution. During the lifetime of the optionee, the option shall be
exercisable only by the optionee.
No options shall be granted under the Plan, and no shares of Stock shall be
issued and delivered upon the exercise of options granted under the Plan, unless
and until any applicable Federal or state registration, listing and/or
qualification requirements and any other requirements of law or of any
regulatory agencies having jurisdiction shall have been fully complied with.
No share of Stock acquired by an employee through the exercise of an option
granted under the Plan may be sold or transferred (other than by will or the
laws of descent and distribution) by the employee prior to an initial public
offering of Stock by the Company.
The Committee in its discretion may, as a condition to the exercise of any
option granted under the Plan, require an employee to whom options have been
granted under the Plan (i) to represent in writing that the shares of Stock
received upon exercise of an option are being acquired for investment and not
with a view to distribution and (ii) to make such other representations and
warranties as are deemed necessary by counsel to the Company Stock certificates
representing unregistered shares of Stock acquired upon the exercise of options
shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR AN OPINION OF COUNSEL TO THE COMPANY THAT REGISTRATION IS
NOT REQUIRED ADDITIONALLY, PURSUANT TO THE PROVISIONS OF THE HAMPSHIRE GROUP,
LTD. 1992 STOCK OPTION PLAN, THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE SOLD OR TRANSFERRED PRIOR TO AN INITIAL PUBLIC OFFERING OF THE COMMON STOCK
OF HAMPSHIRE GROUP, LTD."
ARTICLE X.
Adjustment for Recapitalization, Merger, Etc.
The aggregate number of shares of Stock which may be purchased or acquired
pursuant to options granted hereunder, the maximum number of shares of Stock for
which options may be granted to any individual employee during any calendar
year, the number of shares of Stock covered by each outstanding option and the
price per share thereof in each such option shall be appropriately adjusted for
any increase or decrease in the number of outstanding shares of Stock resulting
from a stock split or other subdivision or consolidation of shares of Stock or
for other capital adjustments or payments of stock dividends or distributions or
other increases or decreases in the outstanding shares of Stock effected without
receipt of consideration by the Company. Any adjustment shall be conclusively
determined by the Committee.
If the Company shall be the surviving corporation in any merger or
reorganization or other business combination, any option granted hereunder shall
cover the securities or other property to which a holder of the number of shares
of Stock covered by the unexercised portion of the option would have been
entitled pursuant to the terms of the merger. Upon any merger or reorganization
or other business combination in which the Company shall not be the surviving
corporation, or a dissolution or liquidation of the Company, or a sale of all or
substantially all of its assets, the Company shall pay to each optionee in cash,
in exchange for the cancellation of any outstanding options of the optionee
hereunder, an amount equal to the difference between the fair market value (on
the date of the applicable corporate transaction) of the Stock subject to the
unexercised portion of the option and the exercise price of such portion of the
option. Notwithstanding the foregoing, in the event of such merger or other
business combination or a sale of all or substantially all of the Company's
assets, the surviving or resulting corporation, as the case may be, or any
parent or acquiring corporation thereof may grant substitute options to purchase
its shares on such terms and conditions, both as to the number of shares and
otherwise, which shall substantially preserve, in the good faith judgment of the
Committee, the rights and benefits of any option then outstanding hereunder.
Stock option agreements under the Plan may provide that upon stockholder
approval of a merger, reorganization or other business combination, whether or
not the Company is the surviving corporation, or a dissolution or liquidation of
the Company or a sale of all or substantially all of its assets, all unmatured
installments of the stock option shall vest and become immediately exercisable
in full.
The foregoing adjustments and the manner of application of the foregoing
provisions including the issuance of any substitute options, shall be determined
by the Committee in its sole discretion. Any such adjustment may provide for the
elimination of any fractional share which might otherwise become subject to an
option.
ARTICLE XI.
No Obligation to Exercise Option
Granting of an option shall impose no obligation on the recipient to
exercise such option.
ARTICLE XII.
Use of Proceeds
The proceeds received front the sale of Stock pursuant to the Plan shall be
used for general corporate purposes.
ARTICLE XIII.
Rights as a Stockholder
An optionee or a transferee of an option shall have no rights as a
stockholder with respect to any share covered by his option until such person
shall have become the holder of record of such share, and such person shall not
be entitled to any dividends or distributions or other rights in respect of such
share for which the record date is prior to the date on which such person shall
have become the holder of record thereof, except as otherwise provided in
ARTICLE X.
ARTICLE XIV.
Employment Rights
Nothing in the Plan or in any option granted hereunder shall confer on any
optionee any right to continue in the employ of the Company or any of its
subsidiaries, or to interfere in any way with the right of the Company or any of
its subsidiaries to terminate the optionee's employment at any time.
ARTICLE XV.
Compliance with the Law
The Company is relieved from any liability for the non-issuance or
non-transfer or any delay in the issuance or transfer of any shares of Stock
subject to options under the Plan which results from the inability of the
Company to obtain, or any delay in obtaining, from any regulatory body having
jurisdiction all requisite authority to issue or transfer any such shares if
counsel for the Company deems such authority necessary for lawful issuance or
transfer thereof. Appropriate legends in addition to that described in ARTICLE
IX may be placed on the stock certificates evidencing shares issued upon
exercise of options to reflect any transfer restrictions.
ARTICLE XVI.
Cancellation of Options
The Committee, in its discretion, may, with the consent of any optionee,
cancel any outstanding option hereunder.
ARTICLE XVII.
Effective Date; Expiration Date of Plan
The Plan shall become effective upon adoption by the Company's Board of
Directors and approval by the stockholders of the Company in a manner which
complies with both Rule 16b-3 under the Exchange Act and Section 422(b)(1) of
the Code and the Treasury Regulations thereunder. The expiration date of the
Plan, after which no option may be granted hereunder, shall be the tenth
anniversary of the later of (i) adoption of the Plan by the Board of Directors
or (ii) the approval of the Plan by the stockholders of the Company pursuant to
the previous sentence.
ARTICLE XVIII.
Amendment or Discontinuance of Plan
The Board may, without the consent of the optionees under the Plan, at any
time terminate the Plan entirety and at any time or from time to time amend or
modify the Plan, provided that no such action shall adversely affect options
theretofore granted hereunder without the optionee's consent. Notwithstanding
the above, the approval of the stockholders of the Company will be required for
any amendment which (i) materially changes the requirements as to eligibility
for participation in the Plan, as specified in ARTICLE IV or (ii) materially
increases (unless pursuant to ARTICLE X) the maximum number of shares subject to
Options granted under the Plan, as specified in ARTICLE III.
ARTICLE XIX.
Change in Control
In the event of a Change in Control, all outstanding unvested options
granted under the Plan shall immediately become fully vested and exercisable.
For the purpose of this Article XIX, a "Change in Control" shall be deemed
to have taken place if and when:
(a) individuals who, on October 1, 1999, constitute the Board (the
"Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director
subsequent to the date hereof, whose election or nomination for election
was approved by a vote of at least two-thirds of the Incumbent Directors
then on the Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
director, without written objection to such nomination) shall be an
Incumbent Director; provided, however, that no individual initially elected
or nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors or as a result of any
other actual or threatened solicitation of proxies or consents by or on
behalf of any person other than the Board shall be deemed to be an
Incumbent Director;
(b) any "Person" (as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or
more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board (the "Voting
Securities"); provided, however, that the event described in this paragraph
(b) shall not be deemed to be a Change in Control by virtue of any of the
following acquisitions: (i) by the Company or any subsidiary of the Company
in which the Company owns more than 50% of the combined voting power of
such entity (a "Subsidiary"), (ii) by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Subsidiary, (iii) by
any underwriter temporarily holding the Company's Voting Securities
pursuant to an offering of such Voting Securities or (iv) pursuant to a
Non-Qualifying Transaction (as defined in paragraph (c));
(c) the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company or
any Subsidiary that requires the approval of the Company's stockholders,
whether for such transaction or the issuance of securities in the
transaction (a "Business Combination"), unless immediately following such
Business Combination: (i) more than 50% of the total voting power of (A)
the corporation resulting from such Business Combination (the "Surviving
Corporation"), or (B) if applicable, the ultimate parent corporation that
directly or indirectly has beneficial ownership of 100% of the voting
securities eligible to elect directors of the Surviving Corporation (the
"Parent Corporation"), is represented by the Company's Voting Securities
that were outstanding immediately prior to such Business Combination (or,
if applicable, is represented by shares into which the Company's Voting
Securities were converted pursuant to such Business Combination), and such
voting power among the holders thereof is in substantially the same
proportion as the voting power of the Company's Voting Securities among the
holders thereof immediately prior to the Business Combination, (ii) no
Person (other than any employee benefit plan (or related trust) sponsored
or maintained by the Surviving Corporation or the Parent Corporation), is
or becomes the beneficial owner, directly or indirectly, of 30% or more of
the total voting power of the outstanding voting securities eligible to
elect directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) and (iii) at least a majority of
the members of the board of directors of the Parent Corporation (or, if
there is no Parent Corporation, the Surviving Corporation) following the
consummation of the Business Combination were Incumbent Directors at the
time of the Board's approval of the execution of the initial agreement
providing for such Business Combination (any Business Combination which
satisfies all of the criteria specified in (i), (ii) and (iii) above shall
be deemed to be a "Non-Qualifying Transaction");
(d) a sale of all or substantially all of the Company's assets;
(e) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company; or
(f) such other events as the Board may designate.
Notwithstanding the foregoing, a Change in Control of the Company shall not
be deemed to occur solely because any person acquires beneficial ownership of
more than 50% of the Company's Voting Securities as a result of the acquisition
of the Company's Voting Securities by the Company which reduces the number of
the Company's Voting Securities outstanding; provided, that if after such
acquisition by the Company such person becomes the beneficial owner of
additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control of the Company shall then occur.