EXHIBIT 10.4
LITHIA MOTORS, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The Lithia Motors, Inc. Employee Stock Purchase Plan
(the "Plan") is intended to provide an incentive for employees of Lithia Motors,
Inc. (the "Company") and its participating Subsidiaries to acquire or increase
their proprietary interests in the Company through the purchase of shares of
Common Stock of the Company. The Plan is intended to qualify as an "Employee
Stock Purchase Plan" under Sections 421 and 423 of the Internal Revenue Code of
1986, as amended (the "Code"). The provisions of the Plan will be construed in a
manner consistent with the requirements of such sections of the Code and the
regulations issued thereunder.
2. DEFINITIONS. As used in this Plan:
2.1. "Account" Account means the account recorded in the
records of the Company established on behalf of a Participant to which the
amount of the Participant's payroll deductions authorized under Section 6 and
purchases of Common Stock under Section 8 shall be credited, and any
distributions of shares of Common Stock under Section 9 and withdrawals under
Section 10 shall be charged.
2.2. "Benefits Representative" means the employee
benefits department of the Company or any such other person, regardless of
whether employed by an Employer, who has been formally, or by operation or
practice, designated by the Committee to assist the Committee with the
day-to-day administration of the Plan.
2.3. "Board" means the Board of Directors of the Company.
2.4. "Code" means the Internal Revenue Code of 1986, or
any successor thereto, as amended and in effect from time to time. Reference in
the Plan to any Section of the Code shall be deemed to include any amendments or
successor provisions to any Section and any treasury regulations thereunder.
2.5. "Committee" means the Compensation Committee of the
Board. The Board shall have the power to fill vacancies on the Committee arising
by resignation, death, removal or otherwise. The Board, in its sole discretion,
may split the powers and duties of the Committee among one or more separate
Committees, or retain all powers and duties of the Committee in a single
Committee. The members of the Committee shall serve at the discretion of the
Board.
2.6. "Common Stock" or "Stock" means the Class A Common
Stock, without par value, of the Company.
2.7. "Company" means Lithia Motors, Inc. an Oregon
corporation, and any successor thereto.
2.8. "Disability" means any complete and permanent
disability as defined in Section 22(e)(3) of the Code.
2.9. "Effective Date" means the date on which this Plan
is approved by the shareholders of the Company which date shall be, the
inception date of the Plan.
2.10. "Employee" means any person who, at such time, is in
the Employment of and Employer.
2.11. "Employer" means the Company, its successors, any
future parent (as defined in Section 424(e) of the Code), each current or future
Subsidiary and any company whose operating assets or stock is acquired by the
Company or any Subsidiary.
2.12. "Employment" means Employment as an employee or
officer by the Company or a Subsidiary as designated in such entity's payroll
records, or by any corporation issuing or assuming rights or obligations under
the Plan in any transaction described in Section 424(a) of the Code or by a
parent corporation or a subsidiary corporation of such corporation. In this
regard, neither the transfer of a Participant from Employment by the Company to
Employment by a Subsidiary nor the transfer of a Participant from Employment by
a Subsidiary to Employment by either the Company or any by any other Subsidiary
shall be deemed to be a termination of Employment of the Participant. Moreover,
the Employment of a Participant shall not be deemed to have been terminated
because of absence from active Employment on account of temporary illness or
during authorized vacation, temporary leaves of absence from active Employment
granted by Company or any Subsidiary for reasons of professional advancement,
education, health, or government service, or during military leave for any
period if the Participant returns to active Employment within 90 days after the
termination of military leave, or during any period required to be treated as a
leave of absence which, by virtue of any valid law or agreement, does not result
in a termination of Employment. Any worker treated as an independent contractor
by the Company or any Subsidiary who is later reclassified as a common-law
employee shall not be in Employment during any period in which such worker was
treated by the Company or a Subsidiary as an independent contractor. Any "leased
employee", as described in Section 414(n) of the Code, shall not be deemed an
Employee hereunder.
2.13. "Entry Date" means the first day of each Fiscal
Quarter.
2.14. "Fiscal Quarter" means a three consecutive month
period beginning on each January 1, April 1, July 1 and October 1, commencing
with the first such date following the Effective Date and continuing until the
Plan is terminated.
2.15. "Market Price" means, subject to the next paragraph,
the market value of a share of Stock on any date, which shall be determined as
(i) the closing sales price on the immediately preceding business day of a share
of Stock as reported on the New York Stock Exchange or other principal
securities exchange on which shares of Stock are then listed or admitted to
trading or (ii) if not so reported, the average of the closing bid and asked
prices for a share of Stock on the immediately preceding business day as quoted
on the National Association of Securities Dealers Automated Quotation System
("NASDAQ"), or (iii) if not quoted on NASDAQ, the average of the closing bid and
asked prices for a share of Stock as quoted by the National Quotation Bureau's
"Pink Sheets" or the National Association of Securities Dealers' OTC Bulletin
Board System. If the price of a share of Stock shall not be so reported pursuant
to the previous sentence, the fair market value of a share of Stock shall be
determined by the Committee in its discretion provided that such method is
appropriate for purposes of an employee stock purchase plan under Section 423 of
the Code.
Notwithstanding the previous paragraph of this definition, the Market
Price of a share of Stock solely for purposes of determining the option price on
the first or last day of the Fiscal Quarter in accordance with Section 7.2 shall
be based on the Market Price on the first or last day of the Fiscal Quarter, as
applicable, and not on the immediately preceding business day.
2.16. "Participant" means any Employee who meets the
eligibility requirements of Section 3 and who has elected to and is
participating in the Plan.
2.17. "Plan" means the Lithia Motors, Inc. Employee Stock
Purchase Plan, as set forth herein, and all amendments hereto.
2.18. "Stock" means the Common Stock (as defined above).
2.19. "Subsidiary" means any domestic or foreign
corporation, limited liability company, partnership or other form of business
entity (other than the Company) (i) which, pursuant to Section 424(f) of the
Code, is included in an unbroken chain of entities beginning with the Company
if, at the time of the granting of the option, each of the entities other than
the last entity in the unbroken chain owns at least a majority of the total
combined voting power of all interests in one of the other entities in such
chain and (ii) which has been designated by the Board or the Committee as a
entity whose Employees are eligible to participate in the Plan.
2.20. "Total Pay" means regular straight-time earnings or
base salary, plus payments for overtime, shift differentials, incentive
compensation, bonuses, and other special payments, fees, allowances or
extraordinary compensation.
3. ELIGIBILITY.
3.1. Eligibility Requirements. Participation in the Plan
is voluntary. Each Employee who has completed at least ninety (90) days of
continuous Employment with an Employer (calculated from his last date of hire to
the termination of his Employment for any reason), is regularly scheduled to
work at least 20 hours per week and has reached the age of majority in the
jurisdiction of his legal residency, will be eligible to participate in the Plan
on the first day of the payroll period commencing on or after the earlier of (i)
the Effective Date or (ii) the Entry Date on which the Employee satisfies the
aforementioned 8 eligibility requirements. Each Employee whose Employment
terminates and who is rehired by an Employer shall be treated as a new Employee
for eligibility purposes under the Plan.
3.2. Limitations on Eligibility. Notwithstanding any
provision of this Plan to the contrary, no Employee will be granted an option
under the Plan:
3.2.1. if, immediately after the grant, the
Employee would own stock, and/or hold outstanding options to purchase
stock, possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or of any
Subsidiary; or
3.2.2. which permits the Employee's rights to
purchase stock under this Plan and all other employee stock purchase
plans (within the meaning of Section 423 of the Code) of
the Company and its Subsidiaries to accrue at a rate which exceeds
$25,000 of the fair market value of the stock (determined at the time
such option is granted) for each Fiscal year in which such option is
outstanding at any time, all as determined in accordance with Section
423(b)(8) of the Code.
For purposes of Section 3.2.1 above, pursuant to Section 424(d) of the
Code, (i) the Employee with respect to whom such limitation is being determined
shall be considered as owning the stock owned, directly or indirectly, by or for
his brothers and sisters (whether by the whole or half blood), spouse,
ancestors, and lineal descendants; and (ii) stock owned, directly or indirectly,
by or for a corporation, partnership, estate, or trust, shall be considered as
being owned proportionately by or for its shareholders, partners, or
beneficiaries. In addition, for purposes of Section 3.2.2 above, pursuant to
Section 423(b)(8) of the Code, (i) the right to purchase stock under an option
accrues when the option (or any portion thereof) first becomes exercisable
during the calendar year, (ii) the right to purchase stock under an option
accrues at the rate provided in the option but in no case may such rate exceed
$25,000 of fair market value of such stock (determined at the time such option
is granted) for any one calendar year, and (iii) a right to purchase stock which
has accrued under one option granted pursuant to the Plan may not be carried
over to any other option.
4. SHARES SUBJECT TO THE PLAN. The total number of shares of
Common Stock that upon the exercise of options granted under the Plan will not
exceed 1,500,000 shares (subject to adjustment as provided in Section 16), and
such shares may be originally issued shares, treasury shares, reacquired shares,
shares bought in the market, or any combination of the foregoing. If any option
which has been granted expires or terminates for any reason without having been
exercised in full, the unpurchased shares will again become available for
purposes of the Plan. Any shares which are not subject to outstanding options
upon the termination of the Plan shall cease to be subject to the Plan.
5. PARTICIPATION.
5.1. Payroll Deduction Authorization. An Employee shall be
eligible to participate in the Plan as of the first Entry Date following such
Employee's satisfaction of the eligibility requirements of Section 3, or, if
later, the first Entry Date following the date on which the Employee's Employer
adopted the Plan. At least 10 days (or such other period as may be prescribed by
the Committee or a Benefits Representative) prior to the first Entry Date as of
which an Employee is eligible to participate in the Plan, the Employee shall
execute and deliver to the Benefits Representative, on the form prescribed for
such purpose, an authorization for payroll deductions which specifies his chosen
rate of payroll deduction contributions pursuant to Section 6, and such other
information as is required to be provided by the Employee on such enrollment
form. The enrollment form shall authorize the Employer to reduce the Employee's
Base Pay by the amount of such authorized contributions. To the extent provided
by the Committee or a Benefits Representative, each Participant shall also be
required to open a stock brokerage account with a brokerage firm which has been
engaged to administer the purchase, holding and sale of Common Stock for
Accounts under the Plan and, as a condition of participation hereunder, the
Participant shall be required to execute any form required by the brokerage firm
to open and maintain such brokerage account.
5.2. Continuing Effect of Payroll Deduction Authorization.
Payroll deductions for a Participant will commence with the first payroll period
beginning after the Participant's authorization for payroll deductions becomes
effective, and will end with the payroll period that ends when terminated by
the Participant in accordance with Section 6.3 or due to his termination of
Employment in accordance with Section 11. Payroll deductions will also cease
when the Participant is suspended from participation due to a withdrawal of
payroll deductions in accordance with Section 10. When applicable with respect
to Employees who are paid on a hourly wage basis, the authorized payroll
deductions shall be withheld from wages when actually paid following the period
in which the compensatory services were rendered. Only payroll deductions that
are credited to the Participant's Account during the Fiscal Quarter will be used
to purchase Common Stock pursuant to Section 8 regardless of when the work was
performed.
5.3. Employment and Shareholders Rights. Nothing in this
Plan will confer on a Participant the right to continue in the employ of the
Employer or will limit or restrict the right of the Employer to terminate the
Employment of a Participant at any time with or without cause. A Participant
will have no interest in any Common Stock to be purchased under the Plan or any
rights as a shareholder with respect to such Stock until the Stock has been
purchased and credited to the Participant's Account.
6. PAYROLL DEDUCTIONS.
6.1. Participant Contributions by Payroll Deductions. At
the time a Participant files his payroll deduction authorization form, the
Participant will elect to have deductions made from the Participant's Base Pay
for each payroll period such authorization is in effect in whole percentages at
the rate of not less than 1% nor more than 10% of the Participant's Base Pay.
6.2. No Other Participant Contributions Permitted. All
payroll deductions made for a Participant will be credited to the Participant's
Account under the Plan. A Participant may not make any separate cash payment
into such Account.
6.3. Changes in Participant Contributions. Subject to
Sections 10 and 21, a Participant may increase, decrease, suspend, or resume
payroll deductions under the Plan by giving written notice to a designated
Benefits Representative at such time and in such form as the Committee or
Benefits Representative may prescribe from time to time. Such increase,
decrease, suspension or resumption will be effective as of the first day of the
payroll period as soon as administratively practicable after receipt of the
Participant's written notice, but not earlier than the first day of the payroll
period of the Fiscal Quarter next following receipt and acceptance of such form.
Notwithstanding the previous sentence, a Participant may completely discontinue
contributions at any time during a Fiscal Quarter, effective as of the first day
of the payroll period as soon as administratively practicable following receipt
of a written discontinuance notice from the Participant on a form provided by a
designated Benefits Representative. Following a discontinuance of contributions,
a Participant cannot authorize any payroll contributions to his Account for the
remainder of the Fiscal Quarter in which the discontinuance was effective.
7. GRANTING OF OPTION TO PURCHASE STOCK.
7.1. Quarterly Grant of Options. For each Fiscal Quarter,
a Participant will be deemed to have been granted an option to purchase, on the
first day of the Fiscal Quarter, as many whole and fractional shares as may be
purchased with the payroll deductions (and any cash dividends as provided in
Section 8) credited to the Participant's Account during the Fiscal Quarter.
7.2. Option Price. The option price of the Common Stock
purchased with the amount credited to the Participant's Account during each
Fiscal Quarter will be the lower of:
7.2.1. 85% of the Market Price of a share of Stock
on the first day of the Fiscal Quarter; or
7.2.2. 85% of the Market Price of a share of Stock
on the last day of the Fiscal Quarter.
Only the Market Price as of the first day of the Fiscal Quarter and the last day
of the Fiscal Quarter shall be considered for purposes of determining the option
purchase price; interim fluctuations during the Fiscal Quarter shall not be
considered.
8. EXERCISE OF OPTION.
8.1. Automatic Exercise of Options. Unless a Participant
has elected to withdraw payroll deductions in accordance with Section 10, the
Participant's option for the purchase of Common Stock will be deemed to have
been exercised automatically as of the last day of the Fiscal Quarter for the
purchase of the number of whole and fractional shares of Common Stock which the
accumulated payroll deductions (and cash dividends on the Common Stock as
provided in Section 8.2) in the Participant's Account at that time will purchase
at the applicable option price. Fractional shares may be issued under the Plan.
As of the last day of each Fiscal Quarter, the balance of each Participant's
Account shall be applied to purchase the number of whole and fractional shares
of Stock as determined by dividing the balance of such Participant's Account as
of such date by the option price determined pursuant to Section 7.2. The
Participant's Account shall be debited accordingly. The Committee or its
delegate shall make all determinations with respect to applicable currency
exchange rates when applicable.
8.2. Dividends Generally. Cash dividends paid on shares of
Common Stock which have not been delivered to the Participant pending the
Participant's request for delivery pursuant to Section 9.3, will be combined
with the Participant's payroll deductions and applied to the purchase of Common
Stock at the end of the Fiscal Quarter in which the cash dividends are received,
subject to the Participant's withdrawal rights set forth in Section 10.
Dividends paid in the form of shares of Common Stock or other securities with
respect to shares that have been purchased under the Plan, but which have not
been delivered to the Participant, will be credited to the shares that are
credited to the Participant's Account.
8.3. Pro-rata Allocation of Available Shares. If the total
number of shares to be purchased under option by all Participants exceeds the
number of shares authorized under Section 4, a pro-rata allocation of the
available shares will be made among all Participants authorizing such payroll
deductions based on the amount of their respective payroll deductions through
the last day of the Fiscal Quarter.
9. OWNERSHIP AND DELIVERY OF SHARES.
9.1. Beneficial Ownership. A Participant will be the
beneficial owner of the shares of Common Stock purchased under the Plan on
exercise of his option and will have all rights of beneficial ownership in such
shares. Any dividends paid with respect to such shares will be credited to the
Participant's Account and applied as provided in Section 8 until the shares are
delivered to the Participant.
9.2. Registration of Stock. Stock to be delivered to a
Participant under the Plan will be registered on the books and records of the
Company in the name of the Participant, or if the Participant so directs by
written notice to the designated Benefits Representative or brokerage firm, if
any, prior to the purchase of Stock hereunder, in the names of the Participant
and one such other person as may be designated by the Participant, as joint
tenants with rights of survivorship or as tenants by the entireties, to the
extent permitted by applicable law. Any such designation shall not apply to
shares purchased after a Participant's death by the Participant's beneficiary or
estate, as the case may be, pursuant to Section 11.2. If a brokerage firm is
engaged by the Company to administer Accounts under the Plan, such firm shall
provide such account registration forms as are necessary for each Participant to
open and maintain a brokerage account with such firm.
9.3. Delivery of Stock Certificates. The Company, or a
brokerage firm or other entity selected by the Company, shall deliver to each
Participant a certificate for the number of shares of Common Stock purchased by
the Participant hereunder as soon as practicable after the close of each Fiscal
Quarter. Alternatively, in the discretion of the Committee, the stock
certificate may be delivered to a designated stock brokerage account maintained
for the Participant and held in "street name" in order to facilitate the
subsequent sale of the purchased shares.
9.4. Regulatory Approval. In the event the Company is
required to obtain from any commission or agency the authority to issue any
stock certificate hereunder, the Company shall seek to obtain such authority.
The inability of the Company to obtain from any such commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
of any such certificate shall relieve the Company from liability to any
Participant, except to return to the Participant the amount of his Account
balance used to exercise the option to purchase the affected shares.
10. WITHDRAWAL OF PAYROLL DEDUCTIONS. At any time during a Fiscal
Quarter, but in no event later than 15 days (or such shorter prescribed by the
Committee or a Benefits Representative) prior to the last day of the Fiscal
Quarter, a Participant may elect to abandon his election to purchase Common
Stock under the Plan. By written notice to the designated Benefits
Representative on a form provided for such purpose, the Participant may thus
elect to withdraw all of the accumulated balance in his Account being held for
the purchase of Common Stock in accordance with Section 8.2. Partial withdrawals
will not be permitted. All such amounts will be paid to the Participant as soon
as administratively practical after receipt of his notice of withdrawal. After
receipt and acceptance of such withdrawal notice, no further payroll deductions
will be made from the Participant's Base Pay beginning as of the next payroll
period during the Fiscal Quarter in which the withdrawal notice is received. The
Committee, in its discretion, may determine that amounts otherwise withdrawable
hereunder by Participants shall be offset by an amount that the Committee, in
its discretion, determines to be reasonable to help defray the administrative
costs of effecting the withdrawal, including, without limitation, fees imposed
by any brokerage firm which administers such Participant's Account. After a
withdrawal, an otherwise eligible Participant may resume participation in the
Plan as of the first day of the Fiscal Quarter next following his delivery of a
payroll deduction authorization pursuant to the procedures prescribed in Section
5.1.
11. TERMINATION OF EMPLOYMENT.
11.1. General Rule. Upon termination of a Participant's
Employment for any reason, his participation in the Plan will immediately
terminate.
11.2. Termination Due to Retirement, Death or Disability.
If the Participant's termination of Employment is due to (i) retirement from
Employment on or after his attainment of age 65, (ii) death or (iii) Disability,
the Participant (or the Participant's personal representative or legal guardian
in the event of Disability, or the Participant's beneficiary (as defined in
Section 12) or the administrator of his will or executor of his estate in the
event of death), will have the right to elect, either to:
11.2.1. Withdraw all of the cash and shares of
Common Stock credited to the Participant's Account as of his
termination date; or
11.2.2. Exercise the Participant's option for the
purchase of Common Stock on the last day of the Fiscal Quarter (in
which termination of Employment occurs) for the purchase of the number
of shares of Common Stock which the cash balance credited to the
Participant's Account as of the date of the Participant's termination
of Employment will purchase at the applicable option price.
The Participant (or, if applicable, such other person designated in the
first paragraph of this Section 11.2) must make such election by giving written
notice to the Benefits Representative at such time and in such manner as
prescribed from time to time by the Committee or Benefits Representative. In the
event that no such written notice of election is received by the Benefits
Representative within 30 days of the Participant's termination of Employment
date, the Participant (or such other designated person) will automatically be
deemed to have elected to withdraw the balance in the Participant's Account as
of his termination date. Thereafter, any accumulated cash and shares of Common
Stock credited to the Participant's Account as of his termination of Employment
date will be delivered to or on behalf of the Participant as soon as
administratively practicable.
11.3. Termination Other Than for Retirement, Death or
Disability. Upon termination of a Participant's Employment for any reason other
than retirement, death, or Disability pursuant to Section 11.2, the
participation of the Participant in the Plan will immediately terminate.
Thereafter, any accumulated cash and shares of Common Stock credited to the
Participant's Account as of his termination of Employment date will be delivered
to the Participant as soon as administratively practicable.
11.4. Rehired Employees. Any Employee whose Employment
terminates and who is subsequently rehired by an Employer shall be treated as a
new Employee for purposes of eligibility to participate in the Plan.
12. ADMINISTRATION OF THE PLAN.
12.1. No Participation in Plan by Committee Members. No
options may be granted under the Plan to any member of the Committee during the
term of his membership on the Committee.
12.2. Authority of the Committee. Subject to the provisions
of the Plan, the Committee shall have the plenary authority to (i) interpret the
Plan and all options granted under the Plan, (ii) make such rules as it deems
necessary for the proper administration of the Plan, (iii) make all other
determinations necessary or advisable for the administration of the Plan, and
(iv) correct any defect or supply any omission or reconcile any inconsistency in
the Plan or in any option granted under the Plan in the manner and to the extent
that the Committee deems advisable. Any action taken or determination made by
the Committee pursuant to this and the other provisions of the Plan shall be
conclusive on all parties. The act or determination of a majority of the
Committee shall be deemed to be the act or determination of the Committee. By
express written direction, or by the day-to-day operation of Plan
administration, the Committee may delegate the authority and responsibility for
the day-to-day administrative or ministerial tasks of the Plan to a Benefits
Representative, including a brokerage firm or other third party engaged for such
purpose.
12.3. Meetings. The Committee shall designate a chairman
from among its members to preside at its meetings, and may designate a
secretary, without regard to whether that person is a member of the Committee,
who shall keep the minutes of the proceedings. Meetings shall be held at such
times and places as shall be determined by the Committee, and the Committee may
hold telephonic meetings. The Committee may take any action otherwise proper
under the Plan by the affirmative vote of a majority of its members, taken at a
meeting, or by the affirmative vote of all of its members taken without a
meeting. The Committee may authorize any one or more of their members or any
officer of the Company to execute and deliver documents on behalf of the
Committee.
12.4. Decisions Binding. All determinations and decisions
made by the Committee shall be made in its discretion pursuant to the provisions
of the Plan, and shall be final, conclusive and binding on all persons including
the Company, Participants, and their estates and beneficiaries.
12.5. Expenses of Committee. The Committee may employ legal
counsel, including, without limitation, independent legal counsel and counsel
regularly employed by the Company, consultants and agents as the Committee may
deem appropriate for the administration of the Plan. The Committee may rely upon
any opinion or computation received from any such counsel, consultant or agent.
All expenses incurred by the Committee in interpreting and administering the
Plan, including, without limitation, meeting expenses and professional fees,
shall be paid by the Company.
12.6. Indemnification. Each person who is or was a member
of the Committee shall be indemnified by the Company against and from any
damage, loss, liability, cost and expense that may be imposed upon or reasonably
incurred by him in connection with or resulting from any claim, action, suit, or
proceeding to which he may be a party or in which he may be involved by reason
of any action taken or failure to act under the Plan, except for any such act or
omission constituting willful misconduct or gross negligence. Such person shall
be indemnified by the Company for all amounts paid by him in settlement thereof,
with the Company's approval, or paid by him in satisfaction of any judgment in
any such action, suit, or proceeding against him, provided he shall give the
Company an opportunity, at its own expense, to handle and defend the same before
he undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's Articles of Incorporation
or Bylaws, as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
13. DESIGNATION OF BENEFICIARY. At such time, in such manner, and
using such form as shall be prescribed from time to time by the Committee or a
Benefits Representative, a Participant may file a written designation of a
beneficiary who is to receive any Common Stock and/or cash credited to the
Participant's Account at the Participant's death. Such designation of
beneficiary may be changed
by the Participant at any time by giving written notice to the Benefits
Representative at such time and in such form as prescribed. Upon the death of a
Participant, and receipt by the Benefits Representative of proof of the identity
at the Participant's death of a beneficiary validly designated under the Plan,
the Benefits Representative will take appropriate action to ensure delivery of
such Common Stock and/or cash to such beneficiary. In the event of the death of
a Participant and the absence of a beneficiary validly designated under the Plan
who is living at the time of such Participant's death, the Benefits
Representative will take appropriate action to ensure delivery of such Common
Stock and/or cash to the executor or administrator of the estate of the
Participant, or if no such executor or administrator has been appointed (to the
knowledge of the Benefits Representative), the Committee, in its discretion, may
direct delivery of such Common Stock and/or cash to the spouse or to any one or
more dependents of the Participant as the Committee may designate in its
discretion. No beneficiary will, prior to the death of the Participant, acquire
any interest in any Common Stock or cash credited to the Participant's Account.
14. TRANSFERABILITY. No amounts credited to a Participant's
Account, whether cash or Common Stock, nor any rights with regard to the
exercise of an option or to receive Common Stock under the Plan, may be
assigned, transferred, pledged, or otherwise disposed of in any way by the
Participant other than by will or the laws of descent and distribution. Any such
attempted assignment, transfer, pledge, or other disposition will be void and
without effect. Each option shall be exercisable, during the Participant's
lifetime, only by the Employee to whom the option was granted. The Company shall
not recognize, and shall be under no duty to recognize, any assignment or
purported assignment by an Employee of his option or of any rights under his
option.
15. NO RIGHTS AS A SHAREHOLDER UNTIL CERTIFICATE ISSUED. With
respect to shares of Stock subject to an option, an optionee shall not be deemed
to be a shareholder, and the optionee shall not have any of the rights or
privileges of a shareholder. An optionee shall have the rights and privileges of
a shareholder when, but not until, a certificate for shares has been issued to
the optionee following exercise of his option.
16. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The Board shall
make or provide for such adjustments in the maximum number of shares specified
in Section 4 and the number and option price of shares subject to options
outstanding under the Plan as the Board shall determine is appropriate to
prevent dilution or enlargement of the rights of Participants that otherwise
would result from any stock dividend, stock split, stock exchange, combination
of shares, or other change in the capital structure of the Company, merger,
consolidation, spin-off of assets, reorganization, partial or complete
liquidation, issuance of rights or warrants to purchase securities, any other
corporate transaction or event having an effect similar to any of the foregoing.
In the event of a merger of one or more corporations into the Company,
or a consolidation of the Company and one or more other corporations in which
the Company is the surviving corporation, each Participant, at no additional
cost, shall be entitled, upon his payment for all or part of the Common Stock
purchasable by him under the Plan, to receive (subject to any required action by
shareholders) in lieu of the number of shares of Common Stock which he was
entitled to purchase, the number and class of shares of stock or other
securities to which such holder would have been entitled pursuant to the terms
of the agreement of merger or consolidation if, immediately prior to such merger
or consolidation, such holder had been the holder of record of the number of
shares of Common Stock equal to the number of shares purchasable by the
Participant hereunder.
If the Company is not the surviving corporation in any reorganization,
merger or consolidation (or survives only as a subsidiary of an entity other
than a previously wholly-owned subsidiary of the Company), or if the Company is
to be dissolved or liquidated or sell substantially all of its assets or stock
to another corporation or other entity, then, unless a surviving corporation
assumes or substitutes new options (within the meaning of Section 424(a) of the
Code) for all options then outstanding, (i) the date of exercise for all options
then outstanding shall be accelerated to dates fixed by the Committee prior to
the effective date of such corporate event, (ii) a Participant may, at his
election by written notice to the Company, either (x) withdraw from the Plan
pursuant to Section 10 and receive a refund from the Company in the amount of
the accumulated cash and Stock balance in the Participant's Account, (y)
exercise a portion of his outstanding options as of such exercise date to
purchase shares of Stock, at the option price, to the extent of the balance in
the Participant's Account, or (z) exercise in full his outstanding options as of
such exercise date to purchase shares of Stock, at the option price, which
exercise shall require such Participant to pay the related option price, and
(iii) after such effective date any unexercised option shall expire. The date
the Committee selects for the exercise date under the preceding sentence shall
be deemed to be the exercise date for purposes of computing the option price per
share of Stock. If the Participant elects to exercise all or any portion of the
options, the Company shall deliver to such Participant a stock certificate
issued pursuant to Section 9.4 for the number of shares of Stock with respect to
which such options were exercised and for which such Participant has paid the
option price. If the Participant fails to provide the notice set forth above
within three days after the exercise date selected by the Committee under this
Section 16, the Participant shall be conclusively presumed to have requested to
withdraw from the Plan and receive payment of the accumulated balance of his
Account. The Committee shall take such steps in connection with such
transactions as the Committee shall deem necessary or appropriate to assure that
the provisions of this Section 16 are effectuated for the benefit of the
Participants.
Except as expressly provided in this Section 16, the issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, for cash or property, or for labor or services either
upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of shares of
Stock then available for purchase under the Plan.
17. PLAN EXPENSES; USE OF FUNDS; NO INTEREST PAID. The expenses of
the Plan shall be paid by the Company except as otherwise provided herein or
under the terms and conditions of any agreement entered into between the
Participant and any brokerage firm engaged to administer Accounts. All funds
received or held by the Company under the Plan shall be included in the general
funds of the Company free of any trust or other restriction, and may be used for
any corporate purpose. No interest shall be paid to any Participant or credited
to his Account under the Plan.
18. TERM OF THE PLAN. The Plan shall become effective upon the
approval of the Plan by the holders of the majority of the Common Stock present
and represented at a special or annual meeting of the Company's shareholders
held on or before 12 months from December 18, 1997. Except with respect to
options then outstanding, if not terminated sooner under the provisions of
Section 19, no further options shall be granted under the Plan at the earlier of
(i) December 31, 2007, or (ii) the point in time when no shares of Stock
reserved for issuance under Section 4 are available.
19. AMENDMENT OR TERMINATION OF THE PLAN. The Board shall have the
plenary authority to terminate or amend the Plan; provided, however, that the
Board shall not, without the approval of the shareholders of the Company, (i)
increase the maximum number of shares which may be issued under the Plan
pursuant to Section 4, (ii) materially amend the requirements as to the class of
employees eligible to purchase Stock under the Plan, or (iii) permit the members
of the Committee to purchase Stock under the Plan. No termination, modification,
or amendment of the Plan shall adversely affect the rights of a Participant with
respect to an option previously granted to him under such option without his
written consent.
In addition, to the extent that the Committee determines that, in the
opinion of counsel, (i) the listing for qualification requirements of any
national securities exchange or quotation system on which the Company's Common
Stock is then listed or quoted, or (ii) the Code or Treasury regulations issued
thereunder, require shareholder approval in order to maintain compliance with
such listing or qualification requirements or to maintain any favorable tax
advantages or qualifications, then the Plan shall not be amended by the Board in
such respect without first obtaining such required approval of the Company's
shareholders.
20. SECURITIES LAWS RESTRICTIONS ON EXERCISE. The Committee may,
in its discretion, require as conditions to the exercise of any option that the
shares of Common Stock reserved for issuance upon the exercise of the option
shall have been duly listed, upon official notice of issuance, upon a stock
exchange, and that either (i) a Registration Statement under the Securities Act
of 1933, as amended, with respect to said shares shall be effective; or (ii) the
Participant shall have represented at the time of purchase, in form and
substance satisfactory to the Company, that it is his intention to purchase the
Stock for investment and not for resale or distribution.
21. SECTION 16 COMPLIANCE. The Plan, and transactions hereunder by
persons subject to Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), are intended to comply with all applicable conditions of
Rule 16b-3 or any successor exemption provision promulgated under the Exchange
Act. To the extent that any provision of the Plan or any action by the Committee
or the Board fails, or is deemed to fail, to so comply, such provision or action
shall be null and void but only to the extent permitted by law and deemed
advisable by the Committee in its discretion.
22. WITHHOLDING TAXES FOR DISQUALIFYING DISPOSITION. Whenever
shares of Stock that were received upon the exercise of an option granted under
the Plan are disposed of within two years after the date of grant of such option
or one year from the date of exercise of such option (within the meaning of
Section 423(a)(1)), the Company shall have the right to require the participant
to remit to the Company in cash an amount sufficient to satisfy federal, state
and local withholding and payroll tax requirements, if any, attributable to such
disposition prior to authorizing such disposition or permitting the delivery of
any certificate or certificates with respect thereto.
23. NO RESTRICTION ON CORPORATE ACTION. Subject to Section 19,
nothing contained in the Plan shall be construed to prevent the Board or any
Employer from taking any corporate action which is deemed by the Employer to be
appropriate or in its best interest, whether or not such
action would have an adverse effect on the Plan or any option granted under the
Plan. No Employee, beneficiary or other person shall have any claim against any
Employer as a result of any such action.
24. USE OF FUNDS. The Employers shall promptly transfer all
amounts withheld under Section 6 to the Company or to any brokerage firm engaged
to administer Accounts, as directed by the Company. All payroll deductions
received or held by the Company under the Plan may be used by the Company for
any corporate purpose, and the Company will not be obligated to segregate such
payroll deductions.
25. MISCELLANEOUS.
25.1. Options Carry Same Rights and Privileges. To the
extent required to comply with the requirements of Section 423 of the Code, all
Employees granted options under the Plan to purchase Common Stock shall have the
same rights and privileges hereunder.
25.2. Headings. Any headings or subheadings in this Plan
are inserted for convenience of reference only and are to be ignored in the
construction or interpretation of any provisions hereof.
25.3. Gender and Tense. Any words herein used in the
masculine shall be read and construed in the feminine when appropriate. Words in
the singular shall be read and construed as though in the plural, and
vice-versa, when appropriate.
25.4. Governing Law. This Plan shall be governed and
construed in accordance with the laws of the State of Oregon to the extent not
preempted by federal law.
25.5. Regulatory Approvals and Compliance. The Company's
obligation to sell and deliver Common Stock under the Plan is at all times
subject to all approvals of and compliance with the (i) regulations of any
applicable stock exchanges (including NASDAQ) and (ii) any governmental
authorities required in connection with the authorization, issuance, sale or
delivery of such Stock, as well as federal, state and foreign securities laws.
25.6. Severability. In the event that any provision of this
Plan shall be held illegal, invalid, or unenforceable for any reason, such
provision shall be fully severable, but shall not affect the remaining
provisions of the Plan, and the Plan shall be construed and enforced as if the
illegal, invalid, or unenforceable provision had not been included herein.
25.7. Refund of Contributions on Noncompliance with Tax
Law. In the event the Company should receive notice that this Plan fails to
qualify as an "employee stock purchase plan" under Section 423 of the Code, all
then existing Account balances will be paid to the Participants and the Plan
shall immediately terminate.
25.8. No Guarantee of Tax Consequences. The Company, Board,
and the Committee do not make any commitment or guarantee that any tax treatment
will apply or be available to any person participating or eligible to
participate in the Plan, including, without limitation, any tax imposed by the
United States or any state thereof, any estate tax, or any tax imposed by a
foreign government.
25.9. Company as Agent for the Employers. Each Employer, by
adopting the Plan, appoints the Company and the Board as its agents to exercise
on its behalf all of the powers and authorities hereby conferred upon the
Company and the Board by the terms of the Plan, including, but not by way of
limitation, the power to amend and terminate the Plan.