EXHIBIT 10.2
EARTH AND OCEAN SPORTS, INC.
1997 EQUITY INCENTIVE PLAN
1. Purpose
The purpose of this 1997 Equity Incentive Plan (the "Plan") is to
secure for Earth and Ocean Sports, Inc. (the "Company") and its stockholders the
benefits arising from capital stock ownership by employees, officers and
directors of, and consultants to, the Company and its subsidiaries or other
persons who are expected to make significant contributions to the future growth
and success of the Company and its subsidiaries. The Plan is intended to
accomplish these goals by enabling the Company to offer such persons
equity-based interests, equity-based incentives or performance-based stock
incentives in the Company, or any combination thereof ("Awards").
2. Administration
The Plan will be administered by the Board of Directors of the Company
(the "Board"). The Board shall have full power to interpret and administer the
Plan, to prescribe, amend and rescind rules and regulations relating to the Plan
and Awards, and full authority to select the persons to whom Awards will be
granted ("Participants"), determine the type and amount of Awards to be granted
to Participants (including any combination of Awards), determine the terms and
conditions of Awards granted under the Plan (including terms and conditions
relating to events of merger, consolidation, dissolution and liquidation, change
of control, vesting, forfeiture, restrictions, dividends and interest, if any,
on deferred amounts), waive compliance by a participant with any obligation to
be performed by him or her under an Award, waive any term or condition of an
Award, cancel an existing Award in whole or in part with the consent of a
Participant, grant replacement Awards, accelerate the vesting or lapse of any
restrictions of any Award and adopt the form of instruments evidencing Awards
under the Plan and change such forms from time to time. Any interpretation by
the Board of the terms and provisions of the Plan or any Award thereunder and
the administration thereof, and all action taken by the Board, shall be final,
binding and conclusive on all parties and any person claiming under or through
any party. No director shall be liable for any action or determination made in
good faith. The Board may, to the full extent permitted by law, delegate any or
all of its responsibilities under the Plan to a committee (the "Committee")
appointed by the Board and consisting of two or more members of the Board.
3. Effective Date
The Plan shall be effective as of the date first approved by the Board
of Directors, subject to the approval of the Plan by the Company's stockholders.
Grants of Awards under the Plan made prior to such approval shall be effective
when made (unless otherwise specified by the Board at the
time of grant), but shall be conditioned on and subject to such approval of the
Plan by the Company's stockholders.
4. Shares Subject to the Plan
Subject to adjustment as provided in Section 9.6, the total number of
shares of the Common Stock, $.01 par value per share, of the Company (the
"Common Stock"), reserved and available for distribution under the Plan shall be
450,000 shares. Such shares may consist, in whole or in part, of authorized and
unissued shares or treasury shares.
If any Award of shares of Common Stock requiring exercise by the
Participant for delivery of such shares terminates without having been exercised
in full, is forfeited or is otherwise terminated without a payment being made to
the Participant in the form of Common Stock, or if any shares of Common Stock
subject to restrictions are repurchased by the Company pursuant to the terms of
any Award or are otherwise reacquired by the Company to satisfy obligations
arising by virtue of any Award, such shares shall be available for distribution
in connection with future Awards under the Plan.
5. Eligibility
Employees, officers and directors of, and consultants to, the Company
and its subsidiaries, or other persons who are expected to make significant
contributions to the future growth and success of the Company and its
subsidiaries shall be eligible to receive Awards under the Plan. The Board, or
other appropriate committee or person to the extent permitted pursuant to the
last sentence of Section 2, shall from time to time select from among such
eligible persons those who will receive Awards under the Plan.
6. Types of Awards
The Board may offer Awards under the Plan in any form of equity-based
interest, equity-based incentive or performance-based stock incentive in Common
Stock of the Company or any combination thereof. The type, terms and conditions
and restrictions of an Award shall be determined by the Board at the time such
Award is made to a Participant; provided, however, that no Participant may be
granted Awards, in the aggregate, for more than 25% of the shares of Common
Stock then subject to the Plan during any fiscal year of the Company. If any
option granted under the Plan shall expire or terminate for any reason without
having been exercised in full or shall cease for any reason to be exercisable in
whole or in part or shall be repurchased by the Company, the shares subject to
such option shall be included in the determination of the aggregate number of
shares of Common Stock deemed to have been granted to such employee under the
Plan.
An Award shall be made at the time specified by the Board and shall be
subject to such conditions or restrictions as may be imposed by the Board and
shall conform to the general rules applicable under the Plan as well as any
special rules then applicable under federal tax laws or regulations or the
federal securities laws relating to the type of Award granted.
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Without limiting the foregoing, Awards may take the following forms and
shall be subject to the following rules and conditions:
6.1 Options
An option is an Award that entitles the holder on exercise thereof to
purchase Common Stock at a specified exercise price. Options granted under the
Plan may be either incentive stock options ("incentive stock options") that meet
the requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or options that are not intended to meet the requirements of
Section 422 ("non-statutory stock options").
6.1.1 Option Price. The price at which Common Stock may be purchased
upon exercise of an option shall be determined by the Board, provided however,
the exercise price shall not be less than the par value per share of Common
Stock.
6.1.2 Option Grants. The granting of an option shall take place at the
time specified by the Board. Options shall be evidenced by option agreements.
Such agreements shall conform to the requirements of the Plan, and may contain
such other provisions (including but not limited to vesting and forfeiture
provisions, acceleration, change of control, protection in the event of merger,
consolidations, dissolutions and liquidations) as the Board shall deem
advisable. Option agreements shall expressly state whether an option grant is
intended to qualify as an incentive stock option or non-statutory stock option.
6.1.3 Option Period. An option will become exercisable at such time or
times (which may be immediately or in such installments as the Board shall
determine) and on such terms and conditions as the Board shall specify. The
option agreements shall specify the terms and conditions applicable in the event
of an option holder's termination of employment during the option's term.
Any exercise of an option must be in writing, signed by the proper
person and delivered or mailed to the Company, accompanied by (1) any additional
documents required by the Board and (2) payment in full in accordance with
Section 6.1.4 for the number of shares for which the option is exercised.
6.1.4 Payment of Exercise Price. Stock purchased on exercise of an
option shall be paid for as follows: (1) in cash or by check (subject to such
guidelines as the Company may establish for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
instrument evidencing the option (or in the case of a non-statutory stock
option, by the Board at or after grant of the option), (i) through the delivery
of shares of Common Stock that have a fair market value (determined in
accordance with procedures prescribed by the Board) equal to the exercise price,
(ii) at the discretion of the Committee and consistent with applicable law,
through the delivery of an assignment to the Company of a sufficient amount of
the proceeds from the sale of the Common Stock acquired upon exercise of the
option and an authorization to the broker or selling agent to pay that amount to
the Company, which sale shall be at the
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Participant's direction at the time of exercise, or (iii) by any combination of
the permissible forms of payment.
6.1.5 Buyout Provision. The Board may at any time offer to buy out for
a payment in cash, shares of Common Stock, deferred stock or restricted stock,
an option previously granted, based on such terms and conditions as the Board
shall establish and communicate to the option holder at the time that such offer
is made.
6.1.6 Special Rules for Incentive Stock Options. Each provision of the
Plan and each option agreement evidencing an incentive stock option shall be
construed so that each incentive stock option shall be an incentive stock option
as defined in Section 422 of the Code or any statutory provision that may
replace such Section, and any provisions thereof that cannot be so construed
shall be disregarded. Instruments evidencing incentive stock options must
contain such provisions as are required under applicable provisions of the Code.
Incentive stock options may be granted only to employees of the Company and its
subsidiaries. The exercise price of an incentive stock option shall not be less
than 100% (110% in the case of an incentive stock option granted to a more than
ten percent stockholder of the Company) of the fair market value of the Common
Stock on the date of grant, as determined pursuant to Section 6.1.7 hereof. An
incentive stock option may not be granted after the tenth anniversary of the
date on which the Plan was adopted by the Board and the latest date on which an
incentive stock option may be exercised shall be the tenth anniversary (fifth
anniversary, in the case of any incentive stock option granted to a more than
ten percent stockholder of the Company) of the date of grant, as determined by
the Board. Each Participant may be granted options treated as incentive stock
options only to the extent that, in the aggregate under this Plan and all
incentive stock option plans of the Company and any present or future parent or
subsidiary (as those terms are used in Section 424 of the Code), incentive stock
options do not become exercisable for the first time by such employee during any
calendar year with respect to stock having a fair market value (determined at
the time the incentive stock options were granted) in excess of $100,000. The
Company intends to designate any options granted in excess of such limitation as
non-statutory stock options, and the Company shall issue separate certificates
to the optionee with respect to options that are non-statutory stock options and
options that are incentive stock options.
6.1.7 Determination of Fair Market Value. If, at the time an option is
granted under the Plan, the Common Stock is publicly traded, "fair market value"
shall be determined as of the date of grant or, if the prices or quotes
discussed in this sentence are unavailable for such date, the last business day
for which such prices or quotes are available prior to the date of grant and
shall mean (i) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is traded, if the Common Stock is then traded on a national securities
exchange; or (ii) the last reported sale price (on that date) of the Common
Stock on the Nasdaq National Market, if the Common Stock is not then traded on a
national securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the Nasdaq
National Market. If the Common Stock is not publicly traded at the time an
option is granted under the Plan, "fair market value" shall mean the fair value
of the Common Stock as determined by the Committee after taking into
consideration all factors which it
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deems appropriate, including, without limitation, recent sale and offer prices
of the Common Stock in private transactions negotiated at arms' length.
6.2 Restricted and Unrestricted Stock
An Award of restricted stock entitles the recipient thereof to acquire
shares of Common Stock upon payment of the purchase price subject to
restrictions specified in the instrument evidencing the Award.
6.2.1 Restricted Stock Awards. Awards of restricted stock shall be
evidenced by restricted stock agreements. Such agreements shall conform to the
requirements of the Plan, and may contain such other provisions (including
restriction and forfeiture provisions, change of control, protection in the
event of mergers, consolidations, dissolutions and liquidations) as the Board
shall deem advisable.
6.2.2 Restrictions. Until the restrictions specified in a restricted
stock agreement shall lapse, restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of, and upon certain
conditions specified in the restricted stock agreement, must be resold to the
Company for the price, if any, specified in such agreement. The restrictions
shall lapse at such time or times, and on such conditions, as the Board may
specify. The Board may at any time accelerate the time at which the restrictions
on all or any part of the shares shall lapse.
6.2.3 Rights as a Stockholder. A Participant who acquires shares of
restricted stock will have all of the rights of a stockholder with respect to
such shares including the right to receive dividends and to vote such shares.
Unless the Board otherwise determines, certificates evidencing shares of
restricted stock will remain in the possession of the Company until such shares
are free of all restrictions under the Plan.
6.2.4 Purchase Price. The purchase price of shares of restricted stock
shall be determined by the Board, in its sole discretion, but such price may not
be less than the par value of such shares.
6.2.5 Other Awards Settled With Restricted Stock. The Board may provide
that any or all the Common Stock delivered pursuant to an Award will be
restricted stock.
6.2.6 Unrestricted Stock. The Board may, in its sole discretion, sell
to any Participant shares of Common Stock free of restrictions under the Plan
for a price determined by the Board, but which may not be less than the par
value per share of the Common Stock.
6.3 Deferred Stock
6.3.1 Deferred Stock Award. A deferred stock Award entitles the
recipient to receive shares of deferred stock which is Common Stock to be
delivered in the future. Delivery of the Common Stock will take place at such
time or times, and on such conditions, as the Board may
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specify. The Board may at any time accelerate the time at which delivery of all
or any part of the Common Stock will take place.
6.3.2 Other Awards Settled with Deferred Stock. The Board may, at the
time any Award described in this Section 6 is granted, provide that, at the time
Common Stock would otherwise be delivered pursuant to the Award, the Participant
will instead receive an instrument evidencing the right to future delivery of
deferred stock.
6.4 Performance Awards
6.4.1 Performance Awards. A performance Award entitles the recipient to
receive, without payment, an amount, in cash or Common Stock or a combination
thereof (such form to be determined by the Board), following the attainment of
performance goals. Performance goals may be related to personal performance,
corporate performance, departmental performance or any other category of
performance deemed by the Board to be important to the success of the Company.
The Board will determine the performance goals, the period or periods during
which performance is to be measured and all other terms and conditions
applicable to the Award.
6.4.2 Other Awards Subject to Performance Conditions. The Board may, at
the time any Award described in this Section 6 is granted, impose the condition
(in addition to any conditions specified or authorized in this Section 6 of the
Plan) that performance goals be met prior to the Participant's realization of
any payment or benefit under the Award.
7. Purchase Price and Payment
Except as otherwise provided in the Plan, the purchase price of Common
Stock to be acquired pursuant to an Award shall be the price determined by the
Board, provided that such price shall not be less than the par value of the
Common Stock. Except as otherwise provided in the Plan, the Board may determine
the method of payment of the exercise price or purchase price of an Award
granted under the Plan and the form of payment. The Board may determine that all
or any part of the purchase price of Common Stock pursuant to an Award has been
satisfied by past services rendered by the Participant. The Board may agree at
any time, upon request of the Participant, to defer the date on which any
payment under an Award will be made.
8. Change in Control
8.1 Impact of Event
In the event of a "Change in Control" as defined in Section 8.2, the
following provisions shall apply, unless the agreement evidencing the Award
otherwise provides:
(a) Any stock options or other stock-based Awards awarded under the
Plan that were not previously exercisable and vested shall become fully
exercisable and vested.
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(b) Awards of restricted stock and other stock-based Awards subject to
restrictions and to the extent not fully vested, shall become fully vested and
all such restrictions shall lapse so that shares issued pursuant to such Awards
shall be free of restrictions.
(c) Deferral limitations and conditions that relate solely to the
passage of time, continued employment or affiliation, will be waived and removed
as to deferred stock Awards and performance Awards. Performance of other
conditions (other than conditions relating solely to the passage of time,
continued employment or affiliation) will continue to apply unless otherwise
provided in the agreement evidencing the Awards or in any other agreement
between the Participant and the Company or unless otherwise agreed by the Board.
8.2 Definition of "Change in Control"
"Change in Control" means any one of the following events: (i) when any
Person (other than SSPR, L.P. and its partners and affiliates) is or becomes the
beneficial owner (as defined in Section 13(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder), together with all Affiliates and Associates (as such terms are used
in Rule 12b-2 under the Exchange Act) of such Person, directly or indirectly, of
50% or more (by voting power) of the outstanding common stock of the Company,
without the prior approval of the Prior Directors of the Company, as the case
may be, (ii) the failure of the Prior Directors to constitute a majority of the
Board of Directors of the Company, as the case may be, at any time within two
years following any Electoral Event, or (iii) any other event that the Prior
Directors shall determine constitutes an effective change in the control of the
Company. As used in the preceding sentence, the following capitalized terms
shall have the respective meanings set forth below:
(a) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined in Rule
405 under the Securities Act of 1933, as amended, and any "group" (within the
meaning of such term in Rule 13d-5 under the Exchange Act);
(b) "Prior Directors" shall mean the persons sitting on the Company's
Board of Directors, as the case may be, immediately prior to any Electoral Event
(or, if there has been no Electoral Event, those persons sitting on the Board of
Directors on the date of completion of the Company's initial underwritten public
offering) and any future director of the Company who has been nominated or
elected by a majority of the Prior Directors who are then members of the Board
of Directors of the Company; and
(c) "Electoral Event" shall mean any contested election of Directors,
or any tender or exchange offer for the Company's Common Stock, not approved by
the Prior Directors, by any Person other than the Company.
9. General Provisions
9.1 Documentation of Awards
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Awards will be evidenced by written instruments, which may differ among
Participants, prescribed by the Board from time to time. Such instruments may be
in the form of agreements to be executed by both the Participant and the Company
or certificates, letters or similar instruments which need not be executed by
the participant but acceptance of which will evidence agreement to the terms
thereof. Such instruments shall conform to the requirements of the Plan and may
contain such other provisions (including provisions relating to events of
merger, consolidation, dissolution and liquidations, change of control and
restrictions affecting either the agreement or the Common Stock issued
thereunder), as the Board deems advisable.
9.2 Rights as a Stockholder
Except as specifically provided by the Plan or the instrument
evidencing the Award, the receipt of an Award will not give a Participant rights
as a stockholder with respect to any shares covered by an Award until the date
of issue of a stock certificate to the participant for such shares.
9.3 Conditions on Delivery of Stock
The Company will not be obligated to deliver any shares of Common Stock
pursuant to the Plan or to remove any restriction from shares previously
delivered under the Plan (a) until all conditions of the Award have been
satisfied or removed, (b) until, in the opinion of the Company's counsel, all
applicable federal and state laws and regulations have been complied with, (c)
if the outstanding Common Stock is at the time listed on any stock exchange or
trading system, until the shares have been listed or authorized to be listed on
such exchange or trading system upon official notice of issuance, and (d) until
all other legal matters in connection with the issuance and delivery of such
shares have been approved by the Company's counsel. If the sale of Common Stock
has not been registered under the Securities Act of 1933, as amended, the
Company may require, as a condition to exercise of the Award, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such act and may require that the certificates
evidencing such Common Stock bear an appropriate legend restricting transfer.
If an Award is exercised by the participant's legal representative, the
Company will be under no obligation to deliver Common Stock pursuant to such
exercise until the Company is satisfied as to the authority of such
representative.
9.4 Tax Withholding
The Company will withhold from any cash payment made pursuant to an
Award an amount sufficient to satisfy all federal, state and local withholding
tax requirements (the "withholding requirements").
In the case of an Award pursuant to which Common Stock may be
delivered, the Board will have the right to require that the participant or
other appropriate person remit to the Company an amount sufficient to satisfy
the withholding requirements, or make other arrangements satisfactory to the
Board with regard to such requirements, prior to the delivery of any Common
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Stock. If and to the extent that such withholding is required, the Board may
permit the participant or such other person to elect at such time and in such
manner as the Board provides to have the Company hold back from the shares to be
delivered, or to deliver to the Company, Common Stock having a value calculated
to satisfy the withholding requirement.
9.5 Nontransferability of Awards
Except as otherwise specifically provided by the Board, no Award (other
than an Award in the form of an outright transfer of cash or Common Stock not
subject to any restrictions) may be transferred other than by the laws of
descent and distribution, except pursuant to the terms of a qualified domestic
relations order as defined in the Code, and during a Participant's lifetime an
Award requiring exercise may be exercised only by him or her (or in the event of
incapacity, the person or persons properly appointed to act on his or her
behalf).
9.6 Adjustments in the Event of Certain Transactions
(a) In the event of a stock dividend, stock split or combination of
shares, recapitalization, reclassification or other change in the Company's
capitalization, or other distribution with respect to common stockholders other
than normal cash dividends, the Board will make (i) appropriate adjustments to
the maximum number of shares that may be delivered under the Plan under Section
4 above, and (ii) appropriate adjustments to the number and kind of shares of
stock or securities subject to Awards then outstanding or subsequently granted,
any exercise prices relating to Awards and any other provisions of Awards
affected by such change. The foregoing shall not apply to any stock split
effected after the date of adoption of the Plan but on or prior to the effective
date of the Company's initial underwritten public offering under the Securities
Act of 1933.
(b) The Board may also make appropriate adjustments to take into
account material changes in law or in accounting practices or principles,
mergers, consolidations, acquisitions, dispositions, repurchases or similar
corporate transactions, or any other event, if it is determined by the Board
that adjustments are appropriate to avoid distortion in the operation of the
Plan, but no such adjustments other than those required by law may adversely
affect the rights of any Participant (without the Participant's consent) under
any Award previously granted.
9.7 Employment Rights
Neither the adoption of the Plan nor the grant of Awards will confer
upon any person any right to continued employment with the Company or any
subsidiary or interfere in any way with the right of the Company or subsidiary
to terminate any employment relationship at any time or to increase or decrease
the compensation of such person. Except as specifically provided by the Board in
any particular case, the loss of existing or potential profit in Awards granted
under the Plan will not constitute an element of damages in the event of
termination of an employment relationship even if the termination is in
violation of an obligation of the Company to the employee.
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Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall be
determined by the Board at the time. For purposes of this Plan, transfer of
employment between the Company and its subsidiaries shall not be deemed
termination of employment.
9.8 Other Employee Benefits
The value of an Award granted to a Participant who is an employee, and
the amount of any compensation deemed to be received by an employee as a result
of any exercise or purchase of Common Stock pursuant to an Award or sale of
shares received under the Plan, will not constitute "earnings" or "compensation"
with respect to which any other employee benefits of such employee are
determined, including without limitation benefits under any pension, stock
ownership, stock purchase, life insurance, medical, health, disability or salary
continuation plan.
9.9 Legal Holidays
If any day on or before which action under the Plan must be taken falls
on a Saturday, Sunday or legal holiday, such action may be taken on the next
succeeding day not a Saturday, Sunday or legal holiday.
9.10 Foreign Nationals
Without amending the Plan, Awards may be granted to persons who are
foreign nationals or employed outside the United States or both, on such terms
and conditions different from those specified in the Plan, as may, in the
judgment of the Board, be necessary or desirable to further the purpose of the
Plan.
10. Termination and Amendment
The Plan shall remain in full force and effect until terminated by the
Board. Subject to the last sentence of this Section 10, the Board may at any
time or times amend the Plan or any outstanding Award for any purpose that may
at the time be permitted by law, or may at any time terminate the Plan as to any
further grants of Awards. No amendment, unless approved by the stockholders,
shall be effective if it would cause the Plan to fail to satisfy the
requirements of the federal tax law or regulation relating to incentive stock
options or the requirements of Rule 16b-3 (or any successor rule) under the
Exchange Act. No amendment of the Plan or any agreement evidencing Awards under
the Plan may adversely affect the rights of any participant under any Award
previously granted without such participant's consent.
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