EXHIBIT 99.1
EGGHEAD, INC.
1993 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purpose of the 1993 Stock Option Plan (this "Plan") is to provide a
means whereby selected employees, directors, officers, agents, consultants,
advisors and independent contractors of Egghead, Inc. (the "Company"), or of any
parent or subsidiary (as defined in subsection 5.8 and referred to hereinafter
as "related corporations") thereof, may be granted incentive stock options
and/or non-qualified stock options to purchase the Common Stock (as defined in
Section 3) of the Company. In order to attract and retain the services or
advice of such employees, directors, officers, agents, consultants, advisors and
independent contractors and to provide added incentive to such persons by
encouraging stock ownership in the Company.
SECTION 2. ADMINISTRATION
This Plan shall be administered by the Board of Directors of the Company
(the "Board") or, in the event the Board shall appoint and/or authorize a
committee to administer this Plan, by such committee. The administrator of this
Plan shall hereinafter be referred to as the "Plan Administrator."
In the event a member of the Board (or the committee) may be eligible,
subject to the restrictions set forth in Section 4, to participate in or receive
or hold options under this Plan, no member of the Board or the committee shall
vote with respect to the granting of an option hereunder to himself or herself,
as the case may be, and, if state corporate law does not permit a committee to
grant options to directors, then any option granted under this Plan to a
director for his or her services as such shall be approved by the full Board.
The members of any committee serving as Plan Administrator shall be
appointed by the Board for such term as the Board may determine. The Board may
from time to time remove members from, or add members to, the committee.
Vacancies on the committee, however caused, may be filled by the Board.
With respect to grants made under the Plan to officers and directors of the
Company who are subject to Section 16 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Plan Administrator shall be constituted at all
times so as to meet the requirements of Rule 16b-3 promulgated under Section
16(b) of the Exchange Act if any of the Company's equity securities are
registered pursuant to Section 12(b) or 12(g) of the Exchange Act.
2.1 RESPONSIBILITIES
Except for the terms and conditions explicitly set forth in this Plan, the
Plan Administrator shall have the authority, in its discretion, to determine all
matters relating to the options to be granted under this Plan, including
selection of the individuals to be granted options, the number of shares to be
subject to each option, the exercise price, and all other terms and conditions
of the options. Grants under this Plan need not be identical in any respect,
even when made simultaneously. The interpretation and construction by the Plan
Administrator of any terms or provisions of this Plan or any option issued
hereunder, or of any rule or regulation promulgated in connection herewith,
shall be conclusive and binding on all interested parties, so long as such
interpretation and construction with respect to incentive stock options
correspond to the requirements of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), the regulations thereunder, and any amendments
thereto.
2.2 SECTION 16(b) COMPLIANCE AND BIFURCATION OF PLAN
It is the intention of the Company that, if any of the Company's equity
securities are registered pursuant to Section 12(b) or 12(g) of the Exchange
Act, this Plan shall comply in all respects with Rule 16b-3 under the Exchange
Act and, if any Plan provision is later found not to be in compliance with such
Section, the provision shall be deemed null and void, and in all events this
Plan shall be
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construed in favor of its meeting the requirements of Rule 16b-3.
Notwithstanding anything in this Plan to the contrary, the Board, in its
absolute discretion, may bifurcate this Plan so as to restrict, limit, or
condition the use of any provision of this Plan to participants who are officers
and directors subject to Section 16 of the Exchange Act without so restricting,
limiting, or conditioning this Plan with respect to other participants.
SECTION 3. STOCK SUBJECT TO THIS PLAN
The stock subject to this Plan shall be the Company's Common Stock (the
"Common Stock"), presently authorized but unissued or subsequently acquired by
the Company. Subject to adjustment as provided in Section 7, the aggregate
amount of Common Stock to be delivered upon the exercise of all options granted
under this Plan shall not exceed (a) 2,000,000 shares as such Common Stock was
constituted on or about June 16, 1993, plus (b) to the extent that additional
options are not granted under the Company's 1986 Combined Incentive and
Non-Qualified Stock Option Plan, as amended (the "1986 Plan"), an additional
number of shares of Common Stock equal to the number of shares which are
currently reserved for issuance under the 1986 Plan and which (i) are available
for options not yet granted under the 1986 Plan as of June 16, 1993, or
(ii) would become available for issuance thereafter under the 1986 Plan as a
result of the cancellation, expiration or other termination of outstanding
options. If any option granted under this Plan shall expire or be surrendered,
exchanged for another option, canceled, or terminated for any reason without
having been exercised in full, the unpurchased shares subject thereto shall
thereupon again be available for purposes of this Plan, including for
replacement options which may be granted in exchange for such expired,
surrendered, exchanged, canceled, or terminated options.
SECTION 4. ELIGIBILITY
An incentive stock option may be granted only to any individual who, at the
time the option is granted, is an employee of the Company or any related
corporation. A nonqualified stock option may be granted to any employee,
director, officer, agent, consultant, advisor, or independent contractor of the
Company or any related corporation, whether an individual or an entity.
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
Options granted under this Plan shall be evidenced by written agreements
which shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and which are not inconsistent with this
Plan. Notwithstanding the foregoing, options shall include or incorporate by
reference the following terms and conditions:
5.1 NUMBER OF SHARES AND PRICE
The maximum number of shares that may be purchased pursuant to the exercise
of each option and the price per share at which such option is exercisable (the
"Exercise Price") shall be as established by the Plan Administrator, provided
that the Plan Administrator shall act in good faith to establish the Exercise
Price which shall be not less than the fair market value per share of the Common
Stock at the time the option is granted with respect to incentive stock options
and also provided that, with respect to incentive stock options granted to
greater than 10% shareholders, the Exercise Price shall be as required by
subsection 6.1.
5.2 TERM AND MATURITY
Subject to the restrictions contained in Section 6 with respect to granting
incentive stock options to greater than 10% shareholders, the term of each
incentive stock option shall be as established by the Plan Administrator and, if
not so established, shall be 10 years from the date it is granted but in no
event shall it exceed 10 years. The term of each nonqualified stock option
shall be as established by the Plan Administrator and, if not so established,
shall be 10 years. To ensure that the Company or related corporation will
achieve the purpose and receive the benefits contemplated in this Plan, any
option
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granted to any eligible person hereunder ("Optionee") shall, unless the
condition of this sentence is waived or modified in the agreement evidencing the
option or by resolution adopted at any time by the Plan Administrator, be
exercisable according to the following schedule:
Period of Optionee's Continuous
Relationship With the Company
or Related Corporation From the Portion of Total Option
Date the Option Is Granted That Is Exercisable
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After one year . . . . . . . . . . . . . . 16-2/3%
After two years . . . . . . . . . . . . . . 50 %
After three years . . . . . . . . . . . . . 100 %
5.3 EXERCISE
Subject to the vesting schedule described in subsection 5.2, each option
may be exercised in whole or in part at any time and from time to time;
provided, however, that no fewer than 100 shares (or the remaining shares then
purchasable under the option, if less than 100 shares) may be purchased upon any
exercise of option rights hereunder and that only whole shares will be issued
pursuant to the exercise of any option. During an Optionee's lifetime, any
options granted under this Plan are personal to him or her and are exercisable
solely by such Optionee. Options shall be exercised by delivery to the Company
of notice of the number of shares with respect to which the option is exercised,
together with payment of the Exercise Price.
5.4 PAYMENT OF EXERCISE PRICE
Payment of the option Exercise Price shall be made in full at the time the
notice of exercise of the option is delivered to the Company and shall be in
cash, bank certified or cashier's check, or personal check (unless at the time
of exercise the Plan Administrator in a particular case determines not to accept
a personal check) for the Common Stock being purchased.
The Plan Administrator can determine at any time before exercise that
additional forms of payment will be permitted. To the extent permitted by the
Plan Administrator and applicable laws and regulations (including, but not
limited to, federal tax and securities laws and regulations and state corporate
law), an option may be exercised by:
(a) delivery of shares of stock of the Company held by an Optionee
having a fair market value equal to the Exercise Price, such fair market
value to be determined in good faith by the Plan Administrator;
(b) delivery of a full-recourse promissory note executed by the
Optionee; provided that (i) such note delivered in connection with an
incentive stock option shall, and such note delivered in connection with a
nonqualified stock option may, in the sole discretion of the Plan
Administrator, bear interest at a rate specified by the Plan Administrator
but in no case less than the rate required to avoid imputation of interest
(taking into account any exceptions to the imputed interest rules) for
federal income tax purposes; and (ii) the Plan Administrator in its sole
discretion shall specify the term and other provisions of such note at the
time an incentive stock option is granted or at any time prior to exercise
of a nonqualified stock option; (iii) the Plan Administrator may require
that the Optionee pledge the Optionee's shares to the Company for the
purpose of securing the payment of such note and may require that the
certificate representing such shares be held in escrow in order to perfect
the Company's security interest; and (iv) the Plan Administrator in its
sole discretion may at any time restrict or rescind this right upon
notification to the Optionee; or
(c) delivery of a properly executed exercise notice, together with
irrevocable instructions to a broker, all in accordance with the
regulations of the Federal Reserve Board, to promptly deliver to the
Company the amount of sale or loan proceeds to pay the exercise price and
any federal, state, or local withholding tax obligations that may arise in
connection with the exercise.
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5.5 WITHHOLDING TAX REQUIREMENT
The Company or any related corporation shall have the right to retain and
withhold from any payment of cash or Common Stock under this Plan the amount of
taxes required by any government to be withheld or otherwise deducted and paid
with respect to such payment. At its discretion, the Company may require an
Optionee receiving shares of Common Stock to reimburse the Company for any such
taxes required to be withheld by the Company and withhold any distribution in
whole or in part until the Company is so reimbursed. In lieu thereof, the
Company shall have the right to withhold from any other cash amounts due or to
become due from the Company to the Optionee an amount equal to such taxes. The
Company may also retain and withhold or the Optionee may elect, subject to
approval by the Company at its sole discretion, to have the Company retain and
withhold a number of shares having a market value not less than the amount of
such taxes required to be withheld by the Company to reimburse the Company for
any such taxes and cancel (in whole or in part) any such shares so withheld. In
order to qualify such election for exemption under Rule 16b-3 promulgated under
Section 16(b) of the Exchange Act, any election made by an officer or director
who is subject to Section 16 of the Exchange Act must be an irrevocable election
made six months prior to the date the option exercise becomes taxable or such
irrevocable election must become effective during the quarterly 10-day window
period required under Section 16(b) of the Exchange Act for exercises of stock
appreciation rights.
5.6 HOLDING PERIODS
Shares of Common Stock obtained upon the exercise of a stock option may not
be sold by a person subject to Section 16 of the Exchange Act until six months
after the date the option was granted.
5.7 NONTRANSFERABILITY OF OPTIONS
Options granted under this Plan and the rights and privileges conferred
hereby may not be transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise) other than by will or by the
applicable laws of descent and distribution and shall not be subject to
execution, attachment, or similar process. Any attempt to transfer, assign,
pledge, hypothecate, or otherwise dispose of any option under this Plan or of
any right or privilege conferred hereby, contrary to the Code or to the
provisions of this Plan, or the sale or levy or any attachment or similar
process upon the rights and privileges conferred hereby shall be null and void.
Notwithstanding the foregoing, if the Company permits, an Optionee may, during
the Optionee's lifetime, designate a person who may exercise the option after
the Optionee's death by giving written notice of such designation to the Plan
Administrator. Such designation may be changed from time to time by the
Optionee by giving written notice to the Plan Administrator revoking any earlier
designation and making a new designation.
5.8 TERMINATION OF RELATIONSHIP
The Plan Administrator shall determine the terms and conditions under which
an option may be exercised following termination of an Optionee's relationship
with the Company or any related corporation.
As used herein, the term "related corporation," when referring to a
subsidiary corporation, shall mean any corporation (other than the Company) in,
at the time of the granting of the option, an unbroken chain of corporations
ending with the Company, if stock possessing 50% or more of the total combined
voting power of all classes of stock of each of the corporations other than the
Company is owned by one of the other corporations in such chain. When referring
to a parent corporation, the term "related corporation" shall mean any
corporation in an unbroken chain of corporations ending with the Company if, at
the time of the granting of the option, each of the corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
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5.9 NO STATUS AS SHAREHOLDER
Neither the Optionee nor any party to which the Optionee's rights and
privileges under the option may pass shall be, or have any of the rights or
privileges of, a shareholder of the Company with respect to any of the shares
issuable upon the exercise of any option granted under this Plan unless and
until any such option has been exercised.
5.10 CONTINUATION OF RELATIONSHIP
Nothing in this Plan or in any option granted pursuant to this Plan shall
confer upon any Optionee any right to continue in the employ or other
relationship of the Company or of a related corporation, or to interfere in any
way with the right of the Company or of any such related corporation to
terminate his or her employment or other relationship with the Company at any
time.
5.11 LIMITATION ON VALUE FOR INCENTIVE STOCK OPTIONS
As to all incentive stock options granted under the terms of this Plan, to
the extent that the aggregate fair market value of the stock (determined at the
time the incentive stock option is granted) with respect to which incentive
stock options are exercisable for the first time by the Optionee during any
calendar year (under this Plan and all other incentive stock option plans of the
Company, a related corporation or a predecessor corporation) exceeds $100,000,
such options shall be treated as nonqualified stock options. The previous
sentence shall not apply if the Internal Revenue Service issues a public rule,
issues a private ruling to the Company, any Optionee, or any legatee, personal
representative or distributee of an Optionee, or issues regulations changing or
eliminating such annual limit.
SECTION 6. GREATER THAN 10% SHAREHOLDERS
6.1 EXERCISE PRICE AND TERM OF INCENTIVE STOCK OPTIONS
If incentive stock options are granted under this Plan to employees who
own more than 10% of the total combined voting power of all classes of stock of
the Company or any related corporation, the term of such incentive stock options
shall not exceed five years and the Exercise Price shall be not less than 110%
of the fair market value of the Common Stock at the time the incentive stock
option is granted. This provision shall control notwithstanding any contrary
terms contained in an option agreement or any other document.
6.2 ATTRIBUTION RULE
For purposes of subsection 6.1, in determining stock ownership, an employee
shall be deemed to own the stock owned, directly or indirectly, by or for his or
her brothers, sisters, spouse, ancestors and lineal descendants. Stock owned,
directly or indirectly, by or for a corporation, partnership, estate or trust
shall be deemed to be owned proportionately by or for its shareholders, partners
or beneficiaries. If an employee or a person related to the employee owns an
unexercised option or warrant to purchase stock of the Company, the stock
subject to that portion of the option or warrant that is unexercised shall not
be counted in determining stock ownership. For purposes of this Section 6,
stock owned by an employee shall include all stock actually issued and
outstanding immediately before the grant of the incentive stock option to the
employee.
SECTION 7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
The aggregate number and class of shares for which options may be granted
under this Plan, the number and class of shares covered by each outstanding
option and, the Exercise Price per share thereof (but not the total price), and
each such option, shall all be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock of the Company resulting
from a split-up or consolidation of shares or any like capital adjustment, or
the payment of any stock dividend.
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7.1 EFFECT OF LIQUIDATION OR REORGANIZATION
7.1.1 CASH, STOCK, OR OTHER PROPERTY FOR STOCK
Except as provided in subsection 7.1.2, upon a merger (other than a
merger of the Company in which the holders of Common Stock immediately
prior to the merger have the same proportionate ownership of Common Stock
in the surviving corporation immediately after the merger, consolidation,
acquisition of property or stock, separation, reorganization (other than a
mere reincorporation or the creation of a holding company) or liquidation
of the Company, as a result of which the shareholders of the Company
receive cash, stock, or other property in exchange for or in connection
with their shares of Common Stock, any option granted hereunder shall
terminate, but the Optionee shall have the right immediately prior to any
such merger, consolidation, acquisition of property or stock, separation,
reorganization, or liquidation to exercise such Optionee's option in whole
or in part whether or not the vesting requirements set forth in the option
agreement have been satisfied.
7.1.2 CONVERSION OF OPTIONS ON STOCK FOR STOCK EXCHANGE
If the shareholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their shares of Common Stock
in any transaction involving a merger, consolidation, acquisition of
property or stock, separation, or reorganization, all options granted
hereunder shall be converted into options to purchase shares of Exchange
Stock unless the Company and the corporation issuing the Exchange Stock, in
their sole discretion, determine that any or all such options granted
hereunder shall not be converted into options to purchase shares of
Exchange Stock but instead shall terminate in accordance with the
provisions of subsection 7.1.1; provided, however, that all options granted
hereunder shall be converted automatically into Exchange Stock in (i) a
merger of the Company in which the holders of Common Stock immediately
prior to the merger have the same proportionate ownership of Common Stock
in the surviving corporation immediately after the merger, (ii) a mere
reincorporation, or (iii) the creation of a holding company. The amount
and price of converted options shall be determined by adjusting the amount
and price of the options granted hereunder in the same proportion as used
for determining the number of shares of Exchange Stock the holders of the
Common Stock receive in such merger, consolidation, acquisition of property
or stock, separation, or reorganization. The converted options shall
retain the vesting requirements applicable to the options granted
hereunder, unless the Company and the corporation issuing the Exchange
Stock, in their sole discretion, determine otherwise.
7.2 FRACTIONAL SHARES
In the event of any adjustment in the number of shares covered by any
option, any fractional shares resulting from such adjustment shall be
disregarded and each such option shall cover only the number of full shares
resulting from such adjustment.
7.3 DETERMINATION OF BOARD TO BE FINAL
All Section 7 adjustments shall be made by the Board, and its determination
as to what adjustments shall be made, and the extent thereof, shall be final,
binding, and conclusive. Unless an Optionee agrees otherwise, any change or
adjustment to an incentive stock option shall be made in such a manner so as not
to constitute a "modification" as defined in Code Section 425(h) and so as not
to cause his or her incentive stock option issued hereunder to fail to continue
to qualify as an incentive stock option as defined in Code Section 422(b).
SECTION 8. SECURITIES REGULATION
Shares shall not be issued with respect to an option granted under this
Plan unless the exercise of such option and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, any applicable state securities laws, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall
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be further subject to the approval of counsel for the Company with respect to
such compliance, including the availability, if applicable, of an exemption from
registration for the issuance and sale of any shares hereunder.
SECTION 9. AMENDMENT AND TERMINATION
9.1 BOARD ACTION
The board may amend, suspend, or terminate this Plan at any time, provided
that no such amendment shall be made without the approval of the Company's
shareholders if such approval is required to comply with Rule 16b-3 under the
Exchange Act or the Washington Business Corporation Act or, with respect to
incentive stock options, Section 422 of the Code or any successor provision.
9.2 TERM OF THE PLAN
Unless sooner terminated by the Board, this Plan shall terminate ten years
from the earlier of (a) the date on which this Plan is adopted by the Board or
(b) the date on which this Plan is approved by the shareholders of the Company.
No option may be granted after such termination or during any suspension of this
Plan. The amendment or termination of this Plan shall not, without the consent
of the option holder, alter or impair any rights or obligations under any option
theretofore granted under this Plan.
SECTION 10. EFFECTIVENESS OF THIS PLAN.
This Plan shall become effective upon adoption by the Board so long as it
is approved by a majority of stock represented by shareholders voting either in
person or by proxy at a duly held shareholders' meeting any time within 12
months before or after the adoption of this Plan.
Plan adopted by the Board of Directors on June 16, 1993, and approved by
the shareholders on Sept. 15, 1993.
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