EXHIBIT 10.5
HARLEY-DAVIDSON, INC.
1995 STOCK OPTION PLAN
(amended through February 19, 1997)
ARTICLE I
PURPOSE
The purpose of the Harley-Davidson, Inc. 1995 Stock Option Plan is to
provide favorable opportunities for certain selected employees of Harley-
Davidson, Inc. and its subsidiaries to purchase or receive shares of Common
Stock of Harley-Davidson, Inc., or to benefit from the appreciation thereof.
Such opportunities should provide an increased incentive for these employees to
contribute to the future success and prosperity of Harley-Davidson, Inc., thus
enhancing the value of the stock for the benefit of the shareholders, and
increase the ability of Harley-Davidson, Inc. to attract and retain individuals
of exceptional skill upon whom, in large measure, its sustained progress, growth
and profitability depend.
ARTICLE II
DEFINITIONS
The following capitalized terms used in the Plan shall have the respective
meanings set forth in this Article:
2.1. BOARD: The Board of Directors of Harley-Davidson, Inc.
2.2. CODE: The Internal Revenue Code of 1986, as amended.
2.3. COMMITTEE: The Human Resources Committee of the Board; provided
that if any member of the Human Resources Committee is not both a
Disinterested Person and Outside Director, the Committee shall be comprised
of only those members of the Human Resources Committee who are both
Disinterested Persons and Outside Directors.
2.4. COMMON STOCK: The common stock of Harley-Davidson, Inc.
2.5. COMPANY: Harley-Davidson, Inc. and any of its Subsidiaries.
2.6. DISABILITY: Disability within the meaning of Section 22(e)(3) of
the Code, as determined by the Committee.
2.7. DISINTERESTED PERSONS: Non-employee directors within the meaning
of Rule 16b-3 as promulgated under the Securities Exchange Act of 1934, as
amended.
2.8. EMPLOYER: The entity that employs the employee or Optionee.
2.9. FAIR MARKET VALUE: The average of the high and low reported
sales prices of Common Stock on the New York Stock Exchange Composite Tape
on the date for which fair market value is being determined.
2.10. ISO: An incentive stock option within the meaning of Section 422
of the Code and which is designated as an incentive stock option by the
Committee.
2.11. NON-ISO: A stock option which is not an ISO.
2.12. OPTION: A stock option granted under the Plan. Options include
both ISOs and Non-ISOs.
2.13. OPTION PRICE: The purchase price of a share of Common Stock
under an Option.
2.14. OPTIONEE: A person who has been granted one or more Options.
2.15. OUTSIDE DIRECTORS: Outside Directors within the meaning of
Section 162(m) of the Code and the regulations promulgated thereunder.
2.16. PARENT CORPORATION: The parent corporation, as defined in
Section 424(e) of the Code.
2.17. PLAN: The Harley-Davidson, Inc. 1995 Stock Option Plan.
2.18. RETIREMENT: Retirement on or after age sixty-two or, with the
consent of the Committee, at an earlier age.
2.19. SUBSIDIARY: A corporation, limited partnership, general
partnership, limited liability company, business trust or other entity of
which more than fifty percent (50%) of the voting power or ownership
interest is directly and/or indirectly held by Harley-Davidson, Inc.
2.20. TERMINATION DATE: A date fixed by the Committee but not later
than the day preceding the tenth anniversary of the date on which the
Option is granted.
ARTICLE III
ADMINISTRATION
3.1. The Committee shall administer the Plan and shall have full power to
grant Options, construe and interpret the Plan, establish and amend rules and
regulations for its administration, and perform all other acts relating to the
Plan, including the delegation of administrative responsibilities, which it
believes reasonable and proper.
3.2. Subject to the provisions of the Plan, the Committee shall, in its
discretion, determine who shall be granted Options, the number of shares subject
to option under any such Options, the dates after which Options may be
exercised, in whole or in part, whether Options shall be ISOs, and the terms and
conditions of the Options.
3.3. Any decision made, or action taken, by the Committee arising out of
or in connection with the interpretation and administration of the Plan shall be
final and conclusive.
ARTICLE IV
SHARES SUBJECT TO THE PLAN
4.1. The total number of shares of Common Stock available for grants of
Options under the Plan shall be 3,800,000 provided that Options for not more
than 200,000 shares of Common Stock shall be granted to an Optionee in any
calendar year under the Plan, which amount shall be reduced by the amount of
Common Stock subject to options granted to such Optionee in such calendar year
under any other stock option plan of the Company. The foregoing amounts shall
be subject to adjustment in accordance with Article VIII of the Plan. If an
Option or portion thereof shall expire, be canceled or terminate for any reason
without having been exercised in full, the unpurchased shares covered by such
Option shall be available for future grants of Options. An Option, or portion
thereof, exercised through the exercise of a stock appreciation right pursuant
to Section 6.7 of the Plan shall be treated, for the purposes of this Article,
as though the Option, or portion thereof, had been exercised through the
purchase of Common Stock, with the result that the shares of Common Stock
subject to the Option, or portion thereof, that was so exercised shall not be
available for future grants of Options.
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ARTICLE V
ELIGIBILITY
5.1. Options may be granted to key employees of the Company or to persons
who have been engaged to become key employees of the Company. Key employees
will comprise, in general, those who contribute to the management, direction and
overall success of the Company, including those who are members of the Board.
Members of the Board who are not employees of the Company shall not be eligible
for Option grants.
ARTICLE VI
TERM OF OPTIONS
6.1. OPTION AGREEMENTS: All Options shall be evidenced by written
agreements executed by the Company. Such Options shall be subject to the
applicable provisions of the Plan, and shall contain such provisions as are
required by the Plan and any other provisions the Committee may prescribe. All
agreements evidencing Options shall specify the total number of shares subject
to each grant, the Option Price and the Termination Date. Those Options that
comply with the requirements for an ISO set forth in Section 422 of the Code and
are designated ISOs by the Committee shall be ISOs and all other Options shall
be Non-ISOs.
6.2. OPTION PRICE: The Option Price shall be set by the Committee;
provided, however, that the price per share shall not be less than the Fair
Market Value of a share of Common Stock on the date the Option is granted.
6.3. PERIOD OF EXERCISE: The Committee shall determine the dates after
which Options may be exercised in whole or in part. If Options are exercisable
in installments, installments or portions thereof that are exercisable and not
exercised shall accumulate and remain exercisable. The Committee may also amend
an Option to accelerate the dates after which Options may be exercised in whole
or in part. However, no Option or portion thereof shall be exercisable after
the Termination Date.
6.4. SPECIAL RULES REGARDING ISOS GRANTED TO CERTAIN EMPLOYEES:
Notwithstanding any contrary provisions of Sections 6.2 and 6.3 of the Plan, no
ISO shall be granted to any employee who, at the time the Option is granted,
owns (directly or indirectly, within the meaning of Section 424(d) of the Code)
more than ten percent of the total combined voting power of all classes of stock
of the Employer or of any Subsidiary or Parent Corporation thereof, unless (a)
the Option Price under such Option is at least 110 percent of the Fair Market
Value of a share of Common Stock on the date the Option is granted and (b) the
Termination Date of such Option is a date not later than the day preceding the
fifth anniversary of the date on which the Option is granted.
6.5. MANNER OF EXERCISE AND PAYMENT: An Option, or portion thereof, shall
be exercised by delivery of a written notice of exercise to the Company and
payment of the full price of the shares being purchased pursuant to the Option.
An Optionee may exercise an Option with respect to less than the full number of
shares for which the Option may then be exercised, but an Optionee must exercise
the Option in full shares of Common Stock. The price of Common Stock purchased
pursuant to an Option, or portion thereof, may be paid:
a. in United States dollars in cash or by check, bank draft or money
order payable to the order of the Company.
b. through the delivery of shares of Common Stock with an aggregate
Fair Market Value on the date of exercise equal to the Option Price, or
c. by any combination of the above methods of payment.
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The Committee shall determine acceptable methods for tendering Common Stock as
payment upon exercise of an Option and may impose such limitations and
prohibitions on the use of Common Stock to exercise an Option as it deems
appropriate, including, without limitation, any limitation or prohibition
designed to avoid certain accounting consequences which may result from the use
of Common Stock as payment upon exercise of an Option.
6.6. WITHHOLDING TAXES: The Company may, in its discretion, require an
Optionee to pay to the Company at the time of exercise the amount that the
Company deems necessary to satisfy its obligation to withhold Federal, state or
local income or other taxes incurred by reason of the exercise. Upon or prior
to the exercise of an Option requiring tax withholding, an Optionee may make a
written election to have shares of Common Stock withheld by the Company from the
shares otherwise to be received. The number of shares so withheld shall have an
aggregate Fair Market Value on the date of exercise sufficient to satisfy the
applicable withholding taxes. The acceptance of any such election by an
Optionee shall be at the sole discretion of the Committee. Where the exercise
of an Option does not give rise to an obligation to withhold Federal income
taxes on the date of exercise, the Company may, in its discretion, require an
Optionee to place shares of Common Stock purchased under the Option in escrow
for the benefit of the Company until such time as Federal income tax withholding
is required on amounts included in the gross income of the Optionee as a result
of the exercise of an Option. At such time, the Company, in its discretion, may
require an Optionee to pay to the Company the amount that the Company deems
necessary to satisfy its obligation to withhold Federal, state or local income
or other taxes incurred by reason of the exercise of the Option, in which case
the shares of Common Stock will be released from escrow to the Optionee.
Alternatively, subject to acceptance by the Committee, in its sole discretion,
an Optionee may make a written election to have shares of Common Stock held in
escrow applied toward the Company's obligation to withhold Federal, state or
local income or other taxes incurred by reason of the exercise of the Option,
based on the Fair Market Value of the shares on the date of the termination of
the escrow arrangement. Upon application of such shares toward the Company's
withholding obligation, any shares of Common Stock held in escrow and not, in
the judgment of the Committee, necessary to satisfy such obligation shall be
released from escrow to the Optionee.
6.7. STOCK APPRECIATION RIGHTS: At or after the grant of an Option, the
Committee, in its discretion, may provide an Optionee with an alternate means of
exercising an Option, or a designated portion thereof, by granting the Optionee
a stock appreciation right. A "stock appreciation right" is a right to receive,
upon exercise of an Option or any portion thereof, in the Committee's sole
discretion, an amount of cash equal to, and/or shares of Common Stock having a
Fair Market Value on the date of exercise equal to, the excess of the Fair
Market Value of a share of Common Stock on the date of exercise over the Option
Price, multiplied by the number of shares of Common Stock that the Optionee
would have received had the Option or portion thereof been exercised through the
purchase of shares of Common Stock at the Option Price, provided that (a) such
Option or portion thereof has been designated as exercisable in this alternative
manner, (b) such Option or portion thereof is otherwise exercisable, and (c) the
Fair Market Value of a share of Common Stock on the date of exercise exceeds the
Option Price.
6.8. NONTRANSFERABILITY OF OPTIONS: Except as may be otherwise provided
by the Committee, each Option shall, during the Optionee's lifetime, be
exercisable only by the Optionee and neither it nor any right hereunder shall be
transferable otherwise than by will or the laws of descent and distribution or
be subject to attachment, execution or other similar process. In the event of
any attempt by the Optionee to alienate, assign, pledge, hypothecate or
otherwise dispose of an Option or of any right hereunder, except as provided for
herein, or in the event of any levy or any attachment, execution or similar
process upon the rights or interest hereby conferred, the Company may terminate
the Option by notice to the Optionee and the Option shall thereupon become null
and void.
6.9. CESSATION OF EMPLOYMENT OF OPTIONEE:
a. CESSATION OF EMPLOYMENT OTHER THAN BY REASON OF RETIREMENT,
DISABILITY OR DEATH. If an Optionee shall cease to be employed by the
Company otherwise than by reason of Retirement, Disability, or death, each
Option held by the Optionee, together with all rights hereunder, shall
terminate on the date of cessation of employment, to the extent not
previously exercised.
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b. CESSATION OF EMPLOYMENT BY REASON OF RETIREMENT OR DISABILITY.
If an Optionee shall cease to be employed by the Company by reason of
Retirement or Disability, each Option held by the Optionee shall remain
exercisable, to the extent it was exercisable at the time of cessation of
employment, until the earliest of:
i. the Termination Date,
ii. the death of the Optionee, or such later date not more than
one year after the death of the Optionee as the Committee, in its
discretion, may provide pursuant to Section 6.9(c) of the Plan,
iii. the third anniversary of the date of the cessation of the
Optionee's employment, if employment ceased by reason of Retirement,
or
iv. the first anniversary of the date of the cessation of the
Optionee's employment by reason of Disability;
and thereafter all such Options shall terminate together with all rights
hereunder, to the extent not previously exercised.
c. CESSATION OF EMPLOYMENT BY REASON OF DEATH. In the event of the
death of the Optionee while employed by the Company, an Option may be
exercised at any time or from time to time prior to the earlier of the
Termination Date or the first anniversary of the date of the Optionee's
death, by the person or persons to whom the Optionee's rights under each
Option shall pass by will or by the applicable laws of descent and
distribution, to the extent that the Optionee was entitled to exercise such
Option on the Optionee's date of death. In the event of the death of the
Optionee while entitled to exercise an Option pursuant to Section 6.9(b),
the Committee, in its discretion, may permit such Option to be exercised at
any time or from time to time prior to the Termination Date during a period
of up to one year from the death of the Optionee, as determined by the
Committee, by the person or persons to whom the Optionee's rights under
each Option shall pass by will or by the applicable laws of descent and
distribution, to the extent that the Option was exercisable at the time of
cessation of the Optionee's employment. Any person or persons to whom an
Optionee's rights under an Option have passed by will or by the applicable
laws of descent and distribution shall be subject to all terms and
conditions of the Plan and the Option applicable to the Optionee.
6.10. NOTIFICATION OF SALES OF COMMON STOCK: Any Optionee who disposes of
shares of Common Stock acquired upon the exercise of an ISO either (a) within
two years after the date of the grant of the ISO under which the stock was
acquired or (b) within one year after the transfer of such shares to the
Optionee, shall notify the Company of such disposition and of the amount
realized upon such disposition.
ARTICLE VII
LIMITATIONS AND ACCELERATIONS ON EXERCISABILITY
7.1. Notwithstanding any other provision of this Plan, in the case of an
ISO, the aggregate Fair Market Value (determined at the time the ISO is granted)
of the shares of Common Stock with respect to which all "incentive stock
options" (within the meaning of Section 422 of the Code) are first exercisable
by the Optionee during any calendar year (under this Plan and under all other
incentive stock option plans of the Employer, any Subsidiary and any Parent
Corporation) shall not exceed $100,000.
7.2. Each Option granted under the Plan shall have a limited right of
surrender allowing the Optionee to surrender that Option within the 30-day
period following a Change of Control Event and to receive cash, in lieu of
exercising the Option, in the amount by which the highest "COC Fair Market
Value" (as hereinafter defined) of the number of shares of Common Stock covered
by the Option during the 60 days preceding the date on which the Change of
Control Event occurs exceeds the exercise price for the shares of Common Stock
covered by the Option. For this purpose, the "COC Fair Market Value" of the
Common Stock means the closing price of one share of Common Stock as reported on
the New
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York Stock Exchange Composite Tape. If the Common Stock is not listed or
admitted to trading on the New York Stock Exchange, the COC Fair Market Value of
the Common Stock shall be the closing price of one share of Common Stock on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, the last quoted sale price or, if
not so quoted, the average of the high bid and low asked prices in the over-the-
counter market of the Common Stock, as reported by the National Association of
Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other
system then in use, or, if on any such date the Common Stock is not quoted by
any such organization, the average of the closing bid and asked prices of the
Common Stock as furnished by a professional market maker making a market in the
Common Stock selected by the Board. If on any such date no market maker is
making a market in the Common Stock or other Stock, the COC Fair Market Value
shall be determined in good faith by the Continuing Directors who are not
Disinterested Persons. For purposes of this Section 7.2:
(a) "Change of Control Event" means any one of the following: (i)
Continuing Directors no longer constitute at least two-thirds of the
Directors constituting the Board; (ii) any person or groups (as defined in
Rule 13d-5 under the Securities Exchange Act of 1934, as amended ("Exchange
Act")), together with its affiliates, becomes the beneficial owner,
directly or indirectly, of 20% or more of Harley-Davidson, Inc.'s then
outstanding Common Stock or 20% or more of the voting power of Harley-
Davidson, Inc.'s then outstanding securities entitled generally to vote for
the election of Harley-Davidson, Inc.'s Directors; (iii) the approval by
Harley-Davidson, Inc.'s stockholders of the merger or consolidation of
Harley-Davidson, Inc. with any other corporation, the sale of substantially
all of Harley-Davidson, Inc.'s assets or the liquidation or dissolution of
Harley-Davidson, Inc., unless, in the case of a merger or consolidation,
the Continuing Directors in office immediately prior to such merger or
consolidation constitute at least two-thirds of the directors constituting
the board of directors of the surviving corporation of such merger or
consolidation and any parent (as defined in Rule 12b-2 under the Exchange
Act) of such corporation; or (iv) at least two-thirds of the Continuing
Directors who are Disinterested Persons in office immediately prior to any
other action proposed to be taken by Harley-Davidson, Inc.'s stockholders
or by the Board determine that such proposed action, if taken, would
constitute a change of control of Harley-Davidson, Inc. and such action is
taken; and
(b) "Continuing Director" means any person who either (i) was a
Director on February 2, 1995, or (ii) was designated before such person's
initial election as a Director as a Continuing Director by a majority of
the Continuing Directors.
ARTICLE VIII
ADJUSTMENTS
8.1. If (a) the Company shall at any time be involved in a transaction to
which Section 424(a) of the Code is applicable; (b) the Company shall declare a
dividend payable in, or shall subdivide or combine, its Common Stock; or (c) any
other event shall occur which in the judgment of the Committee necessitates an
adjustment to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the Committee may,
in such manner as it may deem equitable, adjust any or all of (i) the number and
type of securities subject to the Plan and which thereafter may be the subject
of Options; (ii) the number and type of securities subject to outstanding
Options; (iii) the Option Price with respect to any Option; and (iv) the number
of shares of Common Stock that may be issued pursuant to Options granted to an
Optionee in any calendar year; provided, however, that each such adjustment, in
the case of ISOs, shall be made in such a manner as not to constitute a
"modification" within the meaning of Section 424(h)(3) of the Code. The
judgment of the Committee with respect to any matter referred to in this Article
shall be conclusive and binding upon each Optionee.
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ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
9.1. The Board may at any time, or from time to time, suspend or terminate
the Plan in whole or in part or amend it in such respects as the Board may deem
appropriate, provided, however, that no such amendment shall be made, which
would, without approval of the shareholders:
a. materially modify the eligibility requirements for receiving
Options;
b. increase the aggregate number of Shares of Common Stock which may
be issued pursuant to Options granted under the Plan, except as is provided
for in accordance with Article VIII of the Plan;
c. increase the number of shares of Common Stock which may be issued
pursuant to Options granted to an Optionee in any calendar year, except as
is provided for in accordance with Article VIII of the Plan;
d. reduce the minimum Option Price, except as is provided for in
accordance with Article VIII of the Plan;
e. extend the period of granting Options; or
f. materially increase in any other way the benefits accruing to
Optionees.
9.2. No amendment, suspension or termination of this Plan shall, without
the Optionee's consent, alter or impair any of the rights or obligations under
any Option theretofore granted to an Optionee under the Plan.
9.3. The Board may amend this Plan, subject to the limitations cited
above, in such manner as it deems necessary to permit the granting of Options
meeting the requirements of future amendments or issued regulations, if any, to
the Code.
ARTICLE X
GOVERNMENT AND OTHER REGULATIONS
10.1. The obligation of the Company to issue or transfer and deliver shares
for Options exercised under the Plan shall be subject to all applicable laws,
regulations, rules, orders and approvals which shall then be in effect and
required by governmental entities and the stock exchanges on which Common Stock
is traded.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1. PLAN DOES NOT CONFER EMPLOYMENT OR SHAREHOLDER RIGHTS: The right of
the Employer to terminate (whether by dismissal, discharge, retirement or
otherwise) the Optionee's employment with it at any time at will, or as
otherwise provided by any agreement between the Company and the Optionee, is
specifically reserved. Neither the Optionee nor any person entitled to exercise
the Optionee's rights in the event of the Optionee's death shall have any rights
of a shareholder with respect to the shares subject to each Option, except to
the extent that, and until, such shares shall have been issued upon the exercise
of each Option.
11.2. PLAN EXPENSES: Any expenses of administering this Plan shall be
borne by the Company.
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11.3. USE OF EXERCISE PROCEEDS: Payments received from Optionees upon the
exercise of Options shall be used for the general corporate purposes of the
Company, except that any stock received in payment may be retired, or retained
in the Company's treasury and reissued.
11.4. INDEMNIFICATION: In addition to such other rights of indemnification
as they may have as members of the Board or the Committee, the members of the
Committee and the Board shall be indemnified by the Company against all costs
and expenses reasonably incurred by them in connection with any action, suit or
proceeding to which they or any of them may be party by reason of any action
taken or failure to act under or in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except a judgment based upon a finding of bad faith;
provided that upon the institution of any such action, suit or proceeding a
Committee or Board member shall, in writing, give the Company notice thereof and
an opportunity, at its own expense, to handle and defend the same before such
Committee or Board member undertakes to handle and defend it on such member's
own behalf.
ARTICLE XII
SHAREHOLDER APPROVAL AND EFFECTIVE DATES
12.1. The Plan shall become effective when it is approved by the
shareholders of Harley-Davidson, Inc. at a shareholders meeting by the requisite
vote under New York Stock Exchange Rules, Internal Revenue Code Section 162(m)
and Rule 16b-3 under the Securities Exchange Act of 1934. Options may not be
granted under the Plan after April 26, 2005.
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