EXHIBIT 4.1
CONVERSE INC.
1994 STOCK OPTION PLAN
(As Amended and Restated as of February 25, 1998)
A. Objectives of the Plan.
The Converse Inc. 1994 Stock Option Plan (the "Plan") of Converse Inc.
(the "Corporation") is intended to encourage and provide opportunities for
ownership of the Corporation's Common Stock by such key employees (including
officers) of the Corporation and any subsidiaries of the Corporation, and
persons providing bona fide consulting or advisory services to the Corporation
and any subsidiaries (other than in connection with the offer or sale of
securities of the Corporation in a capital raising transaction) ("consultants")
as the Board of Directors of the Corporation (the "Board") or a committee
thereof constituted for this purpose may from time to time determine. The Plan
is also intended to provide incentives for such employees and consultants to put
forth maximum efforts for the successful operation of the Corporation and its
subsidiaries. By extending to such key employees and consultants the
opportunity to acquire proprietary interests in the Corporation and to
participate in its success, the Plan may be expected to benefit the Corporation
and its shareholders by making its possible for the Corporation and its
subsidiaries to attract and retain the best available talent and by providing
such key employees and consultants with added incentives to increase the value
of the Corporation's stock.
B. Grants and Stock Subject to the Plan.
Awards under the Plan may consist of grants of nonqualified stock
options as described in Section 6, incentive stock options as described in
Section 7, and restricted stock as described in Section 8. All grants shall be
subject to the terms and conditions set forth herein and to such other terms and
conditions consistent with this Plan as the Committee deems appropriate and as
are specified in writing by the Committee to the individual in a grant
instrument or an amendment to the grant instrument. The Committee shall approve
the form and provisions of each grant instrument. Grants under a particular
section of the Plan need not be uniform as among the grantees.
There are reserved for issue under the Plan 3,300,000 shares of the
Common Stock, without nominal or per value, of the Corporation (the "Shares").
Such Shares may be, in whole or in part, as the Board shall from time to time
determine, authorized but unissued Shares, or issued Shares which shall have
been reacquired by the Corporation. The maximum number of Shares with respect
to which options may be granted to any individual during any calendar year is
500,000 and the maximum number of Shares with respect to which options may be
granted to any individual during the term of the Plan is 750,000. Similarly,
the maximum number of shares of restricted stock that may be granted to any
individual during any calendar year is 500,00 and the maximum number of Shares
with respect to which options may be granted to any individual during the term
of the Plan is 750,000.
C. Administration.
Subject to the express provisions of the Plan, the Plan shall be
administered by the Executive Compensation and Stock Option Committee of the
Board (the "Committee"), and the Committee shall have
plenary authority, in its discretion, to determine the individuals to whom, and
the time or times at which, options, if any, shall be granted, the type of
option to be granted (e.g., incentive or nonqualified) and the number of Shares
to be subject to an option. Subject to the express provisions of the Plan, the
Committee shall also have the plenary authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations regarding it, and to take
whatever action is necessary to carry out the purposes of the Plan. The
Committee's determinations or matters referred to in this Section 3 shall be
conclusive.
D. The Committee.
The Committee shall consist of three or more members of the Board.
The Committee shall be appointed by the Board, which may from time to time
designate the number to serve on the Committee, appoint members of the Committee
in substitution for members previously appointed and fill vacancies, however
caused, in the Committee. No member of the Board while a member of the
Committee shall be eligible to receive an option under the Plan. The Committee
shall elect one of is members as its Chairman and shall hold its meetings at
such times and places as it may determine. A majority of the members shall
constitute a quorum. Any determination reduced to writing and signed by all the
members of the Committee shall be fully as effective as if it had been made by a
majority vote at a meeting duly called and held. The Committee may appoint a
secretary, shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
1. Eligibility.
Options may be granted only to key employees (which term as used
herein includes officers) of, and consultants to, the Corporation and of its
subsidiary corporations (the "Subsidiaries") as the term "subsidiary
corporation" is define in Section 424(f) of the Internal Revenue Code of 1986,
as amended, (the "Code"). For the purposes of the Plan the term "employee"
shall be an individual with an "employment relationship" as defined in Section
421 (Treasury Regulation Section 1.421-7(h)) of the Code. A member of the Board
or of the board of directors of a subsidiary who is not also an employee of an
consultant to the Corporation or of one of its subsidiaries shall not be
eligible to receive an option. Nothing contained in the Plan shall be construed
to limit the right of the Corporation to grant options otherwise than under the
Plan in connection with (i) the employment of any person, (ii) the acquisition,
by purchase, lease, merger, consolidation or otherwise, of the business or
assets of another corporation, firm or association, including grants to
employees thereof who become employees of the Corporation or a subsidiary, or
(iii) other proper corporate purposes.
2. Nonqualified Stock Options.
Unless it is designated an incentive stock option by the Committee,
any option granted under the Plan shall be nonqualified and shall be in such
form as the Committee may from time to time approve. Any such nonqualified stock
option shall be subject to the following terms and conditions and shall contain
such additional terms and conditions, not inconsistent with the provisions of
the Plan, as the Committee shall deem desirable:
a. Option Price. The option price of Shares purchasable under
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an option shall be determined by the Committee in accordance
with procedures established by the Committee.
b. Option Period. The term of an option shall be fixed by the
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Committee, but no option shall be exercisable after the
expiration of ten years from the date the option is granted.
c. Exercisability. Option shall be exercisable at such time or
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times as determined by the Committee at or subsequent to
grant; provided, however, that except as provided in
Subsections (f), (g) and (h) of this Section 6, no option
may be exercised at any time unless the holder is then
regular employee of, or consultant to, the Corporation or a
subsidiary and has continuously remained and employee or
consultant at all times since the date of granting of the
option. If any option granted under the Plan shall expire
or terminate for any reason without ever having been
exercised in full, the unissued shares subject thereto shall
again be available for the purposes of the Plan. The
proceeds of the sale of Shares subject to options are to be
added to the general funds of the Corporation.
d. Method of Exercise. Options which are exercisable may be
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exercised in whole or in part at any time during the option
period, by completing and delivering to the Corporation an
option exercise from provided by the Corporation specifying
the number of Shares to be purchased. Such form shall be
accompanied by payment in full of the purchase price in
cash. No shares shall be issued until full payment therefor
has been made.
e. Transferability of Options. No option shall be transferable
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by the optionee otherwise that as set forth below or by will
or by the laws of descent and distribution, and such options
shall be exercisable, during the optionee's lifetime, only
by the optionee. Notwithstanding the foregoing, if the
Committees in its sole discretion so permits, an optionee
may transfer a nonqualified stock option to the optionee's
spouse, parents or lineal descendants or to a trust for the
benefit of such family members or to a partnership in which
such family members are the only partners; provided that the
option shall continue to be subject to the same terms and
conditions as were applicable thereto immediately prior to
the transfer.
f. Termination by Reason of Death. If an optionee's
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employment, or engagement as a consultant, by the
Corporation or any subsidiary terminates by reason of death,
as to those Shares with respect to which the option had
become exercisable (under the provisions of the particular
option) on the date of death, the stock option may
thereafter be exercised by the legal representative of the
estate or by the legatee of the optionee under the will of
the optionee, during a period of one year (six month in the
case of options granted before July 30, 1997) from the date
of such death or until the expiration of the stated period
of the option, whichever period is shorter.
g. Terminating by Reason of Retirement or Permanent Disability.
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If an optionee's employment, or engagement as a consultant,
by the Corporation
or any subsidiary terminates by reason of retirement or
permanent disability, as to those Shares with respect to
which the option had become exercisable (under provisions of
the particular option) on the date of termination of
employment or such engagement, any stock option held by such
optionee may thereafter be exercised for a period of one
year following such date (or until three months following
such date in the case of options granted before July 30,
1997); provided, however, that if the optionee dies within
such period, any unexercised stock options held by such
optionee shall thereafter be exercisable, to the extent it
was exercisable at the time of death, for a period of one
year (six months in the case of options granted before July
30, 1997) from the date of such death or for the stated term
of the option, whichever period is shorter.
h. Other Termination. If an optionee's employment, or
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engagement as a consultant, terminates for any reason other
than death, permanent disability, or retirement, as to those
Shares with respect to which the option had become
exercisable (under the provisions of the particular option)
on the date of termination of employment or engagement as a
consultant, any option held by such optionee may thereafter
be exercised during the period of one month from the date of
such termination of employment or the expiration of the
stated period of the option, whichever period is shorter;
provided, however, that if the optionee dies within such
one-month period, any unexercised option held by such
optionee shall thereafter be exercisable, to the extent to
which it was exercisable at the time of death, for a period
of six months from the date of such death or for the stated
period of the option, whichever period is shorter.
i. Option Buy out. The Committee may at any time offer to
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repurchase an option, other than an option which has been
held for less than six months by an optionee who is subject
to Section 16(b) of the Securities Exchange Act of 1934, the
("1934 Act"), based on such terms and conditions as the
Committee shall establish and Communicate to the optionee at
the time that such offer is made.
E. Incentive Stock Option.
Any option granted under the Plan shall, at the discretion of the
Committee, qualify as an incentive stock option as defined in Section 422(b) of
the Code and shall be in such form as the Committee may from time to time
approve. Any such incentive sock option shall be subject to the following terms
and conditions in addition to those set forth in Section 6 and shall contain
such additional terms and conditions, not inconsistent with the provisions of
the Plan, as the Committee shall deem desirable.
1. Eligibility. Incentive stock options shall not be granted to any
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individual who, at the time the option is granted, owns stock
possessing more than ten percent of the total combined voting
power of all classes of stock of the Corporation or its parent
corporation (as the term "parent corporation" is defined in
Section 424(e) of the Code) or its subsidiaries (a "Ten Percent
Shareholder") unless: 1) the option price
is at least 110% of the fair market value of the Shares subject
to the option, and 2) the option states that it is not
exercisable after the expiration of five years from the date the
option is granted. Incentive stock options shall not be granted
to a person who is not a Ten Percent Shareholder unless the
option price is at least 100% of the faire market value of the
Shares subject to the option on the date the option is granted.
a. Limitation on Exercise of Options. The maximum aggregate
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fair market value (determined at the time an option is
granted) of the Shares with respect to which incentive stock
options are exercisable for the first time by any optionee
during any calendar year (under all plans of the Company and
its parent corporation and subsidiaries) shall not exceed
$100,000. If the foregoing $100,000 limit is exceeded with
respect to an incentive stock option on account of the
acceleration of the exercise of the option pursuant to
Section 9 of the Plan, the portion of the incentive stock
option in excess of the $100,000 limit shall be treated as a
nonqualified stock option. If the provisions of this
Section limit the exercisability of certain incentive stock
options which would otherwise become exercisable on account
of termination of employment, the Committee, in its sole
discretion, shall determine the times at which such
incentive stock options become exercisable so that the
provisions of this Section 7(b) are not violated; provided,
that in no event shall any incentive stock option be
exercisable more than ten years from the date it is granted
(five years in the case of incentive stock options granted
to Ten Percent Shareholders (described in Section 7(a)).
2. Restricted Stock Grants.
The Committee may issue or transfer shares of Corporation stock
to an employee under a grant of restricted stock, upon such terms as the
Committee deems appropriate. The following provisions are applicable to
restricted stock:
a. General Requirements. Shares of Corporation stock issued or
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transferred pursuant to restricted stock grants may be
issued or transferred for consideration or for no
consideration, as determined by the Committee. The Committee
may establish conditions under which restrictions on shares
of restricted stock shall lapse over a period of time or
according to such other criteria as the Committee deems
appropriate. The period of time during which the restricted
stock will remain subject to restrictions will be designated
in the grant instrument as the "Restriction Period."
b. Number of Shares. The Committee shall determine the number
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of shares of Corporation stock to be issued or transferred
pursuant to a restricted stock grant and the restrictions
applicable to such shares.
c. Requirement of Employment or Service. If the grantee ceases
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to be employed by, or provide service to, the Corporation
during a period
designated in the grant instrument as the Restriction
Period, or if other specified conditions are not met, the
restricted stock grant shall terminate as to all shares
covered by the grant as to which the restrictions have not
lapsed, and those shares of Corporation stock must be
immediately returned to the Corporation. The Committee may,
however, provide for complete or partial exceptions to this
requirement as it deems appropriate.
d. Restrictions on Transfer and Legend on Stock Certificate.
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During the Restriction Period, a grantee may not sell,
assign, transfer, pledge or otherwise dispose of the shares
of restricted stock except to a successor grantee under
subsection (g). Each certificate for a share of restricted
stock shall contain a legend giving appropriate notice of
the restrictions in the grant. The grantee shall be
entitled to have the legend removed from the stock
certificate covering the shares subject to restrictions when
all restrictions on such shares have lapsed. The Committee
may determine that the Corporation will not issue
certificates for shares of restricted stock until all
restrictions on such shares have lapsed, or that the
Corporation will retain possession of certificates for
shares of restricted stock until all restrictions on such
shares have lapsed.
e. Right to Vote and to Receive Dividends. Unless the
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Committee determines otherwise, during the Restriction
Period, the grantee shall have the right to vote shares of
restricted stock and to receive any dividends or other
distributions paid on such shares, subject to any
restrictions deemed appropriate by the Committee.
f. Lapse of Restrictions. All restrictions imposed on
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restricted stock shall lapse upon the expiration of the
applicable Restriction Period and the satisfaction of all
conditions imposed by the Committee. The Committee may
determine, as to any or all restricted stock grants, that
the restrictions shall lapse without regard to any
Restriction Period. Further, all restrictions on restricted
stock grants shall automatically lapse upon the occurrence
of Change of Control (as defined under Section 9).
g. Nontransferability of Restricted Stock Grants. Except as
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provided below, only the grantee may exercise rights under a
restricted stock grant during the grantee's lifetime. A
grantee may not transfer those rights except by will or by
the laws of descent and distribution. When a grantee dies,
the personal representative or other person entitled to
succeed to the rights of the grantee may exercise such
rights. A successor grantee must furnish proof satisfactory
to the Corporation of his or her right to receive the grant
under the grantee's will or under the applicable laws of
descent and distribution.
3. Adjustment Upon Changes in Capitalization, Etc.
The aggregate number and class of share reserved under the Plan
and with respect to which options may be granted to any individual, the
number and class of shares subject to each option granted pursuant to the
Plan and the option price per Share payable under each such option shall be
appropriately and equitably adjusted in the event of any reclassification
or increase or decrease in the number of the issued Shares of the
Corporation by reason of a split-up or consolidation of Shares; the payment
of a stock dividend; a recapitalization; a combination or exchange of
Shares; a spin-off; or any like capital adjustment.
Subject to the next paragraph, if the Corporation shall be
reorganized or shall be merged with or into or consolidated with any other
corporation, or shall set all or substantially all of its assets or effect
a complete liquidation, each option, if any, then outstanding under the
Plan, shall thereafter apply to such number and kind of securities, cash or
other property as would have been issuable by reason of such
reorganization, merger, consolidation, sale or liquidation to a holder of
the number of Shares which were subject to the option, if any, immediately
prior to such transaction.
If the event of a proposed transaction of the type set forth in
the preceding paragraph, the Committee may determine that each option then
outstanding under the Plan, shall terminate as of a date to be fixed by the
Committee and approved by the Board upon not less than thirty days' written
notice to the optionee; and may further determine when and to the extent
that, any option granted at least six months prior to such event to any
optionee who has been an employee or consultant for one year or more prior
to the date of such notice, shall be accelerated and such optionee shall be
entitled to exercise such option without regard to any installment
provision of the option prior to the termination date fixed in said notice;
provided, however, that in no event shall the Committee have the right to
make any determination provided for in this paragraph, if doing so would
make any transaction ineligible for pooling of interest accounting
treatment under APB No. 16 or any successor provision that but for such
determination would be eligible for such treatment.
All adjustments under this Section 9 shall be made by the
Committee, subject to the approval of the Board, which action shall be
final and conclusive.
Anything to the contrary notwithstanding, upon a Change of
Control (as hereinafter defined) and, in the case of options granted on or
after April 1, 1996, subsequent termination of an optionee's employment by
the Corporation or by the optionee as a result of a material breach by the
Corporation of any employment agreement between the optionee and the
Corporation, each option granted prior to such Change of Control shall
become immediately exercisable in full. As used herein, "Change of
Control" shall mean any of the following events:
a. The acquisition (other than (i) from the Corporation of
INTERCO INCORPORATED or (ii) by Apollo (as hereinafter
defined)) by any
person, entity or "group", within the meaning of Section
13(d)(3) or 14(d)(2) of the 1934 Act, excluding, for this
purpose, the Corporation of its subsidiaries, or any
employee benefit plan of the Corporation or its
subsidiaries, of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the 1934 Act) of 20% or more of
either the then outstanding Shares or the combined voting
power of the Corporation's then outstanding voting
securities entitled to vote generally in the election of
directors if the beneficial ownership of such person, entity
or "group" exceeds the beneficial ownership of Shares and
the combined voting power of the Corporation's then
outstanding securities entitled to vote generally in the
election of directors held by any person or entity that
acquired such Shares or securities having such voting power
from the Corporation and by Apollo; or
b. Individuals who, as of the Effective Date (as defined in
Section 13), constitute the Board (as of such date, the
"Incumbent Board"), cease for any reason to constitute at
least a majority of the Board; provided, that any person
becoming a director subsequent to the first anniversary of
the Effective Date whose election, or nomination for
election by the Corporation's stockholders, was approved by
a vote of at least majority of the directors then
compromising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of
office is in connection with an actual or threatened
election contest relating to the election of the directors
of the Corporation, as such terms are sued in Rule 14a-11 of
Regulation 14A promulgated under the 1934 Act) shall be
considered as though such person were a member of the
Incumbent Board; or
c. Approval by the stockholders of the Corporation of a
reorganization, merger or consolidation, in each case, with
respect to which persons who were the stockholders of the
Corporation immediately prior to such reorganization, merger
or consolidation do not, immediately thereafter, own,
directly or indirectly, more than 50% of the combined voting
power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated
company's then outstanding voting securities, or a
liquidation or dissolution of the Corporation or the sale of
all or substantially all of the assets of the Corporation,
in each case, unless the transaction was approved by a
majority of the directors then comprising the Incumbent
Board.
For purposes of the definition of "Change of Control", the term
"Apollo" shall mean Apollo Advisors, L.P. and Lion Advisors, L.P. and any
entity that controls, is controlled by or is under common control with
Apollo Advisors, L.P. and Lion Advisors, L.P., including accounts under
common management.
4. Amendments and Termination.
The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made which would impair
the rights of an optionee under an option without the optionee's consent,
or which without the approval of the stockholders would, except as is
provided in Section 9, increase the total number of Shares reserved for the
purpose of the Plan, change the employees or class of employees and
consultants eligible to participant in the Plan, or extend the maximum
option period under Section 6(b).
The Committee may amend the terms of any option theretofore
granted, prospectively or retroactively, but no such amendment shall impair
the rights of any optionee without the consent of the optionee. The
Committee may also substitute new options for previously granted options,
including substitution for previously granted options having higher option
prices.
5. General Provisions.
a. The Committee may require each person purchasing Shares
pursuant to an option under the Plan to represent to and
agree with the Corporation in writing that the optionee is
acquiring the Shares without a view to distribution thereof.
The certificates for such Shares may include any legend
which the Committee deems appropriate to reflect any
restrictions on transfer.
b. All certificates for Shares delivered under the Plan shall
be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of the Securities
and Exchange Commission, any stock exchange upon which the
Shares are then listed, and any applicable federal or state
securities law, and the Committee may cause a legend or
legends to be put on any such certificates to make
appropriate reference to such restrictions.
c. Nothing contained in the Plan shall prevent the Board from
adopting other or additional compensation arrangements,
subject to stockholder approval if such approval is
required; and such arrangements may be either generally
applicable or applicable only in specific cases.
6. Withholding of Taxes.
a. Required Withholding. All grants under the Plan shall be
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subject to applicable federal (including FICA), state and
local tax withholding requirements. The Corporation shall
have the right to deduct from all grants paid in cash, or
from other wages paid to the grantee, any federal, state or
local taxes required by law to be withheld with respect to
such Grants. In the case of options and other grants paid
in Corporation stock, the Corporation may require the
grantee or other person receiving such
shares to pay to the Corporation the amount of any such
taxes that the Corporation is required to withhold with
respect to such grants, or the Corporation may deduct from
other wages paid by the Corporation the amount of any
withholding taxes due with respect to such grants.
b. Election to Withhold Shares. If the Committee so permits, a
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grantee may elect to satisfy the Corporation's income tax
withholding obligation with respect to an option, or
restricted stock paid in Corporation stock by having Shares
withheld up to an amount that does not exceed the grantee's
minimum applicable withholding tax rate for federal
(including FICA), state and local tax liabilities. The
election must be in a form and manner prescribed by the
Committee and shall be subject to the prior approval of the
Committee.
7. Effective Date of Plan.
The Plan became effective on October 19, 1994 the date it was
adopted by the Board and by the Company's then sole stockholder (the
"Effective Date"). The Plan as amended and restated became be effective as
of April 1, 1996. The Plan as further amended and restated herein shall be
effective May 11, 1998, subject to stockholder approval.
8. Term of Plan.
No option shall be granted pursuant to the Plan more than 10
years after the Effective Date, but options theretofore granted may extend
beyond and be exercised after that date.