URBAN OUTFITTERS, INC.
1997 STOCK OPTION PLAN
DRAFTED BY
DRINKER BIDDLE & REATH
PHILADELPHIA NATIONAL BANK BUILDING
1345 CHESTNUT STREET
PHILADELPHIA, PA 19107-3496
MARCH 1997
TABLE OF CONTENTS
Page
SECTION 1 - Purpose and Definitions.................................. 1
SECTION 2 - Administration........................................... 4
SECTION 3 - Eligibility.............................................. 4
SECTION 4 - Stock.................................................... 5
SECTION 5 - Granting of Options...................................... 5
SECTION 6 - Annual Limit............................................. 6
SECTION 7 - Options for Non-Employee Directors....................... 6
SECTION 8 - Terms and Conditions of Options for Key
Employees and Consultants................................10
SECTION 9 - Option Agreements - Other Provisions.....................15
SECTION 10 - Capital Adjustments.....................................16
SECTION 11 - Amendment or Discontinuance of the Plan.................17
SECTION 12 - Termination of Plan.....................................18
SECTION 13 - Shareholder Approval....................................19
SECTION 14 - Miscellaneous...........................................19
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URBAN OUTFITTERS, INC.
1997 STOCK OPTION PLAN
SECTION 1 - Purpose and Definitions
(a) Purpose. This URBAN OUTFITTERS, INC. 1997 STOCK OPTION PLAN is intended to
provide a means whereby URBAN OUTFITTERS, INC. may, through the grant of Options
to purchase Common Stock to Key Employees and Consultants, attract and retain
such Key Employees and Consultants, and motivate such Key Employees and
Consultants to exercise their best efforts on behalf of the Company and of any
Related Corporation. Moreover, the Company may, through the grant of
Non-Qualified Stock Options to Non-Employee Directors under a formula, attract
and retain Non-Employee Directors and motivate such Non-Employee Directors to
exercise their best efforts on behalf of the Company and any Related
Corporation.
(b Definitions.
(1) Board. The term "Board" shall mean the Board of Directors of the
Company.
(2) Common Stock. The term "Common Stock" shall mean the common
stock of the Company, par value $0.0001 per share.
(3) Code. The term "Code" shall mean the Internal Revenue Code of
1986, as amended.
(4) Committee. The term "Committee" shall mean a committee which
consists of not fewer than two (2) directors of the Company who are
Outside Directors. The members of the Committee shall be appointed by,
and serve at the pleasure of, the Board.
(5) Company. The term "Company" shall mean Urban Outfitters, Inc.
(6) Consultant. The term "Consultant" shall mean an individual who
is not an employee of the Company or a Related Corporation, and who has
entered into a consulting arrangement with the Company or a Related
Corporation.
(7) Fair Market Value. The term "Fair Market Value" shall mean the
fair market value of the optioned shares of Common Stock, which
shall be arrived at by a good faith determination of the Committee and
shall be:
(A) The arithmetic average of the highest and lowest quoted
selling price, if there is a market for the Common Stock on a
registered securities exchange or in an over the counter market,
on the date of grant; or
(B) Such other method of determining fair market value as shall
be authorized by the Code, or the rules or regulations thereunder,
and adopted by the Committee.
(8) Incentive Stock Option. The term "Incentive Stock Option"
("ISO") shall mean an option which, at the time such option is granted
under the Plan, qualifies as an ISO within the meaning of section 422
of the Code and is designated as an ISO in the Option Agreement.
(9) Key Employees. The term "Key Employees" shall mean officers and
other key employees of the Company or a Related Corporation.
(10) Non-Employee Directors. The term "Non-Employee Directors" shall
mean directors of the Company who:
(A) Are not employees of the Company or any Related
Corporation; and
(B) Have not been employees of the Company or any Related
Corporation during the immediately preceding 12-month period.
(11) Non-Qualified Stock Option. The term "Non-Qualified Stock
Option" ("NQSO") shall mean an option which, at the time such option is
granted, does not qualify as an ISO, and/or is designated as an NQSO in
the Option Agreement.
(12) Option Agreement. The term "Option Agreement" shall mean a
written document evidencing the grant of an Option, as described in
Section 9.
(13) Optionee. The term "Optionee" shall mean a Key Employee or
Consultant to whom an Option has been granted.
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(14) Options. The term "Options" shall mean Incentive Stock Options
and Non-Qualified Stock Options.
(15) Outside Director. The term "Outside Director" shall mean a
director who:
(A) Is not currently an officer (as defined in 17 CFR
240.16a-1(f)) of, or otherwise currently employed by, the Company
or a parent or subsidiary of the Company within the meaning of 17
CFR 240.16b-3(b)(3),
(B) Does not receive compensation, either directly or
indirectly, from the Company or a parent or subsidiary of the
Company within the meaning of 17 CFR 240.16b-3(b)(3) for services
rendered as a consultant or in any other capacity other than as a
director, except for an amount that does not exceed the dollar
amount for which disclosure would be required under 17 CFR
229.404(a),
(C) Does not possess an interest in any other transaction for
which disclosure would be required pursuant to 17 CFR 229.404(a),
(D) Is not engaged in a business relationship for which
disclosure would be required pursuant to 17 CFR 229.404(b), and
(E) Is an outside director within the meaning of Treas. Reg.
(section)1.162-27(e)(3), or any successor thereto.
(16) Plan. The term "Plan" shall mean the Urban Outfitters, Inc.
1997 Stock Option Plan, as set forth herein and as amended from time to
time.
(17) Related Corporation. The term "Related Corporation" shall mean
either a corporate subsidiary of the Company, as defined in section
424(f) of the Code or the corporate parent of the Company, as defined
in section 424(e) of the Code.
Notwithstanding Sections 1(b)(8) and (11) if an Option granted to a Key
Employee is not designated in the Option Agreement as an ISO or NQSO, the option
shall constitute an ISO if it complies with the terms of Section 422 of the
Code, and otherwise, it shall constitute an NQSO.
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SECTION 2 - Administration
The Plan shall be administered by the Committee. Each member of the
Committee, while serving as such, shall be deemed to be acting in his or her
capacity as a director of the Company.
The Committee shall have full authority, subject to the terms of the
Plan, to select the Key Employees to be granted ISOs and/or NQSOs under the
Plan, to select the Consultants to be granted NQSOs under the Plan, to grant
Options on behalf of the Company and to set the date of grant and the other
terms of such Options. The Committee may correct any defect, supply any omission
and reconcile any inconsistency in this Plan and in any Option granted hereunder
in the manner and to the extent it shall deem desirable. The Committee also
shall have the authority to establish such rules and regulations, not
inconsistent with the provisions of the Plan, for the proper administration of
the Plan, and to amend, modify or rescind any such rules and regulations, and to
make such determinations and interpretations under, or in connection with, the
Plan, as it deems necessary or advisable. All such rules, regulations,
determinations and interpretations shall be binding and conclusive upon the
Company, its shareholders and all employees, and upon their respective legal
representatives, beneficiaries, successors and assigns and upon all other
persons claiming under or through any of them.
Notwithstanding the foregoing, the terms and conditions of grants of
NQSOs to Non-Employee Directors are intended to be fixed in advance.
Consequently, the grants of NQSOs to Non-Employee Directors shall be as set
forth in Section 7 and neither the Committee nor the Board shall have any
discretionary authority with respect thereto.
No member of the Board or the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Option
granted under it.
SECTION 3 - Eligibility
Key Employees shall be eligible to receive Options under the Plan. Non-
Employee Directors shall be eligible to receive NQSOs (but not ISOs) pursuant to
Section 7. Consultants shall be eligible to receive NQSOs (but not ISOs)
pursuant to Section 8. More than one Option may be granted to a Key Employee,
Non-Employee Director or Consultant under the Plan.
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SECTION 4 - Stock
Options may be granted under the Plan to purchase up to a maximum of
one million two hundred and fifty thousand (1,250,000) shares of Common Stock
subject to adjustment as hereinafter provided; provided, however, that no Key
Employee shall receive Options for more than four hundred thousand (400,000)
shares of Common Stock over the life of the Plan. Shares issuable under the Plan
may be authorized but unissued shares or reacquired shares, and the Company may
purchase shares required for this purpose, from time to time, if it deems such
purchase to be advisable.
If any Option granted under the Plan expires or otherwise terminates
for any reason whatever (including, without limitation, the Key Employee's, Non-
Employee Director's or Consultant's surrender thereof) without having been
exercised, the shares subject to the unexercised portion of such Option shall
continue to be available for the granting of Options under the Plan as fully as
if such shares had never been subject to an Option; provided, however, that (a)
if an Option is cancelled, the cancelled Option is counted against the maximum
number of shares for which Options may be granted to a Key Employee, and (b) if
the Option price is reduced after the date of grant, the transaction is treated
as a cancellation of an Option and the grant of a new Option for purposes of
counting the maximum number of shares for which Options may be granted to a Key
Employee.
SECTION 5 - Granting of Options
From time to time until the expiration or earlier suspension or
discontinuance of the Plan, the Committee may, on behalf of the Company, grant
to Key Employees and Consultants under the Plan such Options as it determines
are warranted; provided, however, that grants of ISOs and NQSOs shall be
separate and not in tandem; and further provided that Consultants shall not be
eligible to receive grants of ISOs. The granting of an Option under the Plan
shall not be deemed either to entitle the Key Employee or Consultant to, or to
disqualify the Key Employee or Consultant from, any participation in any other
grant of Options under the Plan. In making any determination as to whether a Key
Employee or Consultant shall be granted an Option and as to the number of shares
to be covered by such Option, the Committee shall take into account the duties
of the Key Employee or Consultant, his or her present and potential
contributions to the success of the Company or a Related Corporation, and such
other factors as the Committee shall deem relevant in accomplishing the purposes
of the Plan. Moreover, the Committee may provide in a Key Employee's or
Consultant's Option Agreement that said Option may be exercised only if certain
conditions, as determined by the Committee, are fulfilled.
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The Committee shall grant NQSOs to Non-Employee Directors in accordance
with Section 7.
SECTION 6 - Annual Limit
(a) ISOs. The aggregate Fair Market Value (determined as of the date
the ISO is granted) of the Common Stock with respect to which ISOs are
exercisable for the first time by a Key Employee during any calendar
year (under this Plan and any other ISO plan of the Company or a
Related Corporation) shall not exceed one hundred thousand dollars
($100,000).
(b) NQSOs. The annual limit set forth above for ISOs shall not apply
to NQSOs.
SECTION 7 - Options for Non-Employee Directors
(a) Granting of NQSOs to Non-Employee Directors
(1) Initial Grant. An NQSO to purchase 10,000 shares of Common
Stock (as adjusted pursuant to Section 10) automatically shall be
granted to a Non-Employee Director, who was not a Non-Employee
Director prior to the Company's 1998 annual shareholders' meeting,
on the date he or she becomes a Non-Employee Director, whether by
reason of his or her election by shareholders or appointment by the
Board to be a director, or, if applicable, the expiration of the
12-month period specified in Section 1(b)(10)(B) with respect to a
present or future director who had previously been an employee of
the Company or any Related Corporation; provided, that if a
Non-Employee Director who previously received an NQSO grant under
Section 5(a) of the Urban Outfitters, Inc. 1993 Non-Employee
Directors' Non-Qualified Stock Option Plan or Section 7(a)(1) of
this Plan terminates service as a director and is subsequently
elected or appointed to the Board again, such director shall not be
eligible to receive an NQSO grant under this Section 7(a)(1).
(2) Subsequent Grants. In addition to the initial grant, pursuant
to Section 5(a) of the Urban Outfitters, Inc. 1993 Non-Employee
Directors' Non-Qualified Stock Option Plan or Section 7(a)(1) of
this Plan, on the first business day immediately following each of
the dates on which an incumbent Non-Employee Director is elected or
re-elected to the Board by shareholders subsequent to the 1997
annual shareholders' meeting, he or she shall automatically be
granted an NQSO
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to purchase 10,000 shares of Common Stock (as adjusted pursuant to
Section 10), except that in the case of the first election or
re-election following the date of the Non-Employee Director's
initial election or appointment to the Board, no grant shall be
made on account of such first election or re-election unless at
least six months have elapsed since such initial election or
appointment.
(b) Terms and Conditions of Options. Options granted to Non-
Employee Directors shall expressly specify that they are NQSOs. In addition,
such NQSOs shall include expressly or by reference the following terms and
conditions, as well as such other provisions not inconsistent with the
provisions of the Plan:
(1) Number of Shares. A statement of the number of shares of
Common Stock to which the NQSO pertains.
(2) Price. A statement of the NQSO exercise price, which shall be
the higher of one hundred percent (100%) of the Fair Market Value
per share of the Common Stock, or the par value thereof, on the date
the NQSO is granted.
(3) Term. Subject to earlier termination as provided in Section
7(b)(5), (6), and (7) and Section 10 below, the term of each NQSO
granted under this Section 7 shall be ten (10) years from the date
of grant.
(4) Exercise. NQSOs granted under this Section 7 shall be
exercisable on the business day immediately preceding the annual
meeting of shareholders next succeeding the date of grant of such
NQSOs. Except as otherwise provided in Sections 7(b)(5), (6) and (7)
below, NQSOs shall only be exercisable by a Non-Employee Director
while he or she remains a director of the Company. Any NQSO shares,
the right to the purchase of which has accrued, may be purchased at
any time up to the expiration or termination of the NQSO.
Exercisable NQSOs may be exercised, in whole or in part, from time
to time by giving written notice of exercise to the Company at its
principal office, specifying the number of shares to be purchased
and accompanied by payment in full of the aggregate price for such
shares. Only full shares shall be issued under the Plan, and any
fractional share which might otherwise be issuable upon exercise of
an NQSO granted hereunder shall be forfeited.
The NQSO exercise price shall be payable:
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(A) In cash or its equivalent; or
(B) Unless in the opinion of counsel to the Company to do so
may result in a possible loss of an exemption from short-swing
profit liability, in whole or in part through the transfer of
Common Stock newly acquired upon exercise of the NQSO or Common
Stock previously acquired by the Non-Employee Director, provided
the previously acquired Common Stock so transferred has been held
by the Non-Employee Director for more than six (6) months on the
date of exercise.
In the event such NQSO exercise price is paid, in whole or in
part, with Common Stock, the portion of the NQSO exercise price so
paid shall equal the Fair Market Value of Common Stock so
surrendered (determined in accordance with Section 1(b)(7), but on
the date of exercise rather than on the date of grant).
(5) Expiration of Term or Removal as Director. If a Non-Employee
Director's service as a director of the Company terminates prior to
the expiration date fixed for his or her NQSO under this Section 7
for any reason (such as, without limitation, failure to be
re-elected by the Company's shareholders) other than by disability
or death, such NQSO may be exercised, to the extent of the number of
shares of Common Stock with respect to which he or she could have
exercised it on the date of such termination, by the Non-Employee
Director at any time prior to the earlier of:
(A) The expiration date specified in such NQSO; or
(B) One (1) year after the date of such termination of service
as a director.
(6) Exercise upon Disability of Non-Employee Director. If a
Non-Employee Director shall become disabled (within the meaning of
Section 22(e)(3) of the Code) during his or her term as a director
of the Company and, prior to the expiration date fixed for his or
her NQSO, his or her term as a director is terminated as a
consequence of such disability, such NQSO may be exercised, to the
extent of the number of shares of Common Stock with respect to which
the Non-Employee Director could have exercised it on the date of
such termination, by the Non-Employee Director at any time prior to
the earlier of:
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(A) The expiration date of such NQSO; or
(B) One (1) year after the date of such termination of service
as a director.
In the event of the Non-Employee Director's legal disability,
such NQSO may be so exercised by his or her legal representative.
(7) Exercise upon Death of Non-Employee Director. If a Non-
Employee Director shall die during his or her term as a director of
the Company and prior to the expiration date fixed for his or her
NQSO, or if a Non-Employee Director whose term as a director has
been terminated for any reason shall die following his or her
termination as a director, but prior to the earlier of:
(A) The expiration date fixed for his or her NQSO; or
(B) The expiration of the period determined under Section
7(b)(5) and (6) above;
such NQSO may be exercised, to the extent of the number of shares
with respect to which the Non-Employee Director could have exercised
it on the date of his or her death, by the Non-Employee Director's
estate, personal representative or beneficiary who acquired the
right to exercise such NQSO by bequest or inheritance or by reason
of the death of the Non-Employee Director, at any time prior to the
earlier of:
(i) The expiration date specified in such NQSO (which
may be the expiration date determined under Section 7(b)(5)
and (6) above); or
(ii) One (1) year after the date of death.
(c) Transferability. A Non-Employee Director may transfer an NQSO
granted pursuant to this Section 7 to (1) a member of his or her immediate
family, (2) a partnership of which the only partners are members of his or her
immediate family, or (3) a trust established solely for the benefit of his or
her immediate family members. Except as provided in the preceding sentence, or
by will or the laws of descent and distribution, NQSOs granted pursuant to this
Section 7 shall not be assignable or transferable by the Non-Employee Director,
and during the lifetime of the Non-Employee Director, the NQSO shall be
exercisable only by him or her or by his or her guardian or legal
representative. Any NQSO transferred by a Non-Employee Director shall not be
assignable or
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transferable by the transferee. If the Non-Employee Director is married at the
time of exercise and if the Non-Employee Director so requests at the time of
exercise, the certificate or certificates shall be registered in the name of the
Non-Employee Director and the Non-Employee Director's spouse, jointly, with
right of survivorship.
SECTION 8 - Terms and Conditions of Options for Key Employees and Consultants
The Options granted to Key Employees pursuant to the Plan shall
expressly specify whether they are ISOs or NQSOs; however, if the Option is not
designated in the Option Agreement as an ISO or NQSO, the Option shall
constitute an ISO if it complies with the terms of Section 422 of the Code, and
otherwise, it shall constitute an NQSO. The Options granted to Consultants
pursuant to the Plan shall expressly state that they are NQSOs. In addition, the
Options granted to Key Employees and Consultants pursuant to the Plan shall
include expressly or by reference the following terms and conditions, as well as
such other provisions not inconsistent with the provisions of this Plan and, for
ISOs granted under this Plan, the provisions of Section 422(b) of the Code, as
the Committee shall deem desirable:
(a) Number of Shares. A statement of the number of shares to
which the Option pertains.
(b) Price. A statement of the Option price which shall be
determined and fixed by the Committee in its discretion but shall
not be less than the higher of one hundred percent (100%) (one
hundred ten percent (110%) in the case of an ISO granted to a Key
Employee who is a more than ten percent (10%) shareholder as
discussed in (i) below) of the Fair Market Value per share of Common
Stock, or the par value thereof, on the date the Option is granted.
(c) Term. Subject to earlier termination as provided in
Subsections (e), (f) and (g) below and in Section 10 hereof, the
term of each Option shall be not more than ten (10) years (five (5)
years in the case of an ISO granted to a Key Employee who is a more
than ten percent (10%) shareholder as discussed in (i) below) from
the date of grant.
(d) Exercise.
(1) General. Options shall be exercisable in such installments
and on such dates, not less than six (6) months from the date of
grant, and not more than seven (7) years from the date of grant,
as the Committee may specify, provided that:
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(A) In the case of new Options granted in replacement for
Options (whether granted under the Plan or otherwise) held by
the Key Employee or Consultant, the new Options may be made
exercisable, if so determined by the Committee, in its
discretion, at the earliest date the replaced Options were
exercisable, but not earlier than three (3) months from the
date of grant of the new Options; and
(B) The Committee may accelerate the exercise date of any
outstanding Options (including, without limitation, the three
(3) month exercise date referred to in (A) above), in its
discretion, if it deems such acceleration to be desirable.
Any Option shares, the right to the purchase of which has
accrued, may be purchased at any time up to the expiration or
termination of the Option. Exercisable Options may be exercised,
in whole or in part, from time to time by giving written notice
of exercise to the Company at its principal office, specifying
the number of shares to be purchased and accompanied by payment
in full of the aggregate Option price for such shares. Only full
shares shall be issued under the Plan, and any fractional share
which might otherwise be issuable upon exercise of an Option
granted hereunder shall be forfeited.
(2) Manner of Payment. The Option price shall be payable:
(A) In cash or its equivalent;
(B) If the Committee, in its discretion, so provides in the
Option Agreement or, in the case of Options which are not
ISOs, if the Committee, in its discretion, so determines at or
prior to the time of exercise, in whole or in part, in Common
Stock previously acquired by the Optionee, provided that if
such shares of Common Stock were acquired through the exercise
of an ISO and are used to pay the Option price of an ISO, such
shares have been held by the Key Employee for a period of not
less than the holding period described in Section 422(a)(1) of
the Code on the date of exercise, or if such shares of Common
Stock were acquired through exercise of an NQSO or of an
Option under a similar plan or through exercise of an ISO and
are used to pay the Option price of an NQSO, such shares have
been held by the Optionee for a period of more than six (6)
months on the date of exercise;
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(C) If the Committee, in its discretion, so provides in the
Option Agreement or, in the case of Options which are not
ISOs, if the Committee, in its discretion, so determines at or
prior to the time of exercise, in whole or in part, in Common
Stock newly acquired by the Optionee upon exercise of such
Option (which shall constitute a disqualifying disposition in
the case of an Option which is an ISO);
(D) If the Committee, in its discretion, so provides in the
Option Agreement or, in the case of Options which are not
ISOs, if the Committee, in its discretion, so determines at or
prior to the time of exercise, in any combination of (A), (B)
and (C) above; or
(E) If the Committee, in its discretion, so provides in the
Option Agreement or, in the case of Options which are not
ISOs, if the Committee, in its discretion, so determines at or
prior to the time of exercise, by permitting the Optionee to
deliver a properly executed notice of exercise of the Option
to the Company and a broker, with irrevocable instructions to
the broker promptly to deliver to the Company the amount of
sale or loan proceeds necessary to pay the exercise price of
the Option.
In the event such Option price is paid, in whole or in part,
with shares of Common Stock, the portion of the Option price so
paid shall be equal to the Fair Market Value of Common Stock so
surrendered (determined in accordance with Section 1(b)(7), but
on the date of exercise rather than on the date of grant).
(e) Termination of Employment. If a Key Employee's employment by,
or a Consultant's consulting arrangement with, the Company (and
Related Corporations) is terminated by either party prior to the
expiration date fixed for his or her Option for any reason other
than death or disability, such Option may be exercised, to the
extent of the number of shares with respect to which the Optionee
could have exercised it on the date of such termination, or to any
greater extent permitted by the Committee, by the Optionee at any
time prior to the earlier of:
(1) The expiration date specified in such Option; or
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(2) An accelerated termination date determined by the
Committee, in its discretion, except that, subject to Section 10
hereof, such accelerated termination date shall not be earlier
than the date of the Optionee's termination of employment or
consultancy, and such termination date shall not be later than
thirty (30) days after the date of such termination of employment
or consultancy.
(f) Exercise upon Disability. If a Key Employee or Consultant
shall become disabled (within the meaning of Section 22(e)(3) of the
Code) during his or her employment or consultancy and, prior to the
expiration date fixed for his or her Option, his or her employment
or consultancy is terminated as a consequence of such disability,
such Option may be exercised, to the extent of the number of shares
with respect to which the Optionee could have exercised it on the
date of such termination, or to any greater extent permitted by the
Committee, by the Optionee at any time prior to the earlier of:
(1) The expiration date specified in such Option; or
(2) An accelerated termination date determined by the
Committee, in its discretion, except that, subject to Section 10
hereof, such accelerated termination date shall not be earlier
than the date of the Optionee's termination of employment or
consultancy by reason of disability, and such date shall not be
later than six (6) months after the date of such termination of
employment or consultancy. In the event of the Optionee's legal
disability, such Option may be so exercised by the Optionee's
legal representative.
(g) Exercise upon Death. If a Key Employee or Consultant shall
die during his or her employment or consultancy, and prior to the
expiration date fixed for his or her Option, or if an Optionee whose
employment or consultancy is terminated for any reason, shall die
following his or her termination of employment or consultancy but
prior to the earliest of:
(1) The expiration date fixed for his or her Option;
(2) The expiration of the period determined under Subsections
(e) and (f) above; or
(3) In the case of an ISO, three (3) months following
termination of employment,
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such Option may be exercised, to the extent of the number of shares
with respect to which the Optionee could have exercised it on the date
of his or her death, or to any greater extent permitted by the
Committee, by the Optionee's estate, personal representative or
beneficiary who acquired the right to exercise such Option by bequest
or inheritance or by reason of the death of the Optionee, at any time
prior to the earlier of:
(A) The expiration date specified in such Option; or
(B) An accelerated termination date determined by the
Committee, in its discretion except that, subject to Section
10 hereof, such accelerated termination date shall not be
later than six (6) months after the date of death.
(h) Transferability.
(1) ISOs. No ISO shall be assignable or transferable by the
Key Employee otherwise than by will or by the laws of descent and
distribution, and during the lifetime of the Key Employee, the
ISO shall be exercisable only by him or her or by his or her
guardian or legal representative. If the Key Employee is married
at the time of exercise and if the Key Employee so requests at
the time of exercise, the certificate or certificates shall be
registered in the name of the Key Employee and the Key Employee's
spouse, jointly, with right of survivorship.
(2) NQSOs. Except as otherwise provided in any Option
Agreement, no NQSO shall be assignable or transferable by the Key
Employee or Consultant otherwise than by will or by the laws of
descent and distribution, and during the lifetime of the
Optionee, the NQSO shall be exercisable only by him or her or by
his or her guardian or legal representative. If an Optionee's
Option Agreement provides that the NQSO is transferrable, such
Option Agreement shall set forth any limitations on the transfer
of the NQSO. If the Optionee is married at the time of exercise
and if the Optionee so requests at the time of exercise, the
certificate or certificates shall be registered in the name of
the Optionee and the Optionee's spouse, jointly, with right of
survivorship.
(i) Ten Percent Shareholder. If the Key Employee owns more
than ten percent (10%) of the total combined voting power of all
shares of stock of the Company or of a Related Corporation at the
time an ISO is granted to such Key Employee, the Option price for
the ISO shall be not less than one hundred ten percent (110%) of the
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Fair Market Value of the optioned shares of Common Stock on the date
the ISO is granted, and such ISO, by its terms, shall not be
exercisable after the expiration of five (5) years from the date the
ISO is granted. The conditions set forth in this Subsection (i)
shall not apply to NQSOs.
(j) Withholding and Use of Shares to Satisfy Tax Obligations.
The obligation of the Company to deliver shares of Common Stock upon
the exercise of any Option shall be subject to applicable federal,
state and local tax withholding requirements.
If the exercise of any Option is subject to the withholding
requirements of applicable federal, state and/or local tax laws, the
Committee, in its discretion (and subject to such withholding rules
("Withholding Rules") as shall be adopted by the Committee), may
permit the Key Employee to satisfy the minimum required federal,
state and/or local withholding tax, in whole or in part, by electing
to have the Company withhold (or by returning to the Company) shares
of Common Stock, which shares shall be valued, for this purpose, at
their Fair Market Value (determined in accordance with Section
1(b)(7), but on the date of exercise (rather that the date of
grant), or if later, the date on which the Optionee recognizes
ordinary income with respect to such exercise) (the "Determination
Date"). An election to use shares of Common Stock to satisfy tax
withholding requirements must be made in compliance with and subject
to the Withholding Rules. The Committee may not withhold shares in
excess of the number necessary to satisfy the minimum federal, state
and/or local income tax withholding requirements. In the event
shares of Common Stock acquired under the exercise of an ISO are
used to satisfy such withholding requirement, such shares of Common
Stock must have been held by the Key Employee for a period of not
less than the holding period described in Section 422(a)(1) of the
Code on the Determination Date.
SECTION 9 - Option Agreements - Other Provisions
Options granted under the Plan shall be evidenced by Option Agreements
in such form as the Committee shall, from time to time, approve, which Option
Agreements shall contain such provisions, not inconsistent with the provisions
of the Plan for NQSOs granted pursuant to the Plan, and such conditions, not
inconsistent with Section 422(b) of the Code or the provisions of the Plan for
ISOs granted pursuant to the Plan, as the Committee shall deem advisable, and
which Option Agreements shall specify whether the Option is an ISO or NQSO;
provided, however, if an Option granted to a Key Employee is not designated in
the Option Agreement as an ISO or NQSO, the Option shall constitute an ISO if it
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complies with the terms of Section 422 of the Code, and otherwise, it shall
constitute an NQSO. Each Key Employee, Non-Employee Director and Consultant
shall enter into, and be bound by, such Option Agreement.
SECTION 10 - Capital Adjustments
The number of shares which may be issued under the Plan, and the
maximum number of shares with respect to which Options may be granted during a
specified period to any Key Employee under the Plan, both as stated in Section 4
hereof, the number of shares with respect to which NQSOs are granted to Non-
Employee Directors under Section 7(a), and the number of shares issuable upon
exercise of outstanding Options under the Plan (as well as the Option price per
share under such outstanding Options), shall, subject to the provisions of
Section 424(a) of the Code, be adjusted proportionately, to reflect any stock
dividend, stock split, share combination, or similar change in the
capitalization of the Company.
In the event of a corporate transaction (as that term is described in
Section 424(a) of the Code and the Treasury Regulations issued thereunder as,
for example, a merger, consolidation, acquisition of property or stock,
separation, reorganization, or liquidation), each outstanding Option shall be
assumed by the surviving or successor corporation; provided, however, that, in
the event of a proposed corporate transaction, the Committee may terminate all
or a portion of the outstanding Options issued to Key Employees and Consultants
if it determines that such termination is in the best interests of the Company.
If the Committee decides to terminate outstanding Options issued to Key
Employees and Consultants, the Committee shall give each Key Employee and
Consultant holding an Option to be terminated not less than seven (7) days'
notice prior to any such termination by reason of such a corporate transaction,
and any such Option which is to be so terminated may be exercised (if and only
to the extent that it is then exercisable) up to, and including the date
immediately preceding such termination. Further, as provided in Section 8(d)
hereof the Committee, in its discretion, may accelerate, in whole or in part,
the date on which any or all Options issued to Key Employees and Consultants
become exercisable.
Notwithstanding the foregoing, in the event of a corporate transaction
(as described above) in which holders of Common Stock are to receive cash,
securities or other property, and provision is not made for the continuance and
assumption of NQSOs granted to Non-Employee Directors, all such outstanding
NQSOs shall terminate as of the last business day immediately preceding the
closing date of such corporate transaction and the Company shall pay to each
Non-Employee Director an amount in cash with respect to each share to which a
terminated NQSO pertains equal to the difference between the NQSO exercise price
and the value of the consideration to be received by the holders of Common Stock
in connection with such transaction.
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SECTION 11 - Amendment or Discontinuance of the Plan
(a) General. The Board from time to time may suspend or discontinue
the Plan or amend it in any respect whatsoever, except that the
following amendments shall require shareholder approval (given in the
manner set forth in Section 11(b) below):
(1) With respect to ISOs, any amendment which would:
(A) Change the class of employees eligible to participate in
the Plan;
(B) Except as permitted under Section 10 hereof, increase the
maximum number of shares of Common Stock with respect to which
ISOs may be granted under the Plan; or
(C) Extend the duration of the Plan under Section 12 hereof
with respect to any ISOs granted hereunder;
(2) With respect to Options to be granted to Key Employees, any
amendment which would require shareholder approval pursuant to
Treas. Reg. (section) 1.162-27(e)(4)(vi) or any successor thereto;
and
(3) Any amendment for which shareholder approval is required
under the rules of an exchange or market on which Common Stock is
listed.
Notwithstanding the foregoing, no such suspension, discontinuance or
amendment shall materially impair the rights of any holder of an
outstanding Option without the consent of such holder.
(b) Shareholder Approval Requirements. Shareholder approval must
meet the following requirements:
(1) The approval of shareholders must be by a majority of the
outstanding shares of Common Stock present, or represented, and
entitled to vote at a meeting duly held in accordance with the
applicable laws of the Commonwealth of Pennsylvania;
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(2) The approval of shareholders must be by a majority of the
votes cast on the issue (including abstentions to the extent
abstentions are counted as voting under applicable state law); and
(3) The approval of shareholders must comply with all applicable
provisions of the corporate charter, bylaws, and applicable state
law prescribing the method and degree of shareholder approval
required for the issuance of corporate stock or options. If the
applicable state law does not prescribe a method and degree of
shareholder approval in such case, the approval of shareholders must
be effected:
(A) By a method and in a degree that would be treated as
adequate under applicable state law in the case of an action
requiring shareholder approval (i.e., an action on which
shareholders would be entitled to vote if the action were taken
at a duly held shareholders' meeting); or
(B) By a majority of the votes cast at a duly held
shareholders' meeting at which a quorum representing a majority
of all outstanding voting stock is, either in person or by proxy,
present and voting on the Plan.
(c) Amendments Affecting Non-Employee Directors. Notwithstanding the
foregoing, no amendment to any provision of the Plan that would affect
NQSOs to be awarded to Non-Employee Directors shall be made if such
amendment would cause the terms and conditions of grants made pursuant
to Section 7 of the Plan to fail to be fixed in advance, within the
meaning of Securities and Exchange Commission interpretations under
Section 16(b) of the Securities Exchange Act of 1934.
SECTION 12 - Termination of Plan
Unless earlier terminated as provided in the Plan, the Plan and all
authority granted hereunder shall terminate absolutely at 12:00 midnight on
March 18, 2002, which date is five (5) years after the date the Plan was adopted
by the Board (or the date the Plan was approved by the shareholders of the
Company, whichever is earlier), and no Options hereunder shall be granted
thereafter. Nothing contained in this Section 12, however, shall terminate or
affect the continued existence of rights created under Options issued hereunder
and outstanding on March 18, 2002, which by their terms extend beyond such date.
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SECTION 13 - Shareholder Approval
This Plan shall become effective on March 19, 1997 (the date the Plan
was adopted by the Board); provided, however, that if the Plan is not approved
by the shareholders in the manner described in Section 11(b), within twelve (12)
months before or after said date, the Plan and all Options granted hereunder
shall be null and void.
SECTION 14 - Miscellaneous
(a) Governing Law. With respect to any ISOs granted pursuant to the
Plan and the Option Agreements thereunder, the Plan, such Option
Agreements and any ISOs granted pursuant thereto shall be governed by
the applicable Code provisions to the maximum extent possible.
Otherwise, the operation of, and the rights of Key Employees,
Non-Employee Directors and Consultants under, the Plan, the Option
Agreements and any Options granted thereunder shall be governed by
applicable federal law and otherwise by the laws of the Commonwealth of
Pennsylvania.
(b) Rights. Neither the adoption of the Plan nor any action of the
Board or the Committee shall be deemed to give any individual any right
to be granted an Option, or any other right hereunder, unless and until
the Committee shall have granted such individual an Option, and then
his or her rights shall be only such as are provided by the Option
Agreement.
Any Option under the Plan shall not entitle the holder thereof to
any rights as a shareholder of the Company prior to the exercise of
such Option and the issuance of the shares pursuant thereto. Further,
notwithstanding any provisions of the Plan or the Option Agreement with
a Key Employee, the Company shall have the right, in its discretion, to
retire a Key Employee at any time pursuant to its retirement rules or
otherwise to terminate his or her employment at any time for any reason
whatsoever.
(c) Indemnification of Board and Committee. Without limiting any
other rights of indemnification which they may have from the Company
and any Related Corporation, the members of the Board and the members
of the Committee shall be indemnified by the Company against all costs
and expenses reasonably incurred by them in connection with any claim,
action, suit, or proceeding to which they or any of them may be a 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
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amounts paid by them in settlement thereof (provided such settlement is
approved by 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 willful misconduct or
recklessness on their part. Upon the making or institution of any such
claim, action, suit, or proceeding, the Board or Committee member shall
notify the Company in writing, giving the Company an opportunity, at
its own expense, to handle and defend the same before such Board or
Committee member undertakes to handle it on his or her own behalf.
(d) Application of Funds. The proceeds received by the Company from
the sale of Common Stock pursuant to Options granted under the Plan
shall be used for general corporate purposes. Any cash received in
payment for shares upon exercise of an Option to purchase Common Stock
shall be added to the general funds of the Company and shall be used
for its corporate purposes. Any Common Stock received in payment for
shares upon exercise of an Option to purchase Common Stock shall become
treasury stock.
(e) No Obligation to Exercise Option. The granting of an Option
shall impose no obligation upon a Key Employee, Non-Employee Director
or Consultant to exercise such Option.
(f) Listing and Registration of Shares. Each Option shall be subject
to the requirement that, if at any time the Committee shall determine,
in its discretion, that the listing, registration or qualification of
the shares covered thereby upon any securities exchange or under any
state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such Option or the purchase of shares
thereunder, or that action by the Company, Key Employee, Non-Employee
Director or Consultant should be taken in order to obtain an exemption
from any such requirement, no such Option may be exercised, in whole or
in part, unless and until such listing, registration, qualification,
consent, approval, or action shall have been effected, obtained, or
taken under conditions acceptable to the Committee. Without limiting
the generality of the foregoing, each Key Employee, Non-Employee
Director or Consultant or his or her legal representative or
beneficiary may also be required to give satisfactory assurance that
shares purchased upon exercise of an Option are being purchased for
investment and not with a view to distribution, and certificates
representing such shares may be legended accordingly.
(g) Rights as a Shareholder. A Key Employee, Non-Employee Director,
or Consultant shall have no rights as a shareholder with respect to any
shares covered by his or her Option until the issuance of a stock
certificate to him or her for such shares.
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IN WITNESS WHEREOF, URBAN OUTFITTERS, INC. has caused these presents to
be duly executed, under seal, this ____ day of March, 1997
ATTEST: URBAN OUTFITTERS, INC.
[SEAL]
By:
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Jay Hammer, Secretary Richard A. Hayne, President
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