EXHIBIT 10.18
AUTHENTIC FITNESS CORPORATION
1998 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. Purpose
The purpose of the Authentic Fitness Corporation 1998 Stock Option Plan
for Non-Employee Directors (the "Plan") is to promote the interests of Authentic
Fitness Corporation (the "Company") and its stockholders by increasing the
proprietary and vested interest of non-employee directors in the growth and
performance of the Company by granting such directors options to purchase shares
of Common Stock, par value $.001 per share (the "Shares"), of the Company.
2. Administration
The Plan shall be administered by the Company's Board of Directors (the
"Board"). Subject to the provisions of the Plan, the Board shall be authorized
to interpret the Plan, to establish, amend, and rescind any rules and
regulations relating to the Plan and to make all other determinations necessary
or advisable for the administration of the Plan; provided, however, that the
Board shall have no discretion with respect to the selection of directors to
receive options, the number of Shares subject to any such options, the purchase
price thereunder or the timing of grants of options under the Plan. The
determinations of the Board in the administration of the Plan, as described
herein, shall be final and conclusive. The Secretary of the Company shall be
authorized to implement the Plan in accordance with its terms and to take such
actions of a ministerial nature as shall be necessary to effectuate the intent
and purposes thereof. The validity, construction and effect of the Plan and any
rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Delaware.
3. Eligibility
The class of individuals eligible to receive grants of options under
the Plan shall be directors of the Company who are not employees of the Company
or its affiliates and who are "non-employee directors" of the Company, within
the meaning of Rule 16b-3(b)(3)(i) promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act") (such directors, "Eligible Directors").
Any holder of an option granted hereunder shall hereinafter be referred to as a
"Participant."
4. Shares Subject to the Plan
Subject to adjustment as provided in Section 6, an aggregate of 400,000
Shares shall be available for issuance upon the exercise of options granted
under the Plan. The Shares deliverable upon the exercise of options may be made
available from authorized but unissued Shares or treasury Shares. If any option
granted under the Plan shall terminate for any reason without having been
exercised, the Shares subject to, but not delivered under, such option shall be
available for other options. In the event that (i) any option granted under
the Plan is exercised through the delivery of Shares or (ii) a Participant shall
deliver Shares in satisfaction of any withholding obligation relating to any
option granted under the Plan, the number of Shares available for issuance upon
the exercise of options shall be increased by the number of Shares surrendered,
to the extent permissible under Rule 16b-3 promulgated under the Exchange Act.
5. Grant, Terms and Conditions of Options
(a) Upon first election or appointment to the Board, each newly elected
Eligible Director shall be granted an option to purchase 15,000 Shares.
(b) Immediately following each Annual Shareholders Meeting, commencing
with the Annual Shareholders Meeting on November 19, 1998, each Eligible
Director, other than an Eligible Director first elected to the Board within the
12 months immediately preceding and including such meeting, shall be granted an
option to purchase 10,000 Shares as of the date of such meeting.
(c) The options granted hereunder shall be nonstatutory stock options
not intended to qualify under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), and shall have the following terms and conditions:
(i) Price. The purchase price per Share deliverable upon the
exercise of each option shall be 100% of the Fair Market Value per
Share on the date the option is granted. For purposes of this Plan,
Fair Market Value shall be the closing per Share sales price as
reported for consolidated trading of issues listed on the New York
Stock Exchange on the date in question, or, if the Shares shall not
have traded on such date, the closing per Share sales price on the
first date prior thereto on which the Shares were so traded.
(ii) Payment. Options may be exercised only upon payment of
the purchase price thereof in full. Such payment shall be made in cash
or, unless otherwise determined by the Board, in Shares, which shall
have a Fair Market Value (determined in accordance with the rules of
paragraph (i) above) at least equal to the aggregate exercise price of
the Shares being purchased, or a combination of cash and Shares.
(iii) Exercisability and Term of Options. Options shall be
exercisable in whole or in part at all times during the period
beginning on the date of grant until the earlier of ten years from the
date of grant and the expiration of the one year period provided in
paragraph (iv) below.
(iv) Termination of Service as Eligible Director. Upon
termination of a Participant's service as a Director for any reason,
all outstanding options shall be exercisable in whole or in part for a
period of one year from the date upon which the Participant ceases to
be a Director, provided that in no event shall the options be
exercisable beyond the period provided for in paragraph (iii) above.
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(v) Nontransferability of Options. No option may be assigned,
alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant otherwise than by will or the laws of
descent and distribution, and during the lifetime of the Participant to
whom an option is granted it may be exercised only by the Participant
or by the Participant's guardian or legal representative.
Notwithstanding the foregoing, options may be transferred pursuant to a
qualified domestic relations order.
(vi) Listing and Registration. Each option shall be subject to
the requirement that if at any time the Board shall determine, in its
discretion, that the listing, registration or qualification of the
Shares subject to such option 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 issue or purchase
of Shares thereunder, no such option may be exercised in whole or in
part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any condition not
acceptable to the Board.
(vii) Option Agreement. Each option granted hereunder shall be
evidenced by an agreement with the Company which shall contain the
terms and provisions set forth herein and shall otherwise be consistent
with the provisions of the Plan.
(viii) Restoration Options. In the event that any Participant
delivers Shares in payment of the exercise price of any option granted
hereunder, the Board shall have the authority to grant or provide for
the automatic grant of a "Restoration Option" (as herein defined) to
such Participant, subject to Section 4. The grant of a Restoration
Option shall be subject to the satisfaction of such conditions or
criteria as the Board in its sole discretion shall establish from time
to time. A Restoration Option shall entitle the holder thereof to
purchase a number of Shares equal to the number of such Shares so
delivered upon exercise of the original Option and, in the discretion
of the Board, the number of Shares, if any, tendered to the Company to
satisfy any withholding tax liability arising in connection with the
exercise of the original Option. A Restoration Option shall have a per
share exercise price of not less than 100% of the per Share Fair Market
Value on the date of grant of such Restoration Option, a term not
longer than the remaining term of the original Option at the time of
exercise thereof, and such other terms and conditions as the Board in
its sole discretion shall determine.
6. Adjustment of and Changes in Shares
In the event of a stock split, stock dividend, subdivision or
combination of the Shares or other change in corporate structure affecting the
Shares, the number of Shares authorized by the Plan and the number of Shares
subject to options to be granted pursuant
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to Sections 5(a) and (b) shall be increased or decreased proportionately, as the
case may be, and the number of Shares subject to any outstanding option shall be
increased or decreased proportionately, as the case may be, with appropriate
corresponding adjustment in the purchase price per Share thereunder.
7. No Rights of Shareholders
Neither a Participant nor a Participant's legal representative
shall be, or have any of the rights and privileges of, a shareholder of the
Company in respect of any Shares purchasable upon the exercise of any option, in
whole or in part, unless and until certificates for such Shares shall have been
issued.
8. Plan Amendments
The Board may amend, alter, suspend, discontinue, or terminate
the Plan or any portion thereof at any time; provided that no such amendment,
alteration, suspension, discontinuation or termination shall be made without
stockholder approval if such approval is necessary to comply with any tax or
regulatory requirement, including for these purposes any approval requirement
which is a prerequisite for exemptive relief from Section 16(b) of the Exchange
Act for which or with which the Board deems it necessary or desirable to qualify
or comply.
9. Effective Date and Duration of Plan
The Plan shall become effective as of November 19, 1998. The
Plan shall terminate the day following the tenth Annual Shareholders Meeting at
which Directors are elected succeeding the date on which the Plan was approved
and adopted by the Board, unless the Plan is extended or terminated at an
earlier date by the Board or is terminated by exhaustion of the Shares available
for issuance hereunder.
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