LANDS' END, INC. STOCK OPTION PLAN
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PART 1: IDENTIFICATION OF THE PLAN
1.1 Title. The Plan described herein shall be known as the "Lands' End,
Inc. Stock Option Plan" and is referred to herein as the "Plan." This Plan is
an amendment and restatement of what was previously known as the "Lands' End,
Inc. 1990 Stock Option Plan" and the "Lands' End, Inc. Second Amended and
Restated 1990 Stock Option Plan."
1.2 Purpose. The purpose of the Plan is to provide officers and key
employees of Lands' End, Inc. (the "Company") with additional incentive to
increase their efforts on the Company's behalf and to remain in or enter into
the employ of the Company by granting such employees from time to time, at the
discretion of the Committee:
(a) incentive stock options (within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code")) to purchase shares
of common stock of the Company ("Company Shares"), and
(b) nonqualified stock options (meaning all options granted under the
Plan which are not designated by the Committee at the time of grant as
incentive stock options) to purchase Company Shares.
By virtue of the benefits available under the Plan, employees who are
responsible for the future growth and continued success of the Company have an
opportunity to participate in the appreciation in the value of Company Shares,
which furnishes such employees with an additional incentive to work for and
contribute to such appreciation through the growth and success of the Company.
1.3 Adoption of the Plan. The Lands' End, Inc. 1990 Stock Option
Plan was adopted by the Company's Board of Directors on November 27, 1990 and
approved by the Company's shareholders on May 15, 1991. The Lands' End, Inc.
1990 Stock Option Plan was amended and restated by the Company's Board of
Directors on October 22, 1991 and December 9, 1991 (at which time it was renamed
the Lands' End, Inc. Second Amended and Restated 1990 Stock Option Plan) which
amendments were approved by the Company's shareholders on May 20, 1992. The
Lands' End, Inc. 1990 Second Amended and Restated Stock Option Plan was further
amended and restated by the Company's Board of Directors on December 10, 1993
and April 15, 1994 (at which time it was renamed the Lands' End, Inc. Stock
Option Plan) which amendments were approved by the Company's shareholders on
May 18, 1994. The Lands' End, Inc. Stock Option Plan was further amended and
restated by the Company's Board of Directors on April 7, 1995 (the "Latest
Restatement Date"). Options may be granted under the Plan, as amended and
restated on the Latest Restatement Date, before such amendment and restatement
is approved by the Company's shareholders; provided, that if such shareholder
approval shall not have been obtained by September 30, 1995, all options granted
under the Plan on or after May 18, 1994 shall automatically be deemed to have
been granted under and pursuant to the terms of the Plan as in effect prior to
such amendment and restatement.
1.4 Company Shares Reserved for the Plan. There is reserved for
issuance upon the exercise of options to be granted under the Plan an aggregate
of 2,500,000 Company Shares, which may be authorized and unissued shares or
treasury shares and which number is subject to adjustment for events occuring
after the Latest Restatement Date as provided in Section 5.4.
PART 2: ADMINISTRATION OF THE PLAN
2.1 Committee's Membership and Powers. The Plan will be administered
by a committee of the Board of Directors of the Company (the "Committee")
consisting of two or more Directors as the Board may designate from time to
time, none of whom has been eligible to receive a benefit under this Plan or
under any other plan of the Company entitling participants to acquire stock,
stock options or stock appreciation rights for a period of at least one year
prior to appointment. The members of the Committee must be "disinterested
persons" as that term is defined in Rule 16b-3 of the Securities and Exchange
Commission and "outside directors" as that term is defined in Section 162(m) of
the Code. No person who is appointed as a member of the Committee shall be
entitled to receive any benefit under the Plan for a period of at least one year
following the termination of such person's membership on the Committee. The
Committee shall have the power to construe and interpret this Plan, to make all
factual determinations hereunder and to establish the terms of any incentive
stock options or nonqualified stock options granted hereunder. The
determinations of the Committee shall be made in accordance with their judgment
as to the best interests of the Company and its shareholders and in accordance
with the purpose of the Plan. A majority of members of the Committee shall
constitute a quorum, and all determinations of the Committee shall be made by a
majority of its members. Any determination of the Committee under the Plan may
be made without notice or meeting of the Committee, by a writing signed by all
of the Committee members. The initial members of the Committee are David Heller
and John Latter.
2.2 Indemnification. Service on the Committee shall constitute
service as a Director of the Company so that members of the Committee shall be
entitled to indemnification and reimbursement as Directors of the Company to the
full extent provided for at any time by law, the Company's Certificate of
Incorporation, the Company's By-Laws and in any insurance policy or other
agreement intended for the benefit of the Company's Directors.
PART 3: PLAN PARTICIPANTS
Participants will consist of such officers and key employees of the
Company as the Committee in its sole discretion determines from time to time.
Designation of a participant in any year shall not require the Committee to
designate such person to receive a benefit in any other year or to receive the
same type or amount of benefit as granted to the participant in any other year
or as granted to any other participant in any year. The Committee shall
consider such factors as its deems pertinent in selecting participants and in
determining the type and amount of their respective benefits.
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PART 4: TERMS AND CONDITIONS OF OPTIONS
4.1 Grant Date. An option shall be deemed to have been granted under
the Plan on the date (the "Grant Date") designated by the Committee at the time
it shall approve such option as the Grant Date of such option, provided that the
Committee may not designate a Grant Date with respect to any option which is
earlier than the date on which the granting of such option is approved by the
Committee.
4.2 Option Price. The option price per Company Share shall be fixed
by the Committee at or before the time the Committee approves the granting of
the option. However, except as provided in the following sentence, no option
shall have an option price per Company Share of less than 100 percent of the
fair market value of a Company Share on the Grant Date of the option. At its
discretion, the Committee may issue options to a participant who, in accordance
with section 5.8 hereof, has voluntarily surrendered and cancelled a prior
option at a price per Company Share equal to or greater than the price per
Company Share of the prior option. For this purpose "fair market value" of a
Company Share as of any date shall be equal to the last per share sales price
reported for a Company Share for such date in The Wall Street Journal or, if no
sales of Company Shares are reported for such date in The Wall Street Journal,
for the next succeeding date for which sales of Company Shares are so reported
in The Wall Street Journal. If sales of Company Shares are not reported for any
date in The Wall Street Journal, then the "fair market value" of a Company Share
as of any date shall be determined in such manner as shall be prescribed in good
faith by the Committee.
4.3 Term and Exercisability of Options. Options may "vest" and
become exercisable in one or more installments upon the passage of a specified
period of time as the Committee shall in each case determine in its sole
discretion when the option is granted; however no option may be exercised later
than December 31 of the year in which the tenth anniversary of the Grant Date of
such option occurs (or any earlier date which is the last day of the term of the
option). The Committee shall have authority, in its sole discretion, to
accelerate the vesting and exercisability of all or part of any option granted
hereunder and, subject to section 4.5 hereof, to establish restrictions or
limitations with respect to the exercise of options, including, but not limited
to, the period during which options may be exercised.
4.4 Special Incentive Stock Option Terms. The terms of each
incentive stock option granted under the Plan shall include those terms which
are required by Section 422 of the Code and such other terms not inconsistent
therewith as the Committee may determine. Each option which is designated by
the Committee as an incentive stock option shall be considered to have contained
from the outset such terms and provisions as shall be necessary to entitle such
intended incentive stock option to the tax treatment afforded by the Code to
incentive stock options under Section 422 of the Code. If any agreement
covering such an intended incentive stock option granted under the Plan does not
explicitly include any terms required to entitle such intended incentive stock
option to the tax treatment afforded by the Code to incentive stock options,
then all of such required terms and provisions shall be considered implicit in
such agreement and such intended incentive stock option shall be considered to
have been granted subject to such required terms and conditions. In accordance
with Section 422 of the Code, the aggregate fair market value
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(determined as of the grant date) of the Company Shares with respect to which
incentive stock options are exercisable for the first time by a participant in
any given calendar year shall not exceed $100,000.
4.5 Termination of Employment. Unless otherwise determined by the
Committee, if a participant ceases to be employed by the Company for reasons
other than his disability (as described in clause (c) below), retirement on or
after his normal retirement date or death, the option (or any remaining
unexercised portion thereof) shall terminate effective as of the date of the
participant's termination of employment and no portion of the terminated option
shall be exercisable after that date. Unless otherwise determined by the
Committee, if a participant's termination of employment is a result of his
retirement, death or disability, the following provisions shall apply with
respect to such option:
(a) If the participant's termination of employment is on account of
his retirement at or after his normal retirement date, any unexercised
portion of the option shall be exercisable during the 12 months following
the retirement date (unless earlier terminated) and shall terminate on the
first anniversary of the date of the termination of his employment (or such
earlier time when the option would otherwise expire or terminate on its own
terms) whether or not such option or options were exercisable on the
retirement date under the provisions of the applicable agreements relating
thereto. To the extent that any such unexercised portion of the option is
not exercised within three months following the date of termination of
employment, it cannot be exercised as an incentive stock option but only as
a nonqualified stock option.
(b) If the participant's termination of employment is on account of
his death, any vested but unexercised portion of the option shall be
exercisable during the 12 months following the date of death (unless
earlier terminated) and shall terminate on the first anniversary of the
date of death (or such earlier time when the option would otherwise expire
or terminate on its own terms). Vested options may be exercised by the
participant's estate or any person who acquired the right to exercise the
option by bequest, inheritance or the laws of descent and distribution.
(c) If the participant's termination of employment is on account of
his disability, any vested but unexercised portion of the option shall be
exercisable during the six months following the termination of employment
(unless earlier terminated) and shall terminate on the 180th day following
the termination of his employment (or such earlier time when the option
would otherwise expire or terminate on its own terms). In such event,
vested options may be exercised by the participant or his guardian. For
this purpose a participant shall be considered "disabled" if the Committee
determines in good faith that he is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or
can be expected to last for a continuous period of not less than twelve
months.
4.6 Method of Exercising Options. An option may be exercised only by
a written notice to the Company accompanied by payment of the full option price
which, in the
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discretion of the Committee, may be made in any one or any combination of the
following: cash, certified or official bank check, or delivery of Company Share
certificates endorsed in blank or accompanied by executed stock powers
evidencing Company Shares whose value shall be deemed to be the "fair market
value" (as determined in accordance with Section 4.2 hereof) on the date of
exercise of such Company Shares.
4.7 Maximum Grant. In accordance with Section 162(m) of the Code,
the maximum number of Company Shares with respect to which options may be
granted to any one participant in any twelve month period is 400,000 (as
proportionately adjusted for all stock splits, stock dividends and other
recapitalizations occurring after the Latest Restatement Date).
PART 5: GENERAL PROVISIONS
5.1 Option Agreement. No person shall have any rights under any
option granted under this Plan unless and until the Company and the person to
whom such options shall have been granted shall have executed and delivered an
agreement expressly granting the option to such person and containing provisions
setting forth the terms of the option.
5.2 Shareholder Rights. A participant shall not have any dividend,
voting or other shareholder rights by reason of a grant of an option prior to
the issuance of any Company Shares pursuant to the proper exercise of all or any
portion of such option.
5.3 Nontransferability of Options. Each option granted under this
Plan shall not be transferable otherwise than by will or the laws of descent and
distribution, and shall be exercisable during the participant's lifetime only by
such participant or his guardian in the event of disability. In the event of
the death of a participant, exercise shall be made only:
(a) by the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased participant's
rights under the benefit shall pass by will or the laws of descent and
distribution; and
(b) to the extent that the deceased participant was entitled thereto
at the date of his death.
5.4 Adjustments. In the event that the Committee shall determine
that any dividend or other distribution (whether in the form of cash, Company
Shares, other securities or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, combination, split-
up, spin-off, repurchase or exchange of Company Shares or other securities of
the Company, issuance of warrants or other rights to purchase Company Shares or
other securities of the Company, or other similar corporate transaction or event
affects the Company Shares such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
then the Committee shall, in such manner as it may deem equitable, adjust any or
all of (a) the number and type of Company Shares (or other securities or
property) which
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thereafter may be made the subject of options, (b) the number and type of
Company Shares (or other securities or property) subject to outstanding options,
and (c) the grant, purchase, or exercise price with respect to any options, or,
if deemed appropriate, make provision for a cash payments to the holder of an
outstanding option.
5.5 Withholding of Taxes. The Company shall be entitled, if the
Committee (or any financial officer designated by it) considers it necessary or
desirable, to withhold (or secure payment from the participant in lieu of
withholding) the amount of any withholding or other payment required of the
Company under the tax withholding provisions of the Code, any state's income tax
act or any other applicable law with respect to any Company Shares issuable
under such participant's exercised options, and the Company may defer issuance
unless indemnified to its satisfaction with respect to payment of such
withholding or other tax. Subject to such rules as the Committee may adopt,
participants may satisfy this obligation, in whole or in part, by an election to
have the number of Company Shares received upon exercise of any option reduced
by a number of Company Shares having a "fair market value" (as determined in
accordance with Section 4.2 hereof) equal to the amount of the required
withholding to be so satisfied or to surrender to the Company previously held
Company Shares having an equivalent fair market value.
5.6 No Employment Rights Conferred. Nothing in the Plan or in any
option granted under the Plan shall confer any right on an employee to continue
in the employ of the Company or shall interfere in any way with the right of the
Company at any time to terminate his employment with or without cause or to
adjust his compensation.
5.7 Disposition of Company Shares.
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(a) Unless otherwise specifically authorized by the Committee,
participants may not dispose of, sell or otherwise transfer any Company
Shares acquired upon exercise of options granted under the Plan for a
period of six months following the Grant Date.
(b) As a condition of participation in the Plan, each participant
agrees that he will give prompt notice to the Committee of any disposition
of Company Shares acquired upon the exercise of an incentive stock option
if such disposition occurs within either two years after the Grant Date of
an incentive stock option or one year after the receipt of such Company
Shares by the participant following his exercise of the incentive stock
option.
5.8 Cancellation of Options. By express written agreement a
participant and the Committee may agree that any previously granted option is
thereby cancelled as of the date of the agreement and, at its discretion, the
Committee may subsequently grant to such a participant who has voluntarily
surrendered and cancelled a prior option one or more new or substitute similar
or different options under the Plan.
5.9 Continued Availability of Company Shares Under Unexercised
Options. If an option granted under the Plan terminates or expires without
being wholly exercised or if Company Shares as to which an option has been
exercised shall for any reason not be issued, a new
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option may be granted under the Plan covering the number of Company Shares to
which such termination, expiration, failure to issue or reacquisition related.
5.10 No Strict Construction. No rule of strict construction shall be
applied against the Company, the Committee or any other person in the
interpretation of any of the terms of the Plan, any option agreement or any
option granted under the Plan or any rule or procedure established by the
Committee.
5.11 Choice of Law. Each option granted under the Plan shall be
considered to be a contract under the laws of the State of Wisconsin and, for
all purposes, the Plan and each option granted under the Plan shall be construed
in accordance with and governed by the laws of the State of Wisconsin.
5.12 Successors. This Plan is binding on and will inure to the
benefit of any successor to the Company, whether by way of merger,
consolidation, purchase or otherwise.
5.13 Severability. If any provision of the Plan or an option
agreement shall be held illegal or invalid for any reason, such illegality or
invalidity shall not affect the remaining provisions of the Plan or such
agreement, and the Plan and such agreement shall each be construed and enforced
as if the invalid provisions had never been set forth therein.
5.14 Performance Compensation. All options granted under the Plan are
intended to qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code. In the event that any provision of the Plan would
cause any option granted under the Plan to be treated as other than
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be deemed automatically amended to the extent necessary to
cause all options granted under the Plan to be treated as "performance-based
compensation" within the meaning of Section 162(m) of the Code.
PART 6: AMENDMENT AND TERMINATION
6.1 Amendment. The Board of Directors may amend the Plan from time
to time, in its sole discretion, but no amendment shall:
(a) without a participant's consent impair his rights to any option
theretofore granted; or
(b) without the authorization and approval of the Company's
shareholders (i) increase the maximum number of Company Shares which may be
issued in the aggregate under the Plan, except as provided in subsection
5.4, (ii) extend the termination date of the Plan or of any option granted
under the Plan, (iii) enlarge the class of employees eligible to receive
options under the Plan or (iv) create "material changes" to the Plan for
purposes of Section 162(m) of the Internal Revenue Code.
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6.2 Termination. The Board of Directors may terminate the Plan at
any time with respect to Company Shares for which options have not theretofore
been granted. Unless earlier terminated, the Plan will terminate at the close
of business on December 31, 2000. Following the termination of the Plan, no
further options may be granted under the Plan; however, all options which prior
to the Plan termination have not expired, terminated or been exercised or
surrendered may be exercised thereafter in accordance with their terms and the
terms hereof, and the Committee shall continue to have its full powers under the
Plan, except with respect to the granting of options under the Plan.
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