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EXHIBIT 10.4
AMENDED
1996 INCENTIVE STOCK PLAN
I. Purpose
This 1996 Incentive Stock Plan (the "Plan") is intended to attract,
retain and provide incentives to Employees, officers, Directors and consultants
of the Company, and to thereby increase overall shareholders' value. The Plan
generally provides for the granting of stock, stock options, stock appreciation
rights, restricted shares, other stock-based awards or any combination of the
foregoing to the eligible participants.
II. Definitions
(a) "Award" includes, without limitation, stock options (including
incentive stock options within the meaning of Section 422(b) of the Code),
stock appreciation rights, stock awards, restricted share awards, dividend
equivalent rights, or other awards that are valued in whole or in part by
reference to, or are otherwise based on, the Common Stock ("other Common
Stock-based Awards"), all on a stand alone, combination or tandem basis, as
described in or granted under this Plan.
(b) "Award Agreement" means a written agreement setting forth the
terms and conditions of each Award made under this Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Change in Control" means:
(i) An acquisition by any person (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the
"Exchange Act")) who is not as of the effective date of the Plan the beneficial
holder of at least 10% of the Company's then outstanding common stock, of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 30% or more of either (x) the then outstanding common stock
(the "Outstanding Company Common Stock") or (y) the combined voting power of
the then outstanding common stock entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); excluding, however,
the following: (1) any acquisition of Outstanding Company Common Stock by the
Company, (2) any acquisition of Outstanding Company Common Stock by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company or (3) any acquisition of
Outstanding Company Common Stock by any person pursuant to a transaction which
complies with clauses (1), (2) and (3) of subsection (iii) of this definition;
or
(ii) A change in the composition of the Board such that the
individuals who, as of the effective date of the Plan, constitute the Board
(such Board shall be hereinafter referred to as the "Incumbent Board") ceased
for any reason to constitute at least a majority of the Board; provided,
however, for purposes of this definition, that any individual who becomes a
Director subsequent to such effective date, whose election, or nomination for
election by the Company's
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stockholders, was approved by a vote of at least a majority of those
individuals who are Directors and who were also members of the Incumbent Board
(or deemed to be such pursuant to this proviso) shall be considered as though
such individual were a member of the Incumbent Board; but, provided further,
that any such individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person or legal entity other than the Board shall not be so considered as a
member of the Incumbent Board; or
(iii) The approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company ("Corporate Transaction");
excluding, however, such a Corporate Transaction pursuant to which (1) all or
substantially all of the individuals and entities who are the Beneficial
Owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 60% of, respectively, the
outstanding common stock, and the combined voting power of the then outstanding
common stock entitled to vote generally in the election of directors, as the
case may be, of the company resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all or more subsidiaries)
in substantially the same proportions as their ownership, immediately prior to
such Corporate Transaction, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (2) no person (other
then the Company, any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or such
corporation resulting from such Corporate Transaction) will beneficially own,
directly or indirectly, 30% or more of, respectively, the outstanding shares of
common stock of the corporation resulting form such Corporate Transaction or
the combined voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of directors except to
the extent that such ownership existed with respect to the Company prior to the
Corporate Transaction and (3) individuals who were members of the Incumbent
Board will constitute at least a majority of the board of directors of the
corporation resulting from such Corporate Transaction; or
(iv) The approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(f) "Committee" means the Compensation Committee of the Board or such
other committee of the Board as may be designated by the Board from time to
time to administer this Plan.
(g) "Common Stock" means the $.01 par value Class A Common Stock of
the Company.
(h) "Company" means Hastings Books, Music & Video, Inc., a Texas
corporation.
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(i) "Director" means a member of the Board.
(j) "Employee" means an employee of the Company or a Subsidiary.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(l) "Fair Market Value" means during such time as the Common Stock of
the Company is not publicly traded, the price per share of Common Stock of the
Company established by a fair market evaluation of the Common Stock of the
Company performed by an independent third party at the direction of the Company
as the value of the Common Stock of the Company held by the Company's profit
sharing plan. A.G. Edwards & Sons, Inc., currently provides such an evaluation
annually for the Company's profit sharing plan. In the event more than one
evaluation is performed annually, the evaluation immediately prior to the date
of grant shall be the evaluation used. In the event the Common Stock of the
Company becomes publicly traded, Fair Market Value shall mean the average of
the opening and closing price of the stock on the day immediately preceding the
date of the grant. In the event the Common Stock of the Company is not
publicly traded and no evaluation is performed for the Company's profit sharing
plan, the Fair Market Value shall be as determined by a majority of the
disinterested directors of the Company.
(m) "Participant" means an Employee, officer, Director or consultant
who has been granted an Award under the Plan.
(n) "Plan Year" means a calendar year.
(o) "Subsidiary" means any corporation or other entity, whether
domestic or foreign, in which the Company has or obtains, directly or
indirectly, a proprietary interest of more than 50% by reason of stock
ownership or otherwise.
III. Eligibility
Any Employee, officer, Director or consultant of the Company or
Subsidiary selected by the Committee is eligible to receive an Award pursuant
to Section VI hereof.
IV. Plan Administration
(a) Except as otherwise determined by the Board, the Plan shall be
administered by the Committee. The Board, or the Committee to the extent
determined by the Board, shall periodically make determinations with respect to
the participation of Employees, officers, Directors and consultants in the Plan
and, except as otherwise required by law or this Plan, the grant terms of
Awards, including vesting schedules, retirement and termination rights, payment
alternatives such as cash, stock, contingent award or other means of payment
consistent with the purposes of this Plan, and such other terms and conditions
as the Board or the Committee deems appropriate which shall be contained in an
Award Agreement with respect to a Participant.
(b) The Committee shall have authority to interpret and construe the
provisions of the
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Plan and any Award Agreement and make determinations pursuant to any Plan
provision or Award Agreement which shall be final and binding on all persons.
No member of the Committee shall be liable for any action or determination made
in good faith, and the members shall be entitled to indemnification and
reimbursement in the manner provided in the Company's Certificate of
Incorporation, as it may be amended from time to time.
(c) The Committee shall have the authority at any time to provide for
the conditions and circumstances under which Awards shall be forfeited. The
Committee shall have the authority to accelerate the vesting of any Award and
the time at which any Award becomes exercisable.
V. Capital Stock Subject to the Provisions of this Plan
(a) The capital stock subject to the provisions of this Plan shall be
shares of authorized but unissued Common Stock and shares of Common Stock held
as treasury stock. Subject to adjustment in accordance with the provisions of
Section X, and subject to Section V(c) below, the maximum number of shares of
Common Stock that shall be available for grants of Awards under this Plan shall
be 125,000.
(b) The grant of a restricted share Award shall be deemed to be equal
to the maximum number of shares which may be issued under the Award. Awards
payable only in cash will not reduce the number of shares available for Awards
granted under the Plan.
(c) There shall be carried forward and be available for Awards under
the Plan, in addition to shares available for grant under paragraph (a) of this
Section V, all of the following: (i) any unused portion of the limit set forth
in paragraph (a) of this Section V; (ii) shares represented by Awards which are
cancelled, forfeited, surrendered, terminated, paid in cash or expire
unexercised; and (iii) the excess amount of variable Awards which become fixed
at less than their maximum limitations.
VI. Awards Under This Plan
As the Board or Committee may determine, the following types of Awards
and other Common Stock-based Awards may be granted under this Plan on a stand
alone, combination or tandem basis:
(a) Stock Option. A right to buy a specified number of
shares of Common Stock at a fixed exercise price during a specified time.
Unless otherwise specifically provided in an Award Agreement, (i) the exercise
price of each share of Common Stock covered by a stock option shall not be less
than the Fair Market Value of the Common Stock on the date of the grant of such
stock option and (ii) 20% of the shares covered by the stock option shall
become exercisable on the first anniversary of its grant and an additional 20%
of such shares shall become exercisable on each of the second, third, fourth
and fifth anniversary of its grant.
(b) Incentive Stock Option. An Award which may be granted
only to Employees in the form of a stock option which shall comply with the
requirements of Code Section 422 or any successor section as it may be amended
from time to time. The exercise price of any
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incentive stock option shall not be less than 100% if the Fair Market Value of
the Common Stock on the date of grant of the incentive stock option Award. An
Employee who owns stock representing 10% of the voting power or value of all
classes of stock of the Company or a Subsidiary shall only be granted an
incentive stock option (i) with an exercise price of at least 110% of the Fair
Market Value of the Common Stock on the date of the grant of such option and
(ii) that expires 5 years form the date of its grant. Subject to adjustment in
accordance with the provisions of Section X, the aggregate number of shares
which may be subject to incentive stock option Awards under this Plan shall not
exceed the maximum number of shares provided in paragraph (a) of Section V
above. To the extent that Code Section 422 requires certain provisions to be
set forth in a written plan, said provisions are incorporated herein by this
reference.
(c) Stock Option in lieu of Compensation Election. A right
given with respect to a year to a Director, officer or key Employee to elect to
exchange annual retainers, fees or compensation for stock options.
(d) Stock Appreciation Right. A right which may or may not
be contained in the grant of a stock option or incentive stock option to
receive the excess of the Fair Market Value of a share of Common Stock on the
date the option is surrendered over the option exercise price or other
specified amount contained in the Award Agreement.
(e) Restricted Shares. A transfer of Common Stock to a
Participant subject to forfeiture until such restrictions, terms and conditions
as the Committee may determine are fulfilled.
(f) Dividend Equivalent Right. A right to receive dividends
or their equivalent in value in Common Stock, cash or in a combination of both
with respect to any new or previously existing Award.
(g) Stock Award. An unrestricted transfer of ownership of
Common Stock.
(h) Other Stock-Based Awards. Other Common Stock-based
Awards which are related to or serve a similar function to those Awards set
forth in this Section VI.
VII. Award Agreements
Each Award under the Plan shall be evidenced by an Award Agreement
setting forth the terms and conditions of the Award and executed by the Company
and Participant.
VIII. Other Terms and Conditions
(a) Assignability. Unless provided to the contrary in any Award, no
Award shall be assignable or transferable except by will, by the laws of
descent and distribution and during the lifetime of a Participant, the Award
shall be exercisable only by such Participant. No Award
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granted under the Plan shall be subject to execution, attachment or process.
(b) Termination of Employment or Other Relationship. The Committee
shall determine the disposition of the grant of each Award in the event of the
retirement, disability, death or other termination of a Participant's
employment or other relationship with the Company or a Subsidiary.
(c) Rights as a Stockholder. A Participant shall have no rights as a
stockholder with respect to shares covered by an Award until the date the
Participant is the holder of record. No adjustment will be made for dividends
or other rights for which the record date is prior to such date.
(d) No Obligation to Exercise. The grant of an Award shall impose no
obligation upon the Participant to exercise the Award.
(e) Payments by Participants. The Committee may determine that
Awards for which a payment is due from a Participant may be payable: (i) in
U.S. dollars by personal check, bank draft or money order payable to the order
of the Company, by money transfers or direct account debits; (ii) pursuant to a
broker-assisted "cashless exercise" program if established by the Company (iii)
with previously owned Common Stock; (iv) by a combination of the methods
described in (i) through (iii) above; or (v) by such other methods as the
Committee may deem appropriate.
(f) Withholding. Except as otherwise provided by the Committee, (i)
the deduction of withholding and any other taxes required by law will be made
from all amounts paid in cash and (ii) in the case of payments of Awards in
shares of Common Stock, the Participant shall be required to pay the amount of
any taxes required to be withheld prior to receipt of such stock, or
alternatively, a number of shares the Fair Market Value of which equals the
amount required to be withheld may be deducted from the payment.
(g) Restrictions on Sale and Exercise. With respect to officers and
directors for purposes of Section 16 of the Exchange Act, and if required to
comply with rules promulgated thereunder, (i) no Award providing for exercise,
a vesting period, a restriction period or the attainment of performance
standards shall permit unrestricted ownership of Common Stock by the
Participant for at least six months from the date of grant, and (ii) Common
Stock acquired pursuant to this Plan (other than Common Stock acquired as a
result of the granting of a "derivative security") may not be sold for at least
six months after acquisition.
(h) Change in Control. In the event of a Change in Control, all
Awards shall vest, become immediately exercisable and/or cease to be subject to
any risk of forfeiture, as the case may be.
IX. Termination, Modification and Amendments
(a) The Plan may from time to time be terminated, modified or amended
by the affirmative vote of the holders of a majority of the outstanding shares
of the capital stock of the
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Company present or represented and entitled to vote at a duly held stockholders
meeting.
(b) The Board may at any time terminate the Plan or from time to time
make such modifications or amendments of the Plan as it may deem advisable;
provided, however, that the Board shall not make any material amendments to the
Plan which require stockholder approval under applicable law, rule or
regulation unless the same shall be approved by the requisite vote of the
Company's stockholders.
(c) No termination, modification or amendment of the Plan may
adversely affect the rights conferred by an Award without the consent of the
recipient thereof.
X. Recapitalization
The aggregate number of shares of Common Stock as to which Awards may
be granted to Participants, the number of shares thereof covered by each
outstanding Award, and the price per share thereof in each such Award, shall
all be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a subdivision or consolidation of
shares or other capital adjustment, or the payment of a stock dividend or other
increase or decrease in such shares, effected without receipt of consideration
by the Company, or other change in corporate or capital structure; provided,
however, that any fractional shares resulting from any such adjustment shall be
eliminated. The Committee may also make the foregoing changes and any other
changes, including changes in the classes of securities available, to the
extent it is deemed necessary or desirable to preserve the intended benefits of
the Plan for the Company and the Participants in the event of any other
reorganization, recapitalization, merger, consolidation, spin-off,
extraordinary dividend or other distribution or similar transaction.
XI. No Right to Employment
No person shall have any claim or right to be granted an Award, and
the grant of an Award shall not be construed as giving a Participant the right
to be retained in the employ of, or in the other relationship with, the Company
or a Subsidiary. Further, the Company and each Subsidiary expressly reserve
the right at any time to dismiss a Participant free from any liability, or any
claim under the Plan, except as provided herein or in any Award Agreement
issued hereunder.
XII. Governing Law
To the extent that federal laws do not otherwise control, the Plan
shall be construed in accordance with and governed by the laws of the State of
Texas.
XIII. Savings Clause
This Plan is intended to comply in all aspects with applicable laws
and regulations, including, with respect to those Employees who are officers or
director for purposes of Section 16 of the Exchange Act, Rule 16b-3 under the
Exchange Act. In case any one more of the
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provisions of this Plan shall not in any way be affected or impaired thereby
and the invalid, illegal or unenforceable provision shall be deemed null and
void; however, to the extent permissible by law, any provision which could be
deemed null and void shall first be construed, interpreted or revised
retroactively to permit this Plan to be construed in compliance with all
applicable laws (including Rule 16b-3) so as to foster the intent of this Plan.
XIV. Effective Date and Term
The Plan shall become effective upon adoption by the Board, subject to
approval of the Plan by the affirmative vote of the holders of a majority of
the outstanding shares of the capital stock of the Company entitled to vote
thereon within one year following adoption of the Plan by the Board. All
Awards granted prior to such approval by the stockholders shall be subject to
such approval and shall not be exercisable and/or transferable prior thereto.
In the event such approval is not obtained within such one-year period, the
Plan and all Awards granted thereunder shall be null and void. The Plan shall
terminate on the tenth anniversary of the date on which it becomes efficient.
No Award shall be granted after the termination of the Plan.