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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(C) or ss. 240.14a-12
THE SPORTS CLUB COMPANY, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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[THE SPORTS CLUB COMPANY LOGO]
April 13, 2001
Dear Fellow Stockholders:
It is our pleasure to invite you to our 2001 Annual Meeting of
Stockholders.
We will hold the meeting on Monday, May 21, 2001, at 10:00 a.m. at The
Sports Club/LA - Los Angeles, 1835 Sepulveda Boulevard, Los Angeles, California.
In addition to the formal items of business, we will review recent major
developments and answer your questions.
This booklet includes the Notice of Annual Meeting and the Proxy Statement
of the Board of Directors of the Company. The Proxy Statement describes the
business that we will conduct at the meeting and provides information about The
Sports Club Company, Inc.
Your vote is important. Whether you plan to attend the meeting or not,
please complete, date, sign and return the enclosed proxy card promptly. If you
attend the meeting and prefer to vote in person, you may do so.
We look forward to seeing you at the meeting.
Sincerely,
/s/ D. MICHAEL TALLA /s/ REX A. LICKLIDER
D. Michael Talla Rex A. Licklider
Chairman of the Board and Vice Chairman of the Board and
Co-Chief Executive Officer Co-Chief Executive Officer
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[THE SPORTS CLUB COMPANY LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DATE: MAY 21, 2001
TIME: 10:00 A.M.
PLACE: THE SPORTS CLUB/LA - LOS ANGELES
1835 SEPULVEDA BOULEVARD
LOS ANGELES, CA 90025
NOTICE IS HEREBY GIVEN THAT THE ANNUAL MEETING OF STOCKHOLDERS OF THE SPORTS
CLUB COMPANY, INC. WILL BE HELD AT 10:00 A.M. ON MAY 21, 2001, AT THE SPORTS
CLUB/LA - LOS ANGELES. AT OUR ANNUAL MEETING, WE WILL ASK YOU TO:
1. ELECT TWO DIRECTORS FOR THREE-YEAR TERMS,
2. ADOPT OUR 2001 EMPLOYEE STOCK PURCHASE PLAN,
3. ADOPT OUR 2001 INCENTIVE STOCK PLAN, AND
4. TRANSACT ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING.
This Notice and the accompanying Proxy Statement and Proxy Card are being
mailed, beginning April 13, 2001 to owners of shares of the Common Stock of The
Sports Club Company, Inc. in connection with the solicitation of proxies by the
Board of Directors for the 2001 Annual Meeting of Stockholders. This proxy
procedure is necessary to permit all Sports Club Company stockholders, many of
whom live outside of the Los Angeles area and are unable to attend the meeting,
to vote.
Only stockholders owning Sports Club Company shares on April 6, 2001 are
entitled to attend and vote at the meeting. A complete list of these
stockholders will be available at both our corporate office and the meeting site
beginning May 7, 2001. There were 17,896,643 shares of Company Common Stock
outstanding on April 6, 2001.
The Proxy Statement contains important information for you to consider when
deciding how to vote on the matters brought before the meeting. PLEASE READ IT
CAREFULLY AND TAKE THIS OPPORTUNITY TO VOTE. Your shares can only be voted at
the Annual Meeting if you are present or represented by proxy. Whether or not
you plan on attending the meeting you are encouraged to vote by proxy to ensure
that your shares will be represented. If you receive more than one proxy card
because your shares are registered in different names or addresses, each proxy
card should be completed and returned. We have enclosed our Annual Report for
2000.
By Order of the Board of Directors
/s/ LOIS BARBERIO
Lois Barberio
Vice President and Secretary
Los Angeles, California
April 13, 2001
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TABLE OF CONTENTS
Part I - Questions and Answers About the Annual Meeting and
Voting.................................................... 1
Part II - Proposals Recommended By the Board................ 3
Proposal 1. - Election of Two Directors................ 3
Proposal 2. - Adoption of 2001 Employee Stock Purchase
Plan.................................................. 3
Proposal 3. - Adoption of 2001 Incentive Stock Plan.... 6
Part III - Information About Our Directors and Officers..... 10
Biographies of Directors and Executive Officers........ 10
Information Regarding Our Board of Directors........... 11
Number of Directors and Terms..................... 11
Committees........................................ 12
Board and Committee Attendance During 2000........ 12
How We Compensate Directors....................... 13
Section 16 Compliance............................. 13
Information Regarding Our Executive Officers........... 14
How We Compensate Executive Officers.............. 14
Option Grants, Exercises and Year-End Values...... 15
Unexercised Stock Options and Fiscal Year-End
Option Values..................................... 15
Employment Agreements............................. 16
Report of the Compensation Committee................... 16
Compensation Philosophy........................... 16
Components of Executive Compensation.............. 16
Compensation of Chief Executive Officers.......... 17
Report of the Audit Committee.......................... 18
Part IV - Information About the Company..................... 19
Independent Certified Accountants...................... 19
Stock Ownership........................................ 19
Description of Transactions with Our Directors,
Officers and Principal................................ 20
Stockholders........................................... 20
How Our Stock Has Performed Over the Past Several
Years................................................. 22
Part V - Other Information.................................. 23
Submission of Stockholder Proposals.................... 23
Financial Statements................................... 23
Appendix A - 2001 Employee Stock Purchase Plan.............. A - 1
Appendix B - 2001 Incentive Stock Plan...................... B - 1
Appendix C - Charter of the Compensation Committee of the
Board of Directors........................................ C - 1
Appendix D - Charter of the Audit Committee of the Board of
Directors................................................. D - 1
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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Q: WHY DID YOU SEND ME THIS PROXY STATEMENT?
A: We sent you this Proxy Statement and the enclosed proxy card because our
Board of Directors is soliciting your proxy to vote at the 2001 Annual Meeting
of Stockholders. This Proxy Statement summarizes the information you need to
know to vote intelligently at the Annual Meeting. However, you do not need to
attend the Annual Meeting to vote your shares. Instead, you may simply complete,
sign and return the enclosed proxy card.
We will begin sending this Proxy Statement, the attached Notice of Annual
Meeting and the enclosed proxy card on April 13, 2001 to all stockholders
entitled to vote. Stockholders who owned Sports Club Company Common Stock at the
close of business on April 6, 2001 are entitled to vote. On this record date,
there were 17,896,643 shares of Sports Club Company Common Stock outstanding.
Sports Club Company Common Stock is our only class of voting stock. We are also
sending with this Proxy Statement, The Sports Club Company, Inc. 2000 Annual
Report, which includes our financial statements.
A list of stockholders eligible to vote will be available at the offices of The
Sports Club Company, Inc., 11100 Santa Monica Blvd., Suite 300, Los Angeles,
California, and at the meeting site, 1835 Sepulveda Blvd., Los Angeles,
California, beginning May 7, 2001. Stockholders may examine these lists during
normal business hours for any purpose related to the Annual Meeting.
Q: WHAT AM I VOTING ON?
A: There are three proposals.
- The election of two directors for three-year terms,
- The adoption of our 2001 Employee Stock Purchase Plan, and
- The adoption of our 2001 Incentive Stock Plan.
Q: HOW MANY VOTES DO I HAVE?
A: Each share of Sports Club Company Common Stock that you own entitles you to
one vote. The proxy card indicates the number of shares of Sports Club Company
Common Stock that you own.
Q: HOW DO I VOTE BY PROXY?
A: Whether you plan to attend the Annual Meeting or not, we urge you to
complete, sign and date the enclosed proxy card and return it promptly in the
envelope provided. Returning the proxy card will not affect your right to attend
the Annual Meeting and vote in person.
If you properly fill in your proxy card and send it to us in time to vote, your
"proxy" (one of the individuals named as proxies on your proxy card) will vote
your shares as you have directed. Unless otherwise directed in the proxy card,
your proxy will vote your shares as recommended by the Board as follows:
- FOR election of both nominees,
- FOR adoption of our 2001 Employee Stock Purchase Plan, and
- FOR adoption of our 2001 Incentive Stock Plan.
If any other matter is presented, your proxy will vote in accordance with
his/her best judgment. At the time this Proxy Statement went to press, we knew
of no matters that needed to be acted on at the Annual Meeting other than those
discussed in this Proxy Statement.
Q: WHAT IF I VOTE AND THEN CHANGE MY MIND?
A: You can revoke your proxy by writing to us, by sending in another proxy with
a later date, or by attending the meeting and casting your vote in person.
Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A: It indicates that your shares are held in more than one account, such as two
brokerage accounts registered in different names. You should vote each of the
proxy cards to ensure that all of your shares are voted. We encourage you to
register all of your brokerage accounts in the same name and address for better
stockholder service. You may do this by contacting our transfer agent, American
Stock Transfer & Trust Company, at 6201 15th Avenue, Third Floor, Brooklyn, New
York 11219, Telephone: (212) 936-5100.
Q: WILL MY SHARES BE VOTED IF I DO NOT SIGN AND RETURN MY PROXY CARD?
A: If your shares are held in street name, your brokerage firm, under certain
circumstances, may vote your shares.
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Brokerage firms have authority under American Stock Exchange rules to vote
customers' unvoted shares on certain "routine" matters, including the election
of directors.
If you do not vote your proxy, your brokerage firm may either:
- Vote your shares on routine matters, or
- Leave your shares unvoted.
We encourage you to provide instructions to your brokerage firm by voting your
proxy. This ensures your shares will be voted at the meeting.
When a brokerage firm votes its customers' unvoted shares on routine matters,
these shares are counted for purposes of establishing a quorum to conduct
business at the meeting. A brokerage firm cannot vote customers' shares on
non-routine matters. Accordingly, shares that are not voted are considered not
entitled to vote on non-routine matters, rather than as a vote against the
matter.
You may have granted to your stockbroker discretionary voting authority over
your account.
Your stockbroker may be able to vote your shares under the terms of the
agreement you have with your stockbroker.
Q: HOW DO I VOTE IN PERSON?
A: If you plan to attend the Annual Meeting and vote in person, we will give you
a ballot when you arrive. However, if your shares are held in the name of your
broker, bank or other nominee, you must bring an account statement or letter
from the nominee indicating that you were the beneficial owner of the shares on
April 6, 2001, the record date for voting.
Q: WHO WILL COUNT THE VOTE?
A: The Sports Club Company's transfer agent, American Stock Transfer & Trust
Company, will tally the vote, which will be certified by an Inspector of
Election.
Q: IS MY VOTE CONFIDENTIAL?
A: The Sports Club Company has a policy of vote confidentiality. Proxies,
ballots and voting tabulations are available for examination only by the
Inspector of Election and tabulators. Your vote cannot be disclosed to the Board
or management of the Company except as may be required by law and in other
limited circumstances.
Q: HOW MANY VOTES DO YOU NEED TO HOLD THE MEETING?
A: Shares are counted as present at the meeting if:
- The stockholder is present and votes in person at the meeting, or
- The stockholder has properly submitted a proxy card, or
- The stockholder's broker votes the shares as described above.
A majority of the Company's outstanding shares as of the record date must be
present at the meeting in order to hold the meeting and conduct business. This
is called a quorum.
Q: HOW MANY VOTES MUST THE NOMINEES HAVE TO BE ELECTED?
A: We use the phrase "For" vote to mean a vote for a director. Directors will be
elected by a plurality of votes, meaning that the directors with the greatest
number of "For" votes in the election for directors will be elected.
Q: HOW MANY VOTES MUST THE 2001 EMPLOYEE STOCK PURCHASE PLAN HAVE TO PASS?
A: The plan must receive a "For" vote of a majority of the shares present at the
meeting to pass.
Q: HOW MANY VOTES MUST THE 2001 INCENTIVE STOCK PLAN HAVE TO PASS?
A: The Plan must receive a "For" vote of a majority of the shares present at the
meeting to pass.
Q: WHO DO I CONTACT IF I HAVE A QUESTION?
A: Any questions should be directed to Investor Relations, The Sports Club
Company, Inc., 11100 Santa Monica Blvd., Suite 300, Los Angeles, California
90025, Telephone: (310) 479-5200, Fax: (310) 479-8879.
Q: HOW ARE PROXIES SOLICITED?
A: Proxies may be solicited by mail, telephone, or other means by officers,
directors and other employees of the Company. No additional compensation will be
paid to these individuals in connection with proxy solicitations. The Company
pays for distributing and soliciting proxies and reimburses banks, brokers and
other custodians their reasonable fees and expenses for forwarding proxy
materials to stockholders.
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PART II
PROPOSALS RECOMMENDED BY THE BOARD
PROPOSAL 1: ELECTION OF TWO DIRECTORS
Our Board of Directors is divided into three equal classes. One class is
elected at each annual meeting to serve for a three-year term. The number of
directors constituting the whole Board is currently six, with two directors
standing for re-election at this Annual Meeting. At the Annual Meeting, the two
candidates receiving the highest number of votes in the election of Class I
directors will be elected. The Board of Directors' nominees for re-election this
year are Brian J. Collins and Andrew L. Turner. Each has consented to serve for
a three-year term. See page 10 for biographies of both nominees. The other four
directors will continue to serve their current terms.
We have no reason to believe that either of the nominees will be unable to
serve as director. However, if any director is unable to stand for re-election,
the Board may either reduce the size of the Board or designate a substitute. If
a substitute nominee is named, the proxies may be voted for the election of the
substitute.
If any director resigns, dies or is otherwise unable to serve out his or
her term, or if the Board increases the number of directors (stockholders have
authorized a range of between five and nine directors) the Board may appoint a
director to fill the vacancy until the expiration of the term of that director.
Directors will be elected by a plurality of votes, meaning that the two
nominees with the greatest number of "For" votes will be elected as Class I
directors. THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF BOTH
NOMINEES.
PROPOSAL 2: ADOPTION OF 2001 EMPLOYEE STOCK PURCHASE PLAN
Our Board of Directors adopted the Purchase Plan in February 2001 to
encourage our employees to acquire a proprietary interest in the Company by
purchasing our Common Stock through voluntary payroll deductions. The Purchase
Plan is designed as an "employee stock purchase plan" within the meaning of
Section 423(b) of the Internal Revenue Code, and to qualify for the tax benefits
thereunder the Purchase Plan must be approved by the stockholders.
We have summarized below certain key provisions of the Purchase Plan.
Because it is a summary, it may not contain all of the information that is
important to you. Before you decide how to vote, you should review the full text
of the Purchase Plan attached hereto as Appendix A.
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DESCRIPTION OF PURCHASE PLAN
PURPOSE: The purpose of the Purchase Plan is to provide an incentive
to, and promote the retention and motivation of, our
non-executive employees who are eligible to participate in
the Purchase Plan.
ELIGIBILITY AND PARTICIPATION: Excluding executive officers (senior vice presidents and
above), directors and five percent stockholders, any person
who has completed one year of service and is regularly
employed by the Company or one of our subsidiaries for an
average of 20 hours per week during the quarter immediately
preceding the beginning of any offering period is eligible
to participate in the Purchase Plan.
As of March 30, 2001, approximately 900 employees were
eligible to participate in the Purchase Plan.
A participant must contribute at least 1% of his or her
salary but may contribute up to a maximum of 15%.
PURCHASE PERIODS: Each purchase period is six months, with the first purchase
period commencing July 1, 2001.
SHARES AVAILABLE: A total of 500,000 shares of Common Stock will be reserved
for issuance under the Purchase Plan.
ADMINISTRATION: The Plan will be governed and administered by the
Compensation Committee of the Board of Directors
("Administrator"). All questions of interpretation or
application of the Purchase Plan will be determined by the
Administrator, whose decisions are final, conclusive and
binding upon the Company and all participants.
PURCHASE PRICE: The purchase price per share at which shares will be sold to
participating employees is 85% of the lower of fair market
value per share on either the first day or the last day of
the six-month purchase period. The fair market value of the
Common Stock on a given date will be determined by reference
to the closing price of such Common Stock on the American
Stock Exchange on such date.
PURCHASE OF SHARES: An eligible employee who wishes to participate in the
Purchase Plan allocates a portion of his or her after-tax
payroll to the Purchase Plan, which amount will be deducted
from the employee's paycheck and directed to the Purchase
Plan account. At the end of each six-month period, the funds
in the Purchase Plan account are used to purchase Common
Stock. The Internal Revenue Code imposes a $25,000 market
value limit per employee per calendar year on the combined
value of the Common Stock purchased through the Purchase
Plan as calculated at the beginning of each semi-annual
purchase period. Accordingly, assuming the share price does
not decrease as of the end of any six-month purchase period
over the beginning price for the same six months, the
maximum an employee can invest under the Purchase Plan is
$21,250 per year. If an employee reaches this limit at any
purchase date, any remaining funds in the Purchase Plan
account will be retained and applied to the next eligible
semi-annual purchase date or will be returned to the
employee.
The employee's plan account is credited with any cash
dividends paid on his or her Common Stock in the account.
These dividends are automatically reinvested in additional
Common Stock at no cost to the employee. The
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amount of such cash dividends, however, are taxable to the
employee. Any stock dividends are also automatically added
to the employee's plan account.
An employee may increase, decrease or terminate future
payroll deductions, or may withdraw from the Purchase Plan.
Such an election may be made at any time, subject to any
cutoff dates that the Administrator establishes during any
purchase period. If an employee withdraws from the Purchase
Plan, accumulated payroll deductions will be returned to the
employee, without interest, in cash. An employee's
withdrawal from the Purchase Plan prior to the end of a
given purchase period does not affect his or her eligibility
to participate in succeeding purchase periods. The
Administrator may make a pro rata deduction in the number of
shares purchasable by employees if such number exceeds the
number of shares available for issuance under the Purchase
Plan.
TERMINATION OF
EMPLOYMENT: An employee's participation in the Purchase Plan is
terminated when employment is terminated. Upon termination
of participation, the employee is entitled to receive the
shares and any unused funds in his or her individual
account. The Purchase Plan provides for certain additional
rights to employees on leaves of absences of less than
ninety (90) days and to the beneficiaries of an employee
whose participation in the Purchase Plan is terminated due
to death.
CAPITAL CHANGES: The Administrator will adjust the purchase price and the
number of shares purchasable under the Purchase Plan if
there are changes in our capitalization.
AMENDMENT AND
TERMINATION OF
THE PLAN: The Board of Directors may amend the Purchase Plan at any
time or may terminate the Purchase Plan without approval of
stockholders, but in any event, the last offering period
will terminate as of June 30, 2011. If the Purchase Plan is
terminated, then, unless otherwise agreed to by the
Administrator and the affected employees, available funds
will be invested in shares as if the Purchase Plan were
terminated at the end of a purchase period. No amendment may
alter or impair any shares purchased under the Purchase Plan
without the consent of the affected employees. In addition,
the Board may not, without your approval:
- Increase the number of shares which can be purchased under
the Purchase Plan,
- Reduce the purchase price formula, or
- Modify the eligibility provisions.
FEDERAL INCOME
TAX INFORMATION: No income will be taxable to an employee participating in
the Purchase Plan at the time of the purchase of shares of
Common Stock at the formula discount from fair market value.
Upon disposition of the shares, the employee will generally
be subject to tax. If the shares have been held by the
employee for more than two years from the date of the onset
of the purchase period and more than one year from the
purchase date of the shares, the lesser of (1) the excess of
the fair market value of the shares at the time of such
disposition over the purchase price, or (2) 15% of the fair
market value of the shares on the first day of the offering
period, will be taxable as ordinary income, and any further
gain will be treated as long-term capital gain. If the
shares are
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disposed of before the expiration of the holding periods
described above, the excess fair market value of the shares
on the purchase date over the purchase price will be treated
as ordinary income, and further gain or loss on such
disposition will be capital gain or loss. We are not
entitled to a deduction for amounts taxable to an employee
except to the extent of the ordinary income taxable to an
employee upon disposition of shares prior to the expiration
of the holding periods described above.
The foregoing is only a summary of the federal income tax
consequences of the Purchase Plan to participants and us and
does not purport to be complete. Reference is made to
applicable provisions of the Internal Revenue Code. In
addition, the summary does not discuss the tax consequences
of an employee's death or the income tax laws of any
municipality, state or foreign country in which an employee
may reside. Therefore, in order to understand these other
tax consequences applicable to participants in greater
detail, each participant should consult with his or her own
tax advisor.
BENEFITS TO BE
AWARDED UNDER
THE PURCHASE PLAN: Because participation in the Purchase Plan is voluntary, we
do not know how many shares of Common Stock will ultimately
be issued under the Purchase Plan. However, the Board has
authorized 50,000 shares for future issuance.
The Purchase Plan must receive a Yes vote of a majority of the shares
present at the meeting to pass. THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE
2001 EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL 3: ADOPTION OF 2001 INCENTIVE STOCK PLAN
We are asking for your approval of our 2001 Incentive Stock Plan. The Board
of Directors and stockholders originally approved an incentive plan in 1994 and
in 1998 approved an amendment to the plan (collectively, the "Incentive Plan").
An aggregate of 1,800,000 shares of our Common Stock was authorized for issuance
under the Incentive Plan. As of March 30, 2001, 41,168 shares had been exercised
due to grants under the Plan and 1,515,006 shares were subject to outstanding
options. We expect that all shares under the Incentive Plan will be fully
utilized by mid-year and by its terms the Incentive Plan will terminate on the
earlier of, the date no additional shares are available under it, or December
31, 2001.
The Incentive Plan has played an important role in our efforts to attract
and retain employees and serves to align the interests of employees with those
of stockholders through equity ownership of the Company. In order to continue
future equity incentives to employees, the Board of Directors approved our 2001
Incentive Stock Plan (the "2001 Plan") on March 30, 2001, subject to stockholder
approval.
We have summarized below certain key provisions of the 2001 Plan. Because
it is a summary, it may not contain all of the information that is important to
you. Before you decide how to vote, you should review the full text of the 2001
Plan, which we have included as Appendix B.
DESCRIPTION OF 2001 INCENTIVE STOCK PLAN
PURPOSE: The purposes of the 2001 Plan are (1) to attract and retain
individuals with ability on a basis competitive with general
business practices and (2) to promote the interests of the
Company and its stockholders by increasing the proprietary
and vested interests of our employees, consultants, officers
and directors. As of March 30, 2001, approximately fifty
individuals (2 outside consultants, 5 executive officers and
43 employees) were participating in the 2001 Plan.
TERM: No stock will be granted pursuant to the 2001 Plan on or
after March 29, 2011.
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SHARES AVAILABLE: The maximum number of shares of the Company's Common Stock
authorized for issuance under the 2001 Plan is 2,500,000.
This number is subject to adjustment in the event of a stock
exchange, reorganization, recapitalization, stock split,
stock dividend or other capital change or adjustment.
ADMINISTRATION: Currently, the Board of Directors of the Company has
appointed the Board's three member Compensation Committee
("Administrator") to administer the 2001 Plan. The
Administrator has the authority to adopt rules and
regulations that it considers necessary or appropriate to
interpret and carry out the purposes of the 2001 Plan,
including the type, size and terms of awards; the terms of
vesting and the dates of exercisability and payment; and the
amendment of awards previously granted.
AWARDS: The 2001 Plan allows the Administrator to grant awards of
options, rights to purchase shares of Common Stock and stock
appreciation rights. Stock options may be either incentive
stock options qualifying under Section 422 of the Internal
Revenue Code or non-qualified options.
Awards under the 2001 Plan are non-transferable except by
will or the laws of descent and distribution.
TERMINATION AND
AMENDMENT: The Board of Directors has the authority to terminate the
2001 Plan at any time. However, no termination or amendment
may, without the consent of the participant, impair any
rights that were granted prior to termination or amendment.
STOCK OPTIONS: The Administrator has adopted certain rules that govern the
grant of stock options under the 2001 Plan. The exercise
price of incentive stock options must be equal to or greater
than the fair market value on the date the option is granted
(a minimum price of 110% of fair market value for
participants who own at least 10% of our outstanding Common
Stock on the grant date). Non-qualified stock options must
have an exercise price equal to at least 85% of fair market
value on the date of grant.
A stock option expires 90 days following termination of
employment, other than for death or disability, unless
otherwise determined by the Administrator. The option of any
participant whose employment has been terminated by reason
of death or permanent disability generally expires 12 months
after termination.
To date, no option rights have been granted under the 2001
Plan.
PURCHASE RIGHTS: The Administrator has adopted certain rules that govern the
grant of purchase rights under the 2001 Plan. Rights to
purchase shares of Common Stock to be offered for direct
sale must be at a purchase price equal to not less than 85%
of the fair market value. Purchase rights are generally
exercisable for a period of thirty days following the date
of grant. Generally, the provisions applicable to options
regarding transfer and exercise upon termination, death,
disability or retirement will also apply to purchase rights.
To date, no purchase rights have been granted under the 2001
Plan.
STOCK APPRECIATION
RIGHTS: The Administrator has also adopted certain rules that govern
the grant of stock appreciation rights under the 2001 Plan.
Stock appreciation rights allow their holders to benefit
from the appreciation in the value of shares of our Common
Stock without having to invest any funds. Appreciation
rights entitle the
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holder to receive payment having an aggregate value equal to
the product of (1) the excess, if any, of the fair market
value on the exercise date of one share over the base price
per share, times (2) the number of shares called for by the
appreciation right or portion thereof that is exercised. The
Administrator determines whether payment upon exercise of
the appreciation right is made in cash, shares or a
combination of cash and shares.
Stock appreciation rights may be granted in combination with
options or on a stand-alone basis.
Appreciation rights granted in tandem with a related option
are exercisable only to the extent and under the same terms
and conditions as the related option. If an appreciation
right is exercised, the related option grant will be
modified to cancel the number of shares with respect to
which the appreciation right was exercised, and upon the
exercise or termination of a related option, the
appreciation right will terminate as to the number of shares
with respect to which the related option was exercised or
terminated.
Appreciation rights not granted in tandem with options will
generally contain exercise terms substantially similar to
those contained in option grants. Generally, the provisions
applicable to options regarding transfer and exercise upon
termination, death, disability or retirement will also apply
to appreciation rights.
To date, no appreciation rights have been granted under the
2001 Plan.
BENEFITS: As of March 30, 2001, options for 1,515,006 shares of our
Common Stock were outstanding in the aggregate under all of
our incentive stock plans at a weighted average exercise
price of $5.95 per share.
Within the last two years the Administrator has awarded to
our executive officers the following option grants (please
refer to the table entitled "Option Grants, Exercises and
Year-End Values" on page 15 for additional detail regarding
these grants):
D. Michael Talla....................... 250,000
Rex A. Licklider....................... 0
Nanette Pattee Francini................ 128,267
Timothy O'Brien........................ 128,267
Mark Spino............................. 128,267
Philip Swain........................... 128,267
The number of options or other awards to be granted in the
future cannot be determined at this time. The actual
benefits, if any, to individual participants cannot be
determined prior to exercise because the value, if any, of
options and rights is represented by the difference between
the market price of a share of our Common Stock on the date
of exercise and the exercise price of the option and/or
right.
FEDERAL TAX
CONSEQUENCES: Non-qualified options
No income will be recognized by a participant upon the grant
of a non-qualified option. Upon exercise the participant
will generally have ordinary income in the amount equal to
the excess of the fair market value of the shares acquired
over the exercise price. The income recognized by an
employee participant will be subject to tax withholding.
Upon a later sale of such shares, the participant will have
capital gain or loss in an amount equal to the
8
13
difference between the amount realized on such sale and the
tax basis of the shares sold.
We will be entitled to a tax deduction in the same amount as
the ordinary income recognized by the participant with
respect to shares acquired upon exercise of the
non-qualified option.
Incentive stock options
No income will be recognized by a participant upon the grant
of an incentive stock option. Further, the participant will
recognize no income at the time of exercise (although a
participant may have income for purposes of alternative
minimum tax calculations) and we will not be allowed a
deduction for federal income tax purposes in connection with
the grant or exercise of an option.
If the participant holds the acquired shares two years from
the date of grant and one year from the date of exercise the
entire gain (or loss) realized when the participant
eventually disposes of the stock is treated as long term
capital gain (or loss). If the shares are disposed of before
such holding period requirements are satisfied, the
participant will recognize ordinary income in an amount
equal to the lesser of the difference between (1) the
exercise price and the fair market value of the shares on
the date of exercise or (2) the exercise price and the sales
proceeds. Any remaining gain or loss will be treated as
capital gain or loss. We would be entitled to a federal
income tax deduction equal to the amount of ordinary income
recognized by the participant.
Section 162(m)
Compensation of persons who are named executive officers is
subject to the tax deduction limits of section 162(m) of the
Internal Revenue Code. Stock options, and stock appreciation
rights that qualify as "performance-based compensation," are
exempt from section 162(m), thus allowing us the full tax
deduction otherwise permitted for such compensation. If
approved by the stockholders the 2001 Plan will enable the
Administrator to grant options and stock appreciation rights
that will be exempt from the deduction limits of section
162(m).
The foregoing is only a summary of the effects of federal
income taxation upon the participants and us and does not
purport to be complete. Therefore, in order to understand
the federal income tax consequences applicable to
participants in greater detail, each participant should
consult with his or her own tax advisor.
The 2001 Incentive Stock Plan must receive a Yes vote of a majority of the
shares present at the meeting to be adopted. THE BOARD RECOMMENDS THAT YOU VOTE
"FOR" THE 2001 INCENTIVE STOCK PLAN.
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PART III
INFORMATION ABOUT OUR DIRECTORS AND OFFICERS
BIOGRAPHIES OF DIRECTORS AND EXECUTIVE OFFICERS
CLASS I DIRECTORS
BRIAN J. COLLINS Age 40
Director since 1997
Term expires 2001 From December 1996 to May 1999, Mr. Collins
served as Vice President and Chief Financial
Officer of Millennium Partners Management LLC,
an affiliate of Millennium Entertainment
Partners L.P., which is a real estate developer
of mixed-use urban entertainment projects. In
June 1997 he became a principal of Millennium
Partners Management LLC and in June 1999 was
named Chief Operating Officer. From March 1993
to November 1996, Mr. Collins was Senior Vice
President at Carol Management Corp., an owner
and operator of real estate and hotel
properties. Mr. Collins holds a Bachelor of
Arts Degree from Colgate University and a
Masters of Science in Accounting from New York
University's Graduate School of Business. For
so long as Millennium maintains at least a 12%
interest in our equity securities, we and
certain of our stockholders have agreed with
Millennium to cause a nominee of Millennium to
be appointed or elected to our Board of
Directors. Mr. Collins is currently serving as
Millennium's nominee pursuant to this
agreement. See "Description of Transactions
with Our Directors, Officers and Principal
Stockholders."
ANDREW L. TURNER Age 54
Director since 1994
Term expires 2001 Mr. Turner currently serves as Chairman of the
Board for both Ballantrae Healthcare and
Enduracare Rehabilitation Services. He also
serves on the Board of Directors of Watson
Pharmaceuticals, Inc., a publicly traded
pharmaceutical manufacturing company. From 1989
until August 2000, Mr. Turner served as
Chairman of the Board and Chief Executive
Officer of Sun Healthcare Group, Inc., a
publicly traded health care services provider.
In October 1999, Sun Healthcare Group, Inc.
filed voluntary petitions with the U.S.
Bankruptcy Court to reorganize under chapter
11.
CLASS II DIRECTORS
NANETTE PATTEE FRANCINI Age 52
Director since 1994
Term expires 2002 Ms. Pattee Francini began developing sports and
fitness clubs in 1977 and has served as our
Executive Vice President and has been
principally responsible for overseeing all
marketing activities since our inception in
1994. Ms. Pattee Francini holds a Bachelor of
Arts Degree from the University of Arizona.
DENNISON T. VERU Age 40
Director since 1996
Term expires 2002 Mr. Veru has been a Director since 1996. In
March 2000, Mr. Veru became Executive Vice
President of Palisade Capital Management, LLC.
From November 1992 until December 1999, he
served as President and Director of Research of
Awad & Associates, a money management division
of Raymond James Financial. He is a graduate of
Franklin and Marshall College.
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CLASS III DIRECTORS
REX A. LICKLIDER Age 58
Director since 1994
Term expires 2003 Mr. Licklider has served as Vice Chairman of
the Board since 1994 and was appointed Co-Chief
Executive Officer in February 2000. Previously,
Mr. Licklider served as a consultant to us for
strategic and financial planning. He founded
Com Systems, Inc., a publicly traded
long-distance telecommunications company, and
at various times between 1975 and April 1992
served as its Chairman, President and Chief
Executive Officer. Mr. Licklider is a founder
and director of Pentium Investments, Inc. and a
director of The Learning Network, Inc. and
Deckers Outdoor Corporation. He also serves on
the Board of Directors of The Children's Bureau
of Southern California, Los Angeles Youth
Programs, Inc., The Achievable Foundation and
Marymount High School in Los Angeles,
California. Mr. Licklider holds a Bachelor of
Arts Degree in Business Administration from the
University of Arizona and a Masters in Business
Administration from the University of
California at Los Angeles.
D. MICHAEL TALLA Age 54
Director since 1994
Term expires 2003 Mr. Talla began developing sports and fitness
clubs in 1977. From our inception in 1994 he
has served as Chairman of the Board, and until
Mr. Gibbons' appointment in July 1999, also
served as our Chief Executive Officer. Upon Mr.
Gibbon's resignation last February, he assumed
the position of Co-Chief Executive Officer with
Mr. Licklider. Mr. Talla holds a Bachelor of
Arts Degree in Business Administration from the
University of Arizona.
OTHER EXECUTIVE OFFICERS
TIMOTHY M. O'BRIEN Age 49
Chief Financial Officer
Mr. O'Brien has been our Chief Financial
Officer since February 1995 and since June 1995
has also served as Assistant Secretary. Mr.
O'Brien has a Bachelor of Business
Administration Degree from the University of
Wisconsin-Madison and is a Certified Public
Accountant.
PHILIP J. SWAIN Age 43
Sr. Vice President of Operations
Mr. Swain served as Vice President of
Operations from our inception in 1994 and was
appointed Senior Vice President in 2000.
MARK S. SPINO Age 46
Sr. Vice President of Development
Mr. Spino served as Vice President of
Development from our inception in 1994 and was
appointed Senior Vice President in 2000. Mr.
Spino holds a Bachelor of Arts Degree and a
Masters of Arts in Physical Education from the
University of Southern California.
INFORMATION REGARDING OUR BOARD OF DIRECTORS
NUMBER OF DIRECTORS AND TERMS
Our Board of Directors currently has six directors. Two directors are
nominees for re-election this year. The remaining four will continue to serve
the terms described in their biographies included on pages 10 - 11 under
"Biographies of Directors and Executive Officers." The Board is divided into
three equal classes. The classes serve staggered three-year terms.
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COMMITTEES
The Board has two permanent committees: the Audit Committee and the
Compensation Committee. The Board does not have a nominating committee or a
committee performing similar functions.
The Compensation Committee
- Reviews and recommends salaries and bonuses for executive officers,
- Administers our incentive stock and employee stock purchase plans with
authority to grant options and other equity awards,
- Is composed of the three non-employee directors -- Messrs. Collins, Veru
and Turner (Acting Chairman), and
- Met four times during 2000.
The Audit Committee
- Reviews audit and control functions,
- Reviews accounting principles, policies and practices,
- Confers with independent accountants and management personnel regarding
the scope of our audit examination,
- Reviews reports of our independent accountants and our management's
response thereto,
- Approves consolidated financial statements for inclusion in our Annual
Report on Form 10-K,
- Is composed of the three non-employee directors -- Messrs. Collins,
Turner and Veru (acting Chairman), and
- Met three times during 2000.
During the year, the Board examined the composition of the Audit Committee
in light of the adoption by the Securities and Exchange Commission and the
American Stock Exchange of new rules governing audit committees. The new rules
state that the audit committee must be a committee of at least three members
comprised solely of independent directors, each of whom is able to read and
understand fundamental financial statements. Based on this examination the Board
confirmed that only two of the members of our Audit Committee (Messrs. Veru and
Turner) were independent within the meaning of the new rules. The Committee's
third member (Brian Collins) is not considered independent because of his
affiliation with Millennium (See "Description of Transactions with Our
Directors, Officers and Principal Stockholders" at pages 20-21). Under limited
circumstances the rules do allow a Board of Directors to appoint one director to
the audit committee who is not considered independent provided that such
director is not a current employee or immediate family member of an employee.
The Board has decided that Mr. Collins' appointment to the Audit Committee meets
the exception criteria and that it is in the best interests of the stockholders
that Mr. Collins remain the third member of the Audit Committee.
BOARD AND COMMITTEE ATTENDANCE DURING 2000
The Board of Directors held four meetings in 2000. Except for John Gibbons,
who resigned in February 2000, each director attended all meetings of the Board
and all meetings of committees of which such director was a member.
12
17
HOW WE COMPENSATE DIRECTORS
Directors' fees, paid only to directors who are not employees of the
Company, are as follows:
- Annual retainer fee of $12,000,
- $1,000 for each Board and committee meeting attended,
- Expenses of attending Board and committee meetings, and
- Automatic annual award of 2,000 shares of our Common Stock granted under
the Amended and Restated 1994 Stock Compensation Plan each November 15th.
Messrs. Collins, Turner and Veru currently serve on the Board as
non-employee directors. Until assuming the position of Co-Chief Executive
Officer, Mr. Licklider also received amounts due to non-employee directors. All
directors receive reimbursement of reasonable out-of-pocket expenses incurred in
connection with meetings of the Board. Following are the amounts paid to all
directors for each of the last four years:
- - 1997...................................................... $48,783
- - 1998...................................................... 53,320
- - 1999...................................................... 69,240
- - 2000...................................................... 71,500
Under the Amended and Restated 1994 Stock Compensation Plan an aggregate of
30,000 shares of Common Stock was issued to non-employee directors through
December 31, 2000.
SECTION 16 COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers, and greater-than-10% stockholders to file reports
with the Securities and Exchange Commission and the American Stock Exchange on
changes in their beneficial ownership of our Common Stock and to provide the
Company with copies of the reports. Based on our review of these reports and
certifications furnished to us, we believe that all of our directors and
executive officers complied during 2000 with the reporting requirements of
Section 16(a), with the exception of a purchase of 12,000 shares of our Common
Stock by Mr. Brian Collins in June 1999, which, as a result of an administrative
oversight, was reported in March 2001.
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INFORMATION REGARDING OUR EXECUTIVE OFFICERS
HOW WE COMPENSATE EXECUTIVE OFFICERS
The table below shows, for the last three fiscal years, the amount of
compensation earned by the Co-Chief Executive Officers and the next four most
highly-compensated executive officers (the "Named Executive Officers"). The
current salaries of such executive officers are described below under
"Employment Agreements."
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION SHARES ALL OTHER
------------------------ UNDERLYING COMPENSATION
NAME & POSITION YEAR SALARY($)(A) BONUS($) OPTIONS AWARDS ($)(B)
--------------- ---- ------------ -------- -------------- ------------
D. Michael Talla................. 2000 243,875(c) 70,000 250,000 14,245
Co-Chief Executive Officer 1999 243,000(c) 60,000 -- 3,168
and Chairman of the Board 1998 243,000(c) 45,000 30,000 3,168
Rex A. Licklider................. 2000 156,050 -- -- 10,879
Co-Chief Executive Officer and 1999 -- -- -- --
Vice Chairman of the Board 1998 -- -- -- --
Nanette Pattee Francini.......... 2000 198,325 60,000 78,267 9,617
Executive Vice President 1999 159,993 45,000 50,000 1,980
and Director 1998 154,800 35,000 30,000 825
John M. Gibbons.................. 2000 293,336(d) 70,000 -- 1,449
President, Chief Executive 1999 304,508(d) 55,000 -- 2,534
Officer and Director 1998 264,108(d) 42,000 30,000 2,534
(Resigned February 2000)
Mark S. Spino.................... 2000 197,916 60,000 78,267 14,145
Senior Vice President of 1999 150,000 45,000 50,000 3,168
Development 1998 145,000 35,000 30,000 2,775
Philip J. Swain.................. 2000 198,325 60,000 78,267 12,704
Senior Vice President of 1999 160,000 45,000 50,000 1,980
Operations 1998 155,000 35,000 30,000 2,063
Timothy M. O'Brien............... 2000 197,916 60,000 78,267 4,716
Chief Financial Officer 1999 150,000 45,000 50,000 3,168
and Assistant Secretary 1998 146,300 35,000 30,000 3,168
- ---------------
(a) Includes automobile allowance.
(b) Represents value of (i) amounts paid by us on behalf of the Named Executive
Officer and dependents for medical insurance and (ii) our Common Stock
contributed for the benefit of the Named Executive Officer under the 401K
Profit Sharing Plan, based upon the December 31 closing market price each
year of our Common Stock, on the American Stock Exchange.
(c) Mr. Talla also receives, on an annual basis, 49.9% of the first $300,000 of
The Sports Club/LA-Los Angeles' net cash flow. This amount is not included
in Mr. Talla's compensation. See "Certain Relationships and Related
Transactions."
(d) Includes an allowance for living expenses paid to Mr. Gibbons under the
terms of his employment agreement.
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OPTION GRANTS, EXERCISES AND YEAR-END VALUES
The following table describes option grants to the Named Executive Officers
during the last fiscal year.
% OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK
SHARES GRANTED PRICE APPRECIATION FOR
UNDERLYING TO EXERCISE OPTION TERM(B)
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------------
NAME GRANTED(#)(A) FOR 2000 ($/SH) DATE 5%($) 10%($)
---- ------------- --------- -------- ---------- --------- ----------
D. Michael Talla................. 250,000 33.58 8.00 2/8/2005 -- 593,742
Rex A. Licklider................. -- -- -- -- -- --
Nanette Pattee Francini.......... 50,000 6.72 8.00 2/8/2010 -- 118,748
28,267 3.80 4.25 11/5/2010 75,552 191,463
John M. Gibbons.................. -- -- -- -- -- --
Mark S. Spino.................... 50,000 6.72 8.00 2/8/2010 -- 118,748
28,267 3.80 4.25 11/5/2010 75,552 191,463
Phillip J. Swain................. 50,000 6.72 8.00 2/8/2010 -- 118,748
28,267 3.80 4.25 11/5/2010 75,552 191,463
Timothy M. O'Brien............... 50,000 6.72 8.00 2/8/2010 -- 118,748
28,267 3.80 4.25 11/5/2010 75,552 191,463
- ---------------
(a) All grants are incentive stock options granted under the terms of our 1994
Stock Incentive Plan (as amended and restated June 3, 1998), at an exercise
price equal to or greater than the fair market value of our Common Stock on
the date of grant. All of these options vest in 33 1/3% increments on the
first three anniversaries of the date of grant and, with the exception of D.
Michael Talla whose options expire 5 years from date of grant, all of these
options expire 10 years from the date of grant.
(b) The dollar amounts listed are the result of calculations at the 5% and 10%
annual rates of stock appreciation prescribed by the SEC and are not
intended to forecast possible future appreciation, if any, of our Common
Stock. If our Common Stock does not appreciate, the Named Executive Officers
will receive no benefit from the options.
UNEXERCISED STOCK OPTIONS AND FISCAL YEAR-END OPTION VALUES
None of the Named Executive Officers exercised stock options during the
last fiscal year. The following table provides information with respect to
unexercised stock options outstanding as of December 31, 2000.
NUMBER OF SHARES UNDERLYING VALUE OF IN-THE-MONEY
UNEXERCISED OPTIONS AT FISCAL UNEXERCISED OPTIONS AT FISCAL
YEAR-END(A) YEAR-END(B)
------------------------------ ------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) (#) ($) ($)
---- ------------ -------------- ------------ --------------
D. Michael Talla........................... 20,000 260,000 -- --
Rex A. Licklider........................... -- -- -- --
Nanette Pattee Francini.................... 66,667 121,600 1,875 --
John M. Gibbons............................ -- -- -- --
Mark S. Spino.............................. 66,667 121,600 1,875 --
Philip J. Swain............................ 76,667 121,600 3,125 --
Timothy M. O'Brien......................... 96,667 121,600 2,187 --
- ---------------
(a) All options were granted under our 1994 Stock Incentive Plan (as amended and
restated June 3, 1998).
(b) The in-the-money options had exercise prices of less than $2.8125, the
closing price of our Common Stock on the American Stock Exchange on December
31, 2000. The calculations of value assume a fair market value of our Common
Stock on December 31, 2000 at the price of $2.8125 per share.
15
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EMPLOYMENT AGREEMENTS
The Company has no written employment agreements. At December 31, 2000, the
Company's agreements with D. Michael Talla, Co-Chief Executive Officer, and
Nanette Pattee Francini, Executive Vice President, expired.
Our executive officers currently receive the following salaries:
D. Michael Talla Co-Chief Executive Officer................. $250,000
Rex A. Licklider Co-Chief Executive Officer................. 250,000
Nanette Pattee Francini Executive Vice President................... 200,000
Timothy M. O'Brien Chief Financial Officer.................... 200,000
Mark S. Spino Senior Vice President...................... 200,000
Philip J. Swain Senior Vice President...................... 200,000
Effective February 11, 2000, John Gibbons resigned from the Company and we
entered into a Separation from Employment Agreement pursuant to which Mr.
Gibbons received $250,000 prorated over a 12-month period. Mr. Gibbons received
his final payment on March 7, 2001. Additionally, the Board in its discretion
awarded Mr. Gibbons a bonus of $70,000. Mr. Gibbons was also entitled to the
value of his vested stock options.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is composed entirely of non-employee members of
our Board of Directors. Currently Messrs. Collins, Turner and Veru serve on the
Committee. The Committee reviews and approves each of the elements of our
executive compensation program and assesses both the competitiveness and
effectiveness of the program. In addition, the Committee administers the
Company's incentive stock and employee stock purchase plans.
Last year the Committee reviewed its existing charter and made certain
changes. These changes reflected increased specificity in the charter rather
than changes in the Committee's practices. The revised charter was approved by
the full Board on November 6, 2000. The complete text of the new charter is
included in this proxy statement as Appendix C.
COMPENSATION PHILOSOPHY
Our overall executive compensation philosophy is intended to achieve the
following three results:
- To reward the achievement of our strategic goals and the creation of
stockholder value,
- To maintain a close relationship between compensation and stockholder
value, and
- To secure, develop, motivate and retain a high-quality management team.
This philosophy underlies our overall salary structure, including executive
compensation.
The Committee is aware of the limitations imposed by section 162(m) of the
Internal Revenue Code on the deductibility of compensation paid to certain
senior executives to the extent it exceeds $1 million per executive. We
currently intend to recommend compensation amounts and plans which will result
in all compensation payments being fully deductible pursuant to section 162(m).
COMPONENTS OF EXECUTIVE COMPENSATION
The Company's compensation program consists of three key elements:
- A base salary,
- A performance-based annual bonus, and
- Periodic grants of stock options.
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Base Salaries
Base salary levels for all executive officers are reviewed annually. As
part of this process, we review the compensation packages offered by other
companies operating in the sports and leisure industry. We also give
consideration to the experience, responsibilities, management and leadership
abilities of our executive officers and their actual performance on behalf of
the Company, as well as compensation policies prevailing generally within the
industry and within the Peer Group described under "How Our Stock Has Performed
Over the Past Several Years."
Annual Bonus
The Committee also supplements base compensation through discretionary
performance-based bonuses. For 2000, management established overall Company
targets based on achievement of specific performance levels at the end of the
fiscal year; upon review of the achievement of those targets, the Committee
approved the following bonuses in February 2001:
D. Michael Talla............................................ $75,000
Rex A. Licklider............................................ 75,000
Nanette Pattee Francini..................................... 60,000
Timothy O'Brien............................................. 60,000
Philip J. Swain............................................. 60,000
Mark Spino.................................................. 60,000
Stock Options
The Committee believes that long-term incentive compensation in the form of
stock options will motivate officers and key employees to improve the long-term
performance of the Common Stock and thus directly increase stockholder value.
Stock options may also be used to attract new executives. Our incentive stock
plans provide a means by which executive officers and other key employees can
build an investment in the Company, which will align such employees' economic
interests with the interests of the stockholders. Such options are generally
granted at the prevailing market price of the Common Stock and will only have
value if the market price increases. Generally, stock options vest over a period
of time from the date of grant, and the optionee must be associated with the
Company at the time of vesting in order to exercise the option. In addition to
providing performance incentives to employees, stock options provide us with a
form of non-cash compensation, which allows us to provide benefits to employees
without making cash expenditures. Accordingly, the Committee views the grant of
options as an effective component of its overall executive compensation program.
In connection with its grant of options, the Committee considers the
outstanding options held by the individual and the projected value of the
options based on historical and assumed appreciation rates for the Common Stock.
COMPENSATION OF CHIEF EXECUTIVE OFFICERS
The Committee is responsible for recommending the compensation of the
Co-Chief Executive Officers and bases such recommendations on the same factors
as those employed by the Committee for other executive officers. In determining
salary the Committee considers the achievement of earnings and growth goals.
During 1999, Mr. Talla's base salary was $225,000. In February 2000, upon
his appointment to Co-Chief Executive Officer, the Board of Directors increased
his salary to $250,000 and awarded Mr. Talla options to purchase 250,000 shares
at a price of $8.00 per share. In setting Mr. Talla's salary the Committee
considered amounts received by Mr. Talla in respect of his interest in The
Sports Club/LA-Los Angeles' net cash flow as described in "Description of
Transactions with our Directors, Officers and Principal Stockholders."
Mr. Talla now holds in the aggregate options to purchase 280,000 shares of
the Company's Common Stock. The Board awarded Mr. Talla a bonus of $70,000 in
2000 and a bonus of $75,000 in February 2001.
17
22
The Board of Directors appointed Mr. Licklider Co-Chief Executive Officer
in February 2000 and in May of 2000 awarded him an annual base salary of
$250,000. Mr. Licklider holds no options. In February of this year the Board
awarded Mr. Licklider a bonus of $75,000.
In the future, the Committee may establish additional, specific
quantitative and/or qualitative goals, the accomplishment of which will be
considered in fixing the compensation of the chief executive officers.
Members of the Compensation Committee
Andrew L. Turner, Chairman (member since September 1994)
Brian J. Collins (member since April 1998)
Dennison T. Veru (member since February
1996)
REPORT OF THE AUDIT COMMITTEE
Effective January 31, 2000, the Securities and Exchange Commission adopted
new rules and amendments to existing rules relating to the disclosure of
information about companies' audit committees. The new rules require that, for
all votes of shareholders occurring after December 15, 2000, the proxy statement
must contain a report of the audit committee.
Last year, the Audit Committee reviewed its existing charter and made a
number of changes to reflect the new standards set forth in the Securities and
Exchange Commission regulations and the American Stock Exchange listing
requirements. The updated charter was approved by the Board on November 6, 2000.
The complete text of the new charter is included in this proxy statement as
Appendix D.
The Committee is comprised of three non-employee directors, two of whom are
independent as defined by the American Stock Exchange listing requirements.
Management is responsible for the Company's internal controls and the
financial reporting process. Our independent accountants, KPMG, LLP, are
responsible for performing an independent audit of the Company's consolidated
financial statements in accordance with generally accepted auditing standards
and to issue a report thereon. It is the Committee's responsibility, on behalf
of the Board of Directors, to review, monitor and oversee these processes.
In connection with KPMG's audit, the Committee met with management and KPMG
to review and discuss the Company's December 31, 2000 financial statements. The
Committee also discussed with KPMG the matters required by Statement on Auditing
Standards No. 61 (Communication with Audit Committees). The Committee also
received written disclosures from KPMG required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the
Committee discussed with KPMG that firm's independence.
Based upon the Committee's reviews and discussions with management and the
independent accountants, the Committee:
- Recommended to the Board of Directors that they approve the inclusion of
the Company's audited consolidated financial statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 2000, for
filing with the Securities and Exchange Commission, and
- Concurred with KMPG that the provision of their non-audit services, which
were limited to certain tax filing preparation, was compatible with
maintaining, and did not compromise, KPMG's independence.
Members of the Audit Committee
Dennison T. Veru, Chairman (member since February 1996)
Andrew L. Turner (member since September 1994)
Brian J. Collins (member since April 1998)
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PART IV
INFORMATION ABOUT THE COMPANY
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Our Board has selected the firm of KPMG LLP as the Company's independent
public accountants for the 2001 fiscal year. During fiscal 2000 KPMG LLP
provided audit services which included examination of the Company's annual
consolidated financial statements. Representatives of KPMG LLP are expected to
attend the meeting in order to respond to stockholder questions. They will also
have an opportunity to make a statement to the stockholders.
During the last fiscal year KPMG LLP billed us for the following:
- Audit Fees of $92,002 for quarterly and year-end financial review
- Other Fees of $81,833 for tax preparation services
STOCK OWNERSHIP
The following table shows the shares of our Common Stock beneficially owned
as of March 30, 2001 by our directors and Named Executive Officers. It also
shows other individuals or entities that beneficially owned more than 5% of the
17,896,643 issued and outstanding shares of our Common Stock.
TOTAL AND PERCENT OF
SHARES OPTIONS SHARES HELD STOCK OUTSTANDING
NAME AND ADDRESS OWNED EXERCISABLE UNDER --------------------
OF BENEFICIAL OWNER(A) DIRECTLY(B) WITHIN 60 DAYS(C) 401-K PLAN NUMBER PERCENT
---------------------- ----------- ----------------- ----------- --------- -------
D. Michael Talla(d)............ 5,064,215 113,334 3,158 5,180,707 34.45%
Nanette Pattee Francini(d)..... 256,107 110,001 1,425 367,533 34.45%
Mark S. Spino(d)............... 227,969 110,001 2,684 340,654 34.45%
Philip J. Swain(d)............. 154,164 120,001 1,817 275,982 34.45%
Voting Trust(d)................ 5,702,455 453,337 9,084 6,164,876 34.45%
John M. Gibbons................ -- -- -- -- --
Timothy O'Brien................ 3,000 140,001 3,094 146,095 *
The Licklider Living Trust
Dated May 2, 1986............ 1,725,862 -- -- 1,725,862 9.64%
Andrew L. Turner............... 2,000 -- -- 2,000 *
Dennison T. Veru............... 27,000 -- -- 27,000 *
Brian J. Collins............... 53,001 -- -- 53,001 *
All Directors and Executive
Officers as a Group (10
persons)..................... 7,513,318 593,338 12,178 8,118,834 45.37%
Millennium(e).................. 5,294,591 -- -- 5,294,591 29.58%
- ---------------
* Less than 1%
(a) The address of all directors and executive officers is c/o The Sports Club
Company, Inc., at 11100 Santa Monica Blvd., Suite 300, Los Angeles,
California 90025.
(b) Includes shares for which the named person is considered the owner because:
1. the named person has sole voting and investment power,
2. the named persons' spouse has voting and investment power, or
3. the shares are held by other members of the named persons' immediate
family.
(c) Includes shares that can be acquired through stock option exercises through
May 29, 2001.
(d) Named persons share voting power pursuant to a voting agreement that
requires each party to vote his or her shares in the manner determined by a
majority of all holders. The agreement is effective until
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October 20, 2004, or until terminated by persons holding 66 2/3% of the
shares of our Common Stock subject to the agreement. Each of the parties to
the voting agreement effectively controls the voting of all shares held by
the parties to the agreement, and, under SEC rules, are deemed beneficial
owners of the shares subject to the agreement. The total number of shares of
our Common Stock held by the parties without giving effect to beneficial
ownership resulting from the voting agreement is:
SHARES TOTAL SHARES
HELD HELD
NAMED PERSON DIRECTLY (SEE ABOVE TABLE)
------------ --------- -----------------
D. Michael Talla:
Individually................................... 4,893,234
Spouse......................................... 30,953
Trusts for two minor children.................. 140,028
Total............................................. 5,064,215
Nanette Pattee Francini..................................... 256,107
Mark S. Spino............................................... 227,969
Philip J. Swain............................................. 154,164
---------
All Parties to Voting Agreement........................ 5,702,455
=========
(e) The Millennium shares are held by the following affiliates:
SHARES HELD
-----------
Millennium Partners LLC..................................... 2,253,863
Millennium Development Partners L.P. ....................... 978,900
MDP Ventures I LLC.......................................... 72,100
MDP Ventures II LLC......................................... 1,364,728
Millennium Entertainment Partners L.P. ..................... 625,000
---------
5,294,591
=========
The address of all such entities is c/o Millennium Partners Management LLC,
1995 Broadway, New York, New York, 10023.
DESCRIPTION OF TRANSACTIONS WITH OUR DIRECTORS,
OFFICERS AND PRINCIPAL STOCKHOLDERS
From time to time we have entered into transactions with our officers,
directors and stockholders. We believe that each of the following transactions
has been on terms no less favorable to us than could have been obtained from
unaffiliated third parties. All transactions between us and any of our directors
or officers are subject to the approval of the disinterested directors.
Messrs. Talla and Licklider. We have a 50.1% interest in the partnership
that owns The Sports Club/ LA in Los Angeles and Mr. Talla beneficially owns the
remaining 49.9%. The partnership agreement provides that, on an annual basis,
the partners will share in the first $300,000 of the Club's net cash flow in
proportion to their percentage interests. The next $35.0 million of net cash
flow will be distributed to us. All distributions of net cash flow thereafter,
if any, will be made to the partners in proportion to their percentage
interests. Under certain circumstances, we have an option to purchase Mr.
Talla's interest in the partnership for an amount equal to four times the amount
of his most recent annual distribution from the partnership.
In January 1998, Messrs. Talla and Licklider purchased a 7,000 square foot
parcel of land adjacent to property owned and used by The Sports Club/LA in Los
Angeles. In February 1999, we acquired the property from them for $637,422, such
price being equal to the purchase price paid by Messrs. Talla and Licklider,
minus rental income received by them, plus an interest credit on their
investment at an annual rate of 6.56%. The acquired property is currently leased
to a non-affiliated third party.
In September 1999, we sold the property on which the Spectrum
Club - Thousand Oaks is located for a sales price of $12.0 million. Under the
terms of the sale, the sum of $10.0 million was received at the close of
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the sale and the remaining $2.0 million was received upon the fulfillment of
certain conditions by us. We entered into a sale and leaseback agreement for the
property under a long-term lease with an initial annual base rent of $1.3
million. The Thousand Oaks property consists of the Spectrum Club - Thousand
Oaks, a SportsMed facility, unimproved office space, and a parking ramp. We are
currently subleasing the Spectrum Club space to another club operator. Mr.
Licklider owns an approximate 4.6% interest in the purchaser of the property,
and trusts for the benefit of Mr. Talla's minor children own an approximately
5.2% interest in the purchaser of the property.
Millennium. Millennium is a partner in the Reebok-Sports Club/NY
partnership as well as the landlord of the building in which Reebok Sports
Club/NY is located. Reebok-Sports Club/NY partnership pays rent to Millennium in
the amount of $2.0 million per year, and the partnership agreement provides for
a first priority annual distribution of $3.0 million to Millennium. We are
entitled to certain additional priority distributions and 60% of the remaining
cash flow. Millennium's partnership interest entitles them to 20% of such
remaining cash flow.
In June 1997, we issued to Millennium 2,105,263 shares of our Common Stock
in exchange for $10.0 million, consisting of $5.0 million in cash and certain
interests of Millennium in the Reebok-Sports Club/NY partnership, including a
9.9% interest in the partnership and a $2.5 million promissory note issued by
the partnership. We also granted to Millennium certain registration and
preemptive rights regarding its shares. In addition, for so long as Millennium
maintains at least a 12% interest in our equity securities, we and certain of
our stockholders have agreed to cause a nominee of Millennium to be appointed or
elected to the Board of Directors. Pursuant to this agreement Brian J. Collins,
an officer of Millennium, is currently serving as a member of our Board of
Directors.
In December 1997, we sold 625,000 shares of Common Stock to Millennium for
$5.0 million, which we used to fund the cash portion of the acquisition of four
Spectrum Clubs. In addition, Millennium acquired properties underlying two of
the Clubs for $10.0 million and leased these properties to us under a financing
lease agreement. The lease had a term of twenty years, and provided for an
annual rent of $1.0 million for the first ten years and $1.2 million per year
thereafter. In 1999, we purchased the leased property from Millennium for a
price equal to $10.3 million.
The Company has entered into leases with Millennium relating to Sports
Clubs to be developed in San Francisco, Washington D.C. and Boston. On March 27,
2001, the leases were amended with Millennium's landlord contribution increasing
by $16.5 million in exchange for additional rent payments. In addition, after
the Company receives a management fee equal to 6% of all revenues, an amount
equal to its investment in the Club and an 11% annual return on the investment,
Millennium is entitled to receive a percentage of all additional cash flows from
each Club as additional rent. Millennium's percentage of the excess cash flow,
as defined, previously was 20% for each of theses Clubs. Under the amended lease
agreements, their percentage increases to 25% for the Washington and Boston Club
and 60% for the San Francisco Club.
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HOW OUR STOCK HAS PERFORMED OVER THE PAST SEVERAL YEARS
The chart below sets forth line graphs comparing the performance of our
Common Stock against the American Stock Exchange ("AMEX") market index and a
peer group of eight companies.
The peer group is composed of:
- Callaway Golf Company
- Carnival Corp
- Ben & Jerry's Homemade, Inc.
- Bally Total Fitness Holding Corporation
- Cedar Fair LP, Family Golf Centers, Inc.
- National Golf Properties, Inc.
- U.S. Physical Therapy, Inc.
- Family Golf Centers, Inc.
We believe the peer group is an accurate representation of public entities
engaged in the sports and leisure business.
The graph shows a comparison of cumulative total returns for the five years
ended December 31, 2000, our Common Stock, all AMEX listed companies and the
peer group, each of which assumes an initial value of $100 on December 31, 1995.
These indexes are included for comparative purposes only and do not necessarily
reflect management's opinion that such indexes are an appropriate measure of the
relative performance of the stock involved. The graph is not intended to
forecast or be indicative of possible future performance of our Common Stock.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG THE SPORTS CLUB COMPANY, INC.,
THE AMEX MARKET VALUE INDEX AND A PEER GROUP
[PERFORMANCE GRAPH]
THE SPORTS CLUB
COMPANY, INC. AMEX MARKET VALUE PEER GROUP
--------------- ----------------- ----------
12/95 100.00 100.00 100.00
3/96 104.00 102.67 113.20
6/96 86.00 103.66 122.60
9/96 86.00 101.08 130.14
12/96 92.00 101.59 132.61
3/97 148.00 100.68 144.55
6/97 172.00 111.26 165.21
9/97 274.00 126.77 181.40
12/97 296.00 127.06 204.80
3/98 296.00 140.36 250.64
6/98 240.00 139.56 273.45
9/98 200.00 118.71 215.12
12/98 126.00 136.38 313.65
3/99 162.00 139.26 316.18
6/99 132.00 157.31 321.15
9/99 160.00 152.51 288.56
12/99 124.00 174.22 317.32
3/00 120.00 200.17 179.12
6/00 112.00 185.28 148.53
9/00 128.00 189.79 179.17
12/00 90.00 179.02 222.54
* $100 INVESTED ON 12/31/95 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
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PART V
OTHER INFORMATION
This section describes other information that you should read before you
vote.
SUBMISSION OF STOCKHOLDER PROPOSALS
If you want to submit proposals for possible inclusion in the Company's
proxy materials for the 2002 Annual Meeting of Stockholders, you must do so on
or before December 13, 2001. The Secretary of the Company must receive proposals
at its principal office (11100 Santa Monica Boulevard, Suite 300, Los Angeles,
California 90025). It is suggested that any such proposal be submitted by
certified mail, return receipt requested.
If you wish to present a proposal before the 2002 Annual Meeting, but do
not wish to have the proposal considered for inclusion in the Company's Proxy
Statement and proxy card, you must give written notice to the Secretary of the
Company at the address noted above. The Secretary must receive such notice by
February 28, 2002. If you fail to provide timely notice of a proposal to be
presented at the 2002 Annual Meeting, the proxies designated by the Board of
Directors of the Company will have discretionary authority to vote on such
proposal.
FINANCIAL STATEMENTS
This Proxy Statement does not contain financial statements. However,
financial statements for the fiscal year ended December 31, 2000 are included in
the 2000 Annual Report, enclosed with this Proxy Statement. The Annual Report is
not to be regarded as proxy soliciting material or as a communication by which
any solicitation is made.
By Order of the Board of Directors,
/s/ LOIS BARBERIO
Lois Barberio
Vice President and Secretary
Los Angeles, California
April 13, 2001
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APPENDIX A
THE SPORTS CLUB COMPANY, INC.
2001 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE 1
GENERAL PURPOSE OF PLAN
The purpose of this employee stock purchase plan (the "Plan") is to provide
employees of The Sports Club Company, Inc. (the "Company") and its Affiliates
with an opportunity to acquire a proprietary interest in the Company through the
purchase of its Common Stock and, thus, to develop a stronger incentive to work
for the continued success of the Company. The Plan is intended to be an
"employee stock purchase plan" within the meaning of Section 423(b) of the
Internal Revenue Code of 1986, as amended, and shall be interpreted and
administered in a manner consistent with such intent.
ARTICLE 2
DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth
below:
"Affiliate" means any corporation that is a "parent corporation" or
"subsidiary corporation" of the Company, as defined in Sections 424(e) and
424(f) of the Code or any successor provision, and whose participation in
the Plan has been approved by the Board of Directors.
"Board of Directors" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Common Stock" means the Common Stock, par value $0.01 per share (as
such par value may be adjusted from time to time), of the Company.
"Company" means The Sports Club Company, Inc., a Delaware corporation.
"Compensation" means the gross cash compensation (including wage,
salary, commission, bonus, and overtime earnings) paid by the Company or
any of its Affiliates to a Participant in connection with the Participant's
employment.
"Eligible Employee" means any employee of the Company or an Affiliate
meeting both of the following requirements: (i) his or her customary
employment has been at least twenty (20) hours per week during the quarter
immediately preceding the beginning of any Purchase Period, and (ii) he or
she has completed one year of service; provided, however, that "Eligible
Employee" shall not include any person meeting either of the following
criteria (i) such person, immediately after the grant, would own stock
possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company (for this purpose, the rules
of Code Section 424(d) shall apply in determining employee stock
ownership); or (ii) such person is both an "officer" for purposes of
Section 16 of the Securities and Exchange Act of 1934, as amended, and is a
"highly compensated employee" as defined in Section 414(q) of the Code. A
person on leave of absence shall be deemed to be an employee for the first
ninety (90) days of such leave of absence and such employee's employment
shall be deemed to have terminated at the close of business on the
ninetieth (90th) day of such leave of absence unless such employee shall
have returned to regular full-time or part-time employment (as the case may
be) prior to the close of business on such ninetieth (90th) day.
Termination by the Company of any employee's leave of absence, other than
termination of such leave of absence on return to full time or part time
employment, shall terminate an employee's employment for all purposes of
the Plan and shall terminate such employee's participation in the Plan and
right to exercise any option under the Plan.
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"Fair Market Value" of a share of Common Stock as of any date means,
the closing price for such Common Stock on the American Stock Exchange on
such date, or, if the Common Stock ceases to be traded on the American
Stock Exchange, then as determined by the Board of Directors. If such
determination of Fair Market Value is not consistent with the then current
regulations of the Secretary of the Treasury applicable to plans intended
to qualify as an "employee stock purchase plan" within the meaning of
Section 423(b) of the Code, however, Fair Market Value shall be determined
in accordance with such regulations. The determination of Fair Market Value
shall be subject to adjustment as provided in Article 15.
"Participant" means an Eligible Employee who has elected to
participate in the Plan in the manner set forth in Article 4.
"Plan" means the Employee Stock Purchase Plan, as amended from time to
time.
"Purchase Period" means each consecutive 6 month period of the
Company's fiscal year. The first Purchase Period will be July 1, 2001
through December 31, 2001.
"Recordkeeping Account" means the account maintained in the books and
records of the Company recording the amount withheld from each Participant
through payroll deductions made under the Plan.
"Shares" means shares of the Company's Common Stock.
ARTICLE 3
SCOPE OF PLAN
Shares may be sold to Eligible Employees pursuant to the exercise of
options issued under this Plan commencing July 1, 2001, as hereinafter provided,
but not more than 500,000 Shares (subject to adjustment as provided in Article
15) shall be sold to Eligible Employees pursuant to this Plan. The Shares sold
to Eligible Employees pursuant to this Plan may be Shares acquired by purchase
on the open market or in privately negotiated transactions, by direct issuance
from the Company (whether newly issued or Treasury Shares) or by any combination
thereof. The Company, during the term of the Plan, shall at all times reserve
and keep available, such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
ARTICLE 4
ELIGIBILITY AND PARTICIPATION
To be eligible to participate in the Plan for a given Purchase Period, an
employee must be an Eligible Employee as of the first day of such Purchase
Period. An Eligible Employee may elect to participate in the Plan by filing an
enrollment form and payroll deduction authorization form with the Company Human
Resources Department within seven (7) days of the start of each Purchase Period.
Regular payroll deductions from Compensation will begin with the first payday in
such Purchase Period and continue until the Eligible Employee withdraws from the
Plan, modifies his or her authorization, or ceases to be an Eligible Employee,
as hereinafter provided.
ARTICLE 5
AMOUNT OF SHARES EACH ELIGIBLE EMPLOYEE MAY PURCHASE
5.1 On the first day of each Purchase Period, each Eligible Employee shall
be deemed to have been granted an option to purchase Shares on the last business
day of the Purchase Period in the amount of the number of Shares (including
fractional Shares) that can be purchased at the price specified in Section 5.2
with the entire credit balance on that date in the Participant's Recordkeeping
Account; provided, however, that the Fair Market Value (determined on the first
day of any Purchase Period) of Shares that may be purchased by a Participant
during any calendar year shall not exceed $25,000. If the purchases by all
Participants would otherwise cause the aggregate number of Shares to be sold
under the Plan to exceed the
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number specified in Article 3, each Participant shall be allocated a ratable
portion of the maximum number of Shares which may be sold.
5.2 The option price of each Share sold pursuant to this Plan shall be the
lesser of (a) or (b) below:
(a) 85% of the Fair Market Value of such Share on the first day of the
Purchase Period, or, if not a trading day and the Shares are then publicly
traded, on the nearest prior business day on which trading in the Shares
occurred.
(b) 85% of the Fair Market Value of such Share on the last day of the
Purchase Period, or, of not a trading day and the Shares are then publicly
traded, on the nearest prior business day on which trading in the Shares
occurred.
ARTICLE 6
METHOD OF PARTICIPATION
6.1 The Company shall give notice to each Eligible Employee of the option
to purchase Shares pursuant to this Plan and the terms and conditions for such
offering. Such notice is subject to revision by the Company at any time prior to
the date of grant of such options. The Company contemplates that for tax
purposes the first day of the Purchase Period will be the date of the offering
of such Shares.
6.2 Each Eligible Employee who desires to participate in the Plan for a
Purchase Period shall signify his or her election to do so by signing an
enrollment form. An Eligible Employee may elect to have any whole percent of
Compensation (up to 15%) withheld per pay period, which may be increased,
decreased or terminated by the employee during the offering period. An election
to participate in the Plan and to authorize payroll deductions as described
herein must be made prior to any cutoff date prescribed by the Company for each
Purchase Period to which it relates and shall remain in effect unless and until
such Participant withdraws from the Plan, modifies his or her election, or
ceases to be an Eligible Employee, as hereinafter provided.
6.3 Any Eligible Employee who does not make a timely election as provided
in Section 6.2, shall be deemed to have elected not to participate in the Plan.
Such election shall be irrevocable for such Purchase Period. An Eligible
Employee's election not to participate in the Plan for any Purchase Period or
withdrawal from the Plan during any Purchase Period will not have any effect
upon such Eligible Employee's eligibility to participate in any succeeding
Purchase Period.
6.4 Nothing herein contained shall affect the employee's right to
participate in and receive benefits under and in accordance with the then
current provisions of any pension, insurance, retirement savings/401(k) plan or
other employee welfare plan or program of the Company.
ARTICLE 7
RECORDKEEPING ACCOUNT
7.1 The Company shall maintain a Recordkeeping Account for each
Participant. Payroll deductions pursuant to an election made in accordance with
Section 6.2 shall be credited to such Recordkeeping Accounts on each payday. The
Recordkeeping Account shall be debited on the last day of each Purchase Period
by the amount equal to the exercise price of the Participant's option, and will
be debited by the amount of cash as and when distributed to the Participant.
7.2 No interest shall be credited to a Participant's Recordkeeping
Account.
7.3 The Recordkeeping Account is established solely for accounting
purposes, and all amounts credited to the Recordkeeping Account shall remain
part of the general assets of the Company.
7.4 A Participant may not make any contributions to his or her
Recordkeeping Account.
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ARTICLE 8
RIGHT TO ADJUST PARTICIPATION OR TO WITHDRAW
8.1 A Participant may, at any time during a Purchase Period, subject to
any cutoff date established by the Company, direct the Company to increase,
decrease or terminate deductions from his or her future Compensation, subject to
the limitation in Section 6.2. Upon any such action, future payroll deductions
with respect to such Participant shall be made in accordance with the
Participant's direction.
8.2 Any Participant who stops payroll deductions during a Purchase Period
may not thereafter resume payroll deductions during such Purchase Period, and
shall be treated as having withdrawn from the Plan for such Purchase Period. In
such event, all future payroll deductions shall cease, and the entire credit
balance in the Participant's Recordkeeping Account shall be paid to the
Participant, without interest, in cash. A Participant who withdraws from the
Plan will not be eligible to reenter the Plan until the next succeeding Purchase
Period.
8.3 Notification of a Participant's election to increase, decrease, or
terminate deductions, or to withdraw from the Plan, shall be made by filing the
appropriate form with the Company. A notification to increase, decrease, or
terminate deductions or withdraw from the Plan shall be effective for any
payroll period which is more than fifteen (15) days after the date the Company
receives such notice.
ARTICLE 9
TERMINATION OF EMPLOYMENT
9.1 Except as provided in Section 9.2, a Participant's participation in
the Plan will be terminated on the date the Participant's employment with the
Company or any Affiliate is terminated for any reason. Promptly following
termination of employment for any reason other than death, the balance in the
Participant's Recordkeeping Account shall be paid to him or her, in cash, and
such Participant's options shall be cancelled.
9.2 Upon termination of the Participant's employment because of death, his
or her beneficiary (as defined in Article 13) shall have the right to elect, by
written notice given to the Company prior to the earlier of the last day of the
Purchase Period or the expiration of a period of ninety (90) days commencing
with the date of the death of the Participant, either:
(a) to withdraw the balance of the Participant's Recordkeeping
Account, or
(b) to exercise the Participant's option for the purchase of Shares on
the last day of the current Purchase Period for the purchase of the number
of full Shares that Participant's Recordkeeping Account at the date of the
Participant's death will purchase at the applicable option price, and any
excess in such account will be returned to said beneficiary, without
interest.
In the event that no such written notice of election shall be duly received
by the Company, the beneficiary shall automatically be deemed to have elected,
pursuant to paragraph (b), to exercise the Participant's option.
9.3. A Participant on leave of absence shall, subject to the election made
by such Participant to withdraw from the Plan, continue to be a Participant in
the Plan so long as such Participant is on continuous leave of absence. A
Participant who has been on leave of absence for more than ninety (90) days and
who therefore is not an employee for the purpose of the Plan shall not be
entitled to participate in any Purchase Period commencing after the ninetieth
(90th) day of such leave of absence. Notwithstanding any other provisions of the
Plan, unless a Participant on leave of absence returns to regular full time or
part time employment with the Company at the earlier of: (i) the termination of
such leave of absence or (ii) three months from the ninetieth (90th) day of such
leave of absence, such Participant's participation in the Plan shall terminate
on whichever of such dates first occurs.
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ARTICLE 10
PURCHASE OF SHARES
10.1 As of the last day of each Purchase Period, the entire credit balance
in each Participant's Recordkeeping Account shall be used to purchase Shares,
including fractional Shares (subject to the limitations of Article 5), unless
the Participant has filed an appropriate election with the Company in advance of
that date which elects to receive the entire credit balance in cash.
10.2 Shares acquired by each Participant shall be held in an account
maintained by American Stock Transfer & Trust Co. ("AST"), a transfer agent
selected by the Company as its service provider. AST shall maintain individual
accounts for each Participant's Shares, including fractional Shares.
10.3 Prior to the last day of each Purchase Period, the Company shall
determine whether some or all of the Shares to be purchased as of the last day
of such Purchase Period will be purchased by AST for the accounts of
Participants on the open market or in privately negotiated transactions. If some
or all of such Shares are to be purchased by AST, the Company shall advise AST
of the number of Shares to be so purchased and shall provide to AST such funds,
in addition to the funds available from Participants' Recordkeeping Accounts, as
may be necessary to permit AST to so purchase such number of Shares (including
all brokerage fees and expenses).
10.4 Dividends with respect to a Participant's Shares held in the account
maintained by AST shall automatically be reinvested in additional Shares
("Reinvestment Shares"). AST shall commingle all dividends paid on all
Participants' Shares held in the account and shall purchase on the open market,
or in privately negotiated transactions, as soon as reasonably practicable after
the receipt of the dividends, as many Shares as can be acquired with such
commingled dividends and the purchase price of each such Reinvestment Share
shall be the average price paid by AST in purchasing all Reinvestment Shares for
all Participants with the proceeds of such dividend payment. There shall be
allocated to each Participant's individual account such Participant's pro rata
portion of the Reinvestment Shares purchased with the commingled funds. The
Company shall pay all brokerage fees and expenses of AST in connection with the
reinvestment of dividends.
10.5 Each Participant shall be entitled to vote all Shares held for the
benefit of such Participant in the account maintained by AST.
10.6 Certificates for the number of whole Shares, determined as aforesaid,
purchased by each Participant shall be issued and delivered to him or her,
registered in the name of the Participant or as provided in Article 15, only
upon the request of the Participant or his or her representative. Any such
request shall be made by filing the appropriate form with the Company. No
certificates for fractional Shares will be issued. Upon closing of the account,
the Participant will receive a cash distribution representing the value of any
fractional Shares.
ARTICLE 11
RIGHTS AS A STOCKHOLDER
A Participant shall not be entitled to any of the rights or privileges of a
stockholder of the Company with respect to Shares under the Plan, including the
right to receive any dividends which may be declared by the Company, until (i)
he or she actually has paid the purchase price for such Shares and (ii) either
the Shares have been credited to the account maintained by AST for the
Participant's benefit or certificates have been issued to the Participant, both
as provided in Article 10.
ARTICLE 12
RIGHTS NOT TRANSFERABLE
A Participant's rights under this Plan are exercisable only by the
Participant during his or her lifetime, and may not be sold, pledged, assigned
or transferred in any manner other than by will or the laws of descent
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and distribution. Any attempt to sell, pledge assign or transfer the same shall
be null and void and without effect. Except as otherwise required by law, the
amounts credited to a Recordkeeping Account may not be assigned, transferred,
pledged or hypothecated in anyway, and any attempted assignment, transfer,
pledge, hypothecation or other disposition of such amounts will be null and void
and without effect.
ARTICLE 13
DESIGNATION OF BENEFICIARY
A Participant may file a written designation of a beneficiary who is to
receive any Shares and/or cash which the Participant would otherwise be entitled
to receive under the Plan. Such designation of beneficiary may be changed by the
Participant at any time by written notice to the Company. Upon the death of a
Participant and upon receipt by the Company of proof of the Participant's death
and the identity and existence of a beneficiary validly designated by him or her
under the Plan, the Company shall deliver such Shares and/or cash to such
beneficiary. In the event of the death of a Participant and in the absence of a
beneficiary validly designated under the Plan who is living at the time of such
Participant's death, the Company shall deliver such Shares and/or cash to the
executor or administrator of the estate of Participant, or if no such executor
or administrator has been appointed (to the knowledge of the Company), the
Company, in its discretion, may deliver such Shares and/or cash to the spouse or
to any one or more dependents of the Participant as the Company may designate.
No beneficiary shall, prior to the death of the Participant by whom he or she
has been designated, acquire any interest in the Shares and/or cash credited to
the Participant under the Plan.
ARTICLE 14
ADMINISTRATION OF PLAN
This Plan shall be administered by the Board of Directors, or by a
committee of two or more directors or executive officers appointed by the Board
of Directors (in either case, collectively, the "Administrator"), which is
authorized to make such rules as may be necessary to carry out its provisions.
The Administrator shall determine any questions arising in the administration,
interpretation and application of this Plan, and all such determinations shall
be conclusive and binding on all parties. All costs and expenses incurred in
administering the Plan shall be paid by the Company.
ARTICLE 15
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
15.1 If, while any options are outstanding, the outstanding Shares of the
Company have increased, decreased, changed into, or been exchanged for a
different number or kind of shares or securities of the Company through
reorganization, merger, recapitalization, reclassification, stock split, reverse
stock split or similar transaction, appropriate and proportionate adjustments
may be made by the Administrator in the number and/or kind of shares which are
subject to purchase under outstanding options and on the option exercise price
or prices applicable to such outstanding options. In addition, in any such
event, the number and/or kind of shares which may be offered pursuant to this
Plan shall also be proportionately adjusted. No adjustments shall be made for
stock dividends. For purposes of this Section 15.1, any distribution of shares
to the stockholders in an amount aggregating twenty percent (20%) or more of the
outstanding shares shall be deemed a stock split and any distributions of shares
aggregating less than twenty percent (20%) of the outstanding shares shall be
deemed a stock dividend.
15.2 Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon a sale of substantially all of the property or stock of the Company to
another corporation, the holder of each option then outstanding under the Plan
will thereafter be entitled to receive at the end of the next Purchase Period
upon the exercise of such option for each Share as to which such option
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shall be exercised, as nearly as reasonably as may be determined, in cash,
securities and/or property which a holder of one Share was entitled to receive
upon and at the time of such transaction. The Board of Directors shall take such
steps in connection with such transactions as the Board shall deem necessary to
assure that the provisions of this Section 15.2 shall thereafter be applicable,
as nearly as reasonably may be determined, in relation to the said cash,
securities and/or property as to which such holder of such option might
thereafter be entitled to receive.
ARTICLE 16
REGISTRATION OF CERTIFICATES
Except as provided in Article 13, relating to the beneficiary of a deceased
Participant, stock certificates to be issued and delivered upon the request of
the Participant or his or her representative, as provided in Section 10.6, shall
be registered in the name of the Participant, or jointly, as joint tenants with
the right of survivorship, in the name of the Participant and another person, as
the Participant or his or her representative may direct on an appropriate form
filed with the Company.
ARTICLE 17
AMENDMENT OF PLAN
The Company expects to continue the Plan until such time as the Shares
reserved for issuance under the Plan have been sold. The Company reserves,
however, the right at any time to amend this Plan in any respect which shall not
adversely affect the rights of Participants with respect to Shares previously
acquired under the Plan, except that, without stockholder approval, no amendment
shall be made (i) to increase the number of Shares to be reserved under this
Plan, (ii) to reduce the purchase price to be paid for the Shares under the
Plan, or (iii) to change the definition of employees eligible to participate in
the Plan.
ARTICLE 18
EFFECTIVE DATE OF PLAN; TERMINATION
Subject to stockholder approval as provided in Section 21.1, the Plan shall
become effective on the date it is adopted by the Board of Directors. The Plan
shall consist of an offering commencing July 1, 2001 (the "Commencement Date"),
and of additional offerings commencing on the first day of each Purchase Period
thereafter, but in any event, the Plan shall continue in effect for a period
ending on the earlier of (i) ten (10) years from the Commencement Date, or (ii)
the date on which all Shares subject to the Plan have been sold, in each case,
unless sooner terminated in accordance with Plan terms. All rights of
Participants in any offering hereunder shall terminate at the earlier of (i) the
day that Participants become entitled to purchase a number of Shares equal to or
greater than the number of Shares remaining available for purchase or (ii) at
any time, at the discretion of the Board of Directors, after thirty (30) days'
notice has been given to all Participants. Upon termination of this Plan, Shares
shall be purchased for Participants in accordance with Section 10.1, as if the
Plan were terminated at the end of a Purchase Period.
ARTICLE 19
INDEMNIFICATION
In addition to such other rights of indemnification as they may have as
Directors or members of the Administrator, and to the extent allowed by
applicable law, the members of the Administrator shall be indemnified by the
Company against the reasonable expenses, including attorney's fees, actually
incurred in connection with any action, suit or proceeding or in connection with
any appeal therein, to which they or any one of them may be party by reason of
any action taken or failure to act under or in connection with the Plan and
against all amounts paid by them in settlement thereof (provided that the
settlement has been approved by the Company, which approval shall not be
unreasonably withheld) or paid by them in satisfaction of a
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judgement in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
Administrator did not act in good faith and in a manner which such person
reasonably believed to be in the best interests of the Company, and in the case
of a criminal proceeding, had no reason to believe that the conduct complained
of was unlawful; provided, however, that within sixty (60) days after
institution of any such action, suit or proceeding, such Administrator shall, in
writing, offer the Company the opportunity at its own expenses to handle and
defend such action, suit or proceeding.
ARTICLE 20
GOVERNMENTAL REGULATIONS AND LISTING
All rights granted or to be granted to Eligible Employees under this Plan
are expressly subject to all applicable laws and regulations and to the approval
of all governmental authorities required in connection with the authorization,
issuance, sale or transfer of the Shares reserved for this Plan, including,
without limitation, there being a current registration statement of the Company
under the Securities Act of 1933, as amended, covering the Shares purchasable on
the last day of the Purchase Period applicable to such Shares, and if such a
registration statement shall not then be effective, the term of such Purchase
Period shall be extended until the first business day after the effective date
of such a registration statement, or post-effective amendment thereto. All such
rights hereunder are also similarly subject to effectiveness of an appropriate
listing application to the American Stock Exchange, covering Shares under the
Plan upon official notice of issuance. Each Participant agrees and acknowledges
that no Shares shall be purchased or sold hereunder unless and until any then
applicable requirements of state or federal laws and regulatory agencies shall
have been fully complied with to the satisfaction of the Company and its
counsel.
ARTICLE 21
MISCELLANEOUS
21.1 The Plan shall be submitted for approval by the stockholders of the
Company at the 2001 Annual Meeting of Stockholders. If not approved by
stockholders at such meeting, the Plan shall terminate and all funds deposited
into any Participant Recordkeeping Account shall be refunded to the Participant.
21.2 The Plan shall not be deemed to constitute a contract of employment
between the Company and any Participant, nor shall it interfere with the right
of the Company to terminate any Participant and treat him or her without regard
to the effect which such treatment might have upon him or her under the Plan.
21.3 Wherever appropriate as used herein, the masculine gender may be read
as the feminine gender, the feminine gender may be read as the masculine gender,
the singular may be read as the plural and the plural may be read as the
singular.
21.4 The Plan and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of California.
21.5 Delivery of Shares or of cash pursuant to the Plan shall be subject
to any required withholding taxes. A person entitled to receive Shares may, as a
condition precedent to receiving such Shares, be required to pay the Company a
cash amount equal to the amount of any required withholdings.
21.6 The provisions of this Plan shall, in accordance with its terms, be
binding upon, and inure to the benefit of, all successors of each Participant in
the Plan, including, without limitation, such Participant's estate and the
executors, administrators or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of Participant.
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APPENDIX B
THE SPORTS CLUB COMPANY, INC.
2001 INCENTIVE STOCK PLAN
ARTICLE 1
GENERAL PURPOSE OF PLAN
The name of this plan is The Sports Club Company, Inc. 2001 Incentive Stock
Plan (the "Plan"). The purpose of the Plan is to enable The Sports Club Company,
Inc. (the "Company") and any Parent or any Subsidiary to obtain and retain the
services of the types of employees, consultants, officers and directors who will
contribute to the Company's long range success and to provide incentives which
are linked directly to increases in share value which will inure to the benefit
of all shareholders of the Company.
ARTICLE 2
DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth
below:
"Administrator" shall have the meaning set forth in Article 3.1(a).
"Board" means the Board of Directors of the Company.
"Cash Election" has the meaning set forth in Section 7.2(c)(v).
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor thereto.
"Committee" means a committee of at least two Directors appointed by
the Board to administer the Plan.
"Company" means The Sports Club Company, Inc., a corporation organized
under the laws of the State of Delaware (or any successor corporation).
"Date of Grant" means the date on which the Administrator adopts a
resolution expressly granting a Right to a Participant.
"Director" means a member of the Board.
"Disability" means permanent and total disability as defined by the
Administrator.
"Election" shall have the meaning set forth in Section 11.3(c)(i).
"Eligible Person" shall have the meaning set forth in Article 5.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exercise Price" shall have the meaning set forth in Section 6.2(c).
"Fair Market Value" per share at any date shall mean (i) if the Stock
is listed on an exchange or exchanges, or admitted for trading in the
Nasdaq National Market ("National Market"), the last reported sales price
per share on the last business day prior to such date on the principal
exchange on which it is traded, or on the National Market, as applicable,
or if no sale was made on such day on such principal exchange or on the
National Market, as applicable, the last reported sales price per share on
the most recent day prior to such date on which a sale was reported on such
exchange or the National Market, as applicable; or (ii) if the Stock is not
then traded on an exchange or on the National Market, the average of the
closing bid and asked prices per share for the Stock in the
over-the-counter market as quoted on NASDAQ on the day prior to such date;
or (iii) if the Stock is not listed on an exchange or quoted on NASDAQ, an
amount determined in good faith by the Administrator. In determining the
last reported sales price or the closing bid and asked prices, the
Administrator shall refer to The Wall Street Journal or such other source
as the Administrator deems reliable.
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"Grantee" means an Eligible Participant who is granted a SAR pursuant
to the Plan.
"Incentive Stock Option" means a Stock Option intended to qualify as
an "incentive stock option" as that term is defined in Section 422 of the
Code.
"Initial Valuation" shall have the meaning set forth in Section
7.2(b).
"Liquidating Event" shall have the meaning set forth in Section
9.1(b).
"Non-Qualified Stock Option" means a Stock Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable
written Stock Option agreement.
"Offeree" means an Eligible Participant who is granted a Purchase
Right pursuant to the Plan.
"Optionee" means an Eligible Participant who is granted a Stock Option
pursuant to the Plan.
"Parent" means any present or future corporation which would be a
"parent corporation" as that term is defined in Section 424(e) of the Code,
or any successor provision.
"Participant" means any Eligible Person selected by the Administrator,
pursuant to the Administrator's authority in Article 3, to receive grants
of Rights.
"Plan" means The Sports Club Company, Inc. 2001 Incentive Stock Plan,
as the same may be amended or supplemented from time to time.
"Purchase Price" shall have the meaning set forth in Section 8.2(b).
"Purchase Right" means the right to purchase Stock granted pursuant to
Article 8.
"Related SAR Option" shall have the meaning set forth in Section 7.1.
"Rights" means Stock Options, Purchase Rights and/or SARs, as
applicable, granted to Participants.
"Retirement" means retirement from active employment with the Company
or any Parent or Subsidiary as defined by the Administrator.
"SAR" means a stock appreciation right granted alone or in tandem with
a Stock Option pursuant to Article 7.
"Special Terminating Event" with respect to a Participant shall mean
the death, Disability or Retirement of that Participant.
"Spread" shall have the meaning set forth in Section 7.2(c)(iv).
"Stock" means the Common Stock, par value $.01 per share, of the
Company.
"Stock Exchange" means any stock exchange or consolidated stock price
reporting system on which prices for the Stock are quoted at any given
time.
"Stock Option" means any option to purchase shares of Stock granted
pursuant to Article 6.
"Subsidiary" means any present or future corporation which would be a
"subsidiary corporation" as that term is defined in Section 424(f) of the
Code, or any successor provision.
"Tax Date" shall have the meaning set forth in Section 11.3(c)(iv).
"Ten Percent Shareholder" means a person who on the Date of Grant
owns, either directly or through attribution as provided in Section 424(d)
of the Code, Stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of his or her employer
corporation or of any Parent or Subsidiary.
"Withholding Right" has the meaning set forth in Section 11.3(b).
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ARTICLE 3
ADMINISTRATION
SECTION 3.1 The Administrator.
(a) Administrator. The Plan shall be administered by either (i) the Board;
or (ii) the Committee (the group that administers the Plan is referred to as the
"Administrator").
(b) Powers in General. Subject to the provisions of the Plan and in the
case of a Committee, the specific duties delegated by the Board, and subject to
the approval of any relevant authorities, including the approval, if required,
of any Stock Exchange, the Administrator shall have the power and authority in
its discretion to grant to Eligible Persons: (i) Stock Options; (ii) SARs; (iii)
Purchase Rights; or (iv) any combination of the foregoing.
(c) Specific Powers. In particular, the Administrator shall have the
authority: (i) to construe and interpret the Plan and Rights granted thereunder
and to apply the Plan's provisions; (ii) to promulgate, amend and rescind rules
and regulations relating to the administration of the Plan; (iii) to authorize
any person to execute, on behalf of the Company, any instrument required to
carry out the purposes of the Plan; (iv) to determine, subject to the
limitations set forth in the Plan, when Rights are to be granted under the Plan;
(v) from time to time to select, subject to the limitations set forth in this
Plan, those Eligible Participants to whom Rights shall be granted; (vi) to
determine the number of shares of Stock to be made subject to each Right; (vii)
to prescribe the terms and conditions of each Stock Option, including, without
limitation, the exercise price and medium of payment, to determine whether the
Stock Option is to be an Incentive Stock Option or a Non-Qualified Stock Option
and to specify the provisions of the Stock Option agreement relating to such
Stock Option including, without limitation, vesting provisions; (viii) to
prescribe the terms and conditions of each SAR, including, without limitation,
to determine whether such SAR is to be granted alone or in tandem with Stock
Options during the term of the Related SAR Option and to specify the provisions
of the SAR agreement relating to such SAR including, without limitation, vesting
provisions; (ix) to prescribe the terms and conditions of each Purchase Right,
including, without limitation, the purchase price and medium of payment, vesting
provisions and repurchase provisions, and to specify the provisions of the Stock
purchase agreement relating to such sale; (x) to amend any outstanding Rights
for the purpose of modifying the Exercise Price, Initial Valuation or Purchase
Price, as the case may be, thereunder or otherwise, subject to applicable legal
restrictions and to the consent of the other party to such agreement; (xi) to
determine when a consultant's relationship with the Company is sufficient to
constitute employment with the Company for purposes of the Plan; (xii) to
determine the duration and purpose of leaves of absences which may be granted to
a Participant without constituting termination of their employment for purposes
of the Plan; and (xiii) to make any and all other determinations which it
determines to be necessary or advisable for administration of the Plan.
(d) Decisions Final. All decisions made by the Administrator pursuant to
the provisions of the Plan shall be final and binding on the Company and the
Participants.
(e) The Committee. The Board may, in its sole and absolute discretion, from
time to time delegate any or all of its duties and authority with respect to the
Plan to a Committee of not less than two Directors to be appointed by and to
serve at the pleasure of the Board. Once appointed, the Committee shall continue
to serve until otherwise directed by the Board. From time to time, the Board may
increase or decrease (to not less than two members) the size of the Committee,
add additional members to, remove members (with or without cause) from, appoint
new members in substitution therefor, and fill vacancies, however caused, in the
Committee. The Committee shall act pursuant to a vote of the majority of its
members or, in the case of a Committee comprised of two Directors, the unanimous
vote of its members, whether present or not, or by the written consent of the
majority of its members or, in the case of a Committee comprised of two
Directors, the unanimous vote of its members, and minutes shall be kept of all
of its meetings and copies thereof shall be provided to the Board. Subject to
the limitations prescribed by the Plan and the Board, the Committee may
establish and follow such rules and regulations for the conduct of its business
as it may determine to be advisable.
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ARTICLE 4
STOCK SUBJECT TO PLAN
SECTION 4.1 Stock Subject to the Plan.
Subject to adjustment as provided in Article 9, the total number of shares
of Stock reserved and available for issuance under the Plan shall be 2,500,000
shares. Solely for purposes of determining the number of shares of Stock
reserved and available for issuance under the Plan, each SAR granted without
relation to a Stock Option shall be treated as a Stock Option. Shares reserved
hereunder may consist, in whole or in part, of authorized and unissued shares or
treasury shares.
SECTION 4.2 Unexercised Rights.
To the extent that any Rights expire or are otherwise terminated without
being exercised, the shares underlying such Rights (and shares related thereto)
shall again be available for issuance upon exercise of future Rights granted
under the Plan. Shares acquired by the Company upon exercise of Rights pursuant
to Sections 6.2(e), 8.2(c) or 11.3 hereof shall not increase the shares
available for issuance under the Plan.
ARTICLE 5
ELIGIBILITY
Officers, employees, consultants and Directors of the Company, any Parent
or any Subsidiary, other than the Administrator, who are responsible for or
contribute to the management, growth or profitability of the business of the
Company, any Parent or any Subsidiary shall be eligible to be granted Rights
hereunder subject to limitations set forth in this Plan (each, an "Eligible
Person"). The Participants under the Plan shall be selected from time to time by
the Administrator, in its sole discretion, from among those Eligible Persons.
ARTICLE 6
STOCK OPTIONS
SECTION 6.1 General.
Stock Options may be granted alone or in addition to other Rights granted
under the Plan. Any Stock Option granted under the Plan shall be in such form as
the Administrator may from time to time approve, and the provisions of Stock
Option grants need not be the same with respect to each Optionee or each Stock
Option granted. Stock Options granted under the Plan may be either Incentive
Stock Options or Non-Qualified Stock Options.
SECTION 6.2 Terms and Conditions of Stock Options.
Each Stock Option granted pursuant to the Plan shall be evidenced by a
written Stock Option agreement between the Company and the Optionee, which
agreement shall comply with and be subject to the following terms and
conditions:
(a) Number of Shares. Each Stock Option agreement shall state the
number of shares of Stock to which the Stock Option relates.
(b) Type of Option. Each Stock Option agreement shall identify the
portion (if any) of the Stock Option which constitutes an Incentive Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of shares of Stock with respect to which Stock
Options designated as Incentive Stock Options are exercisable for the first
time by any Optionee during any calendar year (under all plans of the
Company or any Parent or Subsidiary) exceeds $100,000, such Stock Options
covering shares of Stock with a Fair Market Value in excess of $100,000
shall be treated as Non-Qualified Stock Options. For purposes of this
Section 6.2(b), Incentive Stock Options shall be
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taken into account in the order in which they were granted, and the Fair
Market Value of the shares of Stock subject to an Incentive Stock Option
shall be determined as of the Date of Grant of such Stock Option.
(c) Exercise Price. Each Stock Option agreement shall state the price
at which shares subject to the Stock Option may be purchased (the "Exercise
Price"), which with respect to Incentive Stock Options, shall not be less
than one hundred percent (100%) of the Fair Market Value of the shares of
Stock on the Date of Grant; provided, however, that in the case of an
Incentive Stock Option granted to a Ten Percent Shareholder, the Exercise
Price shall not be less than one hundred ten percent (110%) of such Fair
Market Value. With respect to Non-Qualified Stock Options, the Exercise
Price shall not be less than eighty-five percent (85%) of the Fair Market
Value of the shares of Stock on the Date of Grant of the Non-Qualified
Stock Option.
(d) Term of Option. The term of each Stock Option shall be the term
stated in the applicable Stock Option agreement; provided, however, that
the term shall be no more than ten (10) years from the Date of Grant
thereof or such shorter term as may be provided in the applicable Stock
Option agreement; and provided further that, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Stock Option is
granted, is a Ten Percent Shareholder, the term of the Stock Option shall
be five (5) years from the Date of Grant thereof or such shorter term as
may be provided in the applicable Stock Option agreement.
(e) Consideration for Stock Option. The consideration to be paid for
the shares of Stock to be issued upon exercise of a Stock Option, including
the method of payment, shall be determined by the Administrator (and, in
the case of an Incentive Stock Option, shall be determined on the Date of
Grant) and may consist entirely of (1) cash, (2) check, subject to
collection, (3) promissory note in accordance with Section 11.5, (4) the
shares of Stock that (x) in the case of Stock acquired upon exercise of a
Stock Option, have been owned by the Optionee for more than six months on
the date of surrender or such other period as may be required to avoid a
charge to the Company's earnings, and (y) have a Fair Market Value on the
date of surrender equal to the aggregate Exercise Price of the Stock as to
which such Stock Option shall be exercised, (5) authorization for the
Company to retain from the total number of shares of Stock as to which the
Stock Option is exercised that number of shares of Stock having a Fair
Market Value on the date of exercise equal to the Exercise Price for the
total number of shares of Stock as to which the Stock Option is exercised,
(6) any combination of the foregoing methods of payment, or (7) such other
consideration and method of payment for the issuance of Stock to the extent
permitted under applicable law. In making its determination as to the type
of consideration to accept, the Administrator shall consider if acceptance
of such consideration may be reasonably expected to benefit the Company.
(f) Procedure for Exercise; Rights as a Stockholder. Any Stock Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator and reflected in the
applicable Stock Option agreement, which may include vesting requirements
and/or performance criteria with respect to the Company and/or the
Optionee; provided, however, that such Stock Option shall become
exercisable at the rate of at least twenty percent (20%) per year over five
(5) years from the Date of Grant. Notwithstanding the above, in the case of
a Stock Option granted to an officer, Director or consultant of the Company
or any Parent or Subsidiary of the Company, the Stock Option may become
fully exercisable, and a repurchase right, if any, in favor of the Company
shall lapse, at any time or during any period established by the
Administrator.
(i) A Stock Option may not be exercised for a fraction of a Share.
(ii) A Stock Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with
the terms of the Stock Option agreement and the Company has received
full payment for the Stock with respect to which the Option is
exercised. Full payment may, as authorized by the Administrator, consist
of any consideration and method of payment allowable under Section 6(e)
above. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the
Company) of the
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stock certificate evidencing such Stock, no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect
to the optioned Stock, notwithstanding the exercise of the Stock Option.
The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Stock Option. No adjustment will be made
for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 9 of
the Plan.
(iii) Exercise of a Stock Option in any manner shall result in a
decrease in the number of shares of Stock that thereafter may be
available, both for purposes of the Plan and for sale under the Stock
Option, by the number of shares of Stock as to which the Stock Option is
exercised.
(g) Employee's or Engagement Agreement. Each person receiving a Stock
Option under the Plan shall agree to remain in the employ of, and/or to
render services pursuant to his or her engagement with, the Company, any
Subsidiary or any Parent, as the Administrator may from time to time
direct, for a period of one (1) year from the Date of Grant, but such
agreement shall not obligate the Company, any Subsidiary or any Parent to
continue to employ or maintain the engagement of the Optionee for any
period whatsoever. The sole remedy of the Company for breach of this
employment or engagement term by the Optionee shall be cancellation of the
Stock Option granted to the Optionee.
ARTICLE 7
STOCK APPRECIATION RIGHTS
SECTION 7.1 General.
The Administrator shall have the authority to grant SARs in tandem with
Stock Options granted under this Plan (the "Related SAR Option") with respect to
all or some of the shares of Stock covered by the Related SAR Option. SARs
granted in tandem with Related SAR Options may be granted either on the Date of
Grant of the Related SAR Option or at any time thereafter during the term of the
Related SAR Option. The Administrator shall also have the authority to grant
SARs without relation to any Stock Option granted under this Plan. Each SAR
shall be granted on such terms and conditions not inconsistent with the Plan as
the Administrator may determine. The provisions of the various SAR awards need
not be the same with respect to each Grantee or with respect to any SARs granted
to the same Grantee.
SECTION 7.2 Terms and Conditions of SARs.
Each SAR granted pursuant to the Plan shall be evidenced by a written SAR
agreement between the Company and the Grantee, which agreement shall comply with
and be subject to the following terms and conditions:
(a) Number of SARs. Each SAR agreement shall state the number of SARs
granted pursuant to the agreement.
(b) Initial Valuations. Each SAR agreement shall provide that each SAR
granted in tandem with a Related Stock Option is valued at the Exercise
Price of the Related SAR Option and that each SAR granted without relation
to a Stock Option is valued at the Fair Market Value of a share of Stock on
the Date of Grant (the "Initial Valuation").
(c) Term and Exercise of SARs.
(i) Each SAR granted otherwise than in tandem with a Stock Option
shall be exercisable as determined by the Administrator, but in no event
after ten (10) years from the Date of Grant. Each other SAR shall be
exercisable only if, and to the extent that, the Related SAR Option is
exercisable and has not yet terminated or expired, and in the case of a
SAR granted in respect of an Incentive Stock Option, only when the Fair
Market Value per share of the Stock exceeds the Exercise Price of the
Related SAR Option; and upon the exercise of a SAR, the Related SAR
Option shall cease to be exercisable to the extent of the shares of
Stock with respect to which such SAR is exercised, and
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shall be considered to have been exercised to that extent for purposes
of determining the number of shares of Stock available for the grant of
further Rights pursuant to the Plan. Upon the exercise or termination of
a Related SAR Option, the SAR granted in tandem with such Related SAR
Option shall terminate to the extent of the shares of Stock with respect
to which the Related SAR Option was exercised or terminated.
(ii) To exercise a SAR granted in tandem with a Related SAR Option,
the Grantee shall (A) give written notice thereof to the Company
specifying the number of shares of Stock with respect to which the SAR
is being exercised and the percentage of the total amount that the
Grantee is entitled to receive which such person elects to receive in
cash or shares of Stock with respect to the exercise of the SAR; and (B)
if requested by the Administrator, deliver the Related SAR Option
agreement to the Secretary of the Company, who shall endorse thereon a
notation of such exercise and return the Related SAR Option agreement to
the Grantee. To exercise a SAR granted without relation to a Stock
Option, the Grantee shall give written notice thereof to the Company
specifying the number of shares of Stock with respect to which the SAR
is being exercised and the percentage of the total amount that the
Grantee is entitled to receive which the Grantee elects to receive in
cash or shares of Stock with respect to the exercise of the SAR. The
date of exercise of a SAR which is validly exercised shall be deemed to
be the date on which there shall have been delivered to the Company the
appropriate aforesaid instruments.
(iii) Upon the exercise of a SAR, the holder thereof shall be
entitled at the holder's election to receive either:
(A) a number of shares of Stock equal to the quotient computed
by dividing the Spread (as defined in Section 7.2(c) (iv)) by the
Fair Market Value per share of Stock on the date of exercise of the
SAR; provided, however, that in lieu of fractional shares, the
Company shall pay in cash or cash equivalent an amount equal to the
same fraction of the Fair Market Value per share of Stock on the date
of exercise of the SAR; or
(B) an amount of money payable in cash or cash equivalent equal
to the Spread; or
(C) a combination of an amount payable in cash or cash
equivalent and a number of shares of Stock calculated as provided in
Section 7.2 (c) (iii) (A) (after reducing the Spread by such dollar
amount), plus any amounts payable in lieu of any fractional shares as
provided above.
(iv) The term "Spread" as used in this Section 7.2(c) shall mean an
amount equal to the product computed by multiplying (A) the excess of
(x) the Fair Market Value per share of Stock on the date the SAR is
exercised, over either (y) in the case of an SAR granted in tandem with
a Related SAR Option, the Exercise Price per share of the Related SAR
Option, or (z) in the case of an SAR not granted in tandem with a Stock
Option, the Initial Valuation of the SAR; by (B) the number of shares of
Stock with respect to which such SAR is being exercised.
(v) Notwithstanding the provisions of Section 7.2 (c) (iii), the
Administrator shall have sole discretion to consent to or disapprove a
Participant's election to receive an amount of money payable in cash or
cash equivalent in whole or in part ("Cash Election") upon the exercise
of a SAR. Such consent or disapproval may be given at any time after the
election to which it relates. If the Administrator shall disapprove a
Cash Election, the exercise of the SAR with respect to which the Cash
Election was made shall be of no effect, but without prejudice to the
right of the holder to exercise such SAR in the future in accordance
with its terms.
(vi) Notwithstanding the foregoing, in the case of a SAR granted in
tandem with an Incentive Stock Option, the holder may not receive an
amount in excess of such amount as will enable the Stock Option to
qualify as an Incentive Stock Option.
(d) Securities Laws. The Company intends that this Section 7.2 shall
comply with the requirements of Rule l6b-3, and any future rules
promulgated in substitution therefor (the "Rule") under the
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Exchange Act, during the term of the Plan. Should any provision of Section
7.2 not be necessary to comply with the requirements of the Rule or should
any additional provisions be necessary to render Section 7.2 in compliance
with the requirements of the Rule, the Board may amend the Plan to add to
or modify the provisions of the Plan accordingly.
(e) Limitation on Amounts Payable. Notwithstanding Section
7.2(c)(iii), the Administrator may place a limitation on the amount payable
in cash, Stock or both upon exercise of a SAR. Any such limitation must be
determined as of the Date of Grant and noted on the instrument evidencing
the Participant's SAR granted hereunder.
ARTICLE 8
PURCHASE RIGHTS
SECTION 8.1 General.
Purchase Rights may be granted alone or in addition to other Rights under
the Plan. Each sale of Stock under this Article 8 shall be evidenced by a Stock
purchase agreement between the Offeree and the Company in the form from time to
time adopted by the Administrator and containing such terms and conditions which
the Administrator deems appropriate, provided, that such terms and conditions
are not inconsistent with the Plan. The provisions of the various Stock purchase
agreements entered into under the Plan need not be identical.
SECTION 8.2 Terms and Conditions of Purchase Rights.
Each Purchase Right granted pursuant to the Plan shall be evidenced by a
written Stock purchase agreement between the Company and the Offeree, which
agreement shall comply with and be subject to the following terms and
conditions:
(a) Number of Shares. Each Stock purchase agreement shall state the
number of shares of Stock which may be purchased pursuant to such
agreement.
(b) Purchase Price. Each Stock purchase agreement shall state the
price at which the Stock subject to such purchase agreement may be
purchased (the "Purchase Price"); provided, however, that the Purchase
Price shall not be less than eighty-five percent (85%) of the Fair Market
Value of the Stock on the Date of Grant, or, in the case of a Ten Percent
Shareholder, the Purchase Price shall not be less than one hundred percent
(100%) of the Fair Market Value of the Stock on the Date of Grant.
(c) Medium and Time of Payment. The consideration to be paid for the
shares of Stock to be issued upon exercise of a Purchase Right, including
the method of payment, shall be determined by the Administrator and may
consist entirely of (1) cash, (2) check, subject to collection, (3)
promissory note in accordance with Section 11.5, (4) other shares of Stock
that (x) in the case of Stock acquired upon exercise of a Stock Option,
have been owned by the Offeree for more than six months on the date of
surrender or such other period as may be required to avoid a charge to the
Company's earnings, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate Purchase Price of the Stock as to which
such Purchase Right shall be exercised, (5) any combination of the
foregoing methods of payment, or (6) such other consideration and method of
payment for the issuance of Stock to the extent permitted under applicable
law. In making its determination as to the type of consideration to accept,
the Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
(d) Repurchase Option. Unless the Administrator determines otherwise,
the Stock purchase agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
disability). The purchase price for Stock repurchased shall be the original
purchase price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The
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repurchase option shall lapse at such rate as the Administrator may
determine; provided, however, that with respect to an Offeree who is not an
officer, Director or consultant of the Company or of any Parent or
Subsidiary of the Company, it shall lapse at a minimum rate of twenty
percent (20%) per year.
ARTICLE 9
ADJUSTMENTS
SECTION 9.1 Effect of Certain Changes.
(a) Stock Dividends, Splits, Etc. If there is any change in the number of
outstanding shares of Stock resulting from a Stock split, reverse Stock split,
Stock dividend, combination, recapitalization, or reclassification of the Stock,
or any other increase or decrease in the number of issued and outstanding shares
of Stock effected without receipt of consideration by the Company, (i) the
number of shares of Stock available for Rights, (ii) the number of shares of
Stock covered by outstanding Rights, (iii) the Exercise Price or Purchase Price
of any Stock Option or Purchase Right and (iv) the Initial Valuations of SARs in
effect prior to such change shall be proportionately adjusted by the
Administrator to reflect any increase or decrease in the number of issued and
outstanding shares of Stock; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration"; and provided, further, that any fractional
shares resulting from the adjustment shall be eliminated. Except as expressly
provided herein, no issuance by the Company of Stock of any class or securities
convertible into shares of Stock of any class shall affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of shares of
Stock subject to a Stock Option, Purchase Right or SAR.
(b) Liquidating Event. In the event of the proposed dissolution or
liquidation of the Company, or in the event of any corporate separation or
division, including, but not limited to, a split-up, split-off or spin-off
(each, a "Liquidating Event"), the Administrator may provide that the holder of
any Right then exercisable shall have the right to exercise such Right (at the
price provided in the applicable Rights agreement) subsequent to the Liquidating
Event, and for the balance of its term, solely for the kind and amount of shares
of Stock and other securities, property, cash or any combination thereof
receivable upon such Liquidating Event by a holder of the number of shares of
Stock for or with respect to which such Right might have been exercised
immediately prior to such Liquidating Event. Alternatively, the Administrator
may provide that each Right granted under the Plan shall terminate as of a date
to be fixed by the Board; provided, however, that not less than thirty (30) days
prior written notice of the date so fixed shall be given to each Rights holder,
and if such notice is given, each Rights holder shall have the right, during the
period of thirty (30) days preceding such termination, to exercise the Right as
to all or any part of the shares of Stock covered thereby, without regard to any
installment or vesting provisions in his or her Rights agreement, on the
condition, however, that the Liquidating Event actually occurs. If the
Liquidating Event actually occurs, such exercise shall be deemed effective (and,
if applicable, the Rights holder shall be deemed a shareholder with respect to
the Rights exercised) immediately preceding the occurrence of the Liquidating
Event, (or as of the date of record for shareholders entitled to share in such
Liquidating Event, if a record date is set).
(c) Merger or Consolidation. Each outstanding Right shall terminate upon a
merger, reorganization or consolidation in which the Company is not the
surviving corporation, provided that (A) each Rights holder to whom no Rights
have been tendered by the surviving corporation pursuant to the terms of item
(B) immediately below shall have the right, exercisable during a ten (10)-day
period ending on the fifth (5th) day prior to such merger, reorganization or
consolidation in which the Company is not the surviving corporation, to exercise
his or her Rights in whole or in part, without regard to any installment or
vesting provisions under his or her Rights agreement on the condition, however,
that the merger, reorganization or consolidation is actually effected; and if
the merger, reorganization or consolidation is actually effected, such exercise
shall be deemed effective (and, if applicable, the Participant shall be deemed a
shareholder with respect to the Rights exercised) immediately preceding the
effective time of such merger, reorganization or consolidation (on the date of
record for shareholders entitled to share in the securities or property
distributed in such merger, reorganization or consolidation, if a record date is
set); and (B) in its sole and absolute
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discretion, the surviving corporation may, but shall not be obligated to, tender
to any Rights holder Rights with respect to the surviving corporation, and such
new Rights shall contain such terms and provisions as shall substantially
preserve the rights and benefits of any Rights then outstanding under this Plan.
(d) Where Company Survives. Section 9.1(c) shall not apply to a merger,
reorganization or consolidation in which the Company is the surviving
corporation, unless shares of Stock are converted into or exchanged for
securities other than publicly-traded common stock, cash (excluding cash in
payment for actual shares) or any other thing of value. Notwithstanding the
preceding sentence, in case of any merger, reorganization or consolidation of
another corporation into the Company in which the Company is the surviving
corporation and in which there is a reclassification or change (including a
change to the right to receive an amount of money payable by cash or cash
equivalent or other property) of the shares of Stock (other than a change in par
value, or from par value to no par value, or as a result of a subdivision or
combination, but including any change in such shares into two or more classes or
series of shares), the Administrator may provide that the holder of each Right
then exercisable shall have the right to exercise such Right solely for the kind
and amount of shares of Stock and other securities (including those of any new
direct or indirect Parent of the Company), property, cash or any combination
thereof receivable upon such reclassification change, merger, reorganization or
consolidation by the holder of the number of shares of Stock for which such
Right might have been exercised.
(e) Surviving Corporation Defined. The determination as to which party to a
merger, reorganization or consolidation is the "surviving corporation" shall be
made on the basis of the relative equity interests of the shareholders in the
corporation existing after the merger, reorganization or consolidation, as
follows: if following any merger, reorganization or consolidation the holders of
outstanding voting securities of the Company immediately prior to the merger,
reorganization or consolidation own equity securities possessing more than fifty
percent (50%) of the voting power of the corporation existing following the
merger, reorganization or consolidation, then for purposes of this Plan, the
Company shall be the surviving corporation. In all other cases, the Company
shall not be the surviving corporation. In making the determination of ownership
by the shareholders of a corporation immediately after the merger,
reorganization or consolidation, of equity securities pursuant to this Section
9.1(e), equity securities which the shareholders owned immediately before the
merger, reorganization or consolidation as shareholders of another party to the
transaction shall be disregarded. Further, for purposes of this Section 9.1(e)
only, outstanding voting securities of a corporation shall be calculated by
assuming the conversion of all equity securities convertible (immediately or at
some future time) into shares entitled to vote.
(f) Par Value Changes. In the event of a change in the Stock of the Company
as presently constituted which is limited to a change of all of its authorized
shares with par value, into the same number of shares without par value, or a
change in the par value, the shares resulting from any such change shall be
"Stock" within the meaning of the Plan.
(g) Certain Distributions. In the event of any distribution to the
Company's stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Stock covered by each outstanding
Stock Option, SAR or Purchase Right to reflect the effect of such distribution.
(h) Decision of Administration Final. To the extent that the foregoing
adjustments relate to stock or securities of the Company, such adjustments shall
be made by the Administrator, whose determination in that respect shall be
final, binding and conclusive; provided that, each Incentive Stock Option
granted pursuant to the Plan shall not be adjusted in a manner that causes such
Stock Option to fail to continue to qualify as an Incentive Stock Option.
(i) No Other Rights. Except as hereinbefore expressly provided in this
Article 9, no Rights holder shall have any rights by reason of any subdivision
or consolidation of shares of Stock or the payment of any dividend or any other
increase or decrease in the number of shares of stock of any class or by reason
of any Liquidating Event, merger, reorganization or consolidation of assets or
stock of another corporation, or any other issue by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class;
and
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except as provided in this Article 9, none of the foregoing events shall affect,
and no adjustment by reason thereof shall be made with respect to, the number or
price of shares of Stock subject to Rights. The grant of a Right pursuant to the
Plan shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structures; to merge, reorganize or consolidate, dissolve or liquidate;
or to sell, transfer or convey all or part of its business or assets.
(j) No Rights as Shareholder. Except as specifically provided in this
Article 9, a Rights holder or a transferee of a Right shall have no rights as a
shareholder with respect to any shares covered by the Rights until the date of
the issuance of a Stock certificate to him or her for such shares, and no
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions of other rights for which
the record date is prior to the date such Stock certificate is issued, except as
provided in Section 9.1(b) or 9.1(c).
ARTICLE 10
AMENDMENT AND TERMINATION
The Board may, at any time, amend, alter or discontinue the Plan, but no
amendment, alteration or discontinuation shall be made which would impair the
rights of a Participant under any Right theretofore granted without such
Participant's consent. Stockholder approval for amendments to the Plan shall be
obtained in such a manner and to such degree as required to comply with all
applicable laws and regulations.
The Administrator may amend the terms of any Right theretofore granted,
prospectively or retroactively, but, subject to Article 3, no such amendment
shall impair the rights of any Participant under any Right theretofore granted
without such Participant's written consent.
ARTICLE 11
GENERAL PROVISIONS
SECTION 11.1 General Restrictions.
(a) No View to Distribute. The Administrator may require each person
purchasing shares of Stock pursuant to the Plan to represent to and agree with
the Company in writing that such person is acquiring the shares without a view
to distribution thereof. The certificates for such shares may include any legend
which the Administrator deems appropriate to reflect any restrictions on
transfer.
(b) Legends. All certificates for shares of Stock delivered under the Plan
shall be subject to such stop transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed and any applicable federal or state securities
laws, and the Administrator may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
SECTION 11.2 Other Compensation Arrangements.
Nothing contained in this Plan shall prevent the Board from adopting other
or additional compensation arrangements, subject to shareholder approval if such
approval is required, and such arrangements may be either generally applicable
or applicable only in specific cases.
SECTION 11.3 Withholding Taxes.
(a) Withholding Required. Each Participant shall, no later than the date as
of which the value of a Right first becomes includable in the gross income of
the Participant for federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Administrator regarding payment of, any
federal, state or local taxes of any kind required by law to be withheld with
respect to the Right or its exercise. The obligations of the Company under the
Plan shall be conditioned upon such payment or arrangements and the
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Participant shall, to the extent permitted by law, have the right to request
that the Company deduct any such taxes from any payment of any kind otherwise
due to the Participant.
(b) Withholding Right. The Administrator may, in its discretion, grant a
Rights holder the right (a "Withholding Right") to elect to make such payment by
irrevocably requiring the Company to withhold from shares issuable upon exercise
of the Right that number of full shares of Stock having a Fair Market Value on
the Tax Date (as defined below) equal to the amount (or portion of the amount)
required to be withheld. The Withholding Right may be granted with respect to
all or any portion of the Right.
(c) Exercise of Withholding Right. To exercise a Withholding Right, the
Rights holder must follow the election procedures set forth below, together with
such additional procedures and conditions as may be set forth in the related
Rights agreement or otherwise adopted by the Administrator:
(i) The Rights holder must deliver to the Company his or her written
notice of election (the "Election") to have the Withholding Right apply to
all (or a designated portion) of his or her Right;
(ii) The Election must be delivered to the Company not less than
twenty (20) days before the date of exercise of the Right to which it
relates;
(iii) unless disapproved by the Administrator as provided in
Subsection (iv) below, the Election once made will be irrevocable; and
(iv) no Election is valid unless the Administrator consents to the
Election; the Administrator has the right and power, in its sole
discretion, with or without cause or reason therefor, to consent to the
Election, to refuse to consent to the Election, or to disapprove the
Election; and if the Administrator has not consented to the Election on or
prior to the date that the amount of tax to be withheld is, under
applicable federal income tax laws, fixed and determined by the Company
(the "Tax Date"), the Election will be deemed approved.
(d) Effect. If the Administrator consents to an Election of a Rights
holder's Withholding Right, then upon the exercise of the Right (or any portion
thereof) to which the Withholding Right relates, the Company will withhold from
the shares otherwise issuable that number of full shares of Stock having an
actual Fair Market Value equal to the amount (or portion of the amount, as
applicable) required to be withheld under applicable federal and/or state income
tax laws as a result of the exercise.
SECTION 11.4 Indemnification.
In addition to such other rights of indemnification as they may have as
Directors or members of the Committee, and to the extent allowed by applicable
law, each member of the Board or Committee comprising the Administrator shall be
indemnified by the Company against the reasonable expenses, including attorney's
fees, actually incurred in connection with any action, suit or proceeding or in
connection with any appeal therein, to which they or any one of them may be
action, party by reason of any action taken or failure to act under or in
connection with the Plan or any Right granted under the Plan, and against all
amounts paid by them in settlement thereof (provided that the settlement has
been approved by the Company, which approval shall not be unreasonably withheld)
or paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such member of the Board or Committee
comprising the Administrator did not act in good faith and in a manner which
such person reasonably believed to be in the best interests of the Company, and
in the case of a criminal proceeding, had no reason to believe that the conduct
complained of was unlawful; provided, however, that within sixty (60) days after
institution of any such action, suit or proceeding, such member of the Board or
Committee comprising the Administrator shall, in writing, offer the Company the
opportunity at its own expense to handle and defend such action, suit or
proceeding.
SECTION 11.5 Loans.
The Company may make loans to Optionees and Offerees as the Administrator,
in its discretion, may determine in connection with the exercise of outstanding
Stock Options and Purchase Rights granted under
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the Plan. Such loans shall (i) be evidenced by promissory notes entered into by
the holders in favor of the Company, (ii) be subject to the terms and conditions
set forth in this Section 11.5 and such other terms and conditions, not
inconsistent with the Plan, as the Administrator shall determine; and (iii) bear
interest, if any, at such rate as the Administrator shall determine. In no event
may the principal amount of any such loan exceed the Exercise Price or the
Purchase Price less the par value of the shares of Stock covered by the Stock
Option or Purchase Right, or portion thereof, exercised by the Optionee or
Offeree. The initial term of the loan, the schedule of payments of principal and
interest under the loan, the extent to which the loan is to be with or without
recourse against the holder with respect to principal and applicable interest
and the conditions upon which the loan will become payable in the event of the
holder's termination of employment shall be determined by the Administrator,
provided, however, that the term of the loan, including extensions, shall not
exceed ten (10) years. Unless the Administrator determines otherwise, when a
loan shall have been made, shares of Stock having a Fair Market Value at least
equal to the principal amount of the loan shall be pledged by the holder to the
Company as security for payment of the unpaid balance of the loan and such
pledge shall be evidenced by a pledge agreement, the terms of which shall be
determined by the Administrator, in its discretion; provided, however, that each
loan shall comply with all applicable laws, regulations and rules of the Board
of Governors of the Federal Reserve System and any other governmental agency
having jurisdiction.
SECTION 11.6 Termination of Employment.
Except as provided in this Section 11.6, no Right may be exercised unless
the Rights holder is then a Director of the Company, or in the employ of the
Company or any Parent or Subsidiary, or rendering services as a consultant to
the Company or any Parent or Subsidiary, and unless he or she has remained
continuously so employed since the Date of Grant. If the employment or services
of a Rights holder shall terminate (other than by reason of a Special
Terminating Event), all Rights previously granted to the Rights holder which are
exercisable at the time of such termination may be exercised for the period
ending ninety (90) days after such termination, unless otherwise provided in the
Rights agreement; provided, however, that no Right may be exercised following
the date of its expiration. Nothing in the Plan or in any Right granted pursuant
to the Plan shall confer upon an employee or consultant any right to continue in
the employ of the Company or any Parent or Subsidiary or interfere in any way
with the right of the Company or any Parent or Subsidiary to terminate such
employment or consulting relationship at any time.
SECTION 11.7 Special Terminating Events.
If a Special Terminating Event occurs, all Rights theretofore granted to
such Rights holder which are exercisable at the time of such Special Terminating
Event may, unless earlier terminated in accordance with their terms, be
exercised by the Rights holder or by his or her estate or by a person who
acquired the right to exercise such Right by bequest or inheritance or otherwise
by reason of the death or Disability of the Rights holder, at any time within
one (1) year after the date of the Special Terminating Event. Notwithstanding
the foregoing, an Incentive Stock Option and any SAR granted in relation to an
Incentive Stock Option shall only be exercisable at any time within three (3)
months after the date of Retirement or termination of employment or consulting
relationship of an Optionee.
SECTION 11.8 Non-Transferability of Rights.
Unless otherwise approved by the Administrator, Rights granted under the
Plan shall not be transferable otherwise than by will or by the laws of descent
and distribution or pursuant to a qualified domestic relations order (as defined
in the Code), and Rights may be exercised, during the lifetime of the Rights
holder, only by the Rights holder or by his or her guardian or legal
representative.
SECTION 11.9 Regulatory Matters.
Each Rights agreement shall provide that no shares of Stock shall be
purchased or sold thereunder unless and until (A) any then applicable
requirements of state or federal laws and regulatory agencies shall have been
fully complied with to the satisfaction of the Company and its counsel, and (B)
if required to do so by the Company, the Optionee or Offeree shall have executed
and delivered to the Company a letter of
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investment intent in such form and containing such provisions as the Board or
Committee may require. The Company, during the term of this Plan, will at all
times reserve and keep available such number of shares of Stock as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Stock hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Stock as to which such
requisite authority shall not have been obtained.
SECTION 11.10 Recapitalizations.
Each Rights agreement shall contain provisions required to reflect the
provisions of Article 9.
SECTION 11.11 Delivery.
Upon exercise of a Right granted under this Plan, the Company shall issue
Stock or pay any amounts due within a reasonable period of time thereafter.
Subject to any statutory obligations the Company may otherwise have, for
purposes of this Plan, thirty (30) days shall be considered a reasonable period
of time.
SECTION 11.12 Other Provisions.
The Rights agreements authorized under the Plan may contain such other
provisions not inconsistent with this Plan, including, without limitation,
restrictions upon the exercise of the Rights, as the Administrator may deem
advisable.
ARTICLE 12
EFFECTIVE DATE OF PLAN
The Plan shall become effective on the date on which the Plan is adopted by
the Board and approved by its shareholders. Any Right granted before the
approval of the Plan by the Company's shareholders shall be expressly
conditioned upon, and shall not be exercisable until, such approval is obtained.
ARTICLE 13
TERM OF PLAN
No Right shall be granted pursuant to the Plan on or after March 29, 2011,
but Rights theretofore granted may extend beyond that date.
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APPENDIX C
CHARTER OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
I. PURPOSE AND AUTHORITY
A. The purpose of the Compensation Committee is to assist the Board of
Directors in discharging their fiduciary responsibilities relating to the fair
and competitive compensation of the executives and other key employees of the
Company. Consistent with this purpose, the Committee's primary duties and
obligations are to:
1. Review and monitor the Company's compensation philosophy.
2. Review and recommend to the full Board executive compensation
programs, plans and awards.
3. Assure that total compensation awarded to the Company's principal
officers and other key employees is reasonable.
4. Administer the Company's short- and long-term incentive plans and
other stock or stock-based plans.
5. Review and recommend to the full Board other benefit plans of the
Company on an as-needed basis.
6. Provide an avenue of communication among management, shareholders
and the Board of Directors relative to the Company's compensation
practices.
B. The Compensation Committee has the authority to conduct investigations
appropriate to fulfilling its purpose and obligations and its members shall be
given direct access to anyone in the organization. The Committee has the ability
to retain, at the Company's expense, special legal, compensation, or other
consultants or experts it deems necessary, in the performance of its duties.
II. ORGANIZATION
A. The Compensation Committee is a committee of the Board of Directors and
its members shall be elected annually by the Board. The Committee shall be
comprised of three or more Directors as determined by the Board, each of whom
shall be an independent member, free from any relationship that would interfere
with the exercise of his or her independent judgment, or that might, in the
opinion of the Board of Directors, be considered a conflict of interest. All
Committee members shall meet the definitions of a "non-employee director" within
the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934.
B. The Committee shall elect one of its members to act as chairman. If the
chairman is not present, the members may designate an acting chairman by
majority vote of the membership present.
C. Vacancies occurring in the Compensation Committee may be filled by
appointment by the Board and no member of the Committee shall be removed except
by vote of a majority of Directors present at any regular or special meeting of
the Board.
D. The compensation of members of the Committee may be determined from time
to time by resolution of the Board. Unless otherwise determined, each member of
the Compensation Committee shall be compensated on the basis of $1,000.00 for
each meeting of the Committee attended by such member. In addition, members of
the Compensation Committee shall be reimbursed for all reasonable expenses
incurred in attending such meetings.
III. MEETINGS
A. The Committee shall meet at least three times annually, or more
frequently as circumstances dictate. Each meeting shall be noticed and scheduled
in accordance with the bylaws of the Company as they relate to Board meetings in
general.
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IV. DUTIES AND RESPONSIBILITIES
A. Review Procedures
1. Review and reassess the adequacy of this Charter at least annually
and submit any amendment to the entire Board for approval.
2. Annually review the Company's philosophy regarding executive
compensation and discuss with the chief executive officer different
compensation approaches.
3. Annually review market data to assess the Company's competitive
position for the three components of executive compensation (base salary,
annual incentives and long-term incentives) by reviewing (i) executive
compensation surveys, compiled by third-party consultants and in which the
Company participates, and/or (ii) Peer Group and industry standards and/or
(iii) other supplemental general compensation information.
4. On at least an annual basis, review with Company's counsel, any
legal matters that could have a significant impact on compensation, the
Company's compliance with applicable laws and regulations, and inquiries
received from regulators or governmental agencies.
B. General Compensation Review and Recommendations
1. Stock and Incentive Plans
a. Administer and make recommendations to the Board of Directors
regarding the adoption, amendment or rescission of incentive
compensation plans and stock-related plans (including specific
provisions) in which the CEO and other senior executives and key
employees may participate, including:
i. Approving option guidelines and general size of overall
grants
ii. Making grants
iii. Interpreting the Plans
iv. Determining rules and regulations relating to the Plans
v. Modifying or canceling existing grants
vi. Designating employees eligible to participate in long-term
incentive plans
vii. Imposing limitations, restrictions and conditions upon any
award as the Committee deems appropriate
2. CEO Compensation
a. Short-term Compensation. Annually, the Committee will:
i. Review and approve appropriate goals and objectives for the
next year, which are then discussed with the entire Board.
ii. Evaluate the performance of the CEO in meeting those goals
and objectives with input from the full Board at year-end.
iii. Approve the compensation level of the CEO based upon this
evaluation.
b. Long-Term Compensation. Annually, the Committee will:
i. Review and approve the long-term incentive award for the
CEO.
ii. Consider the performance of the Company and relative
shareholder return.
iii. Consider the value of such awards granted to other CEO's,
both generally and in the industry.
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iv. Consider the number of stock options and common stock units
granted the CEO in prior years.
3. Other Officer and Key Employee Compensation
a. Consider the judgment and recommendation of the CEO for the
compensation of the Company's principal executives and other key
employees.
b. Annually review and recommend to the Board of Directors
i. Salary ranges and salaries for the principal officers of the
Company. The Committee shall consider the level and extent of
applicable benefits provided by the Company with respect to
insurance, pension provisions, health/medical coverage, vacations and
other like benefits.
4. On at least an annual basis, review with Company's counsel, any
legal matters that could have a significant impact on compensation, the
Company's compliance with applicable laws and regulations, and inquiries
received from regulators or governmental agencies.
D. Other Responsibilities
1. Annually, the Committee will issue a report on executive
compensation in accordance with applicable rules and regulations of the
Securities and Exchange Commission for inclusion in the Company's proxy
statement.
2. Periodically review the Company's 401(k) Profit Sharing Plan and
confer with the Plan's administrator and trustees regarding any proposed
modifications thereto. The Committee will prepare written recommendations
to the Board relative to any such proposed change including its financial
impact.
3. Perform any other activities consistent with this Charter, the
Company's bylaws and governing law, as the Committee or the Board of
Directors deems necessary or appropriate.
4. Maintain minutes of meetings and periodically report to the Board
of Directors on significant results of the foregoing activities.
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APPENDIX D
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. PURPOSE AND AUTHORITY
A. The purpose of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities. Consistent with this purpose, the
Committee's primary duties and obligations are to:
1. Monitor the integrity of the Company's financial reporting
processes and systems of internal controls regarding finance, accounting
and legal compliance.
2. Monitor and appraise the independence and performance of the
Company's independent auditors.
3. Provide an avenue of communication among the independent auditors,
management, and the Board of Directors.
B. The Audit Committee has the authority to conduct investigations
appropriate to fulfilling its purpose and obligations and its members shall be
given direct access to the independent auditors as well as anyone in the
organization. The Committee has the ability to retain, at the Company's expense,
special legal, accounting, or other consultants or experts it deems necessary,
in the performance of its duties.
II. ORGANIZATION
A. The Audit Committee is a committee of the Board of Directors and its
members shall be elected annually by the Board. The Committee and its members
shall meet the requirements of the Securities and Exchange Commission and the
American Stock Exchange. The Committee shall be comprised of three or more
Directors as determined by the Board, each of whom shall be an independent
member, free from any relationship that would interfere with the exercise of his
or her independent judgment, or that might, in the opinion of the Board of
Directors, be considered to be a conflict of interest. No member of the Audit
Committee shall be, or shall have been within the last three years, an employee
of the Company or any of its subsidiaries or affiliates. All members of the
Committee shall have a basic understanding of finance and accounting and be able
to read and understand fundamental financial statements, and at least one member
of the Committee shall have accounting or related financial management
expertise.
B. The Committee shall elect one of its members to act as chairman. If the
chairman is not present, the members may designate an acting chairman by
majority vote of the membership present.
C. Vacancies occurring in the Audit Committee may be filled by appointment
by the Chairman of the Board and no member of the Committee shall be removed
except by vote of a majority of Directors present at any regular or special
meeting of the Board.
D. The compensation of members of the Committee may be determined from time
to time by resolution of the Board. Unless otherwise determined, each member of
the Audit Committee shall be compensated on the basis of $1,000.00 for each
meeting of the Committee attended by such member. In addition, members of the
Audit Committee shall be reimbursed for all reasonable expenses incurred in
attending such meetings.
III. MEETINGS
A. The Committee shall meet at least three times annually, or more
frequently as circumstances dictate. Each meeting shall be noticed and scheduled
in accordance with the bylaws of the Company as they relate to Board meetings in
general. The chairman shall prepare and/or approve an agenda in advance of each
meeting.
B. The Committee shall meet privately in executive session at least
annually with management and the independent auditors and as a Committee to
discuss any matters that the Committee, or each of these groups, believes should
be discussed.
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C. The Committee shall communicate with management and the independent
auditors quarterly to review the Company's financial statements and significant
findings based upon the auditors limited review procedures.
IV. DUTIES AND RESPONSIBILITIES
A. Review Procedures
1. Review and reassess the adequacy of this Charter at least annually.
Submit the Charter to the entire Board for approval and have the document
published at least every three years in accordance with Securities and
Exchange Commission regulations.
2. Review the Company's annual audited financial statements prior to
filing and distribution. Such review should include discussion with
management and independent auditors of significant issues regarding
accounting principles, practices and judgments.
3. In consultation with management and independent auditors, consider
the integrity and adequacy of the Company's financial reporting processes
and controls. Such review should include discussion of significant
financial risk exposures and the steps management has taken to monitor,
control and report such exposures.
4. Periodically review the Company's adopted Investment Policy and
confer with management and other consultants as appropriate regarding
modifications thereto. The Committee will prepare written recommendations
to the Board relative to any proposed change to the Investment Policy,
including its financial impact.
5. Review significant findings prepared by the independent auditors
together with management's responses thereto. Such review should include
discussion and status of prior recommendations.
6. Review with financial management and independent auditors the
Company's quarterly financial results prior to the release of earnings
and/or the Company's quarterly financial statements prior to filing or
distribution. Such review should include discussion as to any significant
changes to the Company's accounting principles and any items required to be
communicated by the independent auditors in accordance with SAS 61.
B. Independent Auditors
1. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall review the
independence and performance of the auditors and annually recommend to the
Board of Directors the appointment of the independent auditors or approve
any discharge of auditors when circumstances warrant.
2. Approve the fees and other significant compensation to be paid to
the independent auditors.
3. On an annual basis, the Committee shall review and discuss with the
independent auditors all significant relationships they have with the
Company that could impair the auditors' independence.
4. Review the independent auditors' audit plan. Such review should
include a discussion of scope, staffing, reliance upon management and
general audit approach.
5. Prior to the Company releasing the year-end earnings, discuss the
results of the audit with the independent auditors. Discuss certain matters
required to be communicated to Audit Committees in accordance with AICPA
SAS 61.
6. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
C. Finance Department and Legal Compliance
1. Review the appointment, performance and replacement of the senior
financial officer of the Company.
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2. Review financial and accounting personnel succession planning
within the Company.
3. On at least an annual basis, review with Company's counsel, any
legal matters that could have a significant impact on the organization's
financial statements, the Company's compliance with applicable laws and
regulations, and inquiries received from regulators or governmental
agencies.
D. Other Responsibilities
1. Annually prepare a report to stockholders as required by the
Securities and Exchange Commission. The report should be included in the
Company's annual proxy statement.
2. Perform any other activities consistent with this Charter, the
Company's bylaws and governing law, as the Committee or the Board of
Directors deems necessary or appropriate.
3. Maintain minutes of meetings and periodically report to the Board
of Directors on significant results of the foregoing activities.
4. Periodically perform self-assessment of the Committee's
performance.
5. Annually review policies and procedures as well as audit results
associated with Directors' and Officers' expense accounts and perquisites.
Annually review a summary of Director and Officers' related party
transactions and potential conflicts of interest.
6. Establish, review and update periodically a Code of Ethical Conduct
and ensure that management has established a system to enforce this Code.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE SPORTS CLUB COMPANY, INC.
I/We hereby appoint Nanette Pattee Francini, Lois Barberio and Timothy
O'Brien, or any one of them acting alone in the absence of the others, as
proxyholders, each with the power to appoint his/her substitute, and hereby
authorize them to represent and to vote, as designated on the reverse side,
all the shares of Common Stock of The Sports Club Company, Inc. held of record
by me/us on April 6, 2001, at the Annual Meeting of Stockholders to be held on
May 21, 2001, or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED ON
THE REVERSE SIDE. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH OF
THE NOMINEES LISTED ON THE REVERSE SIDE. THIS PROXY WILL BE VOTED IN THE
DISCRETION OF THE PROXYHOLDERS UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE ANNUAL MEETING OF STOCKHOLDERS OR ANY ADJOURNMENT THEREOF.
(PLEASE VOTE AND SIGN ON THE OTHER SIDE)
57
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 2001
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
PLEASE MARK YOUR
A [X] VOTES AS IN THIS
EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING:
WITHHOLD
FOR AUTHORITY
1. Election of 2 [ ] [ ]
Class I
Directors
NOMINEES: Class I; Brian J. Collins and Andrew L. Turner
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL, WRITE THAT
NOMINEE'S NAME ON THE LINE PROVIDED:)
- -----------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approve adoption of Company's 2001 [ ] [ ] [ ]
Employees Stock Purchase Plan.
3. Approve adoption of Company's 2001 [ ] [ ] [ ]
Incentive Stock Plan.
The undersigned hereby acknowledges receipt of the Proxy Statement dated April
13, 2001 and hereby revokes any proxy or proxies heretofore given to vote
shares at said meeting or any adjournment thereof.
PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED SELF-ADDRESSED, POSTAGE
PAID ENVELOPE.
SIGNATURE DATE DATE
--------------------- ----- ------------------------- -----
PLEASE SIGN EXACTLY AS SIGNATURE IF HELD JOINTLY
NAME APPEARS HEREON
NOTE: Both should sign if shares are held in joint tenency: If signing as
attorney, executor, administrator, trustee or guardian, give full title;
if a corporation, sign full corporate name by President or authorized
officer: if a partnership, sign partnership name by authorized person.