THE GREAT TRAIN STORE COMPANY
AMENDED AND RESTATED
1994 INCENTIVE COMPENSATION PLAN
I. Purpose of the Plan
The Great Train Store Company 1994 Incentive Compensation Plan (the
"Plan") is intended to provide a means whereby employees, consultants, advisors
and other persons who render similar services to The Great Train Store Company,
a Delaware corporation (the "Company") on a regular basis, may develop a sense
of proprietorship and personal involvement in the development and financial
success of the Company and its subsidiaries, and to encourage them to remain
with and devote their best efforts to the business of the Company and its
subsidiaries, thereby advancing the interests of the Company and its
stockholders. Accordingly, the Company may grant to eligible participants awards
("Awards") in the form of stock options ("Options") with respect to shares of
the Company's common stock, par value $0.01 per share (the "Stock") and in the
form of shares of Stock which are subject to certain restrictions and possible
forfeiture ("Restricted Stock"). Options may either be nonqualified stock
options ("Nonqualified Options") or options ("Incentive Stock Options") which
are intended to qualify as incentive stock options under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Notwithstanding the
foregoing, participants who are not also employees of the Company shall not be
entitled to receive awards in the form of Incentive Stock Options.
II. Administration
The Plan shall be administered by a committee of the Board of Directors
of the Company (the "Board") consisting of not less than two members of the
Board as the Board may appoint (the "Committee"); provided, however, that so
long as the Company is subject to the reporting requirements of the Securities
Exchange Act of 1934 ("1934 Act"), the members of the Committee shall be
"non-employee directors" as defined in paragraph (b)(3)(i) of Rule 16b-3 which
has been adopted by the Securities and Exchange Commission under the 1934 Act,
as such Rule or its equivalent is then in effect ("Rule 16b-3"). Committee
members may resign at any time by delivering written notice to the Board.
Vacancies in the Committee, however caused, shall be filled by the Board. The
Committee is authorized to interpret the Plan and may from time to time adopt
such rules and regulations, not inconsistent with the provisions of the Plan, as
it may deem advisable to carry out the Plan. The Committee shall act by a
majority of its members in office and the Committee may act either by vote at a
telephonic or other meeting or by a memorandum or other written instrument
signed by all of the members of the Committee.
The Committee shall have the sole authority to: (i) grant Awards; (ii)
determine the terms and provisions of the Award agreements (the "Agreements")
entered into under the Plan, including without limitation vesting periods,
periods of restriction and events causing acceleration of vesting or forfeiture
of Awards; (iii) prepare and distribute, in such manner as the Committee
determines to be appropriate, information about the Plan; and (iv) make all
other determinations deemed necessary or advisable for the administration of the
Plan. The Committee may vary the terms and provisions of the individual
Agreements in its discretion. Notwithstanding the foregoing, the Committee shall
not have the authority to make any determination which would be inconsistent
with the requirements, restrictions, prohibitions or limitations specified in
the Plan.
The day-to-day administration of the Plan may be carried out by such
officers and employees of the Company as shall be designated from time to time
by the Committee. All expenses and liabilities incurred by the Committee in
connection with the administration of the Plan shall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers or other persons, and the Committee, the Board, the Company and the
officers and employees of the Company shall be entitled to rely upon the advice,
opinions or valuations of any such persons. The interpretation and construction
by the Committee of any provision of the Plan and any determination by the
Committee under any provision of the Plan shall be final and conclusive for all
purposes. Neither the Committee nor any member thereof shall be liable for any
act, omission, interpretation, construction or determination made in connection
with the Plan in good faith, and the members of the Committee shall be entitled
to indemnification and reimbursement by the Company in respect of any claim,
loss, damage or expense (including counsel fees) arising therefrom to the
fullest extent permitted by law. The members of the Committee shall be named as
insureds in connection with any directors and officers liability insurance
coverage that may be in effect from time to time.
Only employees, consultants, advisors and other persons who render
similar services to the Company and its subsidiaries shall be eligible to
receive Awards under the Plan. In granting Awards to a participant, the
Committee shall take into consideration the contribution the participant has
made or may make to the success of the Company or its subsidiaries and such
other considerations as the Committee shall determine. The Committee shall also
have the authority to consult with and receive recommendations from officers and
other employees of the Company and its subsidiaries with regard to these
matters. In no event shall any participant or his or her legal representatives,
heirs, legatees, distributees, or successors have any right to participate in
the Plan, except to such extent, if any, as the Committee shall determine.
III. Shares Subject to the Plan
The aggregate number of shares which may be issued or awarded under the
Plan shall not exceed 660,000 shares of Stock. Such shares may consist of
authorized but unissued shares of Stock or previously issued shares of Stock
reacquired by the Company. Any of such shares which have not been previously
granted as Awards of Restricted Stock or remain unsold and are not subject to
outstanding Options at the termination of the Plan shall cease to be subject to
the Plan, but until termination of the Plan and the expiration of all Options
granted under the Plan, the Company shall at all times make available a
sufficient number of shares to meet the requirements of the Plan. If any Award,
in whole or in part, expires or terminates unexercised or is canceled or
forfeited, the shares theretofore subject to such Award may again be subject to
an Award granted under the Plan. The issuance of Stock pursuant to the exercise
of an Option shall result in a decrease in the number of shares of Stock which
may thereafter be available for purposes of the Plan by the number of shares as
to which the Option is exercised or canceled. The aggregate number of shares
which may be issued or awarded under the Plan shall be subject to adjustment as
provided in Section VI hereof.
IV. Grants of Options
Options granted under the Plan shall be of such type (Nonqualified
Option or Incentive Stock Option) and for such number of shares of Stock and
subject to such terms and conditions as the Committee shall designate. The
Committee may grant Options at any time and from time to time through, but not
after, May 10, 2004, to any individual eligible to receive the same. For
purposes of the Plan, the date on which an Option is granted is referred to
herein as the "Grant Date."
No employee shall be eligible to receive any Incentive Stock Option if,
on the Grant Date, such employee owns (including ownership through the
attribution provisions of Section 424(d) of the Code) in excess of 10% of the
outstanding voting stock of the Company or a subsidiary (a "10% Stockholder"),
2
unless the "Exercise Price" (as hereinafter defined) for the shares of Stock
subject to the Incentive Stock Option is at least 110% of the "Market Value Per
Share" (as hereinafter defined) of the Stock (on a per share basis) on the Grant
Date and such Option by its terms is not exercisable after the expiration of
five years from the Grant Date.
To the extent that the aggregate Market Value Per Share (determined at
the Grant Date) of Stock with respect to which Incentive Stock Options are
exercisable for the first time by any individual during any calendar year (under
all plans of the Company and its subsidiaries) exceeds $100,000, such excess
Options shall be treated as Nonqualified Options. Excess Incentive Stock Options
shall be determined by taking into account the order in which they were granted.
The Committee may fix such waiting and/or vesting periods, exercise
dates or other limitations as it shall deem appropriate with respect to Options
granted under the Plan including, without limitation, making the exercisability
thereof contingent upon the achievement of specific goals.
Options granted pursuant to the Plan shall be evidenced by Agreements
that shall comply with and be subject to the following terms and conditions and
may contain such other provisions, consistent with the Plan, as the Committee
shall deem advisable. References herein to "Agreements" shall include, to the
extent applicable, any amendments to such Agreements.
A. Payment of Option Exercise Price. Upon exercise of an Option,
the full Exercise Price for the shares with respect to which the Option
is being exercised shall be payable to the Company: (i) in cash or by
check payable and acceptable to the Company; (ii) subject to the
approval of the Committee, by tendering to the Company shares of Stock
owned by the optionee having an aggregate Market Value Per Share as of
the date of exercise that is not greater than the full Exercise Price
for the shares with respect to which the Option is being exercised and
by paying any remaining amount of the Exercise Price as provided in (i)
above; or (iii) subject to the approval of the Committee and to such
instructions as the Committee may specify, at the optionee's written
request the Company may deliver certificates for the shares of Stock for
which the Option is being exercised to a broker for sale on behalf of
the optionee, provided that the optionee has irrevocably instructed such
broker to remit directly to the Company on the optionee's behalf the
full amount of the Exercise Price from the proceeds of such sale;
provided, however, that in the case of an Incentive Stock Option, (ii)
and (iii) above shall apply only if Committee approval is given on or
prior to the Grant Date and the Agreement expressly provides for such
optional payment terms. In the event that the optionee elects to make
payment as allowed under clause (ii) above, the Committee may, upon
confirming that the optionee owns the number of shares of Stock being
tendered, authorize the issuance of a new certificate for the number of
shares being acquired pursuant to the exercise of the Option less the
number of shares being tendered upon the exercise and return to the
optionee (or not require surrender of) the certificate for the shares of
Stock being tendered upon the exercise. Payment instruments will be
received subject to collection.
B. Number of Shares. Each Agreement shall state the total number
of shares of Stock that are subject to the Option.
C. Exercise Price. The "Exercise Price" for each Option shall be
fixed by the Committee at the Grant Date, but in no event may the
Exercise Price per share be less than the Market Value Per Share on the
Grant Date.
3
D. Market Value Per Share. The "Market Value Per Share" as of
any particular date shall be deemed to be the average of the daily
closing prices for the 30 consecutive trading days immediately preceding
the date in question. The closing price for each shall be the last
reported sales price regular way or, in case no reported sale takes
place on such day, the closing bid price regular way, in either case on
the principal national securities exchange (including, for purposes
hereof, the electronic inter-dealer quotation system operated by the
National Association of Securities Dealers, Inc.) on which the Stock is
listed or quoted. If on any such date the Stock is not listed or quoted
on any national securities exchange, the value of a share of Stock shall
be determined in good faith by the Committee, whose determination shall
be conclusive absent manifest error.
E. Term. The term of each Option shall be determined by the
Committee at the Grant Date; provided, however, that each Option shall,
notwithstanding anything in the Plan or any Agreement to the contrary,
expire not more than ten years (five years with respect to an Incentive
Stock Option granted to an employee who is a 10% Stockholder) from the
Grant Date or, if earlier, the date specified in the Agreement.
F. Date of Exercise. In the discretion of the Committee, each
Agreement may contain provisions stating that the Option granted therein
may not be exercised in whole or in part for a period or periods of time
or until the achievement of specific goals, in either case as specified
in such Agreement, and except as so specified therein, any Option may be
exercised in whole at any time or in part from time to time during its
term. The Committee may, however, at any time, in its sole discretion,
amend any outstanding Option, other than an Incentive Stock Option, to
accelerate the time that such Option shall be exercisable or to provide
that the time for exercising such Option shall be accelerated upon the
occurrence of a specified event. Notwithstanding the foregoing, however,
in no event shall an Option, or any portion thereof, be exercisable
until at least six months after the date of grant of such Option.
G. Termination. An Option and all unexercised rights thereunder
shall expire and terminate automatically upon the earliest of: (i) the
date which is one year following the date on which the optionee's
employment by (or other business relationship with) the Company ceases
due to death or disability; (ii) the date on which the optionee's
employment by (or business relationship with) the Company is terminated
by the participant's resignation or by the Company for cause; (iii) the
date which is 30 days following the date on which the optionee's service
with the Company ceases for any reason other than death, disability,
resignation or cause; and (iv) the date of expiration of the Option
determined by the Committee at the time the Option is granted and
specified in such Option.
The term "disability" means permanent and total disability as defined in
Section 22(e)(3) of the Code as determined by the Committee in good faith, upon
receipt and in reliance on sufficient competent medical advice. The term "cause"
as such term relates to the termination of any participant's employment by (or
other business relationship with) the Company means the occurrence of one or
more of the following: (i) such participant is convicted of, pleads guilty to,
or confesses to any felony or any act of fraud, misappropriation or embezzlement
which has an immediate and adverse effect on the Company or any subsidiary, as
determined by the Committee in good faith in its sole discretion, (ii) such
participant engages in a fraudulent act to the damage or prejudice of the
Company or any subsidiary or in conduct or activities damaging to the property,
business or reputation of the Company, all as determined by the Committee in
good faith in its sole discretion, (iii) any act or omission by such person
involving malfeasance or negligence in the performance of such person's duties
4
to the Company or any subsidiary to the detriment of the Company or any
subsidiary, as determined by the Committee in good faith in its sole discretion,
which has not been corrected by such person to the satisfaction of the Committee
within 30 days after written notice from the Company of any such act or
omission, (iv) failure by such person to comply in any material respect with the
terms of his agreement with the Company, if any, or any written policies or
directives of the Company as determined by the Committee in good faith in its
sole discretion, which has not been corrected by such participant to the
satisfaction of the Committee within 30 days after written notice from the
Company of such failure, or (v) breach by such participant of his
non-competition agreement, if any, with the Company, as determined by the
Committee in good faith in its sole discretion.
No Option shall be exercisable after the date of the occurrence of any
of the events described in the first paragraph of this Section IV.G except to
the extent that the optionee was entitled to exercise the Option on the day
immediately prior to such event. The right of an individual to exercise an
Option shall terminate to the extent that such Option is exercised.
Options may be granted under the Plan from time to time in substitution
for stock options and stock appreciation rights previously granted by another
corporation (the "Acquired Corporation") to its employees who become employees
of the Company or of any of its subsidiaries as a result of a merger or
consolidation of the Acquired Corporation with the Company or any such
subsidiary, or the acquisition by the Company or a subsidiary of all or
substantially all of the assets of the Acquired Corporation or the acquisition
by the Company or a subsidiary of the stock of the Acquired Corporation.
V. Restricted Stock
Restricted Stock shall consist of Stock awarded under the Plan by the
Committee which, during a period of restriction specified by the Committee upon
grant (a "Period of Restriction"), shall be subject to (i) restriction on sale
or other transfer by the grantee and (ii) forfeiture by the grantee to the
Company if the grantee ceases to be employed by (or otherwise engaged in a
business relationship with) the Company and its subsidiaries. If the grantee
dies, becomes disabled or is involuntarily terminated for reasons other than
cause while employed by (or otherwise engaged in a business relationship with)
the Company or any of its subsidiaries but prior to full vesting of all the
shares, then all shares shall be deemed fully vested and all such restrictions
on transfer shall lapse and cease to be effective as of the date of death,
disability or termination. Restricted Stock shall be granted at no cost to
employees or at such minimum purchase price as may be required under applicable
law, which shall be payable by the grantee to the Company in cash or by any
other means, including recognition of past employment, as the Committee deems
appropriate upon grant. The Committee may provide upon grant of an Award of
Restricted Stock that any shares of Restricted Stock as may be purchased by the
grantee thereunder and subsequently forfeited by the grantee prior to expiration
of the Period of Restriction shall be reacquired by the Company from the grantee
at the purchase price originally paid in cash by the grantee therefor.
The Committee may provide upon grant of an Award of Restricted Stock
that different numbers or portions of the shares subject to the Award shall have
different Periods of Restriction. The Committee also may establish upon grant of
an Award of Restricted Stock that some or all of the shares subject thereto
shall be subject to additional restrictions upon transfer or sale by the grantee
(although not forfeiture) after expiration of the Period of Restriction.
Each participant who receives Restricted Stock hereunder shall be
entitled to all dividends declared and paid on Stock with respect to all shares
of Restricted Stock held by the participant from the date of grant, or from such
later date prior to the termination of the Period of Restriction as may be
5
specified by the Committee for the Award of Restricted Stock, and during the
Period of Restriction and thereafter (except in the event of forfeiture), and
shall not be required to return any such dividends to the Company in the event
of forfeiture of the Restricted Stock.
Each participant who receives Restricted Stock hereunder shall be
entitled to vote all shares of Restricted Stock held by the employee from the
date of grant, or from such later date prior to the termination of the Period of
Restriction as may be specified by the Committee for the Award of Restricted
Stock, and during the Period of Restriction and thereafter (except in the event
of forfeiture).
Pending expiration of the Period of Restriction, certificates
representing shares of Restricted Stock shall be held by the Company or the
transfer agent for the Stock.
VI. Adjustment
The existence of the Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Board of Directors or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company with or
into another entity, any issuance of bonds, debentures, preferred or prior
preference stocks ahead of or affecting the Stock or the rights thereof, the
dissolution or liquidation of the Company, any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding.
The shares with respect to which Awards may be granted are shares of
Stock as presently constituted. If, however, the number of outstanding shares of
Stock are increased or decreased, or such shares are exchanged for a different
number or kind of shares or securities of the Company through a reorganization,
merger, recapitalization, reclassification, stock dividend, stock split,
combination of shares or other similar transaction, the aggregate number of
shares of Stock subject to the Plan as provided in Section III hereof, and the
shares of Stock subject to issuance under outstanding Options and the shares of
Restricted Stock granted under the Plan shall be appropriately and
proportionately adjusted by the Committee. Any such adjustment in an outstanding
Option shall be made without change in the aggregate purchase price applicable
to the unexercised portion of the Option but with an appropriate adjustment in
the price for each share or other unit of any security covered by the Option.
Notwithstanding anything to the contrary contained in this Section VI,
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, in the case of a
three-party merger where the Company, while the surviving corporation, becomes a
subsidiary of another corporation), or upon a sale of substantially all of the
assets of the Company, the Plan shall terminate, and any Awards granted under
the Plan shall terminate on the day before the consummation of the transaction,
and the Committee shall accelerate the time in which any outstanding Option may
be exercised and remove any restrictions remaining on any previously awarded
Restricted Stock prior to such termination, unless provision shall be made in
writing in connection with such transaction for the continuance of the Plan, for
the assumption of Awards previously granted, or the substitution for such Awards
with either new options to purchase the stock or shares of restricted stock, as
the case may be, of a successor corporation, or parent or subsidiary thereof,
with appropriate adjustments as to number and kind of shares and, in the case of
substitute options, the option Exercise Price, in which event the Plan and
Awards previously granted shall continue in the manner and under the terms so
6
rovided; provided, however, that the Committee or the Board of Directors shall
have the authority to amend this Section to provide for a requirement that a
successor corporation assume any outstanding Awards.
Adjustments under this Section shall be made by the Committee, whose
determination as to what adjustments, and the extent thereof, shall be made,
shall be final, binding and conclusive. No fractional shares of Stock shall be
issued under the Plan or in connection with any such adjustment.
Except as may otherwise be expressly provided in the Plan, the issuance
by the Company of shares of capital stock of any class or securities convertible
into shares of capital stock of any class for cash, property, labor or services,
upon direct sale, upon the exercise of rights or warrants to subscribe therefor,
or upon conversion of shares or obligations of the Company convertible into such
shares of capital stock or other securities, and in any case whether or not for
fair value, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number of shares of Stock available under the Plan or
subject to Awards theretofore granted or the Exercise Price per share with
respect to outstanding Options.
VII. Participant's Agreement to Hold Shares
If, at the time of the exercise of any Option, in the opinion of counsel
for the Company, it is necessary or desirable, in order to comply with any then
applicable laws or regulations relating to the sale of securities, for the
individual exercising the Option to agree to hold any shares issued to the
individual for investment purposes only and without intention to resell or
distribute the same and for the individual to agree to dispose of such shares
only in compliance with such laws and regulations, the individual shall be
required, upon the request of the Company, to execute and deliver to the Company
an agreement to such effect.
VIII. Termination of Authority to Grant Awards
No Awards will be granted pursuant to this Plan after May 10, 2004.
IX. Amendment and Termination
The Board may from time to time and at any time alter, amend, suspend,
discontinue or terminate this Plan and any Awards hereunder; provided, however,
that no change in any Award theretofore granted may be made which would impair
the rights of the grantee without the consent of such grantee.
X. Effective Date of Plan
The Plan shall become effective on May 10, 1994. The Plan was approved
by the sole stockholder of the Company on May 10, 1994, by written consent to
action in lieu of a meeting.
XI. Preemption by Applicable Laws and Regulations
Anything in the Plan or any Agreement entered into pursuant to the Plan
to the contrary notwithstanding, if, at any time specified herein or therein for
the making of any determination with respect to the issuance or other
distribution of shares of Stock, any law, regulation or requirement of any
governmental authority having jurisdiction in the premises shall require either
the Company or the participant (or the participant's beneficiary), as the case
7
may be, to take any action in connection with any such determination, the
issuance or distribution of such shares or the making of such determination
shall be deferred until such action shall have been taken.
XII. Taxes
The Company shall be entitled to withhold, and shall withhold, the
minimum amount of any federal, state or local tax attributable to any shares
deliverable under the Plan, whether upon exercise of a Nonqualified Stock Option
or expiration of a Period of Restriction for Restricted Stock or occurrence of
any other event relating to an Award which requires federal, state or local tax
to be withheld by the Company or any of its subsidiaries (a "Taxable Event"),
after giving the person entitled to receive such delivery notice as far in
advance of the Taxable Event as practicable. The Company may defer making
delivery as to any Award, if any such tax is payable, until indemnified to its
satisfaction. To the extent the Committee so provides upon grant of the Award,
such withholding obligation of the Company shall be satisfied by a reduction of
the number of shares otherwise deliverable to or on behalf of the grantee on
such Taxable Event, with the number of withheld shares to be calculated based on
the Market Value Per Share (as defined in Section IV.D, above) of the Stock on
the date of such Taxable Event.
XIII. Miscellaneous
A. No Employment Contract. Nothing contained in the Plan shall
be construed as conferring upon any participant the right to continue in
the employ of the Company or any of its subsidiaries.
B. Employment with Subsidiaries. Employment by the Company for
the purpose of this Plan shall be deemed to include employment by, and
to continue during any period in which a participant is in the
employment of, any subsidiary.
C. No Rights as a Stockholder. A participant shall have no
rights as a stockholder with respect to shares covered by such
participant's Award until, with respect to Options, the date of the
issuance of shares to the participant upon the participant's exercise of
the Option or, with respect to Restricted Stock, the date of grant or
such later date determined in accordance with Section V above. No
adjustment will be made for dividends or other distributions or rights
for which the record date is prior to the date of such issuance with
respect to Options or the grant date or such later date determined in
accordance with Section V above with respect to Restricted Stock.
D. No Right to Corporate Assets. Nothing contained in the Plan
shall be construed as giving any participant, such participant's
beneficiaries or any other person any equity or other interest of any
kind in any assets of the Company or any subsidiary or creating a trust
of any kind or a fiduciary relationship of any kind between the Company
or any subsidiary and any such person.
E. No Restriction on Corporate Action. Nothing contained in the
Plan shall be construed to prevent the Company or any subsidiary from
taking any corporate action that is deemed by the Company or such
subsidiary to be appropriate or in its best interests, whether or not
such action would have an adverse effect on the Plan or any Award made
under the Plan. No participant, beneficiary or other person shall have
any claim against the Company or any subsidiary as a result of any such
action.
8
F. Non-assignability. Neither a participant nor an participant's
beneficiary shall have the power or right to sell, exchange, pledge,
transfer, assign or otherwise encumber or dispose of such participant's
or beneficiary's interest arising under the Plan or any Award received
under the Plan, nor shall such interest be subject to seizure for the
payment of a participant's or beneficiary's debts, judgments, alimony,
or separate maintenance or be transferable by operation of law in the
event of a participant's or beneficiary's bankruptcy or insolvency and
to the extent any such interest arising under the Plan or an Award
received under the Plan is awarded to a spouse pursuant to any divorce
proceeding, such interest shall be deemed to be terminated and forfeited
notwithstanding any vesting provisions or other terms herein or in the
Agreement evidencing such Award.
G. Application of Funds. The proceeds received by the Company
from the sale of shares of Stock pursuant to the Plan shall be used for
general corporate purposes.
H. Governing Law; Construction. All rights and obligations under
the Plan shall be governed by, and the Plan shall be construed in
accordance with, the laws of the State of Delaware without regard to the
principles of conflicts of laws. Titles and headings to Sections herein
are for purposes of reference only, and shall in no way limit, define or
otherwise affect the meaning or interpretation of any provisions of the
Plan.
9