EXHIBIT 10.5a
HOT TOPIC, INC.
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ADOPTED ON JUNE 14, 1996
APPROVED BY SHAREHOLDERS ON JULY 9, 1996
AMENDED ON FEBRUARY 18, 1998
APPROVED BY SHAREHOLDERS ON MAY 27, 1998
AMENDED ON FEBRUARY 24, 2000
APPROVED BY SHAREHOLDERS ON JUNE 28, 2000
SHARES SUBJECT TO THE PLAN AUTOMATICALLY ADJUSTED ON DECEMBER 27, 1999,
DECEMBER 27, 2000, FEBRUARY 6, 2002 AND SEPTEMBER 2, 2003.
1. PURPOSE.
(a) The purpose of the 1996 Non-Employee Directors' Stock Option Plan
(the "Plan") is to provide a means by which each director of Hot Topic, Inc.
(the "Company") who is not otherwise at the time of grant an employee of or
consultant to the Company or of any Affiliate of the Company (each such person
being hereafter referred to as a "Non-Employee Director") will be given an
opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board"), unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).
(b) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
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3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to options granted
under the Plan shall not exceed in the aggregate seven hundred twenty thousand
(720,000) shares of the Company's common stock. If any option granted under the
Plan shall for any reason expire or otherwise terminate without having been
exercised in full, the stock not purchased under such option shall again become
available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY.
Options shall be granted only to Non-Employee Directors of the Company.
5. GRANTS.
(a) Each person who is elected or appointed for the first time to be a
Non-Employee Director shall automatically be granted, upon the date of his or
her initial election or appointment, an option to purchase ten thousand (10,000)
shares of common stock (an "Initial Grant"), PROVIDED HOWEVER that in the case
of a new Non-Employee Chairman of the Board, such person shall automatically be
granted, upon the date of his or her initial election or appointment, an option
to purchase fifteen thousand (15,000) shares of common stock.
(b) On the date of each annual meeting of shareholders, commencing with
the 2000 annual meeting, each person who is then a Non-Employee Director shall
automatically be granted an option to purchase two thousand five hundred (2,500)
shares of common stock (an "Annual Grant"), PROVIDED HOWEVER that in the case of
a Non-Employee Chairman of the Board, such person shall automatically be
granted, on each such annual meeting date, an option to purchase three thousand
seven hundred fifty (3,750) shares. Notwithstanding the foregoing, a
Non-Employee Director shall not be entitled to an Annual Grant if (i) such
Non-Employee Director has served as a Non-Employee Director for less than three
(3) months, or (ii) such Non-Employee failed to attend at least seventy five
percent (75%) of the meetings (A) of the Board which occurred while the
Non-Employee Director was a member of the Board and (B) of each committee of
which such Non-Employee Director was a member.
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(c) Non-Employee Directors may also be granted options to purchase
shares in amounts deemed appropriate by the Board of Directors.
6. OPTION PROVISIONS.
Each option shall be subject to the following terms and conditions:
(a) The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ("Expiration
Date") ten (10) years from the date of grant. If the optionee's service as a
Non-Employee Director or employee of or consultant to the Company or any
Affiliate terminates for any reason or for no reason, the option shall terminate
on the earlier of the Expiration Date or the date three (3) months following the
date of termination of such service; PROVIDED HOWEVER that if such termination
of service is due to the optionee's death, the option shall terminate on the
earlier of the Expiration Date or twelve (12) months following the date of the
optionee's death. In any and all circumstances, an option may be exercised
following termination of the optionee's service as a Non-Employee Director or
employee of or consultant to the Company or any Affiliate only as to that number
of shares as to which it was exercisable as of the date of termination of all
such service under the provisions of subparagraph 6(e).
(b) The exercise price of each option shall be one hundred percent
(100%) of the fair market value of the stock subject to such option on the date
such option is granted.
(c) Payment of the exercise price of each option is due in full in cash
upon any exercise when the number of shares being purchased upon such exercise
is less than 100 shares; but when the number of shares being purchased upon an
exercise is 100 or more shares, the optionee may elect to make payment of the
exercise price under one of the following alternatives:
(i) Payment of the exercise price per share in cash at the
time of exercise;
(ii) Provided that at the time of the exercise the Company's
common stock is publicly traded and quoted regularly in THE WALL STREET JOURNAL,
payment by delivery of shares of common stock of the Company already owned by
the optionee, held for the period required to avoid a charge to the Company's
reported earnings, and owned free and clear of any liens, claims, encumbrances
or security interest, which common stock shall be valued at its fair market
value on the date preceding the date of exercise; or
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(iii) Provided that at the time of the exercise the Company's
common stock is publicly traded and quoted regularly in THE WALL STREET JOURNAL,
payment pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board which results in the receipt of cash (or check) by the
Company either prior to the issuance of shares of the Company's common stock or
pursuant to the terms of irrevocable instructions issued by the optionee prior
to the issuance of shares of the Company's common stock.
(iv) Payment by a combination of the methods of payment
specified in subparagraph 6(c)(i) and 6(c)(iii) above.
(d) An option shall not be transferable except by will or by the laws
of descent and distribution, or pursuant to a domestic relations order, and
shall be exercisable during the lifetime of the person to whom the option is
granted only by such person (or by his guardian or legal representative) or
transferee pursuant to such an order. Notwithstanding the foregoing, the
optionee may, by delivering written notice to the Company in a form satisfactory
to the Company, designate a third party who, in the event of the death of the
optionee, shall thereafter be entitled to exercise the option.
(e) The option shall become exercisable in installments over a period
of four (4) years from the date of grant as follows: twenty-five percent (25%)
shall be exercisable commencing on the date one year after the date of grant of
the option and six and one-quarter percent (6.25%) shall be exercisable at the
end of each calendar quarter thereafter, provided that the optionee has, during
the entire period prior to such vesting date, continuously served as a
Non-Employee Director or employee of or consultant to the Company or any
Affiliate of the Company, whereupon such option shall become fully exercisable
in accordance with its terms with respect to that portion of the shares
represented by that installment.
(f) The Company may require any optionee, or any person to whom an
option is transferred under subparagraph 6(d), as a condition of exercising any
such option: (i) to give written assurances satisfactory to the Company as to
the optionee's knowledge and experience in financial and business matters; and
(ii) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the option for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the option has been registered under a then-currently-effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or (ii), as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may require
any optionee to provide such other representations, written assurances or
information which the Company shall determine is necessary, desirable or
appropriate to comply with applicable securities laws as a condition of granting
an option to the optionee or permitting the optionee to exercise the option. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
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(g) Notwithstanding anything to the contrary contained herein, an
option may not be exercised unless the shares issuable upon exercise of such
option are then registered under the Securities Act or, if such shares are not
then so registered, the Company has determined that such exercise and issuance
would be exempt from the registration requirements of the Securities Act.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; PROVIDED HOWEVER that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the
Plan shall constitute general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
(b) Nothing in the Plan, or in any instrument executed pursuant
thereto, shall confer upon any Non-Employee Director any right to continue in
the service of the Company or any Affiliate in any capacity or shall affect any
right of the Company, its Board or shareholders or any Affiliate to remove any
Non-Employee Director pursuant to the Company's Bylaws and the provisions of the
laws of the Company's state of incorporation.
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(c) No Non-Employee Director, individually or as a member of a group,
and no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
(d) In connection with each option made pursuant to the Plan, it shall
be a condition precedent to the Company's obligation to issue or transfer shares
to a Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal or other withholding tax
required to be withheld with respect to such sale or transfer, or such removal
or lapse, is made available to the Company for timely payment of such tax.
(e) As used in this Plan, "fair market value" means, as of any date,
the value of the common stock of the Company determined as follows:
(i) If the common stock is listed on any established stock
exchange or a national market system, including without limitation The Nasdaq
Stock Market, the fair market value of a share of common stock shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day prior
to the day of determination, as reported in THE WALL STREET JOURNAL or such
other source as the Board deems reliable.
(ii) If the common stock is quoted on The Nasdaq Stock Market
(but not on the National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the fair market value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in THE WALL STREET JOURNAL or such other source as
the Board deems reliable.
(iii) In the absence of an established market for the common
stock, the fair market value shall be determined in good faith by the Board.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding options will
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be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding options. Such adjustments shall be made by the Board, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company.")
(b) In the event of: (1) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) the acquisition by any person, entity or group within
the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or any comparable successor provisions (excluding
any employee benefit plan, or related trust, sponsored or maintained by the
Company or any Affiliate of the Company) of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the election of
directors, then the time during which options outstanding under the Plan may be
exercised shall be accelerated prior to such event and the options terminated if
not exercised after such acceleration and at or prior to such event.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan
and/or some or all outstanding options granted under the Plan. Except as
provided in paragraph 10 relating to adjustments upon changes in stock, no
amendment shall be effective unless approved by the shareholders of the Company
within twelve (12) months before or after the adoption of the amendment if such
amendment requires shareholder approval in order for the Plan to comply with the
requirements of Rule 16b-3 promulgated under the Exchange Act, Section 162(m) of
the Internal Revenue Code or any Nasdaq or securities exchange requirements.
(b) Rights and obligations under any option granted before any
amendment of the Plan shall not be impaired by such amendment unless (i) the
Company requests the consent of the person to whom the option was granted and
(ii) such person consents in writing.
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12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. No options
may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any option granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the option was granted.
(c) The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.
(a) The Plan shall become effective upon adoption by the Board of
Directors, subject to the condition subsequent that the Plan is approved by the
shareholders of the Company.
(b) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.
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