HOLMES PRODUCTS CORP.
1997 STOCK OPTION PLAN
1. Purpose of the Plan. This stock option plan (the "Plan") is intended
to provide incentives: (a) to the officers and other employees of Holmes
Products Corp., a Massachusetts corporation (the "Company"), and any present or
future subsidiaries of the Company by providing them with opportunities to
purchase stock in the Company pursuant to options granted hereunder which
qualify as "incentive stock options" under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") ("ISO" or "ISOs"); and (b) to officers,
directors, employees, consultants and other key persons of the Company and any
present or future subsidiaries of the Company by providing them with
opportunities to purchase stock in the Company pursuant to options granted
hereunder which do not qualify as ISOs ("Non-Qualified Option" or "Non-Qualified
Options"). As used herein, the terms "parent" and "subsidiary" mean "parent
corporation" and "subsidiary corporation," respectively, as those terms are
defined in Section 424 of the Code and the Treasury Regulations promulgated
thereunder (the "Regulations").
2. Stock Subject to the Plan.
(a) The total number of shares of the authorized but unissued shares of
the common stock, no par value, of the Company ("Common Stock") for which
options may be granted under the Plan shall not exceed 73.86833 shares, subject
to adjustment as provided in Section 11 hereof.
(b) If an option granted hereunder shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares subject
thereto shall again be available for subsequent option grants under the Plan.
(c) Stock issuable upon exercise of an option granted under the Plan
may be subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Committee (as defined in Section 3
below).
3. Administration of the Plan. At the discretion of the Company's Board
of Directors, the Plan shall be administered by the Board of Directors or by a
committee (the "Committee") consisting of two or more members of the Company's
Board of Directors, to whom the Board of Directors may (except as provided in
Section 4 hereof) delegate its authority hereunder. In the event that the Board
of Directors is the administrator of the Plan, reference herein to the Committee
shall be deemed to include the Board of Directors. The decisions of the
Committee as to all questions of interpretation and application of the Plan
shall be final, binding and conclusive on all persons. The Committee shall have
the authority to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan. The Committee may
correct any defect or supply any omission or reconcile any inconsistency in the
Plan or in any option agreement granted hereunder in the manner and to the
extent it shall deem expedient to carry the Plan into effect and shall be the
sole and final judge of
such expediency. No Committee member shall be liable for any action or
determination made in good faith.
If any such Committee is appointed, the Board may from time to time
appoint a member or members of the Committee in substitution for or in addition
to the member or members then in office and may fill vacancies on the Committee
however caused. The Committee shall choose one of its members as Chairman and
shall hold meetings at such times and places as it shall deem advisable. A
majority of the members of the Committee shall constitute a quorum and any
action may be taken by a majority of those present and voting at any meeting.
Any action may also be taken without the necessity of a meeting by a written
instrument signed by a majority of the Committee.
4. Eligibility.
(a) Options designated as ISOs may be granted only to key employees
(including officers who are also employees) of the Company or any of its
subsidiaries, including subsidiaries which become such after the adoption of
this Plan. Non-Qualified Options may be granted to any director, officer,
employee, consultant or key person (including, without limitation, prospective
employees) of the Company or of any of its subsidiaries, including subsidiaries
which become such after the adoption of this Plan.
(b) In determining the eligibility of an individual to be granted an
option, as well as in determining the number of shares to be optioned to any
individual, the Board of Directors shall take into account the position and
responsibilities of the individual being considered, the nature and value to the
Company or its subsidiaries of his or her service and accomplishments, his or
her present and potential contribution to the success of the Company or its
subsidiaries, and such other factors as the Board of Directors may deem
relevant.
(c) No option designated as an ISO shall be granted to any employee of
the Company or any subsidiary if such employee owns, immediately prior to the
grant of an option, stock representing more than 10% of the total combined
voting power of all classes of stock of the Company or a parent or a subsidiary,
unless the purchase price for the stock under such option shall be at least 110%
of its fair market value at the time such option is granted and the option, by
its terms, shall not be exercisable more than five years from the date it is
granted. In determining the stock ownership under this paragraph, the provisions
of Section 424(d) of the Code shall be controlling. In determining the fair
market value under this paragraph, the provisions of Section 6 hereof shall
apply.
(d) The maximum number of shares of the Company's Common Stock with
respect to which an option or options may be granted to any employee in any one
taxable year of the Company shall not exceed 50.00000 shares, taking into
account shares granted during such taxable year under options that are
terminated or repriced, and subject to adjustment under Section 11 hereof.
-2-
(e) To the extent that any portion of an option designated as an ISO
hereunder shall fail to qualify as such, such portion shall thereafter be deemed
to constitute a Non-Qualified Option.
5. Option Agreement. Each option shall be evidenced by an option
agreement (the "Agreement") duly executed on behalf of the Company and by the
optionee to whom such option is granted, which Agreement shall comply with and
be subject to the terms and conditions of the Plan. The Agreement may contain
such other terms, provisions and conditions which are not inconsistent with the
Plan as may be determined by the Board of Directors, provided that options
designated as ISOs shall meet all of the conditions for ISOs as defined in
Section 422 of the Code. The date of grant of an option shall be as determined
by the Board of Directors. More than one option may be granted to an individual.
6. Exercise Price. The exercise price or prices of shares of the
Company's Common Stock for options designated as Non-Qualified Options shall be
as determined by the Board of Directors. The exercise price or prices of shares
of the Company's Common Stock for ISOs shall be the fair market value of such
Common Stock at the time the option is granted as determined by the Board of
Directors in accordance with the Regulations promulgated under Section 422 of
the Code. If such shares are then listed on any national securities exchange,
the fair market value shall be the mean between the high and low sales prices on
such exchange on the business day immediately preceding the date of the grant of
the option or, if no sales were reported, on the nearest date preceding the
grant date for which sales were reported. If the shares are not then listed on
any such exchange, the fair market value of such shares shall be the mean
between the high and low sales prices as reported on the Nasdaq National Market
for the business day immediately preceding the date of the grant of the option,
or, if no sales were reported, on the nearest date preceding the grant date for
which sales were reported. If the shares are not then either listed on any such
exchange or quoted on the Nasdaq National Market, the fair market value shall be
the mean between the average of the "Bid" and the average of the "Ask" prices as
reported on the Nasdaq system for the business day immediately preceding the
date of the grant of the option, or, if no such prices were reported, on the
nearest date preceding the grant date for which such prices were reported. If
the fair market value cannot be determined under the preceding three sentences,
it shall be determined in good faith by the Board of Directors.
7. Manner of Payment; Manner of Exercise.
(a) Options granted under the Plan may provide for the payment of the
exercise price by delivery of (i) cash or a check payable to the order of the
Company in an amount equal to the exercise price of such options, (ii) shares of
Common Stock of the Company owned by the optionee for at least six (6) months
having a fair market value (determined in accordance with the provisions of
Section 6 hereof, as applicable) equal in amount to the exercise price of the
options being exercised, or (iii) any combination of (i) and (ii), provided,
however, that the payment of the exercise price by delivery of shares of capital
stock of the Company owned by such optionee may be made only if such payment
does not result in a charge to earnings of the Company for financial accounting
purposes as determined by the Committee.
-3-
(b) To the extent that the right to purchase shares under an option has
accrued and is in effect, options may be exercised in full at one time or in
part from time to time, by giving written notice, signed by the person or
persons exercising the option, to the Company, stating the number of shares with
respect to which the option is being exercised, accompanied by payment in full
for such shares as provided in subparagraph (a) above. Payment in full of the
option exercise price need not accompany the written notice of exercise provided
the notice directs that the certificate or certificates for the shares for which
the option is being exercised be delivered to a securities broker acceptable to
the Company as the agent for the person exercising the option and, at the time
such certificate or certificates are delivered, the broker tenders to the
Company cash (or cash equivalents acceptable to the Company) equal to the option
exercise price plus the amount (if any) of federal and/or other taxes that the
Company may, in its judgment, be required to withhold with respect to the
exercise of the option.
8. Exercise of Options. Subject to the provisions of paragraphs 9
through 11, each option granted under the Plan shall be exercisable as follows:
(a) Vesting. The option shall either be fully exercisable on the date
of grant or shall become exercisable thereafter in such installments as provided
for in the Option Agreement executed pursuant to Section 5 hereof.
(b) Full Vesting of Installments. Once an installment becomes
exercisable it shall remain exercisable until expiration or termination of the
option, unless otherwise specified by the Board of Directors.
(c) Partial Exercise. Each option or installment may be exercised at
any time or from time to time, in whole or in part, for up to the total number
of shares with respect to which it is then exercisable.
(d) Acceleration of Vesting. The Board of Directors shall have the
right at any time to accelerate the vesting of any installment of any option;
provided that the Board of Directors shall not, without the consent of an
optionee, accelerate the exercise date of any installment of any option granted
to any employee as an ISO if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code.
9. Term of Options; Exercisability.
(a) Term. Each option shall expire not more than ten (10) years from
the date of the granting thereof, but shall be subject to earlier termination as
may be provided in the Agreement.
(b) Exercisability. Except as otherwise provided in the Agreement or by
the Board of Directors at any time, an option granted to an employee optionee
who ceases to be an employee of the Company or one of its subsidiaries shall be
exercisable only to the extent that the right to purchase shares under such
option has accrued and is in effect on the date such optionee ceases to
-4-
be an employee of the Company or one of its subsidiaries. The Agreement may
specify a period or periods of time following such termination of employment
within which the option may be exercised.
10. Options Not Transferable. Except as otherwise provided by the Board
of Directors at any time, the right of any optionee to exercise any option
granted to him or her shall not be assignable or transferable by such optionee
otherwise than by will or the laws of descent and distribution or the rules
thereunder, and any such option shall be exercisable during the lifetime of such
optionee only by the optionee. Except as otherwise provided by the Board of
Directors at any time, any option granted under the Plan shall be null and void
and without effect upon the bankruptcy of the optionee to whom the option is
granted, or upon any attempted assignment or transfer, except as herein
provided, including without limitation any purported assignment, whether
voluntary or by operation of law, pledge, hypothecation or other disposition,
attachment, divorce, trustee process or similar process, whether legal or
equitable, upon such option.
11. Adjustments. Upon the occurrence of any of the following events, an
optionee's rights with respect to options granted to him or her hereunder shall
be adjusted as hereinafter provided, unless otherwise specifically provided in
the written agreement between the optionee and the Company relating to such
option:
(a) Stock Dividends and Stock Splits. If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
(b) Consolidations or Mergers. If the Company is to be consolidated
with or acquired by another entity in a merger, sale of all or substantially all
of the Company's assets or otherwise (an "Acquisition"), the Board of Directors
or the board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to outstanding options, either (i)
make appropriate provision for the continuation of such options by substituting
on an equitable basis for the shares then subject to such options the
consideration then payable with respect to the outstanding shares of Common
Stock in connection with the Acquisition; or (ii) upon written notice to the
optionees, provide that all options must be exercised, to the extent then
exercisable, within a specified number of days of the date of such notice, at
the end of which period the options shall terminate; or (iii) terminate all
options in exchange for a cash payment equal to the excess of the fair market
value of the shares subject to such options (to the extent then exercisable)
over the exercise price thereof.
(c) Recapitalization or Reorganization. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph (b) above) pursuant to which securities of the Company
or of another corporation are issued with respect to
-5-
the outstanding shares of Common Stock, an optionee upon exercising an option
shall be entitled to receive for the purchase price paid upon such exercise the
securities he would have received if he had exercised his option prior to such
recapitalization or reorganization.
(d) Modification of ISOs. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs (a), (b) or (c) with respect to ISOs
shall be made only after the Board of Directors, after consulting with counsel
for the Company, determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in Section 424 of the Code)
or would cause any adverse tax consequences for the holders of such ISOs. If the
Board of Directors determines that such adjustments made with respect to ISOs
would constitute a modification of such ISOs, it may refrain from making such
adjustments.
(e) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, each option will terminate
immediately prior to the consummation of such proposed action or at such other
time and subject to such other conditions as shall be determined by the Board of
Directors, provided that prior to such dissolution or liquidation, the vesting
of any option shall automatically accelerate as if such dissolution or
liquidation is deemed to be a Change of Control. For purposes of this Plan, a
"Change in Control" shall be deemed to have occurred if any person, or any two
or more persons acting as a group, and all affiliates of such person or persons,
who prior to such time owned shares representing less than fifty percent (50%)
of the voting power at elections for the Board of Directors of the Company,
shall acquire, whether by purchase, exchange, tender offer, merger,
consolidation or otherwise, such additional shares of the Company's capital
stock in one or more transactions, or series of transactions, such that
following such transaction or transactions, such person or group and affiliates
beneficially own fifty percent (50%) or more of the voting power at elections
for the Board of Directors of the Company.
(f) Issuances of Securities. Except as expressly provided herein, no
issuance by the Company of shares 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
subject to options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
(g) Fractional Shares. No fractional shares shall be issued under the
Plan and the optionee shall receive from the Company cash in lieu of such
fractional shares.
(h) Adjustments. Upon the happening of any of the events described in
subparagraphs (a), (b) or (c) above, the class and aggregate number of shares
set forth in Section 2 hereof that are subject to options which previously have
been or subsequently may be granted under the Plan shall also be appropriately
adjusted to reflect the events described in such subparagraphs. The Board of
Directors or the Successor Board shall determine the specific adjustments to be
made under this paragraph 11 and, subject to Section 3, its determination shall
be conclusive.
-6-
If any person or entity owning restricted Common Stock obtained by
exercise of an option made hereunder receives shares or securities or cash in
connection with a corporate transaction described in subparagraphs (a), (b) or
(c) above as a result of owning such restricted Common Stock, such shares or
securities or cash shall be subject to all of the conditions and restrictions
applicable to the restricted Common Stock with respect to which such shares or
securities or cash were issued, unless otherwise determined by the Board of
Directors or the Successor Board.
12. No Special Employment Rights. Nothing contained in the Plan or in
any option granted under the Plan shall confer upon any option holder any right
with respect to the continuation of his employment by the Company (or any
subsidiary) or interfere in any way with the right of the Company (or any
subsidiary), subject to the terms of any separate employment agreement to the
contrary, at any time to terminate such employment or to increase or decrease
the compensation of the option holder from the rate in existence at the time of
the grant of an option.
13. Withholding. The Company's obligation to (i) deliver shares upon
the exercise of any option granted under the Plan or (ii) make payments under
Section 11 hereof, shall be subject to the option holder's satisfaction of all
applicable Federal, state and local income, excise and employment tax
withholding requirements. The Company and employee may agree to withhold shares
of capital stock purchased upon exercise of an option to satisfy the
above-mentioned withholding requirements.
14. Restrictions on Issue of Shares.
(a) Notwithstanding the provisions of Section 7, the Company may delay
the issuance of shares covered by the exercise of an option and the delivery of
a certificate for such shares until one of the following conditions shall be
satisfied:
(i) The shares with respect to which such option has been
exercised are at the time of the issue of such shares effectively registered or
qualified under applicable Federal and state securities acts now in force or as
hereafter amended; or
(ii) Counsel for the Company shall have given an opinion,
which opinion shall not be unreasonably conditioned or withheld, that such
shares are exempt from registration and qualification under applicable Federal
and state securities acts now in force or as hereafter amended.
(b) It is intended that all exercises of options shall be effective,
and the Company shall use its best efforts to bring about compliance with the
above conditions within a reasonable time, except that the Company shall be
under no obligation to qualify shares or to cause a registration statement or a
post-effective amendment to any registration statement to be prepared for the
purpose of covering the issue of shares in respect of which any option may be
exercised, except as otherwise agreed to by the Company in writing.
-7-
15. Purchase for Investment; Rights of Holder on Subsequent
Registration. Unless the shares to be issued upon exercise of an option granted
under the Plan have been effectively registered under the Securities Act of
1933, as now in force or hereafter amended, the Company shall be under no
obligation to issue any shares covered by any option unless the person who
exercises such option, in whole or in part, shall give a written representation
and undertaking to the Company which is satisfactory in form and scope to
counsel for the Company and upon which, in the opinion of such counsel, the
Company may reasonably rely, that he or she is acquiring the shares issued
pursuant to such exercise of the option for his or her own account as an
investment and not with a view to, or for sale in connection with, the
distribution of any such shares, and that he or she will make no transfer of the
same except in compliance with any rules and regulations in force at the time of
such transfer under the Securities Act of 1933, or any other applicable law, and
that if shares are issued without such registration, a legend to this effect may
be endorsed upon the securities so issued. In the event that the Company shall,
nevertheless, deem it necessary or desirable to register under the Securities
Act of 1933 or other applicable statutes any shares with respect to which an
option shall have been exercised, or to qualify any such shares for exemption
from the Securities Act of 1933 or other applicable statutes, then the Company
may take such action and may require from each optionee such information in
writing for use in any registration statement, supplementary registration
statement, prospectus, preliminary prospectus or offering circular as is
reasonably necessary for such purpose and may require reasonable indemnity to
the Company and its officers and directors and controlling persons from such
holder against all losses, claims, damages and liabilities arising from such use
of the information so furnished and caused by any untrue statement of any
material fact therein or caused by the omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made.
16. Loans. The Company may make loans to optionees to permit them to
exercise options. If loans are made, the requirements of all applicable Federal
and state laws and regulations regarding such loans must be met.
17. Approval of Stockholders. The Plan shall be subject to approval by
the vote of stockholders holding at least a majority of the voting stock of the
Company voting in person or by proxy at a duly held stockholders' meeting, or by
written consent of stockholders holding at least a majority of the voting stock
of the Company, prior to or within twelve (12) months after the adoption of the
Plan by the Board of Directors and shall take effect as of the date of adoption
by the Board of Directors upon such approval. The Board of Directors may grant
options under the Plan prior to such approval, but any such option shall become
effective as of the date of grant only upon such approval and, accordingly, no
such option may be exercisable prior to such approval.
18. Termination and Amendment. Unless sooner terminated as herein
provided, the Plan shall terminate ten (10) years from the date upon which the
Plan was duly adopted by the Board of Directors of the Company. The Board of
Directors may at any time terminate the Plan
-8-
or make such modification or amendment thereof as it deems advisable; provided,
however, that except as provided in this Section 18, the Board of Directors may
not, without the approval of the stockholders of the Company obtained in the
manner stated in Section 17, increase the maximum number of shares for which
options may be granted or change the designation of the class of persons
eligible to receive options under the Plan. The Board of Directors may grant
options hereunder after an amendment to the Plan by the Board of Directors
requiring shareholder approval under this Section 18, but any such option shall
become effective as of the date of grant only upon such approval and,
accordingly, no such option may be exercisable prior to such approval. The Board
of Directors may terminate, amend or modify any outstanding option with or
without the consent of the option holder, provided, however, that, except as
provided in Section 11, without the consent of the optionee, the Board of
Directors shall not change the number of shares subject to an option, nor the
exercise price thereof, nor extend the term of such option.
19. Reservation of Stock. The Company shall at all times during the term
of the Plan reserve and keep available such number of shares of stock as will be
sufficient to satisfy the requirements of the Plan and shall pay all fees and
expenses necessarily incurred by the Company in connection therewith.
20. Limitation of Rights in the Option Shares. An optionee shall not be
deemed for any purpose to be a shareholder of the Company with respect to any of
the options except to the extent that the option shall have been exercised with
respect thereto, the exercise price shall have been paid in full, the optionee
shall have complied with all applicable provisions of the Plan and Agreement
pursuant to which such option was granted and, in addition, a certificate shall
have been issued theretofore and delivered to the optionee.
21. Notices. Any communication or notice required or permitted to be
given under the Plan shall be in writing, and mailed by registered or certified
mail or delivered by hand, if to the Company, to its principal place of
business, attention: President, and, if to an optionee, to the address as
appearing on the records of the Company.
Adopted by the Board of Directors: November 26, 1997
Adopted by the Stockholders: November 26, 1997
* * *
-9-