SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Columbia Sportswear Company
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(Name of Registrant as Specified In Its Charter)
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COLUMBIA SPORTSWEAR COMPANY
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 17, 2001
To the Shareholders of Columbia Sportswear Company:
The annual meeting of the shareholders of Columbia Sportswear Company, an
Oregon corporation, will be held at 2:00 p.m., Pacific Time, on Thursday, May
17, 2001, at the Hilton Hotel at 921 SW 6th Avenue, Portland, Oregon for the
following purposes:
1. Electing seven directors to serve for the following year and until their
successors are elected;
2. Voting on amendments to the 1997 Stock Incentive Plan to increase the
number of shares reserved for issuance and to make certain adjustments
to the Plan; and
3. Transacting any other business that properly comes before the meeting.
Only shareholders of record at the close of business on April 2, 2001 will
be entitled to vote at the annual meeting.
You are requested to date and sign the enclosed proxy and return it in the
postage-prepaid envelope enclosed for that purpose. You may attend the meeting
in person even if you send in your proxy; retention of the proxy is not
necessary for admission to or identification at the meeting.
By Order of the Board of Directors
/s/ TIMOTHY P. BOYLE
Timothy P. Boyle
President, Chief Executive Officer and
Secretary
Portland, Oregon
April 23, 2001
COLUMBIA SPORTSWEAR COMPANY
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
The enclosed proxy is solicited on behalf of the Board of Directors of
Columbia Sportswear Company, an Oregon corporation, for use at the annual
meeting of shareholders to be held on May 17, 2001 and at any adjournment
thereof. The annual meeting will be held at 2:00 p.m., Pacific Time, on
Thursday, May 17, 2001, at the Hilton Hotel at 921 SW 6th Avenue, Portland,
Oregon.
The Company will bear the cost of preparing and mailing the proxy, proxy
statement, and any other material furnished to shareholders by the Company in
connection with the annual meeting. Proxies will be solicited by use of the
mails and the Internet, and officers and employees of the Company may also
solicit proxies by telephone or personal contact. Copies of solicitation
materials will be furnished to fiduciaries, custodians, and brokerage houses for
forwarding to beneficial owners of the stock held in their names.
All valid, unrevoked proxies will be voted at the annual meeting in
accordance with the instructions given. Any person giving a proxy in the form
accompanying this proxy statement has the power to revoke it at any time before
its exercise. The proxy may be revoked by filing with the Company, attention
Carl K. Davis, an instrument of revocation or a duly executed proxy bearing a
later date. The proxy may also be revoked by voting in person at the meeting. A
shareholder who attends the meeting, however, is not required to revoke the
proxy and vote in person.
UPON WRITTEN REQUEST TO TIMOTHY P. BOYLE, SECRETARY, ANY PERSON WHOSE PROXY
IS SOLICITED BY THIS PROXY STATEMENT WILL BE PROVIDED, WITHOUT CHARGE, A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K. THE ANNUAL REPORT ON FORM 10-K CAN
ALSO BE OBTAINED FROM THE WEBSITE OF THE SECURITIES AND EXCHANGE COMMISSION, AT
WWW.SEC.GOV.
The mailing address of the principal executive offices of the Company is
6600 North Baltimore, Portland, Oregon 97203, and its telephone number is (503)
286-3676. The approximate date this proxy statement and the accompanying proxy
form are first being sent to shareholders is April 23, 2001.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
The Common Stock is the only outstanding authorized voting security of the
Company. The record date for determining holders of Common Stock entitled to
vote at the annual meeting is April 2, 2001. On that date there were 25,876,386
shares of Common Stock outstanding, entitled to one vote per share. The Common
Stock does not have cumulative voting rights.
The following table sets forth certain information regarding the beneficial
ownership as of December 31, 2000 of the Company's Common Stock by (i) each
person known by the Company to own beneficially more than 5% of the Common
Stock, (ii) each director or nominee to become director of the Company, (iii)
each executive officer of the Company named in the Summary Compensation Table,
and (iv) all executive officers and directors as a group. Except as otherwise
noted, the persons listed below have sole investment and voting power with
respect to the Common Stock owned by them.
SHARES PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF SHARES
---------------- --------------------- ----------
Gertrude Boyle......................................... 3,920,496(2) 15.3%
6600 North Baltimore
Portland, Oregon 97203
Timothy P. Boyle....................................... 10,538,379(3) 41.0%
6600 North Baltimore
Portland, Oregon 97203
Sarah A. Bany.......................................... 3,392,996(4) 13.2%
6600 North Baltimore
Portland, Oregon 97203
SHARES PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF SHARES
---------------- --------------------- ----------
Don R. Santorufo....................................... 627,435(5) 2.4%
Terry J. Brown......................................... 52,490(6) *
Robert G. Masin........................................ 40,464(7) *
Murrey R. Albers....................................... 12,589(8) *
Edward S. George....................................... 22,655(9) *
Walter T. Klenz........................................ 874(10) *
John Stanton........................................... 135,144(11) *
All directors and executive officers as a group
(12 persons)......................................... 18,826,474(12) 72.7%
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* Less than 1%.
(1) Shares which the person or group has the right to acquire within 60 days
after December 31, 2000 are deemed to be outstanding in calculating the
percentage ownership of the person or group but are not deemed to be
outstanding as to any other person or group.
(2) Includes 429,839 shares held in two grantor retained annuity trusts for
which Mrs. Boyle is the income beneficiary.
(3) Includes (a) 175,012 shares held in trust, of which Mr. Boyle's wife is
trustee, for the benefit of Mr. Boyle's children, (b) 278 shares held in
trust for Mr. Boyle's wife, for which she is trustee, and (c) 12,925 shares
in a charitable trust for which Mr. Boyle is a trustee. Mr. Boyle disclaims
beneficial ownership of the shares in the charitable trust.
(4) Includes (a) 118,000 shares held in trust, of which Ms. Bany's husband is
trustee, for the benefit of Ms. Bany's children, (b) 637,550 shares held in
two grantor retained annuity trusts for which Ms. Bany is the income
beneficiary and Ms. Bany's husband and children are beneficiaries of the
remainder and (c) 2,915 shares subject to options exercisable within 60
days after December 31, 2000.
(5) Includes 391,389 shares that vest ratably over five years ending December
31, 2004.
(6) Consists of 52,490 shares subject to options exercisable within 60 days
after December 31, 2000.
(7) Includes 24,600 shares subject to options exercisable within 60 days after
December 31, 2000.
(8) Includes 9,589 shares subject to options exercisable within 60 days after
December 31, 2000.
(9) Includes 13,055 shares subject to options exercisable within 60 days after
December 31, 2000.
(10) Consists of 874 shares subject to options exercisable within 60 days after
December 31, 2000.
(11) Includes 9,294 shares subject to options exercisable within 60 days after
December 31, 2000.
(12) Includes 175,969 shares subject to options exercisable within 60 days after
December 31, 2000.
2
PROPOSAL 1: ELECTION OF DIRECTORS
The directors of the Company are elected at each annual meeting to serve
until the next annual meeting and until their successors are elected and
qualified. Each nominee is now serving as a director of the Company. If a quorum
of shareholders is present at the annual meeting, the seven nominees for
election as directors who receive the greatest number of votes cast at the
meeting will be elected directors. Abstentions and broker nonvotes will have no
effect on the results of the vote. Unless otherwise instructed, proxy holders
will vote the proxies they receive for the nominees named below. If any of the
nominees for director at the annual meeting becomes unavailable for election for
any reason, the proxy holders will have discretionary authority to vote pursuant
to the proxy for a substitute or substitutes. The following table briefly
describes the Company's nominees for directors.
NAME, PRINCIPAL OCCUPATION, AND OTHER DIRECTORSHIPS AGE DIRECTOR SINCE
--------------------------------------------------- --- --------------
GERTRUDE BOYLE has served as Chairman of the Board of 77 1970
Directors since 1970. Mrs. Boyle also served as the
Company's President from 1970 to 1988.
TIMOTHY P. BOYLE joined the Company in 1971 as general 51 1978
manager and has served as President and Chief Executive
Officer since 1988. Mr. Boyle also serves as the Company's
Secretary and Treasurer. Mr. Boyle is Gertrude Boyle's son.
SARAH BANY held various positions at the Company between 42 1988
1979 and August 1998, most recently as Director of Retail
Stores. Ms. Bany is Gertrude Boyle's daughter.
MURREY R. ALBERS became a director of the Company in July 59 1993
1993. Mr. Albers is President and Chief Executive Officer of
United States Bakery, a bakery with operations in Oregon,
Washington, Idaho, Montana and California. Mr. Albers, who
has been in his current position since June 1985, joined
United States Bakery as general manager of Franz Bakery in
1975. Mr. Albers chairs the Compensation Committee.
EDWARD S. GEORGE became a director of the Company in April 64 1989
1989. For 30 years, until his retirement, Mr. George worked
in the banking industry. From 1980 to 1990, he was President
and CEO of Torrey Pines Bank. Between 1991 and 1998 he
served as a financial consultant. Mr. George is also a
director of First National Bank of San Diego. Mr. George
chairs the Audit Committee.
WALTER T. KLENZ has served as President and Chief Executive 55 2000
Officer of Beringer Wine Estates since 1990, and has been
Chairman of its Board of Directors since August 1997. Mr.
Klenz joined Beringer Wine Estates in 1976 as director of
marketing for the Beringer brand. He also serves on the
Board of Directors of America West Airlines.
JOHN STANTON became a director of the Company in July 1997. 45 1997
Since 1992, Mr. Stanton has served as Chairman, Chief
Executive Officer and director of Western Wireless
Corporation, a publicly held cellular communications
company, and its predecessors. Mr. Stanton is also Chairman,
Chief Executive Officer, and director of VoiceStream
Wireless Corporation, a publicly traded company that is a
spin-off of Western Wireless. He previously co-founded McCaw
Cellular Communications, where he served as Chief Operating
Officer from 1985 to 1988 and as Vice Chairman from 1988 to
1991. Mr. Stanton also serves as a director of other
corporations, including Advanced Digital Information
Corporation and Microcell, a Canadian wireless company. Mr.
Stanton chairs the Nominating Committee.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met five times in 2000. No director attended fewer
than 75% of the aggregate of all meetings of the Board of Directors and the
committees of which the director was a member during 2000. The standing
committees of the Board of Directors are the Audit Committee, the Compensation
Committee and the Nominating Committee.
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The Audit Committee, which met three times in 2000, consists of Messrs.
George, Albers and Stanton. A description of Audit Committee activity is set
forth below in "Report of the Audit Committee."
The Compensation Committee, which met three times in 2000, determines
compensation for the Company's executive officers and administers the Company's
1997 Stock Incentive Plan and the 1999 Employee Stock Purchase Plan. The
Compensation Committee consists of Messrs. Albers, George and Stanton.
The Nominating Committee, which met one time in 2000, reviews the
composition of the Board and makes recommendations regarding nominations for
director. Shareholders wishing to recommend a prospective nominee for the Board
of Directors may do so by following the procedures set forth in the Company's
bylaws, which are summarized below under "Shareholder Nominations for Director."
The Nominating Committee consists of Messrs. Stanton, Albers and George and Ms.
Bany.
COMPENSATION OF DIRECTORS
Directors who are not officers of the Company receive annual compensation
of $20,000 plus $1,000 per meeting attended in addition to reasonable
out-of-pocket expenses incurred in attending meetings. Each year Directors who
are not officers of the Company receive an option to acquire 3,500 shares of
Common Stock and a $2,000 Columbia Sportswear apparel merchandise allowance. In
the future, Directors may be given the opportunity to receive additional stock
options in lieu of the annual cash retainer.
RECOMMENDATION BY THE BOARD OF DIRECTORS
The Board of Directors recommends that shareholders vote FOR the election
of the nominees named in this proxy statement.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation paid by the Company for
each of the last three years to the Chief Executive Officer and the four other
most highly compensated executive officers.
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION SECURITIES
---------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1)
--------------------------- ---- -------- ---------- ------------ ---------------
Timothy P. Boyle...................... 2000 $660,250 $1,518,000 -- $17,038(2)
President, Chief Executive Officer 1999 $450,259 $ 403,333 -- $16,778(3)
and Secretary 1998 $541,303 $ 554,989 -- $ 9,774
Don R. Santorufo...................... 2000 $495,289 $1,000,000 -- $12,050
Executive Vice President and 1999 $456,394 $ 225,000 -- $17,038(3)
Chief Operating Officer 1998 $443,733 $ 618,257(4) -- $ 9,774
Gertrude Boyle........................ 2000 $643,039 $ 540,000 -- $12,050
Chairman of the Board 1999 $508,587 $ 453,842 -- $11,789
1998 $486,692 $ 400,000 -- $ 9,774
Robert G. Masin....................... 2000 $308,463 $ 242,550 25,000 $16,451(5)
Director of Sales and 1999 $290,221 $ 102,015 5,600 $15,960(3)
Merchandising 1998 $248,269 $ 100,588 30,000 $ 9,774
Terry J. Brown........................ 2000 $288,000 $ 230,400 25,000 $12,050
Vice President, Planning and 1999 $224,078 $ 101,750 8,600 $15,603(3)
Chief Information Officer 1998 $200,663 $ 70,894 44,073 $ 9,774
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(1) Includes the Company's matching contribution under the Company's 401(k)
savings plan of $5,000 for each of 1998 and 1999 and $5,250 for 2000, and a
profit sharing contribution of $4,774 for 1998, $6,789 for 1999, and $6,800
for 2000.
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(2) Includes $4,989 paid in connection with an executive officer disability
insurance premium.
(3) Includes $4,989, $5,249, $4,171 and $3,814 for Messrs. Boyle, Santorufo,
Masin and Brown, respectively, paid in connection with an executive officer
disability insurance premium.
(4) Includes a bonus paid to Mr. Santorufo of $163,008 for amounts equal to the
accrued interest due and owing on Mr. Santorufo's loan from the Company in
connection with his Deferred Compensation Conversion Agreement, increased to
offset taxes owed by Mr. Santorufo as a result of the bonuses.
(5) Includes $4,401 paid in connection with an executive officer disability
insurance premium.
5
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding stock options granted in
2000 to the executive officers named in the Summary Compensation Table.
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENTAGE OF RATES OF ANNUAL STOCK
SHARES OPTIONS GRANTED PRICE APPRECIATION
UNDERLYING TO EMPLOYEES EXERCISE FOR OPTION TERM(2)
OPTIONS DURING PRICE EXPIRATION ---------------------
NAME GRANTED(1) FISCAL YEAR PER SHARE DATE 5% 10%
---- ---------- --------------- --------- ---------- --------- ---------
Gertrude Boyle.................. -- -- -- -- -- --
Timothy P. Boyle................ -- -- -- -- -- --
Don R. Santorufo................ -- -- -- -- -- --
Robert G. Masin................. 16,000 2.4% 23.563 4/20/10 $237,098 $600,854
9,000 1.3% 18.25 1/27/10 $103,296 $261,772
Terry J. Brown.................. 16,262 2.4% 23.563 4/20/10 $240,981 $610,693
8,738 1.3% 18.25 1/27/10 $100,289 $254,152
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(1) Mr. Masin's and Mr. Brown's options vest and become exercisable over a
period of five years on a monthly vesting schedule
(2) In accordance with rules of the Securities and Exchange Commission, these
amounts are the hypothetical gains or option spreads that would exist for
the respective options based on assumed compounded rates of annual stock
price appreciation of 5% and 10% from the date the options were granted over
the option term.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table indicates for all executive officers named in the
Summary Compensation Table (i) stock options exercised during 2000, including
the value realized on the date of exercise, (ii) the number of shares subject to
exercisable (vested) and unexercisable (unvested) stock options as of December
31, 2000, and (iii) the value of in-the-money options, which represents the
positive difference between the exercise price of existing stock options and the
year-end price of the Common Stock.
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
NUMBER UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
OF SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Gertrude Boyle............... -- -- -- -- -- --
Timothy P. Boyle............. -- -- -- -- -- --
Don R. Santorufo............. -- -- -- -- -- --
Robert G. Masin.............. 22,349 603,419 20,589 47,162 $ 725,132 $1,475,599
Terry J. Brown............... 17,634 366,856 45,841 74,925 $1,521,364 $2,375,186
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(1) Based on the last sale price of $49.75 per share on December 29, 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to a five-year written lease dated January 1, 1998, each year the
Company pays $156,096 (as adjusted annually for inflation) to Gertrude Boyle for
use of a portion of its headquarters building. The Company does not intend to
renew this lease after it moves to a new headquarters that it purchased in late
2000.
The Company entered into a five-year lease of a building from the Frank
Deggendorfer Trust for $6,250 monthly beginning March 5, 1998. Frank
Deggendorfer is Gertrude Boyle's son-in-law and Timothy P. Boyle's
brother-in-law. Until late 2000, the leased building housed the Company's Bend,
Oregon outlet store. That store has since been relocated, and the Company is
seeking another tenant for the building.
6
In December 1996 the Company entered into a Deferred Compensation
Conversion Agreement with Don Richard Santorufo, Executive Vice President and
Chief Operating Officer of the Company, providing for the conversion of deferred
compensation units granted under a prior agreement into an aggregate of
1,800,435 shares of the Company's Common Stock. Of those shares, 1,075,321
shares vested immediately, 333,725 shares vested ratably over three years
commencing December 31, 1997, and 391,389 shares vest ratably over five years
ending December 31, 2004. In connection with the transaction, the Company loaned
Mr. Santorufo approximately $5.7 million (the "Loan") for payment of related
income taxes. The Loan was repaid in full in 1998. The agreement provides that
if Mr. Santorufo's employment is terminated then the unvested shares vest
automatically unless Mr. Santorufo is compensated. The amount of such
compensation is determined by multiplying the initial Loan balance by a fraction
which is equal to the then unvested shares divided by the aggregate shares
granted. Under the agreement, the Company provided Mr. Santorufo with bonuses
and amounts to cover certain taxes through 1998. In addition, the Company agreed
to pay a cash bonus for up to 50% of any additional tax liability that may be
imposed on Mr. Santorufo with respect to the compensation received under the
agreement. The amount of this cash bonus would be increased to offset taxes owed
by Mr. Santorufo as a result of such bonus.
In connection with the Company's initial public offering and the
termination of the Company's Subchapter S corporation tax status, the Company
entered into a tax indemnification agreement with each of its shareholders,
including Gertrude Boyle, Timothy P. Boyle, Sarah Bany, Don Richard Santorufo
and certain trusts. The agreements provide that the Company will indemnify and
hold harmless each of these shareholders for federal, state, local or foreign
income tax liabilities, and costs relating thereto, resulting from any
adjustment to the Company's income that is the result of an increase or change
in character of the Company's income during the period it was treated as a
Subchapter S corporation. The agreements also provide that if there is a
determination that the Company was not a Subchapter S corporation prior to the
offering, the shareholders will pay to the Company certain refunds actually
received by them as a result of that determination. In 1998, the Company
reimbursed Gertrude Boyle, Timothy Boyle, and Sarah Bany for income taxes and
related expenses they were assessed of approximately $330,000, $960,000 and
$310,000, respectively, following an audit of the Company's 1995 and 1996
corporate income tax returns. In 1999, the Company paid taxes on behalf of
Gertrude Boyle, Timothy Boyle, Sarah Bany and Don Santorufo, of approximately
$19,000, $54,000, $17,000, and $7,000, respectively, for the Company's income
prior to the initial public offering. Amounts paid in 1999 were offset by a
corresponding tax refund in 2000 from another jurisdiction related to the same
income.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Murrey R. Albers, Edward S. George
and John Stanton, all nonemployee directors. No committee member participates in
committee deliberations or recommendations relating to his own compensation.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
consists of Messrs. Albers, George and Stanton, all non-employee directors. The
Committee makes recommendations to the Board regarding compensation for the
executive officers of the Company, and administers the executive compensation
plans, the Company's Employee Stock Purchase Plan and the Company's stock option
program, from which stock options are granted periodically to certain executive
officers and other employees of the Company.
7
COMPENSATION PRINCIPLES AND PHILOSOPHY
The Committee believes that leadership and motivation of the Company's
executives are critical to the long-term success of the Company. In support of
this philosophy, the Company has adopted an executive compensation policy in
which the primary objectives are to provide a total compensation package:
(1) which will allow it to attract and retain key executive officers
who are primarily responsible for the long-term success of the Company;
(2) that takes into consideration the compensation practices of
comparable companies with whom the Company competes for executive talent;
(3) which will motivate executives to maximize shareholder returns by
achieving both short and long-term Company goals.
The Committee maintains the philosophy that compensation of the Company's
executives should be directly linked to the financial performance of the Company
as well as to each executive's individual contribution. In determining
competitive compensation levels, the Committee has engaged independent
compensation consultants to analyze base salaries and incentive compensation for
executive officers at similarly comparable companies. Total compensation for
executive officers is generally targeted in the 50 to 75th percentile of pay at
these comparable companies, depending on levels of experience and
responsibility. The average of the base salaries for executive positions in 2001
falls in the 61st percentile of market values.
Following the Company's initial public offering, the Committee has put
increasing emphasis on aligning compensation with Company performance, by
increasing the proportion of executive pay that is "at risk," offering increased
rewards for strong Company and individual performance and reduced returns if
performance expectations are not met.
The total compensation package includes a competitive base salary,
incentive bonuses, periodic stock option grants, as well as a 401(k) plan with a
Company match, and a Company profit sharing plan.
COMPENSATION ELEMENTS
There are different elements in the Company's executive compensation
program, all determined by individual performance and Company profitability,
except for stock option grants which are intended to correlate compensation to
stock price performance.
Base Salary Compensation
Base salaries for the Chief Executive Officer and other select executive
officers have been established by reviewing a number of factors, including
responsibilities, experience, demonstrated performance and potential for future
contributions. The Committee also takes into account competitive factors,
including the level of salaries associated with similar positions at businesses
that compete with the Company.
Annual Incentive Compensation
In 1999, the Board of Directors and shareholders approved the Executive
Incentive Compensation Plan. Under the Executive Incentive Compensation Plan,
the Committee establishes performance goals, which may include Company revenues
or earnings or other Company benchmarks, within 90 days of the beginning of the
calendar year. Cash target bonuses for eligible executive officers will be
determined by the extent to which the Company attains the established goals and
by an assessment of each executive officer's performance during the year.
Specific performance goals to which an eligible executive's bonus is tied will
be at the discretion of the Committee. In each case, the target bonus will be a
percentage of the executive's base salary. Bonuses may exceed the target if
performance goals are exceeded. An executive may also receive no bonus for the
year if less than a predetermined percentage of the applicable performance goal
is met or if the executive's performance does not meet the Committee's
expectations. Although the Executive Incentive Compensation Plan requires that
Company performance goals and target bonuses be established in the first quarter
of the year in order to comply with Section 162(M) of the Internal Revenue Code,
the Committee is free to exercise
8
"negative discretion" to reduce bonuses from a preset amount. For example, if
Company performance would result in a maximum bonus, but individual performance
does not meet the Committee's standards, it could exercise negative discretion
to reduce the bonus amount. Under the Executive Incentive Compensation Plan the
Committee established a performance goal for the Company for 2000 based on
pre-tax income. The Company exceeded its performance goals for fiscal 2000, and
each Executive Officer received a cash bonus.
Stock Options
Options provide executives with the opportunity to buy and maintain an
equity interest in the Company and to share in the appreciation of the value of
the stock. They also provide a long-term incentive for the executive to remain
with the Company and promote shareholder returns. The Company has made periodic
stock option grants under the 1997 Stock Incentive Plan to most executive
officers. The Company to date has not granted stock options to Timothy P. Boyle,
Gertrude Boyle or Don Richard Santorufo, each of whom has a substantial
ownership interest in the Company, which provides a long-term performance
incentive. Mr. Santorufo previously received long-term incentive compensation in
the form of restricted stock that vests ratably over a period of several years,
ending in 2004.
The Committee makes annual stock option grants to certain executives and
other select employees. The number of shares in each grant will depend on
factors such as the level of base pay and individual performance. Stock options
are awarded with an exercise price equal to the fair market value of the
Company's Common Stock at the time of the grant. Options granted in 2001 vest
over a period of four years and have ten-year terms. The options only have value
to the recipients if the price of the Company's stock appreciates after the
options are granted.
OTHER BENEFITS
The Company has a 401(k) plan and a profit-sharing plan, which cover
substantially all employees with more than ninety days of service. The Company
has historically made discretionary matching and non-matching contributions,
with the non-matching contributions made in the form of profit sharing. All
contributions to the plans are determined by the Board of Directors. In
addition, executive officers, other than Timothy and Gertrude Boyle, are
eligible to participate in the Company's 1999 Employee Stock Purchase Plan.
Other benefits that are offered to key executives are largely those that
are offered to the general employee population, with some variation. In general,
they are designed to provide a safety net of protection against the financial
catastrophes that can result from illness, disability or death.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee has determined the compensation for the Chief Executive
Officer based on a number of factors. His base salary was determined after a
review of his experience, performance and an evaluation of comparable positions
at other companies. Under the Executive Incentive Compensation Plan total
compensation for Mr. Boyle is tied to the overall financial performance of the
Company. For 2000, Mr. Boyle was eligible to receive between 30 percent and 220
percent of his base salary, depending on the Company achieving between 85 and
130 percent of predetermined financial goals. The Company exceeded 130 percent
of the financial goals, and Mr. Boyle received a bonus of $1,518,000, or 220
percent of his annual salary. Mr. Boyle's 2001 salary of $690,000, is unchanged
from 2000, and was established by the Committee after commissioning a review of
executive salaries across related industries as well as in the same geographic
region. In 2001, Mr. Boyle is again eligible for a performance-based bonus of
between 30 percent and 220 percent of his base salary, depending on his
performance and on the Company achieving between 85 percent and 130 percent of
pre-set financial goals. If the Company's performance is below 85 percent of the
financial goals, Mr. Boyle will receive no bonus. Because of Mr. Boyle's
substantial ownership interest in the Company, the Committee believes he has an
effective long-term incentive tied directly to shareholder return.
9
DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986 limits to $1,000,000
per person the amount that the Company can deduct for compensation paid to any
of its most highly paid officers in any year. Depending on individual and
Company performance, total compensation for certain executives may be greater
than $1,000,000. The limit on deductibility, however, does not apply to
performance-based compensation that meets certain requirements. The Company's
current policy is generally to grant stock options that meet those requirements
so that option compensation recognized by an optionee will be fully deductible
by the Company. Similarly the Executive Incentive Compensation Plan is intended
to provide for fully deductible performance-based compensation.
Members of the Compensation Committee:
Murrey R. Albers -- Chairman
Edward S. George
John Stanton
REPORT OF THE AUDIT COMMITTEE
On May 25, 2000, the Board of Directors approved a charter for the Audit
Committee, which reflects the standards set forth in SEC regulations and the
rules of the Nasdaq Stock Market. The Audit Committee Charter is reproduced in
Appendix A to this proxy statement. Each member of the Audit Committee is
"independent," in accordance with the rules of the Nasdaq Stock Market.
The Audit Committee's role is to provide governance, guidance, and
oversight regarding financial information provided by the Company to the public
or governmental bodies, the Company's systems of internal controls, and the
auditing, accounting, and financial reporting processes in general. The Audit
Committee regularly meets with management and the Company's outside auditors,
Deloitte & Touche LLP, to discuss, among other things the preparation of
financial statements, including key accounting and reporting issues. In
accordance with the Audit Committee charter, the Audit Committee also oversees
the relationship between the Company and its outside auditors, including
recommending their appointment, reviewing the scope of their services and
related fees, and assessing their independence. Specifically, the Audit
Committee:
- Has reviewed and discussed the Company's audited financial statements
with management;
- Has discussed with the Company's auditors the matters required to be
discussed by Statements on Auditing Standards 61;
- Has received the written disclosures and the letter from Deloitte &
Touche LLP required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and has discussed with
Deloitte & Touche its independence;
Based on the Audit Committee's review and discussions referenced above, the
Audit Committee recommended to the Board that the Company's audited financial
statements be included in the Company's Annual Report on Form 10-K.
Members of the Audit Committee:
Edward S. George -- Chairman
Murrey R. Albers
John Stanton
10
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
return of the Company's Common Stock, assuming reinvestment of dividends, with
the cumulative total return of the Standard & Poor's SmallCap 600 Index, the S&P
Textile (Apparel) Small Index, the S&P 500 Textile (Apparel) Index and the S&P
500 Index for the period commencing March 26, 1998 (the date of the Company's
initial public offering) and ending on December 31, 2000. The graph assumes that
$100 was invested in the Company's Common Stock at the initial public offering
price of $18 and each index on March 26, 1998. The table also assumes the
reinvestment of dividends, if any. The Company included indices for the S&P 500
and S&P 500 Textile (Apparel) in order to provide shareholders comparisons with
companies outside the small capitalization category.
[PERFORMANCE GRAPH]
- ------------------------------------------------------------------------------------
03/26/1998 12/31/1998 12/31/1999 12/29/2000
- ------------------------------------------------------------------------------------
Columbia Sportswear Co. $100.00 $ 93.75 $119.44 $276.38
S&P 500 Textile (Apparel) $100.00 $ 74.64 $ 55.92 $ 66.40
S&P Textile (Apparel) Small Cap $100.00 $ 66.20 $ 55.95 $ 66.63
S&P 500 Index $100.00 $112.96 $136.73 $124.28
S&P Small Cap 600 Index $100.00 $ 89.36 $100.44 $112.29
- ------------------------------------------------------------------------------------
11
PROPOSAL 2: AMENDMENTS TO THE 1997 STOCK INCENTIVE PLAN
The Board of Directors has adopted, subject to shareholder approval,
amendments to the Company's 1997 Stock Incentive Plan (the "Plan"). Stock
options have been the principal long-term incentive compensation element of
officer and key employee compensation, and the Board of Directors believes the
Plan is an important tool to attract and retain talented employees and
directors. In order to provide many employees with a long-term stake in the
Company's prosperity, the Board of Directors has made broad-based option grants,
including approximately 224 individuals in the option program as of March 31,
2001. At the time of the Company's initial public offering, there were 2,500,000
shares reserved for issuance under the Plan. Of these, options for 1,147,524
shares had been granted prior to the completion of the IPO. At March 31, 2001,
only 19,444 shares of the Company's Common Stock remained available for future
grants under the Plan. The Board of Directors believes that additional shares
must be reserved for issuance under the Plan. Accordingly, the Board of
Directors has approved, subject to shareholder approval, a 1,100,000 share
increase in the number of shares reserved for issuance under the Option Plan to
a total of 3,600,000 shares. In addition, shareholder approval of Proposal 2
will constitute reapproval of the per-employee limit on grants of options under
the Option Plan of 100,000 shares annually and 100,000 shares in connection with
hiring. This reapproval is required every five years for continued compliance
with regulations under Section 162(m) of the Internal Revenue Code of 1986. See
"Federal Tax Consequences."
The Board of Directors also approved a number of technical amendments to
the Plan. The Board eliminated provisions permitting the award of stock
appreciation rights, and adopted new provisions related to the grant of
"Performance-Based Awards," which are designed to qualify as performance-based
compensation under Section 162(m) of the Internal Revenue Code. See "Federal Tax
Consequences."
This discussion is qualified in its entirety by the copy of the Plan
attached to this proxy statement as Appendix B.
DESCRIPTION OF THE PLAN
ELIGIBILITY. All employees, officers and directors of the Company and its
subsidiaries are eligible to participate in the Plan. Also eligible are
non-employee agents, consultants, advisors, and independent contractors of the
Company or any subsidiary.
ADMINISTRATION. The Plan will be administered by the Board of Directors or,
if the Board so determines, a committee of the Board of Directors or specified
officers of the Company, or both. The Board or the committee, as the case may
be, may promulgate rules and regulations for the operation of the Plan and
generally supervises the administration of the Plan, except that only the Board
of Directors may amend, modify or terminate the Plan. The Board of Directors has
delegated general authority for making option grants to the Compensation
Committee of the Board (the "Committee"). The Committee determines individuals
to whom option grants are made under the Plan and the price and terms of any
grants. For purposes of the description of the Plan, "Board of Directors" or
"Board" shall also mean the Committee or officer when appropriate.
TERM OF PLAN. The Plan will continue until all shares available for
issuance under the Plan have been issued and all restrictions on such shares
have lapsed. The Board of Directors may suspend or terminate the Plan at any
time.
STOCK OPTIONS. The Board of Directors determine the persons to whom options
are granted, the option price, the number of shares to be covered by each
option, the period of each option, the times at which options may be exercised
and whether the option is an incentive stock option as defined in Section 422 of
the Code ("ISO") or a nonqualified stock option ("NSO"). If the option is an
ISO, the option price cannot be less than the fair market value of the Common
Stock on the date of grant. If an optionee with respect to an ISO at the time of
grant owns stock possessing more than 10 percent of the combined voting power of
the Company, the option price may not be less than 110 percent of the fair
market value of the Common Stock on the date of grant. If the option is an NSO,
the option price may be any amount determined by the Board of Directors. No
employee may be granted options under the Plan for more than an aggregate of
100,000 shares in any
12
12-month period or 100,000 shares in connection with hiring. In addition, the
Plan limits the amount of ISOs that may become exercisable under the Plan in any
year to $100,000 per optionee (based on the fair market value of the stock on
the date of grant). No monetary consideration is paid to the Company upon the
granting of options.
Options granted under the Plan generally continue in effect for the period
fixed by the Board of Directors or appropriate committee or officer, except that
ISOs are not exercisable after the expiration of 10 years from the date of grant
or five years in the case of a 10 percent shareholder. Options are exercisable
in accordance with the terms of an option agreement entered into at the time of
grant and, except as otherwise determined by the Board of Directors with respect
to an NSO, are nontransferable except on death of a holder. Options may be
exercised only while an optionee is employed by the Company or a subsidiary or
within 12 months following termination of employment by reason of death or
disability or 30 days following termination for any other reason. The Plan
provides that the Board of Directors may extend the exercise period for any
period up to the expiration date of the option and may increase the number of
shares for which the option may be exercised up to the total number underlying
the option. The purchase price for each share purchased pursuant to exercise of
options must be paid in cash, including cash that may be the proceeds of a loan
from the Company, in shares of Common Stock valued at fair market value, in
restricted stock, in performance units or other contingent awards denominated in
either stock or cash, in deferred compensation credits or in other forms of
consideration, as determined by the Board of Directors or appropriate committee
or officer. Upon the exercise of an option, the number of shares subject to the
option and the number of shares available under the Plan for future option
grants are reduced by the number of shares with respect to which the option is
exercised.
STOCK BONUS AWARDS. The Board of Directors may award Common Stock as a
stock bonus under the Plan and determine the number of shares to be awarded and
the period of time for the award. Stock received as a stock bonus is subject to
the terms, conditions and restrictions determined by the Board of Directors at
the time the stock is awarded. The Company has never made stock bonus awards
under the Plan.
RESTRICTED STOCK. The Plan provides that the Board may issue restricted
stock in such amounts, for such consideration, and subject to such terms,
conditions and restrictions as the Board of Directors may determine. The
restrictions may include restrictions concerning transferability and forfeiture
of the shares awarded. The Company has never awarded restricted stock under the
Plan.
PERFORMANCE-BASED AWARDS. The Board of Directors may grant awards intended
to qualify as performance-based compensation under Section 162(m) of the
Internal Revenue Code denominated at the time of grant either in Common Stock or
in dollar amounts consisting of monetary units that may be earned in whole or in
part if the Company achieves written objective goals established by the Board of
Directors over a designated period of time. Payment of an award earned may be in
cash or stock or both, as the Board of Directors determines. The Board of
Directors may also impose additional restrictions to payment under a
performance-based award in addition to the satisfaction of the performance
goals. No participant may receive in any fiscal year stock-based performance
awards under which the aggregate amount payable under the awards exceeds the
equivalent of 100,000 shares of Common Stock or cash-based performance awards
under which the aggregate amount payable exceeds $3,000,000.
CHANGES IN CAPITAL STRUCTURE. The Plan provides that if the outstanding
Common Stock is increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company or of
another corporation by reason of any recapitalization, stock split or certain
other transactions, appropriate adjustment will be made by the Board of
Directors in the number and kind of shares available for awards under the Plan.
In the event of a merger, consolidation or plan of exchange to which the Company
is a party or a sale of all or substantially all of the Company's assets (each a
"Transaction"), the Board of Directors will, in their sole discretion and to the
extent possible under the structure of the Transaction, select one of the
following alternatives for treating outstanding awards under the Plan: (i)
outstanding options will remain in effect in accordance with their terms; (ii)
outstanding options shall be converted into options to purchase stock in the
corporation that is the surviving or acquiring corporation in the Transaction;
or (iii) the Board of Directors will provide a 30-day period prior to the
consummation of the Transaction during which outstanding options shall be
exercisable to the extent they are already vested or vest within that period
and,
13
upon the expiration of such 30-day period, all unexercised options shall
immediately terminate. The Board of Directors may, in their sole discretion,
accelerate the exercisability of options so that they are exercisable in full
during such 30-day period. In the event of the dissolution of the Company,
options shall be treated in accordance with clause (iii) above.
Federal Income Tax Consequences
The following description is a summary of the federal income tax
consequences of awards under the Plan. Applicable state, local and foreign tax
consequences may differ.
Certain options authorized to be granted under the Plan are intended to
qualify as ISOs for federal income tax purposes. Under federal income tax law
currently in effect, an optionee will recognize no income upon grant or upon
proper exercise of an ISO, although such exercise may produce alternative
minimum tax liability for the optionee. If an employee exercises an ISO and does
not dispose of any of the option shares within two years following the date of
grant and within one year following the date of exercise, then any gain realized
on subsequent disposition of the shares will be taxable as capital gain.
Ordinarily, if an employee disposes of shares acquired upon exercise of an ISO
before the expiration of either the one-year holding period or the two-year
waiting period, the amount by which the fair market value of the shares on the
exercise date exceeds the exercise price will be taxable as ordinary
compensation income in the year of such disposition; however, on certain sales
or exchanges the amount that is taxable as ordinary compensation income is
limited to the amount by which the amount realized on the disposition exceeds
the exercise price. The Company will not be allowed any deduction for federal
income tax purposes at either the time of the grant or exercise of an ISO. Upon
any disqualifying disposition by an employee, the Company will generally be
entitled to a deduction to the extent the employee realized ordinary income.
Certain options authorized to be granted under the Plan will be treated as
NSOs for federal income tax purposes. Under federal income tax law presently in
effect, no income is realized by the grantee of an NSO until the option is
exercised. At the time of exercise of an NSO, the optionee will realize ordinary
compensation income, and the Company will generally be entitled to a deduction,
in the amount by which the fair market value of the shares subject to the option
at the time of exercise exceeds the exercise price. The Company is required to
withhold on the income amount. Upon the sale of shares acquired upon exercise of
an NSO, the excess of the amount realized from the sale over the fair market
value of the shares on the date of exercise will be taxable as capital gain.
An employee who receives stock in connection with the performance of
services will generally realize taxable income at the time of receipt, unless
the shares are substantially nonvested for purposes of Section 83 of the Code
and the employee does not elect immediate taxation pursuant to Section 83(b) of
the Code. If the shares are substantially nonvested at the time of receipt, the
employee will realize taxable income in each year in which a portion of the
shares substantially vest, unless the employee elects within 30 days after the
original transfer to recognize income in connection with the original transfer
under Section 83(b). The Company generally will be entitled to a tax deduction
equal to the amount includable as income by the employee at the same time or
times as the employee recognizes income with respect to the shares. The Company
is required to withhold on the income amount. A participant who receives a cash
bonus right under the Plan will generally recognize income equal at the time of
receipt to the amount of the cash bonus paid, and the Company will generally be
entitled to deduct the same amount.
Section 162(m) of the Code limits to $1,000,000 per person the amount that
the Company may deduct for compensation paid to certain of its most highly
compensated officers in any year. Under Internal Revenue Service regulations,
compensation received through the exercise of an option or performance-based
award is not subject to the $1,000,000 limit if the option or performance-based
award and the plan pursuant to which it is granted meet certain requirements.
One requirement is shareholder approval at least once every five years of
per-employee limits on the number of shares as to which options and
performance-based awards may be granted. Other requirements are that the option
or performance-based award be granted by a committee of at least two outside
directors and that the exercise price of the option or performance-based award
be not less than fair market value of the Common Stock on the date of grant.
These requirements are met and,
14
accordingly, the Company believes that if this proposal is approved by
shareholders, compensation received on exercise of options and performance-based
awards granted under the Plan in compliance with all of the above requirements
will be exempt from the $1,000,000 deduction limit.
RECOMMENDATION BY THE BOARD OF DIRECTORS
The Board of Directors recommends that the amendments to the Plan be
approved. The affirmative vote of the holders of a majority of the shares of
Common Stock present and entitled to vote on the matter is required to approve
this Proposal. Abstentions have the same effect as "no" votes in determining
whether the amendment is approved. Broker non-votes are counted for purposes of
determining whether a quorum exists at the annual meeting but are not counted
and have no effect on the results of the vote on this Proposal. The proxies will
be voted for or against the proposal or as an abstention, in accordance with the
instructions specified on the proxy form. If no instructions are given, proxies
will be voted for approval of the adoption of the Plan.
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP audited the Company's financial statements for the
year ended December 31, 2000 and has been selected to audit the Company's
financial statements for 2001. Representatives of Deloitte & Touche LLP will be
at the annual meeting and will be available to respond to appropriate questions.
They do not plan to make any statement but will have the opportunity to make a
statement if they wish.
FEES PAID TO INDEPENDENT AUDITORS
AUDIT FEES: Fees for audit and review of Forms 10-Q for fiscal 2000 were
$240,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES: Deloitte &
Touche LLP did not render any services related to financial information systems
design and implementation for the fiscal year ended December 31, 2000.
ALL OTHER FEES: Aggregate fees billed for all other services by Deloitte &
Touche LLP for the fiscal year ended December 31, 2000 were $639,000.
The Audit Committee has determined that the provision of services described
above is consistent with Deloitte & Touche's independence.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors, and persons who own more than 10% of the Common
Stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission (SEC). Executive officers, directors, and beneficial
owners of more than 10% of the Common Stock are required by SEC regulation to
furnish the Company with copies of all section 16(a) reports they file. Based
solely on a review of such reports received by the Company and on written
representations from certain reporting persons that they have complied with the
relevant filing requirements, the Company believes that all section 16(a) filing
requirements applicable to its executive officers and directors have been
complied with.
DISCRETIONARY AUTHORITY
Although the Notice of Annual Meeting of Shareholders provides for
transaction of any other business that properly comes before the meeting, the
Board of Directors has no knowledge of any matters to be presented at the
meeting other than the matters described in this proxy statement. The enclosed
proxy, however, gives discretionary authority to the proxy holders to vote in
accordance with their judgment if any other matters are presented.
15
SHAREHOLDER PROPOSALS
SHAREHOLDER PROPOSALS TO BE INCLUDED IN THE COMPANY'S PROXY STATEMENT
A shareholder proposal to be considered for inclusion in proxy materials
for the Company's 2002 annual meeting must be received by the Company not later
than December 25, 2001.
SHAREHOLDER PROPOSALS NOT IN THE COMPANY'S PROXY STATEMENT
Shareholders wishing to present proposals for action at this annual meeting
or at another shareholders' meeting must do so in accordance with the Company's
Bylaws, a copy of which is available upon written request to Carl K. Davis, Vice
President and General Counsel. A shareholder must give timely notice of the
proposed business to the Secretary. For purposes of the Company's 2002 annual
meeting, such notice, to be timely, must be received by the Company by January
24, 2002.
SHAREHOLDER NOMINATIONS FOR DIRECTOR
Shareholders wishing to directly nominate candidates for election to the
Board of Directors at an annual meeting must do so in accordance with the
Company's Bylaws by giving timely notice in writing to the Secretary as defined
above. The notice shall set forth (a) the name and address of the shareholder
who intends to make the nomination, (b) the name, age, business address and
residence address of each nominee, (c) the principal occupation or employment of
each nominee, (d) the class and number of shares of the Company which are
beneficially owned by each nominee and by the nominating shareholder, (e) any
other information concerning the nominee that must be disclosed of nominees in
proxy solicitations pursuant to Regulation 14A of the Securities Exchange Act of
1934, and (f) the executed consent of each nominee to serve as a director of the
Company if elected. If the number of directors to be elected is increased and
there is no public announcement by the Company naming all nominees or specifying
the size of the increased Board of Directors at least 100 days prior to the
first anniversary of the preceding years annual meeting, a shareholder's notice
shall also be considered timely (but only with respect to nominees for new
positions created by such increase) if delivered to the Secretary at the
Company's principal executive offices no later than the close of business on the
tenth day following the day on which the public announcement is first made by
the Company. Shareholders wishing to make any director nominations at any
special meeting of shareholders held for the purpose of electing directors must
do so, in accordance with the Bylaws, by delivering timely notice to the
Secretary setting forth the information described above for annual meeting
nominations. To be timely, the notice must be delivered to the Secretary at the
principal executive offices of the Company not earlier than the close of
business on the 90th day prior to the special meeting and not later than the
close of business on the tenth day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board to be elected at the meeting. The officer
presiding at the meeting may, if in the officer's opinion the facts warrant,
determine that a nomination was not made in accordance with the procedures
prescribed by the Bylaws. If such officer does so, such officer shall so declare
to the meeting and the defective nomination shall be disregarded.
By Order of the Board of Directors
/s/ TIMOTHY P. BOYLE
Timothy P. Boyle
President, Chief Executive Officer and
Secretary
Portland, Oregon
April 23, 2001
16
APPENDIX A
COLUMBIA SPORTSWEAR COMPANY
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I. OBJECTIVE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its responsibilities by reviewing the financial,
operational, and regulatory related reporting matters of Columbia Sportswear
Company ("Company"). The committee's role is to provide governance, guidance,
and oversight regarding financial information provided by the Company to the
public or governmental bodies, the Company's systems of internal controls, and
the auditing, accounting, and financial reporting processes in general.
Furthermore, the Audit Committee should encourage continuous improvement of, and
should foster adherence to, the Company's policies, procedures, and business
practices at all levels. The Audit Committee's primary duties and
responsibilities are to:
- Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system.
- Review and appraise the audit efforts of the Company's independent
accountants and internal audit function.
- Provide an open avenue of communication among the independent
accountants, financial and senior management, internal audit personnel,
and the Board of Directors.
II. COMPOSITION
The Audit Committee will be comprised of three or more directors as
determined by the Board, each of whom shall be "independent" directors, and free
from any relationship that, in the opinion of the Board, would interfere with
his or her independence. All members of the Committee will have a working
familiarity with basic finance and accounting practices, and at least one member
of the Committee will have accounting or related financial management expertise.
The members of the Committee must meet the standards of independence and
experience described in the rules and regulations of the Nasdaq Stock Market (or
other markets on which the Company's securities are listed).
The members of the Committee will be elected by and serve at the pleasure
of the Board of Directors. Unless a Chairperson is elected by the full Board,
the members of the Committee may designate a chairperson by majority vote.
III. MEETINGS
The Committee will meet at least two times annually, or more frequently as
circumstances dictate. The Chairman has the power to call a Committee meeting
whenever he or she believes there is a need. As part of its job to foster open
communication, the Committee should meet at least annually with management,
internal audit personnel, and the independent accountants in separate executive
sessions to discuss any matters that the Committee or each of these groups
believe should be discussed privately. In addition, the Committee or at least
its chairperson should meet with the independent accountants and management
quarterly to review the Company's financials consistent with section IV below.
A-1
IV. RESPONSIBILITIES AND DUTIES
The Audit Committee will have the following responsibilities and duties:
General
(1) Review and update this Charter periodically as conditions warrant.
(2) Review hiring practices for any internal audit personnel and
ensure that the organizational structure is appropriate for effective lines
of communication.
(3) Review with legal counsel matters that could have an impact on the
Company's financial statements and reports filed with the Securities and
Exchange Commission.
(4) Perform any other activities consistent with this Charter, the
Company's Bylaws and governing law, as the Committee or the Board deems
necessary.
Financial Reporting
(5) Review the Company's quarterly financial statements and summary of
reserves prior to press release.
(6) At least the Chairperson should review the Quarterly Report on
Form 10-Q prior to its filing, and all members shall review the Annual
Report on Form 10-K prior to filing.
(7) Review the integrity of the Company's internal and external
financial reporting processes with internal audit personnel and the
independent accountants.
(8) At least annually, review with Management and the independent
accountants the Company's tax position, strategy, and reserves.
(9) Consider the independent accountants' judgements about the quality
and appropriateness of the Company's accounting principles as applied in
its financial reporting.
(10) Consider and approve, if appropriate, major changes to the
Company's auditing and accounting principles and practices as suggested by
the independent accountants, management, or internal audit personnel.
Internal Audit Reporting
(11) Review the performance of internal audit function and approve any
proposed change of personnel.
(12) Review the internal reports to management prepared by internal
audit personnel or accounting personnel acting in an internal audit
capacity and management's response.
Independent Accountant Review
(13) Recommend to the Board of Directors the selection of the
independent accountants, considering independence and effectiveness and
approve the fees and other compensation paid to the independent
accountants. On an annual basis, the Committee should review and discuss
with the accountants all significant relationships the accountants have
with the Company to determine the accountants' independence. To ensure the
independence of outside accountants, the Committee will discuss with the
independent auditors the matters required to be discussed by Statement on
Auditing Standards No. 61, as may be modified or supplemented, and will
obtain from the auditors the disclosures regarding auditor independence
required by Independent Standards Board Standard No. 1, as may be modified
or supplemented.
(14) Review the performance of the independent accountants and approve
any proposed discharge of the independent accountants when circumstances
warrant.
A-2
(15) Periodically consult with the independent accountants without
management represented about internal controls and the completeness and
accuracy of the Company's financial statements.
Process Improvement/Control
(16) Following completion of the annual audit, review separately with
each of management, independent accountants, and internal audit personnel
any significant difficulties encountered during the course of the audit,
including any restrictions on the scope of work or access to required
information.
(17) Review any significant disagreement among management and the
independent accountants or the internal audit personnel in connection with
the preparation of the financial statements.
(18) Review with the independent accountants, the internal audit
personnel and management the extent to which changes or improvements in
financial or accounting practices, as approved by the Audit Committee, have
been implemented.
A-3
APPENDIX B
COLUMBIA SPORTSWEAR COMPANY
1997 STOCK INCENTIVE PLAN, AS AMENDED*
1. PURPOSE. The purpose of this 1997 Stock Incentive Plan (the "Plan") is
to enable Columbia Sportswear Company (the "Company") to attract and retain the
services of [(1)] (i) selected employees, officers and directors of the Company
---
OR ANY PARENT OR SUBSIDIARY OF THE COMPANY and [(2)] (ii) selected nonemployee
- ------------------------------------------ ----
agents, consultants, advisors and independent contractors of the Company OR ANY
------
PARENT OR SUBSIDIARY OF THE COMPANY. FOR PURPOSES OF THIS PLAN, A PERSON IS
- ---------------------------------------------------------------------------
CONSIDERED TO BE EMPLOYED BY OR IN THE SERVICE OF THE COMPANY IF THE PERSON IS
- ------------------------------------------------------------------------------
EMPLOYED BY OR IN THE SERVICE OF THE COMPANY OR ANY PARENT OR SUBSIDIARY OF THE
- -------------------------------------------------------------------------------
COMPANY (IN WHICH CASE, THE COMPANY, PARENT OR SUBSIDIARY IS REFERRED TO AS AN
- ------------------------------------------------------------------------------
"EMPLOYER").
- ------------
2. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided below and
in Section [13] 10, the shares to be offered under the Plan shall consist of
--
Common Stock of the Company, and the total number of shares of Common Stock that
may be issued under the Plan shall [not exceed 2,500,000 shares. The shares
issued under the Plan may be authorized and unissued shares or reacquired] BE
--
3,600,000 shares. If an option [,stock appreciation right or performance unit]
- ---------
OR PERFORMANCE-BASED AWARD granted under the Plan expires, terminates or is
- --------------------------
cancelled, the unissued shares subject to [such option, stock appreciation right
or performance unit] THAT OPTION OR PERFORMANCE-BASED AWARD shall again be
--------------------------------------
available under the Plan. If shares [sold or] awarded as a bonus PURSUANT TO
-----------
SECTION 7 OR SOLD PURSUANT TO SECTION 8 under the Plan are forfeited to or
- ---------------------------------------
repurchased by the Company, the number of shares forfeited or repurchased shall
again be available under the Plan.
3. EFFECTIVE DATE AND DURATION OF PLAN.
[(a)] 3.1 EFFECTIVE DATE. The Plan shall become effective as of March
---
12, 1997. [No option, stock appreciation right or performance unit] NO INCENTIVE
------------
STOCK OPTION (AS DEFINED IN SECTION 5 BELOW) granted under the Plan shall become
- --------------------------------------------
exercisable AND NO PAYMENTS SHALL BE MADE UNDER A PERFORMANCE-BASED AWARD,
--------------------------------------------------------------
however, until the Plan is approved by the affirmative vote of the holders of a
majority of the shares of Common Stock represented at a shareholders meeting at
which a quorum is present [, and any such awards] AND THE EXERCISE OF ANY
-----------------------
INCENTIVE STOCK OPTIONS GRANTED under the Plan before such approval shall be
- -------------------------------
conditioned on and subject to such approval. Subject to this limitation, options
[, stock appreciation rights and performance units] AND PERFORMANCE-BASED AWARDS
----------------------------
may be granted and shares may be awarded as bonuses or sold under the Plan at
any time after the effective date and before termination of the Plan.
[(b)] 3.2 DURATION. The Plan shall continue in effect until all shares
---
available for issuance under the Plan have been issued and all restrictions on
such shares have lapsed. The Board of Directors may suspend or terminate the
Plan at any time except with respect to options, [performance units]
PERFORMANCE-BASED AWARDS and shares subject to restrictions then outstanding
- ------------------------
under the Plan. Termination shall not affect any outstanding options, ANY
---
OUTSTANDING PERFORMANCE-BASED AWARDS OR any right of the Company to repurchase
- ---------------------------------------
shares or the forfeitability of shares issued under the Plan.
4. ADMINISTRATION.
[(a)] 4.1 BOARD OF DIRECTORS. The Plan shall be administered by the
---
Board of Directors of the Company, which shall determine and designate from time
to time the individuals to whom awards shall be made, the amount of the awards
and the other terms and conditions of the awards. Subject to the provisions of
the Plan, the Board of Directors may from time to time adopt and amend rules and
regulations relating to administration of the Plan, advance the lapse of any
waiting period, accelerate any exercise date, waive or modify any restriction
applicable to shares (except those restrictions imposed by law) and make all
other determinations in the judgment of the Board of Directors necessary or
desirable for the administration of the Plan. The interpretation and
construction of the provisions of the Plan and related agreements by the Board
of
- ---------------
* NOTE: Underlined matter is new; Matter in [brackets and italics] is to be
------------------------
deleted.
B-1
Directors shall be final and conclusive. The Board of Directors may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any related agreement in the manner and to the extent it shall deem expedient to
carry the Plan into effect, and it shall be the sole and final judge of such
expediency.
[(b)] 4.2 COMMITTEE. The Board of Directors may delegate to [the
---
Compensation Committee] ANY COMMITTEE of the Board of Directors (the
-------------
"Committee") any or all authority for administration of the Plan. If authority
is delegated to the Committee, all references to the Board of Directors in the
Plan shall mean and relate to the Committee, except (i) as otherwise provided by
the Board of Directors [,] AND (ii) that only the Board of Directors may amend
---
or terminate the Plan as provided in Sections 3 and [13 and (iii) that if the
Committee includes officers of the Company, the Committee shall not be permitted
to grant options to persons who are officers of the Company.] 11.
--
4.3 OFFICERS. THE BOARD OF DIRECTORS MAY DELEGATE TO ANY OFFICER OR
--------------------------------------------------------------------
OFFICERS OF THE COMPANY AUTHORITY TO GRANT AWARDS UNDER THE PLAN, SUBJECT TO ANY
- --------------------------------------------------------------------------------
RESTRICTIONS IMPOSED BY THE BOARD OF DIRECTORS.
- -----------------------------------------------
5. TYPES OF AWARDS; ELIGIBILITY. The Board of Directors may, from time to
time, take the following actions, separately or in combination, under the Plan:
(i) grant Incentive Stock Options, as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), as provided in Sections [6(a)]
6.1 and [6(b)] 6.2; (ii) grant options other than Incentive Stock Options
- --- ---
("Non-Statutory Stock Options") as provided in Sections [6(a)] 6.1 and [6(c)]
---
6.3; (iii) award stock bonuses as provided in Section 7; (iv) sell shares
- ---
subject to restrictions as provided in Section 8; [(v) grant stock appreciation
rights] AND (v) AWARD PERFORMANCE-BASED AWARDS as provided in Section 9 [(vi)
--------------------------------------
grant cash bonus rights as provided in Section 10; and (vii) grant performance
units as provided in Section 11. Any such awards]. AWARDS may be made to
------
employees, including employees who are officers or directors, and to other
individuals described in Section 1 who the Board of Directors believes have made
or will make an important contribution to the Company; provided, however, that
only employees of the Company OR ANY PARENT OR SUBSIDIARY OF THE COMPANY (AS
----------------------------------------------
DEFINED IN SUBSECTIONS 424(e) AND 424(f) OF THE CODE) shall be eligible to
- -----------------------------------------------------
receive Incentive Stock Options under the Plan. The Board of Directors shall
select the individuals to whom awards shall be made and shall specify the action
taken with respect to each individual to whom an award is made. At the
discretion of the Board of Directors, an individual may be given an election to
surrender an award in exchange for the grant of a new award. No employee may be
granted options [or stock appreciation rights under the Plan] for more than an
aggregate of 100,000 shares of Common Stock in connection with the hiring of the
employee or 100,000 shares of Common Stock in any calendar year otherwise.
6. OPTION GRANTS.
[(a)] 6.1 GENERAL RULES RELATING TO OPTIONS.
---
[(i)] 6.1-1 TERMS OF GRANT. The Board of Directors may grant options
-----
under the Plan. With respect to each option grant, the Board of Directors shall
determine the number of shares subject to the option, the option EXERCISE price,
--------
the period of the option, the time or times at which the option may be exercised
and whether the option is an Incentive Stock Option [(subject to the provisions
of Section 6(b))] or a Non-Statutory Stock Option. At the time of the grant of
an option or at any time thereafter, the Board of Directors may provide that an
optionee who exercised an option with Common Stock of the Company shall
automatically receive a new option to purchase additional shares equal to the
number of shares surrendered and may specify the terms and conditions of such
new options.
[(ii)] 6.1-2 EXERCISE OF OPTIONS. Except as provided in Section
-----
[6(a)(iv)] 6.1-4 or as determined by the Board of Directors, no option granted
-----
under the Plan may be exercised unless at the time of such exercise the optionee
is employed by or in the service of the Company and shall have been so employed
or provided such service continuously since the date the option was granted.
[Absence on leave or on account of illness or disability under rules established
by the Board of Directors shall not, however, be deemed an interruption of
employment or service for this purpose. Unless otherwise determined by the Board
of Directors, vesting of options shall not continue during an absence on leave
(including an extended illness) or on account of disability. Except as provided
in Sections 6(a)(iv) and 12, options granted under the Plan may be exercised
from time to time over the period stated in each option in such amounts and at
such times as shall be
B-2
prescribed by the Board of Directors, provided that options shall not be
exercised for fractional shares. Unless otherwise determined by the Board of
Directors] Except as provided in Sections 6.1-4 and 10, options granted under
--- --
the Plan may be exercised from time to time over the period stated in each
option in such amounts and at such times as shall be prescribed by the Board of
Directors, provided that options shall not be exercised for fractional shares.
Unless otherwise determined by the Board of Directors, if an optionee does not
exercise an option in any one year with respect to the full number of shares to
which the optionee is entitled in that year, the optionee's rights shall be
cumulative and the optionee may purchase those shares in any subsequent year
during the term of the option.
[(iii)] 6.1-3 NONTRANSFERABILITY. Each Incentive Stock Option and,
-----
unless otherwise determined by the Board of Directors, each other option granted
under the Plan by its terms (i) shall be nonassignable and nontransferable by
---
the optionee, either voluntarily or by operation of law, except by will or by
the laws of descent and distribution of the state or country of the optionee's
domicile at the time of death, AND (ii) DURING THE OPTIONEE'S LIFETIME, SHALL BE
-------------------------------------------------
EXERCISABLE ONLY BY THE OPTIONEE.
- ---------------------------------
[(iv)] 6.1-4 TERMINATION OF EMPLOYMENT OR SERVICE.
-----
[(A)] 6.1-4(a) GENERAL RULE. Unless otherwise determined by the
--------
Board of Directors, in the event an optionee's employment or service with the
Company terminates for any reason other than because of [physical] TOTAL
-----
disability or death as provided in Sections [6(a)(iv)(B)] 6.1-4(b) and [(C)]
--------
(c), his or her option may be exercised at any time before the expiration date
- ---
of the option or the expiration of 30 days after the date of termination,
whichever is the shorter period, but only if and to the extent the optionee was
entitled to exercise the option at the date of termination.
[(B)] 6.1-4(b) TERMINATION BECAUSE OF TOTAL DISABILITY. Unless
--------
otherwise determined by the Board of Directors, in the event an optionee's
employment or service with the Company terminates because of total disability,
his or her option may be exercised at any time before the expiration date of the
option or [the expiration of] BEFORE THE DATE 12 months after the date of
---------------
termination, whichever is the shorter period, but only if and to the extent the
optionee was entitled to exercise the option at the date of termination. The
term "total disability" means a medically determinable mental or physical
impairment that is expected to result in death or has lasted or is expected to
last for a continuous period of 12 months or more and that causes the optionee
to be unable, in the opinion of the Company and two independent physicians, to
perform his or her duties as an employee, director, officer or consultant of the
[Company] EMPLOYER and UNABLE to be engaged in any substantial gainful activity.
-------- ------
Total disability shall be deemed to have occurred on the first day after the
[Company and the] two independent physicians have furnished their WRITTEN
-------
opinion of total disability to the Company AND THE COMPANY HAS REACHED AN
------------------------------
OPINION OF TOTAL DISABILITY.
- ----------------------------
[(C)] 6.1-4(c) TERMINATION BECAUSE OF DEATH. Unless otherwise
--------
determined by the Board of Directors, in the event of an optionee's death while
employed by or providing service to the Company, his or her option may be
exercised at any time before the expiration date of the option or BEFORE the
------
[expiration of] DATE 12 months after the date of death, whichever is the shorter
----
period, but only if and to the extent the optionee was entitled to exercise the
option at the date of death and only by the person or persons to whom the
optionee's rights under the option shall pass by the optionee's will or by the
laws of descent and distribution of the state or country of domicile at the time
of death.
[(D)] 6.1-4(d) AMENDMENT OF EXERCISE PERIOD APPLICABLE TO
--------
TERMINATION. The Board of Directors[, at the time of grant or, with respect to
an option that is not an Incentive Stock Option, at any time thereafter, may]
MAY AT ANY TIME extend the 30-day and 12-month exercise periods any length of
- ---------------
time not longer than the original expiration date of the option[, and may]. THE
---
BOARD OF DIRECTORS MAY AT ANY TIME increase the portion of an option that is
- ----------------------------------
exercisable, subject to such terms and conditions as the Board of Directors may
determine.
[(E)] 6.1-4(e) FAILURE TO EXERCISE OPTION. To the extent that the
--------
option of any deceased optionee or any optionee whose employment or service
terminates is not exercised within the applicable period, all further rights to
purchase shares pursuant to the option shall cease and terminate.
B-3
6.1-4(f) LEAVE OF ABSENCE. ABSENCE ON LEAVE APPROVED BY THE
------------------------------------------------------------
EMPLOYER OR ON ACCOUNT OF ILLNESS OR DISABILITY SHALL NOT BE DEEMED A
- ---------------------------------------------------------------------
TERMINATION OR INTERRUPTION OF EMPLOYMENT OR SERVICE. UNLESS OTHERWISE
- ----------------------------------------------------------------------
DETERMINED BY THE BOARD OF DIRECTORS, VESTING OF OPTIONS SHALL CONTINUE DURING A
- --------------------------------------------------------------------------------
MEDICAL, FAMILY OR MILITARY LEAVE OF ABSENCE, WHETHER PAID OR UNPAID, AND
- -------------------------------------------------------------------------
VESTING OF OPTIONS SHALL BE SUSPENDED DURING ANY OTHER UNPAID LEAVE OF ABSENCE.
- -------------------------------------------------------------------------------
[(v)] 6.1-5 PURCHASE OF SHARES.
-----
6.1-5(a) NOTICE OF EXERCISE. Unless the Board of Directors
---------------------------
determines otherwise, shares may be acquired pursuant to an option granted under
the Plan only upon the Company's receipt of written notice from the optionee of
the optionee's [intention to exercise] BINDING COMMITMENT TO PURCHASE SHARES,
--------------------------------------
specifying the number of shares [as to which] the optionee desires to [exercise]
PURCHASE UNDER the option and the date on which the optionee [desires] AGREES to
- -------------- ------
complete the transaction, and, if required in order to comply with the
Securities Act of 1933, as amended, containing a representation that it is the
optionee's present intention to acquire the shares for investment and not with a
view to distribution.
6.1-5(b) PAYMENT. Unless the Board of Directors determines
-------- --------
otherwise, on or before the date specified for completion of the purchase of
shares pursuant to an option EXERCISE, the optionee must have paid the Company
--------
the full purchase price of those shares in cash [(including, with the consent of
the Board of Directors, cash that may be the proceeds of a loan from the Company
(provided that, with respect to an Incentive Stock Option, such loan is approved
at the time of option grant))] OR BY CHECK or, with the consent of the Board of
-----------
Directors, in whole or in part, in Common Stock of the Company valued at fair
market value, restricted stock, [performance units] or other contingent awards
denominated in either stock or cash, promissory notes and other forms of
consideration. UNLESS OTHERWISE DETERMINED BY THE BOARD OF DIRECTORS, ANY COMMON
-----------------------------------------------------------------
STOCK PROVIDED IN PAYMENT OF THE PURCHASE PRICE MUST HAVE BEEN PREVIOUSLY
- -------------------------------------------------------------------------
ACQUIRED AND HELD BY THE OPTIONEE FOR AT LEAST SIX MONTHS. The fair market value
- ----------------------------------------------------------
of Common Stock provided in payment of the purchase price shall be the closing
price of the Common Stock [as reported in The Wall Street Journal on the last
trading day before the date the option is exercised] LAST REPORTED BEFORE THE
------------------------
TIME PAYMENT IN COMMON STOCK IS MADE OR, IF EARLIER, COMMITTED TO BE MADE, if
- --------------------------------------------------------------------------
the Common Stock is publicly traded, or [such other reported] ANOTHER value of
-------
the Common Stock as shall be specified by the Board of Directors. No shares
shall be issued until full payment for the shares has been made, INCLUDING ALL
-------------
AMOUNTS OWED FOR TAX WITHHOLDING. With the consent of the Board of Directors
- ---------------------------------
[(which, in the case of an Incentive Stock Option, shall be given only at the
time of grant)], an optionee may request the Company to apply automatically the
shares to be received upon the exercise of a portion of a stock option (even
though stock certificates have not yet been issued) to satisfy the purchase
price for additional portions of the option.
6.1-5(c) TAX WITHHOLDING. Each optionee who has exercised an
-------- ----------------
option shall, immediately upon notification of the amount due, if any, pay to
the Company in cash OR BY CHECK amounts necessary to satisfy any applicable
-----------
federal, state and local tax withholding requirements. If additional withholding
is or becomes required (AS A RESULT OF EXERCISE OF AN OPTION OR AS A RESULT OF
-------------------------------------------------------
DISPOSITION OF SHARES ACQUIRED PURSUANT TO EXERCISE OF AN OPTION) beyond any
- -----------------------------------------------------------------
amount deposited before delivery of the certificates, the optionee shall pay
such amount, IN CASH OR BY CHECK, to the Company on demand. If the optionee
--------------------
fails to pay the amount demanded, the Company OR THE EMPLOYER may withhold that
---------------
amount from other amounts payable [by the Company] to the optionee, including
salary, subject to applicable law. With the consent of the Board of Directors an
optionee may satisfy this obligation, in whole or in part, by [having]
INSTRUCTING the Company TO withhold from the shares to be issued upon exercise
- ----------- --
[that number of shares that would satisfy the withholding amount due] or by
delivering to the Company [Common Stock to satisfy the withholding amount] OTHER
-----
SHARES OF COMMON STOCK; PROVIDED, HOWEVER, THAT THE NUMBER OF SHARES SO WITHHELD
- --------------------------------------------------------------------------------
OR DELIVERED SHALL NOT EXCEED THE MINIMUM AMOUNT NECESSARY TO SATISFY THE
- -------------------------------------------------------------------------
REQUIRED WITHHOLDING OBLIGATION.
- --------------------------------
6.1-5(d) REDUCTION OF RESERVED SHARES. Upon the exercise of an
-------- ----------------------------
option, the number of shares reserved for issuance under the Plan shall be
reduced by the number of shares issued upon exercise of the option (LESS THE
---------
NUMBER OF ANY SHARES SURRENDERED IN PAYMENT FOR THE EXERCISE PRICE OR WITHHELD
- ------------------------------------------------------------------------------
TO SATISFY WITHHOLDING REQUIREMENTS).
- -------------------------------------
B-4
6.1-6 LIMITATIONS ON GRANTS TO NON-EXEMPT EMPLOYEES. UNLESS
------------------------------------------------------------
OTHERWISE DETERMINED BY THE BOARD OF DIRECTORS, IF AN EMPLOYEE OF THE COMPANY OR
- --------------------------------------------------------------------------------
ANY PARENT OR SUBSIDIARY OF THE COMPANY IS A NON-EXEMPT EMPLOYEE SUBJECT TO THE
- -------------------------------------------------------------------------------
OVERTIME COMPENSATION PROVISIONS OF SECTION 7 OF THE FAIR LABOR STANDARDS ACT
- -----------------------------------------------------------------------------
(THE "FLSA"), ANY OPTION GRANTED TO THAT EMPLOYEE SHALL BE SUBJECT TO THE
- -------------------------------------------------------------------------
FOLLOWING RESTRICTIONS: (i) THE OPTION PRICE SHALL BE AT LEAST 85 PERCENT OF THE
- --------------------------------------------------------------------------------
FAIR MARKET VALUE, AS DESCRIBED IN SECTION 6.2-4, OF THE COMMON STOCK SUBJECT TO
- --------------------------------------------------------------------------------
THE OPTION ON THE DATE IT IS GRANTED; AND (ii) THE OPTION SHALL NOT BE
- ----------------------------------------------------------------------
EXERCISABLE UNTIL AT LEAST SIX MONTHS AFTER THE DATE IT IS GRANTED; PROVIDED,
- -----------------------------------------------------------------------------
HOWEVER, THAT THIS SIX-MONTH RESTRICTION ON EXERCISABILITY WILL CEASE TO APPLY
- ------------------------------------------------------------------------------
IF THE EMPLOYEE DIES, BECOMES DISABLED OR RETIRES, THERE IS A CHANGE IN
- -----------------------------------------------------------------------
OWNERSHIP OF THE COMPANY, OR IN OTHER CIRCUMSTANCES PERMITTED BY REGULATION, ALL
- --------------------------------------------------------------------------------
AS PRESCRIBED IN SECTION 7(e)(8)(B) OF THE FLSA.
- ------------------------------------------------
6.2[(b)] INCENTIVE STOCK OPTIONS. Incentive Stock Options shall be
---
subject to the following additional terms and conditions:
[(i)] 6.2-1 LIMITATION ON AMOUNT OF GRANTS. If the aggregate fair
-----
market value of stock (determined as of the date the option with respect to such
stock is granted) with respect to which Incentive Stock Options granted under
this Plan (and any other stock incentive plan of the Company or its parent or
subsidiary corporations) are exercisable for the first time by an employee
during any calendar year exceeds $100,000, the portion of the option or options
not exceeding $100,000 will be treated as an Incentive Stock Option and the
portion of the option exceeding $100,000 will be treated as a Non-Statutory
Stock Option. The preceding sentence will be applied by taking options into
account in the order in which they were granted. The Company may designate stock
that is treated as acquired pursuant to exercise of an option that is in part an
Incentive Stock Option and in part a Non-Statutory Stock Option as Incentive
Stock Option stock by issuing a separate certificate for that stock and
identifying the certificate as Incentive Stock Option stock in its stock
records. In the absence of such a designation, each share of stock issued
pursuant to exercise of the option will be treated in part as Incentive Stock
Option stock and in part as Non-Statutory Stock Option stock.
[(ii)] 6.2-2 LIMITATIONS ON GRANTS TO 10 PERCENT SHAREHOLDERS. An
-----
Incentive Stock Option may be granted under the Plan to an employee possessing
more than 10 percent of the total combined voting power of all classes of stock
of the Company OR ANY PARENT OR SUBSIDIARY (AS DEFINED IN SUBSECTIONS 424(e) AND
-----------------------------------------------------------------
424(f) OF THE CODE) only if the option price is at least 110 percent of the fair
- -------------------
market value, as described in Section [6(b)(iv)] 6.2-4, of the Common Stock
-----
subject to the option on the date it is granted and the option by its terms is
not exercisable after the expiration of five years from the date it is granted.
[(iii)] 6.2-3 DURATION OF OPTIONS. Subject to Sections [6(a)(ii)]
-----
6.1-2, 6.1-4 and [6(b)(ii)] 6.2-2, Incentive Stock Options granted under the
- ------------ -----
Plan shall continue in effect for the period fixed by the Board of Directors,
except that no Incentive Stock Option shall be exercisable after the expiration
of 10 years from the date it is granted.
[(iv)] 6.2-4 OPTION PRICE. The option price per share shall be
-----
determined by the Board of Directors at the time of grant. Except as provided in
Section [6(b)(ii)] 6.2-2, the option price shall not be less than 100 percent of
-----
the fair market value of the Common Stock covered by the Incentive Stock Option
at the date the option is granted. The fair market value shall be [deemed to be]
the closing price of the Common Stock [as] LAST reported [in The Wall Street
----
Journal on the day] before the [date] TIME the option is granted, if the stock
----
is publicly traded, or, [ if there has been no sale on that date, on the last
preceding date on which a sale occurred, or such other] ANOTHER value of the
-------
Common Stock as shall be specified by the Board of Directors.
[(v)] 6.2-5 LIMITATION ON TIME OF GRANT. No Incentive Stock Option
-----
shall be granted on or after the [10th anniversary of the effective date of the
Plan] TENTH ANNIVERSARY OF THE LAST ACTION BY THE BOARD OF DIRECTORS ADOPTING
-----------------------------------------------------------------------
THE PLAN OR APPROVING AN INCREASE IN THE NUMBER OF SHARES AVAILABLE FOR ISSUANCE
- --------------------------------------------------------------------------------
UNDER THE PLAN, WHICH ACTION WAS SUBSEQUENTLY APPROVED WITHIN 12 MONTHS BY THE
- ------------------------------------------------------------------------------
SHAREHOLDERS.
- -------------
[(vi) Conversion of Incentive Stock Options. The Board of Directors
may at any time, without the optionee's consent, convert an Incentive Stock
Option to a Non-Statutory Stock Option.]
B-5
6.2-6 EARLY DISPOSITIONS. IF WITHIN TWO YEARS AFTER AN INCENTIVE
----- ----------------------------------------------------------
STOCK OPTION IS GRANTED OR WITHIN 12 MONTHS AFTER AN INCENTIVE STOCK OPTION IS
- ------------------------------------------------------------------------------
EXERCISED, THE OPTIONEE SELLS OR OTHERWISE DISPOSES OF COMMON STOCK ACQUIRED ON
- -------------------------------------------------------------------------------
EXERCISE OF THE OPTION, THE OPTIONEE SHALL WITHIN 30 DAYS OF THE SALE OR
- ------------------------------------------------------------------------
DISPOSITION NOTIFY THE COMPANY IN WRITING OF (i) THE DATE OF THE SALE OR
- ------------------------------------------------------------------------
DISPOSITION, (ii) THE AMOUNT REALIZED ON THE SALE OR DISPOSITION AND (iii) THE
- ------------------------------------------------------------------------------
NATURE OF THE DISPOSITION (E.G., SALE, GIFT, ETC.).
- ---------------------------------------------------
[(c)] 6.3 NON-STATUTORY STOCK OPTIONS. Non-Statutory Stock Options
---
shall be subject to the following terms and conditions, in addition to those set
forth in Section [6(a)] 6.1 above.
---
[(i)] 6.3-1 OPTION PRICE. The option price for Non-Statutory Stock
-----
Options shall be determined by the Board of Directors at the time of grant and
may be any amount determined by the Board of Directors.
[(ii)] 6.3-2 DURATION OF OPTIONS. Non-Statutory Stock Options
-----
granted under the Plan shall continue in effect for the period fixed by the
Board of Directors.
7. STOCK BONUSES. The Board of Directors may award shares under the Plan as
stock bonuses. Shares awarded as a bonus shall be subject to the terms,
conditions and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability and forfeiture
of the shares awarded, together with such other restrictions as may be
determined by the Board of Directors. The Board of Directors may require the
recipient to sign an agreement as a condition of the award, but may not require
the recipient to pay any monetary consideration other than amounts necessary to
satisfy tax withholding requirements. The agreement may contain any terms,
conditions, restrictions, representations and warranties required by the Board
of Directors. The certificates representing the shares awarded shall bear any
legends required by the Board of Directors. The Company may require any
recipient of a stock bonus to pay to the Company in cash OR BY CHECK upon demand
-----------
amounts necessary to satisfy any applicable federal, state or local tax
withholding requirements. If the recipient fails to pay the amount demanded, the
Company OR THE EMPLOYER may withhold that amount from other amounts payable [by
---------------
the Company] to the recipient, including salary, subject to applicable law. With
the consent of the Board of Directors, a recipient may [deliver Common Stock to
the Company to satisfy this] SATISFY THIS OBLIGATION, IN WHOLE OR IN PART, BY
------------------------------------------------
INSTRUCTING THE COMPANY TO WITHHOLD FROM ANY SHARES TO BE ISSUED OR BY
- ----------------------------------------------------------------------
DELIVERING TO THE COMPANY OTHER SHARES OF COMMON STOCK; PROVIDED, HOWEVER, THAT
- -------------------------------------------------------------------------------
THE NUMBER OF SHARES SO WITHHELD OR DELIVERED SHALL NOT EXCEED THE MINIMUM
- --------------------------------------------------------------------------
AMOUNT NECESSARY TO SATISFY THE REQUIRED withholding obligation. Upon the
- ----------------------------------------
issuance of a stock bonus, the number of shares reserved for issuance under the
Plan shall be reduced by the number of shares issued, LESS THE NUMBER OF SHARES
---------------------------
WITHHELD OR DELIVERED TO SATISFY WITHHOLDING OBLIGATIONS.
- ---------------------------------------------------------
8. RESTRICTED STOCK. The Board of Directors may issue shares under the Plan
for such consideration (including promissory notes and services) as determined
by the Board of Directors. Shares issued under the Plan shall be subject to the
terms, conditions and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability, repurchase by
the Company and forfeiture of the shares issued, together with such other
restrictions as may be determined by the Board of Directors. All Common Stock
issued pursuant to this Section 8 shall be subject to a purchase agreement,
which shall be executed by the Company and the prospective [recipient] PURCHASER
---------
of the shares before the delivery of certificates representing such shares to
the [recipient] PURCHASER. The purchase agreement may contain any terms,
---------
conditions, restrictions, representations and warranties required by the Board
of Directors. The certificates representing the shares shall bear any legends
required by the Board of Directors. The Company may require any purchaser of
restricted stock to pay to the Company in cash OR BY CHECK upon demand amounts
-----------
necessary to satisfy any applicable federal, state or local tax withholding
requirements. If the purchaser fails to pay the amount demanded, the Company OR
THE EMPLOYER may withhold that amount from other amounts payable [by the
- ------------
Company] to the purchaser, including salary, subject to applicable law. With the
consent of the Board of Directors, a purchaser may [deliver Common Stock to the
Company to satisfy this] SATISFY THIS OBLIGATION, IN WHOLE OR IN PART, BY
------------------------------------------------
INSTRUCTING THE COMPANY TO WITHHOLD FROM ANY SHARES TO BE ISSUED OR BY
- ----------------------------------------------------------------------
DELIVERING TO THE COMPANY OTHER SHARES OF COMMON STOCK; PROVIDED, HOWEVER, THAT
- -------------------------------------------------------------------------------
THE NUMBER OF SHARES SO WITHHELD OR DELIVERED SHALL NOT EXCEED THE MINIMUM
- --------------------------------------------------------------------------
AMOUNT NECESSARY TO SATISFY THE REQUIRED withholding obligation. Upon the
- ----------------------------------------
issuance of restricted stock, the number of shares reserved for
B-6
issuance under the Plan shall be reduced by the number of shares issued, LESS
----
THE NUMBER OF SHARES WITHHELD OR DELIVERED TO SATISFY WITHHOLDING OBLIGATIONS.
- ------------------------------------------------------------------------------
[9. Stock Appreciation Rights. (a) GRANT. Stock appreciation rights may be
granted under the Plan by the Board of Directors, subject to such rules, terms
and conditions as the Board of Directors may determine.
(b) EXERCISE.
(i) Each stock appreciation right shall entitle the holder, upon
exercise, to receive from the Company in exchange therefor an amount equal in
value to the excess of the fair market value on the date of exercise of one
share of Common Stock of the Company over its fair market value on the date of
grant (or, in the case of a stock appreciation right granted in connection with
an option, the excess of the fair market value of one share of Common Stock of
the Company over the option price per share under the option to which the stock
appreciation right relates), multiplied by the number of shares covered by the
stock appreciation right or the option, or portion thereof, that is surrendered.
Payment by the Company upon exercise of a stock appreciation right may be made
in Common Stock valued at fair market value, in cash or partly in Common Stock
and partly in cash, all as determined by the Board of Directors.
(ii) A stock appreciation right shall be exercisable only at the time
or times established by the Board of Directors. If a stock appreciation right is
granted in connection with an option, the following rules shall apply: (1) the
stock appreciation right shall be exercisable only to the extent and on the same
conditions that the related option may be exercised; (2) the stock appreciation
right shall be exercisable only when the fair market value of the stock exceeds
the option price of the related option; (3) the stock appreciation right shall
be for no more than 100 percent of the excess of the fair market value of the
stock at the time of exercise over the option price; (4) upon exercise of the
stock appreciation right, the option or portion thereof to which the stock
appreciation right relates terminates; and (5) upon exercise of the option, the
related stock appreciation right or portion thereof terminates.
(iii) The Board of Directors may withdraw any stock appreciation
right granted under the Plan at any time and may impose any conditions upon the
exercise of a stock appreciation right or adopt rules and regulations from time
to time affecting the rights of holders of stock appreciation rights. Such rules
and regulations may govern the right to exercise stock appreciation rights
granted before adoption or amendment of such rules and regulations, as well as
stock appreciation rights granted thereafter.
(iv) For purposes of this Section 9, the fair market value of the
Common Stock shall be determined as of the date the stock appreciation right is
exercised, under the methods set forth in Section 6(b)(iv).
(v) No fractional shares shall be issued upon exercise of a stock
appreciation right. In lieu thereof, cash may be paid in an amount equal to the
value of the fraction or, if the Board of Directors shall determine, the number
of shares may be rounded downward to the next whole share.
(vi) Each stock appreciation right granted in connection with an
Incentive Stock Option, and unless otherwise determined by the Board of
Directors, each other stock appreciation right granted under the Plan by its
terms shall be nonassignable and nontransferable by the holder, either
voluntarily or by operation of law, except by will or by the laws of descent and
distribution of the state or country of the holder's domicile at the time of
death, and each stock appreciation right by its terms shall be exercisable
during the holder's lifetime only by the holder.
(vii) Each participant who has exercised a stock appreciation right
shall, upon notification of the amount due, pay to the Company in cash amounts
necessary to satisfy any applicable federal, state and local tax withholding
requirements. If the participant fails to pay the amount demanded, the Company
may withhold that amount from other amounts payable by the Company to the
participant, including salary, subject to applicable law. With the consent of
the Board of Directors, a participant may satisfy this obligation, in whole or
in part, by having the Company withhold from any shares to be issued upon
exercise that number of shares that would satisfy the withholding amount due or
by delivering Common Stock to the Company to satisfy the withholding amount.
B-7
(viii) Upon the exercise of a stock appreciation right for shares,
the number of shares reserved for issuance under the Plan shall be reduced by
the number of shares issued. Cash payments of stock appreciation rights shall
not reduce the number of shares of Common Stock reserved for issuance under the
Plan.]
[10. CASH BONUS RIGHTS.
(a) GRANT. The Board of Directors may grant cash bonus rights under the
Plan in connection with (i) options granted or previously granted, (ii) stock
appreciation rights granted or previously granted, (iii) stock bonuses awarded
or previously awarded and (iv) shares sold or previously sold under the Plan.
Cash bonus rights will be subject to such rules, terms and conditions as the
Board of Directors may determine. Unless otherwise determined by the Board of
Directors, each cash bonus right granted under the Plan by its terms shall be
nonassignable and nontransferable by the holder, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution of
the state or country of the holder's domicile at the time of death. The payment
of a cash bonus shall not reduce the number of shares of Common Stock reserved
for issuance under the Plan.
(b) CASH BONUS RIGHTS IN CONNECTION WITH OPTIONS. A cash bonus right
granted in connection with an option will entitle an optionee to a cash bonus
when the related option is exercised (or terminates in connection with the
exercise of a stock appreciation right related to the option) in whole or in
part if, in the sole discretion of the Board of Directors, the bonus right will
result in a tax deduction that the Company has sufficient taxable income to use.
If an optionee purchases shares upon exercise of an option and does not exercise
a related stock appreciation right, the amount of the bonus, if any, shall be
determined by multiplying the excess of the total fair market value of the
shares to be acquired upon exercise over the total option price for the shares
by the applicable bonus percentage. If the optionee exercises a related stock
appreciation right in connection with the termination of an option, the amount
of the bonus, if any, shall be determined by multiplying the total fair market
value of the shares and cash received pursuant to the exercise of the stock
appreciation right by the applicable bonus percentage. The bonus percentage
applicable to a bonus right, including a previously granted bonus right, may be
changed from time to time at the sole discretion of the Board of Directors but
shall in no event exceed 75 percent.
(c) CASH BONUS RIGHTS IN CONNECTION WITH STOCK BONUS. A cash bonus right
granted in connection with a stock bonus will entitle the recipient to a cash
bonus payable when the stock bonus is awarded or restrictions, if any, to which
the stock is subject lapse. If bonus stock awarded is subject to restrictions
and is repurchased by the Company or forfeited by the holder, the cash bonus
right granted in connection with the stock bonus shall terminate and may not be
exercised. The amount and timing of payment of a cash bonus shall be determined
by the Board of Directors.
(d) CASH BONUS RIGHTS IN CONNECTION WITH STOCK PURCHASES. A cash bonus
right granted in connection with the purchase of stock pursuant to Section 8
will entitle the recipient to a cash bonus when the shares are purchased or
restrictions, if any, to which the stock is subject lapse. Any cash bonus right
granted in connection with shares purchased pursuant to Section 8 shall
terminate and may not be exercised in the event the shares are repurchased by
the Company or forfeited by the holder pursuant to applicable restrictions. The
amount of any cash bonus to be awarded and timing of payment of a cash bonus
shall be determined by the Board of Directors.
(e) TAXES. The Company shall withhold from any cash bonus paid pursuant
to this Section 10 the amount necessary to satisfy any applicable federal, state
and local withholding requirements.]
[11. PERFORMANCE UNITS. The Board of Directors may grant performance units
consisting of monetary units which may be earned in whole or in part if the
Company achieves certain goals established by the Board of Directors over a
designated period of time, but not in any event more than 10 years. The goals
established by the Board of Directors may include earnings per share, return on
shareholders' equity, return on invested capital and such other goals as the
Board of Directors may establish. In the event that the minimum performance goal
established by the Board of Directors is not achieved at the conclusion of a
period, no payment shall be made to the participants. In the event the maximum
corporate goal is achieved, 100 percent
B-8
of the monetary value of the performance units shall be paid to or vested in the
participants. Partial achievement of the maximum goal may result in a payment or
vesting corresponding to the degree of achievement as determined by the Board of
Directors. Payment of an award earned may be in cash or in Common Stock or a
combination of both, and may be made when earned, or vested and deferred, as the
Board of Directors determines. Deferred awards shall earn interest on the terms
and at a rate determined by the Board of Directors. Unless otherwise determined
by the Board of Directors, each performance unit granted under the Plan by its
terms shall be nonassignable and nontransferable by the holder, either
voluntarily or by operation of law, except by will or by the laws of descent and
distribution of the state or country of the holder's domicile at the time of
death. Each participant who has been awarded a performance unit shall, upon
notification of the amount due, pay to the Company in cash amounts necessary to
satisfy any applicable federal, state and local tax withholding requirements. If
the participant fails to pay the amount demanded, the Company may withhold that
amount from other amounts payable by the Company to the participant, including
salary, subject to applicable law. With the consent of the Board of Directors a
participant may satisfy this obligation, in whole or in part, by having the
Company withhold from any shares to be issued that number of shares that would
satisfy the withholding amount due or by delivering Common Stock to the Company
to satisfy the withholding amount. The payment of a performance unit in cash
shall not reduce the number of shares of Common Stock reserved for issuance
under the Plan. The number of shares reserved for issuance under the Plan shall
be reduced by the number of shares issued upon payment of an award.]
9. PERFORMANCE-BASED AWARDS. THE BOARD OF DIRECTORS MAY GRANT AWARDS
--------------------------------------------------------------------
INTENDED TO QUALIFY AS QUALIFIED PERFORMANCE-BASED COMPENSATION UNDER SECTION
- -----------------------------------------------------------------------------
162(m) OF THE CODE AND THE REGULATIONS THEREUNDER ("PERFORMANCE-BASED AWARDS").
- -------------------------------------------------------------------------------
PERFORMANCE-BASED AWARDS SHALL BE DENOMINATED AT THE TIME OF GRANT EITHER IN
- ----------------------------------------------------------------------------
COMMON STOCK ("STOCK PERFORMANCE AWARDS") OR IN DOLLAR AMOUNTS ("DOLLAR
- -----------------------------------------------------------------------
PERFORMANCE AWARDS"). PAYMENT UNDER A STOCK PERFORMANCE AWARD OR A DOLLAR
- -------------------------------------------------------------------------
PERFORMANCE AWARD SHALL BE MADE, AT THE DISCRETION OF THE BOARD OF DIRECTORS, IN
- --------------------------------------------------------------------------------
COMMON STOCK ("PERFORMANCE SHARES"), OR IN CASH OR IN ANY COMBINATION THEREOF.
- ------------------------------------------------------------------------------
PERFORMANCE-BASED AWARDS SHALL BE SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS:
- --------------------------------------------------------------------------------
9.1 AWARD PERIOD. THE BOARD OF DIRECTORS SHALL DETERMINE THE PERIOD OF
-----------------------------------------------------------------------
TIME FOR WHICH A PERFORMANCE-BASED AWARD IS MADE (THE "AWARD PERIOD").
- ----------------------------------------------------------------------
9.2 PERFORMANCE GOALS AND PAYMENT. THE BOARD OF DIRECTORS SHALL
----------------------------------------------------------------
ESTABLISH IN WRITING OBJECTIVES ("PERFORMANCE GOALS") THAT MUST BE MET BY THE
- -----------------------------------------------------------------------------
COMPANY OR ANY SUBSIDIARY, DIVISION OR OTHER UNIT OF THE COMPANY ("BUSINESS
- ---------------------------------------------------------------------------
UNIT") DURING THE AWARD PERIOD AS A CONDITION TO PAYMENT BEING MADE UNDER THE
- -----------------------------------------------------------------------------
PERFORMANCE-BASED AWARD. THE PERFORMANCE GOALS FOR EACH AWARD SHALL BE ONE OR
- -----------------------------------------------------------------------------
MORE TARGETED LEVELS OF PERFORMANCE WITH RESPECT TO ONE OR MORE OF THE FOLLOWING
- --------------------------------------------------------------------------------
OBJECTIVE MEASURES WITH RESPECT TO THE COMPANY OR ANY BUSINESS UNIT: EARNINGS,
- ------------------------------------------------------------------------------
EARNINGS PER SHARE, STOCK PRICE INCREASE, TOTAL SHAREHOLDER RETURN (STOCK PRICE
- -------------------------------------------------------------------------------
INCREASE PLUS DIVIDENDS), RETURN ON EQUITY, RETURN ON ASSETS, RETURN ON CAPITAL,
- --------------------------------------------------------------------------------
ECONOMIC VALUE ADDED, REVENUES, OPERATING INCOME, INVENTORIES, INVENTORY TURNS,
- -------------------------------------------------------------------------------
CASH FLOWS OR ANY OF THE FOREGOING BEFORE THE EFFECT OF ACQUISITIONS,
- ---------------------------------------------------------------------
DIVESTITURES, ACCOUNTING CHANGES, AND RESTRUCTURING AND SPECIAL CHARGES
- -----------------------------------------------------------------------
(DETERMINED ACCORDING TO CRITERIA ESTABLISHED BY THE BOARD OF DIRECTORS). THE
- -----------------------------------------------------------------------------
BOARD OF DIRECTORS SHALL ALSO ESTABLISH THE NUMBER OF PERFORMANCE SHARES OR THE
- -------------------------------------------------------------------------------
AMOUNT OF CASH PAYMENT TO BE MADE UNDER A PERFORMANCE-BASED AWARD IF THE
- ------------------------------------------------------------------------
PERFORMANCE GOALS ARE MET OR EXCEEDED, INCLUDING THE FIXING OF A MAXIMUM PAYMENT
- --------------------------------------------------------------------------------
(SUBJECT TO SECTION 9.4). THE BOARD OF DIRECTORS MAY ESTABLISH OTHER
- --------------------------------------------------------------------
RESTRICTIONS TO PAYMENT UNDER A PERFORMANCE-BASED AWARD, SUCH AS A CONTINUED
- ----------------------------------------------------------------------------
EMPLOYMENT REQUIREMENT, IN ADDITION TO SATISFACTION OF THE PERFORMANCE GOALS.
- -----------------------------------------------------------------------------
SOME OR ALL OF THE PERFORMANCE SHARES MAY BE ISSUED AT THE TIME OF THE AWARD AS
- -------------------------------------------------------------------------------
RESTRICTED SHARES SUBJECT TO FORFEITURE IN WHOLE OR IN PART IF PERFORMANCE GOALS
- --------------------------------------------------------------------------------
OR, IF APPLICABLE, OTHER RESTRICTIONS ARE NOT SATISFIED.
- --------------------------------------------------------
9.4 MAXIMUM AWARDS. NO PARTICIPANT MAY RECEIVE IN ANY FISCAL YEAR STOCK
------------------------------------------------------------------------
PERFORMANCE AWARDS UNDER WHICH THE AGGREGATE AMOUNT PAYABLE UNDER THE AWARDS
- ----------------------------------------------------------------------------
EXCEEDS THE EQUIVALENT OF 100,000 SHARES OF COMMON STOCK OR DOLLAR PERFORMANCE
- ------------------------------------------------------------------------------
AWARDS UNDER WHICH THE AGGREGATE AMOUNT PAYABLE UNDER THE AWARDS EXCEEDS
- ------------------------------------------------------------------------
$3,000,000.
- -----------
9.5 TAX WITHHOLDING. EACH PARTICIPANT WHO HAS RECEIVED PERFORMANCE
-------------------------------------------------------------------
SHARES SHALL, UPON NOTIFICATION OF THE AMOUNT DUE, PAY TO THE COMPANY IN CASH OR
- --------------------------------------------------------------------------------
BY CHECK AMOUNTS NECESSARY TO SATISFY ANY
- -----------------------------------------
B-9
APPLICABLE FEDERAL, STATE AND LOCAL TAX WITHHOLDING REQUIREMENTS. IF THE
- ------------------------------------------------------------------------
PARTICIPANT FAILS TO PAY THE AMOUNT DEMANDED, THE COMPANY OR THE EMPLOYER MAY
- -----------------------------------------------------------------------------
WITHHOLD THAT AMOUNT FROM OTHER AMOUNTS PAYABLE TO THE PARTICIPANT, INCLUDING
- -----------------------------------------------------------------------------
SALARY, SUBJECT TO APPLICABLE LAW. WITH THE CONSENT OF THE BOARD OF DIRECTORS, A
- --------------------------------------------------------------------------------
PARTICIPANT MAY SATISFY THIS OBLIGATION, IN WHOLE OR IN PART, BY INSTRUCTING THE
- --------------------------------------------------------------------------------
COMPANY TO WITHHOLD FROM ANY SHARES TO BE ISSUED OR BY DELIVERING TO THE COMPANY
- --------------------------------------------------------------------------------
OTHER SHARES OF COMMON STOCK; PROVIDED, HOWEVER, THAT THE NUMBER OF SHARES SO
- -----------------------------------------------------------------------------
DELIVERED OR WITHHELD SHALL NOT EXCEED THE MINIMUM AMOUNT NECESSARY TO SATISFY
- ------------------------------------------------------------------------------
THE REQUIRED WITHHOLDING OBLIGATION.
- ------------------------------------
9.6 EFFECT ON SHARES AVAILABLE. THE PAYMENT OF A PERFORMANCE-BASED
-------------------------------------------------------------------
AWARD IN CASH SHALL NOT REDUCE THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR
- --------------------------------------------------------------------------------
ISSUANCE UNDER THE PLAN. THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR
- --------------------------------------------------------------------------
ISSUANCE UNDER THE PLAN SHALL BE REDUCED BY THE NUMBER OF SHARES ISSUED UPON
- ----------------------------------------------------------------------------
PAYMENT OF AN AWARD, LESS THE NUMBER OF SHARES DELIVERED OR WITHHELD TO SATISFY
- -------------------------------------------------------------------------------
WITHHOLDING OBLIGATIONS.
- ------------------------
10. CHANGES IN CAPITAL STRUCTURE.
---
[(a)] 10.1 STOCK SPLITS; STOCK DIVIDENDS. If the outstanding Common
----
Stock of the Company is hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of any stock split, combination of shares, dividend payable in
shares, recapitalization or reclassification, appropriate adjustment shall be
made by the Board of Directors in the number and kind of shares available for
grants under the Plan AND IN ALL OTHER SHARE AMOUNTS SET FORTH IN THE PLAN. In
----------------------------------------------------
addition, the Board of Directors shall make appropriate adjustment in the number
and kind of shares as to which outstanding options, or portions thereof then
unexercised, shall be exercisable, so that the optionee's proportionate interest
before and after the occurrence of the event is maintained. Notwithstanding the
foregoing, the Board of Directors shall have no obligation to effect any
adjustment that would or might result in the issuance of fractional shares, and
any fractional shares resulting from any adjustment may be disregarded or
provided for in any manner determined by the Board of Directors. Any such
adjustments made by the Board of Directors shall be conclusive.
[(b)] 10.2 MERGERS, REORGANIZATIONS, ETC. In the event of a merger,
----
consolidation, plan of exchange, acquisition of property or stock, [separation]
SPLIT-UP, SPLIT-OFF, SPIN-OFF, reorganization or liquidation to which the
- -----------------------------
Company is a party or [a sale of all] ANY SALE, LEASE, EXCHANGE OR OTHER
----------------------------------
TRANSFER (IN ONE TRANSACTION OR A SERIES OF RELATED TRANSACTIONS) OF ALL, or
- -------------------------------------------------------------------------
substantially all, of the Company's assets (each, a "Transaction"), the Board of
Directors shall, in its sole discretion and to the extent possible under the
structure of the Transaction, select one of the following alternatives for
treating outstanding options under the Plan:
[(i)] 10.2-1 Outstanding options shall remain in effect in
------
accordance with their terms.
[(ii)] 10.2-2 Outstanding options shall be converted into options to
------
purchase stock in [the corporation that is] ONE OR MORE OF THE CORPORATIONS,
--------------------------------
INCLUDING THE COMPANY, THAT ARE the surviving or acquiring [corporation]
- -------------------------------
CORPORATIONS in the Transaction. The amount, type of securities subject thereto
- ------------
and exercise price of the converted options shall be determined by the Board of
Directors of the Company, taking into account the relative values of the
companies involved in the Transaction and the exchange rate, if any, used in
determining shares of the surviving corporation(s) to be [issued to] HELD BY
--- -------
holders of shares of the Company FOLLOWING THE TRANSACTION. Unless otherwise
-------------------------
determined by the Board of Directors, the converted options shall be vested only
to the extent that the vesting requirements relating to options granted
hereunder have been satisfied.
[(iii)] 10.2-3 The Board of Directors shall provide a [30 day]
------
period OF 30 DAYS OR LESS before the consummation of the Transaction during
------------------
which outstanding options may be exercised to the extent then exercisable, and
upon the expiration of that [30 day] period, all unexercised options shall
immediately terminate. The Board of Directors may, in its sole discretion,
accelerate the exercisability of options so that they are exercisable in full
during that [30 day] period.
[(c)] 10.3 DISSOLUTION OF THE COMPANY. In the event of the dissolution
----
of the Company, options shall be treated in accordance with Section [12(b)(iii)]
10.2-3.
- ------
B-10
[(d)] 10.4 RIGHTS ISSUED BY ANOTHER CORPORATION. The Board of Directors
----
may also grant options, [stock appreciation rights, performance units,] AND
---
stock bonuses and [cash bonuses] PERFORMANCE-BASED AWARDS and issue restricted
------------------------
stock under the Plan having terms, conditions and provisions that vary from
those specified in this Plan, provided that any such awards are granted in
substitution for, or in connection with the assumption of, existing options,
[stock appreciation rights,] stock bonuses, [cash bonuses,] PERFORMANCE-BASED
-----------------
AWARDS AND restricted stock [and performance units] granted, awarded or issued
- ----------
by another corporation and assumed or otherwise agreed to be provided for by the
Company pursuant to or by reason of a Transaction.
[13.] 11. AMENDMENT OF THE PLAN. The Board of Directors may at any time,
--- ---
[and from time to time,] modify or amend the Plan in such respects as it shall
deem advisable because of changes in the law while the Plan is in effect or for
any other reason. Except as provided in [Sections 6(a)(iv), 9, 10 and 12]
SECTION 10, however, no change in an award already granted shall be made without
- ----------
the written consent of the holder of [such award.] THE AWARD IF THE CHANGE WOULD
-----------------------------
ADVERSELY AFFECT THE HOLDER.
- ----------------------------
[14] 12. APPROVALS. The Company's obligations under the Plan are subject to
---
the approval of state and federal authorities or agencies with jurisdiction in
the matter. The Company will use its best efforts to take steps required by
state or federal law or applicable regulations, including rules and regulations
of the Securities and Exchange Commission and any stock exchange on which the
Company's shares may then be listed, in connection with the grants under the
Plan. The foregoing notwithstanding, the Company shall not be obligated to issue
or deliver Common Stock under the Plan if such issuance or delivery would
violate applicable state or federal securities laws.
[15] 13. EMPLOYMENT AND SERVICE RIGHTS. Nothing in the Plan or any award
---
pursuant to the Plan shall (i) confer upon any employee any right to be
continued in the employment of [the Company] AN EMPLOYER or interfere in any way
-----------
with the [Company's] EMPLOYER'S right to terminate such employee's employment AT
---------- --
WILL at any time, for any reason, with or without cause, or to decrease such
- ----
employee's compensation or benefits, or (ii) confer upon any person engaged by
[the Company] AN EMPLOYER any right to be retained or employed by the [Company]
-----------
EMPLOYER or to the continuation, extension, renewal or modification of any
- --------
compensation, contract or arrangement with or by the [Company] EMPLOYER.
--------
[16] 14. RIGHTS AS A SHAREHOLDER. The recipient of any award under the Plan
---
shall have no rights as a shareholder with respect to any Common Stock until the
date [of issue to] the recipient [of a stock certificate for] BECOMES THE HOLDER
------------------
OF RECORD OF those shares. Except as otherwise expressly provided in the Plan,
- ------------
no adjustment shall be made for dividends or other rights for which the record
date occurs before the date [such stock certificate is issued.] THE RECIPIENT
-------------
BECOMES THE HOLDER OF RECORD.
- ----------------------------
Adopted March 12, 1997
B-11
PROXY
COLUMBIA SPORTSWEAR COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE ANNUAL MEETING MAY 17, 2001
The undersigned hereby appoints Timothy P. Boyle, Patrick D. Anderson and Carl
K. Davis, and each of them, proxies with full power of substitution, to vote in
behalf of the undersigned at the Annual Meeting of Shareholders of Columbia
Sportswear Company on May 17, 2001, and at any adjournment thereof, all shares
of the undersigned in Columbia Sportswear Company. The proxies are instructed to
vote as follows:
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
INSTRUCTIONS, IF GIVEN. IF NO INSTRUCTIONS ARE GIVEN, THEY WILL BE VOTED FOR THE
DIRECTORS AND FOR AMENDMENTS TO THE 1997 STOCK INCENTIVE PLAN. THE PROXIES MAY
VOTE IN THEIR DISCRETION AS TO OTHER MATTERS THAT MAY COME BEFORE THE MEETING.
PLEASE SIGN ON OTHER SIDE AND RETURN PROMPTLY
- --------------------------------------------------------------------------------
+ FOLD AND DETACH HERE +
Please mark [X]
your votes
as in this
example.
(THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1 AND ITEM 2.)
1. Election of Directors FOR WITHHELD
[ ] [ ]
NOMINEES:
Gertrude Boyle, Timothy P. Boyle, Sarah Bany, Murrey R. Albers, Edward S.
George, Walter T. Klenz and John Stanton
For, except vote withheld from the following nominee(s):
________________________________________________________
2. Approval of amendments to the 1997 FOR AGAINST ABSTAIN
Stock Incentive Plan. [ ] [ ] [ ]
To facilitate meeting arrangements, please [ ]
check here if you plan to attend the meeting
in person.
Signature(s)_____________________________________________Date___________________
NOTE: Please sign exactly as name(s) appears hereon. Joint owners should each
sign. Please mark, date, sign and return proxy card promptly. Receipt is
acknowledged of the notice and proxy statement relating to this meeting.
- --------------------------------------------------------------------------------
+ FOLD AND DETACH HERE +