SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of
[x] Definitive Proxy Statement the Commission Only (as
[ ] Definitive Additional Materials permitted by
[ ] Soliciting Material Pursuant to Rule 14a-6(e)(2))
Section 240.14a-11(c)
or Section 240.14a-12
Barrett Business Services, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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BARRETT BUSINESS SERVICES, INC.
April 21, 2003
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Barrett Business Services, Inc., to be held at 3:00 p.m. on Wednesday, May 14,
2003, at our executive offices located at 4724 S.W. Macadam Avenue, Portland,
Oregon 97239.
Matters to be presented for action at the meeting include the election of
directors, approval of the 2003 Stock Incentive Plan, and ratification of the
selection of independent accountants.
We look forward to conversing with those of you who are able to attend the
meeting in person. Whether or not you can attend, it is important that you sign,
date, and return your proxy as soon as possible. If you do attend the meeting
and wish to vote in person, you may withdraw your proxy and vote personally.
Sincerely,
/s/ William W. Sherertz
William W. Sherertz
President and Chief Executive Officer
BARRETT BUSINESS SERVICES, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 14, 2003
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You are invited to attend the annual meeting of stockholders of Barrett
Business Services, Inc., to be held at its executive offices at 4724 S.W.
Macadam Avenue, Portland, Oregon 97239, on Wednesday, May 14, 2003, at 3:00
p.m., Pacific Time.
Only stockholders of record at the close of business on March 31,
2003, will be entitled to vote at the meeting.
The meeting is being held to consider and act upon the following
matters:
1. Election of directors.
2. Approval of the 2003 Stock Incentive Plan.
3. Approval of the appointment of PricewaterhouseCoopers LLP as
independent accountants for the current fiscal year ending December 31, 2003.
4. Such other business as may properly come before the meeting or
any adjournments thereof.
Please sign and date the accompanying proxy, and return it promptly
in the enclosed postage-paid envelope to avoid the expense of further
solicitation. If you attend the meeting, you may withdraw your proxy and vote
your shares in person.
By Order of the Board of Directors
/s/ Michael D. Mulholland
Michael D. Mulholland
Secretary
Portland, Oregon
April 21, 2003
BARRETT BUSINESS SERVICES, INC.
4724 S.W. Macadam Avenue
Portland, Oregon 97239
(503) 220-0988
PROXY STATEMENT
2003 ANNUAL MEETING OF STOCKHOLDERS
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors (the "Board") of Barrett
Business Services, Inc. (the "Company"), to be voted at the annual meeting of
stockholders to be held on May 14, 2003, and any adjournments thereof. The proxy
statement and accompanying form of proxy were first mailed to stockholders on
approximately April 21, 2003.
VOTING, REVOCATION AND SOLICITATION OF PROXIES
When a proxy in the accompanying form is properly executed and
returned, the shares represented will be voted at the meeting in accordance with
the instructions specified in the spaces provided in the proxy. If no
instructions are specified, the shares will be voted FOR Items 1, 2, and 3 in
the accompanying Notice of Annual Meeting of Stockholders.
Stockholders may expressly abstain from voting on Item 2 or 3 by so
indicating on the proxy. Abstentions and shares represented by duly executed and
returned proxies of brokers or other nominees which are expressly not voted on
Item 2 or 3 will have no effect on the required vote.
Any proxy given pursuant to this solicitation may be revoked by the
person giving the proxy at any time prior to its exercise by written notice to
the Secretary of the Company of such revocation, by a later-dated proxy received
by the Company, or by attending the meeting and voting in person. The mailing
address of the Company's principal executive offices is 4724 S.W. Macadam
Avenue, Portland, Oregon 97239.
The solicitation of proxies will be made primarily by mail, but
proxies may also be solicited personally or by telephone or facsimile by
directors and officers of the Company without additional compensation for such
services. Brokers and other persons holding shares in their names, or in the
names of nominees, will be reimbursed for their reasonable expenses in
forwarding soliciting materials to their principals and in obtaining
authorization for the execution of proxies. All costs of solicitation of proxies
will be borne by the Company.
OUTSTANDING VOTING SECURITIES
The close of business on March 31, 2003, has been fixed as the
record date for the determination of stockholders entitled to notice of and to
vote at the annual meeting. On the record date, the Company had outstanding
5,711,035 shares of Common Stock, $.01 par value ("Common Stock"), each share of
which is entitled to one vote at the meeting. Common Stock is the only
outstanding voting security of the Company.
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ELECTION OF DIRECTORS
The directors of the Company are elected at the annual meeting of
stockholders in May to serve until the next annual meeting and until their
successors are elected and qualified. The Company's Bylaws authorize the Board
to set the number of positions on the Board within a range of three and nine;
the Board has presently established the number of positions at six. Vacancies on
the Board, including vacancies resulting from an increase in the number of
positions, may be filled by the Board for a term ending with the next annual
meeting of stockholders. On September 1, 2002, the Board elected Fores J.
Beaudry to fill a vacant position.
All of the nominees for election as directors are members of the
present Board. A nominee will be elected if the nominee receives a plurality of
the votes cast by the shares entitled to vote in the election, provided that a
quorum is present at the meeting. Unless authority to vote for a director or
directors is withheld, the accompanying proxy will be voted FOR the election of
the nominees named below. If for some unforeseen reason a nominee should become
unavailable for election, the number of directors constituting the Board may be
reduced prior to the annual meeting or the proxy may be voted for the election
of such substitute nominee as may be designated by the Board.
Any recommendations as to nominees for election at the 2004 annual
meeting should be submitted in writing by December 23, 2003, to the Secretary of
the Company at its principal executive offices and should include the name,
address, and qualifications of each proposed nominee.
The following table sets forth information with respect to each
person nominated for election as a director, including their ages as of February
28, 2003, business experience during the past five years, and directorships in
other corporations.
Director
Name Principal Occupation (1) Age Since
---- ------------------------ --- --------
Fores J. Beaudry Independent insurance agent and marketing 58 2002
consultant
Thomas J. Carley Private investor 44 2000
James B. Hicks, Ph.D. Co-founder and Chief Technology Officer of 56 2001
Virogenomics, Inc., a biotechnology company
Anthony Meeker Managing Director of Victory Capital 63 1993
Management, Inc., Cleveland, Ohio, an
investment management firm
Nancy B. Sherertz Private investor 53 1998
William W. Sherertz President and Chief Executive Officer of the 57 1980
Company
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(1) During the past five years, the principal occupation and employment of
each nominee has been as follows:
(a) Mr. Beaudry is self-employed as an independent insurance agent and
marketing consultant. He is also currently acting as the manager for
the National Education Association's long term care plan in the
state of Oregon.
(b) Mr. Carley was President and Chief Financial Officer of Jensen
Securities, a securities and investment banking firm in Portland,
Oregon, for eight years until February 1998, when the company was
sold to D.A. Davidson & Co. Thereafter, he was a research analyst
covering technology companies and financial institutions at D.A.
Davidson & Co. until December 1999.
(c) Mr. Hicks is a co-founder and Chief Technology Officer at
Virogenomics, Inc., a biotechnology company (formerly known as
Activated Cell Systems, LLC), which is located in the Portland
metropolitan area. He has also been a director of AVI BioPharma,
Inc. since 1997. He
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continues to serve as a partner in TekSTART Consulting Group, where
he has been providing consulting services to early stage technology
companies regarding management and operational issues since 2000.
From 1995 to 1999, he was co-founder and technical consultant for
Sapient Health Network, and also served as Chief Executive Officer,
Chief Scientist and a director of Hedral Therapeutics, Inc., a
biotechnology company, from 1994 to 1998.
(d) Mr. Meeker recently retired as a Managing Director of Victory
Capital Management, Inc. (formerly known as Key Asset Management,
Inc.) where he was employed from 1993 to 2003. From 1987 to 1993, he
was Treasurer of the State of Oregon.
(e) Ms. Sherertz was President and a director of the Company from 1975
to March 1993.
(f) Mr. Sherertz also serves as Chairman of the Board of Directors.
Ms. Sherertz and Mr. Sherertz were married to each other until 1994.
DIRECTORS' MEETINGS AND STANDING COMMITTEES
The standing committees of the Board include an audit committee and
a compensation committee. During 2002, the Board held five meetings, the audit
committee held six meetings, and the compensation committee held two meetings.
Each director attended more than 75 percent of the aggregate of the total number
of meetings of the Board and the total number of meetings held by all committees
of the Board on which he or she served during 2002, except Ms. Sherertz
participated in 60 percent of the Board meetings and neither of the compensation
committee meetings.
The audit committee reviews and pre-approves audit and
legally-permitted non-audit services provided by the independent accountants,
makes decisions concerning their engagement or discharge, and reviews with
management and the independent accountants the results of their audit, the
adequacy of internal accounting controls and the quality of financial reporting.
The current members of the audit committee are Mr. Carley, chairman, and Messrs.
Beaudry, Hicks and Meeker.
The compensation committee reviews the compensation of executive
officers of the Company and makes recommendations to the Board regarding salary
levels and other forms of compensation to be paid to executive officers,
including decisions as to grants of options and other stock-based awards. The
current members of the compensation committee are Mr. Meeker, chairman, Mr.
Hicks, and Ms. Sherertz. Ms. Sherertz does not participate in the committee's
deliberations regarding stock options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the compensation committee of the Board during 2002
were James B. Hicks, Anthony Meeker, and Nancy B. Sherertz. Ms. Sherertz was
President of the Company from 1975 to March 1993.
AUDIT COMMITTEE REPORT
The audit committee of the Board reports to the Board and is
responsible for monitoring the integrity of the Company's financial statements,
the compliance by the Company with legal and regulatory requirements relating to
its status as a public company, and the independence and performance of the
Company's independent accountants. The audit committee is presently comprised of
four directors, each of whom meets the financial literacy and independence
requirements specified in current National Association of Securities Dealers
corporate governance standards. The audit committee's activities are governed by
a written charter adopted by the Board, a copy of which was included with the
Company's proxy statement for its 2001 annual meeting filed with the Securities
and Exchange Commission and is available at www.sec.gov.
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In discharging its responsibilities, the Committee and its
individual members have met with management and with the Company's independent
accountants, PricewaterhouseCoopers LLP, to review their audit process and the
Company's accounting functions. The Committee discussed and reviewed with the
Company's independent accountants all matters that the independent accountants
were required to communicate and discuss with the Committee under applicable
auditing standards, including those described in Statement on Auditing Standards
No. 61, as amended, regarding communications with audit committees. Committee
members also discussed and reviewed the results of the independent accountants'
examination of the financial statements, the quality and adequacy of the
Company's internal controls, and issues relating to the accountants'
independence. The Committee has obtained a formal written statement relating to
independence consistent with Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees," and discussed with the
accountants any relationships that may affect their objectivity and
independence.
Based on its review and discussions with management and the
Company's independent accountants, the audit committee recommended to the Board
that the audited financial statements for the fiscal year ended December 31,
2002, be included in the Company's Annual Report on Form 10-K for filing with
the Securities and Exchange Commission ("SEC").
AUDIT COMMITTEE
Thomas J. Carley, Chair
Fores J. Beaudry
James B. Hicks
Anthony Meeker
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STOCK OWNERSHIP BY PRINCIPAL STOCKHOLDERS
AND MANAGEMENT
BENEFICIAL OWNERSHIP TABLE
The following table gives information regarding the beneficial
ownership of Common Stock as of March 31, 2003, by each director and nominee for
director and certain named executive officers and by all directors and executive
officers of the Company as a group. In addition, it gives information about each
person or group known to the Company to own beneficially more than 5 percent of
the outstanding shares of Common Stock. Information as to beneficial stock
ownership is based on data furnished by the persons concerning whom such
information is given. Unless otherwise indicated, all shares listed as
beneficially owned are held with sole voting and dispositive powers.
Amount and Nature Percent
of Beneficial of
Name of Beneficial Owner Ownership(2) Class
------------------------ ----------------- --------
Heartland Advisors, Inc.(1)............................. 927,800(3) 16.3%
Wynnefield Group(1)..................................... 519,400(4) 9.1%
Dimension Fund Advisors, Inc.(1)........................ 357,300(5) 6.3%
Fores J. Beaudry........................................ -- *
Thomas J. Carley........................................ 26,750(6) *
James B. Hicks, Ph.D.................................... 750 *
Anthony Meeker.......................................... 10,950 *
Michael D. Mulholland................................... 7,052 *
Nancy B. Sherertz(1)...................................1,393,500(7) 24.4%
William W. Sherertz(1).................................1,999,957(8) 34.9%
Gregory R. Vaughn ...................................... 4,080 *
All directors and executive officers as a group
(8 persons)............................................3,443,039 59.8%
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* Less than 1 percent of the outstanding shares of Common Stock.
(1) The addresses of persons owning beneficially more than 5 percent of the
outstanding Common Stock are as follows: Heartland Advisors, Inc., 789
North Water Street, Milwaukee, Wisconsin 53202; Wynnefield Group, 450
Seventh Avenue, Suite 509, New York, New York 10123; Dimension Fund
Advisors, Inc., 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401;
Nancy B. Sherertz, 401 Goldsborough Street, Easton, Maryland 21601; and
William W. Sherertz, 4724 S.W. Macadam Avenue, Portland, Oregon 97239.
(2) Includes options to purchase Common Stock which are presently exercisable
or will become exercisable by May 30, 2003, as follows: Mr. Carley, 750
shares; Mr. Hicks, 750 shares; Mr. Meeker, 10,500 shares; Mr. Mulholland,
7,052 shares; Ms. Sherertz, 3,500 shares; Mr. Sherertz, 24,219 shares; Mr.
Vaughn, 4,080 shares; and all directors and executive officers as a group,
50,851 shares.
(3) Heartland Advisors, Inc., a registered investment advisor, filed an
amendment to Schedule 13G on February 12, 2003, reporting sole voting
power as to 305,300 shares and sole dispositive power as to 927,800
shares. William J. Nasgovitz, President and principal shareholder of
Heartland Advisors, Inc., also reported sole voting power as to 500,000 of
the 927,800 shares reported as beneficially owned by Heartland Advisors,
Inc., as a result of his position as an officer and director of Heartland
Group, Inc., a registered investment company.
(4) Wynnefield Group is a combination of Wynnefield Partners Small Cap Value,
L.P., Wynnefield Small Cap Value Offshore Fund, Ltd., and Wynnefield
Partners Small Cap Value, L.P. I. Although these entities are separate and
distinct entities with different beneficial owners (whether designated
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as limited partners or stockholders), for the convenience of reporting
their holdings they are referred to collectively as the "Wynnefield
Group."
(5) Dimension Fund Advisors, Inc., a registered investment advisor, filed an
amendment to Schedule 13G on February 11, 2003, reporting sole voting and
dispositive power as to 357,300 shares.
(6) Includes 4,000 shares owned by Mr. Carley's wife.
(7) Ms. Sherertz disclaims beneficial ownership of 3,310 shares held by her
minor children.
(8) Includes 41,300 shares held by his wife and his minor children, as to
which he shares voting and dispositive powers.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 ("Section 16")
requires that reports of beneficial ownership of Common Stock and changes in
such ownership be filed with the SEC by Section 16 "reporting persons,"
including directors, executive officers, and certain holders of more than 10
percent of the outstanding Common Stock. To the Company's knowledge, all Section
16 reporting requirements applicable to known reporting persons were complied
with for transactions and stock holdings during 2002, except that Nancy B.
Sherertz has not reported the receipt of a stock option to purchase 1,000 shares
of Common Stock in May 2002.
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APPROVAL OF 2003 STOCK INCENTIVE PLAN
DESCRIPTION OF THE 2003 STOCK INCENTIVE PLAN
Effective March 1, 2003, the Board adopted, subject to stockholder
approval, the Company's 2003 Stock Incentive Plan (the "2003 Plan") authorizing
the issuance of up to 400,000 shares of Common Stock in connection with awards
granted under the 2003 Plan, subject to adjustment for changes in
capitalization. The 2003 Plan is intended to replace the Company's Second
Amended and Restated 1993 Stock Incentive Plan (the "1993 Plan"), under which
new grants of incentive stock options may not be made after March 1, 2003. A
copy of the 2003 Plan is attached to this proxy statement as Appendix A.
At March 10, 2003, there were 788,815 shares available for future
grants of awards and 520,195 shares subject to currently outstanding awards
under the 1993 Plan. The 2003 Plan provides that shares subject to outstanding
awards under the 1993 Plan that are cancelled, terminate, or otherwise expire
will become available for grants of new awards under the 2003 Plan. No further
awards will be granted under the 1993 Plan if the 2003 Plan is approved by
stockholders, meaning that the 788,815 shares presently available under the 1993
Plan would no longer be available for issuance.
The 2003 Plan provides for the grant of stock options and other
stock-based awards to the Company's employees, non-employee directors, and
outside consultants or advisers. No awards have been allocated or granted under
the 2003 Plan as of the date of this proxy statement, except non-employee
director options as described below under "Available Awards Under the 2003 Stock
Incentive Plan--Non-Employee Director Options. At March 31, 2003, approximately
40 employees and five non-employee directors were considered eligible to
participate in the 2003 Plan. The closing sale price for the Common Stock
reported on the SmallCap(TM) tier of The Nasdaq Stock Market on March 31, 2003,
was $3.27.
AVAILABLE AWARDS UNDER THE 2003 STOCK INCENTIVE PLAN
The 2003 Plan will be administered by the compensation committee of
the Board. The types of awards that may be granted by the compensation committee
under the 2003 Plan include:
Options. Options to purchase Common Stock may be incentive stock
options meeting the requirements of Section 422 of the Internal Revenue Code of
1986 (the "Code"), or nonqualified options which are not eligible for such
tax-favored treatment. Incentive stock options may expire not more than ten
years from the date of grant. The 2003 Plan does not specify a maximum term for
nonqualified options. The exercise price per share must be not less than 100
percent of the fair market value of a share of Common Stock on the date the
option is granted for incentive stock options and not less than 75 percent of
such fair market value for nonqualified options. The 2003 Plan also authorizes
the issuance of nonqualified deferred compensation options with an exercise
price of not less than $.01 per share for the purpose of deferring a specified
amount of income for a recipient. The award agreement relating to an option may,
in the compensation committee's discretion, provide that if an option is
exercised using previously-acquired shares in payment of the exercise price, the
recipient shall automatically be granted a replacement option (a "reload
option") for a number of shares equal to the number (or a portion of the number)
of shares surrendered with an exercise price equal to the fair market value of
the Common Stock on the date of grant. The Company may not grant options to
purchase more than 200,000 shares to a single individual during any calendar
year.
Stock Appreciation Rights ("SARs"). A recipient of SARs will receive
upon exercise an amount equal to the excess (or specified portion thereof) of
the fair market value of a share of Common Stock on the date of exercise over
the base price, multiplied by the number of shares as to which the rights are
exercised. The base price will be designated by the compensation committee in
the award agreement and may be equal to, higher or lower than the fair market
value of the Common Stock on
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the date of grant. Payment may be in cash, in shares of Common Stock, in the
form of a deferred compensation option or in any other form approved by the
compensation committee. SARs may be granted in connection with options or other
awards or may be granted as independent awards.
Restricted Awards. Restricted awards may take the form of restricted
shares or restricted units. Restricted shares are shares of Common Stock which
are subject to such limitations as the compensation committee deems appropriate,
including restrictions on sale or transfer. Restricted shares may be subject to
forfeiture in the event the recipient terminates employment or service as a
director or consultant during a specified period. Stock certificates
representing restricted shares are issued in the name of the recipient but are
held by the Company until the expiration of any restrictions. From the date of
issuance of restricted shares, the recipient is entitled to the rights of a
stockholder with respect to such shares, including voting and dividend rights.
Restricted units are awards of units equivalent in value to a share
of Common Stock, which similarly may be subject to forfeiture if the recipient
terminates employment or service as a director or consultant during a specified
period. At the expiration of such period, payment is made with respect to
restricted units in an amount equal to the value of the number of shares covered
by the restricted units. Payment may be in cash or unrestricted shares of Common
Stock or in any other form approved by the compensation committee.
Performance Awards. Performance awards are granted in units
equivalent in value to a share of Common Stock. A performance award is subject
to forfeiture if or to the extent the recipient fails to meet certain
performance goals during a designated performance cycle. Performance awards
earned by attaining performance goals are paid at the end of a performance cycle
in cash or shares of Common Stock or in any other form approved by the
compensation committee.
Other Stock-Based Awards. The compensation committee may grant other
awards that involve payments or grants of shares of Common Stock or are measured
by or in relation to shares of Common Stock. The 2003 Plan provides flexibility
to design new types of stock-based or stock-related awards to attract and retain
employees, directors and consultants in a competitive environment.
Non-Employee Director Options. Under the 2003 Plan, non-employee
directors will receive annually as of each annual meeting date an option to
purchase 1,000 shares of Common Stock at a price equal to the fair market value
of a share on the annual meeting date. Directors may be granted other awards
under the 2003 Plan in the discretion of the compensation committee.
CALIFORNIA STOCK OPTION PLAN
The 2003 Plan includes a sub-plan known as the 2003 Stock Option
Plan for California Residents (the "California Plan") for the purpose of option
grants to employees, non-employee directors and consultants who reside in the
state of California. The Company has adopted the California Plan as part of the
2003 Plan in order to comply with certain substantive requirements of California
state securities law when making grants to residents of that state. No awards
will be made to California residents except under the California Plan so long as
the substantive requirements imposed by California law continue.
Under the 2003 Plan, the Company has set aside 100,000 of the
400,000 shares authorized for issuance under the 2003 Plan for options to be
granted under the California Plan. The California Plan provides for options as
described under "Available Awards Under the 2003 Stock Incentive Plan" above,
and no other awards. The Board may in its discretion transfer shares from the
California Plan back to the 2003 Plan from time to time.
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ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
In the event of a change in capitalization, the compensation
committee may make such proportionate adjustments in the aggregate number of
shares for which awards may be granted under the 2003 Plan, the maximum number
of shares which may be awarded to any participant, and the number of shares
covered by, and the exercise or base price of, any outstanding awards, as the
committee in its sole discretion may deem appropriate.
DURATION, TERMINATION AND AMENDMENT OF THE 2003 STOCK INCENTIVE PLAN
The 2003 Plan will remain in effect until awards have been granted
covering all available shares under the 2003 Plan or the 2003 Plan is otherwise
terminated by the Board. The Board may terminate the 2003 Plan at any time, but
any such termination will not affect any outstanding awards. The Board may also
amend the 2003 Plan from time to time, provided that no amendment may be made
without stockholder approval if such approval is required by applicable rules
and regulations of a stock exchange or registered securities association.
NEW PLAN BENEFITS
The 2003 Plan provides for automatic annual grants of options to
purchase 1,000 shares of Common Stock to non-employee directors. No other
options have presently been allocated to eligible participants under the 2003
Plan.
NEW PLAN BENEFITS TABLE
2003 STOCK INCENTIVE PLAN
Name and Position Number of Shares
----------------- ----------------
William B. Sherertz --
President and Chief Executive Officer
Michael D. Mulholland --
Vice President-Finance and Secretary;
Chief Financial Officer
Gregory R. Vaughn --
Vice President
Executive Group --
Non-Executive Director Group 5,000
Non-Executive Officer Employee Group --
FEDERAL INCOME TAX CONSEQUENCES OF AWARDS
The 2003 Plan complies with certain requirements contained in
Section 162(m) of the Code, which relates to the deductibility by the Company of
certain executive compensation for federal income tax purposes. The maximum
number of shares subject to options or stock appreciation rights ("SARs") which
may be granted to any individual participant under the 2003 Plan during any
calendar year may not exceed 200,000 shares.
The following discussion summarizes the principal anticipated
federal income tax consequences of grants of stock options under the 2003 Plan
to participants and to the Company.
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TAX CONSEQUENCES TO PARTICIPANTS
INCENTIVE STOCK OPTIONS. Incentive stock options under the 2003 Plan
are intended to meet the requirements of Section 422 of the Code. No income
results to a participant upon the grant of an incentive stock option or upon the
issuance of shares when the option is exercised. The amount realized on the sale
or taxable exchange of such shares in excess of the exercise price will be
considered a capital gain, except that if such disposition occurs within one
year after exercise of the option or two years after grant of the option, the
participant will recognize compensation taxable at ordinary income tax rates
measured by the amount by which the lesser of (a) the fair market value on the
date of exercise or (b) the amount realized on the sale of the shares, exceeds
the exercise price. For purposes of determining alternative minimum taxable
income, an incentive stock option is treated as a nonqualified option.
NONQUALIFIED OPTIONS. No taxable income is recognized upon the grant
of a nonqualified option. In connection with the exercise of a nonqualified
option, a participant will generally realize compensation income
(self-employment income for non-employee directors) measured by the difference
between the exercise price and the fair market value of the shares acquired on
the date of exercise. The participant's cost basis in the acquired shares is the
fair market value of the shares on the exercise date. Any gain upon sale of the
shares is capital gain.
PAYMENT OF EXERCISE PRICE IN SHARES. The compensation committee may
permit participants to pay all or a portion of the exercise price using
previously-acquired shares of Common Stock. If an option is exercised and
payment is made in previously held shares, there is no taxable gain or loss to
the participant other than any gain recognized as a result of exercise of the
option, as described above.
TAX CONSEQUENCES TO THE COMPANY
To the extent participants qualify for capital gains treatment with
respect to the sale of shares acquired pursuant to exercise of an incentive
stock option, the Company will not be entitled to any tax deduction in
connection with incentive stock options. In the case of nonqualified stock
options, the Company will be entitled to receive a federal income tax deduction
at the same time and in the same amount as the amount which is taxable to
participants as ordinary income.
BOARD RECOMMENDATION AND VOTE REQUIRED
The Board recommends a vote FOR approval of the 2003 Plan. If a
quorum is present at the annual meeting, the amendment will be approved upon the
affirmative vote of a majority of the votes cast upon the proposal at the
meeting.
APPROVAL OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board has selected PricewaterhouseCoopers llp as independent
accountants to examine the financial statements of the Company for the fiscal
year ending December 31, 2003. Although the appointment of accountants is not
required to be submitted to a vote of the stockholders, the Board has decided to
ask the stockholders to approve the appointment and recommends that you vote FOR
approval. If a majority of the shares of Common Stock represented at the annual
meeting are not voted to approve the appointment, the Board will reconsider the
appointment.
PricewaterhouseCoopers llp were the Company's independent
accountants for the year ended December 31, 2002. The Company expects
representatives of PricewaterhouseCoopers llp to be present at the 2003 annual
meeting of stockholders and to be available to respond to appropriate questions.
The accountants will have the opportunity to make a statement at the annual
meeting if they desire to do so.
-10-
AUDIT FEES
The aggregate fees billed by PricewaterhouseCoopers LLP for
professional services rendered for the audit of the Company's annual financial
statements for the year ended December 31, 2002, and their review of the
financial statements included in its quarterly reports on Form 10-Q for that
fiscal year were approximately $122,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
During 2002, PricewaterhouseCoopers LLP did not provide any
professional services to the Company with regard to financial information
systems design and implementation.
ALL OTHER FEES
Fees billed for services provided to the Company by
PricewaterhouseCoopers LLP during 2002, other than the services described above
under "Audit Fees," were $59,000. Such fees were for services rendered in
connection with income tax consulting, planning and return preparation and
various other consulting related to accounting matters. The audit committee of
the Board has considered whether the provision of these services to the Company
is compatible with maintaining the independence of the Company's independent
public accountants.
-11-
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth for the years indicated the
compensation awarded or paid to, or earned by, the Company's chief executive
officer and the Company's other executive officers whose salary level and bonus
in 2002 exceeded $100,000.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Awards
Annual Compensation Securities
Underlying All Other
Name and Principal Salary Bonus Options Compensation
Position Year ($) ($) (#) ($)
---------------------- ----- ------------------- ------------ ------------
William W. Sherertz 2002 $200,000 $38,625(1) 161,719 $56,461(2)
President and 2001 200,000 38,526(1) 50,000 56,461(2)
Chief Executive Officer 2000 200,000 21,320 50,000(3) --
Michael D. Mulholland 2002 $185,000 $ -- 80,000 --
Vice President-Finance 2001 185,000 -- 14,103 --
and Secretary; Chief 2000 185,000 19,721 20,181(3) --
Financial Officer
Gregory R. Vaughn 2002 $150,000 $ -- 45,000 --
Vice President 2001 150,000 -- 8,159 --
2000 150,000 15,990 11,675(3) --
(1) Represents a bonus intended to cover Mr. Sherertz's personal expenses
related to the split-dollar life insurance plan that will not be recovered
by the Company. See note 2 below.
(2) Represents the actual dollar amount of an insurance premium paid by the
Company as part of a split-dollar life insurance plan provided to Mr.
Sherertz. Mr. Sherertz's living trust is obligated to repay to the Company
all of the premiums that it has paid for this insurance policy from the
death benefits collected on the policy or, if earlier, within 60 days
after (x) termination of Mr. Sherertz's employment by the Company, other
than by reason of death, or (y) the bankruptcy or dissolution of the
Company.
(3) Stock option award was voluntarily surrendered as of September 20, 2001,
pursuant to a Company offer made to all optionees. See discussion below
under "Report on Repricing of Options."
-12-
STOCK OPTION DATA
The following table provides information as to options to purchase Common
Stock granted under the 1993 Plan to the named executive officers during 2002.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise Grant Date
Granted(1) in Fiscal Price Expiration Present
Name (#) Year ($/Share) Date Value ($)(2)
---- ------- ------- --------- ---------- --------------
William W. 150,000 40.7 % $3.30 8/19/12 $220,500
Sherertz 11,719(3) 3.2 4.00 10/14/12 17,227
Michael D. 80,000 21.7 3.00 8/19/12 123,200
Mulholland
Gregory R. 45,000 12.2 3.00 8/19/12 69,300
Vaughn
(1) Options generally become exercisable cumulatively in four equal annual
installments beginning one year after the date of grant; provided that the
option will become exercisable in full upon the officer's death,
disability or retirement, or in the event of a change in control of the
Company. A change in control is defined in the option agreements to
include (i) any occurrence which would be required to be reported as such
by the proxy disclosure rules of the SEC, (ii) the acquisition by a person
or group (other than the Company or one of its employee benefit plans) of
30 percent or more of the combined voting power of its voting securities,
(iii) with certain exceptions, the existing directors' ceasing to
constitute a majority of the Board, (iv) certain transactions involving
the merger, sale, or transfer of a majority of the assets of the Company,
or (v) approval by the stockholders of a plan of liquidation or
dissolution of the Company. The options include a feature which entitles
an optionee who tenders previously-acquired shares of Common Stock to pay
all or part of the exercise price of the option, to be granted a
replacement option (a "reload option") to purchase a number of shares
equal to the number of shares tendered with an exercise price equal to the
fair market value of the Common Stock on the date of grant. No SARs were
granted by the Company during 2002.
(2) The values shown have been calculated based on the Black-Scholes option
pricing model and do not reflect the effect of restrictions on
transferability or vesting. The values were calculated based on the
following assumptions: (i) expectations regarding volatility of 58 percent
were based on monthly stock price data for the Company; (ii) the risk-free
rate of return (2.94 percent) was assumed to be the Treasury Bond rate
whose maturity corresponds to the expected term (5.0 years) of the option
granted; and (iii) no dividends on the Common Stock will be paid during
the option term. The values which may ultimately be realized will depend
on the market value of the Common Stock during the periods during which
the options are exercisable, which may vary significantly from the
assumptions underlying the Black-Scholes model.
(3) Option granted pursuant to "reload" provision of Mr. Sherertz's stock
award agreement. Option becomes fully exercisable six months from the date
of grant.
-13-
Information concerning exercises of stock options during 2002 and the
value of unexercised options held by the named executive officers at December
31, 2002, is summarized in the table below.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(1)
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options at Fiscal Options at
Name Acquired on Value Year-End (#) Fiscal Year-End(2)
Exercise (#) Realized ($) (Exercisable/Unexercisable) (Exercisable/Unexercisable)
William W. 12,500 $3,125 -- / 199,219 $0 / $0
Sherertz
Michael D. -- -- 3,525 / 90,578 0 / 8,000
Mulholland
Gregory R. -- -- 2,039 / 51,120 0 / 4,500
Vaughn
-----------------
(1) The named executive officers did not hold any SARs at December 31, 2002.
(2) The values shown have been calculated based on the last reported sale
price, $3.10, of the Common Stock reported on the SmallCap(TM) tier of The
Nasdaq Stock Market on or before December 31, 2002, and the per share
exercise price of unexercised in-the-money options.
-14-
REPORT ON REPRICING OF OPTIONS
The Company implemented a voluntary stock option surrender program in
August 2001 for all option holders who held options with an exercise price of
more than $5.85 per share. The compensation committee implemented the program to
restore the Company's ability to provide significant incentives for senior
management and other key employees without materially increasing the potential
dilutive effects of its option plan. The compensation committee believed the
program would benefit all stockholders by restoring a material incentive to
management and key employees.
Under the program, optionees were given a 30-day period to surrender
options for cancellation. At the close of the offer period, September 20, 2001,
stock options for a total of 797,229 shares were surrendered. The Company's
executive officers participated in the program by surrendering stock options for
cancellation covering shares as follows: Mr. Sherertz, 273,693 shares; Mr.
Mulholland, 137,298 shares; and Mr. Vaughn, 76,538 shares.
On August 20, 2002, the compensation committee awarded new option grants.
At that time, the named executive officers were granted options to purchase
shares of Common Stock as follows: Mr. Sherertz, 150,000 shares; Mr. Mulholland,
80,000 shares; and Mr. Vaughn, 45,000 shares. Mr. Sherertz's options may be
exercised at a price of $3.30 per share. Options granted to Mr. Mulholland and
Mr. Vaughn may be exercised at a price of $3.00 per share, the fair market value
per share of Common Stock on the date of grant. The new options are subject to a
new four-year vesting schedule.
The following table sets forth information concerning option repricings,
as that term is used in the SEC's proxy disclosure rules, of options held by the
Company's executive officers during the last 10 years. The only repricing of
options undertaken by the Company in the last 10 years occurred in connection
with the voluntary surrender program described above. The table provides
information regarding options that were cancelled in the surrender program in
2001 and options that were granted in 2002 to replace them.
-15-
10-YEAR OPTION/SAR REPRICINGS
Number of Market Length of
Securities Price of Exercise Original
Underlying Stock at Prices of New Option Term
Cancelled Time of Cancelled Exercise Remaining
Name Date(1) Options (#) Replacement Options Price(2) at Cancellation
---- ------- ----------- ----------- --------- -------- ---------------
William W. Sherertz, 9-20-01 17,500 $3.00 $ 9.5000 $3.30 2.41 years
President and Chief 9-20-01 7,000 $3.00 $ 8.7500 $3.30 2.88 years
Executive Officer 9-20-01 18,654 $3.00 $16.3625 $3.30 3.99 years
9-20-01 51,346 $3.00 $14.8750 $3.30 3.99 years
9-20-01 30,333 $3.00 $15.0000 $3.30 4.82 years
9-20-01 25,000 $3.00 $14.1250 $3.30 5.53 years
9-20-01 18,860 $3.00 $12.0625 $3.30 6.10 years
9-20-01 25,000 $3.00 $12.0000 $3.30 6.23 years
9-20-01 30,000 $3.00 $ 8.9375 $3.30 7.38 years
9-20-01 50,000 $3.00 $ 6.7500 $3.30 8.39 years
Michael D. Mulholland, 9-20-01 20,000 $3.00 $10.7500 $3.00 2.90 years
Vice President- 9-20-01 10,000 $3.00 $14.8750 $3.00 3.99 years
Finance and 9-20-01 20,000 $3.00 $14.6250 $3.00 4.13 years
Secretary; Chief 9-20-01 18,500 $3.00 $15.0625 $3.00 4.39 years
Financial Officer 9-20-01 17,926 $3.00 $17.9375 $3.00 5.36 years
9-20-01 5,000 $3.00 $12.0000 $3.00 6.23 years
9-20-01 13,024 $3.00 $11.4375 $3.00 6.39 years
9-20-01 12,667 $3.00 $ 8.9375 $3.00 7.38 years
9-20-01 20,181 $3.00 $ 6.7500 $3.00 8.39 years
Gregory R. Vaughn, 9-20-01 50,000 $3.00 $14.69 $3.00 5.79 years
Vice President 9-20-01 7,535 $3.00 $11.44 $3.00 6.39 years
9-20-01 7,328 $3.00 $ 8.94 $3.00 7.38 years
9-20-01 11,675 $3.00 $ 6.75 $3.00 8.39 years
(1) Represents date surrendered options were cancelled.
(2) Represents exercise price of replacement options granted to named
individuals, which was equal to the market price on the date of grant,
except in the case of Mr. Sherertz whose option exercise price is equal to
110 percent of fair market value on the date of grant. The number of
shares subject to replacement options and date of grant of such options
are discussed in the narrative preceding the table.
COMPENSATION COMMITTEE
Anthony Meeker, Chair
James B. Hicks, Ph.D.
Nancy B. Sherertz
-16-
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information regarding shares of the
Company's Common Stock that may be issued upon exercise of options, warrants and
rights under the Company's existing equity compensation plans and arrangements
as of December 31, 2002. The only plan or arrangement under which equity
compensation could be awarded at December 31, 2002, was the 1993 Plan, which was
approved by stockholders. The information includes the number of shares covered
by, and the weighted average exercise price of, outstanding options, warrants,
and other rights, and the number of shares remaining available for future grants
excluding the shares to be issued upon exercise of outstanding options,
warrants, and other rights.
A. Number of C. Number or securities
securities to be B. Weighted- remaining available for
issued upon exercise average exercise future issuance under equity
of outstanding price of outstanding compensation plans
options, warrants, options, warrants, (excluding securities
Plan Category and rights and rights reflected in Column A)
------------- ------------------- ------------------- ----------------------------
Equity compensation
plans approved by
stockholders(1) 520,195 $4.79 788,815
Equity compensation
plans or arrangements
not approved by 0 N/A 0
stockholders
Total 520,195 $4.79 788,815
(1) If the 2003 Plan is approved by stockholders, future grants will be made
only under the 2003 Plan. See "Approval of 2003 Stock Incentive Plan."
TRANSACTIONS WITH MANAGEMENT
In December 2001, pursuant to the approval of all disinterested outside
directors, the Company agreed to loan Mr. Sherertz up to $60,000 between
December 2001 and June 2002 to assist Mr. Sherertz in meeting his debt service
obligations on a loan from the Company's principal bank, which was secured by
Mr. Sherertz's holdings of Common Stock and provided for quarterly payments of
interest only. In the spring of 2002, with the approval of all disinterested
outside directors, the Company agreed to extend its financial commitment to lend
to Mr. Sherertz amounts equal to an additional two quarterly interest payments
in July and September 2002. The Company's note receivable bears interest at the
same rate as the rate charged to Mr. Sherertz by the bank (prime less 0.50
percent; 3.75 percent at March 31, 2003) and repayment by Mr. Sherertz to the
Company is due upon demand. The outstanding balance of the loan by the Company
at March 31, 2003, including accrued interest, was approximately $110,000, which
was the maximum amount outstanding under the loan since January 1, 2002. In
accordance with applicable law, no new loans will be made to Mr. Sherertz under
this or any other arrangement.
Prior to May 1, 2002, the Company recorded revenues of $138,000 and cost
of revenues of $132,000 for providing services to a company owned by Mr.
Sherertz. Effective May 1, 2002, this company was sold to an unrelated third
party.
During 2001, pursuant to the approval of all disinterested outside
directors, the Company entered into a split dollar life insurance agreement with
Mr. Sherertz's personal trust. Terms of the agreement provide that, upon Mr.
Sherertz's death, the Company will recoup from his trust all insurance premiums
paid by the Company. During 2002, the Company paid annual life insurance
premiums of approximately $56,000. In addition, during 2002, the Company paid a
cash bonus of approximately
-17-
$39,000 to Mr. Sherertz in connection with his personal expenses related to the
split dollar life insurance program.
Beginning in October 2001, the Company has rented Mr. Sherertz's personal
residence in LaQuinta, California, for marketing, customer relations, and
business meeting purposes. The seasonal rental rates were established by a local
real estate broker who handles similar properties in the LaQuinta area. The
Company made payments to Mr. Sherertz in the aggregate amount of $97,000 in 2002
for rental of the property.
DIRECTORS' COMPENSATION
Under the standard arrangement in effect at the end of 2002, directors
(other than directors who are full-time employees of the Company, who do not
receive directors' fees) are entitled to receive a fee of $500 for each Board
meeting attended and each meeting of a committee of the Board attended other
than a committee meeting held on the same day as a Board meeting.
A nonqualified option for 1,000 shares of Common Stock is granted
automatically to each non-employee director whose term begins on or continues
after the date of each annual meeting of stockholders at an exercise price equal
to the fair market value of the Common Stock on the date of the meeting.
Accordingly, on May 15, 2002, each then non-employee director received an option
for 1,000 shares at an exercise price of $3.875 per share.
Payment of the exercise price of options granted to non-employee directors
may be in cash or in previously-acquired shares of Common Stock. Each option
includes a reload option feature to the extent that previously-acquired shares
are used to pay the exercise price. Non-employee director options (other than
reload options) become exercisable in four equal annual installments beginning
one year after the date of grant. Reload options become exercisable six months
following the date of grant. All options granted to a non-employee director will
be exercisable in full upon the director's death, disability or retirement, or
in the event of a change in control of the Company. The option term will expire
three months following the date upon which the holder ceases to be a director
other than by reason of death, disability or retirement; in the event of death
or disability, the option will expire one year thereafter, while non-employee
director options will expire five years after retirement.
EMPLOYMENT AGREEMENT
Effective January 26, 1999, the Company entered into an employment
agreement with Michael D. Mulholland, Vice President-Finance and Secretary of
the Company. The agreement provides for a term of not less than two years as of
each anniversary date of the agreement and is subject to automatic extension for
an additional year annually unless either party notifies the other of an
election to terminate the agreement by December 27 of the prior year. In the
event of a change in control of the Company, the agreement will be renewed
automatically for a two-year period beginning with the day immediately preceding
the change in control. The employment agreement provides for an annual salary of
not less than $155,000, subject to annual review by the Board, together with
other compensation and benefits provided for in the Company's compensation
policy for executive officers adopted in 1995.
Pursuant to the employment agreement, if Mr. Mulholland's employment is
terminated by the Company following a change in control of the Company other
than by reason of death or disability or for cause, or by Mr. Mulholland within
90 days following a change in duties related to a change in control of the
Company, he will be entitled to receive a lump sum payment of an amount equal to
two times his then-current annual base salary, subject to reduction to the
extent that such amount would be subject to the excise tax imposed on benefits
that constitute excess parachute payments under Section 280G of the Internal
Revenue Code of 1986, as amended.
-18-
A change in control of the Company for purposes of the employment
agreement is defined as summarized in the notes to the first table under "Stock
Option Data" above, except for a business combination transaction in which the
Company becomes a privately-held company and William W. Sherertz continues as
President and Chief Executive Officer. A change in duties includes a significant
change in the nature or scope of Mr. Mulholland's position, responsibilities,
authorities or duties, a significant diminution in his eligibility to
participate in compensation plans or benefits, a change in the location of his
employment by more than 30 miles, or a significant violation of the Company's
obligations under the agreement.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The compensation committee of the Board acts as an independent resource to
the Board in recommending executive salary levels and analyzing other proposed
forms of executive compensation and was composed of three outside directors
during 2002. The Committee, except for Ms. Sherertz, also provides disinterested
administration of the Company's 1993 Stock Incentive Plan.
The committee's goal is to serve the interests of the Company's
stockholders by enabling the Company to attract, motivate, and retain the
caliber of management expertise necessary for the successful implementation of
the Company's strategic goals.
The Company's overall approach to executive compensation is based on a
philosophy that combines a goal-driven annual cash compensation package with
equity incentives designed to build stock ownership among key employees. These
two key principles serve to align executives effectively with stockholder
interests by focusing management on financial goals necessary to enhance
stockholder value, as well as long-term growth, by strongly encouraging
significant ownership in the Company's stock.
SALARIES. Base salaries for the Company's executive officers are initially
determined by evaluating the responsibilities of the position and the experience
of the individual, and by reference to the competitive marketplace for
management talent. Annual salary adjustments are determined by evaluating the
competitive marketplace, the performance of the Company, the performance of the
executive, particularly with respect to the individual's specific contribution
to the Company's success, and any increased responsibilities assumed by the
executive.
ANNUAL CASH INCENTIVE BONUSES. The compensation committee has implemented
a policy to guide its compensation decisions with respect to the executive
officers of the Company below the level of president. It is the committee's
belief that the stewardship provided by the executive officers is best measured
by the Company's return on equity. Accordingly, target amounts for annual awards
of cash incentive bonuses for 2002 were based upon a formula with reference to
the Company's return on stockholders' equity for the year ended December 31,
2002, and the executive's total salary for the year. No bonuses were paid under
the program for 2002 because the targeted level of return on equity was not
reached.
LONG-TERM INCENTIVE COMPENSATION. The Company strives to align executive
officer financial interests with long-term stockholder value. See "Option Grants
in Last Fiscal Year" above for details of options granted to the named executive
officers in 2001. See also "Report on Repricing of Options" relating to the
details of and reasons for a voluntary option surrender program implemented in
August 2002.
CHIEF EXECUTIVE OFFICER COMPENSATION. In view of the Company's financial
performance for 2002, it was the recommendation of the Company's president,
William W. Sherertz, to the compensation committee that his salary level remain
unchanged for 2002. It was Mr. Sherertz's further recommendation that his
incentive compensation continue to be tied to the long-term enhancement of
-19-
stockholder value. It was the decision of the compensation committee to accept
Mr. Sherertz's recommendations in view of the fact that Mr. Sherertz is a
significant stockholder in the Company and, to the extent his performance as
chief executive officer results in an increase in the value of the Company's
stock, all stockholders, including him, share the benefits.
In 2001, a split-dollar life insurance arrangement was approved for Mr.
Sherertz. Upon termination of the policy, the Company will be repaid an amount
equal to the premiums previously paid by the Company. It is the compensation
committee's position that, in view of Mr. Sherertz's relatively large
stockholdings in the Company, a split dollar life insurance arrangement is in
the best interests of all stockholders.
COMPENSATION COMMITTEE
Anthony Meeker, Chair
James B. Hicks, Ph.D.
Nancy B. Sherertz
-20-
STOCK PERFORMANCE GRAPH
The following graph shows the cumulative total return at the dates indicated for
the period from December 31, 1997, until December 31, 2002, for the Common
Stock, the Standard & Poor's 500 Stock Index (the "S&P 500"), and for a group of
the Company's peers in the staffing industry. The staffing industry peer group
(the "2002 Peer Group") is comprised of the same eight companies included in the
peer group used to prepare the performance graph set forth in the Company's
proxy statement for its annual meeting in May 2002, C D I Corp., Kelly Services,
Inc., Manpower Inc., RemedyTemp, Inc., Robert Half International Inc., SOS
Staffing Services, Inc., TeamStaff, Inc., and Westaff, Inc.
The following graph has been prepared assuming that $100 was invested on
December 31, 1997, in the Common Stock, the S&P 500, and the 2002 Peer Group and
that dividends are reinvested. In accordance with the SEC's proxy rules, the
stockholder return for each company in the 2002 Peer Group index has been
weighted on the basis of market capitalization as of the beginning of each
annual period shown. The stock price performance reflected in the graph may not
be indicative of future price performance.
-21-
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
Performance Graph for
Barrett Business Services, Inc.
Produced on 04/03/2003 including data to 12/31/2002
[GRAPHIC OMITTED]
LEGEND
Symbol CRSP Total Return Index for: 12/1997 12/1998 12/1999 12/2000 12/2001 12/2002
------ --------------------------- ------- ------- ------- ------- ------- -------
Barrett Business Services, Inc. 100.0 72.3 56.4 30.3 31.5 28.0
S&P 500 Stocks 100.0 129.0 156.3 142.4 125.6 97.8
Self-Determined Peer Group 100.0 87.9 81.7 102.9 100.6 79.7
Companies in the Self-Determined Peer Group
C D I CORP KELLY SERVICES INC
MANPOWER INC WIS REMEDYTEMP INC
ROBERT HALF INTERNATIONAL INC SOS STAFFING SERVICES INC
TEAMSTAFF INC WESTAFF INC
Notes:
A. The lines represent monthly index levels derived from compounded
daily returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization
on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 12/31/1996.
Prepared by CRSP (www.crsp.uchicago.edu), Center for Research in Security
Prices, Graduate School of Business, The University of Chicago. Used with
permission. All rights reserved. (C) Copyright 2003
-22-
OTHER MATTERS
Management knows of no matters to be brought before the annual meeting
other than the election of directors and ratification of the selection of
accountants. However, if any other business properly comes before the meeting,
the persons named in the accompanying form of proxy will vote or refrain from
voting thereon in accordance with their judgment pursuant to the discretionary
authority given them in the proxy.
STOCKHOLDER PROPOSALS FOR ANNUAL MEETING IN 2004
Stockholder proposals submitted for inclusion in the proxy materials for
the annual meeting of stockholders to be held in 2004 must be received by the
Company by December 23, 2003. Any such proposal should comply with the SEC's
rules governing stockholder proposals submitted for inclusion in proxy
materials. Proposals should be addressed to Michael D. Mulholland, Secretary,
Barrett Business Services, Inc., 4724 S.W. Macadam Avenue, Portland, Oregon
97239.
For any proposal that is not submitted for inclusion in next year's proxy
materials, but instead is sought to be presented directly at the 2004 annual
meeting of stockholders, management will be able to vote proxies in its
discretion if the Company: (1) receives notice of the proposal before the close
of business on March 7, 2004, and advises stockholders in the 2004 proxy
materials about the nature of the matter and how management intends to vote on
such matter; or (2) has not received notice of the proposal by the close of
business on March 7, 2004. Notices of intention to present proposals at the 2004
annual meeting should be forwarded to the address listed above.
April 21, 2003 BARRETT BUSINESS SERVICES, INC.
-23-
Appendix A
BARRETT BUSINESS SERVICES, INC.
2003 STOCK INCENTIVE PLAN
Article 1
ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT. Barrett Business Services, Inc. ("Corporation"), hereby
establishes the Barrett Business Services, Inc., 2003 Stock Incentive Plan (the
"Plan"), effective as of March 1, 2003 (the "Effective Date"), subject to
shareholder approval as provided in Article 18.
1.2 PURPOSE. The purpose of the Plan is to promote and advance the
interests of Corporation and its shareholders by enabling Corporation to
attract, retain, and reward key employees, directors, and outside consultants of
Corporation and its subsidiaries. It is also intended to strengthen the
mutuality of interests between such employees, directors, and consultants and
Corporation's shareholders. The Plan is designed to serve these purposes by
offering stock options and other equity-based incentive awards, thereby
providing a proprietary interest in pursuing the long-term growth,
profitability, and financial success of Corporation.
1.3 PRIOR PLANS. The Plan will be separate from the Barrett Business
Services, Inc. 1993 Stock Incentive Plan and related Barrett Business Services,
Inc. Stock Option Plan for California Residents (the "Prior Plans"). The
adoption of the Plan will neither affect nor be affected by the continued
existence of the Prior Plans except that:
(a) After the effective date of the Plan, no further Awards will be
granted under the Prior Plans; and
(b) The number of Shares which may be made subject to Awards under
the Plan will be adjusted from time to time pursuant to Section 4.2 to
reflect cancellation, termination, or expiration of stock options
previously granted under the Prior Plans.
Article 2
DEFINITIONS
2.1 DEFINED TERMS. For purposes of the Plan, the following terms have the
meanings set forth below:
"ANNUAL DIRECTOR OPTIONS" means Options granted to Non-Employee
Board Directors pursuant to Article 14 of the Plan.
"AWARD" means an award or grant made to a Participant of Options,
Stock Appreciation Rights, Restricted Awards, Performance Awards, or Other
Stock-Based Awards pursuant to the Plan.
"AWARD AGREEMENT" means an agreement as described in Section 6.4.
"BOARD" means the Board of Directors of Corporation.
"CALIFORNIA OPTION" means any Option granted to a California
resident under the California Plan.
"CALIFORNIA PLAN" means the Barrett Business Services, Inc. 2003
Stock Option Plan for California Residents, attached hereto as Exhibit A
as it may be amended from time to time.
"CALIFORNIA SECURITIES LAWS" means the California Corporate
Securities Law of 1968, as amended, and rules and regulations adopted
under such law.
A-1
"CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, or any successor thereto, together with rules,
regulations, and interpretations promulgated thereunder. Where the context
so requires, any reference to a particular Code section will be construed
to refer to the successor provision to such Code section.
"COMMITTEE" means the committee appointed by the Board to administer
the Plan as provided in Article 3 of the Plan.
"COMMON STOCK" means the $.01 par value Common Stock of Corporation.
"CONSULTANT" means any consultant or adviser to Corporation or a
Subsidiary selected by the Committee, who is not an employee of
Corporation or a Subsidiary.
"CONTINUING RESTRICTION" means a Restriction contained in Sections
6.5(g), 6.5(i), 17.4, 17.5, and 17.7 of the Plan and any other
Restrictions expressly designated by the Committee in an Award Agreement
as a Continuing Restriction.
"CORPORATION" means Barrett Business Services, Inc., a Maryland
corporation, or
any successor corporation.
"DEFERRED COMPENSATION OPTION" means a Nonqualified Option granted
in lieu of a specified amount of other compensation pursuant to Section
7.8 of the Plan.
"DISABILITY" means the condition of being permanently "disabled"
within the meaning of Section 22(e)(3) of the Code, namely being unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result
in death or which has lasted or can be expected to last for a continuous
period of not less than 12 months. However, the Committee may change the
foregoing definition of "Disability" or may adopt a different definition
for purposes of specific Awards.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
and in effect from time to time, or any successor statute. Where the
context so requires, any reference to a particular section of the Exchange
Act, or to any rule promulgated under the Exchange Act, will be construed
to refer to successor provisions to such section or rule.
"FAIR MARKET VALUE" means, on any given day, the fair market value
per share of the Common Stock determined as follows:
(a) If the Common Stock is traded on an established securities
exchange, the mean between the reported high and low sale prices of Common
Stock as reported for such day by the principal exchange on which Common
Stock is traded (as determined by the Committee) or, if Common Stock was
not traded on such day, on the next preceding day on which Common Stock
was traded;
(b) If trading activity in Common Stock is reported on The Nasdaq
Stock Market, the mean between the reported high and low sale prices of
Common Stock as reported for such day by Nasdaq or, if Common Stock trades
were not reported on such day, on the next preceding day on which Common
Stock trades were reported by Nasdaq;
(c) If trading activity in Common Stock is reported on the OTC
Bulletin Board, the mean between the bid price and asked price quote for
such day as reported on the OTC Bulletin Board or, if there are no such
quotes for Common Stock for such day, on the next preceding day for which
bid and asked price quotes for Common Stock were reported on the OTC
Bulletin Board; or
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(d) If there is no market for Common Stock or if trading activities
for Common Stock are not reported in one of the manners described above,
the fair market value will be as determined by the Committee.
"INCENTIVE STOCK OPTION" or "ISO" means any Option granted pursuant
to the Plan that is intended to be and is specifically designated in its
Award Agreement as an "incentive stock option" within the meaning of
Section 422 of the Code.
"NON-EMPLOYEE BOARD DIRECTOR" means a member of the Board who is not
an employee of Corporation or any Subsidiary.
"NON-EMPLOYEE SUBSIDIARY DIRECTOR" means a member of the board of
directors of a Subsidiary who is neither an employee of Corporation or a
Subsidiary nor a member of the Board.
"NONQUALIFIED OPTION" or "NQO" means any Option, including a
Deferred Compensation Option, granted pursuant to the Plan that is not an
Incentive Stock Option.
"OPTION" means an ISO, an NQO, a Deferred Compensation Option, or an
Annual Director Option.
"OTHER STOCK-BASED AWARD" means an Award as defined in Section 11.1.
"PARTICIPANT" means an employee of Corporation or a Subsidiary, a
Consultant, a Non-Employee Board Director, or a Non-Employee Subsidiary
Director who is granted an Award under the Plan.
"PERFORMANCE AWARD" means an Award granted pursuant to the
provisions of Article 10 of the Plan, the Vesting of which is contingent
on performance attainment.
"PERFORMANCE CYCLE" means a designated performance period pursuant
to the provisions of Section 10.3 of the Plan.
"PERFORMANCE GOAL" means a designated performance objective pursuant
to the provisions of Section 10.4 of the Plan.
"PLAN" means this Barrett Business Services, Inc., 2003 Stock
Incentive Plan, as set forth herein and as it may be amended from time to
time.
"REPORTING PERSON" means a Participant who is subject to the
reporting requirements of Section 16(a) of the Exchange Act.
"RESTRICTED AWARD" means a Restricted Share or a Restricted Unit
granted pursuant to Article 9 of the Plan.
"RESTRICTED SHARE" means an Award described in Section 9.1(a) of the
Plan.
"RESTRICTED UNIT" means an Award of units representing Shares
described in Section 9.1(b) of the Plan.
"RESTRICTION" means a provision in the Plan or in an Award Agreement
which limits the exercisability or transferability, or which governs the
forfeiture, of an Award or the Shares, cash, or other property payable
pursuant to an Award.
"RETIREMENT" means:
(a) For Participants who are employees, retirement from active
employment with Corporation and its Subsidiaries on or after age 65, or
such earlier retirement date as approved by the Committee for purposes of
the Plan;
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(b) For Participants who are Non-Employee Board Directors or
Non-Employee Subsidiary Directors, retirement from the applicable board of
directors after attaining the maximum age (if any) specified in the
articles of incorporation or bylaws of the applicable corporation; or
(c) For Participants who are Consultants, termination of service as
a Consultant after attaining a retirement age specified by the Committee
for purposes of an Award to such Consultant.
However, the Committee may change the foregoing definition of
"Retirement" or may adopt a different definition for purposes of specific
Awards.
"SHARE" means a share of Common Stock.
"STOCK APPRECIATION RIGHT" or "SAR" means an Award to benefit from
the appreciation of Common Stock granted pursuant to the provisions of
Article 8 of the Plan. "Subsidiary" means a "subsidiary corporation" of
Corporation, within the meaning of Section 425 of the Code, namely any
corporation in which Corporation directly or indirectly controls 50
percent or more of the total combined voting power of all classes of stock
having voting power.
"VEST," "VESTING," or "VESTED" means:
(a) In the case of an Award that requires exercise, to be or to
become immediately and fully exercisable and free of all Restrictions
(other than Continuing Restrictions);
(b) In the case of an Award that is subject to forfeiture, to be or
to become nonforfeitable, freely transferable, and free of all
Restrictions (other than Continuing Restrictions);
(c) In the case of an Award that is required to be earned by
attaining specified Performance Goals, to be or to become earned and
nonforfeitable, freely transferable, and free of all Restrictions (other
than Continuing Restrictions); or
(d) In the case of any other Award as to which payment is not
dependent solely upon the exercise of a right, election, or option, to be
or to become immediately payable and free of all Restrictions (except
Continuing Restrictions).
2.2 GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine or feminine terminology used in the Plan also includes the
opposite gender; and the definition of any term in Section 2.1 in the singular
also includes the plural, and vice versa.
Article 3
ADMINISTRATION
3.1 General. The Plan will be administered by a Committee composed as
described in Section 3.2
3.2 Composition of the Committee. The Committee will be appointed by the
Board and will consist of not less than a sufficient number of Non-Employee
Board Directors so as to qualify the Committee to administer the Plan as
contemplated by Section 162(m)(4)(C) of the Code and Rule 16b-3 under the
Exchange Act. The Board may from time to time remove members from, or add
members to, the Committee. Vacancies on the Committee, however caused, will be
filled by the Board. In the event that the Committee ceases to satisfy the
requirements of Section 162(m)(4)(C) or Rule 16b-3, the Board will reconstitute
the Committee as necessary to satisfy such requirements.
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3.3 Authority of the Committee. The Committee has full power and authority
(subject to such orders or resolutions as may be issued or adopted from time to
time by the Board) to administer the Plan in its sole discretion, including the
authority to:
(a) Construe and interpret the Plan and any Award Agreement;
(b) Promulgate, amend, and rescind rules and procedures relating to
the implementation of the Plan;
(c) Select the employees, Non-Employee Board Directors, Non-Employee
Subsidiary Directors, and Consultants who will be granted Awards;
(d) Determine the number and types of Awards to be granted to each
such Participant;
(e) Determine the number of Shares, or Share equivalents, to be
subject to each Award;
(f) Determine the option price, purchase price, base price, or
similar feature for any Award; and
(g) Determine all the terms and conditions of all Award Agreements,
consistent with the requirements of the Plan.
Decisions of the Committee, or any delegate as permitted by the Plan, will
be final, conclusive, and binding on all Participants.
3.4 ACTION BY THE COMMITTEE. A majority of the members of the Committee
will constitute a quorum for the transaction of business. Action approved by a
majority of the members present at any meeting at which a quorum is present, or
action in writing by all of the members of the Committee, will be the valid acts
of the Committee.
3.5 DELEGATION. Notwithstanding the foregoing, the Committee may delegate
to one or more officers of Corporation the authority to determine the
recipients, types, amounts, and terms of Awards granted to Participants who are
not Reporting Persons.
3.6 LIABILITY OF COMMITTEE MEMBERS. No member of the Committee will be
liable for any action or determination made in good faith with respect to the
Plan, any Award, or any Participant.
3.7 COSTS OF PLAN. The costs and expenses of administering the Plan will
be borne by Corporation.
Article 4
DURATION OF THE PLAN AND SHARES SUBJECT TO THE PLAN
4.1 DURATION OF THE PLAN. The Plan is effective March 1, 2003, subject to
approval by Corporation's shareholders as provided in Article 18. The Plan will
remain in effect until Awards have been granted covering all the available
Shares or the Plan is otherwise terminated by the Board. Termination of the Plan
will not affect outstanding Awards.
4.2 SHARES SUBJECT TO THE PLAN. The shares which may be made subject to
Awards under the Plan are Shares of Common Stock, which may be either authorized
and unissued Shares or reacquired Shares. No fractional Shares may be issued
under the Plan. Subject to adjustment pursuant to Article 15, the maximum number
of Shares for which Awards may be granted under the Plan is 400,000, of which
100,000 Shares are reserved for issuance to California residents pursuant to the
California Plan. If an Award under the Plan (or any option previously granted
under the Prior Plans) is canceled or expires for any reason prior to having
been fully Vested or exercised by a Participant or is settled in cash in lieu of
Shares or is exchanged for other Awards, all Shares covered by such Awards will
be added back into the number of Shares available for future Awards under the
Plan or the
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California Plan, as the case may be. In addition, the Committee may from time to
time in its discretion transfer shares from the California Plan to the Plan.
4.3 GRANTS TO CALIFORNIA RESIDENTS. So long as (a) the Awards and the
Shares subject to Awards must be registered under the California Securities
Laws; and (b) the California Securities Laws continue to impose substantive
requirements on stock plans comparable to those found under Section 25102(o) and
related regulations of the California Securities Laws, no Awards may be made to
a Participant who resides in the state of California except pursuant to the
California Plan.
Article 5
ELIGIBILITY
5.1 EMPLOYEES, CONSULTANTS, AND NON-EMPLOYEE SUBSIDIARY DIRECTORS.
Officers and other key employees of Corporation and its Subsidiaries (including
employees who may also be directors of Corporation or a Subsidiary),
Consultants, and Non-Employee Subsidiary Directors who, in the Committee's
judgment, are or will be contributors to the long-term success of Corporation
are eligible to receive Awards under the Plan.
5.2 NON-EMPLOYEE BOARD DIRECTORS. All Non-Employee Board Directors are
eligible to receive Annual Director Options pursuant to Article 14 of the Plan
and such other Awards, if any, as the Committee determines from time to time.
Article 6
AWARDS
6.1 Types of Awards. The types of Awards that may be granted under the
Plan are:
(a) Options governed by Article 7 of the Plan;
(b) Stock Appreciation Rights governed by Article 8 of the Plan;
(c) Restricted Awards governed by Article 9 of the Plan;
(d) Performance Awards governed by Article 10 of the Plan;
(e) Other Stock-Based Awards or combination awards governed by
Article 11 of the Plan; and
(f) Annual Director Options governed by Article 14 of the Plan.
In the discretion of the Committee, any Award (other than an Annual Director
Option) may be granted alone, in addition to, or in tandem with other Awards
under the Plan.
6.2 GENERAL. Subject to the limitations of the Plan, the Committee may
cause Corporation to grant Awards to such Participants, at such times, of such
types, in such amounts, for such periods, with such option prices, purchase
prices, or base prices, and subject to such terms, conditions, limitations, and
restrictions as the Committee, in its discretion, deems appropriate. Awards may
be granted as additional compensation to a Participant or in lieu of other
compensation to such Participant. A Participant may receive more than one Award
and more than one type of Award under the Plan.
6.3 NONUNIFORM DETERMINATIONS. The Committee's determinations under the
Plan or under one or more Award Agreements, including, without limitation, (a)
the selection of Participants to receive Awards, (b) the type, form, amount, and
timing of Awards, (c) the terms of specific Award Agreements, and (d) elections
and determinations made by the Committee with respect to exercise or payments of
Awards, need not be uniform and may be made by the Committee selectively among
Participants and Awards, whether or not Participants are similarly situated.
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6.4 AWARD AGREEMENTS. Each Award will be evidenced by a written Award
Agreement between Corporation and the Participant. Award Agreements may, subject
to the provisions of the Plan, contain any provision approved by the Committee.
6.5 PROVISIONS GOVERNING ALL AWARDS. All Awards are subject to the
following provisions:
(a) ALTERNATIVE AWARDS. If any Awards are designated in their Award
Agreements as alternative to each other, the exercise of all or part of
one Award will automatically cause an immediate equal (or pro rata)
corresponding termination of the other alternative Award or Awards.
(b) RIGHTS AS SHAREHOLDERS. No Participant will have any rights of a
shareholder with respect to Shares subject to an Award until such Shares
are issued in the name of the Participant.
(c) EMPLOYMENT RIGHTS. Neither the adoption of the Plan nor the
granting of any Award confers on any person the right to continued
employment with Corporation or any Subsidiary or the right to remain as a
director of or a Consultant to Corporation or any Subsidiary, as the case
may be, nor does it interfere in any way with the right of Corporation or
a Subsidiary to terminate such person's employment or to remove such
person as a Consultant or as a director at any time for any reason, with
or without cause.
(d) RESTRICTION ON TRANSFER. Unless otherwise expressly provided in
an individual Award Agreement, each Award (other than Restricted Shares
after they Vest) will not be transferable other than by will or the laws
of descent and distribution and will be exercisable (if exercise is
required), during the lifetime of the Participant, only by the Participant
or, in the event the Participant becomes legally incompetent, by the
Participant's guardian or legal representative. Notwithstanding the
foregoing, the Committee, in its discretion, may provide in any Award
Agreement that the Award:
o May be freely transferred;
o May be freely transferred to a class of transferees
specified in the Award Agreement; or
o May be transferred, but only subject to any terms and
conditions specified in the Award Agreement (including, without
limitation, a condition that an Award may only be transferred
without payment of consideration).
Furthermore, notwithstanding the foregoing, any Award may be surrendered
to Corporation pursuant to Section 6.5(h) in connection with the payment
of the purchase or option price of another Award or the payment of the
Participant's federal, state, or local tax withholding obligation with
respect to the exercise or payment of another Award.
(e) Termination of Employment. The terms and conditions under which
an Award may be exercised, if at all, after a Participant's termination of
employment or service as a Non-Employee Board Director, Non-Employee
Subsidiary Director, or Consultant will be determined by the Committee and
specified in the applicable Award Agreement.
(f) Change in Control. The Committee, in its discretion, may provide
in any Award Agreement that:
(i) In the event of a change in control of Corporation (as the
Committee may define such term in the Award Agreement), each
outstanding Award will become immediately Vested to the full extent
not previously Vested. Any such acceleration of Award Vesting must
comply with applicable regulatory requirements and any Participant
will be entitled to decline the accelerated Vesting of all or any
portion of his or her Award, if he or she determines that such
acceleration may result in adverse tax consequences to him or her;
and
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(ii) In the event the Board approves a proposal for: (i)
merger, exchange or consolidation in which Corporation is not the
resulting or surviving corporation (or in which Corporation is the
resulting or surviving corporation but becomes a subsidiary of
another corporation); (ii) transfer of all or substantially all the
assets of Corporation; (iii) sale of 30 percent or more of the
combined voting power of Corporation's voting securities; or (iv)
the dissolution or liquidation of Corporation (each, a
"Transaction"), the Committee will notify Participants in writing of
the proposed Transaction (the "Proposal Notice") at least 30 days
prior to the effective date of the proposed Transaction. The
Committee may, in its 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:
(A) The Committee may provide that outstanding Awards
will be converted into or replaced by Awards of a similar type
in the stock of the surviving or acquiring corporation in the
Transaction. The amount and type of securities subject to and
the exercise price (if applicable) of the replacement or
converted Awards will be determined by the Committee based on
the exchange ratio, if any, used in determining shares of the
surviving corporation to be issued to holders of Shares of
Corporation. If there is no exchange ratio in the Transaction,
the Committee will, in making its determination, take into
account the relative values of the companies involved in the
Transaction and such other factors as the Committee deems
relevant. Such replacement or converted Awards will continue
to Vest over the period (and at the same rate) as the Awards
which the replacement or converted Awards replaced, unless
determined otherwise by the Committee;
(B) The Committee may provide a 30-day period prior to
the consummation of the Transaction during which all
outstanding Awards will tentatively become fully Vested, and
upon consummation of such Transaction, all outstanding and
unexercised Awards will immediately terminate. If the
Committee elects to provide such 30-day period for the
exercise of Awards, the Proposal Notice must so state.
Participants, by written notice to Corporation, may exercise
their Awards and, in so exercising the Awards, may condition
such exercise upon, and provide that such exercise will become
effective immediately prior to, the consummation of the
Transaction, in which event Participants need not make payment
for any Common Stock to be purchased upon exercise of an Award
until five days after written notice by Corporation to the
Participants that the Transaction has been consummated (the
"Transaction Notice"). If the Transaction is consummated, each
Award, to the extent not previously exercised prior to the
consummation of the Transaction, will terminate and cease
being exercisable as of the effective date of such
consummation. If the Transaction is abandoned, (1) all
outstanding Awards not exercised will continue to be Vested
and exercisable, to the extent such Awards were Vested and
exercisable prior to the date of the Proposal Notice, and (2)
to the extent that any Awards not exercised prior to such
abandonment have become Vested and exercisable solely by
operation of this Section 6.5(f)(ii), such Vesting and
exercisability will be deemed annulled, and the Vesting and
exercisability provisions otherwise in effect will be
reinstituted, as of the date of such abandonment; or
(C) The Committee may provide that outstanding Awards
that are not fully Vested will become fully Vested subject to
Corporation's right to pay each Participant a cash amount
(determined by the Committee and based on the amount, if any,
being received by Corporation's shareholders in the
Transaction) in exchange for cancellation of the applicable
Award.
Unless the Committee specifically provides otherwise in the change
in control provision for a specific Award Agreement, Awards will become
Vested as of a change in control date only if, or to
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the extent, such acceleration in the Vesting of the Awards does not result
in an "excess parachute payment" within the meaning of Section 280G(b) of
the Code. The Committee, in its discretion, may include change in control
provisions in some Award Agreements and not in others, may include
different change in control provisions in different Award Agreements, and
may include change in control provisions for some Awards or some
Participants and not for others.
(g) Conditioning or Accelerating Benefits. The Committee, in its
discretion, may include in any Award Agreement a provision conditioning or
accelerating the Vesting of an Award or the receipt of benefits pursuant
to an Award, either automatically or in the discretion of the Committee,
upon the occurrence of specified events, including without limitation, a
change in control of Corporation (subject to the foregoing paragraph (f)),
a sale of all or substantially all of the property and assets of
Corporation, or an event of the type described in Article 15 of this Plan.
(h) Payment of Purchase Price and Withholding. The Committee, in its
discretion, may include in any Award Agreement a provision permitting the
Participant to pay the purchase or option price, if any, for the Shares or
other property issuable pursuant to the Award, or the Participant's
federal, state, or local tax withholding obligation with respect to such
issuance in whole or in part by any one or more of the following methods;
provided, however, that the availability of any one or more methods of
payment may be suspended from time to time if the Committee determines
that the use of such payment method would result in adverse financial
accounting treatment for Corporation:
(i) By delivering previously owned Shares (including
Restricted Shares, whether or not Vested);
(ii) By surrendering other outstanding Vested Awards under the
Plan denominated in Shares or in Share equivalent units;
(iii) By reducing the number of Shares or other property
otherwise Vested and issuable pursuant to the Award;
(iv) Unless specifically prohibited by any applicable statute
or rule, including, without limitation, the provisions of the
Sarbanes-Oxley Act of 2002, by delivering to Corporation a
promissory note payable on such terms and over such period as the
Committee may determine;
(v) By delivery (in a form approved by the Committee) of an
irrevocable direction to a securities broker acceptable to the
Committee (subject to the provisions of the Sarbanes-Oxley Act of
2002 and any other applicable statute or rule):
(A) To sell Shares subject to the Award and to deliver
all or a part of the sales proceeds to Corporation in payment
of all or a part of the option or purchase price and taxes or
withholding taxes attributable to the issuance; or
(B) To pledge Shares subject to the Award to the broker
as security for a loan and to deliver all or a part of the
loan proceeds to Corporation in payment of all or a part of
the option or purchase price and taxes or withholding taxes
attributable to the issuance; or
(vi) In any combination of the foregoing or in any other form
approved by the Committee.
If Restricted Shares are surrendered in full or partial payment of
the purchase or option price of Shares issuable under an Award, a
corresponding number of the Shares issued upon exercise of the Award will
be Restricted Shares subject to the same Restrictions as the surrendered
Restricted Shares. Shares withheld or surrendered as described above will
be valued based on their Fair Market Value on the date of the transaction.
Any Shares withheld or surrendered with respect to a
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Reporting Person will be subject to such additional conditions and
limitations as the Committee may impose to comply with the requirements of
the Exchange Act.
(i) Reporting Persons. With respect to all Awards granted to
Reporting Persons:
(i) Awards requiring exercise will not be exercisable
until at least six months after the date the Award was
granted, except in the case of the death or Disability of the
Participant; and
(ii) Shares issued pursuant to any other Award may not
be sold by the Participant for at least six months after
acquisition, except in the case of the death or Disability of
the Participant; provided, however, that (unless an Award
Agreement provides otherwise) the limitation of this Section
6.5(i) will apply only if or to the extent required by Rule
16b-3 under the Exchange Act. Award Agreements for Awards to
Reporting Persons must also comply with any future
restrictions imposed by such Rule 16b-3.
(j) Service Periods. At the time of granting Awards, the
Committee may specify, by resolution or in the Award Agreement, the
period or periods of service performed or to be performed by the
Participant in connection with the grant of the Award.
Article 7
OPTIONS
7.1 TYPES OF OPTIONS. Options granted under the Plan may be in the form of
Incentive Stock Options or Nonqualified Options (including Deferred Compensation
Options and Annual Director Options). The grant of each Option and the Award
Agreement governing each Option will identify the Option as an ISO or an NQO. In
the event the Code is amended to provide for tax-favored forms of stock options
other than or in addition to Incentive Stock Options, the Committee may grant
Options under the Plan meeting the requirements of such forms of options.
7.2 GENERAL. All Options will be subject to the terms and conditions set
forth in Article 6 and this Article 7 and Award Agreements governing Options may
contain such additional terms and conditions, not inconsistent with the express
provisions of the Plan, as the Committee deems desirable; provided, however,
that California Options will be governed by the California Plan.
7.3 OPTION PRICE. Each Award Agreement for Options will state the option
exercise price per Share of Common Stock purchasable under the Option, which may
not be less than:
(a) $.01 per share in the case of a Deferred Compensation Option;
(b) 75 percent of the Fair Market Value of a Share on the date of
grant for all other Nonqualified Options (except Annual Director Options);
or
(c) 100 percent of the Fair Market Value of a Share on the date of
grant for all Incentive Stock Options.
7.4 OPTION TERM. The Award Agreement for each Option will specify the term
of each Option, which may be unlimited or may have a specified period during
which the Option may be exercised, as determined by the Committee.
7.5 TIME OF EXERCISE. The Award Agreement for each Option will specify, as
determined by the Committee:
(a) The time or times when the Option becomes exercisable and
whether the Option becomes exercisable in full or in graduated amounts
based on: (i) continuation of employment over a period specified in the
Award Agreement, (ii) satisfaction of performance goals or criteria
specified in the Award Agreement, or (iii) a combination of continuation
of employment and satisfaction of performance goals or criteria;
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(b) Such other terms, conditions, and restrictions as to when the
Option may be exercised as determined by the Committee; and
(c) The extent, if any, to which the Option will remain exercisable
after the Participant ceases to be an employee, Consultant, or director of
Corporation or a Subsidiary.
An Award Agreement for an Option may, in the discretion of the Committee,
provide whether, and to what extent, the time when an Option becomes exercisable
may be accelerated or otherwise modified (i) in the event of the death,
Disability, or Retirement of the Participant, or (ii) upon the occurrence of a
change in control of Corporation. The Committee may, at any time in its
discretion, accelerate the time when all or any portion of an outstanding Option
becomes exercisable.
7.6 SPECIAL RULES FOR INCENTIVE STOCK OPTIONS. In the case of an Option
designated as an Incentive Stock Option, the terms of the Option and the Award
Agreement will conform with the statutory and regulatory requirements specified
pursuant to Section 422 of the Code, as in effect on the date such ISO is
granted. ISOs may be granted only to employees of Corporation or a Subsidiary.
ISOs may not be granted under the Plan after ten years following the date
specified in Section 4.1, unless the ten-year limitation of Section 422(b)(2) of
the Code is removed or extended.
7.7 RESTRICTED SHARES. In the discretion of the Committee, the Shares
issuable upon exercise of an Option may be Restricted Shares if so provided in
the Award Agreement for the Option.
7.8 DEFERRED COMPENSATION OPTIONS. The Committee may, in its discretion,
grant Deferred Compensation Options with an option price less than Fair Market
Value to provide a means for deferral to future dates of compensation otherwise
payable to a Participant. The option price will be determined by the Committee
subject to Section 7.3(a)of the Plan. The number of Shares subject to a Deferred
Compensation Option will be determined by the Committee, in its discretion, by
dividing the amount of compensation to be deferred by the difference between the
Fair Market Value of a Share on the date of grant and the option price of the
Deferred Compensation Option. Amounts of compensation deferred with Deferred
Compensation Options may include amounts payable under Awards granted under the
Plan or under any other compensation program or arrangement of Corporation as
permitted by the Committee. The Committee may grant Deferred Compensation
Options only if it reasonably determines that the recipient of such an Option is
not likely to be deemed to be in constructive receipt for income tax purposes of
the income being deferred.
7.9 RELOAD OPTIONS. The Committee, in its discretion, may provide in an
Award Agreement for an Option that in the event all or a portion of the Option
is exercised by the Participant using previously acquired Shares, the
Participant will automatically be granted (subject to the available pool of
Shares subject to grants of Awards as specified in Section 4.2 of the Plan) a
replacement Option (with an option price equal to the Fair Market Value of a
Share on the date of such exercise) for a number of Shares equal to (or equal to
a portion of) the number of shares surrendered upon exercise of the Option. Such
reload Option features may be subject to such terms and conditions as the
Committee determines, including, without limitation, a condition that the
Participant retain the Shares issued upon exercise of the Option for a specified
period of time.
7.10 LIMITATION ON NUMBER OF SHARES SUBJECT TO OPTIONS. In no event may
Options for more than 200,000 Shares be granted to any individual under the Plan
during any calendar year.
Article 8
STOCK APPRECIATION RIGHTS
8.1 GENERAL. Stock Appreciation Rights are subject to the terms and
conditions set forth in Article 6 and this Article 8 and Award Agreements
governing Stock Appreciation Rights may contain such additional terms and
conditions, not inconsistent with the express terms of the Plan, as the
Committee deems desirable.
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8.2 NATURE OF STOCK APPRECIATION RIGHT. A Stock Appreciation Right is an
Award entitling a Participant to receive an amount equal to the excess (or, if
the Committee determines at the time of grant, a portion of the excess) of the
Fair Market Value of a Share of Common Stock on the date of exercise of the SAR
over the base price, as described below, on the date of grant of the SAR,
multiplied by the number of Shares with respect to which the SAR is being
exercised. The base price will be designated by the Committee in the Award
Agreement for the SAR and may be the Fair Market Value of a Share on the grant
date of the SAR or such other higher or lower price as the Committee determines.
8.3 EXERCISE. A Stock Appreciation Right may be exercised by a Participant
in accordance with procedures established by the Committee. The Committee may
also provide that a SAR will be automatically exercised on one or more specified
dates or upon the satisfaction of one or more specified conditions. In the case
of SARs granted to Reporting Persons, exercise of the SARs will be limited by
the Committee to the extent required to comply with the applicable requirements
of Rule 16b-3 under the Exchange Act.
8.4 FORM OF PAYMENT. Payment upon exercise of a Stock Appreciation Right
may be made in cash, in installments, in Shares, by issuance of a Deferred
Compensation Option, or in any combination of the foregoing, or in any other
form as the Committee may determine.
8.5 LIMITATION ON NUMBER OF STOCK APPRECIATION RIGHTS. In no event may
more than 200,000 Stock Appreciation Rights be granted to any individual under
the Plan during any calendar year.
Article 9
RESTRICTED AWARDS
9.1 TYPES OF RESTRICTED AWARDS. Restricted Awards granted under the Plan
may be in the form of either Restricted Shares or Restricted Units.
(a) RESTRICTED SHARES. A Restricted Share is an Award of Shares
transferred to a Participant subject to such terms and conditions as the
Committee deems appropriate, including, without limitation, restrictions
on the sale, assignment, transfer, or other disposition of such Restricted
Shares and may include a requirement that the Participant forfeit such
Restricted Shares back to Corporation upon termination of Participant's
employment (or service as a Non-Employee Board Director, Non-Employee
Subsidiary Director, or Consultant) for specified reasons within a
specified period of time or upon other conditions, as set forth in the
Award Agreement for such Restricted Shares. Each Participant receiving a
Restricted Share will be issued a stock certificate in respect of such
Shares, registered in the name of such Participant, and will execute a
stock power in blank with respect to the Shares evidenced by such
certificate. The certificate evidencing such Restricted Shares and the
stock power will be held in custody by Corporation until the Restrictions
have lapsed.
(b) RESTRICTED UNITS. A Restricted Unit is an Award of units (with
each unit having a value equivalent to one Share) granted to a Participant
subject to such terms and conditions as the Committee deems appropriate,
and may include a requirement that the Participant forfeit such Restricted
Units upon termination of Participant's employment (or service as a
Non-Employee Board Director, Non-Employee Subsidiary Director, or
Consultant) for specified reasons within a specified period of time or
upon other conditions, as set forth in the Award Agreement for such
Restricted Units.
9.2 GENERAL. Restricted Awards are subject to the terms and conditions of
Article 6 and this Article 9 and Award Agreements governing Restricted Awards
may contain such additional terms and conditions, not inconsistent with the
express provisions of the Plan, as the Committee deems desirable.
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9.3 RESTRICTION PERIOD. Award Agreements for Restricted Awards will
provide that Restricted Awards, and the Shares subject to Restricted Awards, may
not be transferred, and may provide that, in order for a Participant to Vest in
such Restricted Awards, the Participant must remain in the employment (or remain
as a Non-Employee Board Director, Non-Employee Subsidiary Director, or
Consultant) of Corporation or its Subsidiaries, subject to relief for reasons
specified in the Award Agreement, for a period commencing on the grant date of
the Award and ending on such later date or dates as the Committee may designate
at the time of the Award (the "Restriction Period"). During the Restriction
Period, a Participant may not sell, assign, transfer, pledge, encumber, or
otherwise dispose of Shares received under or governed by a Restricted Award
grant. The Committee, in its sole discretion, may provide for the lapse of
restrictions in installments during the Restriction Period. Upon expiration of
the applicable Restriction Period (or lapse of Restrictions during the
Restriction Period where the Restrictions lapse in installments) the Participant
will be entitled to settlement of the Restricted Award or portion thereof, as
the case may be. Although Restricted Awards will usually Vest based on continued
employment (or service as a Non-Employee Board Director, Non-Employee Subsidiary
Director, or Consultant) and Performance Awards under Article 10 will usually
Vest based on attainment of Performance Goals, the Committee, in its discretion,
may condition Vesting of Restricted Awards on attainment of Performance Goals as
well as continued employment (or service as a Non-Employee Board Director,
Non-Employee Subsidiary Director, or Consultant). In such case, the Restriction
Period for such a Restricted Award must include the period prior to satisfaction
of the Performance Goals.
9.4 FORFEITURE. If a Participant ceases to be an employee (or Consultant,
Non-Employee Board Director, or Non-Employee Subsidiary Director) of Corporation
or a Subsidiary during the Restriction Period for any reason other than reasons
which may be specified in an Award Agreement (such as death, Disability, or
Retirement) the Award Agreement may require that all non-Vested Restricted
Awards previously granted to the Participant be forfeited and returned to
Corporation.
9.5 SETTLEMENT OF RESTRICTED AWARDS.
(a) RESTRICTED SHARES. Upon Vesting of a Restricted Share Award, the
legend on such Shares will be removed, the Participant's stock power will
be returned and the Shares will no longer be Restricted Shares. The
Committee may also, in its discretion, permit a Participant to receive, in
lieu of unrestricted Shares at the conclusion of the Restriction Period,
payment in cash, in installments, or by issuance of a Deferred
Compensation Option equal to the Fair Market Value of the Restricted
Shares as of the date the Restrictions lapse.
(b) RESTRICTED UNITS. Upon Vesting of a Restricted Unit Award, a
Participant is entitled to receive payment for Restricted Units in an
amount equal to the aggregate Fair Market Value of the Shares covered by
such Restricted Units at the expiration of the Applicable Restriction
Period. Payment in settlement of a Restricted Unit will be made as soon as
practicable following the conclusion of the applicable Restriction Period
in cash, in installments, in Shares equal to the number of Restricted
Units, by issuance of a Deferred Compensation Option, or in any other
manner or combination of such methods as the Committee, in its sole
discretion, determines.
9.6 RIGHTS AS A SHAREHOLDER. A Participant has, with respect to
unforfeited Shares received under a grant of Restricted Shares, all the rights
of a shareholder of Corporation, including the right to vote the shares, and the
right to receive any cash dividends. Stock dividends issued with respect to
Restricted Shares will be treated as additional Shares covered by the grant of
Restricted Shares and will be subject to the same Restrictions.
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Article 10
PERFORMANCE AWARDS
10.1 GENERAL. Performance Awards are subject to the terms and conditions
set forth in Article 6 and this Article 10 and Award Agreements governing
Performance Awards may contain such other terms and conditions not inconsistent
with the express provisions of the Plan, as the Committee deems desirable.
10.2 NATURE OF PERFORMANCE AWARDS. A Performance Award is an Award of
units (with each unit having a value equivalent to one Share) granted to a
Participant subject to such terms and conditions as the Committee deems
appropriate, including, without limitation, the requirement that the Participant
forfeit such Performance Award or a portion thereof in the event specified
performance criteria are not met within a designated period of time.
10.3 PERFORMANCE CYCLES. For each Performance Award, the Committee will
designate a performance period (the "Performance Cycle") with a duration to be
determined by the Committee in its discretion within which specified Performance
Goals are to be attained. There may be several Performance Cycles in existence
at any one time and the duration of Performance Cycles may differ from each
other.
10.4 PERFORMANCE GOALS. The Committee will establish Performance Goals for
each Performance Cycle on the basis of such criteria and to accomplish such
objectives as the Committee may from time to time select. Performance Goals may
be based on (i) performance criteria for Corporation, a Subsidiary, or an
operating group, (ii) a Participant's individual performance, or (iii) a
combination of both. Performance Goals may include objective and subjective
criteria. During any Performance Cycle, the Committee may adjust the Performance
Goals for such Performance Cycle as it deems equitable in recognition of unusual
or nonrecurring events affecting Corporation, changes in applicable tax laws or
accounting principles, or such other factors as the Committee may determine.
10.5 DETERMINATION OF AWARDS. As soon as practicable after the end of a
Performance Cycle, the Committee will determine the extent to which Performance
Awards have been earned on the basis of performance in relation to the
established Performance Goals.
10.6 TIMING AND FORM OF PAYMENT. Settlement of earned Performance Awards
will be made to the Participant as soon as practicable after the expiration of
the Performance Cycle and the Committee's determination under Section 10.5, in
the form of cash, installments, Shares, Deferred Compensation Options, or any
combination of the foregoing or in any other form as the Committee determines.
ARTICLE 11
OTHER STOCK-BASED AND COMBINATION AWARDS
11.1 OTHER STOCK-BASED AWARDS. The Committee may grant other Awards under
the Plan pursuant to which Shares are or may in the future be acquired, or
Awards denominated in or measured by Share equivalent units, including Awards
valued using measures other than the market value of Shares. Other Stock-Based
Awards are not restricted to any specific form or structure and may include,
without limitation, Share purchase warrants, other rights to acquire Shares, and
securities convertible into or redeemable for Shares. Such Other Stock-Based
Awards may be granted either alone, in addition to, or in tandem with, any other
type of Award granted under the Plan.
11.2 COMBINATION AWARDS. The Committee may also grant Awards under the
Plan in tandem or combination with other Awards or in exchange of Awards, or in
tandem or combination with, or as alternatives to, grants or rights under any
other employee plan of Corporation, including the plan of any acquired entity.
No action authorized by this section will reduce the amount of any existing
benefits or change the terms and conditions thereof without the Participant's
consent.
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ARTICLE 12
DEFERRAL ELECTIONS
The Committee may permit a Participant to elect to defer receipt of the
payment of cash or the delivery of Shares that would otherwise be due to such
Participant by virtue of the exercise, earn out, or Vesting of an Award made
under the Plan. If any such election is permitted, the Committee will establish
rules and procedures for such payment deferrals, including, but not limited to:
(a) payment or crediting of reasonable interest or other growth or earnings
factor on such deferred amounts credited in cash, (b) the payment or crediting
of dividend equivalents in respect of deferrals credited in Share equivalent
units, or (c) granting of Deferred Compensation Options.
ARTICLE 13
DIVIDEND EQUIVALENTS
Any Awards may, at the discretion of the Committee, earn dividend
equivalents. In respect of any such Award which is outstanding on a dividend
record date for Common Stock, the Participant may be credited with an amount
equal to the amount of cash or stock dividends that would have been paid on the
Shares covered by such Award, had such covered Shares been issued and
outstanding on such dividend record date. The Committee will establish such
rules and procedures governing the crediting of dividend equivalents, including
the timing, form of payment, and payment contingencies of such dividend
equivalents, as it deems appropriate or necessary.
ARTICLE 14
Annual DIRECTOR Options
14.1 GENERAL. All Non-Employee Board Directors will receive Annual
Director Options pursuant to this Article 14.
14.2 ELIGIBILITY. The persons eligible to receive Awards pursuant to this
Article 14 are all Non-Employee Board Directors of Corporation.
14.3 DEFINITIONS. For purposes of this Article 14, "Annual Meeting Date"
means the date of Corporation's regular annual meeting of shareholders.
14.4 ANNUAL DIRECTOR OPTIONS.
(a) GRANT OF ANNUAL DIRECTOR OPTIONS. As of each Annual Meeting
Date, each Non-Employee Board Director whose term begins on or continues
after that Annual Meeting Date will be granted automatically an Annual
Director Option to purchase 1,000 Shares.
(b) OPTION PRICE. The option exercise price for each Annual Director
Option will be equal to the Fair Market Value of a Share as of the Annual
Meeting Date.
(c) TERMS OF ANNUAL DIRECTOR OPTIONS. Each Annual Director Option
will have the terms and conditions specified in the form of Award
Agreement attached to this Plan as Exhibit B; provided, however, that if
such Option is a California Option, it will be issued pursuant to the
California Plan.
ARTICLE 15
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
15.1 PLAN DOES NOT RESTRICT CORPORATION. The existence of the Plan and the
Awards granted under the Plan will not affect or restrict in any way the right
or power of the Board or the shareholders of Corporation to make or authorize
any adjustment, recapitalization, reorganization, or other change in
Corporation's capital structure or its business, any merger or consolidation of
the Corporation, any issue of bonds, debentures, preferred or prior preference
stocks ahead of or affecting
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Corporation's capital stock or the rights thereof, the dissolution or
liquidation of Corporation or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding.
15.2 ADJUSTMENTS BY THE COMMITTEE. In the event of any change in
capitalization affecting the Common Stock of Corporation, such as a stock
dividend, stock split, recapitalization, merger, consolidation, split-up,
combination or exchange of shares or other form of reorganization, or any other
change affecting the Common Stock, such proportionate adjustments, if any, as
the Committee, in its sole discretion, may deem appropriate to reflect such
change, will be made with respect to the aggregate number of Shares for which
Awards in respect thereof may be granted under the Plan, the maximum number of
Shares which may be sold or awarded to any Participant, the number of Shares
covered by each outstanding Award, and the base price or purchase price per
Share in respect of outstanding Awards. The Committee may also make such
adjustments in the number of Shares covered by, and price or other value of, any
outstanding Awards in the event of a spin-off or other distribution (other than
normal cash dividends), of Corporation assets to shareholders.
ARTICLE 16
AMENDMENT AND TERMINATION
The Board may amend, suspend, or terminate the Plan or any portion of the
Plan at any time, provided that no amendment may be made without shareholder
approval if such approval is required by applicable law or the requirements of
an applicable stock exchange or registered securities association.
ARTICLE 17
MISCELLANEOUS
17.1 TAX WITHHOLDING. Corporation has the right to deduct from any
settlement of any Award under the Plan, including the delivery or Vesting of
Shares or Awards, any federal, state, or local taxes of any kind required by law
to be withheld with respect to such payments or to take such other action as may
be necessary in the opinion of Corporation to satisfy all obligations for the
payment of such taxes. The recipient of any payment or distribution under the
Plan has the obligation to make arrangements satisfactory to Corporation for the
satisfaction of any such tax withholding obligations. Corporation will not be
required to make any such payment or distribution under the Plan until such
obligations are satisfied.
17.2 UNFUNDED PLAN. The Plan will be unfunded and Corporation will not be
required to segregate any assets that may at any time be represented by Awards
under the Plan. Any liability of Corporation to any person with respect to any
Award under the Plan will be based solely upon any contractual obligations that
may be effected pursuant to the Plan. No such obligation of Corporation will be
deemed to be secured by any pledge of, or other encumbrance on, any property of
Corporation.
17.3 PAYMENTS TO TRUST. The Committee is authorized to cause to be
established a trust agreement or several trust agreements whereunder the
Committee may make payments of amounts due or to become due to Participants in
the Plan.
17.4 ANNULMENT OF AWARDS. Any Award Agreement may provide that the grant
of an Award payable in cash is revocable until cash is paid in settlement
thereof or that grant of an Award payable in Shares is revocable until the
Participant becomes entitled to the certificate in settlement thereof. In the
event the employment (or service as a Non-Employee Board Director, Non-Employee
Subsidiary Director, or Consultant) of a Participant is terminated for cause (as
defined below), any Award which is revocable will be annulled as of the date of
such termination for cause. For the purpose of this Section 17.4, the term "for
cause" has the meaning set forth in the Participant's employment agreement, if
any, or otherwise means any discharge (or removal) for material or flagrant
violation of
the policies and procedures of Corporation or for other performance or conduct
which is materially detrimental to the best interests of Corporation, as
determined by the Committee.
17.5 ENGAGING IN COMPETITION WITH CORPORATION. Any Award Agreement may
provide that, if a Participant terminates employment (or service as a
Non-Employee Board Director, Non-Employee Subsidiary Director, or Consultant)
with Corporation or a Subsidiary for any reason whatsoever, and within a period
of time (as specified in the Award Agreement) after the date thereof accepts
employment with any competitor of (or otherwise engages in competition with)
Corporation, the Committee, in its sole discretion, may require such Participant
to return to Corporation the economic value of any Award that is realized or
obtained (measured at the date of exercise, Vesting, or payment) by such
Participant at any time during the period beginning on the date that is six
months prior to the date of such Participant's termination of employment (or
service as a Non-Employee Board Director, Non-Employee Subsidiary Director, or
Consultant) with Corporation.
17.6 OTHER CORPORATION BENEFIT AND COMPENSATION PROGRAMS. Payments and
other benefits received by a Participant under an Award made pursuant to the
Plan are not to be deemed a part of a Participant's regular, recurring
compensation for purposes of the termination indemnity or severance pay law of
any state or country and will not be included in, or have any effect on, the
determination of benefits under any other employee benefit plan or similar
arrangement provided by Corporation or a Subsidiary unless expressly so provided
by such other plan or arrangements, or except where the Committee expressly
determines that an Award or portion of an Award should be included to accurately
reflect competitive compensation practices or to recognize that an Award has
been made in lieu of a portion of cash compensation. Awards under the Plan may
be made in combination with or in tandem with, or as alternatives to, grants,
awards, or payments under any other Corporation or Subsidiary plans,
arrangements, or programs. The Plan notwithstanding, Corporation or any
Subsidiary may adopt such other compensation programs and additional
compensation arrangements as it deems necessary to attract, retain, and reward
employees and directors for their service with Corporation and its Subsidiaries.
17.7 SECURITIES LAW RESTRICTIONS. No Shares may be issued under the Plan
unless counsel for Corporation is satisfied that such issuance will be in
compliance with applicable federal and state securities laws. Certificates for
Shares delivered under the Plan may be subject to such stop-transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange or registered securities association upon which the Common
Stock is then listed or quoted, and any applicable federal or state securities
laws. The Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
17.8 GOVERNING LAW. Except with respect to references to the Code or
federal securities laws, the Plan and all actions taken thereunder will be
governed by and construed in accordance with the laws of the state of Maryland.
ARTICLE 18
SHAREHOLDER APPROVAL
The adoption of the Plan and the grant of Awards under the Plan are
expressly subject to the approval of the Plan by Corporation's shareholders
holding a majority of Corporation's outstanding Shares.
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Exhibit A
BARRETT BUSINESS SERVICES, INC.
2003 STOCK OPTION PLAN
For California Residents
ARTICLE 1
ESTABLISHMENT AND PURPOSE
Barrett Business Services, Inc. ("Corporation") hereby establishes this
2003 Stock Option Plan for California residents (the "California Plan"). The
purpose of the California Plan is to promote and advance the interests of
Corporation and its shareholders by enabling Corporation to attract, retain, and
reward key employees, directors, and outside consultants of Corporation and its
subsidiaries who reside in the state of California. It is also intended to
strengthen the mutuality of interests between such employees, directors, and
consultants and Corporation's shareholders. The California Plan is designed to
serve these purposes by offering stock options, thereby providing a proprietary
interest in pursuing the long-term growth, profitability, and financial success
of Corporation. In addition to the foregoing, the California Plan is designed to
comply with regulations under California law applicable to the grant of stock
options.
All options under the California Plan will be governed by the terms and
conditions of this plan and a written Award Agreement containing such additional
terms and conditions as are deemed desirable by the Committee and are not
inconsistent with the terms of the California Plan.
ARTICLE 2
DEFINITIONS
2.1 Defined Terms. For purposes of the California Plan, the
following terms have the meanings set forth below:
"ANNUAL DIRECTOR OPTIONS" means Options granted to Non-Employee
Board Directors pursuant to Article 6 of the California Plan.
"AWARD AGREEMENT" means an agreement as described in Section 6.4.
"BOARD" means the Board of Directors of Corporation.
"CALIFORNIA OPTION" means any Option granted to a California
resident.
"CALIFORNIA PLAN" means this Barrett Business Services, Inc. 2003
Stock Option Plan For California Residents, as set forth herein and as it
may be amended from time to time.
"CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, together with rules, regulations, and
interpretations promulgated thereunder. Where the context so requires, any
reference to a particular Code section will be construed to refer to the
successor provision to such Code section.
"COMMITTEE" means the committee appointed by the Board to administer
the California Plan as provided in Article 3.
"COMMON STOCK" means the $.01 par value common stock of Corporation.
"CONSULTANT" means any consultant or adviser to Corporation or a
Subsidiary selected by the Committee, who is not an employee of
Corporation or a Subsidiary.
"DISABILITY" means the condition of being permanently "disabled"
within the meaning of Section 22(e)(3) of the Code, namely being unable to
engage in any substantial gainful activity by
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reason of any medically determinable physical or mental impairment which
can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than 12 months. However, the
Committee may change the foregoing definition of "Disability" or may adopt
a different definition for purposes of specific Awards.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
and in effect from time to time, or any successor statute. Where the
context so requires, any reference to a particular section of the Exchange
Act, or to any rule promulgated under the Exchange Act, will be construed
to refer to successor provisions to such section or rule.
"FAIR MARKET VALUE" means, on any given day, the fair market value
per share of the Common Stock determined as follows:
(a) If the Common Stock is traded on an established securities
exchange, the mean between the reported high and low sale prices of Common
Stock as reported for such day by the principal exchange on which Common
Stock is traded (as determined by the Committee) or, if Common Stock was
not traded on such day, on the next preceding day on which Common Stock
was traded;
(b) If trading activity in Common Stock is reported on The Nasdaq
Stock Market, the mean between the reported high and low sale prices of
Common Stock as reported for such day by Nasdaq or, if Common Stock trades
were not reported on such day, on the next preceding day on which Common
Stock trades were reported by Nasdaq;
(c) If trading activity in Common Stock is reported on the OTC
Bulletin Board, the mean between the bid price and asked price quote for
such day as reported on the OTC Bulletin Board or, if there are no such
quotes for Common Stock for such day, on the next preceding day for which
bid and asked price quotes for Common Stock were reported on the OTC
Bulletin Board; or
(d) If there is no market for Common Stock or if trading activities
for Common Stock are not reported in one of the manners described above,
the fair market value will be as determined by the Committee.
"INCENTIVE STOCK OPTION" or "ISO" means any Option granted pursuant
to the California Plan that is intended to be and is specifically
designated in its Award Agreement as an "incentive stock option" within
the meaning of Section 422 of the Code.
"NON-EMPLOYEE DIRECTOR" means a member of the Board or the board of
directors of a Subsidiary who is not an employee of either Corporation or
a Subsidiary.
"NON-EMPLOYEE BOARD DIRECTOR" means a Non-Employee Director who is a
member of the Board.
"NON-EMPLOYEE SUBSIDIARY DIRECTOR" means a Non-Employee Director who
is a member of the board of directors of a Subsidiary and who is not also
a member of the Board.
"NONQUALIFIED OPTION" or "NQO" means any Option, including a
Deferred Compensation Option, granted pursuant to the California Plan that
is not an Incentive Stock Option.
"OPTION" means an ISO, an NQO, a Deferred Compensation Option, or an
Annual Director Option.
"PARTICIPANT" means an employee or a Consultant of Corporation or a
Subsidiary or a Non-Employee Director, who is granted an Option under the
California Plan.
"REPORTING PERSON" means a Participant who is subject to the
reporting requirements of Section 16(a) of the Exchange Act.
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"RETIREMENT" means:
(a) For Participants who are employees, retirement from active
employment with Corporation and its Subsidiaries on or after age 65, or
such earlier retirement date as approved by the Committee for purposes of
the California Plan;
(b) For Participants who are Non-Employee Directors, retirement from
the applicable board of directors after attaining the maximum age (if any)
specified in the articles of incorporation or bylaws of the applicable
corporation; or
(c) For Participants who are Consultants, termination of service as
a Consultant after attaining a retirement age specified by the Committee
in the Award Agreement for an Option to such Consultant.
However, the Committee may change the foregoing definition of
"Retirement" or may adopt a different definition for purposes of specific
Option grants.
"SHARE" means a share of Common Stock.
"SUBSIDIARY" means a "subsidiary corporation" of Corporation, within
the meaning of Section 425 of the Code, namely any corporation in which
Corporation directly or indirectly controls 50 percent or more of the
total combined voting power of all classes of stock having voting power.
"VEST," "VESTING" or "VESTED" means to be or to become immediately
and fully exercisable.
2.2 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine or feminine terminology used in the California Plan also
includes the opposite gender; and the definition of any term in Section 2.1 in
the singular also includes the plural, and vice versa.
ARTICLE 3
ADMINISTRATIVE MATTERS
3.1 GENERAL. The California Plan will be administered by a Committee
composed as described in Section 3.2.
3.2 COMPOSITION OF THE COMMITTEE. The Committee will be appointed by
the Board and will consist of not less than a sufficient number of Non-Employee
Directors so as to qualify the Committee to administer the California Plan as
contemplated by Section 162(m)(4)(C) of the Code and Rule 16b-3 under the
Exchange Act. The Board may from time to time remove members from, or add
members to, the Committee. Vacancies on the Committee, however caused, will be
filled by the Board. In the event that the Committee ceases to satisfy the
requirements of Section 162(m)(4)(C) or Rule 16b-3, the Board will reconstitute
the Committee as necessary to satisfy such requirements.
3.3 AUTHORITY OF THE COMMITTEE. The Committee has full power and
authority (subject to such orders or resolutions as may be issued or adopted
from time to time by the Board) to administer the California Plan in its sole
discretion, including the authority to:
(a) Construe and interpret the California Plan and any Award
Agreement;
(b) Promulgate, amend, and rescind rules and procedures relating to
the implementation of the California Plan;
(c) Select the employees, Non-Employee Directors, and Consultants
who will be granted Options;
(d) Determine the number of Shares to be subject to each Option and
the exercise price; and
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(e) Determine all the terms and conditions of all Award Agreements,
consistent with the requirements of the California Plan.
Decisions of the Committee, or any delegate as permitted by the
California Plan, will be final, conclusive, and binding on all
Participants.
3.4 ACTION BY THE COMMITTEE. A majority of the members of the
Committee constitutes a quorum for the transaction of business. Action approved
by a majority of the members present at any meeting at which a quorum is
present, or action in writing by all of the members of the Committee, will be
the valid acts of the Committee. 3.5 Delegation. Notwithstanding the foregoing,
the Committee may delegate to one or more officers of Corporation the authority
to determine the recipients, amounts, and terms of Options granted to
Participants who are not Reporting Persons.
3.6 LIABILITY OF COMMITTEE MEMBERS. No member of the Committee will
be liable for any action or determination made in good faith with respect to the
California Plan, any Option grant, or any Participant.
3.7 COSTS OF CALIFORNIA PLAN. The costs and expenses of
administering the California Plan will be borne by Corporation.
3.8 DURATION OF THE CALIFORNIA PLAN. The California Plan will remain
in effect until the earlier of (i) the date Options have been granted covering
all the available Shares under the California Plan, (ii) the date which is ten
years from the date the plan is adopted or the date the plan is approved by
security holders, whichever is earlier, or (iii) the date the plan is otherwise
terminated by the Board. Termination of the California Plan will not affect
outstanding Options.
3.9 SHARES SUBJECT TO THE CALIFORNIA PLAN. The shares which may be
made subject to Options under the California Plan will be Shares of Common
Stock, which may be either authorized and unissued Shares or reacquired Shares.
No fractional Shares will be issued under the California Plan. Subject to
adjustment pursuant to Section 8.8, the maximum number of Shares for which
Options may be granted under the California Plan is 100,000. If Options under
the California Plan are canceled or expire for any reason prior to having been
fully exercised by a Participant or are settled in cash in lieu of Shares, all
Shares covered by such Options will be made available for future Options under
the California Plan. Notwithstanding the foregoing, at no time will the total
number of Shares issuable upon exercise of all outstanding Options granted under
this California Plan or Corporation's 2003 Stock Incentive Plan, together with
the total number of Shares granted under any other stock option, stock
incentive, stock bonus or similar plan or agreement of Corporation, exceed 30
percent of the then outstanding Shares of Corporation.
3.10 INFORMATION TO EMPLOYEES. Each recipient of an Option will
receive a copy of annual financial statements of Corporation within 90 days of
the close of the Corporation's fiscal year unless such Participant's duties with
Corporation assure that he or she has access to such information or equivalent
information.
ARTICLE 4
ELIGIBILITY
4.1 EMPLOYEES, CONSULTANTS, AND NON-EMPLOYEE SUBSIDIARY DIRECTORS.
Officers and other key employees of Corporation and its Subsidiaries (including
employees who may also be directors of Corporation or a Subsidiary),
Consultants, and Non-Employee Subsidiary Directors who, in the Committee's
judgment, are or will be contributors to the long-term success of Corporation
are eligible to receive Options under the California Plan.
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4.2 NON-EMPLOYEE BOARD DIRECTORS. All Non-Employee Board Directors
are eligible to receive Annual Director Options pursuant to Article 6 of the
California Plan and such other Options, if any, as the Committee determines from
time to time.
ARTICLE 5
OPTIONS
5.1 OPTIONS. Options granted under the California Plan may be in the
form of Incentive Stock Options or Nonqualified Options. The grant of each
Option and the Award Agreement governing each Option will identify the Option as
an ISO or an NQO. In the event the Code is amended to provide for tax-favored
forms of stock options other than or in addition to Incentive Stock Options, the
Committee may grant Options under the California Plan meeting the requirements
of such forms of options, provided such Options are otherwise in accordance with
California law.
5.2 GENERAL. Options will be subject to the terms and conditions set
forth in this Article 4 and Article 5 and Award Agreements governing Options may
contain such additional terms and conditions, not inconsistent with the express
provisions of the California Plan, as the Committee deems desirable.
5.3 OPTION PRICE. Each Award Agreement for a California Option will
provide for an option exercise price per Share purchasable under the Option,
which will not be less than: (a) 85 percent of the Fair Market Value of a Share
on the date of grant for all Nonqualified Options, or (b) 100 percent of the
Fair Market Value of a Share on the date of grant for all Incentive Stock
Options or Annual Director Options; provided, however, that the price will be
not less than 110 percent of the Fair Market Value of a Share if the Option is
granted to a person who owns Shares possessing more than 10 percent of the total
combined voting power of all classes of stock of Corporation.
5.4 OPTION TERM. The Award Agreement for each California Option will
specify, as determined by the Committee, the term of the Option and the period
within which the option must be exercised, which may not exceed 120 months.
5.5 TIME OF EXERCISE. The Award Agreement for each California Option
will specify, as determined by the Committee:
(a) The time or times when the Option will become exercisable and
whether the Option will become exercisable in full or in graduated amounts
based on continuation of employment over a period specified in the Award
Agreement; provided, however, that if an Option is granted to an employee
who is not an officer or director of Corporation, that option must vest at
a rate of at least 20 percent per year over five years from the date the
Option is granted;
(b) Such other terms, conditions, and restrictions as to when an
Option may be exercised consistent with the foregoing; and
(c) The extent to which the Option will remain exercisable after a
Participant ceases to be an employee, Consultant, or director of
Corporation or a Subsidiary, provided that if a Participant is terminated
other than for cause (as defined by applicable law, an employment
contract, or the Award Agreement), the Option will remain exercisable (to
the extent such Option is exercisable on the date of termination) after
the Participant ceases to be an employee, Consultant, or director of
Corporation or a Subsidiary for a period of: (1) at least six months from
the date of termination if termination was caused by death or Disability,
or (2) at least 30 days from the date of termination if termination was
caused by other than death or Disability.
The Committee may, at any time in its discretion, accelerate the
time when all or any portion of an outstanding California Option becomes
exercisable.
5.6 SPECIAL RULES FOR INCENTIVE STOCK OPTIONS. In the case of a
California Option designated as an Incentive Stock Option, the terms of the
Option and the Award Agreement will conform with the
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statutory and regulatory requirements specified pursuant to Section 422 of the
Code, as in effect on the date such ISO is granted. ISOs may be granted only to
employees of Corporation or a Subsidiary. ISOs may not be granted under this
California Plan after ten years following the adoption of this California Plan.
5.7 RELOAD OPTIONS. The Committee, in its discretion, may provide in
an Award Agreement for a California Option that, in the event all or a portion
of the Option is exercised by the Participant using previously acquired Shares,
the Participant will automatically be granted (subject to the available pool of
Shares subject to grants of California Options) a replacement Option (with an
option price equal to the Fair Market Value of a Share on the date of such
exercise) for a number of Shares equal to (or equal to a portion of) the number
of Shares surrendered upon exercise of the Option. Such reload Option features
may be subject to such terms and conditions as the Committee determines (and as
are consistent with the terms of this California Plan), including, without
limitation, a condition that the Participant retain the Shares issued upon
exercise of the Option for a specified period of time.
5.8 LIMITATION ON NUMBER OF SHARES SUBJECT TO OPTIONS. In no event
may Options for more than 25,000 Shares be granted to any individual under the
California Plan during any calendar year.
ARTICLE 6
ANNUAL DIRECTOR OPTIONS
6.1 GENERAL. Annual Director Options will be granted under this
Article 6.
6.2 ELIGIBILITY. The persons eligible to receive Annual Director
Options pursuant to this Article 6 are all Non-Employee Board Directors of
Corporation who reside in California.
6.3 DEFINITIONS. For purposes of this Article 6, "Annual Meeting
Date" means the date of Corporation's regular annual meeting of shareholders.
6.4 Annual Director Options.
(a) Grant of Annual Director Options. As of each Annual Meeting
Date, each Non-Employee Board Director whose term begins on or continues
after that Annual Meeting Date will be granted automatically an Annual
Director Option to purchase 1,000 Shares.
(b) Option Price. The option exercise price for each Annual Director
Option will be equal to the Fair Market Value of a Share as of the Annual
Meeting Date.
(c) Terms of Annual Director Options. Except as otherwise
specifically provided in this Article 6, each Annual Director Option will
be subject to the same terms and conditions as other Options granted under
the California Plan.
ARTICLE 7
ADDITIONAL PROVISIONS
7.1 NONUNIFORM DETERMINATIONS. The Committee's determinations under
the California Plan or under one or more Award Agreements, including, without
limitation, (a) the selection of Participants, (b) the type, form, amount, and
timing of grants, (c) the terms of specific Award Agreements, and (d) elections
and determinations made by the Committee with respect to exercise, need not be
uniform and may be made by the Committee selectively among Participants, whether
or not Participants are similarly situated.
7.2 AWARD AGREEMENTS. Each Option will be evidenced by a written
Award Agreement between Corporation and the Participant. Award Agreements may,
subject to the provisions of the California Plan, contain any provision approved
by the Committee.
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7.3 PROVISIONS GOVERNING ALL GRANTS. All grants will be subject to
the following provisions:
(a) RIGHTS AS SHAREHOLDERS. No Participant will have any rights of a
shareholder with respect to Shares subject to an Option until such Shares
are issued in the name of the Participant.
(b) EMPLOYMENT RIGHTS. Neither the adoption of the California Plan
nor the granting of any Option will confer on any person the right to
continued employment with Corporation or any Subsidiary or the right to
remain as a director of or a Consultant to Corporation or any Subsidiary,
as the case may be, nor will it interfere in any way with the right of
Corporation or a Subsidiary to terminate such person's employment or to
remove such person as a Consultant or as a director at any time for any
reason, with or without cause.
(c) RESTRICTION ON TRANSFER. Unless otherwise expressly provided in
an individual Award Agreement, each Option will not be transferable other
than by will or the laws of descent and distribution and will be
exercisable, during the lifetime of the Participant, only by the
Participant or, in the event the Participant becomes legally incompetent,
by the Participant's guardian or legal representative. Notwithstanding the
foregoing, any Option may be surrendered to Corporation pursuant to
Section 7.36.5(g) in connection with the payment of the purchase or option
price of another Option or the payment of the Participant's federal,
state, or local tax withholding obligation with respect to the exercise or
payment of another Option.
(d) Change in Control. The Committee, in its discretion, may provide
in any Award Agreement that:
(i) In the event of a change in control of Corporation (as the
Committee may define such term in the Award Agreement), each
outstanding Option will become immediately Vested to the full extent
not previously Vested. Any such acceleration of Option Vesting must
comply with applicable regulatory requirements and any Participant
will be entitled to decline the accelerated Vesting of all or any of
his or her Options, if he or she determines that such acceleration
may result in adverse tax consequences to him or her; and
(ii) In the event the Board approves a proposal for: (i) merger,
exchange or consolidation in which Corporation is not the resulting
or surviving corporation (or in which Corporation is the resulting
or surviving corporation but becomes a subsidiary of another
corporation); (ii) transfer of all or substantially all the assets
of Corporation; (iii) sale of 30 percent or more of the combined
voting power of Corporation's voting securities; or (iv) the
dissolution or liquidation of Corporation (each, a "Transaction"),
the Committee will notify Participants in writing of the proposed
Transaction (the "Proposal Notice") at least 30 days prior to the
effective date of the proposed Transaction. The Committee may, 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 California Plan:
(1) The Committee may provide that outstanding Options will
be converted into or replaced by Options for the stock of the
surviving or acquiring corporation in the Transaction. The
amount and type of securities subject to and the exercise price
of the replacement or converted Options will be determined by
the Committee and based on the exchange ratio, if any, used in
determining shares of the surviving corporation to be issued to
holders of shares of Corporation. If there is no exchange ratio
in the Transaction, the Committee will, in making its
determination, take into account the relative values of the
companies involved in the Transaction and such other factors as
the Committee deems relevant. Such replacement or converted
Options will continue to Vest over the period (and at the same
rate) as the Options which the replacement or converted Options
replaced, unless determined otherwise by the Committee; or
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(2) The Committee may provide a 30-day period prior to the
consummation of the Transaction during which all outstanding
Options will tentatively become fully Vested, and upon
consummation of such Transaction, all outstanding and
unexercised Options will immediately terminate. If the Committee
elects to provide such 30-day period for the exercise of
Options, the Proposal Notice must so state. Participants, by
written notice to Corporation, may exercise their Options and,
in so exercising the Options, may condition such exercise upon,
and provide that such exercise will become effective immediately
prior to, the consummation of the Transaction, in which event
Participants need not make payment for any Common Stock to be
purchased upon exercise of Options until five days after written
notice by Corporation to Participants that the Transaction has
been consummated (the "Transaction Notice"). If the Transaction
is consummated, each Option, to the extent not previously
exercised prior to the consummation of the Transaction, will
terminate and cease being exercisable as of the effective date
of such consummation. If the Transaction is abandoned, (1) all
outstanding Options not exercised will continue to be Vested and
exercisable, to the extent such Options were Vested and
exercisable prior to the date of the Proposal Notice, and (2) to
the extent that any Options not exercised prior to such
abandonment have become Vested and exercisable solely by
operation of this Section 7.3(d)(ii), such Vesting and
exercisability will be deemed annulled, and the Vesting and
exercisability provisions otherwise in effect will be
reinstituted, as of the date of such abandonment.
(3) The Committee may provide that outstanding Options that
are not fully Vested will become fully Vested subject to
Corporation's right to pay each Participant a cash amount
(determined by the Committee and based on the amount, if any,
being received by Corporation's shareholders in the Transaction)
in exchange for cancellation of the applicable Option.
Unless the Committee specifically provides otherwise in the change of
control provision for a specific Award Agreement, Options will become
Vested as of a change in control date only if, or to the extent, such
acceleration in Vesting of the Options does not result in an "excess
parachute payment" within the meaning of Section 280G(b) of the Code.
The Committee, in its discretion, may include change in control provisions
in some Award Agreements and not in others, may include different change
in control provisions in different Award Agreements, and may include
change in control provisions for some Options or some Participants and not
for others.
(e) Payment of Purchase Price and Withholding. The Committee, in its
discretion, may include in any Award Agreement a provision permitting the
Participant to pay the option price, if any, for Shares or the
Participant's federal, state, or local tax withholding obligation with
respect to such issuance in whole or in part by any one or more of the
following; provided, however, that the availability of any one or more
methods of payment may be suspended from time to time if the Committee
determines that the use of such payment method would result in adverse
financial accounting treatment for Corporation:
(i) By delivering previously owned Shares;
(ii) By surrendering other outstanding Vested Options;
(iii) By reducing the number of Shares issuable pursuant to the
Option;
(iv) Unless specifically prohibited by any applicable statute or
rule, including, without limitation, the provisions of the Sarbanes-Oxley
Act of 2002, by delivering to Corporation a promissory note payable on
such terms and over such period as the Committee may determine;
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(v) By delivery (in a form approved by the Committee) of an
irrevocable direction to a securities broker acceptable to the Committee
(subject to the provisions of the Sarbanes-Oxley Act of 2002 and any other
applicable statute or rule):
(1) To sell Shares subject to the Option and to deliver all or
a part of the sales proceeds to Corporation in payment of all or a
part of the option price and taxes or withholding taxes attributable
to the issuance; or
(2) To pledge Shares subject to the Option to the broker as
security for a loan and to deliver all or a part of the loan
proceeds to Corporation in payment of all or a part of the option
price and taxes or withholding taxes attributable to the issuance;
or
(vi) In any combination of the foregoing or in any other form
approved by the Committee.
Shares withheld or surrendered as described above will be valued
based on their Fair Market Value on the date of the transaction. Any Shares
withheld or surrendered with respect to a Reporting Person will be subject to
such additional conditions and limitations as the Committee may impose to comply
with the requirements of the Exchange Act.
ARTICLE 8
MISCELLANEOUS
8.1 AMENDMENT AND TERMINATION. The Board may amend, suspend, or
terminate the California Plan or any portion of the California Plan at any time,
provided that no amendment may be made without shareholder approval if such
approval is required by applicable law or the requirements of an applicable
stock exchange or registered securities association.
8.2 TAX WITHHOLDING. Corporation has the right to deduct from any
settlement of any Option granted under the California Plan any federal, state,
or local taxes of any kind required by law to be withheld or to take such other
action as may be necessary in the opinion of Corporation to satisfy all
obligations for the payment of such taxes. The recipient of an Option under the
California Plan has the obligation to make arrangements satisfactory to
Corporation for the satisfaction of any such tax withholding obligations.
Corporation will not be required to make any such payment or distribution under
the California Plan until such obligations are satisfied.
8.3 UNFUNDED PLAN. The California Plan will be unfunded and
Corporation will not be required to segregate any assets that may at any time be
represented by Options under the California Plan. Any liability of Corporation
to any person with respect to any Options under the California Plan will be
based solely upon any contractual obligations that may be effected pursuant to
the California Plan. No such obligation of Corporation will be deemed to be
secured by any pledge of, or other encumbrance on, any property of Corporation.
8.4 ANNULMENT OF OPTIONS. Any Award Agreement may provide that the
grant of an Option is revocable until the Participant becomes entitled to the
certificate therefor. In the event the employment (or service as a Non-Employee
Director or a Consultant) of a Participant is terminated for cause (as defined
below), any Option which is revocable will be annulled as of the date of such
termination for cause. For the purpose of this Section 17.4, the term "for
cause" has the meaning set forth in the Participant's employment agreement or
applicable law, if any, or otherwise means any discharge (or removal) for
material or flagrant violation of the policies and procedures of Corporation or
for other performance or conduct which is materially detrimental to the best
interests of Corporation, as determined by the Committee.
8.5 ENGAGING IN COMPETITION WITH CORPORATION. Any Award Agreement
may provide that, if a Participant terminates employment (or service as a
Non-Employee Director or a Consultant) with
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Corporation or a Subsidiary for any reason whatsoever, and within a period of
time (as specified in the Award Agreement) after the date thereof accepts
employment with any competitor of (or otherwise engages in competition with)
Corporation, the Committee, in its sole discretion, may require such Participant
to return to Corporation the economic value of any Option that is realized or
obtained (measured at the date of exercise) by such Participant at any time
during the period beginning on the date that is six months prior to the date of
such Participant's termination of employment (or service as a Non-Employee
Director or a Consultant) with Corporation.
8.6 OTHER CORPORATION BENEFIT AND COMPENSATION PROGRAMS. Benefits
received by a Participant under an Award Agreement will not be deemed a part of
a Participant's regular, recurring compensation for purposes of the termination
indemnity or severance pay law of any state or country and will not be included
in, or have any effect on, the determination of benefits under any other
employee benefit plan or similar arrangement provided by Corporation or a
Subsidiary. Corporation or any Subsidiary may adopt such other compensation
programs and additional compensation arrangements as it deems necessary to
attract, retain, and reward employees and directors for their service with
Corporation and its Subsidiaries.
8.7 SECURITIES LAW RESTRICTIONS. No Shares will be issued under the
California Plan unless counsel for Corporation is satisfied that such issuance
will be in compliance with applicable federal and state securities laws.
Certificates for Shares delivered under the California Plan may be subject to
such stop-transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations, and other requirements of the Securities
and Exchange Commission, any stock exchange or registered securities association
upon which the Common Stock is then listed or quoted, and any applicable federal
or state securities laws. The Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such restrictions.
8.8 ADJUSTMENTS BY THE COMMITTEE. In the event of any change in
capitalization affecting the Common Stock of Corporation, such as a stock
dividend, stock split, recapitalization, merger, consolidation, split-up,
combination or exchange of shares or other form of reorganization, or any other
change affecting the Common Stock, the Committee, in its sole discretion, will
make such proportionate adjustments to the aggregate number of Shares for which
Options in respect thereof may be granted under the California Plan as the
Committee deems appropriate to reflect such change. The Committee may also make
such adjustments in the number of Shares covered by, and price or other value
of, any outstanding Options in the event of a spin-off or other distribution
(other than normal cash dividends) of Corporation assets to shareholders.
8.9 GOVERNING LAW. Except with respect to references to the Code,
federal securities laws, or California law, the California Plan and all actions
taken thereunder will be governed by and construed in accordance with the laws
of the state of Maryland.
8.10 SHAREHOLDER APPROVAL. The adoption of the California Plan and
the grant of Options under the California Plan are expressly subject to the
approval of the California Plan by Corporation's shareholders holding a majority
of Corporation's outstanding Shares.
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PROXY
BARRETT BUSINESS SERVICES, INC.
2003 Annual Meeting of Stockholders
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William W. Sherertz and Anthony Meeker as
proxies, each with power to act alone and with power of substitution, and hereby
authorizes them to represent and to vote all the shares of common stock of
Barrett Business Services, Inc., which the undersigned may be entitled to vote
at the Annual Meeting of Stockholders to be held on Wednesday, May 14, 2003, at
3:00 p.m., or at any adjournment thereof.
(Continued and to be signed on reverse)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
/FOLD AND DETACH HERE/
1. ELECTION OF DIRECTORS: FOR all nominees listed WITHHOLD AUTHORITY
Fores J. Beaudry below (except as marked to vote for all nominees
Thomas J. Carley to the contrary below) listed below
James B. Hicks, Ph.D. / / / /
Anthony Meeker
Nancy B. Sherertz
William W. Sherertz
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOR AGAINST ABSTAIN
2. PROPOSAL TO APPROVE THE
2003 STOCK INCENTIVE PLAN. / / / / / /
3. PROPOSAL TO APPROVE THE APPOINTMENT
OF PRICEWATERHOUSECOOPERS LLP
as independent accountants for the
fiscal year ending December 31, 2003. / / / / / /
4. In their discretion, upon any other matter which may properly come before
the meeting.
The shares represented by this proxy when properly executed will be voted
in the manner directed herein by the undersigned stockholder. If no direction is
made, this proxy will be voted FOR Items 1, 2 and 3. If any other matters
properly come before the meeting, the persons named as proxies will vote in
accordance with their best judgment.
The undersigned acknowledge receipt of the 2003 Notice of Annual Meeting
and accompanying Proxy Statement and revokes all prior proxies for said meeting.
Please sign exactly as your name appears hereon. If the shares are jointly
held, each joint owner named should sign. When signing as attorney, personal
representative, administrator, or other fiduciary, please give full title. If a
corporation, please sign in full corporate name by authorized officer. If a
partnership, please sign in partnership name by authorized person.
Please Mark, Sign, Date and Return the Proxy Card Promptly Using the
Enclosed Envelope.
Signature(s)______________________________________________ Date:__________,
2003
/ FOLD AND DETACH HERE /