1988 Stock Option Plan – Harley-Davidson Inc.
HARLEY-DAVIDSON, INC.
1988 STOCK OPTION PLAN
(as amended through August 20, 1997)
ARTICLE I
PURPOSE
The purpose of the Harley-Davidson, Inc. 1988 Stock Option Plan is to
provide favorable opportunities for certain selected employees of
Harley-Davidson, Inc. and its subsidiaries to purchase or receive shares of
Common Stock of Harley-Davidson, Inc., or to benefit from the appreciation
thereof. Such opportunities should provide an increased incentive for these
employees to contribute to the future success and prosperity of
Harley-Davidson, Inc., thus enhancing the value of the stock for the benefit
of the shareholders, and increase the ability of Harley-Davidson, Inc. to
attract and retain individuals of exceptional skill upon whom, in large
measure, its sustained progress, growth and profitability depend.
ARTICLE II
DEFINITIONS
The following capitalized terms used in the Plan shall have the respective
meanings set forth in this Article:
2.1. BOARD: The Board of Directors of Harley-Davidson, Inc.
2.2. CODE: The Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
2.3. COMMITTEE: The Human Resources Committee of the Board;
provided that if any member of the Human Resources Committee is not both
a Disinterested Person and Outside Director, the Committee shall be
comprised of only those members of the Human Resources Committee who are
both Disinterested Persons and Outside Directors.
2.4. COMMON STOCK: The common stock of Harley-Davidson, Inc.
2.5. COMPANY: Harley-Davidson, Inc. and any of its
Subsidiaries.
2.6. DISABILITY: Disability within the meaning of Section
22(e)(3) of the Code, as determined by the Committee.
2.7. DISINTERESTED PERSONS: Non-employee directors within the
meaning of Rule 16b-3 as promulgated under the Securities Exchange Act
of 1934, as amended.
2.8. EMPLOYER: The entity that employs the employee or
Optionee.
2.9. FAIR MARKET VALUE: The average of the high and low
reported sales prices of Common Stock on the New York Stock Exchange
Composite Tape on the date for which fair market value is being
determined.
2.10. ISO: An incentive stock option within the meaning of
Section 422 of the Code and which is designated as an incentive stock
option by the Committee.
2.11. NON-ISO: A stock option which is not an ISO.
2.12. OPTION: A stock option granted under the Plan. Options
include both ISOs and Non-ISOs.
2.13. OPTION PRICE: The purchase price of a share of Common
Stock under an Option.
2.14. OPTIONEE: A person who has been granted one or more
Options.
2.15. OUTSIDE DIRECTORS: Outside Directors within the meaning
of Section 162(m) of the Code and the regulations promulgated thereunder.
2.16. PARENT CORPORATION: The parent corporation, as defined in
Section 424(e) of the Code.
2.17. PLAN: The Harley-Davidson, Inc. 1988 Stock Option Plan.
2.18. RETIREMENT: Retirement on or after age sixty-two or, with
the consent of the Committee, at an earlier age.
2.19. SUBSIDIARY: A corporation, limited partnership, general
partnership, limited liability company, business trust or other entity
of which more than fifty percent (50%) of the voting power or ownership
interest is directly and/or indirectly held by the Harley-Davidson, Inc.
2.20. TERMINATION DATE: A date fixed by the Committee but not
later than the day preceding the tenth anniversary of the date on which
the Option is granted.
ARTICLE III
ADMINISTRATION
3.1. The Committee shall administer the Plan and shall have full
power to grant Options, construe and interpret the Plan, establish and amend
rules and regulations for its administration, and perform all other acts
relating to the Plan, including the delegation of administrative
responsibilities, which it believes reasonable and proper.
3.2. Subject to the provisions of the Plan, the Committee shall, in
its discretion, determine who shall be granted Options, the number of shares
subject to option under any such Options, the dates after which Options may
be exercised, in whole or in part, whether Options shall be ISOs, and the
terms and conditions of the Options.
3.3. Any decision made, or action taken, by the Committee arising out
of or in connection with the interpretation and administration of the Plan
shall be final and conclusive.
ARTICLE IV
SHARES SUBJECT TO THE PLAN
4.1. The total number of shares of Common Stock available for grants
of Options under the Plan shall be 1,600,000; provided that Options for not
more than 400,000 shares of Common Stock shall be granted to an Optionee in
any calendar year under the Plan, which amount shall be reduced by the amount
of Common Stock subject to options granted to such Optionee in such calendar
year under any other stock option plan of the Company. The foregoing amounts
shall be subject to adjustment in accordance with Article VIII of the Plan.
These shares may be either authorized but unissued or reacquired shares of
Common Stock. If an Option or portion thereof shall expire, be canceled or
terminate for any reason without having been exercised in full, the
unpurchased shares covered by such Option shall be available for future
grants of Options. An Option, or portion thereof, exercised through the
exercise of a stock appreciation right pursuant to Section 6.7 of the Plan
shall be treated, for the purposes of this Article, as though the Option, or
portion thereof, had been exercised through the purchase of Common Stock,
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with the result that the shares of Common Stock subject to the Option, or
portion thereof, that was so exercised shall not be available for future
grants of Options.
ARTICLE V
ELIGIBILITY
5.1. Options may be granted to key employees of the Company or to
persons who have been engaged to become key employees of the Company. Key
employees will comprise, in general, those who contribute to the management,
direction and overall success of the Company, including those who are members
of the Board. Members of the Board who are not employees of the Company shall
not be eligible for Option grants.
ARTICLE VI
TERM OF OPTIONS
6.1. OPTION AGREEMENTS: All Options shall be evidenced by written
agreements executed by the Company. Such Options shall be subject to the
applicable provisions of the Plan, and shall contain such provisions as are
required by the Plan and any other provisions the Committee may prescribe.
All agreements evidencing Options shall specify the total number of shares
subject to each grant, the Option Price and the Termination Date. Those
Options that comply with the requirements for an ISO set forth in Section 422
of the Code and are designated ISOs by the Committee shall be ISOs and all
other Options shall be Non-ISOs.
6.2. OPTION PRICE: The Option Price shall be set by the Committee;
provided, however, that the price per share shall not be less than the Fair
Market Value of a share of Common Stock on the date the Option is granted.
6.3. PERIOD OF EXERCISE: The Committee shall determine the dates
after which Options may be exercised in whole or in part. If Options are
exercisable in installments, installments or portions thereof that are
exercisable and not exercised shall accumulate and remain exercisable. The
Committee may also amend an Option to accelerate the dates after which
Options may be exercised in whole or in part. However, no Option or portion
thereof shall be exercisable after the Termination Date.
6.4. SPECIAL RULES REGARDING ISOS GRANTED TO CERTAIN EMPLOYEES:
Notwithstanding any contrary provisions of Sections 6.2 and 6.3 of the Plan,
no ISO shall be granted to any employee who, at the time the Option is
granted, owns (directly or indirectly, within the meaning of Section 424(d)
of the Code) more than ten percent of the total combined voting power of all
classes of stock of the Employer or of any Subsidiary or Parent Corporation
thereof, unless (a) the Option Price under such Option is at least 110
percent of the Fair Market Value of a share of Common Stock on the date the
Option is granted and (b) the Termination Date of such Option is a date not
later than the day preceding the fifth anniversary of the date on which the
Option is granted.
6.5. MANNER OF EXERCISE AND PAYMENT: An Option, or portion thereof,
shall be exercised by delivery of a written notice of exercise to the Company
and payment of the full price of the shares being purchased pursuant to the
Option. An Optionee may exercise an Option with respect to less than the full
number of shares for which the Option may then be exercised, but an Optionee
must exercise the Option in full shares of Common Stock. The price of Common
Stock purchased pursuant to an Option, or portion thereof, may be paid:
a. in United States dollars in cash or by check, bank draft or
money order payable to the order of the Company.
b. through the delivery of shares of Common Stock with an
aggregate Fair Market Value on the date of exercise equal to the Option
Price, or
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c. by any combination of the above methods of payment.
The Committee shall determine acceptable methods for tendering Common Stock
as payment upon exercise of an Option and may impose such limitations and
prohibitions on the use of Common Stock to exercise an Option as it deems
appropriate, including, without limitation, any limitation or prohibition
designed to avoid certain accounting consequences which may result from the
use of Common Stock as payment upon exercise of an Option.
6.6. WITHHOLDING TAXES: The Company may, in its discretion, require
an Optionee to pay to the Company at the time of exercise the amount that the
Company deems necessary to satisfy its obligation to withhold Federal, state
or local income or other taxes incurred by reason of the exercise. Upon or
prior to the exercise of an Option requiring tax withholding, an Optionee may
make a written election to have shares of Common Stock withheld by the
Company from the shares otherwise to be received. The number of shares so
withheld shall have an aggregate Fair Market Value on the date of exercise
sufficient to satisfy the applicable withholding taxes. The acceptance of
any such election by an Optionee shall be at the sole discretion of the
Committee. Where the exercise of an Option does not give rise to an
obligation to withhold Federal income taxes on the date of exercise, the
Company may, in its discretion, require an Optionee to place shares of Common
Stock purchased under the Option in escrow for the benefit of the Company
until such time as Federal income tax withholding is required on amounts
included in the gross income of the Optionee as a result of the exercise of
an Option. At such time, the Company, in its discretion, may require an
Optionee to pay to the Company the amount that the Company deems necessary to
satisfy its obligation to withhold Federal, state or local income or other
taxes incurred by reason of the exercise of the Option, in which case the
shares of Common Stock will be released from escrow to the Optionee.
Alternatively, subject to acceptance by the Committee, in its sole
discretion, an Optionee may make a written election to have shares of Common
Stock held in escrow applied toward the Company's obligation to withhold
Federal, state or local income or other taxes incurred by reason of the
exercise of the Option, based on the Fair Market Value of the shares on the
date of the termination of the escrow arrangement. Upon application of such
shares toward the Company's withholding obligation, any shares of Common
Stock held in escrow and not, in the judgment of the Committee, necessary to
satisfy such obligation shall be released from escrow to the Optionee.
6.7. STOCK APPRECIATION RIGHTS: At or after the grant of an Option,
the Committee, in its discretion, may provide an Optionee with an alternate
means of exercising an Option, or a designated portion thereof, by granting
the Optionee a stock appreciation right. A 'stock appreciation right' is a
right to receive, upon exercise of an Option or any portion thereof, in the
Committee's sole discretion, an amount of cash equal to, and/or shares of
Common Stock having a Fair Market Value on the date of exercise equal to, the
excess of the Fair Market Value of a share of Common Stock on the date of
exercise over the Option Price, multiplied by the number of shares of Common
Stock that the Optionee would have received had the Option or portion thereof
been exercised through the purchase of shares of Common Stock at the Option
Price, provided that (a) such Option or portion thereof has been designated
as exercisable in this alternative manner, (b) such Option or portion thereof
is otherwise exercisable, and (c) the Fair Market Value of a share of Common
Stock on the date of exercise exceeds the Option Price.
6.8. NONTRANSFERABILITY OF OPTIONS: Each Option shall, during the
Optionee's lifetime, be exercisable only by the Optionee, and neither it nor
any right hereunder shall be transferable otherwise than by will or the laws
of descent and distribution or be subject to attachment, execution or other
similar process. In the event of any attempt by the Optionee to alienate,
assign, pledge, hypothecate or otherwise dispose of an Option or of any right
hereunder, except as provided for herein, or in the event of any levy or any
attachment, execution or similar process upon the rights or interest hereby
conferred, the Company may terminate the Option by notice to the Optionee and
the Option shall thereupon become null and void.
6.9. CESSATION OF EMPLOYMENT OF OPTIONEE:
a. CESSATION OF EMPLOYMENT OTHER THAN BY REASON OF RETIREMENT,
DISABILITY OR DEATH. If an Optionee shall cease to be employed by the
Company otherwise than by reason of Retirement,
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Disability, or death, each Option held by the Optionee, together with
all rights hereunder, shall terminate on the date of cessation of
employment, to the extent not previously exercised.
b. CESSATION OF EMPLOYMENT BY REASON OF RETIREMENT OR
DISABILITY. If an Optionee shall cease to be employed by the Company by
reason of Retirement or Disability, each Option held by the Optionee
shall remain exercisable, to the extent it was exercisable at the time
of cessation of employment, until the earliest of:
i. the Termination Date,
ii. the death of the Optionee, or such later date not more
than one year after the death of the Optionee as the Committee, in
its discretion, may provide pursuant to Section 6.9(c) of the Plan,
iii. the third anniversary of the date of the cessation of the
Optionee's employment, if employment ceased by reason of
Retirement, or
iv. the first anniversary of the date of the cessation of the
Optionee's employment by reason of Disability;
and thereafter all such Options shall terminate together with all rights
hereunder, to the extent not previously exercised.
c. CESSATION OF EMPLOYMENT BY REASON OF DEATH. In the event of
the death of the Optionee, while employed by the Company, an Option may
be exercised at any time or from time to time prior to the earlier of
the Termination Date or the first anniversary of the date of the
Optionee's death, by the person or persons to whom the Optionee's rights
under each Option shall pass by will or by the applicable laws of
descent and distribution, to the extent that the Optionee was entitled
to exercise such Option on the Optionee's date of death. In the event
of the death of the Optionee while entitled to exercise an Option
pursuant to Section 6.9(b), the Committee, in its discretion, may permit
such Option to be exercised at any time or from time to time prior to
the Termination Date during a period of up to one year from the death of
the Optionee, as determined by the Committee, by the person or persons
to whom the Optionee's rights under each Option shall pass by will or by
the applicable laws of descent and distribution, to the extent that the
Option was exercisable at the time of cessation of the Optionee's
employment. Any person or persons to whom an Optionee's rights under an
Option have passed by will or by the applicable laws of descent and
distribution shall be subject to all terms and conditions of the Plan
and the Option applicable to the Optionee.
6.10. NOTIFICATION OF SALES OF COMMON STOCK: Any Optionee who
disposes of shares of Common Stock acquired upon the exercise of an ISO
either (a) within two years after the date of the grant of the ISO under
which the stock was acquired or (b) within one year after the transfer of
such shares to the Optionee, shall notify the Company of such disposition and
of the amount realized upon such disposition.
ARTICLE VII
LIMITATIONS AND ACCELERATIONS ON EXERCISABILITY
7.1. Notwithstanding any other provision of this Plan, in the case of
an ISO, the aggregate Fair Market Value (determined at the time the ISO is
granted) of the shares of Common Stock with respect to which all 'incentive
stock options' (within the meaning of Section 422 of the Code) are first
exercisable by the Optionee during any calendar year (under this Plan and
under all other incentive stock option plans of the Employer, any Subsidiary
and any Parent Corporation) shall not exceed $100,000.
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ARTICLE VIII
ADJUSTMENTS
8.1. If (a) the Company shall at any time be involved in a
transaction to which Section 424(a) of the Code is applicable; (b) the
Company shall declare a dividend payable in, or shall subdivide or combine,
its Common Stock; or (c) any other event shall occur which in the judgment of
the Committee necessitates an adjustment to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under the
Plan, then the Committee may, in such manner as it may deem equitable, adjust
any or all of (i) the number and type of securities subject to the Plan and
which thereafter may be the subject of Options; (ii) the number and type of
securities subject to outstanding Options; (iii) the Option Price with
respect to any Option; and (iv) the number of shares of Common Stock that may
e issued pursuant to Options granted to an Optionee in any calendar year;
provided, however, that each such adjustment, in the case of ISOs, shall be
made in such manner as not to constitute a 'modification' within the meaning
of Section 424(h)(3) of the Code. The judgment of the Committee with respect
to any matter referred to in this Article shall be conclusive and binding
upon each Optionee.
ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
9.1. The Board may at any time, or from time to time, suspend or
terminate the Plan in whole or in part or amend it in such respects as the
Board may deem appropriate, provided, however, that no such amendment shall
be made, which would, without approval of the shareholders:
a. materially modify the eligibility requirements for receiving
Options;
b. increase the aggregate number of Shares of Common Stock
which may be issued pursuant to Options granted under the Plan, except
as is provided for in accordance with Article VIII of the Plan;
c. Increase the number of shares of Common Stock which may be
issued pursuant to Options granted to an Optionee in any calendar year,
except as is provided for in accordance with Article VIII of the Plan;
d. reduce the minimum Option Price, except as is provided for in
accordance with Article VIII of the Plan;
e. extend the period of granting Options; or
f. materially increase in any other way the benefits accruing to
Optionees.
9.2. No amendment, suspension or termination of this Plan shall,
without the Optionee's consent, alter or impair any of the rights or
obligations under any Option theretofore granted to an Optionee under the
Plan.
9.3. The Board may amend this Plan, subject to the limitations cited
above, in such manner as it deems necessary to permit the granting of Options
meeting the requirements of future amendments or issued regulations, if any,
to the Code.
ARTICLE X
GOVERNMENT AND OTHER REGULATIONS
10.1. The obligation of the Company to issue or transfer and deliver
shares for Options exercised under the Plan shall be subject to all
applicable laws, regulations, rules, orders and approvals which shall
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then be in effect and required by governmental entities and the stock
exchanges on which Common Stock is traded.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1. PLAN DOES NOT CONFER EMPLOYMENT OR SHAREHOLDER RIGHTS: The
right of the Employer to terminate (whether by dismissal, discharge,
retirement or otherwise) the Optionee's employment with it at any time at
will, or as otherwise provided by any agreement between the Company and the
Optionee, is specifically reserved. Neither the Optionee nor any person
entitled to exercise the Optionee's rights in the event of the Optionee's
death shall have any rights of a shareholder with respect to the shares
subject to each Option, except to the extent that, and until, such shares
shall have been issued upon the exercise of each Option.
11.2. PLAN EXPENSES: Any expenses of administering this Plan shall be
borne by the Company.
11.3. USE OF EXERCISE PROCEEDS: Payments received from O ptionees
upon the exercise of Options shall be used for the general corporate purposes
of the Company, except that any stock received in payment may be retired, or
retained in the Company's treasury and reissued.
11.4. INDEMNIFICATION: In addition to such other rights of
indemnification as they may have as members of the Board, or the Committee,
the members of the Committee and the Board shall be indemnified by the
Company against all costs and expenses reasonably incurred by them in
connection with any action, suit or proceeding to which they or any of them
may be party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by
them in satisfaction of a judgment in any such action, suit or proceeding,
except a judgment based upon a finding of bad faith; provided that upon the
institution of any such action, suit or proceeding a Committee or Board
member shall, in writing, give the Company notice thereof and an opportunity,
at its own expense, to handle and defend the same before such Committee or
Board member undertakes to handle and defend it on such member's own behalf.
ARTICLE XII
SHAREHOLDER APPROVAL AND EFFECTIVE DATES
12.1. The Plan shall become effective when it is adopted by the Board.
However, the Plan and all Options shall terminate after the passage of one
year from the date the Plan was adopted by the Board unless:
a. within such one year period, the Plan is approved by the
vote at a meeting of the shareholders of Harley-Davidson, Inc. of the
holders of a majority of the outstanding shares of Harley-Davidson, Inc.
entitled to vote; provided that if at a meeting of such shareholders
held within such one year period, the Plan is not so approved, the Plan
and all Options shall terminate at the time of that meeting of
shareholders; or
b. within such one year period, the Plan is approved by the
shareholders of Harley-Davidson, Inc.
Options may not be granted under the Plan after May 6, 1995.
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