EXHIBIT 10.3

 

K•SWISS, INC.

 

1999 STOCK INCENTIVE PLAN

(as amended through October 28, 2002)

 

Section 1.    PURPOSE OF PLAN

 

This Amended and Restated 1999 Stock Incentive Plan (this “Plan”) of K•Swiss
Inc., a Delaware corporation (the “Company”), is intended to serve as an
incentive to, and to encourage stock ownership by certain employees and
non-employee directors, so that they may acquire or increase their proprietary
interests in the success of the Company and to encourage them to remain in the
Company’s service.

 

Section 2.    PERSONS ELIGIBLE UNDER PLAN

 

Any employee, consultant or director of the Company or any of its subsidiaries
or affiliates (an “Eligible Person”) shall be eligible to be considered for the
grant of Awards (as hereinafter defined) hereunder. Any director of the Company
who is not an employee (a “Non-Employee Director”) shall be eligible to be
considered for the grant of Non-Employee Director Options (as hereinafter
defined) pursuant to Section 10 hereof, but shall not otherwise participate in
this Plan. For purposes of this Plan, the Chairman of the Board’s status as a
Non-Employee Director shall be determined by the Board of Directors of the
Company (the “Board”).

 

Section 3.    AWARDS

 

(A)    The Board or the Committee (as hereinafter defined) is authorized under
this Plan to approve any type of arrangement with an Eligible Person that is not
inconsistent with the provisions of this Plan and that, by its terms, involves
or might involve the issuance of (1) shares of Class A Common Stock, par value
$0.01 per share, of the Company or of any other class of security of the Company
which is convertible into shares of the Company’s Class A Common Stock (the
“Shares”) or (2) a right or interest with an exercise or conversion privilege at
a price related to the Shares or with a value derived from the value of the
Shares, which right or interest may, but need not, constitute a “Derivative
Security,” as such term is defined in Rule 16a-l promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), as such Rule
may be amended from time to time. The entering into of any such arrangement is
referred to herein as the “grant” of an “Award.”

 

(B)    Awards are not restricted to any specified form or structure and may
include, without limitation, grants, sales or bonuses of stock, restricted
stock, stock options, reload stock options, stock purchase warrants, other
rights to acquire stock, securities convertible into or redeemable for stock,
stock appreciation rights, limited stock appreciation rights, phantom stock,
dividend equivalents, performance units or performance shares, and an Award may
consist of one such security or benefit, or two or more of them in tandem or in
the alternative. The terms upon which an Award is granted shall be evidenced by
a written agreement executed by the Company and the Eligible Person to whom such
Award is granted.

 

(C)    Subject to paragraph (D)(2) below, Awards may be granted, and Shares may
be issued pursuant to an Award, for any lawful consideration as determined by
the Board or the Committee, including, without limitation, services rendered by
the Eligible Person.

 

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(D)    Subject to the provisions of this Plan, the Board or the Committee shall
determine all of the terms and conditions of each Award granted under this Plan,
which terms and conditions may (but need not) include, among other things:

 

(1)    provisions specifying the exercise or settlement price for any Award, or
specifying the method by which such price is determined; provided, that the
exercise or settlement price of any Award that is an option to acquire a Share
or a right to appreciation with respect to a Share or a similar Award, and that
is intended to qualify as “performance-based compensation” for purposes of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”),
shall be not less than the fair market value of a Share on the date such Award
is granted;

 

(2)    provisions relating to the exercisability and/or vesting of Awards, lapse
and non-lapse restrictions upon the Shares obtained or obtainable under Awards
or under this Plan and the termination, expiration and/or forfeiture of Awards;

 

(3)    provisions conditioning or accelerating the grant of an Award or the
receipt of benefits pursuant to such Award upon the occurrence of specified
events, including, without limitation, the achievement of performance goals, the
exercise or settlement of a previous Award, the satisfaction of an event or
condition within the control of the recipient of the Award or within the control
of others, a change of control of the Company, an acquisition of a specified
percentage of the voting power of the Company, the dissolution or liquidation of
the Company, a sale of substantially all of the property and assets of the
Company or an event of the type described in Section 7 hereof;

 

(4)    provisions required in order for such Award to qualify (a) as an
incentive stock option under Section 422 of the Code (an “Incentive Stock
Option”), (b) as “performance based compensation” under Section 162(m) of the
Code, and/or (c) for an exemption from Section 16 of the Exchange Act; and/or

 

(5)    provisions restricting the transferability of Awards or Shares issued
under Awards.

 

(E)    Subject to the provisions of this Plan, the purchase price of any Award
and the Award holder’s tax withholding obligation (if applicable) with respect
to such Award shall be made by any one or more of the following:

 

(1)    payment in full in cash, at or before the time the Company delivers the
Shares underlying such Award;

 

(2)    the delivery of other property, at or before the time the Company
delivers the Shares underlying such Award;

 

(3)    the delivery of previously owned shares of capital stock of the Company
(including “pyramiding”) at or before the time the Company delivers the Shares
underlying such Award;

 

(4)    a reduction in the amount of Shares or other property otherwise issuable
pursuant to such Award; or

 

(5)    the holder of the Award irrevocably authorizing a broker approved in
writing by the Company to sell Shares to be acquired through exercise of the
Award and remitting to the Company a sufficient portion of the sale proceeds to
pay the entire exercise price and any federal and state withholding resulting
from such exercise (a “Cashless Exercise”); provided, however, that
notwithstanding anything in this Plan to the contrary, (a) the Company shall
only deliver such Shares at or after the time the Company receives full payment
for such Shares, (b) the purchase price for such Shares and tax withholdings (if
applicable) will be due and payable to the Company no later than one business
day following the date on which the proceeds from the sale of the underlying
Shares are received by the authorized broker, (c) in no event will the Company
directly or indirectly extend or maintain credit, arrange for the extension of
credit or renew any extension of

 

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credit, in the form of a personal loan or otherwise, in connection with a
Cashless Exercise and (d) in no event shall the holder of the Award enter into
any agreement or arrangement with a brokerage or similar firm in which the
proceeds received in connection with a Cashless Exercise will be received by or
advanced to the holder of such Award before the date the Shares underlying such
Award are delivered or released by the Company.

 

Notwithstanding anything in this Plan to the contrary, no Award holder shall be
permitted to pay the purchase price of the Shares underlying such Award, or
other property issuable pursuant to such Award, or such recipient’s withholding
tax obligation with respect to such issuance (if applicable), in whole or in
part by the delivery of a promissory note.

 

(F)    Notwithstanding any provisions of this Plan to the contrary:

 

(1)    payment of the purchase price for Shares underlying an Award and the
Award holder’s withholding tax obligation (if applicable) with respect to such
Shares shall be due the date the Shares underlying the Award are delivered; and

 

(2)    in no event shall the Company issue or deliver the Shares underlying an
Award before the Company receives payment for such Shares pursuant to Section
3(E).

 

(G)    Notwithstanding any provisions of this Plan to the contrary, Awards shall
be deemed to be exercised when both of the following shall have occurred:

 

(i)    the delivery to the Company of a written notice of such exercise; and

 

(ii)    payment in full of the aggregate purchase price for the Shares or other
property issuable pursuant to such Award and any tax withholding obligation (if
applicable) with respect to such issuance.

 

Section 4.    STOCK SUBJECT TO PLAN

 

(A)    The aggregate number of Shares that may be issued pursuant to all
Incentive Stock Options granted under this Plan shall not exceed 1,800,000, as
amended and restated, subject to adjustment as provided in Section 7 hereof.

 

(B)    At any time, the aggregate number of Shares issued and issuable pursuant
to all Awards (including all Incentive Stock Options and Awards that constitute
a right or interest with an exercise or conversion privilege at a price related
to the Shares or with a value derived from the value of Shares) granted under
this Plan shall not exceed 1,800,000, as amended and restated, subject to
adjustment as provided in Section 7 hereof.

 

(C)    The aggregate number of Shares subject to Awards granted during any
calendar year to any one Eligible Person (including the number of shares
involved in Awards having a value derived from the value of Shares) shall not
exceed 600,000, subject to adjustment as provided in Section 7 hereof.

 

(D)    For purposes of Section 4(B) hereof, the aggregate number of Shares
issued and issuable pursuant to Awards granted under this Plan shall at any time
be deemed to be equal to the sum of the following:

 

(i)    the number of Shares that were issued prior to such time pursuant to
Awards granted under this Plan, other than Shares that were subsequently
reacquired by the Company pursuant to the terms and conditions of such Awards
and with respect to which the holder thereof received no benefits of ownership
such as dividends; plus

 

(ii)    the number of Shares that were otherwise issuable prior to such time
pursuant to Awards granted under this Plan, but that were withheld by the
Company as payment of the purchase price

 

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of the Shares issued pursuant to such Awards or as payment of the recipient’s
tax withholding obligation with respect to such issuance; plus

 

(iii)    the maximum number of Shares that are or may be issuable at or after
such time pursuant to Awards granted under this Plan prior to such time.

 

Section 5.    NATURE AND DURATION OF PLAN

 

(A)    This Plan is intended to constitute an unfunded arrangement for a select
group of management or other key employees and consultants.

 

(B)    Any Awards granted under this Plan shall be granted within ten years from
the Effective Date of this Plan (as provided in Section 9) (the “Expiration
Date”). Although Shares may be issued after the Expiration Date pursuant to
Awards made prior to such date, no Shares shall be issued under this Plan after
the tenth anniversary of the Expiration Date.

 

Section 6.    ADMINISTRATION OF PLAN

 

(A)    This Plan shall be administered by the Board or a committee of the Board
(the “Committee”) consisting of two or more directors, each of whom is (i) a
“Non-Employee Director” (as such term is defined in Rule 16b-3 promulgated under
the Exchange Act), and (ii) with respect to any Award intended to qualify for
the “performance-based compensation” exception of Section 162(m) of the Code, is
an “outside director” within the meaning of Section 162(m) of the Code. The
Board shall have the discretion to appoint, add, remove or replace members of
the Committee, and shall have the sole authority to fill vacancies on the
Committee.

 

(B)    Subject to the provisions of this Plan, the Board or the Committee shall
be authorized and empowered to do all things necessary or desirable in
connection with the administration of this Plan with respect to the Awards over
which the Board or such Committee has authority, including, without limitation,
the following:

 

(1)    adopt, amend and rescind rules and regulations relating to this Plan;

 

(2)    determine which persons are Eligible Persons and to which of such
Eligible Persons, if any, and when Awards shall be granted hereunder;

 

(3)    grant Awards to Eligible Persons and determine the terms and conditions
thereof, including the number of Shares subject thereto and the circumstances
under which Awards become exercisable or vested or are forfeited or expire,
which terms may but need not be conditioned upon the passage of time, continued
employment, the satisfaction of performance criteria, the occurrence of certain
events (including events which the Board or the Committee determine constitute a
change of control), or other factors;

 

(4)    determine whether, and the extent to which adjustments are required
pursuant to Section 7 hereof;

 

(5)    interpret and construe any terms and conditions of, and define any terms
used in, this Plan, any rules and regulations under this Plan and/or any Award
granted under this Plan; and

 

(6)    determine the terms and conditions of the Non-Employee Director Options
that are granted hereunder, other than the terms and conditions specified in
Section 10 hereof.

 

(C)    All decisions, determinations, and interpretations of the Committee shall
be final and conclusive upon any Eligible Person to whom an Award has been
granted and to any other person holding an Award.

 

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(D)    The Committee may, in the terms of an Award or otherwise, temporarily
suspend the exercisability of an Award and/or the issuance of Shares under an
Award if the Committee determines that securities law or other considerations so
warrant.

 

Section 7.    ADJUSTMENTS

 

If the outstanding securities of the class then subject to this Plan are
increased, decreased or exchanged for or converted into cash, property or a
different number or kind of shares or securities, or if cash, property or shares
or securities are distributed in respect of such outstanding securities, in
either case as a result of a reorganization, merger, consolidation,
recapitalization, restructuring, reclassification, dividend (other than a
regular, quarterly cash dividend) or other distribution, stock split, reverse
stock split, spin-off or the like, or if substantially all of the property and
assets of the Company are sold, then, unless the terms of such transaction shall
provide otherwise, the Board or the Committee may make appropriate and
proportionate adjustments in (A) the number and type of shares or other
securities or cash or other property that may be acquired pursuant to Awards
theretofore granted under this Plan and the exercise or settlement price of such
Awards, (B) the aggregate number and type of shares or other securities that may
be issued pursuant to all Awards thereafter granted under this Plan, (C) the
aggregate number of Shares that may be issued pursuant to Incentive Stock
Options that may be granted under this Plan, and (D) the aggregate number of
Shares that may be subject to Awards granted during any calendar year to any one
Eligible Person; provided, however, that notwithstanding the foregoing, no
adjustment shall be made pursuant to this Section 7 to the extent that it would
(and the adjustment shall be modified appropriately so that it does not) (1)
cause an Award intended to qualify for the “performance based compensation”
exception under Section 162(m) of the Code to not so qualify, or (2) without the
consent of the Company and the holder of the Incentive Stock Option, cause an
Award intended to qualify as an Incentive Stock Option to not so qualify.

 

Section 8.    AMENDMENT AND TERMINATION OF PLAN

 

The Board may amend, alter or discontinue this Plan or any agreement evidencing
an Award made under this Plan, but no amendment or alteration shall be made
which would impair the rights of any Award holder, without such holder’s
consent, under any Award theretofore granted; provided, that no such consent
shall be required if the Board or the Committee determines in its sole
discretion and prior to the date of any change of control (as defined, if
applicable, in the agreement evidencing such Award) that such amendment or
alteration is not reasonably likely to significantly diminish the benefits
provided under such Award, or that any such diminution has been adequately
compensated.

 

Section 9.    EFFECTIVE DATE OF PLAN

 

The 1999 Stock Incentive Plan originally became effective on April 12, 1999. No
Class A Shares may be issued under this Plan until it has been approved,
directly or indirectly, by (a) the affirmative votes of the holders of a
majority of the securities of the Company present, or represented, and entitled
to vote at a meeting duly held in accordance with the laws of the State of
Delaware or (b) the written consent of the holders of a majority of the
securities of the Company entitled to vote. The amendments to the Plan reflected
herein became effective as of October 28, 2002, the date upon which they were
approved by the Board.

 

Section 10.    NON-EMPLOYEE DIRECTOR OPTIONS

 

(A)    The Board or the Committee is authorized under this Plan to grant each
Non-Employee Director an option (a “Non-Employee Director Option”) to purchase
up to 4,000 Shares during a calendar year, subject to adjustment as provided in
Section 7 hereof.

 

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(B)    Each Non-Employee Director Option granted under this Plan shall expire
upon the first to occur of the following:

 

(1)    Twenty-four (24) months after the date upon which the optionee shall
cease to be a director of the Company; or

 

(2)    The tenth anniversary of the Date of Grant of such Non-Employee Director
Option.

 

(C)    Each Non-Employee Director Option shall have an exercise price equal to
the greater of (1) the aggregate fair market value on the Date of Grant of such
option of the Shares subject thereto or (2) the aggregate par value of such
Shares on such date.

 

(D)    All outstanding Non-Employee Director Options theretofore granted under
this Plan shall become fully exercisable upon the first to occur of the
following:

 

(1)    the date of stockholder approval of a reorganization, merger or
consolidation of the Company as a result of which the outstanding securities of
the class then subject to this Plan are exchanged for or converted into cash,
property and/or securities not issued by the Company or by a company whose
common equity holders immediately after such transaction consist only of persons
who are holders of the common equity of the Company immediately before such
transaction;

 

(2)    the first date upon which the directors of the Company who were nominated
by the Board for election as directors shall cease to constitute a majority of
the authorized number of directors of the Company;

 

(3)    the dissolution or liquidation of the Company; or

 

(4)    the sale of all or substantially all of the property and assets of the
Company.

 

Section 11.    EXTRAORDINARY CORPORATE TRANSACTIONS.

 

(A)    The Committee may provide, either at the time an Award is granted or
thereafter, that a Change in Control shall have such effect as specified by the
Committee, or no effect, as the Committee in its sole discretion may provide.
Without limiting the foregoing, the Committee may but need not provide, either
at the time an Award is granted or thereafter, that if a Change in Control
occurs, then effective as of a date selected by the Committee, the Committee
(which for purposes of the Change in Controls described in (iii) and (v) of
Section 11(B) shall be the Committee as constituted prior to the occurrence of
such Change in Control) acting in its sole discretion without the consent or
approval of any Eligible Person, will effect one or more of the following
alternatives or combination of alternatives with respect to any or all
outstanding Awards (which alternatives may be conditional on the occurrence of
such of the Change in Control specified in clause (i) through (v) of Section
11(B) which gives rise to the Change in Control and which may vary among
individual Eligible Persons):

 

(1)    in the case of a Change in Control specified in clauses (i), (ii) or (iv)
of Section 11(B), accelerate the time at which Awards then outstanding may be
exercised in full for a limited period of time on or before a specified date
(which will permit the Eligible Person to participate with the Class A Common
Stock received upon exercise of such Award in the event of a Change in Control
specified in clauses (i), (ii) or (iv), as the case may be) fixed by the
Committee, after which specified date all unexercised options and all rights of
Eligible Persons thereunder shall terminate;

 

(2)    accelerate the time at which Awards then outstanding may be exercised so
that such Awards shall be exercisable in full for their then remaining term and
shall be subject to assumption and/or adjustment pursuant to Section 7; or

 

(3)    require the mandatory surrender to the Company of outstanding Awards held
by such Eligible Person (irrespective of whether such Awards are then
exercisable under the provisions of

 

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this Plan) as of a date, before or not later than sixty days after such Change
in Control, specified by the Committee, and in such event the Committee shall
thereupon cancel such Awards and the Company shall pay to each Eligible Person
an amount of cash equal to the excess of the fair market value of the aggregate
shares subject to such Award over the aggregate Award price of such shares.

 

Notwithstanding the foregoing, with the consent of the Eligible Person, the
Committee may in lieu of the foregoing make such provision with respect of any
Change in Control as it deems appropriate.

 

(B)    For purposes of this Plan and Awards granted under this Plan, the term
“Change in Control” shall mean (i) any merger or consolidation in which the
Company shall not be the surviving entity (or survives only as a subsidiary of
another entity whose shareholders did not own all or substantially all of the
Company’s Common Stock immediately prior to such transaction), (ii) the sale of
all or substantially all of the Company’s assets to any other person or entity
(other than a wholly-owned subsidiary), (iii) the acquisition of beneficial
ownership or control of (including, without limitation, power to vote) more than
50% of the outstanding shares of Common Stock by any person or entity (including
a “group” as defined by or under Section 13(d)(3) of the Exchange Act), (iv) the
dissolution or liquidation of the Company, (v) a contested election of
directors, as a result of which or in connection with which the persons who were
directors of the Company before such election or their nominees cease to
constitute a majority of the Board, or (vi) any other event specified by the
Committee, regardless of whether at the time an Award is granted or thereafter.

 

Section 12.    COMPLIANCE WITH OTHER LAWS AND REGULATIONS

 

This Plan, the grant and exercise of Awards thereunder, and the obligation of
the Company to sell and deliver shares under such Awards, shall be subject to
all applicable federal and state laws, rules and regulations and to such
approvals by any governmental or regulatory agency as may be required. The
Company shall not be required to issue or deliver any certificates for shares of
Class A Common Stock prior to the completion of any registration or
qualification of the Shares under any federal or state law or issuance of any
ruling or regulation of any government body which the Company shall, in its sole
discretion, determine to be necessary or advisable.

 

Section 13.    NO RIGHT TO COMPANY EMPLOYMENT

 

Nothing in this Plan or as a result of any Award granted pursuant to this Plan
shall confer on any individual any right to continue in the employ of the
Company or interfere in any way with the right of the Company to terminate an
individual’s employment at any time. The agreement evidencing an Award may
contain such provisions as the Committee may approve with respect to the effect
of approved leaves of absence.

 

Section 14.    LIABILITY OF COMPANY

 

The Company and any affiliate which is in existence or hereafter comes into
existence shall not be liable to an Eligible Person or other persons as to:

 

(A) The non-issuance or sale of Shares as to which the Company has been unable
to obtain from any regulatory body having jurisdiction the authority deemed by
the Company’s counsel to be necessary to the lawful issuance and sale of any
Shares hereunder; and (B) Any tax consequence expected, but not realized, by any
Eligible Person or other person due to the issuance, exercise, settlement,
cancellation or other transaction involving any Award granted hereunder.

 

Section 15.    GOVERNING LAW

 

This Plan and any Awards and agreements hereunder shall be interpreted and
construed in accordance with the laws of the State of Delaware and applicable
federal law.

 

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