EXHIBIT 10.2

 

1995 EMPLOYEE STOCK OPTION PLAN

CUTTER & BUCK INC.

(RESTATED AS OF OCTOBER 19, 2005)

 

A.                                   Purpose of the Plan.  The purpose of this
1995 Employee Stock Option Plan is to provide for supplementary compensation for
past services and an incentive and reward to eligible key employees, managers
and officers of the CUTTER & BUCK INC. (“Company”) or any subsidiary of the
Company.  The Company’s goal is to attract and retain the best available
personnel for positions of substantial responsibility, provide additional
incentive to such key employees, managers and officers and promote the success
of the Company’s business.

 

2.                                       Definitions.  As used herein, the
following definitions shall apply:

 

(a)                                  “Board” shall mean the Board of Directors
of the Company.

 

(b)                                 “Committee” shall mean the Compensation
Committee appointed by the Board in accordance with Section 4(a) of the Plan.

 

(c)                                  “Common Stock” shall mean the common stock
of the Company.

 

(d)                                 “Company” shall mean CUTTER & BUCK INC., a
Washington corporation.

 

(e)                                  “Employee” shall mean any person (including
any person who may be an officer or director) employed by the Company or its
present or future subsidiaries whom the Committee may determine to be a key
employee, key managerial personnel or key officer.

 

(f)                                    “Fair Market Value” shall be determined
by the Committee.

 

(g)                                 “Incentive Stock Option” shall mean a Stock
Option conforming to the applicable provisions of Section 422 of the Internal
Revenue Code.

 

(h)                                 “Option” shall mean any stock option granted
pursuant to the Plan.  An Option granted under this Plan shall be a
“Nonqualified Stock Option” unless it meets the qualifications for an Incentive
Stock Option as specified under the Plan and is so designated by the Committee.

 

(i)                                     “Optioned Shares” shall mean stock
subject to an Option granted pursuant to this Plan.

 

(j)                                     “Participant” shall mean an Employee who
receives a Stock Option.

 

(k)                                  “Plan” shall mean this Stock Option Plan
for key employees, managers and officers of the Company, as the same may be
amended from time to time.

 

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(l)                                     “Share” shall mean the Common Stock of
the Company.

 

(m)                               “Taxable Year” shall mean the fiscal year of
the Company.

 

(n)                                 “Ten Percent Shareholder” shall mean any
direct or indirect owner of more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any then existing parent
or subsidiary of the Company.

 

3.                                       Stock Subject to Options.  Except as
otherwise provided in Section 17, the maximum aggregate number of Shares which
may be optioned and sold pursuant to the Plan is 312,240 Shares, which will be
authorized, but unissued.

 

If an Option should expire or become unexercisable for any reason without having
been exercised in full, the unissued Shares which were subject thereto shall,
unless the Plan shall have been terminated, become available for other Options
under the Plan.

 

4.                                       Administration of the Plan.

 

(a)                                  Appointment of Committee.  The Plan shall
be administered by the Compensation Committee consisting of three or more
members.  No member of the Committee is eligible to receive options while
serving on the Committee, and each member shall be a disinterested person within
the meaning of Rule 16b-3 of the Securities Exchange Act of 1934.  Members of
the Committee shall be appointed by the Board and shall serve until their
resignation or removal.  The Board may remove Committee members, with or without
cause, at any time, and may also fill any vacancies.

 

(b)                                 Procedure.  A majority of the entire
Committee shall constitute a quorum and the action of a majority of the members
present at any meeting at which a quorum is present shall be deemed the action
of the Committee.  In addition, any decision or determination reduced to writing
and signed by all of the members of the Committee shall be fully as effective as
if it has been made by a majority vote at a meeting duly called and held.  The
Committee may appoint a Secretary to keep minutes of its meetings and may make
such rules and regulations for the conduct of its business as it shall deem
advisable.

 

(c)                                  Powers of the Committee.  Subject to the
provisions of the Plan, the Committee shall have authority:

 

(i)                                     To determine the fair market value of
the Shares covered by each Option, the Employees to whom and the time or times
at which Options shall be granted, and the number of Shares to be represented by
each Option;

 

(ii)                                  To interpret the Plan;

 

(iii)                               To prescribe, amend and rescind rules and
regulations relating to the Plan;

 

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(iv)                              To determine the terms and provisions of each
Option granted under the Plan (which need not be identical), and with the
consent of the holder thereof, to modify or amend each Option;

 

(v)                                 To determine whether the Option price is
payable in money or in stock of the Company;

 

(vi)                              To authorize any person to execute on behalf
of the Company any instrument required to effectuate the grant of an Option
previously granted by the Committee;

 

(vii)                           To designate an Option as either an Incentive
Stock Option or a Nonqualified Stock Option; and

 

(viii)                        To make all other determinations deemed necessary
or advisable for the administration of the Plan.

 

(d)                                 Liability.  No member of the Committee shall
be personally liable by reason of any contract or other instrument executed by
him or her or on his or her behalf or in his or her capacity as a member of the
Committee or for any mistake of judgment made in good faith, and the Company
shall indemnify and hold harmless each member of the Committee and each other
officer, employee, or director of the Company to whom any duty or power relating
to the administration or interpretation of the Plan has been delegated, against
any cost or expense (including counsel fees) or liability (including any sum
paid in settlement of a claim with the approval of the Committee) arising out of
any act or omission to act in connection with the Plan unless arising out of
such person’s own fraud or bad faith.

 

(e)                                  Effect of Committee’s Decision.  All
decisions, determinations and interpretations of the Committee shall be final
and binding on all Participants and any other holders of any Options granted
under this Plan.

 

5.                                       Eligibility.  Options may be granted
only to Employees, including Employees who are directors or officers of the
Company.  An Employee who has been granted an Option award may, if he is
otherwise eligible, be granted additional Option awards.

 

Notwithstanding any provision to the contrary, in this Section 5, no Employee
may be granted an Incentive Stock Option under this Plan if the Employee, at the
time the Incentive Stock Option is granted, owns stock possessing more than 10
percent of the total combined voting power of all classes of stock of the
Company or any then existing parent or subsidiary of the Company unless at the
time the Incentive Stock Option is granted the Incentive Stock Option price is
at least 110 percent of the fair market value of the stock subject to the
Incentive Stock Option and the Incentive Stock Option by its terms is not
exercisable after the expiration of five (5) years from the date that the
Incentive Stock Option is granted and the Incentive Stock Option conforms to all
other applicable provisions of Section 422 of the Internal Revenue Code and
Treasury Regulations thereunder.

 

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6.                                       Term of Plan.  The Plan shall become
effective upon its adoption by the Board or its approval or ratification by vote
of the holders of a majority of the outstanding Shares entitled to vote on the
adoption of the Plan, whichever is earlier.  It shall continue in effect for a
term of ten (10) years unless sooner terminated under Section 16 of the Plan.

 

7.                                       Term of Option.  The term of each
Option granted under the Plan shall be determined by the Committee, however, it
shall not exceed ten (10) years from the date of grant or five (5) years from
the date of grant for a Ten Percent Shareholder in the case of an Incentive
Stock Option.

 

8.                                       Option Price.  The Option price shall
be the fair market value of the Shares at the time the Option is granted;
provided that the Option price for shares to be issued pursuant to any Incentive
Stock Option granted to a Ten Percent Shareholder shall not be less than 110
percent of the fair market value of the Shares at the time the Incentive Stock
Option is granted.

 

9.                                       Aggregate Value.  The aggregate fair
market value (determined as of the time the Option is granted) of the stock with
respect to which Incentive Stock Options are exercisable for the first time by a
Participant during any calendar year (under this Plan, and all other incentive
stock option plans of the Company and any parent or subsidiary of the Company)
shall not exceed $100,000.

 

10.                                 Vesting of Option.  Options shall vest in
accordance with the following schedule (unless the Committee establishes another
schedule):

 

Years Following

 

Percent of Option

 

Grant of Option Award

 

Award Exercisable

 

 

 

 

 

After Year 1

 

20

 

After Year 2

 

40

 

After Year 3

 

60

 

After Year 4

 

80

 

After Year 5

 

100

 

 

The vested portion of an Option award shall be exercisable at any time (but no
later than the end of the option period determined pursuant to Section 7 above),
subject, however, to all other terms of the Plan and of the Option granted to
Participant.  An Option may not be exercised for fractional shares of the
Company.

 

If a Participant dies or his or her employment is terminated due to his or her
permanent disability (as determined by the Committee) his or her Optioned Shares
shall become 100 percent vested, if not already so vested under this Section.

 

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11.                                 Additional Rights in Certain Events.

 

(a)                                  Definitions.  For purposes of this
Section 11, the following terms shall have the following meanings:

 

(i)                                     The term “Person” shall be used as that
term is used in Sections 13(d) and 14(d) of the 1934 Act as in effect on the
effective date of the Plan.

 

(ii)                                  “Beneficial Ownership” shall be determined
as provided in Rule 13d-3 under the 1934 Act as in effect on the effective date
of the Plan.

 

(iii)                               A specified percentage of “Voting Power” of
a company shall mean such number of the Voting Shares, as defined below, as
shall enable the holders thereof to cast such percentage of all the votes which
could be cast in an annual election of directors (without consideration of the
rights of any class of stock other than the common stock of the company to elect
directors by a separate class vote); and “Voting Shares” shall mean all
securities of a company entitling the holders thereof to vote in an annual
election of directors (without consideration of the rights of any class of stock
other than the common stock of the company to elect directors by a separate
class vote).

 

(iv)                              “Tender Offer” shall mean a tender offer or
exchange offer to acquire securities of the Company (other than such an offer
made by the Company or any subsidiary), whether or not such offer is approved or
opposed by the Board.

 

(v)                                 “Continuing Directors” shall mean a director
of the Company who either (a) was a director of the Company on the effective
date of the Plan or (b) is an individual whose election, or nomination for
election, as a director of the Company was approved by a vote of at least two
thirds of the directors then still in office who were Continuing Directors
(other than an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of
directors of the Company which would be subject to Rule 14a-11 under the 1934
Act, or any successor rule).

 

(vi)                              “Section 11 Event” shall mean the date upon
which any of the following events occurs:

 

(1)                                  The Company acquires actual knowledge that
any Person other than the Company, a subsidiary or any employee benefit plan(s)
sponsored by the Company or a subsidiary had acquired the Beneficial Ownership,
directly or indirectly, of securities of the Company entitling such Person to
40% or more of the Voting Power of the Company;

 

(2)                                  A Tender Offer is made to acquire
securities of the Company entitling the holder thereof to 30% or more of the
Voting Power of the Company; or

 

(3)                                  A solicitation subject to Rule 14a-11 under
the 1934 Act (or

 

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any successor rule) relating to the election or removal of 50% or more of the
members of the Board or any class of the Board shall be made by any person other
than the Company or less than 51% of the members of the Board shall be
Continuing Directors; or

 

(4)                                  The shareholders of the Company shall
approve a merger, consolidation, share exchange, division or sale or other
disposition of assets of the Company as a result of which the shareholder of the
Company immediately prior to such transaction shall not hold, directly or
indirectly, immediately following such transaction a majority of the Voting
Power (i) in the case of a merger or consolidation, the surviving or resulting
corporation, (ii) in the case of a share exchange, the acquiring corporation or
(iii) in the case of a division or a sale or other disposition of assets, each
surviving, resulting or acquiring corporation which, immediately following the
transaction, holds more than 10% of the consolidated assets of the Company
immediately prior to the transaction; provided, however, that (i) if securities
beneficially owned by a grantee are included in determining the Beneficial
Ownership of a Person referred to in Section 11(a)(vi)(1), (ii) a grantee is
required to be named pursuant to Item 2 of the Schedule 14D-1 (or any similar
successor filing requirement required to be filed by the bidder making a Tender
Offer referred to in Section 11(a)(vi)(2) or (iii) if a grantee is a
“participant” as defined in Instruction 3 to Item 4 of Schedule 14A under the
1934 Act (or any successor rule) in a solicitation (other than a solicitation by
the Company) referred to in Section 11(a)(vi)(3), then no Section 11 Event with
respect to such grantee shall be deemed to have occurred by reason of such
event.

 

(b)                                 Acceleration of the Exercise Date of Stock
Options.

 

Notwithstanding any other provision contained in the Plan, in case any
“Section 11 Event” occurs, all outstanding stock options (other than those held
by a person referred to in the proviso to Section 11(a)(vi)) shall become
immediately and fully exercisable whether or not otherwise exercisable by their
terms.

 

12.                                 Exercise of Option.

 

(a)                                  Procedure for Exercise.  An Option shall be
deemed to be exercised when written notice of such exercise has been given to
the Company in accordance with the Option and full payment for the Shares with
respect to which the Option is exercised has been received by the Company. 
Until the issuance of the stock certificates (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to Optioned Shares notwithstanding the
exercise of the Option.  No adjustment will be made for a dividend or other
rights for which the record date is prior to the date of exercise of the Option
except as provided in Section 17 of the Plan.

 

Notwithstanding any provision to the contrary contained herein, both
Nonqualified Stock Options and Incentive Stock Options may with approval of the
Committee be exercised by

 

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means of (i) an exchange of Shares previously held by the Participant for the
Optioned Shares, or (ii) broker-assisted cashless exercise transactions
involving brokers with which the Company has a formal understanding regarding
such transactions.  For Nonqualified Stock Options and Incentive Stock Options,
with approval of the Committee, payment may be made by delivery (including by
facsimile) to the Company or its designated agent of an executed irrevocable
instrument to a broker-dealer to sell a sufficient portion of the shares and
deliver the sale proceeds directly to the Company to pay for the Option.  In
addition, to the extent that the Options exercised are Nonqualified Stock
Options, a Participant may with approval of the Committee satisfy his or her
requirement for federal income tax withholding by means of (i) delivery to the
Company of Shares previously held by the Participant with a Fair Market Value
equal to the withholding obligation, or (ii) allowing the Company to withhold
Optioned Shares with a Fair Market Value equal to the withholding obligation. 
Any Participant subject to Section 16(b) of the Securities Exchange Act of 1934,
as amended, who elects to exchange Shares to be issued upon exercise of the
Option for the Optioned Shares, or allows the Company to withhold Optioned
Shares with a Fair Market Value equal to the withholding obligation must do so
either (i) during the periods which begin on the third business day following
the Company’s regular release of its quarterly and annual statements of sales
and earnings and ending on the 12th business day following such date, or
(ii) pursuant to an irrevocable election made by the Participant at least six
months in advance of the date the Option exercised becomes taxable.  For
purposes of an exchange, a delivery, or withholding, Shares held by a
Participant and Optioned Shares shall be valued at their Fair Market Value as of
the date of delivery which value shall be credited on a dollar for dollar basis
toward payment of the Option price for the Optioned Shares or the associated tax
withholding obligation.

 

(b)                                 Time of Exercise; Effect of Termination. 
Unless otherwise provided in the terms of an Option, it is the intent of this
Plan that an Option may be exercised by the Participant as provided in this Plan
only while an Employee of the Company except as set out below.  If a
Participant’s employment is terminated, the following rules control:

 

(i)                                     If the Participant dies, the persons to
whom the Participant’s rights have passed by will or the laws of descent and
distribution may exercise such rights, to the extent the Participant could have
done so immediately preceding his death.  Any such Option must be exercised
within three (3) months of the Participant’s death, in the case of an Incentive
Stock Option, and twelve (12) months of the Participant’s death, in the case of
a Nonqualified Option, but in no event later than the end of the prescribed
Option period.

 

(ii)                                  If the Participant’s employment is
terminated due to his or her embezzlement or theft of Company funds,
defraudation of the Company, violation of Company rules, regulations or
policies, or any intentional act which harms the Company, such Option, to the
extent not exercised as of the date of termination, shall be terminated as of
that date.

 

(iii)                               If the Participant’s employment is
terminated due to his or her disability, as defined in Section 22(e)(3) of the
Internal Revenue Code, the Participant may exercise his or her Option, to the
extent exercisable as of the date of termination within twelve (12) months after
termination, but in no event later than the end of the prescribed Option period.

 

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(iv)                              If the Participant’s employment is terminated
for any reason other than those set forth in subparagraphs (i), (ii) and
(iii) above, the Participant may exercise his or her Option, to the extent
exercisable as of the date of his termination, within three (3) months after
termination in the case of Incentive Stock Options and within one hundred (100)
days after termination in the case of Nonqualified Options, but in no event
later than the end of the prescribed Option period.

 

13.                                 Options Not Transferable.  Options under the
Plan may not be sold, pledged, assigned or transferred in any manner other than
by will or the laws of descent and distribution and may be exercised during the
Participant’s lifetime only by the Participant.

 

14.                                 Fiscal Year Amount Limitation.  No
Participant shall be granted options to purchase more than 112,500 Shares of
Company Common Stock in any Taxable Year.

 

15.                                 Disposition of Incentive Option Shares.  In
order to receive Incentive Stock Option tax treatment under Section 422 of the
Internal Revenue Code a Participant may not dispose of any Share received
pursuant to an Incentive Stock Option within two (2) years of the date of the
granting of the Option or within one (1) year after the transfer of such Share
to such Participant.

 

16.                                 Amendment or Termination of the Plan.

 

(a)                                  The Board may amend the Plan from time to
time in such respects as the Board deems advisable, except that no amendment
may, without further shareholder approval or ratification:

 

(i) Increase the total number of Shares which may be available under Section 3
of the Plan (subject, however, to Section 19);

 

(ii) Change the definition of eligibility in Section 5 of the Plan;

 

(iii) Change the term of Option stated in Section 7 of the Plan;

 

(iv) Change the Option price established in Section 8 of the Plan.

 

(b)                                 The Board, without further approval of the
shareholders, may at any time terminate the Plan.

 

(c)                                  No amendment or termination of the Plan
shall diminish or otherwise adversely affect the rights of a Participant with
respect to a previously granted Option.

 

17.                                 Adjustments Upon Changes in Capitalization. 
The number and kind of Shares of Company stock subject to an Option and the
fiscal year amount limitation set forth in Section 14, shall be appropriately
adjusted along with a corresponding adjustment in the Option price to reflect
any stock dividend, stock split, split-up, a declaration of a distribution
payable in a form other than Common Stock in an amount that has a material
effect on the price of Common Stock or any combination or exchange of Shares,
however accomplished.  An appropriate adjustment shall also

 

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be made with respect to the aggregate number and kind of shares remaining
available to be optioned and sold under the Plan.  Adjustments, if any, and any
determinations or interpretations, including any determination of whether a
distribution has a material effect on the price of Common Stock, made by the
Committee shall be final, binding and conclusive.

 

18.                                 Agreement and Representations of Employee. 
As a condition to the exercise of any portion of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of exercise that the Shares are being purchased or acquired only for investment
and without any present intention to resell or distribute the Shares if, in the
opinion of counsel for the Company, such a representation is required under the
Securities Act of 1933 or any other applicable federal or state law, regulation
or rule of any governmental agency.  Appropriate legends restricting the
transfer of the Shares, unless such Shares are registered under appropriate
federal and state securities laws or unless exemptions are available therefrom,
will be placed on Share certificates issued pursuant to this Plan.

 

19.                                 Reservations of Shares of Common Stock.  The
Company, during the term of this Plan, will at all times reserve and keep
available, and will seek or obtain from any regulatory body having jurisdiction
any requisite authority in order to issue and sell, such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.  Inability of the
Company 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, shall relieve the Company of any liability with respect
to the nonissuance or sale of Shares as to which such requisite authority shall
not have been obtained.

 

20.                                 General Limitations and Provisions.  Nothing
contained in the Plan shall give any Employee the right to be retained in the
employment of the Company or affect the right of the Company to dismiss any
Employee.  The adoption of the Plan shall not constitute a contract between the
Company and any Employee.  Whether or not any Options are to be granted
hereunder shall be exclusively within the discretion of the Committee, and
nothing contained herein shall be construed as giving any Employee any right to
participate hereunder.  No Option shall be considered as compensation under any
other employee benefit plan of the Company except as otherwise determined by the
Committee.

 

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