EXHIBIT 10.4


 


CUTTER &
BUCK INC.


1999
NONEMPLOYEE DIRECTOR STOCK INCENTIVE PLAN


 


1.                                       Purpose
of the Plan.  The purposes of this
1999 Nonemployee Director Stock Incentive 
Plan (the “Plan”) are to promote the long-term success of Cutter &
Buck Inc. (the “Company”) by creating a long-term mutuality of interests
between the nonemployee directors and shareholders of the Company, to provide
an additional inducement for such directors to remain with the Company, and to
provide a means through which the Company may attract able persons to serve as
directors of the Company.


 


2.                                       Administration.


 


a.                                       The
Plan shall be administered by the Compensation Committee (the “Committee”) of
the Board of Directors of the Company (the “Board”).


 


b.                                      The
Committee shall interpret the Plan and prescribe such rules, regulations and
procedures in connection with the operations of the Plan as it shall deem to be
necessary and advisable for the administration of the Plan consistent with the
purposes of the Plan.  All questions of
interpretation and application of the Plan, or as to stock options granted
under the Plan, shall be subject to the determination of the Committee, which
shall be final and binding.


 


c.                                       Notwithstanding
the above, the selection of the directors to whom stock options are to be
granted, the timing of such grants, the number of shares subject to any stock
option, the exercise price of any stock option, the periods during which any
stock option may be exercised and the term of any stock option shall be as
hereinafter provided, and the Committee shall have no discretion as to such
matters.


 


3.                                       Shares
Available Under the Plan.  The
aggregate number of shares which may be issued and as to which grants of stock
options may be made under the Plan is 163,569 shares of the common stock of the
Company (without taking into effect any split of such shares), no par value
(the “Common Stock”), subject to adjustment and substitution as set forth in Section 6.  If any stock option granted under the Plan is
canceled by mutual consent or terminates or expires for any reason without
having been exercised in full, the number of shares subject to such option
shall again be available for purposes of the Plan.  The shares which may be issued under the Plan
may be authorized but unissued shares, treasury shares, or both.


 


4.                                       Grant
of Stock Options.  On the third
business day following the day of each annual meeting of the shareholders of
the Company, each person who is then a member of the Board and who is not then
an employee of the Company or any of its subsidiaries and is not then an
independent consultant (other than in his or her capacity as a member of the
Board) to the Company or any of its subsidiaries (collectively a “Nonemployee
Director”) shall be granted, automatically and without further action by the
Board or the Committee, a “nonstatutory stock option” (i.e., a stock option
which does not qualify under Section 422 or 423 of the Internal Revenue
Code of


 





















 


1986 (the “Code”)) to
purchase 7,500 shares of Common Stock, subject to adjustment and substitution
as set forth in Section 6.  If the
number of shares then remaining available for the grant of stock options under
the Plan at any time is not sufficient for each Nonemployee Director then
eligible to be granted an option for 7,500 shares (or the number of adjusted or
substituted shares pursuant to Section 6), then each such Nonemployee
Director shall be granted an option for a number of whole shares equal to the
number of shares then remaining available divided by the number of Nonemployee
Directors then eligible for grant of an option in accordance with this Section 4,
disregarding any fractions of a share.


 


5.                                       Terms
and Conditions of Stock Options. 
Stock options granted under the Plan shall be subject to the following
terms and conditions:


 


a.                                       The
purchase price at which each stock option may be exercised (the “Option Price”)
shall be one hundred percent (100%) of the fair market value of the shares of
Common Stock covered by the stock option on the date of grant, determined as
provided in Section 5.g.


 


b.                                      The
Option Price shall be paid in full upon exercise, in cash in United States
dollars (including check, bank draft or money order); provided, however, that
in lieu of such cash the person exercising the stock option may pay the Option
Price in whole or in part by delivering to the Company shares of the Common
Stock having a fair market value on the date of exercise of the stock option,
determined as provided in Section 5.g, equal to the Option Price for the
shares being purchased; except that (i) any portion of the Option Price
representing a fraction of a share shall in any event be paid in cash, and (ii) no
shares of the Common Stock which have been held for less than six months may be
delivered in payment of the Option Price of a stock option.  Delivery of shares may also be accomplished
through the effective transfer to the Company of shares held by a broker or
other agent.  The Company will also
cooperate with any person exercising a stock option who participates in a
cashless exercise program of a broker or other agent under which all or part of
the shares received upon exercise of the stock option are sold through the
broker or other agent or under which the broker or other agent make a loan to
such person.  Notwithstanding the foregoing,
the exercise of the stock option shall not be deemed to occur and no shares of
Common Stock will be issued by the Company upon exercise of the stock option
until the Company has received payment of the Option Price in full.  The date of exercise of a stock option shall
be determined under procedures established by the Committee, and as of the date
of exercise, the person exercising the stock option shall be considered for all
purposes to be the owner of the shares of Common Stock with respect to which
the stock option has been exercised. 
Payment of the Option Price with shares shall not increase the number of
shares of the Common Stock which may be issued under the Plan as provided in Section 3.


 


c.                                       No
stock option shall be exercisable during the first six months of its term
except in case of death as provided in Section 5.e.  Subject to the preceding sentence and subject
to Section 5.e, which provides for earlier termination of a stock option
under certain circumstances, each stock option shall be exercisable for ten
years from the date of grant and not thereafter.  A stock option to the extent exercisable at
any time may be exercised in whole or in part.


 


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d.                                      No
stock option shall be transferable by the grantee otherwise than by will, or if
the grantee dies intestate, by the laws of descent and distribution of the
state of domicile of the grantee at the time of death.


 


e.                                       If
a grantee ceases to be a director of the Company for any reason, any outstanding
stock options held by the grantee shall be exercisable according to the
following provisions:


 


(i)                                     If a grantee
ceases to be a director of the Company for any reason other than resignation,
removal for cause, or death, any outstanding stock option held by such grantee
shall be exercisable by the grantee (but only if exercisable by the grantee
immediately prior to ceasing to be director) at any time prior to the
expiration date of such stock option or within three years after the date the
grantee ceases to be a director, whichever is the shorter period;


 


(ii)                                  If during his term of
office as a director a grantee resigns from the Board or is removed from office
for cause, any outstanding stock option held by the grantee which is not
exercisable by the grantee immediately prior to resignation or removal shall
terminate as of the date of resignation or removal, and any outstanding stock
option held by the grantee which is exercisable by the grantee immediately
prior to resignation or removal shall be exercisable by the grantee at any time
prior to the expiration date of such stock option or within three months after
the date of resignation or removal of the grantee, whichever is the shorter
period;


 


(iii)                               Following the death of a
grantee during service as a director of the Company, any outstanding stock
option held by the grantee at the time of death (whether or not exercisable by
the grantee immediately prior to death) shall be exercisable by the person
entitled to do so under the will of the grantee, or, if the grantee shall fail
to make testamentary disposition of the stock option or shall die intestate, by
the legal representative of the grantee at any time prior to the expiration
date of such stock option or within three years after the date of death of the
grantee, whichever is the shorter period; and


 


(iv)                              Following the death of a
grantee after ceasing to be a director and during a period when a stock option
is exercisable under clause (ii) above, the stock option shall be
exercisable by such person entitled to do so under the will of the grantee or
by such legal representative at any time prior to the expiration date of the
stock option or within one year after the date of death, whichever is the
shorter period.


 


A stock option held by a
grantee who has ceased to be a director of the Company shall terminate upon the
expiration of the applicable exercise period, if any, specified in this Section 5.e.


 


f.                                         All
stock options shall be confirmed by an agreement, or an amendment thereto,
which shall be executed on behalf of the Company by the Chief Executive Officer
(if other than the President), the President or any Vice President and by the
grantee.


 


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g.                                      Fair
market value of the Common Stock shall be the mean between the following
prices, as applicable, for the date as of which fair market value is to be
determined, as quoted in The Wall Street Journal
(or in such other reliable publication as the Committee, in its discretion, may
determine to rely upon):  (i) if the
Common Stock is listed on the New York Stock Exchange, the highest and lowest
sales prices per share of the Common Stock as quoted in the NYSE-Composite
Transactions listing for such date, (ii) if the Common Stock is not listed
on such exchange, the highest and lowest sales prices per share of the Common
Stock for such date on (or on any composite index including) the principal
United States securities exchange registered under the 1934 Act on which the
Common Stock is listed, or (iii) if the Common Stock is not listed on any
such exchange, the highest and lowest sales prices per share of the Common
Stock for such date on the National Association of Securities Dealers Automated
Quotations System or any successor system then in use (“NASDAQ”).  If there are no such sale price quotations
for the date as of which fair market value is to be determined but there are
such sale price quotations within a reasonable period both before and after
such date, then fair market value shall be determined by taking a weighted
average of the means between the highest and lowest sales prices per share of
the Common Stock as so quoted on the nearest date before and the nearest date
after the date as of which fair market value is to be determined.  The average should be weighted inversely by
the respective numbers of trading days between the selling dates and the date
as of which fair market value is to be determined.  If there are no such sale price quotations on
or within a reasonable period both before and after the date as of which fair
market value is to be determined, then fair market value of the Common Stock
shall be the mean between the bona fide bid and asked prices per share of
Common Stock as so quoted for such date on NASDAQ, or if none, the weighted
average of the means between such bona fide bid and asked prices on the nearest
trading date before and the nearest trading date after the date as of which
fair market value is to be determined, if both such dates are within a
reasonable period.  The average is to be determined
in the manner described above in this Section 5.g.  If the fair market value of the Common Stock
cannot be determined on the basis previously set forth in this Section 5.g
for the date as of which fair market value is to be determined, the Committee
shall in good faith determine the fair market value of the Common Stock on such
date.  Fair market value shall be
determined without regard to any restriction other than a restriction which, by
its terms, will never lapse.


 


h.                                      The
obligation of the Company to issue shares of the Common Stock under the Plan
shall be subject to (i) the effectiveness of a registration statement
under the Securities Act of 1933, as amended, with respect to such shares, if
deemed necessary or appropriate by counsel for the Company, (ii) the
condition that the shares shall have been listed (or authorized for listing
upon official notice of issuance) upon each stock exchange, if any, on which
the Common Stock may then be listed and (iii) all other applicable laws,
regulations, rules and orders which may then be in effect.


 


Subject to the foregoing
provision of this Section 5 and the other provisions of the Plan, any
stock option granted under the Plan shall be subject to such restrictions and
other terms and conditions, if any, as shall be determined, in its discretion,
by the Committee and set forth in the agreement referred to in Section 5.f,
or an amendment thereto.


 


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6.                                       Adjustment
and Substitution of Shares.  If a
dividend or other distribution shall be declared upon the Common Stock payable
in shares of the Common Stock, then (i) the number of shares of the Common
Stock set forth in Section 4, (ii) the number of shares of the Common
Stock then subject to any outstanding stock options, and (iii) the number
of shares of the Common Stock which may be issued under the Plan but are not
then subject to outstanding stock options on the date fixed for determining the
shareholders entitled to receive such stock dividend or distribution, shall be
adjusted by adding thereto the number of shares of the Common Stock which would
have been distributable thereon if such shares had been outstanding on such
date.


 


If the outstanding shares
of the Common Stock shall be changed into or exchangeable for a different
number or kind of shares of stock or other securities of the Company or another
Company, whether through reorganization, reclassification, recapitalization,
stock split up, combination of shares, merger or consolidation, then there shall
be substituted for each share of the Common Stock set forth in Section 4,
for each share of the Common Stock subject to any then outstanding stock option
and for each share of the Common Stock which may be issued under the Plan but
which is not then subject to any outstanding stock option, the number and kind
of shares of stock or other securities into which each outstanding share of the
Common Stock shall be so changed or for which each such share shall be
exchangeable.


 


In case of any adjustment
or substitution as provided for in the first two paragraphs of this Section 6,
the aggregate Option Price for all shares subject to each then outstanding
stock option prior to such adjustment or substitution shall be the aggregate
Option Price for all shares of stock or other securities (including any
fraction) to which such shares shall have been adjusted or which shall have
been substituted for such shares.  Any
new Option Price per share shall be carried to at least three decimal places
with the last decimal place rounded upwards to the nearest whole number.


 


If the outstanding Common
Stock shall be changed in value by reason of any spinoff, split off or split
up, or dividend in partial liquidation, dividend in property other than cash or
extraordinary distribution to holders of the Common Stock, the Committee shall
make any adjustments to any then outstanding stock option which it determines
are equitably required to prevent dilution or enlargement of the rights of
grantees which would otherwise result from any such transaction.


 


No adjustment or
substitution provided for in this Section 6 shall require the Company to
issue or sell a fraction of a share or other security.  Accordingly, all fractional shares or other
securities which result from any such adjustment or substitution shall be
eliminated and not carried forward to any subsequent adjustment or
substitution.


 


Except as provided in
this Section 6, a grantee shall have no rights by reason of any issue by
the Company of stock of any class or securities convertible into stock of any
class, any subdivision or consolidation of shares of stock of any class, the
payment of any stock dividend or any other increase or decrease in the number
of shares of stock of any class.


 


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7.                                       Effect
of the Plan on the Rights of Company and Shareholders.  Nothing in the Plan, in any stock option
granted under the Plan, or in any stock option agreement shall confer any right
to any person to continue as a director of the Company or interfere in any way
with the rights of the shareholders of the Company or the Board to elect and
remove directors.


 


8.                                       Amendment
and Termination.  The right to amend
or to terminate the Plan at any time are hereby specifically reserved to the
Board; provided that no such termination shall terminate any outstanding stock
options granted under the Plan; and provided further that no amendment of the
Plan shall be made without shareholder approval if shareholder approval of the
amendment is at the time required for stock options under the Plan to qualify
for any exemption from Section 16(b) of the 1934 Act provided by Rule 16b-3,
or any successor rule, or by the rules of any stock exchange on which the
Common Stock may then be listed.  No
amendment or termination of the Plan shall, without the written consent of the
holder of a stock option theretofore awarded under the Plan, adversely affect
the rights of such holder with respect thereto.


 


9.                                       Effective
Date and Duration of Plan.  The Plan
shall become effective upon approval by the affirmative vote of the holders of
a majority of the Common Stock present in person or by proxy and entitled to
vote at a duly called and convened meeting of such holders, and the first stock
options granted hereunder shall be granted on the third business day
thereafter.


 


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