Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of this 3rd day of
September, 1999, and having an "Effective Date" of September 3,
1999, is by and between SCHOOL SPECIALTY, INC., a Delaware
corporation (the "Company"), and MARY M. KABACINSKI ("Employee").
RECITALS
The Company desires to employ Employee and to have the
benefit of her skills and services, and Employee desires to
accept employment with the Company, on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the mutual promises,
terms, covenants and conditions set forth herein, and the
performance of each, the parties hereto, intending legally to be
bound, hereby agree as follows:
AGREEMENTS
1. Employment and Duties. The Company hereby agrees to
employ the Employee and the Employee hereby accepts
employment as a Vice President and the Chief Financial
Officer of the Company and agrees to devote her full
business time and efforts to the diligent and faithful
performance of her duties as a Vice President and the
Chief Financial Officer of the Company hereunder under
the direction of the Chief Executive Officer of the
Company. Such duties shall be performed from
headquarters in the Appleton, Wisconsin, area.
2. Term of Employment. Unless sooner terminated as hereinafter
provided, the term of the Employee's employment hereunder shall
commence with and only with the Effective Date and shall continue
for a period of two (2) years (the "Term"). This Agreement may
be terminated prior to the end of the Term in the manner provided
herein. In the event that this agreement is not terminated
pursuant to the terms of this Agreement, following the first year
of the Term of two (2) years or the first year of any renewal
terms thereof, said agreement shall extend for successive renewal
terms of two (2) years each measured from the date of renewal,
unless either party shall notify the other party of their desire
to not renew the term of this agreement, with said notice to be
made no later than ninety (90) days prior to the expiration of
the first year of the Term of this agreement or any then
effective first year of any renewal term thereof.
3. Compensation. For all services rendered by Employee,
the Company shall compensate Employee as follows:
(a) Base Salary. Effective on the date hereof, the
annual base salary payable to Employee shall be One
Hundred Seventy Five Thousand Dollars ($175,000.00)
per year or such greater amount as determined from
time to time by the Board of Directors of the
Company (but not reviewed less frequently than on
an annual basis), payable on a regular basis in
accordance with the Company's standard payroll
procedures, but not less than monthly. It is
understood that the base salary is a minimum
amount, and shall not be reduced during the term of
this Agreement.
(b) Incentive Bonus. During the initial term and any
extensions thereof, Employee shall be eligible to
receive an incentive bonus based upon her
participation in the Company's senior management
bonus program as specified in Exhibit A as attached
hereto, or successor senior management bonus
programs. The first and last years of employment
will be prorated.
(c) Perquisites, Benefits, and Other Compensation.
During the initial term and any extensions thereof,
Employee shall be entitled to receive all
perquisites and benefits as are customarily
provided by the Company to its executive employees,
subject to such changes, additions, or deletions as
the Company may make generally from time to time,
as well as such other perquisites or benefits as
may be specified from time to time by the Board of
Directors or the Chief Executive Officer of the
Company.
(d) Stock Options. The Employee shall be granted a combination
of options granted under the School Specialty, Inc., 1998 Stock
Incentive Plan Incentive Stock Option Agreement ("ISO") (as
defined and qualified under S.422 of the Internal Revenue Code of
1986, as amended (the "Code") and School Specialty, Inc., 1998
Stock Incentive Plan Nonqualified Stock Option Agreement ("NSO")
in a total amount of 75,000 shares of common stock of the Company
(the "Option Shares"). The Option Shares shall be composed of the
maximum amount of shares permitted to be issued under the terms
of the ISO with the balance to be issued under the terms of the
NSO. The strike price of these options shall be the closing price
of common stock of the Company on the Effective Date. The ability
to purchase the Option Shares shall be consistent with the
current management option agreement specified in Exhibit B as
attached hereto.
4. Covenants and Conditions.
(a) The Employee will acquire information and knowledge
respecting the intimate and confidential affairs of
the Company in the various phases of its business.
Accordingly, the Employee agrees that she shall not
for a period of two (2) years following the
termination of her employment with the Company, use
for herself or disclose to any person not employed
by the Company any such knowledge or information
heretofore acquired or acquired during the term of
this employment hereunder including but not limited
to the prescribed requirements of S.134.90 of the
Wisconsin Statutes, as hereinafter amended from
time to time. Nothing in this agreement shall be
construed to limit or supersede the common law of
torts or statutory or other protection of trade
secrets where such law provides the Company with
greater protections or protections for a longer
duration than that provided in this section 4 of
this Agreement.
(b) The Employee agrees that all memoranda, notes, records,
papers, or other documents and all copies thereof relating to the
Company's operations or business, some of which may be
prepared by her, and all objects associated therewith
(such as models and samples) in any way obtained by her
shall be the Company's property. This shall include, but
is not limited to, documents and objects concerning any
process, apparatus, or product manufactured, used, developed,
investigated, or considered by the Company. The Employee
shall not, except for Company use, copy or duplicate
any of the aforementioned documents or objects, nor
remove them from the Company's facilities, nor use any
information concerning them except for the Company's benefit,
either during her employment or thereafter. The Employee agrees
that she will deliver all of the aforementioned documents and
objects that may be in her possession to the Company on
termination of her employment, or at any other time on the
Company's request, together with her written certification of
compliance, except for those documents and objects received as a
director of the Company.
5. Death or Disability of the Employee. The Employee's
employment shall terminate immediately upon her death.
In the event the Employee becomes physically or mentally
disabled so as to become unable, for a period of more
than one hundred twenty (120) consecutive workings days
or for more than one hundred twenty (120) working days
in the aggregate during any twelve (12) month period, to
perform her duties hereunder on a substantially full-
time basis, the Company may at its option terminate her
employment upon not less than thirty (30) days written
notice. The Company's right to terminate the Employee's
employment pursuant to the preceding sentence shall
cease in the event the notice of termination provided
for therein shall not be given during the period of the
Employee's disability or within ninety (90) days after
such disability ceases. In the event of termination, the
Company shall be obligated to pay the Employee's salary
under paragraph 3 hereof, net of the gross amount of
Long Term disability benefits received by the Employee,
through the balance of the term of this Agreement and
any then currently effective extension thereof.
6. Termination and Severance Compensation. The Company
reserves the right to immediately terminate the
Employee's employment under this agreement should any of
the following occur:
(a) The Employee's commission of a felony that is an
act which, in the opinion of the Board of
Directors, is either abhorrent to the community or
is an intentional act, which the Board of Directors
considers materially damaging to the reputation of
the Company or its successors or assigns.
(b) The Employee's breach of or failure to perform her
obligations in accordance with the terms and
conditions of this agreement. However the right of
the Company to terminate the employment of the
Employee under the terms of this paragraph 6(b)
shall be conditioned upon the Company promptly
providing to the Employee a written notice which
describes the Employee's breach of or failure to
perform her obligations in accordance with the
terms and conditions of this agreement. The
Employee shall have thirty (30) days from the date
of the Company's issuance of this notice to cure
the described breach or failure. Notwithstanding
the above described language, should the Company
issue more than one (1) notice in any twelve (12)
month period under the terms of this paragraph
6(b), the Employee shall have no cure rights for
such breach or failure to perform.
(c) The death or disability of the Employee.
7. Rights and Obligations of Successors. In the event that
any of the following events occur, a "Change in
Control" shall be deemed to occur for the purpose of
this Agreement: (a) any person or group of persons
acting in concert becomes the beneficial owner,
directly or indirectly (excluding ownership by or
through employee benefit plans), of securities of the
Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding
securities; (b) the Company is combined (by merger,
share exchange, consolidation, or otherwise) with
another corporation and as a result of such combination
less than seventy five percent (75%) of the outstanding
securities of the surviving or resulting corporation
are owned in the aggregate by the former shareholders
of the Company; or (c) any person or group of persons
acting in concert obtains direct or indirect control of
the Board of Directors of the Company, other than the
current shareholders of the Company. The Employee shall
have the right to terminate her employment under the
terms of this Agreement for a period of sixty (60) days
following the Change in Control. In the event that the
Employee shall not so elect to terminate this
Agreement, then this agreement shall be assignable and
transferable by the Company to any subsidiary or
affiliate or to any subsidiary or affiliate of the
Company affiliated with the Change in Control and shall
inure to the benefit of and be binding upon the
Employee and her heirs and personal representatives and
the Company and its successors and assigns. In the
event the Employee elects to terminate employment, the
Employee shall be paid through the term of this
Agreement and any then currently effective extension
thereof.
8. Covenant Not to Compete. In consideration of the
employment hereunder, the Employee hereby agrees that
during the term of her employment by the Company and
for a period of eighteen (18) months following the
termination of her employment with the Company, the
Employee will not either directly or indirectly own,
have proprietary interest (except for less than 5% of
any listed company or company traded in the over-the-
counter market) of any kind in, be employed by, or
serve as a consultant to or in any other capacity for
any firm, other than the Company and its subsidiaries,
engaged in the manufacture and distribution of school
supplies, equipment, furniture or other products made
and distributed by the Company or any of the Company's
present or future subsidiary corporations (acquired
during the term of this Agreement) during the period of
the Employee's employment in the area where they are
engaged in business without the express written consent
of the Company. The Employee agrees that a breach of
the covenant contained herein will result in
irreparable and continuing damage to the Company for
which there will be no adequate remedy at law and in
the event of any breach of such agreement, the Company
shall be entitled to injunctive and such other and
further relief including damages as may be proper.
9. Notice. All notices, demands and other communications
hereunder shall be deemed to have been duly given, if delivered
by hand or mailed, certified or registered mail with postage
prepaid:
To the Company: School Specialty, Inc.
426 W. College Avenue
P.O. Box 1579
Appleton, WI 54911
Attention: Mr. Daniel P. Spalding
Fax: (920) 882-5863
With a copy to: Joseph F. Franzoi IV, Esq.
Franzoi & Franzoi, S.C.
514 Racine Street
Menasha, WI 54952
Fax: (920) 725-0998
To Employee: Mary M. Kabacinski
910 East Mayfield Drive
Appleton, WI 54911
or to such other address as the person to whom notice
is to be given may have specified in a notice duly
given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or
other communication shall be deemed to have been given
as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be
deemed given only when actually received by the
addressees.
10. Entire Agreement; Amendment; Waiver. This Agreement
(including any documents referred to herein) sets forth
the entire understanding of the parties hereto with
respect to the subject matter contemplated hereby. Any
and all previous agreements and understandings between
or among the parties regarding the subject matter
hereof, whether written or oral, are superseded by this
Agreement. This Agreement shall not be amended or
modified except by a written instrument duly executed
by each of the parties hereto. Any extension or waiver
by any party of any provision hereto shall be valid
only if set forth in an instrument in writing signed on
behalf of such party.
11. Expenses. Each party hereto will pay their respective
fees, expenses and disbursements of their agents,
representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement,
and its enforcement.
12. Governing Law. This Agreement shall in all respects be
construed according to the laws of the State of
Wisconsin, without regard to its conflict of laws
principles.
IN WITNESS WHEREOF, the parties hereto have cause this
Agreement to be duly executed as of the date first written above.
COMPANY: SCHOOL SPECIALTY, INC.
/s/ Daniel P. Spalding
--------------------------------------
Daniel P. Spalding, Chairman and
Chief Executive Officer
EMPLOYEE:
/s/ Mary Kabacinski
--------------------------------------
Mary Kabacinski, Individually
School Specialty
Fiscal 2000
Incentive Program
Executive Plan:
Corporate criteria: 100% on consolidated EBITA
Budget EBITA: $62,829,000
Payout:
Below budget: $-0-
At budget: 50% of base salary
Max at Budget + 20%, or $75,395,000 = 100% of base salary
Specialty/Traditional Companies Plan:
Corporate criteria: 25% based upon consolidated EBITA, as above.
Division criteria: 75% based upon Division performance in three areas:
1. Budget EBITA: Max payout: 37.5% of base salary
Below budget: $-0-
At budget: 18.75% of base salary
Max: budget + 20% of Division EBITA: 37.5% of base salary
2. Return on Average Operating Assets: Max payout: 18.75% of base salary
Calc: EBITA/Gross A/R + Gross Inv. + Net F/A - A/P =
Return on Average Operating Assets (RAOA)
(average calculated using month-end balance)
Payout:
0 - 20% RAOA 0
21 - 60% RAOA 0 - 18.75% of base salary
3. Return on Sales: Max payout: 18.75% of base salary
Calc: EBITA/Net Sales
Payout:
Spec. Co's
7 - 20% Return on Sales: 0 - 18.75% of base salary
Trad. Co.
6 - 12% Return on Sales: 0 - 18.75% of base salary
Example:
Corporate EBITA budget $63 million
Spec. Co. EBITA budget $10 million
Executive Base Salary $100,000
If actual performance is a follows:
EBITA Div. $11 million
Avg. Operating Assets $28 million
Net Sales $61 million
EBITA Corp. $68 million
Bonus:
25% Corp. EBITA: $68-$63 = $5 mil. = 75% X $100,000 X 25% = $18,750
37.5% Div. EBITA: $10-$11 = $1 mil. = 75% X $100,000 X 37.5% = $28,125
18.75% RAOA: 11 mil/28 mil = 40 RAOA = 75% X $100,000 X 18.75% =$14,063
18.75% Rtn on Sales: 11 mil/61 mil = 18% = 85% X $100,000 X 18.75% = $15,938
Total Bonus $76,876
May 17, 1999
AMENDED AND RESTATED
SCHOOL SPECIALTY, INC.
1998 STOCK INCENTIVE PLAN
PURPOSE SCHOOL SPECIALTY, INC., a Delaware corporation
(the "Company"), wishes to recruit, reward, and
retain employees, consultants, independent
contractors, advisors, officers and outside
directors. To further these objectives, the
Company hereby sets forth the School Specialty,
Inc. 1998 Stock Incentive Plan (the "Plan") to
provide options ("Options") or direct grants
("Stock Grants" and, together with the Options,
"Awards") to employees, consultants, independent
contractors, advisors, officers and outside
directors with respect to shares of the Company's
common stock (the "Common Stock"). The Plan was
originally effective as of the effective date (the
"Effective Date") of the Company's registration
under Section 12 of the Securities Exchange Act of
1934 (the "Exchange Act") with respect to its
initial public offering ("IPO"), and this
amendment and restatement is effective as of
September 2, 1999.
PARTICIPANTS The following persons are eligible to receive
Options and Stock Grants under the Plan: (1)
current and prospective Employees (as defined
below) of the Company and any Eligible Subsidiary
(as defined in the Eligible Subsidiary section
below), (2) consultants, advisors and independent
contractors of the Company and any Eligible
Subsidiary and (3) officers and directors of the
Company and any Eligible Subsidiary who are not
Employees ("Eligible Officers and Eligible
Directors"). Eligible persons become "Optionees"
when the Administrator grants them an option under
this Plan or "Recipients" when they receive a
direct grant of Common Stock. (Optionees and
Recipients are referred to collectively as
"Participants." The term Participant also
includes, where appropriate, a person authorized
to exercise an Award in place of the original
Optionee.)
Employee means any person employed as a common law
employee of the Company or an Eligible Subsidiary.
ADMINISTRATOR The Administrator will be the Compensation
Committee of the Board of Directors of the Company
(the "Compensation Committee"), unless the Board
specifies another committee. The Board may also
act under the Plan as though it were the
Compensation Committee.
The Administrator is responsible for the general
operation and administration of the Plan and for
carrying out its provisions and has full
discretion in interpreting and administering the
provisions of the Plan. Subject to the express
provisions of the Plan, the Administrator may
exercise such powers and authority of the Board as
the Administrator may find necessary or
appropriate to carry out its functions. The
Administrator may delegate its functions (other
than those described in the Granting of Awards
section) to Employees of the Company.
The Administrator's powers will include, but not
be limited to, the power to amend, waive, or
extend any provision or limitation of any Award.
The Administrator may act through meetings of a
majority of its members or by unanimous consent.
GRANTING OF Subject to the terms of the Plan, the Administrator
AWARDS will, in its sole discretion, determine:
the Participants who receive Awards,
the terms of such Awards,
the schedule for exercisability or
nonforfeitability (including any requirements
that the Participant or the Company satisfy
performance criteria),
the time and conditions for expiration of the
Award, and
the form of payment due upon exercise, if
any.
The Administrator's determinations under the Plan
need not be uniform and need not consider whether
possible Participants are similarly situated.
Options granted to Employees may be nonqualified
stock options ("NQSOs") or "incentive stock
options" ("ISOs") within the meaning of Section
422 of the Internal Revenue Code of 1986, as
amended from time to time (the "Code"), or the
corresponding provision of any subsequently
enacted tax statute. Options granted to
consultants, independent contractors, advisors,
Eligible Officers and Eligible Directors,
including Formula Options (as defined below), must
be NQSOs. The Administrator will not grant ISOs
unless the stockholders either have already
approved the granting of ISOs or give such
approval within 12 months after the grant.
The Administrator may impose such conditions on or
charge such price for the Stock Grants as it deems
appropriate.
SUBSTITUTIONS The Administrator may also grant Awards in
substitution for options or other equity interests
held by individuals who become Employees of the
Company or of an Eligible Subsidiary as a result
of the Company's acquiring or merging with the
individual's employer or acquiring its assets. If
necessary to conform the Awards to the interests
for which they are substitutes, the Administrator
may grant substitute Awards under terms and
conditions that vary from those the Plan otherwise
requires. Awards in substitution for U.S. Office
Products' options in connection with the
distribution by U.S. Office Products of the
Company's Common Stock will retain their pre-
distribution exercise schedule and terms
(including Change of Control provisions) and
expiration date.
DIRECTOR Each Eligible Director will receive a formula
FORMULA stock option ("Formula Option") with respect
OPTIONS to 15,000 shares of Common Stock upon the first
to occur of their initial appointment or election
to the Board (with the grant made as of the date
of such appointment or election). Thereafter,
each Eligible Director serving on the Board will
receive a Formula Option annually with respect to
5,000 shares of Common Stock on a date determined
by the Administrator.
EXERCISE Unless the Administrator specifies otherwise, each
SCHEDULE Formula Option will become exercisable as to 20%
of the covered shares on the first anniversary
of its Date of Grant (as defined in the Date
of Grant section below), an additional 30% on
the second anniversary, and the remaining 50% on
or after the third anniversary. A Formula Option
will become exercisable in its entirety upon the
Eligible Director's death, Disability, or attainment
of age 70. Options will be forfeited to the extent
they are not then exercisable if an Eligible Director
resigns or fails to be reelected as a director.
DATE OF GRANT The Date of Grant will be the date as of which
this Plan or the Administrator grants an Award to
a Participant, as specified in the Plan or in the
Administrator's minutes.
EXERCISE PRICE The Exercise Price is the value of the
consideration that a Participant must provide in
exchange for one share of Common Stock. The
Administrator will determine the Exercise Price
under each Award and may set the Exercise Price
without regard to the Exercise Price of any other
Awards granted at the same or any other time. The
Company may use the consideration it receives from
the Participant for general corporate purposes.
The Exercise Price per share for NQSOs may not be
less than 100% of the Fair Market Value (as
defined below) of a share on the Date of Grant.
If an Option is intended to be an ISO, the
Exercise Price per share may not be less than 100%
of the Fair Market Value (on the Date of Grant) of
a share of Common Stock covered by the Option;
provided, however, that if the Administrator
decides to grant an ISO to someone covered by
Sections 422(b)(6) and 424(d) (as a
more-than-10%-stockholder), the Exercise Price of
the Option must be at least 110% of the Fair
Market Value (on the Date of Grant).
The Administrator may satisfy any state law
requirements regarding adequate consideration for
Stock Grants by (i) issuing Common Stock held as
treasury stock or (ii) charging the Recipients at
least the par value for the shares covered by the
Stock Grant. The Administrator may designate that
a Recipient may satisfy (ii) above either by
direct payments or by the Administrator's
withholding from other payments due to the
Recipient.
FAIR MARKET Fair Market Value of a share of Common Stock for
VALUE purposes of the Plan will be determined as follows:
If the Common Stock trades on a national
securities exchange, the closing sale price
on that date;
If the Common Stock does not trade on any
such exchange, the closing sale price as
reported by the National Association of
Securities Dealers, Inc. Automated Quotation
System ("Nasdaq") for such date;
If no such closing sale price information is
available, the average of the closing bid and
asked prices that Nasdaq reports for such
date; or
If there are no such closing bid and asked
prices, the average of the closing bid and
asked prices as reported by any other
commercial service for such date.
For any date that is not a trading day, the Fair
Market Value of a share of Common Stock for such
date shall be determined by using the closing sale
price or the average of the closing bid and asked
prices, as appropriate, for the immediately
preceding trading day.
The Fair Market Value will be deemed equal to the
IPO price for any Options granted as of the date
on which the IPO's underwriters price the IPO or
granted on the following day before trading opens
in the Common Stock.
EXERCISABILITY The Administrator will determine the times and
conditions for exercise of or purchase under each
Award but may not extend the period for exercise
beyond the tenth anniversary of its Date of Grant
(or five years for ISOs granted to 10% owners
covered by Code Sections 422(b)(6) and 424(d)).
Awards will become exercisable at such times and
in such manner as the Administrator determines and
the Award Agreement, if any, indicates; provided,
however, that the Administrator may, on such terms
and conditions as it determines appropriate,
accelerate the time at which the Participant may
exercise any portion of an Award or at which
restrictions on Stock Grants lapse. For Stock
Grants, "exercise" refers to acceptance of the
Award or lapse of restrictions, as appropriate in
context.
If the Administrator does not specify otherwise,
Options will become exercisable and restrictions
on Stock Grants will lapse as to one-fourth of the
covered shares on each of the first four
anniversaries of the Date of Grant.
No portion of an Award that is unexercisable at a
Participant's termination of employment will
thereafter become exercisable, unless the Award
Agreement provides otherwise, either initially or
by amendment.
CHANGE OF Upon a Change of Control (as defined below), all
CONTROL Options held by current Employees, consultants,
advisors, independent contractors, Eligible
Officers and Eligible Directors will become fully
exercisable and all restrictions on Stock Grants
will lapse. A Change of Control for this purpose
means the occurrence of any one or more of the
following events:
a person, entity, or group (other than the
Company, any Company subsidiary, any Company
benefit plan, or any underwriter temporarily
holding securities for an offering of such
securities) acquires ownership of more than
50% of the undiluted total voting power of
the Company's then-outstanding securities
eligible to vote to elect members of the
Board ("Company Voting Securities");
consummation of a merger or consolidation of
the Company into any other entity-unless the
holders of the Company Voting Securities
outstanding immediately before such
consummation, together with any trustee or
other fiduciary holding securities under a
Company benefit plan, hold securities that
represent immediately after such merger or
consolidation at least 50% of the combined
voting power of the then outstanding voting
securities of either the Company or the other
surviving entity or its parent; or
the stockholders of the Company approve (i) a
plan of complete liquidation or dissolution
of the Company or (ii) an agreement for the
Company's sale or disposition of all or
substantially all the Company's assets, and
such liquidation, dissolution, sale, or
disposition is consummated.
Even if other tests are met, a Change of
Control has not occurred under any
circumstance in which the Company files for
bankruptcy protection or is reorganized
following a bankruptcy filing.
The Adjustments Upon Changes in Capital Stock
provisions will also apply if the Change of
Control is a Substantial Corporate Change (as
defined in those sections).
LIMITATION An Option granted to an Employee will be an ISO
ON ISOs only to the extent that the aggregate Fair Market
Value (determined at the Date of Grant) of the
stock with respect to which ISOs are exercisable
for the first time by the Optionee during any
calendar year (under the Plan and all other plans
of the Company and its subsidiary corporations,
within the meaning of Code Section 422(d)), does
not exceed $100,000. This limitation applies to
Options in the order in which such Options were
granted. If, by design or operation, the Option
exceeds this limit, the excess will be treated as an NQSO.
METHOD OF To exercise any exercisable portion of an Award,
EXERCISE the Participant must:
Deliver a written notice of exercise to the
Assistant Secretary of the Company designated
by the Board (or to whomever the
Administrator designates), in a form
complying with any rules the Administrator
may issue, signed by the Participant, and
specifying the number of shares of Common
Stock underlying the portion of the Award the
Participant is exercising;
Pay the full Exercise Price, if any, by
cashier's or certified check for the shares
of Common Stock with respect to which the
Award is being exercised, unless the
Administrator consents to another form of
payment (which could include the use of
Common Stock); and
Deliver to the Administrator such
representations and documents as the
Administrator, in its sole discretion, may
consider necessary or advisable.
Payment in full of the Exercise Price need not
accompany the written notice of exercise provided
the notice directs that the stock certificates for
the shares issued upon the exercise be delivered
to a licensed broker acceptable to the Company as
the agent for the individual exercising the Option
and at the time the stock certificates are
delivered to the broker, the broker will tender to
the Company cash or cash equivalents acceptable to
the Company and equal to the Exercise Price.
If the Administrator agrees to allow an Optionee
to pay through tendering Common Stock to the
Company, the individual can only tender stock they
have held for at least six months at the time of
surrender. Shares of stock offered as payment
will be valued, for purposes of determining the
extent to which the Participant has paid the
Exercise Price, at their Fair Market Value on the
date of exercise. The Administrator may also, in
its discretion, accept attestation of ownership of
Common Stock and issue a net number of shares upon
Option exercise.
AWARD No one may exercise an Award more than ten years
EXPIRATION after its Date of Grant (or five years, for an
ISO granted to a more-than-10% stockholder).
Unless the Award Agreement provides otherwise,
either initially or by amendment, no one may exercise
an Award after the first to occur of:
EMPLOYMENT The 90th day after the date of termination of
TERMINATION employment (other than for death or Disability), where
termination of employment means the time when the
employer-employee or other service providing
relationship between the Employee, consultant,
independent contractor, advisor or Eligible
Officer and the Company ends for any reason,
including retirement. Unless the Award Agreement
provides otherwise, termination of employment does
not include instances in which the Company
immediately rehires an Employee as a consultant,
independent contractor or advisor. The
Administrator, in its sole discretion, will
determine all questions of whether particular
terminations or leaves of absence are terminations
of employment;
DlSABILITY For Disability, the earlier of (i) the first
anniversary of the Participant's termination of
employment for Disability and (ii) 30 days after
the Participant no longer has a Disability, where
"Disability" means the inability to engage in any
substantial gainful activity by reason of any
medically determinable physical or mental
impairment that can be expected to result in death
or that has lasted or can be expected to last for
a continuous period of not less than twelve
months; or
DEATH The date 24 months after the Participant's death.
If exercise is permitted after termination of
employment, the Award will nevertheless expire as
of the date that the former service provider
violates any covenant not to compete in effect
between the Company and such person. In addition,
an Optionee who exercises an Option more than 90
days after termination of employment with the
Company and/or an Eligible Subsidiary will only
receive ISO treatment to the extent permitted by
law, and becoming or remaining an employee of
another related company (that is not an Eligible
Subsidiary) or an independent contractor to the
Company will not prevent loss of ISO status
because of the formal termination of employment.
Nothing in this Plan extends the term of an Award
beyond the tenth anniversary of its Date of Grant,
nor does anything in this Award Expiration section
make an Award exercisable that has not otherwise
become exercisable.
AWARD Award Agreements will set forth the terms of each
AGREEMENT Award and will include such terms and conditions,
consistent with the Plan, as the Administrator
may determine are necessary or advisable. To the
extent the agreement is inconsistent with the Plan,
the Plan will govern. The Award Agreements may contain
special rules. The Administrator may, but is not
required to, issue agreements for Stock Grants.
STOCK SUBJECT Except as adjusted below under Adjustments upon
TO PLAN Changes in Capital Stock,
the aggregate number of shares of Common
Stock that may be issued under the Awards
(whether ISOs, NQSOs, or Stock Grants) may
not exceed 20% percent of the total number of
shares of Common Stock outstanding,
determined immediately after the grant of the
Award;
the maximum number of shares that may be
subject to ISOs may not exceed 600,000; and
the maximum number of shares that may be
granted under Awards for a single individual
in a calendar year may not exceed 1,200,000.
(The individual maximum applies only to
Awards first made under this Plan and not to
Awards made in substitution of a prior
employer's options or other incentives,
except as Code Section 162(m) otherwise
requires.)
The Common Stock will come from either authorized
but unissued shares or from previously issued
shares that the Company reacquires, including
shares it purchases on the open market. If any
Award expires, is canceled, or terminates for any
other reason, the shares of Common Stock available
under that Award will again be available for the
granting of new Awards (but will be counted
against that calendar year's limit for a given
individual).
No adjustment will be made for a dividend or other
right (except a stock dividend) for which the
record date precedes the date of exercise.
The Participant will have no rights of a
stockholder with respect to the shares of stock
subject to an Award except to the extent that the
Company has issued certificates for, or otherwise
confirmed ownership of, such shares upon the
exercise of the Award.
The Company will not issue fractional shares
pursuant to the exercise of an Award, but the
Administrator may, in its discretion, direct the
Company to make a cash payment in lieu of
fractional shares.
PERSON WHO During the Participant's lifetime, only the
MAY EXERCISE Participant or his duly appointed guardian or
personal representative may exercise the
Awards. After his death, his personal
representative or any other person authorized
under a will or under the laws of descent
and distribution may exercise any then
exercisable portion of an Award. If someone other
than the original recipient seeks to exercise any
portion of an Award, the Administrator may request
such proof as it may consider necessary or
appropriate of the person's right to exercise the
Award.
ADJUSTMENTS Subject to any required action by the Company
UPON CHANGES (which it shall promptly take) or its stockholders, and
IN CAPITAL subject to the provisions of applicable corporate
STOCK law, if, after the Date of Grant of an Award,
the outstanding shares of Common Stock
increase or decrease or change into or are
exchanged for a different number or kind of
security because of any recapitalization,
reclassification, stock split, reverse stock
split, combination of shares, exchange of
shares, stock dividend, or other distribution
payable in capital stock, or
some other increase or decrease in such
Common Stock occurs without the Company's
receiving consideration
the Administrator may make a proportionate and
appropriate adjustment in the number of shares of
Common Stock underlying each Award, so that the
proportionate interest of the Participant
immediately following such event will, to the
extent practicable, be the same as immediately
before such event. (This adjustment does not
apply to Common Stock that the Optionee has
already purchased nor to Stock Grants that are
already nonforfeitable, except to the extent of
similar treatment for most stockholders.) Unless
the Administrator determines another method would
be appropriate, any such adjustment to an Award
will not change the total price with respect to
shares of Common Stock underlying the unexercised
portion of the Award but will include a
corresponding proportionate adjustment in the
Award's Exercise Price. The Administrator will
make a commensurate change to the maximum number
and kind of shares provided in the Stock Subject
to Plan section.
Any issue by the Company of any class of preferred
stock, or securities convertible into shares of
common or preferred stock of any class, will not
affect, and no adjustment by reason thereof will
be made with respect to, the number of shares of
Common Stock subject to any Award or the Exercise
Price except as this Adjustments section
specifically provides. The grant of an Award
under the Plan will not affect in any way the
right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of
its capital or business structure, or to merge or
to consolidate, or to dissolve, liquidate, sell,
or transfer all or any part of its business or
assets.
SUBSTANTIAL Upon a Substantial Corporate Change, the Plan and
CORPORATE any unexercised Awards will terminate unless provision
CHANGE is made in writing in connection with such transaction
for the assumption or continuation of outstanding Awards,
or the substitution for such options or grants of any
options or grants covering the stock or securities
of a successor employer corporation, or a parent
or subsidiary of such successor, with appropriate
adjustments as to the number and kind of shares of
stock and prices, in which event the Awards will
continue in the manner and under the terms so
provided.
Unless the Administrator determines otherwise, if
an Award would otherwise terminate under the
preceding sentence, Participants who are then
Employees, consultants,
advisors, independent contractors, Eligible Officers
and Eligible Directors will have the right, at such
time before the consummation of the transaction causing
such termination as the Administrator reasonably
designates, upon such reasonable notice as
determined by the Administrator, to exercise any
unexercised portions of the Award, whether or not
they had previously become exercisable. However,
unless the Administrator determines otherwise, the
acceleration will not occur if it would render
unavailable "pooling of interest" accounting for
any reorganization, merger, or consolidation of
the Company.
A Substantial Corporate Change means:
the dissolution or liquidation of the
Company,
merger, consolidation, or reorganization of
the Company with one or more corporations in
which the Company is not the surviving
corporation,
the sale of substantially all of the assets
of the Company to another corporation, or
any transaction (including a merger or
reorganization in which the Company survives)
approved by the Board that results in any
person or entity (other than any affiliate of
the Company as defined in Rule 144(a)(1)
under the Securities Act, any Company
subsidiary, any Company benefit plan, or any
underwriter temporarily holding securities
for an offering of such securities) owning
100% of the combined voting power of all
classes of stock of the Company.
ELIGIBLE Eligible Subsidiary means each of the Company's
SUBSUDIARY Subsidiaries, except as the Administrator otherwise
specifies. For ISO grants, Subsidiary means any
corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if,
at the time an ISO is granted to a Participant under
the Plan, each corporation (other than the last
corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined
voting power of all classes of stock in another
corporation in such chain. For ISO purposes,
Subsidiary also includes a single-member limited
liability company included within the chain
described in the preceding sentence. For NQSOs,
the Administrator can use a different definition
of Subsidiary in its discretion.
LEGAL The Company will not issue any shares of Common Stock
COMPLIANCE under an Award until all applicable requirements imposed
by Federal and state securities and other laws,
rules, and regulations, and by any applicable
regulatory agencies or stock exchanges, have been
fully met. To that end, the Company may require
the Participant to take any reasonable action to
comply with such requirements before issuing such
shares. No provision in the Plan or action taken
under it authorizes any action that is otherwise
prohibited by Federal or state laws.
The Plan is intended to conform to the extent
necessary with all provisions of the Securities
Act of 1933, as amended (the "Securities Act"),
and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and all regulations
and rules the Securities and Exchange Commission
issues under those laws. Notwithstanding anything
in the Plan to the contrary, the Administrator
must administer the Plan, and Awards may be
granted and exercised, only in a way that conforms
to such laws, rules, and regulations. To the
extent permitted by applicable law, the Plan and
any Awards will be deemed amended to the extent
necessary to conform to such laws, rules, and
regulations.
PURCHASE FOR Unless a registration statement under the
INVESTMENT Securities Act covers the shares of Common Stock
AND OTHER a Participant receives upon exercise of his
RESTRICTIONS Award, the Administrator may require, at the time
of such exercise or receipt of a grant, that the
Participant agree in writing to acquire such shares
for investment and not for public resale or distribution,
unless and until the shares subject to the Award are
registered under the Securities Act. Unless the
shares are registered under the Securities Act,
the Participant must acknowledge:
that the shares purchased on exercise of the
Award are not so registered,
that the Participant may not sell or
otherwise transfer the shares unless:
the shares have been registered under
the Securities Act in connection with
the sale or transfer thereof, or
counsel satisfactory to the Company has
issued an opinion satisfactory to the
Company that the sale or other transfer
of such shares is exempt from
registration under the Securities Act,
and
such sale or transfer complies with all
other applicable laws, rules, and
regulations, including all applicable
Federal and state securities laws,
rules, and regulations.
Additionally, the Common Stock, when issued upon
the exercise of an Award, will be subject to any
other transfer restrictions, rights of first
refusal, and rights of repurchase set forth in or
incorporated by reference into other applicable
documents, including the Company's articles or
certificate of incorporation, by-laws, or
generally applicable stockholders' agreements.
The Administrator may, in its sole discretion,
take whatever additional actions it deems
appropriate to comply with such restrictions and
applicable laws, including placing legends on
certificates and issuing stop-transfer orders to
transfer agents and registrars.
TAX The Participant must satisfy all applicable
WITHHOLDING Federal, state, and local income and
employment tax withholding requirements before
the Company will deliver stock certificates upon
the exercise of an Award. The Company may decide
to satisfy the withholding obligations through
additional withholding on salary or wages. If the
Company does not or cannot withhold from other
compensation, the Participant must pay the
Company, with a cashier's check or certified
check, the full amounts required by withholding.
Payment of withholding obligations is due before
the Company issues shares with respect to the
Award. If the Administrator so determines, the
Participant may instead satisfy the withholding
obligations by directing the Company to retain
shares from the Award exercise, by tendering
previously owned shares, or by attesting to his
ownership of shares (with the distribution of net
shares).
TRANSFERS, Unless the Administrator otherwise approves in
ASSIGNMENTS, advance in writing for estate planning or other
AND PLEDGES purposes, an Award may not be assigned,
pledged, or otherwise transferred in any way,
whether by operation of law or otherwise or
through any legal or equitable proceedings
(including bankruptcy), by the Participant to any
person, except by will or by operation of
applicable laws of descent and distribution. If
Rule 16b-3 of the Exchange Act then applies to an
Award, the Participant may not transfer or pledge
shares of Common Stock acquired under a Stock
Grant or upon exercise of an Option until at least
six months have elapsed from (but excluding) the
Date of Grant, unless the Administrator approves
otherwise in advance in writing. The
Administrator may, in its discretion, expressly
provide that a Participant may transfer his Award
without receiving consideration to (i) members of
his immediate family (children, grandchildren, or
spouse); (ii) trusts for the benefit of such
family members; or (iii) partnerships where the
only partners are such family members.
AMENDMENT OR The Board may amend, suspend, or terminate the
TERMINATION Plan at any time, without the consent of the
OF PLAN AND Participants or their beneficiaries; provided
OPTIONS however, that no amendment will deprive any
Participant or beneficiary of any previously
declared Award. Except as required by law or
by the Adjustments upon Changes in Capital Stock
section, the Board may not, without the
Participant's or beneficiary's consent, modify
the terms and conditions of an Award so as to
adversely affect the Participant. No amendment,
suspension, or termination of the Plan will,
without the Participant's or beneficiary's consent,
terminate or adversely affect any right or
obligations under any outstanding Awards.
PRIVILEGES No Participant and no beneficiary or other person
OF STOCK claiming under or through such Participant will
OWNERSHIP have any right, title, or interest in or to
any shares of Common Stock allocated or reserved
under the Plan or subject to any Award except as
to such shares of Common Stock if any, already
issued to such Participant.
EFFECT ON Whether exercising or receiving an Award causes
OTHER PLANS the Participant to accrue or receive additional
benefits under any pension or other plan is
governed solely by the terms of such other plan.
LIMITATIONS Notwithstanding any other provisions of the
ON LIABILITY Plan, no individual acting as an agent of the
Company shall be liable to any Participant,
former Participant, spouse, beneficiary,
or any other person for any claim, loss,
liability, or expense incurred in connection
with the Plan, nor shall such individual be
personally liable because of any contract or other
instrument he executes in such other capacity.
The Company will indemnify and hold harmless each
agent of the Company to whom any duty or power
relating to the administration or interpretation
of the Plan has been or will be delegated, against
any cost or expense (including attorneys' fees) or
liability (including any sum paid in settlement of
a claim with the Administrator's approval) arising
out of any act or omission to act concerning this
Plan unless arising out of such person's own fraud
or bad faith.
NO EMPLOYMENT Nothing contained in this Plan constitutes an
CONTRACT employment contract between the Company and the
Participants. The Plan does not give any Participant
any right to be retained in the Company's employ,
nor does it enlarge or diminish the Company's right
to end the Participant's employment.
APPLICABLE The laws of the State of Delaware (other than its
LAW choice of law provisions) govern this Plan and its
interpretation.
DURATION Unless the Board extends the Plan's term, the
OF PLAN Administrator may not grant Awards after June 8, 2008.
The Plan will then terminate but will continue to
govern unexercised and unexpired Awards.