EXHIBIT 10.21
First Amended and Restated
Total Renal Care Holdings, Inc.
1995 Equity Compensation Plan
1. Purpose. The purpose of the Total Renal Care Holdings, Inc. 1995
-------
Equity Compensation Plan ("Plan") is to promote the interests of Total Renal
Care Holdings, Inc. ("Company") and its shareholders by enabling the Company to
offer Participants an opportunity to acquire an equity interest in the Company
so as to better attract, retain, and reward employees, directors, and other
persons providing services to the Company and, accordingly, to strengthen the
mutuality of interests between those persons and the Company's shareholders by
providing those persons with a proprietary interest in pursuing the Company's
long-term growth and financial success.
2. Definitions. For purposes of this Plan, the following terms shall
-----------
have the meanings set forth below.
(a) "Board" means the Board of Directors of Total Renal Care
Holdings, Inc.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
Reference to any specific section of the Code shall be deemed to be a
reference to any successor provision.
(c) "Committee" means the administrative Committee of this Plan that
is provided in Section 3 below.
(d) "Common Stock" means the common stock of Total Renal Care
Holdings, Inc. or any security issued in substitution, exchange, or in
lieu thereof.
(e) "Company" means Total Renal Care Holdings, Inc., a Delaware
corporation, or any successor corporation. Except where the context
indicates otherwise, the term "Company" shall include its Parent and
Subsidiaries.
(f) "Disabled" means permanent and total disability, as defined in
Code Section 22(e)(3).
(g) "Exchange Act" means the Securities Exchange Act of 1934.
(h) "Fair Market Value" shall mean, on any given day, the closing
price for the Common Stock on that day, or if the Common Stock was not
traded on that day, on the next preceding day on which the Common Stock
was traded, determined in accordance with the following rules.
(i) If the Common Stock is admitted to trading or listed on a
national securities exchange, the closing price for any day shall be
the last reported sale price regular way, or if no such reported sale
takes place on that day, the average of the last reported bid and ask
prices regular way, in either case on the principal national
securities exchange on which the Common Stock is admitted to trading
or listed.
(ii) If not listed or admitted to trading on any national
securities exchange, the last sale price on that day of the Common
Stock reported on the Nasdaq National Market of the Nasdaq Stock
Market ("Nasdaq National Market") or, if no such reported sale takes
place on that day, the average of the closing bid and ask prices on
that day.
(iiI) If not included in the Nasdaq National Market, the average
of the closing bid and ask prices of the Common Stock on that day
reported by The Nasdaq Stock Market, or any comparable system on that
day.
(iv) If the Common Stock is not included in the Nasdaq Stock
Market or any comparable system, the closing bid and ask prices on
that day as furnished by any member of the National Association of
Securities Dealers, Inc. selected from time to time by the Company for
that purpose.
In the case of an Incentive Stock Option, "Fair Market Value" shall be
determined without reference to any restriction other than one that, by its
terms, will never lapse.
(i) "Incentive Stock Option" means an option to purchase Common Stock
that is an incentive stock option under Section 422 of the Code.
(j) "Insider" means a person who is subject to Section 16 of the
Exchange Act.
(k) "Non-Qualified Stock Option" means any option to purchase Common
Stock that is not an Incentive Stock Option.
(l) "Option" means an Incentive Stock Option or a Non-Qualified Stock
Option.
(m) "Parent" shall mean any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company if each of the
corporations (other than the Company) owns stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in
one of the other corporations in the chain, as determined in accordance
with the rules of Code Section 424(e).
-2-
(n) "Participant" means a person who was been granted an Option or
Restricted Stock.
(o) "Plan" means this Total Renal Care Holdings, Inc. 1995 Equity
Compensation Plan, as it may be amended from time to time.
(p) "Restricted Stock" means shares of Common Stock issued under
Section 8 below that are subject to restrictions on ownership.
(q) "Severance" means, with respect to a Participant, the termination
of the Participant's provision of services to the Company as an employee,
director, or independent contractor, whether by reason of death,
disability, retirement, or any other reason. For purposes of determining
the exercisability of an Incentive Stock Option, a Participant who is on a
leave of absence that exceeds ninety (90) days will be considered to have
incurred a Severance on the ninety-first (91st) day of the leave of
absence, unless the Participant's rights to reemployment are guaranteed by
statute or contract. However, a Participant will not be considered to have
incurred a Severance because of a transfer of employment between the
Company and a Subsidiary or a Parent (or vice versa).
(r) "Subsidiary" shall mean any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company if each of
the corporations (other than the last corporation in the unbroken chain)
owns stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in
the chain, as determined in accordance with the rules of Code Section
424(f).
(s) "Ten Percent Shareholder" means any person who owns (after taking
into account the constructive ownership rules of Section 424(d) of the
Code) more than ten percent (10%) of the stock of Total Renal Care
Holdings, Inc. or of any of its Parents or Subsidiaries.
3. Administration.
--------------
(a) This Plan shall be administered by a Committee appointed by the
Board. The Board may remove members from, or add members to, the Committee
at any time. The Committee shall be composed of individuals in a manner
that complies with Rule 16b-3 under the Exchange Act and with Code Section
162(m).
(b) The Committee may conduct its meetings in person or by telephone.
A majority of the members of the Committee shall constitute a quorum, and
any action shall constitute the action of the Committee if it is
authorized by a majority of the members:
-3-
(i) Present at any meeting; or
(ii) In writing without a meeting.
(c) The Committee is authorized to interpret this Plan and to adopt
rules and procedures relating to the administration of this Plan. All
actions of the Committee in connection with the interpretation and
administration of this Plan shall be binding upon all parties.
(d) Subject to the limitations of Sections 9 and 14 below, the
Committee is expressly authorized to make such modifications to this Plan
and the Options granted hereunder as are necessary to effectuate the intent
of this Plan as a result of any changes in the tax, accounting, or
securities laws treatment of Participants and the Plan.
(e) The Committee may delegate its responsibilities to others under
such conditions and limitations as it may prescribe, except that the
Committee may not delegate its authority with regard to the granting of
Options to Insiders.
4. Duration of Plan.
----------------
(a) This Plan shall be effective as of the close of the initial
public offering of the Common Stock of Total Renal Care Holdings, Inc.,
provided this Plan is approved by the majority of the Company's
shareholders, in accordance with the provisions of Code Section 422, within
twelve (12) months before or after its adoption by the Board. If the Plan
is not approved by the shareholders within that time period, the Plan and
all Options issued under the Plan will terminate. The approval by the
shareholders must relate to:
(i) The class of individuals entitled to receive Incentive Stock
Options; and
(ii) The aggregate number of shares of Common Stock that may be
issued under the Plan, except as modified pursuant to Section 12
below.
If either of those items are changed, the approval of the shareholders must
again be obtained.
(b) In the event that this Plan is not so approved, this Plan shall
terminate and any Options granted under this Plan shall be void.
(c) This Plan shall terminate on December 17, 1999, except with
respect to Options then outstanding.
-4-
5. Number of Shares.
----------------
(a) The aggregate number of shares of Common Stock which may be
issued pursuant to this Plan shall be one million (1,000,000). This
aggregate number may be adjusted from time to time as set forth in Section
12 below. The maximum number of shares that may be issued to a single
Participant is one million (1,000,000).
(b) Upon the forfeiture of shares of Restricted Stock, the forfeited
shares of Common Stock shall again become available for use under the Plan.
Upon the expiration or termination of an outstanding Option which shall not
have been exercised in full, the shares of Common Stock remaining unissued
under the Option shall again become available for use under the Plan.
(c) The Committee shall prescribe such rules as it deems appropriate
regarding the effect that using Common Stock to:
(i) Satisfy the withholding obligations; or
(ii) Pay part or all of the exercise price of an Option or the
purchase price of a grant of Restricted Stock;
will have upon the maximum number of shares that may be issued under the
Plan.
6. Eligibility.
-----------
(a) Persons eligible to receive grants of Options or Restricted Stock
under this Plan shall consist of employees, directors, and other persons
providing services to the Company. However, Incentive Stock Options may
only be granted to employees.
(b) In the event that the Company acquires another entity, the
Committee may authorize the issuance of Options ("Substitute Options") to
the individuals performing services for the acquired entity in substitution
of stock options previously granted to those individuals in connection with
their performance of services for the acquired entity upon such terms and
conditions as the Committee shall determine, taking into account the
limitations of Code Section 424(a) in the case of a Substitute Option that
is intended to be an Incentive Stock Option.
7. Form of Options. Options shall be granted under this Plan on such
---------------
terms and in such form as the Committee may approve, which shall not be
inconsistent with the provisions of this Plan, and which need not be the same
for each such grant.
-5-
(a) The exercise price per share of Common Stock purchasable under an
Option shall be set forth in the Option. However, the exercise price of an
Incentive Stock Option, determined on the date of the grant, shall be no
less than:
(i) One hundred ten percent (110%) of the Fair Market Value of
the Common Stock in the case of a Ten Percent Shareholder; or
(ii) One hundred percent (100%) of the Fair Market Value of the
Common Stock in the case of any other employee.
However, the exercise price of such a substituted Incentive Stock Option
(issued pursuant to Section 6 above) may be less than the Fair Market Value
on the grant date.
(b) An Option shall be exercisable at such time or times and be
subject to such terms and conditions as may be set forth in the Option.
However, no Option shall be exercisable prior to the date this Plan is
approved by the Company's shareholders, as set forth in Section 4 above.
(c) The aggregate Fair Market Value (determined as of the date of
grant) of the number of shares of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by a Participant
during any calendar year shall not exceed one hundred thousand dollars
($100,000) or such other limit as may be required by Code Section 422.
8. Restricted Stock.
----------------
(a) The Committee may issue grants of Restricted Stock, upon such
terms and conditions as it may deem appropriate, which need not be the same
for each grant.
(b) Restricted Stock may be sold to Participants, or it may be issued
to Participants without the receipt of any consideration.
(c) A Participant shall not have a vested right to the shares subject
to the grant of Restricted Stock until the satisfaction of the vesting
requirements specified in the grant.
(d) The Participant may not assign or alienate the Participant's
interest in the shares of Restricted Stock prior to vesting. Otherwise, the
Participant shall have all of the rights of a shareholder of the Company,
with respect to the shares received under a grant of Restricted Stock,
including the right to vote the shares and to receive any cash dividends.
Stock dividends issued with respect to the shares covered by a grant of
Restricted Stock shall be treated as additional shares received under the
grant of Restricted Stock.
-6-
9. Modification of Grants.
----------------------
(a) The Committee may modify an existing Option, including the right
to:
(i) Change the exercise price;
(ii) Accelerate the right to exercise it;
(iii) Extend or renew it; or
(iv) Cancel it and issue a new Option.
However, no modification may be made to an Option that would impair the
rights of the Participant holding the Option without the Participant's
consent. The Committee may make similar modifications to grants of
Restricted Stock.
(b) In the event that the Board amends the terms of an Option so that
it no longer qualifies as an Incentive Stock Option under Code Section 422,
the limitations imposed upon the Option under the Code and the Plan by
virtue of it (formerly) qualifying as an Incentive Stock Option shall no
longer apply, to the extent specified in the amendment.
(c) Whether a modification of an existing Incentive Stock Option will
be treated as the issuance of a new Incentive Stock Option will be
determined in accordance with the rules of Code Section 424(h).
(d) Whether a modification of an existing Option granted to an
Insider will be treated as a new grant will be determined in accordance
with Rule 16b-3.
10. Termination of Options.
----------------------
(a) Except to the extent the terms of an Option require its prior
termination, each Incentive Stock Option shall terminate on the earliest of
the following dates:
(i) The date which is ten (10) years from the date on which the
Option is granted or five (5) years in the case of an Option granted
to a Ten Percent Shareholder.
(ii) The date which is one (1) year from the date of the
Severance of the Participant to whom the Option was granted, if the
Participant was Disabled at the time of Severance.
-7-
(iii) The date which is one (1) year from the date of the
Severance of the Participant to whom the Option was granted, if the
Participant's death occurs:
(A) While the Participant is employed by the Company; or
(B) Within three (3) months following the Participant's
Severance.
(iv) In the case of any Severance other than one described in
Subparagraphs (ii) or (iii) above, the date that is three (3) months
from the date of the Participant's Severance.
(b) The rules contained in Paragraph (a) above do not apply to Non-
Qualified Stock Options.
11. Non-transferability of Grants.
-----------------------------
(a) During the lifetime of the Participant, each Option is
exercisable only by the Participant. Options are not assignable or
transferable except by will or the laws of descent and distribution.
(b) Shares of Restricted Stock shall be subject to such restrictions
as may be imposed in the grants.
12. Adjustments
-----------
(a) In the event of any change in the capitalization of the Company
affecting its Common Stock (e.g., a stock split, reverse stock split, stock
dividend, recapitalization, combination, or reclassification), the
Committee shall authorize such adjustments as it may deem appropriate with
respect to:
(i) The aggregate number or kind of shares for which Options
may be granted under this Plan;
(ii) The number or kind of shares covered by each outstanding
Option; and
(iii) The exercise price per share in respect of each
outstanding Option.
(b) The Committee may also make such adjustments in the event of a
spinoff or other distribution) of Company assets to shareholders (other
than normal cash
-8-
dividends.
13. Notice of Disqualifying Disposition. A Participant must notify the
-----------------------------------
Company if the Participant disposes of stock acquired pursuant to the exercise
of an Incentive Stock Option issued under the Plan prior to the expiration of
the holding periods required to qualify for capital gains treatment on the sale.
14. Amendment and Termination. The Board may at any time amend or
-------------------------
terminate this Plan. However, no amendment or termination may impair the rights
of the Participant holding an Option without the Participant's consent.
However, except as may otherwise be permitted under Rule 16b-3 under the 1934
Act, no amendment to the Plan may be adopted without the approval of the
shareholders that would materially:
(a) Increase the number of shares that may be issued to Insiders;
(b) Increase the benefits accruing to Insiders; or
(c) Modify the requirements for Insiders to participate.
15. Tax Withholding.
---------------
(a) The Company shall have the right to take such actions as may be
necessary to satisfy its tax withholding obligations arising because of
the operation of this Plan.
(b) If Common Stock is used to satisfy the Company's tax withholding
obligations, the stock shall be its Fair Market Value when the tax
withholding is required to be made.
16. No Additional Rights.
--------------------
(a) Neither the adoption of this Plan nor the granting of any Option
or Restricted Stock shall:
(i) Affect or restrict in any way the power of the Company to
undertake any corporate action otherwise permitted under applicable
law; or
(ii) Confer upon any Participant the right to continue
performing services for the Company, nor shall it interfere in any way
with the right of the Company to terminate the services of any
Participant at any time, with or without cause.
(b) No Participant shall have any rights as a shareholder with
respect to any
-9-
shares covered by an Option granted to the Participant until the date a
certificate for such shares has been issued to the Participant following
the exercise of the Option.
17. Securities Law Restrictions.
---------------------------
(a) No shares of Common Stock shall be issued under this Plan unless
the Committee shall be satisfied that the issuance will be in compliance
with applicable federal and state securities laws.
(b) The Committee may require certain investment or other
representations and undertakings by the person exercising an Option or
purchasing Restricted Stock in order to comply with applicable law.
(c) Certificates for shares of Common Stock delivered under this Plan
may be subject to such restrictions as the Committee may deem advisable.
The Committee may cause a legend to be placed on the certificates to refer
to these restrictions.
18. Indemnification. To the maximum extent permitted by law, the Company
---------------
shall indemnify each member of the Committee and each other member of the Board,
as well as any other employee of the Company with duties under this Plan,
against expenses (including any amount paid in settlement) reasonably incurred
by the individual in connection with any claims against the individual by reason
of the performance of the individual's duties under this Plan, unless the losses
are due to the individual's gross negligence or lack of good faith.
19. Governing Law. This Plan and all actions taken thereunder shall be
-------------
governed by and construed in accordance with the laws of the State of Delaware.
-10-