Exhibit 4.1
TOTAL RENAL CARE HOLDINGS, INC.
1997 EQUITY COMPENSATION PLAN
1. PURPOSE. The purpose of the Total Renal Care Holdings, Inc. 1997
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Equity Compensation Plan (this "Plan") is to promote the interests of Total
Renal Care Holdings, Inc. (the "Company") and its stockholders 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 Participants and the Company's
stockholders by providing Participants 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
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have the meanings set forth below.
(a) "Award" means an Option granted under this Plan or Restricted
Stock issued under this Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended, and
the applicable regulations thereunder. Reference to any specific section
of the Code shall be deemed to be a reference to any successor provision.
(d) "Committee" means the committee appointed by the Board, if any,
to administer this Plan as permitted by Section 4 below or, if no such
committee is appointed, the Board.
(e) "Common Stock" means the common stock of Total Renal Care
Holdings, Inc. or any security issued in substitution, exchange, or in
lieu thereof.
(f) "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 the Subsidiaries of
Total Renal Care Holdings, Inc.
(g) "Incentive Stock Option" means an option to purchase Common Stock
that is an incentive stock option under Section 422 of the Code.
(h) "1995 Plan" means the Company's 1995 Equity Incentive Plan.
(i) "Non-Qualified Stock Option" means any Option that is not an
Incentive Stock Option.
(j) "Option" means an Incentive Stock Option or a Non-Qualified Stock
Option.
(k) "Participant" means a person who has been granted an Option or
Restricted Stock.
(l) "Plan" means this 1997 Equity Compensation Plan of the Company,
as it may be amended from time to time.
(m) "Restricted Stock" means shares of Common Stock issued pursuant
to this Plan that are subject to contractual restrictions.
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(n) "Spill-Over Shares" means (i) shares of Common Stock which remain
available for issuance under the 1995 Plan on the date this Plan is
approved by the Company's stockholders, and (ii) shares of Common Stock
which would otherwise become available for issuance under the 1995 Plan
due to the expiration or termination of options granted under the 1995
Plan prior to stockholder approval of the 1997 Plan.
(o) "Subsidiary" means 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 Section 424(f) of the
Code.
3. ELIGIBILITY. All employees, directors, and other persons providing
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bona fide services (other than persons only providing services in connection
with the offering or sale of securities in a capital raising transaction) to the
Company or any Subsidiary are eligible to receive Awards under this Plan;
provided, however, that Incentive Stock Options may only be granted to employees
of the Company or any Subsidiary. In the event that the Company acquires
another entity, the Committee may authorize the issuance of Awards ("Substitute
Awards") to employees, directors and other persons in substitution of stock
options or restricted stock grants previously granted to such employees,
directors and other persons 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 any Substitute Award that is intended to be an Incentive Stock Option.
4. ADMINISTRATION. This Plan shall be administered by the Board or by a
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committee consisting of two or more members of the Board appointed by the Board
to administer this Plan. 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. Subject to the
limitations set forth below, the Committee is expressly authorized to make such
modifications to this Plan and the Awards 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. The
Committee may delegate its responsibilities to others under such conditions and
limitations as it may prescribe.
5. EFFECTIVE DATE OF THIS PLAN. This Plan shall be effective on July 1,
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1997; provided, however that in the event this Plan is not approved by the
stockholders of the Company at its 1997 Annual Meeting, this Plan shall become
effective, if at all, on such date as the Board may determine. No Awards may be
granted under this Plan prior to its effective date. This Plan may be
terminated by the Board at any time. Unless earlier terminated by the Board,
this Plan shall terminate as of the close of business on the day prior to the
tenth anniversary of the effective date of this Plan. The foregoing
notwithstanding, no termination of this Plan shall adversely affect the rights
of any Participant with respect to any Award outstanding as of the time of such
termination.
6. SHARES SUBJECT TO THIS PLAN. The aggregate number of shares of
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Common Stock which may be issued pursuant to this Plan shall be equal to the sum
of (i) two million five hundred thousand (2,500,000) shares plus (ii) up to
500,000 Spill-Over Shares from the 1995 Plan. This aggregate number may be
adjusted from time to time as set forth in Section 11 below. Subject to
adjustments as provided in Section 11 below, the maximum number of shares of
Common Stock which may be issuable pursuant to Awards granted during any
calendar year to any Participant is three hundred thousand (300,000) shares.
Upon the expiration or termination of any Option granted under this Plan which
shall not have been exercised in full, the shares of Common Stock remaining
unissued under such Option shall again become available for granting under the
Plan. Upon the repurchase or forfeiture of any shares of Restricted Stock
issued hereunder, such repurchased shares of Common Stock shall again become
available for issuance under this Plan.
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7. FORM OF OPTIONS. Options shall be granted under this Plan on such
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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. Options may be either Nonqualified Stock Options or
Incentive Stock Options. The terms and conditions of each Option shall include,
in addition to such other terms and conditions as may be established by the
Committee, (i) the per share exercise price of such Option (ii) the termination
date of such Option, which shall not be later than ten years after the date of
grant, and (iii) the effect on such Option of the termination of the
Participant's employment. Any Option which is intended, as evidenced by its
designation, as an Incentive Stock Option shall be made subject to such terms
and conditions as may be required for such Option to qualify as an Incentive
Stock Option under the Code. Incentive Stock Options granted under this Plan
shall also include as a requirement that the Participant receiving such
Incentive Stock Option notify the Company if he or she disposes of Common Stock
acquired pursuant to the exercise thereof prior to the expiration of the holding
period prescribed in Section 422(a)(1) of the Code. Any Option which is
intended to constitute "qualified performance-based compensation" as such term
is defined in the regulations promulgated under Section 162(m) of the Code shall
be granted in such manner and made subject to such terms and conditions as may
be required for such Option to so qualify as "qualified performance-based
compensation."
8. RESTRICTED STOCK. The Committee may issue Restricted Stock upon such
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terms, restrictions and conditions as it may deem appropriate, which need not be
the same for each grant. Restricted Stock may be issued for such consideration
as the Committee may determine; provided, however, that in no case shall shares
of Restricted Stock be issued for less than the minimum consideration required
by law, if any.
9. MODIFICATION OF AWARDS. The Committee may modify any outstanding
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Award as it deems appropriate. Such authority shall include, without
limitation, the right to decrease the exercise price of any Option, accelerate
the right to exercise any Option and modify any restrictions with respect to any
Restricted Stock; provided, however, that no modification may be made to any
Award that would adversely affect the rights of the Participant with respect to
any outstanding Award without such Participant's consent. In the event that the
Board amends the terms of an Option so that it no longer qualifies as an
Incentive Stock Option, 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. 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).
10. TRANSFER RESTRICTIONS. During the lifetime of the Participant,
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Options granted to such Participant under this Plan are exercisable only by the
Participant and are not assignable or transferable, except by will or the laws
of descent and distribution. Shares of Restricted Stock shall be subject to
such restrictions on transferability as may be imposed by the Committee.
11. ADJUSTMENTS. In the event of any stock split, reverse stock split,
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stock dividend, recapitalization, combination, reclassification, reorganization,
merger, combination, consolidation, exchange of Common Stock or spinoff or other
distribution of Company assets to stockholders (other than normal cash
dividends), the Committee may, in such manner and to such extent , if any, as it
deems appropriate and equitable, authorize such adjustments with respect to: (i)
the aggregate number and kind of shares for which Awards may be granted under
this Plan; (ii) the number and kind of shares covered by outstanding Awards; and
(iii) the per share exercise price of outstanding Options and the per share
repurchase price of outstanding Restricted Stock. In connection with any merger
or consolidation of the Company with or into another entity in which the Company
is not the surviving corporation or as a result of which the Common Stock ceases
or will cease to be publicly traded, the Committee may, but shall not be
required to, authorize the termination of all outstanding Options upon the
consummation of such merger or consolidation, provided that, as a condition to
such termination, all restrictions on the exercisability of such Options (i.e.,
vesting provisions) shall be eliminated and the holders thereof shall be given
at least 20 days prior to such termination to exercise such Options without
regard to any such restrictions.
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12. AMENDMENT OF THIS PLAN. The Board may amend this Plan at any time;
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provided, however, that no such amendment may adversely affect the rights of any
Participant with respect to any outstanding Award without the Participant's
consent.
13. TAX WITHHOLDING. The Company shall have the right to take such
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actions as may be necessary to satisfy its tax withholding obligations arising
because of the operation of this Plan.
14. NO ADDITIONAL RIGHTS. Neither the adoption of this Plan nor the
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granting of any Option or the issuance of any 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, (ii) confer upon any
Participant the right to continue performing services for the Company, or (iii)
interfere in any way with the right of the Company to terminate the services of
any Participant at any time, with or without cause, subject to such other
contractual obligations which may exist. No Participant shall have any rights
as a shareholder with respect to any 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.
15. SECURITIES LAW RESTRICTIONS. No shares of Common Stock shall be
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issued under this Plan unless the Committee shall be satisfied that the issuance
will be in compliance with applicable federal and state securities laws, as well
as the requirements of any stock exchange on which the Common Stock is traded.
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. 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.
16. INDEMNIFICATION. To the maximum extent permitted by law, the Company
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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, provided such
settlement is approved by the Company) reasonably incurred by the individual in
connection with any claim against the individual by reason of the performance of
the individual's duties as a member of the Committee, unless the losses are due
to the individual's gross negligence or lack of good faith; provided, however,
that the Company shall be entitled to control the defense of any such claim and
shall be entitled to engage counsel for such defense; and provided further, that
if more than one member of the Committee or such other employee is subject to
such claim, or if the Company or other parties entitled to indemnification by
the Company are also subject to such claim, the Company, if applicable, and all
such parties shall be represented by a single counsel selected by the Company
and no member or other party shall be entitled to be represented by separate
counsel at the Company's expense unless counsel selected by the Company advises
the Company in writing that such counsel cannot represent such member or other
party under applicable rules of professional responsibility.
17. GOVERNING LAW. This Plan and all actions taken thereunder shall be
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governed by and construed in accordance with the laws of the State of Delaware.
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