EXHBIBIT 10.1
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DESA HOLDINGS CORPORATION
1998 STOCK OPTION PLAN
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DESA HOLDINGS CORPORATION
1998 STOCK OPTION PLAN
TABLE OF CONTENTS
Page
1. PURPOSE 1
2. ADMINISTRATION OF THE PLAN 1
3. STOCK SUBJECT TO THE PLAN 3
4. AUTHORITY TO GRANT OPTIONS 3
5. WRITTEN OPTION AGREEMENT 4
6. ELIGIBILITY 4
7. OPTION PRICE 4
8. DURATION OF OPTIONS 5
9. RESTRICTIONS ON EXERCISE OF OPTIONS 6
10. EXERCISE OF OPTIONS 7
11. NON-TRANSFERABILITY OF OPTIONS 9
12. TERMINATION OF EMPLOYMENT OR INVOLVEMENT OF
OPTIONEE WITH THE COMPANY 9
13. REQUIREMENTS OF LAW, ETC. 10
14. LEGEND ON CERTIFICATES 11
15. NO RIGHTS AS STOCKHOLDER 11
16. NO EMPLOYMENT OBLIGATION 11
17. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE 11
18. AMENDMENT OR TERMINATION OF PLAN 14
19. CERTAIN RIGHTS OF THE COMPANY 15
20. TAX WITHHOLDING 15
21. EFFECTIVE DATE AND DURATION OF THE PLAN 16
(i)
DESA HOLDINGS CORPORATION
1998 STOCK OPTION PLAN
1. PURPOSE
The purpose of this 1998 Stock Option Plan (the "Plan") is to encourage
directors, officers, consultants and and other key employees of DESA Holdings
Corporation (the "Company") and its Subsidiaries (as hereinafter defined) to
continue their association with the Company and its Subsidiaries by providing
opportunities for such persons to participate in the ownership of the Company
and in its future growth through the granting of stock options (the "Options")
which may be options designed to qualify as incentive stock options (within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended [the
"Code"]) (an "ISO"), or options not intended to qualify for any special tax
treatment under the Code (a "NQO"). The term "Subsidiary" as used in the Plan
means a corporation or other business organization of which the Company owns,
directly or indirectly through an unbroken chain of ownership, fifty percent
(50%) or more of the total combined voting power of all classes of stock,
partnership interests or other equity interests. As of the date of adoption of
this Plan, DESA International, Inc. is a Subsidiary.
2. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by a committee (the
"Committee") consisting of those directors of the Company who shall at any time
and from time to time be serving as members of the Compensation Committee of the
Board of Directors of the Company (the "Board"); provided that, (i) at any time
that Section 16 of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act") is applicable to the Company, the Committee shall be composed of
at least two (2) directors and each such director shall be a "Non-Employee
Director" within the meaning of Rule 16b-3 under the Exchange Act and, (ii) at
any time that Section 162(m) of the Code is applicable to the Company, each such
director shall be an "outside director" within the meaning of Section 162 of the
Code and the regulations thereunder.
(b) The Committee shall select one of its members as Chairman
and shall hold meetings at such times and places as it may
determine. A majority of the Committee shall constitute a quorum. Acts of a
majority of the members of the Committee present at any meeting of the Committee
at which a quorum is present, or acts consented to or approved in writing by all
of the members of the Committee, shall be the valid acts of the Committee.
(c) The Committee shall from time to time determine to whom
Options shall be granted under the Plan, the type of Options granted, the number
of shares of Stock (as hereinafter defined) that may be purchased under each
such Option and the terms and conditions (including but not limited to vesting
provisions) of each such Option. The Committee shall from time to time report to
the Board the names of the persons to whom Options are granted, the type of
Options granted, the number of shares of Stock that may be purchased under each
such Option and the terms and conditions of each such Option.
(d) The Committee shall have the sole authority, in its
absolute discretion, to adopt, amend and rescind such rules and regulations as,
in its opinion, may be advisable in the administration of the Plan, and to
interpret the Plan, the rules and regulations, and the instruments evidencing
options granted under the Plan and to make all other determinations deemed
necessary or advisable for the administration of the Plan. All questions of
interpretation and application of the Plan, such rules and regulations, Options
granted under the Plan or instruments evidencing Options shall be subject to the
determination of the Committee, which shall be final, binding and conclusive on
all Optionees (as hereinafter defined).
(e) The powers and determinations of the Committee set forth
in the Plan (including but not limited to this Section) may be exercised or made
by the Committee or the Board, as the Board may from time to time direct in its
discretion, and references in the Plan, in rules or regulations under the Plan
or in instruments evidencing Options shall be understood to refer to the Board
in any such case.
(f) The Plan shall be administered in such a manner as to
permit those Options granted hereunder and designated under Section 4 as such to
qualify as incentive stock options as described in Section 422 of the Code
unless defined elsewhere.
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3. STOCK SUBJECT TO THE PLAN
The total number of shares of stock which may be subject to Options
issued under the Plan (the "Option Pool") shall be 1,462,222 shares of the
Company's Common Stock, $.01 par value per share ("Stock"), from either
authorized but unissued shares or treasury shares; provided that the number of
shares stated in this Section 3 shall be subject to adjustment in accordance
with the provisions of Section 17. If any outstanding Option is surrendered or
expires or terminates for any reason or due to any cause (including but not
limited to the death or severance of employment of the Optionee), the shares of
Stock allocable to the unexercised portion of such Option may again be subject
to an Option under the Plan.
4. AUTHORITY TO GRANT OPTIONS
The Committee may determine, from time to time, which key employees of
the Company or any Subsidiary or other persons shall be granted Options under
the Plan, the terms and conditions (including but not limited to vesting
provisions) of the Options and whether an Option shall be an ISO or a NQO) and
the number of shares which may be purchased under the Option or Options;
provided, however, that if any person to whom a grant has been made fails to
execute and deliver to the Committee an Option Agreement within ten (10) days
after it is submitted to him or her, the Option so granted shall be voidable by
the Company at its election, without further notice to the Optionee. Without
limiting the generality of the foregoing, the Committee may from time to time
grant: (a) to such eligible employees as it shall determine, an Option or
Options to buy a stated number of shares of Stock under the terms and conditions
of the Plan, which Option or Options will if so designated at the time of grant
constitute an ISO; and (b) to such eligible directors, employees or other
persons as it shall determine an Option or Options to buy a stated number of
shares of Stock under the terms and conditions of the Plan, which Option or
Options shall constitute a NQO. Subject only to any applicable limitations set
forth elsewhere in the Plan, the number of shares of Stock to be covered by any
Option shall be as determined by the Committee.
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5. WRITTEN OPTION AGREEMENT
Each Option granted hereunder shall be embodied in a written option
agreement (the "Option Agreement") substantially in the form of Exhibit 1 or
Exhibit 2 attached hereto (or in such other form not inconsistent with the Plan
as the Committee may determine), which shall be signed by the Optionee and by
the Chairman of the Board, the President, the Chief Operating Officer, or the
Chief Financial Officer of the Company for and in the name and on behalf of the
Company. An Option Agreement pertaining to an ISO shall contain the restriction
on exercisability set forth in Section 9 and any Option Agreement for any
Option, whether ISO or NQO, may contain such other provisions not inconsistent
with the Plan as the Committee in its sole and absolute discretion shall
approve.
6. ELIGIBILITY
The persons who shall be eligible for grants of Options under the Plan
shall be directors, officers, employees and other persons, whether or not
employees, who render services of special importance to the management,
operation or development of the Company or a Subsidiary. ISOs shall not be
granted to any person who is not an employee of the Company or a Subsidiary. A
director, officer, employee or other person to whom an Option has been granted
under the Plan, and any successor to such person who may be eligible to exercise
such Option following the death of the employee, or permitted assignee of such
person under Section 11 of the Plan, is sometimes referred to herein as an
"Optionee".
7. OPTION PRICE
(a) Except as otherwise provided in this Section, the price at
which shares of Stock may be purchased pursuant to an Option shall be specified
by the Committee at the time the Option is granted, but shall in no event be
less than the par value of such shares and not less than one hundred percent
(100%) of the fair market value (as hereinafter defined) of the Stock on the
date the Option is granted. In the case of an employee who owns (or is
considered under Section 424(d) of the Code as owning) stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Subsidiary, the price at which shares of Stock may
be so purchased pursuant to an
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ISO shall be not less than one hundred and ten percent (110%) of the fair market
value of the Stock on the date the ISO is granted.
(b) For purposes of the Plan, the "fair market value" of a
share of the Stock on any date specified herein, shall mean (i) the last
reported sales price, regular way, or, in the event that no sale takes place on
such date, the average of the reported closing bid and asked prices, regular
way, in either case (A) on the principal national securities exchange on which
the Stock is listed or admitted to trading, or (B) if not then listed or
admitted to trading on any national securities exchange, on the NASDAQ National
Market System; or (ii) if the Stock is not quoted on such National Market
System, (A) the average of the closing bid and asked prices on such date in the
over-the-counter market as reported by NASDAQ, or (B) if bid and asked prices
for the Stock on such date shall not have been reported through NASDAQ, the
average of the bid and asked prices for such date as furnished by any American
or New York Stock Exchange member firm regularly making a market in the Stock
selected for such purpose by the Committee; or (iii) if the Stock is not then
listed or admitted to trading on any national exchange or quoted in the
over-the-counter market, the fair value thereof determined in good faith by the
Committee as of a date which is within thirty (30) days of the date as of which
the determination is to be made.
8. DURATION OF OPTIONS
Subject to Section 12 of the Plan, the duration of any Option shall be
specified by the Committee in the Option Agreement, but no Option shall be
exercisable after the expiration of ten (10) years from the date as of which
such Option is granted. In the case of any employee who owns (or is considered
under Section 424(d) of the Code as owning) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any Subsidiary, no ISO shall be exercisable after the expiration of
five (5) years from the date as of which such Option is granted. The Committee,
in its sole and absolute discretion, may extend any Option theretofore granted
subject to the aforesaid limits and may provide that an Option shall be
exercisable during its entire duration or during any lesser period of time.
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9. RESTRICTIONS ON EXERCISE OF OPTIONS
(a) Notwithstanding any other provision of the Plan, (i) at
any time that Section 16 of the Exchange Act is applicable to the Company no
Option shall be exercisable until at least six (6) months after the date on
which such Option is granted by the Committee and (ii) the aggregate fair market
value (determined as of the time the Option is granted) of the Stock with
respect to which ISOs may be exercisable for the first time by an Optionee
during any calendar year (under the Plan or any other incentive stock option
plan(s) of the Company or any Subsidiary) shall not exceed $100,000. Subject to
the foregoing, each Option may be exercised so long as it is valid and
outstanding from time to time, in part or as a whole, in such manner and subject
to such conditions as the Committee, in its sole and absolute discretion, may
provide in the Option Agreement.
(b) The Committee may from time to time restrict the exercise of any
Option by prohibiting such exercise at any time during which and for such period
of time as any Optionee is engaged in any activity determined by the Committee,
after consideration of the facts presented on behalf of the Company and the
Optionee, to be detrimental to the best interests of the Company and its
stockholders. The Committee shall notify the Optionee in writing of any such
determination and of the scope and duration of any such restriction. If the
Committee notifies an Optionee in writing that such Optionee is engaged or may
have engaged in such a detrimental activity and such Optionee has exercised or
attempts to exercise an Option after such notification but prior to a decision
of the Committee based on the consideration of all facts presented on behalf of
the Company and the Optionee, the Company shall not be required to recognize
such exercise until the Committee has made its decision and, in the event any
exercise shall have taken place, it shall be of no force and effect (and void ab
initio) if the Committee makes an adverse determination; provided, however, that
if the Committee finds in favor of the Optionee then the Optionee will be deemed
to have exercised such Option as of the date he or she originally gave written
notice of his or her attempt to exercise or actual exercise, as the case may be.
The decision of the Committee as to the detrimental nature of the Optionee's
activities shall be final, binding and conclusive.
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10. EXERCISE OF OPTIONS
(a) Options shall be exercised by the delivery of written
notice to the Company setting forth the number of shares of Stock with respect
to which the Option is to be exercised, accompanied by payment of the option
price for such shares, which payment shall be made, subject to the alternative
provisions of this Section, in cash or by such cash equivalents, payable to the
order of the Company in an amount in United States dollars equal to the option
price for such shares, as the Committee in its sole and absolute discretion
shall consider acceptable. Such notice shall be delivered in person to the Chief
Financial Officer or Treasurer of the Company or shall be sent by registered
mail, return receipt requested, to the Chief Financial Officer or Treasurer of
the Company, in which case delivery shall be deemed made on the date such notice
is deposited in the mail.
(b) Alternatively, at the discretion of the Committee and
subject to such rules as may be established by the Committee, payment of the
option price may be made through a so-called "cashless exercise" procedure,
under which:
(i) The Optionee delivers irrevocable instructions to a broker
to sell shares of Stock acquired upon exercise of the Option and to
remit promptly to the Company a sufficient portion of the sale proceeds
of such shares to pay the option price and any withholding tax
resulting from such exercise; or
(ii) A broker (A) transmits the option price to the Company in
cash or acceptable cash equivalents, either (I) against the Optionee's
notice of exercise and the Company's confirmation that it will deliver
to the broker stock certificates issued in the name of the broker for
at least that number of shares having the fair market value equal to
the option price or (II) as the proceeds of a margin loan to the
Optionee; or (B) agrees to pay the option price to the Company in cash
or acceptable cash equivalents upon the broker's receipt from the
Company of stock certificates issued in the name of the broker for at
least that number of shares having a fair market value equal to the
option price.
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The Optionee's written notice of exercise of an option pursuant to a "cashless
exercise" procedure must include the name and address of the broker involved, a
clear description of the procedure, and such other information or undertaking by
the broker as the Treasurer shall reasonably require.
(c) Alternatively, at the discretion of the Committee and
subject to such rules as may be established by the Committee, payment of the
option price may be made, in whole or in part, in shares of Stock owned by the
Optionee; provided, however, that the Optionee may not make payment in shares of
Stock that he acquired upon the earlier exercise of any ISO (or other "incentive
stock option"), unless and until he has held the shares until at least two (2)
years after the date the ISO (or such other incentive stock option) was granted
and at least one (1) year after the date the ISO (or such other incentive stock
option) was exercised. If payment is made in whole or in part in shares of
Stock, then the Optionee shall deliver to the Company in payment of the option
price of the shares in respect of which such Option is exercised:
(i) Certificates registered in the name of such Optionee
representing a number of shares of Stock legally and beneficially owned
by such Optionee, fully vested and free of all liens, claims and
encumbrances of every kind, with such certificates to be duly endorsed
or accompanied by stock powers duly endorsed in blank by the record
holder of the shares of Stock represented by such certificates; and
(ii) If the option price for the shares in respect of which
such Option is exercised exceeds the fair market value of the shares of
Stock represented by such certificates on the date of delivery of such
certificates, cash or such cash equivalents payable to the order to the
Company, in an amount in United States dollars equal to the amount of
such excess and otherwise as the Committee in its sole and absolute
discretion shall consider acceptable.
Notwithstanding the foregoing provisions of this Section, the Committee, in its
sole and absolute discretion, (A) may refuse to accept shares of Stock in
payment of the option price for the shares of Stock with respect to which such
Option is to be exercised and, in that event, any certificates representing
shares of Stock which were delivered to the Company with such written
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notice shall be returned to such Optionee together with notice by the Company to
such Optionee of the refusal of the Committee to accept such shares of Stock.
(d) As promptly as practicable after the receipt by the
Company of (i) written notice from the Optionee setting forth the number of
shares of Stock with respect to which such Option is to be exercised and (ii)
payment of the option price of such shares in the form required by the foregoing
provisions of this Section, the Company shall, subject to the provisions of
Section 13 of the Plan, cause to be delivered to such Optionee certificates
representing the number of shares with respect to which such Option has been so
exercised.
11. NON-TRANSFERABILITY OF OPTIONS
Options shall not be transferable by the Optionee otherwise than by
will or under the laws of descent and distribution and, during his or her
lifetime, shall be exercisable only by the Optionee. Options shall be null and
void and without effect upon any attempted assignment or transfer, except as
hereinabove provided, including without limitation any purported assignment,
whether voluntary or by operation of law, pledge, hypothecation or other
disposition contrary to the provisions hereof, or levy of execution, attachment,
trustee process or similar process, whether legal or equitable upon the Options.
Notwithstanding the foregoing, the Committee may, in its sole and absolute
discretion, permit the transfer of Options which are not ISOs to (a) members of
the Optionee's immediate family (consisting of parents, siblings, issue (natural
or adopted), in-laws, step-parents, step-children (natural or adopted) or
cousins or (b) trusts or other estate planning vehicles solely for the benefit
of the Optionee and such immediate family members of the Optionee or (c) limited
partnerships or limited liability companies whose only partners or members are
the Optionee and such immediate family members of such Optionee, subject to such
restrictions and conditions as the Committee may deem advisable or appropriate.
12. TERMINATION OF EMPLOYMENT OR INVOLVEMENT
OF OPTIONEE WITH THE COMPANY
For purposes of the Plan, employment by or involvement with (in the
case of an Optionee who is not an employee) the Company or
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a Subsidiary shall be considered employment by or involvement with the Company.
After the Optionee's termination of employment with or involvement with the
Company, the Option shall terminate as provided in the Option Agreement, and the
Option shall be vested only to the extent vested on the date of such termination
of employment.
13. REQUIREMENTS OF LAW, ETC.
(a) The Company shall not be required to transfer any Stock or
to sell or issue any shares upon the exercise of any Option if the transfer,
sale or issuance of such shares may result in a violation by the Optionee or the
Company of any provisions of any law, statute or regulation of any governmental
authority. Without limiting the generality of the foregoing, in connection with
the Securities Act of 1933, as amended (the "Securities Act") and any applicable
state securities or "blue sky" law (a "Blue Sky Law"), upon the proposed
transfer of Stock or the proposed exercise of any Option the Company shall not
be required to transfer or issue shares unless the Board has received evidence
or advice satisfactory to it to the effect that such transfer or issuance of
shares is pursuant to a registration statement in effect under the Securities
Act and applicable Blue Sky Laws or otherwise is subject to an exemption from
such registration. Any determination in this connection by the Board shall be
final, binding and conclusive. The Company shall not be obligated to take any
other action in order to cause the transfer of Stock or the exercise of an
Option to comply with any law or regulations of any governmental authority,
including, without limitation, the Securities Act or applicable Blue Sky Law.
(b) Notwithstanding any other provision of the Plan to the
contrary, the Company may refuse to permit a transfer of shares of the Stock or
of any Option if in the opinion of its legal counsel such transfer may violate
any federal or state securities laws or subject the Company to liability
thereunder. Any sale, assignment, transfer, pledge or other disposition of
shares of the Stock received upon exercise of any Option (or any other shares or
securities derived therefrom) or of any Option which is not in accordance with
the provisions of this Section shall be void and of no effect and shall not be
recognized by the Company.
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14. LEGEND ON CERTIFICATES
The Committee may cause any certificate representing shares of Stock
acquired upon exercise of an Option (and any other shares or securities derived
therefrom) to bear a legend to the effect that the securities represented by
such certificate have not been registered under the Securities Act or any
applicable Blue Sky Law, and may not be sold, assigned, transferred, pledged or
otherwise disposed of except in accordance with the Plan and applicable
agreements binding the holder and the Company or any of its stockholders.
15. NO RIGHTS AS STOCKHOLDER
No Optionee shall have any rights as a stockholder with respect to
shares covered by his or her Option until the date of issuance of a stock
certificate for such shares; except as otherwise provided in Section 17 of the
Plan, no adjustment for dividends or otherwise shall be made if the record date
therefor is prior to the date of issuance of such certificate.
16. NO EMPLOYMENT OBLIGATION
The granting of any Option shall not impose upon the Company or any
Subsidiary any obligation to employ or continue to employ any Optionee, or to
engage or retain the services of any person, and the right of the Company or any
Subsidiary to terminate the employment or services of any person shall not be
diminished or affected by reason of the fact that an Option has been granted to
him or her. The existence of any Option shall not be taken into account in
determining any damages relating to termination of employment or services for
any reason.
17. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE
(a) The existence of outstanding Options shall not affect in
any way the right or power of the Company or its stockholders to make or
authorize any or all any subdivisions, splits, combinations or consolidations of
shares of capital stock of the Company (including the Stock) or the payment of a
dividend in shares of the Stock or other securities of the Company, adjustments,
recapitalizations, reclassifications, reorganizations
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or other changes in the Company's capital structure or its business or any
merger or consolidation of the Company or any issue of bonds, debentures,
preferred or preference stock, whether or not convertible into or exchangeable
or exercisable for shares of the Stock or other securities, ranking prior to or
pari passu with the Stock or affecting the rights thereof, or warrants, rights
or options to acquire the same, or the dissolution or liquidation of the Company
or any sale or transfer of all or any part of its assets or business or any
other corporate act or proceeding, whether of a similar character or otherwise.
(b) Subject to the provisions of Section 17(d) of the Plan,
the number of shares of the Stock in the Option Pool (less the number of shares
theretofore delivered upon exercise of Options) and the number of shares of the
Stock covered by any outstanding Options and the price per share payable upon
exercise thereof (provided that in no event shall the option price be less than
the par value of such shares) shall be appropriately adjusted by the Board in
the event that the outstanding shares of the Stock are changed into or exchanged
for a different number or kind of shares or other securities of the Company or
of another corporation by reason of any reorganization, merger, consolidation,
recapitalization, reclassification, stock split, combination of shares, or
dividends payable in capital stock. The decision of the Board as to the
adjustment, if any, required by the provisions of this Section shall be final,
binding and conclusive.
(c) If the Company merges or consolidates with a wholly-owned
subsidiary for the purpose of reincorporating itself under the laws of another
jurisdiction, the Optionees will be entitled to acquire shares of the Stock of
the reincorporated Company upon the same terms and conditions as were in effect
immediately prior to such reincorporation (unless such reincorporation involves
a change in the number of shares or the capitalization of the Company, in which
case proportional adjustments shall be made as provided in this Section), and
the Plan, unless otherwise rescinded by the Board, will remain the Plan of the
reincorporated Company.
(d) Unless otherwise determined by the Board in its sole
discretion and except as otherwise provided in Section 17(c) of the Plan, if
while unexercised Options remain outstanding under the Plan (i) the Company is
merged or consolidated with another corporation or other entity, whether or not
the Company is the
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surviving entity, or (ii) the Company is liquidated or sells or otherwise
disposes of all or substantially all of its assets to another entity, or (iii)
there takes place a Change in Control (as hereinafter defined), or (iv) in other
circumstances in which the Board in its sole and absolute discretion deems it
appropriate for the provisions of this paragraph to apply, (A) the purchaser(s)
of the Company's assets or capital stock may, in his, her or its discretion,
deliver to the Optionee, to the extent that the right to purchase shares of the
Stock under the Option has vested, the same kind of consideration (less the
price per share payable upon exercise thereof) that is delivered to the holders
of the Stock as a result of such merger, consolidation, liquidation, sale,
disposition, Change in Control or other circumstances or (B) the Board may, in
its sole determination, cancel the Option, to the extent not theretofore
exercised, in exchange for consideration in cash or in kind, which consideration
in the case of (A) or (B) shall be equal in value to the value of those shares
of stock or other consideration the Optionee would have received had the Option
been exercised (to the extent it has vested and not been exercised) and no
disposition of the shares so acquired upon such exercise been made prior to such
merger, consolidation, liquidation, sale, disposition, Change in Control or
other circumstances, less the price per share payable upon exercise thereof.
Upon receipt of such consideration by the Optionee, the Option shall immediately
terminate and be of no further force and effect, including with respect to the
vested and unvested portion thereof. The value of the stock or other
consideration the Optionee would have received if the Option had been exercised
shall be determined in good faith by the Board. In addition, in the case of any
such merger, consolidation, liquidation, sale, disposition, Change in Control or
other circumstance, the Board may, in its sole discretion, accelerate the
vesting of the Option.
(e) For purposes of this Section, a "Change in Control" shall
be deemed to have occurred if any person, or any two or more persons acting as a
group, and all affiliates of such person or persons, who prior to such time
owned less than fifty percent (50%) of the then outstanding Common Stock of the
Company, shall acquire such additional shares of the Company's Common Stock in
one or more transactions, or series of transactions, such that following such
transaction or transactions, such person or group and affiliates beneficially
own fifty percent (50%) or more of the Company's Common Stock outstanding; and
"Common Stock" shall mean the Stock,
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or if changed, the capital stock of the Company as it shall be constituted from
time to time entitling the holders thereof to share generally in the
distribution of all assets available for distribution to the Company's
stockholders after the distribution to any holders of capital stock with
preferential rights.
(f) Upon dissolution or liquidation of the Company, the Option
shall terminate, but the Optionee (if at such time in the employment of the
Company) shall have the right, immediately prior to such dissolution or
liquidation, to purchase shares of the Stock pursuant to the Option to the
extent such Option is then vested.
(g) No fraction of a share of Stock shall be purchasable or
deliverable upon the exercise of the Option, but in the event any adjustment
hereunder of the number of shares covered by the Option shall cause such number
to include a fraction of a share, such fraction shall be adjusted to the nearest
smaller whole number of shares.
(h) Except as expressly provided herein, the issue by the
Company of shares of Stock or other securities of any class or series or
securities convertible into or exchangeable or exercisable for shares of the
Stock or other securities of any class or series for cash or property or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number,
class or price of shares of the Stock then subject to outstanding Options.
18. AMENDMENT OR TERMINATION OF PLAN
The Board may, in its sole and absolute discretion, modify, revise or
terminate the Plan at any time and from time to time; provided, however, that
without the further approval of the holders of at least a majority of the
outstanding shares of Stock, the Board may not (a) may not materially increase
the benefits accruing to Optionees or grantees under the Plan or make any
"modifications" as that term is defined under Section 424(h)(3) (or its
successor) of the Code if such increase in benefits or modifications would
adversely affect the qualification of the Plan or any Options for "incentive
stock option" treatment under Section 422 of the Code;
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(b) may not change the aggregate number of shares of Stock which may be issued
under ISOs pursuant to the provisions of the Plan, except as provided in Section
17 of the Plan; (c) may not reduce the option price at which ISOs may be granted
to an amount less than the minimum amount defined by Section 7; or (d) may not
change the class of persons eligible to receive ISOs. Notwithstanding the
preceding sentence, the Board shall in all events have the power and authority
to make such changes in the Plan and in the regulations and administrative
provisions hereunder or in any outstanding Option as, in the opinion of counsel
for the Company, may be necessary or appropriate from time to time to enable any
STE-1 Option granted pursuant to the Plan to qualify as an incentive stock
option or such other form of stock option as may be defined under the Code, as
amended from time to time, so as to receive preferential federal income tax
treatment.
19. CERTAIN RIGHTS OF THE COMPANY
The Committee may, in its sole and absolute discretion, also require an
employee or other person, as a condition to receiving any Option, to enter into
a noncompetition agreement or other agreement in such form as the Committee may,
from time to time in its sole and absolute discretion, determine.
20. TAX WITHHOLDING
(a) To the extent required by law the Company shall withhold
income and other taxes with respect to any income recognized by an Optionee or
other person relating to any Options granted under this Plan. It shall be a
condition to the Optionee's receipt of any Options that the Optionee
acknowledges and agrees to the Company's withholding of taxes and further that
if the amount of any consideration payable to the Optionee is insufficient to
pay such taxes, upon the request of the Company the Optionee shall pay to the
Company an amount sufficient for the Company to satisfy tax withholding
requirements.
(b) Without limiting the foregoing, the Committee may in its
discretion permit any withholding obligation to be paid in whole or in part in
the form of Stock, by withholding from the shares to be issued upon exercise of
an NQO or by accepting delivery from the Optionee of shares of Stock already
owned by the Optionee in connection with withholding in respect of exercise of
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an NQO. The fair market value of the shares for such purposes shall be
determined exclusively by the Committee. However, an Optionee may not make any
such payment of withholding taxes in the form of shares of Stock previously
acquired by him or her pursuant to the exercise of any ISO unless and until such
shares shall have been held by him or her for at least two (2) years from the
date such option was granted and at least one (1) year from the date the option
was exercised. If payment of withholding taxes is made in whole or in part in
shares of Stock already owned by the Optionee, then the Optionee shall deliver
to the Company certificates registered in the name of the Optionee representing
shares of Stock legally and beneficially owned by such Optionee, fully vested
and free of all liens, claims and encumbrances of every kind, such certificates
to be duly endorsed or accompanied by stock powers duly endorsed in blank by the
record holder of the shares represented by such certificates.
21. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall become effective and shall be deemed to have been
adopted as of March 19, 1998, subject only to ratification by the holders of a
majority of the outstanding shares of capital stock entitled to vote thereon
(voting as a single class) within twelve (12) months after such date. Unless the
Plan shall have terminated earlier, the Plan shall terminate on the tenth (10th)
anniversary of its effective date, and no Option shall be granted pursuant to
the Plan after the day preceding the tenth (10th) anniversary of its effective
date.
The Plan supersedes the 1997 Stock Option Plan of the Company, adopted
on November 26, 1997.
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EXHIBIT 1
to 1998 Stock Option Plan
Form of Stock Option Agreement
DESA Holdings Corporation
Stock Option Agreement
Specific Terms of the Option
Subject to the terms and conditions hereinafter set forth and the terms
and conditions of the DESA Holdings Corporation 1998 Stock Option Plan (the
"Plan"), DESA Holdings Corporation, a Delaware corporation (the "Company", which
term shall include, unless the context otherwise clearly requires, all
Subsidiaries [as defined in the Plan] of the Company) hereby grants the
following option (the "Option") to purchase Common Stock, par value, $0.01 per
share (the "Stock") of the Company:
A. Name of person to whom the Option is granted (the
"Optionee"): __________________________.
B. Date of grant of Option: _______________.
C. An Option for _______ shares of Stock.
D. Option Price (per share) payable upon exercise: $ _______.
E. Term of Option: Subject to Section 3 below, this Option
expires at 5:00 p.m. Central Time (Standard or Daylight
Savings, as applicable) _______________.
F. Exercise Schedule: Subject to the provisions of Section 3
below, this Option shall vest and become exercisable with
respect to the number of shares of the Stock and upon the
attainment of certain performance goals on or prior to the end
of certain performance periods, as shown on Schedule I
attached hereto and incorporated herein.
DESA HOLDINGS CORPORATION The undersigned hereby accepts
the grant of the Option on
all the terms set forth
herein and in the Plan:
By:_______________________ __________________________________
Title:_________________ (Signature of Optionee)
Date:___________________
Optionee's Address:
__________________________________
__________________________________
__________________________________
OTHER TERMS OF THE OPTION
WHEREAS, the Compensation Committee (the "Committee") of the Board of
Directors of the Company has authorized the grant of this stock option pursuant
and subject to the terms of the Plan, a copy of which the Optionee acknowledges
has been delivered to the Optionee and is hereby incorporated herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and the Optionee,
intending to be legally bound, covenant and agree as set forth on the first page
hereof and as follows:
1. Grant. Pursuant and subject to the Plan, the Company does hereby
grant to the Optionee a stock option (the "Option") to purchase from the Company
the number of shares of Stock set forth in Section C on the first page hereof
upon the terms and conditions set forth in the Plan and upon the additional
terms and conditions contained in this agreement (this "Option Agreement"). This
Option is a [incentive] [nonqualified] stock option and [is] [is not] intended
to qualify for special federal income tax treatment as an "incentive stock
option" pursuant to Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
2. Option Price. This Option may be exercised at the option price per
share of Stock set forth in Section D on the first page hereof, subject to
adjustment as provided herein and in the Plan.
3. Term and Exercisability of Option. This Option shall expire on the
earlier of (a) the date determined pursuant to Section E on the first page
hereof and (b) the date determined pursuant to Section 8 of the Plan, and shall
be exercisable prior to such expiration in accordance with and subject to the
terms and conditions set forth in the Plan (including but not limited to
Sections 9 and 10 of the Plan) and those terms and conditions, if any, set forth
in Section F on the first page hereof. If the Optionee's employment or
involvement with the Company is terminated for Cause (as defined in Schedule II
hereto) or the Optionee voluntarily terminates his or her employment or
involvement with the Company, at any time, for any reason or for no reason, in
either such case, (excluding a Resignation for Good Reason as
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defined in Schedule II to this Option Agreement) the Option hereby granted to
the Optionee shall terminate on the date of such termination of employment or
involvement. If the Optionee is terminated by the Company without Cause or the
Optionee resigns for Good Reason at any time, the Option shall terminate on the
date of such termination of employment or involvement with respect to the
unvested portion thereof, and with respect to the vested portion of the Option,
on the day which is three months after such termination of employment or
involvement. If the Optionee is terminated by the Company due to the death or
Disability (as defined in Schedule II) of the Optionee, the Option shall
terminate with respect to any unvested portion thereof on the date of such
termination of employment or involvement, and with respect to the vested portion
of the Option, on the 181st day after the date of such termination of employment
or involvement. If the Optionee dies before this Option has been exercised in
full, the personal representative of the Optionee may exercise this Option as
set forth in the preceding sentence.
4. Method of Exercise. To the extent that the right to purchase shares
of Stock has accrued hereunder, this Option may be exercised from time to time
by written notice to the Company substantially in the form attached hereto as
Exhibit A, stating the number of shares with respect to which this Option is
being exercised, and accompanied by payment in full of the option price for the
number of shares to be delivered, by means of payment acceptable to the Company
in accordance with Section 10 of the Plan. Subject to the Plan and to Section 7
hereof, as soon as practicable after its receipt of such notice, the Company
shall, without transfer or issue tax to the Optionee (or other person entitled
to exercise this Option), deliver to the Optionee (or other person entitled to
exercise this Option), at the principal executive offices of the Company or such
other place as shall be mutually acceptable, a certificate or certificates for
such shares out of theretofore authorized but unissued shares or treasury shares
of the Stock as the Company may elect; provided, however, that the time of such
delivery may be postponed by the Company for such period as may be required for
it with reasonable diligence to comply with any applicable requirements of law.
Payment of the option price may be made in cash or cash equivalents or otherwise
in accordance with Section 10 of the Plan. If the Optionee (or other person
entitled to exercise this Option) fails to pay for and accept delivery of all of
the shares specified in such notice upon
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tender of delivery thereof, his or her right to exercise this Option with
respect to such shares not paid for may be terminated by the Company.
5. Forfeiture; Restrictions on Exercise. This Option may be subject to
forfeiture upon the occurrence of the events specified in Section 12 of the Plan
or Section 3 of this Option Agreement or restrictions on exercise upon the
occurrence of events specified in Section 9 of the Plan.
6. Nonassignability of Option Rights. This Option shall not be
assignable or transferable by the Optionee except as provided in Section 11 of
the Plan.
7. Compliance with Securities Act. The Company shall not be obligated
to sell or issue any shares of Stock or other securities pursuant to the
exercise of this Option unless the shares of Stock or other securities with
respect to which this Option is being exercised are at that time effectively
registered or exempt from registration under the Securities Act of 1933, as
amended, and applicable state securities laws. In the event shares or other
securities shall be issued which shall not be so registered, the Optionee hereby
represents, warrants and agrees that he or she will receive such shares or other
securities for investment and not with a view to their resale or distribution,
and will execute an appropriate investment letter satisfactory to the Company
and its counsel as a condition precedent to any exercise of this Option in whole
or in part.
8. Legends. The Optionee hereby acknowledges that the stock certificate
or certificates evidencing shares of the Stock or other securities issued
pursuant to any exercise of this Option will bear a legend setting forth the
restrictions on their transferability described in Section 6 hereof, in Section
14 of the Plan, and under any applicable agreements between the Optionee and the
Company or any of its stockholders.
9. Rights as Stockholder. The Optionee shall have no rights as a
stockholder with respect to any shares of the Stock or other securities covered
by this Option until the date of issuance of a certificate to him or her for
such shares or other securities. No adjustment shall be made for dividends or
other rights for which the record date is prior to the date such stock
certificate is issued.
-4-
10. Stockholders Agreement. The Optionee hereby agrees to and joins in
as a "Management Holder", and agrees to be bound as a "Management Holder" by the
terms and conditions of, the Stockholders Agreement, dated as of November 26,
1997, among the Company and the other persons named therein. The Optionee hereby
further acknowledges and agrees that the Option and the shares of the Stock
issuable upon exercise of the Option are and shall be subject to the terms and
provisions of said Stockholders Agreement, as the same may be amended or
modified from time to time in accordance with its terms.
11. Withholding Taxes. The Optionee hereby agrees, as a condition to
any exercise of this Option, to provide to the Company an amount sufficient to
satisfy its obligation to withhold certain federal, state and local taxes
arising by reason of such exercise (the "Withholding Amount") by (a) authorizing
the Company to withhold the Withholding Amount from his or her cash
compensation, or (b) remitting the Withholding Amount to the Company in cash;
provided, however, that to the extent that the Withholding Amount is not
provided by one or a combination of such methods, the Company in its sole and
absolute discretion may refuse to issue such shares of Stock or may withhold
from the shares of Stock otherwise deliverable upon exercise of this Option that
number of shares having a fair market value, on the date of exercise, sufficient
to eliminate any deficiency in the Withholding Amount.
12. Termination or Amendment of Plan. The Board of Directors of the
Company may in its sole and absolute discretion at any time terminate or from
time to time modify or amend the Plan as provided in Section 18 of the Plan, but
no such termination or amendment will adversely affect rights and obligations
under this Option without the consent of the Optionee.
13. Effect Upon Employment. Nothing in this Option or the Plan shall be
construed to impose any obligation upon the Company to employ or retain in its
employ, or continue its involvement with, the Optionee.
14. Time for Acceptance. Unless the Optionee shall evidence his or her
acceptance of this Option by execution of this Option
-5-
Agreement within ten (10) days after its delivery to him or her, the Option and
this Option Agreement shall at the option of the Company be null and void.
15. General Provisions.
(a) Amendment; Waivers. This Option Agreement, including the
Plan, contains the full and complete understanding and agreement of the parties
hereto as to the subject matter hereof and may not be modified or amended, nor
may any provision hereof be waived, except by a further written agreement duly
signed by each of the parties. The waiver by either of the parties hereto of any
provision hereof in any instance shall not operate as a waiver of any other
provision hereof or in any other instance.
(b) Binding Effect. This Option Agreement shall inure to the
benefit of and be binding upon the parties hereto and, to the extent provided
herein and in the Plan, their respective heirs, executors, administrators,
representatives, successors and assigns.
(c) Construction. This Option Agreement is to be construed in
accordance with the terms of the Plan. In case of any conflict between the Plan
and this Option Agreement, the Plan shall control. The titles of the sections of
this Option Agreement and of the Plan are included for convenience only and
shall not be construed as modifying or affecting their provisions. The masculine
gender shall include both sexes; the singular shall include the plural and the
plural the singular unless the context otherwise requires.
(d) Governing Law. This Option Agreement shall be governed by
and construed and enforced in accordance with the applicable laws of the United
State of America and the law (other than the law governing conflict of law
questions) of the State of Delaware except to the extent the laws of any other
jurisdiction are mandatorily applicable.
(e) Notices. Any notice in connection with this Option
Agreement shall be deemed to have been properly delivered if it is in writing
and is delivered in hand or sent by registered or certified mail, return receipt
requested, to the party addressed as follows, unless another address has been
substituted by notice so given:
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To the Optionee: To his or her address as
listed on the books of the Company.
To the Company: DESA Holdings Corporation
2701 Industrial Drive
Bowling Green, KY 42102,
Attention: Chairman of the Board
Copy to:
J.W. Childs Associates, L.P.
One Federal Street
Boston, MA 02110
Attention: Mr. Adam L. Suttin
Copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Attention: Christopher Cabot, Esq.
16. Notice of ISO Stock Disposition. The Optionee shall notify the
Company promptly in the event that he or she sells, transfers, exchanges or
otherwise disposes of any shares of Common Stock issued upon exercise of an ISO,
before the later of (i) the second anniversary of the date of grant of the ISO
and (ii) the first anniversary of the date the shares were issued upon exercise
of the ISO.
-7-
Exhibit A to Stock Option Agreement
[FORM FOR EXERCISE OF STOCK OPTION]
DESA Holdings Corporation
[Address as specified in Section 15(e)
of the Option Agreement]
Re: Exercise of Option under DESA Holdings Corporation
1998 Stock Option Plan (the "Plan")
Gentlemen:
Please take notice that the undersigned hereby elects to
exercise the stock option granted to on
, 19___ by and to the extent of purchasing shares of Common
Stock, par value $.01 per share, of DESA Holdings Corporation (the "Company")
for the option price of $__________ per share, subject to the terms and
conditions of the Stock Option Agreement between and the Company dated as of
, 199 (the "Option Agreement") and the Plan.
The undersigned encloses herewith payment, in cash or in such other
property as is permitted under the Plan, of the option price for said shares. If
the undersigned is making payment of any part of the option price by delivery of
shares of Common Stock of the Company, he or she hereby confirms that he or she
has investigated and considered the possible income tax consequences to him or
her of making such payments in that form. The undersigned hereby agrees to
provide the Company an amount sufficient to satisfy the obligation of the
Company to withhold certain taxes, as provided in Section 11 of the Option
Agreement.
The undersigned hereby specifically confirms to the Company that he or
she shall hold said shares subject to all of the terms and conditions of said
Stock Option Agreement and the Plan.
Very truly yours,
Date (Signed by or
other party duly exercising
option)
DESA HOLDINGS CORPORATION
1998 STOCK OPTION PLAN
SCHEDULE I
to Option Agreements
Option Vesting Schedule
Subject to the provisions of Section 3 of the Option Agreement to which
this Option Vesting Schedule is attached:
A. For purposes hereof, "EBITDA" means consolidated earnings of the
Company and its subsidiaries before interest, taxes, depreciation and
amortization and after deduction of all operating expenses, subject to
adjustment by the Board of Directors for extraordinary and non-recurring items,
all as calculated in accordance with generally accepted accounting principles
consistently applied, and as reflected in the Company's most recently available
audited consolidated financial statements for the immediately preceding fiscal
year and certified by an officer of the Company.
"Shares" means the number of shares of Stock set forth in paragraph C
of the Option Agreement to which this Option Vesting Schedule is attached.
"Target Period" means one of the fiscal years of the Company set forth
in Table A hereinbelow.
B. If the Company's EBITDA in any Target Period is equal to the Base
Target EBITDA for such period, the Option will vest and be exercisable with
respect to 6% of the Shares. If the Company's EBITDA in any Target Period is
equal to or greater than the Optimistic Target EBITDA for such period, the
Option will vest and be exercisable with respect to 20% of the Shares. If the
Company's EBITDA for any Target Period is between the Base Target and the
Optimistic Target EBITDA, then the percentage of the Shares with respect to
which the Option shall vest shall be determined according to a linear
extrapolation such that at the Base Target EBITDA the Option will vest for 6% of
the Shares and at the Optimistic Target EBITDA the Option will vest for 20% of
the Shares.
-2-
C. Notwithstanding the foregoing, (a) if (i) the Company's EBITDA for
the 2003 Target Period is equal to or greater than the Base Target EBITDA for
such period, and (ii) the Company's cumulative EBITDA for all five Target
Periods is equal to the cumulative Base Target EBITDA for such five-year period,
then the Option shall vest and be exercisable with respect 30% of the Shares (to
the extent not theretofore vested in accordance with this with Schedule I); (b)
if (i) the Company's EBITDA for the 2003 Target Period is equal to or greater
than the Base Target EBITDA for such period, and (ii) the Company's cumulative
EBITDA for all five Target Periods is equal to or greater than the cumulative
Optimistic Target EBITDA, then the Option shall vest and be exercisable with
respect to 100% of the Shares (to the extent not theretofore vested in
accordance with this with Schedule I); and (c) if (i) the Company's EBITDA for
the 2003 Target Period is equal to or greater than the Base Target EBITDA for
such period, and (ii) the Company's cumulative EBITDA for all five Target
Periods is between the cumulative Base Target EBITDA and the cumulative
Optimistic Target, then the percentage of the Shares with respect to which the
Option shall vest shall be determined according to a linear extrapolation such
that at the cumulative Base Target EBITDA the Option will vest for 30% of the
Shares and at the cumulative Optimistic Target EBITDA the Option will vest for
100% of the Shares (to the extent not theretofore vested in accordance with this
with Schedule I).
D. Notwithstanding the foregoing, if there shall occur a Change of
Control (as defined in the Plan) prior to the end of Fiscal Yr. 5, then the
Option shall vest and be exercisable, effective immediately prior to such Change
in Control, with respect to a percentage of the Shares reserved (but for this
paragraph) for vesting in any Target Period ending after the occurrence of such
Change in Control equal to the quotient (expressed as a percentage) of (i) the
number of Shares with respect to which the Option shall have theretofore vested,
divided by (ii) the maximum number of Shares with respect to which the Option
would have theretofore vested had the Company's EBITDA for each Target Period
ending prior to the occurrence of such Change in Control been equal to or
greater than the Optimistic Target EBITDA for the each such Target Period;
provided, however, that such percentage determined pursuant to this paragraph
shall be rounded down to the nearest tenth of a percent.
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Table A
Optimistic Target
Base Target EBITDA EBITDA
Fiscal Year (millions) (Millions)
1999 [To be determined by [To be determined by
the Board of the Board of
Directors of the Directors of the
Company] Company]
2000 [To be determined by [To be determined by
the Board of the Board of
Directors of the Directors of the
Company] Company]
2001 [To be determined by [To be determined by
the Board of the Board of
Directors of the Directors of the
Company] Company]
2002 [To be determined by [To be determined by
the Board of the Board of
Directors of the Directors of the
Company] Company]
2003 [To be determined by [To be determined by
the Board of the Board of
Directors of the Directors of the
Company] Company]
Cumulative [To be determined by [To be determined by
the Board of the Board of
Directors of the Directors of the
Company] Company]
E. Notwithstanding the foregoing, provided that (i) Optionee shall
continue to be an employee, director or consultant of the Company or a
subsidiary, and (ii) the Company shall not have (a) merged or consolidated with
another corporation or other entity, whether or not the Company is the surviving
entity, or (b) liquidated or sold or otherwise disposed of all or substantially
all of its assets to another entity, or (c) been subject to a Change in Control
(as defined in the Plan), the Option shall vest and be exercisable, effective
immediately, nine (9) years and six (6) months from the date as of which such
Option was granted.
-4-
F. Notwithstanding the foregoing, in the event that the Realized Value
(defined below) of the Initial Shares (defined below) should equal or exceed the
amounts set forth in the following table in the time periods indicated, then the
unvested portion of the Option shall vest and be immediately exercisable:
Period Realized Value
11/26/97-2/29/00
3/1/00-2/28/01
3/1/01-2/28/02
3/1/02-2/28/03
G. "Initial Shares" means the shares of Common Stock of the Company
issued and outstanding at November 26, 1997 and beneficially owned by J.W.
Childs Equity Partners and affiliates (excluding JWC Equity Funding, Inc.).
"Realized Value" means the aggregate cash proceeds, net of reasonable
out-of-pocket fees and expenses (including but not limited to broker's fees and
underwriters discounts and commissions) actually received, from time to time, by
holders of the Initial Shares from (i) sale(s) or other disposition(s) of all or
a portion of the Initial Shares, or (ii) sales(s) or other dispositions(s) of
securities or other property received by such holders as proceeds of sale(s) or
other disposition(s) by holders of the Initial Shares of all or a portion of the
Initial Shares, or (iii) any combination of the foregoing clauses (i) and (ii).
H. Upon the Company's making an acquisition or disposition of any
material business or line of business, the EBITDA Targets set forth above for
Target Periods ending after the date of such transaction will be adjusted by the
Board of Directors of the Company to take into account the changes in EBITDA
expected as a result of such transaction.
-5-
DESA HOLDINGS CORPORATION
SCHEDULE II
Definitions Applicable to
Non-Qualified Stock Option Agreement
1. "Cause" The Company shall have "Cause" for termination of the
Optionee if any of the following has occurred:
(i) Optionee's conviction or admission of a felony or a crime
involving moral turpitude under the laws of any state in the United
States or the federal laws of the United States, or fraud,
misappropriation or embezzlement of the assets of the Company or any
subsidiary thereof;
(ii) If Optionee is party to a written employment agreement
with the Company or a subsidiary, the breach by Optionee of any
provision or covenant contained therein which breach, by the terms of
such agreement, constitutes "cause" for termination of Optionee's
employment thereunder;
(iii) If Optionee is not a party to a written employment
agreement with the Company or a subsidiary, (a) Optionee's continued
failure, whether willful, intentional or negligent, after written
notice, to perform his or her duties as an employee of the Company
(other than as a result of a Disability), or (b) Optionee's breach of
any duty or obligation of noncompetition or confidentiality owed by the
Optionee to the Company or any of its subsidiaries.
2. "Disability" If during the term of his or her Employment by the
Company, the Optionee shall become physically or mentally disabled to the extent
that he or she is, in the reasonable opinion of a recognized medical expert
selected by the Company, unable to continue the proper performance of his or her
duties for a continuous period of one hundred eighty (180) days, Optionee shall
be considered disabled.
-6-
3. "Resignation for Good Reason" The Optionee shall have "Good Reason"
for terminating his or her employment with the Company if, other than for Cause,
any of the following has occurred:
(i) If Optionee is a party to a written employment agreement
with the Company or any subsidiary, (a) the Company (or subsidiary, as
applicable) causes a material change in Optionee's duties as set forth
therein or assigns the Employee to duties materially inconsistent
therewith; (b) the Optionee is removed from, or not re-elect to, any
position(s) of employment set forth in such agreement; (c) there is a
reduction in the Optionee's salary or fringe benefits established in
such employment agreement; (d) an adverse change in the terms of
participation or benefits under a bonus plan established in conjunction
with such agreement (unless the Company provides benefits that are
substantially equivalent); or (d) there is any breach by the Company
(or a subsidiary, if applicable) of any term of such agreement, which
is not cured by within thirty (30) days after receipt of written notice
of such breach.
(ii) If Optionee is not party to a written employment
agreement with the Company or any subsidiary, the Optionee's base
salary has been reduced other than in connection with an
across-the-board reduction of employee compensation imposed by the
Board of Directors in response to negative financial results or other
adverse circumstances affecting the Company.
-7-
EXHIBIT 2
to 1998 Stock Option Plan
Form of Stock Option Agreement
DESA Holdings Corporation
Stock Option Agreement
Specific Terms of the Option
Subject to the terms and conditions hereinafter set forth and the terms
and conditions of the DESA Holdings Corporation 1998 Stock Option Plan (the
"Plan"), DESA Holdings Corporation, a Delaware corporation (the "Company", which
term shall include, unless the context otherwise clearly requires, all
Subsidiaries [as defined in the Plan] of the Company) hereby grants the
following option (the "Option") to purchase Common Stock, par value, $0.01 per
share (the "Stock"), of the Company:
A. Name of person to whom the Option is granted (the
"Optionee"): __________________________.
B. Date of grant of Option: _______________.
C. An Option for _______ shares of Stock.
D. Option price (per share) payable upon exercise: $ _______.
E. Term of Option: Subject to Section 3 below, this Option
expires at 5:00 p.m. Eastern Time (Standard or Daylight
Savings, as applicable) _______________.
F. Exercise Schedule: Subject to the provisions of Section 3
below, this Option shall vest and become exercisable with
respect to the number of shares of the Stock at the end of
certain periods, as shown on Schedule I attached hereto and
incorporated herein.
DESA HOLDINGS CORPORATION The undersigned hereby accepts the
grant of the Option on all the terms
set forth herein and in the Plan
By:_______________________ __________________________________
Title:____________________ (Signature of Optionee)
Date:___________________
Optionee's Address:
_________________________________
_________________________________
_________________________________
OTHER TERMS OF THE OPTION
WHEREAS, the Compensation Committee (the "Committee") of the Board of
Directors of the Company has authorized the grant of this stock option pursuant
and subject to the terms of the Plan, a copy of which the Optionee acknowledges
has been delivered to the Optionee and is hereby incorporated herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and the Optionee,
intending to be legally bound, covenant and agree as set forth on the first page
hereof and as follows:
1. Grant. Pursuant and subject to the Plan, the Company does hereby
grant to the Optionee a stock option (the "Option") to purchase from the Company
the number of shares of Stock set forth in Section C on the first page hereof
upon the terms and conditions set forth in the Plan and upon the additional
terms and conditions contained in this agreement (this "Option Agreement"). This
Option is a [incentive] [nonqualified] stock option and [is] [is not] intended
to qualify for special federal income tax treatment as an "incentive stock
option" pursuant to Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
2. Option Price. This Option may be exercised at the option price per
share of Stock set forth in Section D on the first page hereof, subject to
adjustment as provided herein and in the Plan.
3. Term and Exercisability of Option. This Option shall expire on the
earlier of (a) the date determined pursuant to Section E on the first page
hereof and (b) the date determined pursuant to Section 8 of the Plan, and shall
be exercisable prior to such expiration in accordance with and subject to the
terms and conditions set forth in the Plan (including but not limited to
Sections 9 and 10 of the Plan) and those terms and conditions, if any, set forth
in Section F on the first page hereof. If the Optionee's employment or
involvement with the Company is terminated for Cause (as defined in Schedule II
hereto) or the Optionee voluntarily terminates his or her employment or
involvement with the Company, at any time, for any reason or for no reason, in
either such case, (excluding a Resignation for Good Reason as
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defined in Schedule II to this Option Agreement) the Option hereby granted to
the Optionee shall terminate on the date of such termination of employment or
involvement. If the Optionee is terminated by the Company without Cause or the
Optionee resigns for Good Reason at any time, the Option shall terminate on the
date of such termination of employment or involvement with respect to the
unvested portion thereof, and with respect to the vested portion of the Option,
on the day which is three months after such termination of employment or
involvement. If the Optionee is terminated by the Company due to the death or
Disability (as defined in Schedule II) of the Optionee, the Option shall
terminate with respect to any unvested portion thereof on the date of such
termination of employment or involvement, and with respect to the vested portion
of the Option, on the 181st day after the date of such termination of employment
or involvement. If the Optionee dies before this Option has been exercised in
full, the personal representative of the Optionee may exercise this Option as
set forth in the preceding sentence.
4. Method of Exercise. To the extent that the right to purchase shares
of Stock has accrued hereunder, this Option may be exercised from time to time
by written notice to the Company substantially in the form attached hereto as
Exhibit A, stating the number of shares with respect to which this Option is
being exercised, and accompanied by payment in full of the option price for the
number of shares to be delivered, by means of payment acceptable to the Company
in accordance with Section 10 of the Plan. Subject to the Plan and to Section 7
hereof, as soon as practicable after its receipt of such notice, the Company
shall, without transfer or issue tax to the Optionee (or other person entitled
to exercise this Option), deliver to the Optionee (or other person entitled to
exercise this Option), at the principal executive offices of the Company or such
other place as shall be mutually acceptable, a certificate or certificates for
such shares out of theretofore authorized but unissued shares or treasury shares
of the Stock as the Company may elect; provided, however, that the time of such
delivery may be postponed by the Company for such period as may be required for
it with reasonable diligence to comply with any applicable requirements of law.
Payment of the option price may be made in cash or cash equivalents or otherwise
in accordance with Section 10 of the Plan. If the Optionee (or other person
entitled to exercise this Option) fails to pay for and accept delivery of all of
the shares specified in such notice upon
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tender of delivery thereof, his or her right to exercise this Option with
respect to such shares not paid for may be terminated by the Company.
5. Forfeiture; Restrictions on Exercise. This Option may be subject to
forfeiture upon the occurrence of the events specified in Section 12 of the Plan
or Section 3 of this Option Agreement or restrictions on exercise upon the
occurrence of events specified in Section 9 of the Plan.
6. Nonassignability of Option Rights. This Option shall not be
assignable or transferable by the Optionee except as provided in Section 11 of
the Plan.
7. Compliance with Securities Act. The Company shall not be obligated
to sell or issue any shares of Stock or other securities pursuant to the
exercise of this Option unless the shares of Stock or other securities with
respect to which this Option is being exercised are at that time effectively
registered or exempt from registration under the Securities Act of 1933, as
amended, and applicable state securities laws. In the event shares or other
securities shall be issued which shall not be so registered, the Optionee hereby
represents, warrants and agrees that he or she will receive such shares or other
securities for investment and not with a view to their resale or distribution,
and will execute an appropriate investment letter satisfactory to the Company
and its counsel as a condition precedent to any exercise of this Option in whole
or in part.
8. Legends. The Optionee hereby acknowledges that the stock certificate
or certificates evidencing shares of the Stock or other securities issued
pursuant to any exercise of this Option will bear a legend setting forth the
restrictions on their transferability described in Section 6 hereof, in Section
14 of the Plan, and under any applicable agreements between the Optionee and the
Company or any of its stockholders.
9. Rights as Stockholder. The Optionee shall have no rights as a
stockholder with respect to any shares of the Stock or other securities covered
by this Option until the date of issuance of a certificate to him or her for
such shares or other securities. No adjustment shall be made for dividends or
other rights for which the record date is prior to the date such stock
certificate is issued.
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10. Stockholders Agreement. The Optionee hereby agrees to and joins in
as a "Management Holder", and agrees to be bound as a "Management Holder" by the
terms and conditions of, the Stockholders Agreement, dated as of November 26,
1997, among the Company and the other persons named therein. The Optionee hereby
further acknowledges and agrees that the Option and the shares of the Stock
issuable upon exercise of the Option are and shall be subject to the terms and
provisions of said Stockholders Agreement, as the same may be amended or
modified from time to time in accordance with its terms.
11. Withholding Taxes. The Optionee hereby agrees, as a condition to
any exercise of this Option, to provide to the Company an amount sufficient to
satisfy its obligation to withhold certain federal, state and local taxes
arising by reason of such exercise (the "Withholding Amount") by (a) authorizing
the Company to withhold the Withholding Amount from his or her cash
compensation, or (b) remitting the Withholding Amount to the Company in cash;
provided, however, that to the extent that the Withholding Amount is not
provided by one or a combination of such methods, the Company in its sole and
absolute discretion may refuse to issue such shares of Stock or may withhold
from the shares of Stock otherwise deliverable upon exercise of this Option that
number of shares having a fair market value, on the date of exercise, sufficient
to eliminate any deficiency in the Withholding Amount.
12. Termination or Amendment of Plan. The Board of Directors of the
Company may in its sole and absolute discretion at any time terminate or from
time to time modify or amend the Plan as provided in Section 18 of the Plan, but
no such termination or amendment will adversely affect rights and obligations
under this Option without the consent of the Optionee.
13. Effect Upon Employment. Nothing in this Option or the Plan shall be
construed to impose any obligation upon the Company to employ or retain in its
employ, or continue its involvement with, the Optionee.
14. Time for Acceptance. Unless the Optionee shall evidence his or her
acceptance of this Option by execution of this Option
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Agreement within ten (10) days after its delivery to him or her, the Option and
this Option Agreement shall at the option of the Company be null and void.
15. General Provisions.
(a) Amendment; Waivers. This Option Agreement, including the
Plan, contains the full and complete understanding and agreement of the parties
hereto as to the subject matter hereof and may not be modified or amended, nor
may any provision hereof be waived, except by a further written agreement duly
signed by each of the parties. The waiver by either of the parties hereto of any
provision hereof in any instance shall not operate as a waiver of any other
provision hereof or in any other instance.
(b) Binding Effect. This Option Agreement shall inure to the
benefit of and be binding upon the parties hereto and, to the extent provided
herein and in the Plan, their respective heirs, executors, administrators,
representatives, successors and assigns.
(c) Construction. This Option Agreement is to be construed in
accordance with the terms of the Plan. In case of any conflict between the Plan
and this Option Agreement, the Plan shall control. The titles of the sections of
this Option Agreement and of the Plan are included for convenience only and
shall not be construed as modifying or affecting their provisions. The masculine
gender shall include both sexes; the singular shall include the plural and the
plural the singular unless the context otherwise requires.
(d) Governing Law. This Option Agreement shall be governed by
and construed and enforced in accordance with the applicable laws of the United
State of America and the law (other than the law governing conflict of law
questions) of the State of Delaware except to the extent the laws of any other
jurisdiction are mandatorily applicable.
(e) Notices. Any notice in connection with this Option
Agreement shall be deemed to have been properly delivered if it is in writing
and is delivered in hand or sent by registered or certified mail, return receipt
requested, to the party addressed as follows, unless another address has been
substituted by notice so given:
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To the Optionee: To his or her address as
listed on the books of the Company.
To the Company: DESA Holdings Corporation
2701 Industrial Drive
Bowling Green, KY 42102,
Attention: Chairman of the Board
Copy to:
J.W. Childs Associates, L.P.
One Federal Street
Boston, MA 02110
Attention: Mr. Adam L. Suttin
Copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Attention: Christopher Cabot, Esq.
16. Notice of ISO Stock Disposition. The Optionee shall notify the
Company promptly in the event that he or she sells, transfers, exchanges or
otherwise disposes of any shares of Common Stock issued upon exercise of an ISO,
before the later of (i) the second anniversary of the date of grant of the ISO
and (ii) the first anniversary of the date the shares were issued upon exercise
of the ISO.
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Exhibit A to Stock Option Agreement
[FORM FOR EXERCISE OF STOCK OPTION]
DESA Holdings Corporation
[Address as specified in Section 15(e)
of the Option Agreement]
Re: Exercise of Option under DESA Holdings Corporation
1998 Stock Option Plan (the "Plan")
Gentlemen:
Please take notice that the undersigned hereby elects to
exercise the stock option granted to on
, 19___ by and to the extent of purchasing shares of Common
Stock, par value $.01 per share, of DESA Holdings Corporation (the "Company")
for the option price of $__________ per share, subject to the terms and
conditions of the Stock Option Agreement between and the Company dated as of
, 199 (the "Option Agreement") and the Plan.
The undersigned encloses herewith payment, in cash or in such other
property as is permitted under the Plan, of the option price for said shares. If
the undersigned is making payment of any part of the option price by delivery of
shares of Common Stock of the Company, he or she hereby confirms that he or she
has investigated and considered the possible income tax consequences to him or
her of making such payments in that form. The undersigned hereby agrees to
provide the Company an amount sufficient to satisfy the obligation of the
Company to withhold certain taxes, as provided in Section 11 of the Option
Agreement.
The undersigned hereby specifically confirms to the Company that he or
she shall hold said shares subject to all of the terms and conditions of said
Stock Option Agreement and the Plan.
Very truly yours,
Date (Signed by or
other party duly exercising
option)
DESA HOLDINGS CORPORATION
1998 STOCK OPTION PLAN
SCHEDULE I
to Option Agreements
Option Vesting Schedule
For purposes hereof, "Shares" means the number of shares of Stock set
forth in paragraph C of the Option Agreement to which this Option Vesting
Schedule is attached.
Subject to the provisions of Section 3 of the Option Agreement to which
this Option Vesting Schedule is attached, the Option shall become exercisable as
follows:
(1) With respect to 5% of the Shares, as the date which is one (1)
year after the date set forth in paragraph B of the Option
Agreement to which this Option Vesting Schedule is attached;
(2) With respect to 5% of the Shares, as the date which is two (2)
years after the date set forth in paragraph B of the Option
Agreement to which this Option Vesting Schedule is attached;
(3) With respect to 50% of the Shares, as the date which is three
(3) years after the date set forth in paragraph B of the
Option Agreement to which this Option Vesting Schedule is
attached;
(4) With respect to 20% of the Shares, as the date which is four
(4) years after the date set forth in paragraph B of the
Option Agreement to which this Option Vesting Schedule is
attached; and
(5) With respect to 20% of the Shares, as the date which is five
(5) years after the date set forth in paragraph B of the
Option Agreement to which this Option Vesting Schedule is
attached;
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DESA HOLDINGS CORPORATION
SCHEDULE II
Definitions Applicable to
Non-Qualified Stock Option Agreement
1. "Cause" The Company shall have "Cause" for termination of the
Optionee if any of the following has occurred:
(i) Optionee's conviction or admission of a felony or a crime
involving moral turpitude under the laws of any state in the United
States or the federal laws of the United States, or fraud,
misappropriation or embezzlement of the assets of the Company or any
subsidiary thereof;
(ii) If Optionee is party to a written employment agreement
with the Company or a subsidiary, the breach by Optionee of any
provision or covenant contained therein which breach, by the terms of
such agreement, constitutes "cause" for termination of Optionee's
employment thereunder;
(iii) If Optionee is not a party to a written employment
agreement with the Company or a subsidiary, (a) Optionee's continued
failure, whether willful, intentional or negligent, after written
notice, to perform his or her duties as an employee of the Company
(other than as a result of a Disability), or (b) Optionee's breach of
any duty or obligation of noncompetition or confidentiality owed by the
Optionee to the Company or any of its subsidiaries.
2. "Disability" If during the term of his or her Employment by the
Company, the Optionee shall become physically or mentally disabled to the extent
that he or she is, in the reasonable opinion of a recognized medical expert
selected by the Company, unable to continue the proper performance of his or her
duties for a continuous period of one hundred eighty (180) days, Optionee shall
be considered disabled.
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3. "Resignation for Good Reason" The Optionee shall have "Good Reason"
for terminating his or her employment with the Company if, other than for Cause,
any of the following has occurred:
(i) If Optionee is a party to a written employment agreement
with the Company or any subsidiary, (a) the Company (or subsidiary, as
applicable) causes a material change in Optionee's duties as set forth
therein or assigns the Employee to duties materially inconsistent
therewith; (b) the Optionee is removed from, or not re-elect to, any
position(s) of employment set forth in such agreement; (c) there is a
reduction in the Optionee's salary or fringe benefits established in
such employment agreement; (d) an adverse change in the terms of
participation or benefits under a bonus plan established in conjunction
with such agreement (unless the Company provides benefits that are
substantially equivalent); or (d) there is any breach by the Company
(or a subsidiary, if applicable) of any term of such agreement, which
is not cured by within thirty (30) days after receipt of written notice
of such breach.
(ii) If Optionee is not party to a written employment
agreement with the Company or any subsidiary, the Optionee's base
salary has been reduced other than in connection with an
across-the-board reduction of employee compensation imposed by the
Board of Directors in response to negative financial results or other
adverse circumstances affecting the Company.
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