EXHIBIT 10.2
CORNERSTONE BRANDS, INC.
1998 STOCK INCENTIVE PLAN
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1. Purpose
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The purpose of this 1998 Stock Incentive Plan (the "Plan") of Cornerstone
Brands, Inc., a Delaware corporation (the "Company"), is to advance the
interests of the Company's stockholders by enhancing the Company's ability to
attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company's stockholders.
Except where the context otherwise requires, the term "Company" shall include
any present or future subsidiary corporation, as defined in Section 424(f) of
the Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder (the "Code"), and any other business venture (including without
limitation, joint venture or limited liability company) in which the Company has
a significant interest, as determined by the Board of Directors of the Company
(the "Board").
2. Eligibility
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All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted options, restricted stock awards, or other stock-based
awards (each, an "Award") under the Plan. Each person who has been granted an
Award under the Plan shall be deemed a "Participant".
3. Administration, Delegation
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(a) Administration by Board of Directors. The Plan will be administered by
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the Board of Directors of the Company (the "Board"). The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in the
Board's sole discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award. No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.
(b) Delegation to Executive Officers. To the extent permitted by
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applicable law, the Board may delegate to one or more executive officers of the
Company the power to make Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of shares subject to Awards and the maximum number of shares for any one
Participant to be made by such executive officers.
(c) Appointment of Committees. To the extent permitted by applicable law,
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the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). All references in the
Plan to the "Board" shall mean the Board or a Committee of the Board or the
executive officer referred to in Section 3(b) to the extent that the Board's
powers or authority under the Plan have been delegated to such Committee or
executive officer.
4. Stock Available for Awards
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(a) Number of Shares. Subject to adjustment under Section 8, Awards may be
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made under the Plan for up to 3,200,000 shares of common stock, $.001 par value
per share, of the Company (the "Common Stock"). If any Award expires or is
terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part or results in any Common Stock not being issued,
the unused Common Stock covered by such Award shall again be available for the
grant of Awards under the Plan, subject, however, in the case of Incentive Stock
Options (as hereinafter defined), to any limitation required under the Code.
Shares issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.
(b) Per-Participant Limit. Subject to adjustment under Section 8, for
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Awards granted after the Common Stock is registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the maximum number of
shares of Common Stock with respect to which an Award may be granted to any
Participant under the Plan shall be 500,000 per calendar year. The per-
Participant limit described in this Section 4(b) shall be construed and applied
consistently with Section 162(m) of the Code.
5. Stock Options
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(a) General. The Board may grant options to purchase Common Stock (each,
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an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive
Stock Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".
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(b) Incentive Stock Options. An Option that the Board intends to be an
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"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
(c) Exercise Price. The Board shall establish the exercise price at the
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time each Option is granted and specify it in the applicable option agreement.
The exercise price per share of an Option shall be equal to at least the fair
market value of a share of the Common Stock on the date of grant, as determined
by the Board.
(d) Duration of Options. Each Option shall be exercisable at such times
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and subject to such terms and conditions as the Board may specify in the
applicable option agreement.
(e) Exercise of Option. Options may be exercised by delivery to the
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Company of a written notice of exercise signed by the proper person or by any
other form of notice (including electronic notice) approved by the Board
together with payment in full as specified in Section 5(f) for the number of
shares for which the Option is exercised.
(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an
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Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may, in its sole discretion, otherwise provide
in an option agreement, (i) delivery of an irrevocable and unconditional
undertaking by a creditworthy broker to deliver promptly to the Company
sufficient funds to pay the exercise price or (ii) delivery by the Participant
to the Company of a copy of irrevocable and unconditional instructions to a
creditworthy broker to deliver promptly to the Company cash or a check
sufficient to pay the exercise price;
(3) at such time as the Common Stock is registered under the Exchange
Act, delivery of shares of Common Stock owned by the Participant valued at their
fair market value as determined by (or in a manner approved by) the Board in
good faith ("Fair Market Value"), which Common Stock was owned by the
Participant at least six months prior to such delivery;
(4) to the extent permitted by the Board, in its sole discretion (i)
by delivery of a promissory note of the Participant to the Company on terms
determined
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by the Board, or (ii) by payment of such other lawful consideration as the Board
may determine; or
(5) any combination of the above permitted forms of payment.
6. Restricted Stock
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(a) Grants. The Board may grant Awards entitling recipients to acquire
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shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, "Restricted Stock Award").
(b) Terms and Conditions. The Board shall determine the terms and
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conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
7. Other Stock-Based Awards
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The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions and the grant of securities
convertible into Common Stock.
8. Adjustments for Changes in Common Stock and Certain Other Events
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(a) Changes in Capitalization. In the event of any stock split, reverse
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stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than a normal
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the per-Participant limit set forth in Section 4(b), (iii) the number and
class of securities and exercise price per share subject to each outstanding
Option, (iv) the repurchase price per share
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subject to each outstanding Restricted Stock Award, and (v) the terms of each
other outstanding Award shall be appropriately adjusted by the Company (or
substituted Awards may be made, if applicable) to the extent the Board shall
determine, in good faith, that such an adjustment (or substitution) is necessary
and appropriate. If this Section 8(a) applies and Section 8(c) also applies to
any event, Section 8(c) shall be applicable to such event, and this Section 8(a)
shall not be applicable.
(b) Liquidation or Dissolution. In the event of a proposed liquidation or
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dissolution of the Company, the Board shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before such effective date. The Board may specify the effect of a liquidation
or dissolution on any Restricted Stock Award or other Award granted under the
Plan at the time of the grant of such Award.
(c) Acquisition and Change in Control Events
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(1) Definitions
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(a) An "Acquisition Event" shall mean:
(i) any merger or consolidation of the Company with or into
another entity as a result of which the Common Stock is
converted into or exchanged for the right to receive
cash, securities or other property; or
(ii) any exchange of shares of the Company for cash,
securities or other property pursuant to a statutory
share exchange transaction.
(b) A "Change in Control Event" shall mean:
(i) the acquisition by an individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership
of any capital stock of the Company if, after such
acquisition, such Person beneficially owns (within the
meaning of Rule 13d-3 promulgated under the Exchange
Act) 20% or more of either (x) the then-outstanding
shares of common stock of the
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Company (the "Outstanding Company Common Stock") or (y)
the combined voting power of the then-outstanding
securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that for
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purposes of this subsection (i), the following
acquisitions shall not constitute a Change in Control
Event: (A) any acquisition directly from the Company
(excluding an acquisition pursuant to the exercise,
conversion or exchange of any security exercisable for,
convertible into or exchangeable for common stock or
voting securities of the Company, unless the Person
exercising, converting or exchanging such security
acquired such security directly from the Company or an
underwriter or agent of the Company), (B) any
acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (C) any
acquisition by any corporation pursuant to a Business
Combination (as defined below) which complies with
clauses (x) and (y) of subsection (iii) of this
definition; or
(ii) such time as the Continuing Directors (as defined
below) do not constitute a majority of the Board (or,
if applicable, the Board of Directors of a successor
corporation to the Company), where the term "Continuing
Director" means at any date a member of the Board (x)
who was a member of the Board on the date of the
initial adoption of this Plan by the Board or (y) who
was nominated or elected subsequent to such date by at
least a majority of the directors who were Continuing
Directors at the time of such nomination or election or
whose election to the Board was recommended or endorsed
by at least a majority of the directors who were
Continuing Directors at the time of such nomination or
election; provided, however, that there shall be
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excluded from this clause (y) any individual whose
initial assumption of office occurred as a result of an
actual or threatened election contest with respect to
the election or removal of directors or other actual or
threatened solicitation of proxies or consents, by or
on behalf of a person other than the Board; or
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(iii) the consummation of a merger, consolidation,
reorganization or statutory share exchange involving
the Company or a sale or other disposition of all or
substantially all of the assets of the Company (a
"Business Combination"), unless, immediately following
such Business Combination, each of the following two
conditions is satisfied: (x) all or substantially all
of the individuals and entities who were the beneficial
owners of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly
or indirectly, more than 50% of the then-outstanding
shares of common stock and the combined voting power of
the then-outstanding securities entitled to vote
generally in the election of directors, respectively,
of the resulting or acquiring corporation in such
Business Combination (which shall include, without
limitation, a corporation which as a result of such
transaction owns the Company or substantially all of
the Company's assets either directly or through one or
more subsidiaries) (such resulting or acquiring
corporation is referred to herein as the "Acquiring
Corporation") in substantially the same proportions as
their ownership of the Outstanding Company Common Stock
and Outstanding Company Voting Securities,
respectively, immediately prior to such Business
Combination and (y) no Person (excluding the Acquiring
Corporation or any employee benefit plan (or related
trust) maintained or sponsored by the Company or by the
Acquiring Corporation) beneficially owns, directly or
indirectly, 20% or more of the then-outstanding shares
of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding
securities of such corporation entitled to vote
generally in the election of directors (except to the
extent that such ownership existed prior to the
Business Combination).
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(c) "Cause" shall mean any (i) willful failure by the
Participant, which failure is not cured within 30 days
of written notice to the Participant from the Company,
to perform his or her material responsibilities to the
Company or (ii) willful misconduct by the Participant
which materially affects the business reputation of the
Company. The Participant shall be considered to have
been discharged for "Cause" if the Company determines,
within 30 days after the Participant's resignation,
that discharge for Cause was warranted.
(2) Effect on Options
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(a) Acquisition Event. Upon the occurrence of an
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Acquisition Event (regardless of whether such event
also constitutes a Change in Control Event), or the
execution by the Company of any agreement with respect
to an Acquisition Event (regardless of whether such
event will result in a Change in Control Event), the
Board shall provide that all outstanding Options shall
be assumed, or equivalent options shall be substituted,
by the Acquiring Corporation (or an affiliate thereof);
provided that if such Acquisition Event also
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constitutes a Change in Control Event, except to the
extent specifically provided to the contrary in the
instrument evidencing any Option or any other agreement
between a Participant and the Company, such assumed or
substituted options shall become immediately
exercisable in full if during the vesting period of the
Option the Participant's employment with the Company or
the Acquiring Corporation is terminated without Cause
by the Company or the Acquiring Corporation. For
purposes hereof, an Option shall be considered to be
assumed if, following consummation of the Acquisition
Event, the Option confers the right to purchase, for
each share of Common Stock subject to the Option
immediately prior to the consummation of the
Acquisition Event, the consideration (whether cash,
securities or other property) received as a result of
the Acquisition Event by holders of Common Stock for
each share of Common Stock held immediately prior to
the consummation of the Acquisition Event (and if
holders were offered a choice of consideration, the
type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock);
provided, however, that if the consideration
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received as a result of the Acquisition Event is not
solely common stock of the Acquiring Corporation (or an
affiliate thereof), the Company may, with the consent
of the Acquiring Corporation, provide for the
consideration to be received upon the exercise of
Options to consist solely of common stock of the
Acquiring Corporation (or an affiliate thereof)
equivalent in fair market value to the per share
consideration received by holders of outstanding shares
of Common Stock as a result of the Acquisition Event.
Notwithstanding the foregoing, if the Acquiring
Corporation (or an affiliate thereof) does not agree to
assume, or substitute for, such Options, then the Board
shall, upon written notice to the Participants, provide
that all then unexercised Options will become
exercisable in full as of a specified time prior to the
Acquisition Event and will terminate immediately prior
to the consummation of such Acquisition Event, except
to the extent exercised by the Participants before the
consummation of such Acquisition Event; provided,
however, that in the event of an Acquisition Event
under the terms of which holders of Common Stock will
receive upon consummation thereof a cash payment for
each share of Common Stock surrendered pursuant to such
Acquisition Event (the "Acquisition Price"), then the
Board may instead provide that all outstanding Options
shall terminate upon consummation of such Acquisition
Event and that each Participant shall receive, in
exchange therefor, a cash payment equal to the amount
(if any) by which (A) the Acquisition Price multiplied
by the number of shares of Common Stock subject to such
outstanding Options (whether or not then exercisable),
exceeds (B) the aggregate exercise price of such
Options.
(b) Change in Control Event that is not an Acquisition
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Event. Upon the occurrence of a Change in Control Event
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that does not also constitute an Acquisition Event,
except to the extent specifically provided to the
contrary in the instrument evidencing any Option or any
other agreement between a Participant and the Company,
each such Option shall be immediately exercisable in
full if during the vesting period of the Option the
Participant's employment with the Company or the
Acquiring Corporation is
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terminated without Cause by the Company or the
Acquiring Corporation.
(3) Effect on Restricted Stock Awards
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(a) Acquisition Event that is not a Change in Control
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Event. Upon the occurrence of an Acquisition Event that
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is not a Change in Control Event, the repurchase and
other rights of the Company under each outstanding
Restricted Stock Award shall inure to the benefit of
the Company's successor and shall apply to the cash,
securities or other property which the Common Stock was
converted into or exchanged for pursuant to such
Acquisition Event in the same manner and to the same
extent as they applied to the Common Stock subject to
such Restricted Stock Award.
(b) Change in Control Event. Upon the occurrence of a
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Change in Control Event (regardless of whether such
event also constitutes an Acquisition Event), except to
the extent specifically provided to the contrary in the
instrument evidencing any Restricted Stock Award or any
other agreement between a Participant and the Company,
each such Restricted Stock Award shall immediately
become free from all conditions or restrictions if
during the vesting period of the Restricted Stock Award
the Participant's employment with the Company or the
Acquiring Corporation is terminated without Cause by
the Company or the Acquiring Corporation.
(4) Effect on Other Awards
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(a) Acquisition Event that is not a Change in Control
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Event. The Board shall specify the effect of an
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Acquisition Event that is not a Change in Control Event
on any other Award granted under the Plan at the time
of the grant of such Award.
(b) Change in Control Event. Upon the occurrence of a
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Change in Control Event (regardless of whether such
event also constitutes an Acquisition Event), except to
the extent specifically provided to the contrary in the
instrument evidencing any Award or any other agreement
between a Participant and the Company, each such Award
shall immediately become fully exercisable, realizable,
vested or
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free from conditions or restrictions if during the
vesting period of the Award the Participant's
employment with the Company or the Acquiring
Corporation is terminated without Cause by the Company
or the Acquiring Corporation.
9. General Provisions Applicable to Awards
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(a) Transferability of Awards. Except as the Board may otherwise determine
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or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
(b) Documentation. Each Award shall be evidenced by a written instrument
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in such form as the Board shall determine. Each Award may contain terms and
conditions in addition to those set forth in the Plan.
(c) Board Discretion. Except as otherwise provided by the Plan, each Award
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may be made alone or in addition or in relation to any other Award. The terms
of each Award need not be identical, and the Board need not treat Participants
uniformly.
(d) Termination of Status. The Board shall determine the effect on an
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Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) Withholding. Each Participant shall pay to the Company, or make
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provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. Except as the Board may otherwise
provide in an Award, Participants may satisfy such tax obligations in whole or
in part by delivery of shares of Common Stock, including shares retained from
the Award creating the tax obligation, valued at their Fair Market Value. The
Company may, to the extent permitted by law, deduct any such tax obligations
from any payment of any kind otherwise due to a Participant.
(f) Amendment of Award. The Board may amend, modify or terminate any
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outstanding Award, including but not limited to, substituting therefor another
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Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(g) Conditions on Delivery of Stock. The Company will not be obligated to
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deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(h) Acceleration. The Board may at any time provide that any Options shall
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become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of restrictions in full or in part or that any other Awards
may become exercisable in full or in part or free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be.
10. Miscellaneous
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(a) No Right To Employment or Other Status. No person shall have any claim
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or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable
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Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date and
the distribution date for such stock dividend shall be entitled to receive, on
the distribution date, the stock dividend with respect to the shares of Common
Stock
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acquired upon such Option exercise, notwithstanding the fact that such
shares were not outstanding as of the close of business on the record date for
such stock dividend.
(c) Effective Date and Term of Plan. The Plan shall become effective on
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the date on which it is adopted by the Board. No Awards shall be granted under
the Plan after the completion of ten years from the earlier of (i) the date on
which the Plan was adopted by the Board or (ii) the date the Plan was approved
by the Company's stockholders, but Awards previously granted may extend beyond
that date.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan
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or any portion thereof at any time, provided that to the extent required by
Section 162(m), no Award granted to a Participant designated as subject to
Section 162(m) by the Board after the date of such amendment shall become
exercisable, realizable or vested, as applicable to such Award (to the extent
that such amendment to the Plan was required to grant such Award to a particular
Participant), unless and until such amendment shall have been approved by the
Company's stockholders as required by Section 162(m) (including the vote
required under Section 162(m)).
(e) Governing Law. The provisions of the Plan and all Awards made
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hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
Adopted by the Board of Directors of
the Company on August 21, 1998
Approved by the Stockholders of the
Company on __________ ___, 1998
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