EXHIBIT 10.4
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PLY GEM INVESTMENT HOLDINGS, INC.
PHANTOM STOCK PLAN
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SECTION 1. GENERAL
(a) PURPOSE. The purpose of this Ply Gem Investment Holdings, Inc.
Phantom Stock Plan (the "Plan") is to attract, motivate and retain certain key
employees of Ply Gem Investment Holdings, Inc. (the "Company") and its
Subsidiaries who are primarily responsible for the long-term performance of the
Company and to align their interest with that of the stockholders of the
Company.
(b) OVERVIEW. The Plan is generally designed to provide
non-qualified deferred compensation to Participants. Each Participant's interest
in the Plan is recorded in and maintained under a bookkeeping Account and these
Accounts are deemed invested in the Company's stock, but there is no stock
actually issued to the Plan (which is generally why these accounts credits are
called "Phantom"). When valuing a Participant's Account for payment purposes,
the following rules generally apply: if the Company becomes publicly traded
through an IPO, the stock market will dictate the value of the Account; if a
Realization Event or a Tag-Along Event occurs, the amount paid to shareholders
will dictate the value of the Account; and in the event that a Participant's
employment with the Company terminates and if neither a Realization Event nor an
IPO occurs prior to the time the Participant is paid the value of his or her
Account, certain formulas described in the Plan dictate the value of the Account
(which value differs depending upon the length of time a Participant has been
employed with the Company and the circumstances surrounding the termination of
employment). Following an IPO, each Participant will generally be paid out five
years after the IPO, subject to further deferral opportunities and the right of
the Company to accelerate such payment, with earlier payment upon a Realization
Event or a termination of employment. The value of each Account is generally
paid in cash or stock, at the discretion of the Company.
SECTION 2. DEFINITIONS.
As used in this Plan, capitalized terms not defined in this Plan shall
have the meaning attributed to such terms in the Stockholders Agreement and the
following terms shall have the meanings set forth below:
(a) ACCOUNT. An unfunded bookkeeping account established to record
a Participant's interest under this Plan, the terms and conditions of which are
set forth in this Plan and in each Participant's Award Agreement.
(b) AWARD. A grant of Phantom Incentive Units and/or a grant of
Phantom Additional Units under this Plan.
(c) AWARD AGREEMENT. The written agreement evidencing an Award,
which shall be executed or otherwise acknowledged in writing by a Participant.
(d) BOARD. The Board of Directors of the Company.
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(e) CAUSE. "Cause" means: (i) conviction of, or entry of a
pleading of guilty or no contest by, a Participant with respect to a felony or
any lesser crime of which fraud or dishonesty is a material element; (ii) a
Participant's willful and continued failure to perform substantially his or her
duties with the Company or any of its Subsidiaries, or a failure to follow the
lawful direction of the Board or any chief executive officer of the Company or
any of its Subsidiaries to whom such Participant reports after the Board of
Directors or such chief executive officer delivers a written demand for
substantial performance, specifically identifying the manner in which the
Participant has not substantially performed his material duties and the
Participant neglects to cure such a failure within 30 days; (iii) a
Participant's theft, fraud or embezzlement of any property or assets of the
Company or any of its Affiliates or Subsidiaries, or such Participant's
dishonesty against the Company or any of its Affiliates or Subsidiaries which
has resulted in material damage to the Company or any of its Affiliates or
Subsidiaries or (iv) a Participant's breach of any noncompetition or
nonsolicitation requirements set forth in the Stockholders Agreement or willful
breach of any confidentiality requirements set forth in the Stockholders
Agreement, in each case, whether or not such agreement or requirement is
enforceable under applicable law.
(f) COMMON STOCK. Common stock, par value $0.01 per share, of the
Company, and any other stock or units into which such common stock shall
thereafter be changed by reason of a recapitalization, merger, consolidation,
split-up, combination, exchange of stock or units or the like.
(g) COMPANY. Ply Gem Investment Holdings, Inc., a Delaware
corporation.
(h) DISABILITY. With respect to any Participant, any event of
disability under the disability insurance plan of the Company or any of its
Affiliates or Subsidiaries covering such Participant, or if there shall be no
such disability plan, then as set forth in any agreement between such
Participant and the Company or any of its Affiliates or Subsidiaries, or if
there shall be no such agreement, then the inability of the Participant to
perform his or her duties as an employee of the Company or any of its Affiliates
or Subsidiaries for at least one-hundred eighty (180) days during any
consecutive 12-month period.
(i) EFFECTIVE DATE. February __, 2004.
(j) IPO. The closing of the initial underwritten public offering
of shares of Common Stock pursuant to an effective registration statement filed
under the Securities Act.
(k) PARTICIPANT. Any current or future employee of the Company or
any of its Subsidiaries who is eligible for, and is selected by the Board for,
an Award under this Plan and who has executed an Award Agreement.
(l) PHANTOM ADDITIONAL UNIT. A Phantom Additional Unit is a
phantom stock unit representing one share of Common Stock and 0.4591 shares of
Preferred Stock that is credited to a Participant's Account. As used herein, a
"Common Phantom Additional Unit" shall mean the portion of a Phantom Additional
Unit representing one share of Common Stock and a "Preferred Phantom Additional
Unit" shall mean the portion of a Phantom Additional Unit representing 0.4591
shares of Preferred Stock.
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(m) PHANTOM INCENTIVE UNIT. A Phantom Incentive Unit is a phantom
stock unit representing a share of Common Stock that is credited to a
Participant's Account.
(n) PLAN. This Ply Gem Investment Holdings, Inc. Phantom Stock
Plan.
(o) PREFERRED STOCK. Senior Preferred Stock, par value $0.01 per
share, of the Company, and any other stock or units into which such preferred
stock shall thereafter be changed by reason of a recapitalization, merger,
consolidation, split-up, combination, exchange of stock or units or the like.
(p) REALIZATION EVENT. Any transaction in which Caxton-Iseman (Ply
Gem), L.P. has the right to exercise "Drag-Along Rights" pursuant to Section 4.7
of the Stockholders Agreement.
(q) STOCKHOLDERS AGREEMENT. That certain Stockholders Agreement,
dated as of February __, 2004, by and among the Company, Caxton-Iseman (Ply
Gem), L.P., the other investors executing the agreement and designated as "Other
Investors" therein and the individuals executing the agreement and designated as
"Management Stockholders" therein.
(r) TAG-ALONG EVENT. Any occurrence of an event qualifying for
"Tag Along" treatment under Section 4.5 of the Stockholders' Agreement.
SECTION 3. ADMINISTRATION.
(a) This Plan shall be administered by the Board. Subject to the
provisions of this Plan and applicable law and subject to Participants' rights
under outstanding Award Agreements, the Board shall have the power and sole
discretion, in addition to other express powers and authorizations conferred on
the Board by this Plan, to: (i) designate Participants; (ii) determine the
Awards to a Participant; (iii) determine, in a manner consistent with the terms
of this Plan and any Award Agreements entered into pursuant to this Plan,
payments and how other matters are to be calculated in connection with Awards
and Accounts; (iv) determine the terms and conditions of Awards; (v) determine
whether, to what extent, and under what circumstances Awards and amounts payable
pursuant to an Account shall be deferred at the election of the holder thereof
or of the Board; (vii) interpret, administer, reconcile any inconsistency,
correct any defect and/or supply any omission in this Plan and any instrument or
agreement relating to this Plan, or Awards under this Plan; (viii) establish,
amend, suspend, or waive such rules and regulations and appoint such agents as
it shall deem appropriate for the proper administration of this Plan; and (ix)
make any other determination and take any other action that the Board deems
necessary or desirable for the administration of this Plan. The decisions of the
Board shall be final, conclusive, and binding upon all parties, including,
without limitation, the Company, any Participant, any holder or beneficiary of
any Account and any stockholder of the Company.
(b) No member of the Board shall be liable for any action or
determination made in good faith with respect to this Plan, any Award or any
Account.
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SECTION 4. ELIGIBILITY. Members of senior management and key
employees of the Company and/or its Subsidiaries shall be eligible to be
designated as a Participant in this Plan by the Board and to receive an Award
credited to an Account.
SECTION 5. PHANTOM INCENTIVE UNIT AWARDS AND PHANTOM ADDITIONAL
UNIT AWARDS.
(a) GENERAL. The Board shall, in its sole discretion, designate
employees of the Company or its Subsidiaries as Participants in this Plan and,
in connection therewith, the Board shall determine the number of Phantom
Incentive Units and/or Phantom Additional Units to be granted to each
Participant so designated. An Account shall be established in the records of the
Company to which the number of Phantom Incentive Units and/or Phantom Additional
Units so granted shall be credited. As more fully set forth herein, a
Participant shall share in any dividends or distributions paid by the Company to
its stockholders, and a Participant's Account will be fully or partially
distributed to him or her following the occurrence of a Realization Event.
(b) AVAILABILITY FOR AWARD; DIVIDENDS; VALUE.
(i) Awards may be made in respect of up to 10% of the
Common Stock outstanding as constituted as of the Effective Date (prior to
dilution by the Phantom Incentive Units, Phantom Additional Units and any
Contingent Rights) under the Plan.
(ii) To the extent that dividends or distributions are
declared and paid to holders of Common Stock, each Participant will receive the
amount that would have been distributed to the Participant had the Phantom
Incentive Units and/or Common Phantom Additional Units credited to the
Participant's Account been issued and outstanding Common Stock and such dividend
or distribution shall be paid at the same time and in the same manner as
dividends or distributions are paid to holders of Common Stock.
(iii) To the extent that dividends or distributions are
declared and paid to holders of Preferred Stock, each Participant will receive
the amount that would have been distributed to the Participant had the Preferred
Phantom Additional Units credited to the Participant's Account been issued and
outstanding Preferred Stock and such dividend or distribution shall be paid at
the same time and in same manner as dividends and distributions are paid to
holders of Preferred Stock.
(c) DEFERRAL OF PAYMENT. Notwithstanding any other provision of
this Plan, the Board may make good faith determinations respecting the time
and/or medium of payment and/or impose conditions on payment of the value of a
Participant's Account in order to reflect the time and medium of payment, or
conditions on payment, applicable to holders of Common Stock and/or Preferred
Stock, as applicable, in connection with a Realization Event, IPO or otherwise,
in order to accomplish the intended purposes of this Plan. By way of example and
without limiting the generality of the foregoing, the Board may impose
appropriate restrictions on the payment of the value of a Participant's Account
if the holders of Common Stock and/or Preferred Stock, as applicable, are
subject to a clawback or are required to escrow payment for their Common Stock
and/or Preferred Stock, as applicable.
(d) TERMINATION OF ACCOUNT FOLLOWING PAYMENT. Following the
payment of all or a portion of the Account attributable to the Phantom Incentive
Units, any such Phantom
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Incentive Units shall thereafter be deemed cancelled. Following the payment of
all or a portion of the Account attributable to Common Phantom Additional Units,
any such Common Phantom Additional Units shall thereafter be deemed cancelled,
although the Preferred Phantom Additional Units may still have value if such
portion of the Account was not theretofore paid. Following the payment of all or
a portion of the Account attributable to Preferred Phantom Additional Units, any
such Preferred Phantom Additional Units shall thereafter be deemed cancelled,
although the Common Phantom Additional Units may still have value if such
portion of the Account was not theretofore paid. The payment of a dividend or
distribution with respect to any Award shall not be considered a payment of any
portion of a Participant's Account for purposes of this Section 5(d).
SECTION 6. PAYMENT OF ACCOUNTS.
(a) REALIZATION EVENT. Except as provided in Section 8 (generally
relating to terminations of employment before a Realization Event), upon the
closure and funding of a Realization Event, each Account shall be credited with
the same value per Phantom Incentive Unit and/or Common Phantom Additional Unit
as the value received in the Realization Event by a holder of Common Stock for
one share of Common Stock, and each Participant (or his or her estate, as
applicable) will be paid the value of his or her Account, subject to the Board's
discretion to defer the payment of the value of a Participant's Account to
appropriately reflect the payment schedule, contingent payment, holdbacks or
contingent obligations applicable to holders of Common Stock following the
Realization Event, as follows:
(i) as soon as practicable following a Realization Event
that is a cash transaction, the value of each Account shall be paid in cash to
the Participants.
(ii) following a Realization Event that is an equity or
other non-cash exchange for Common Stock, (A) the Board shall credit each
Account attributable to any Phantom Incentive Unit and/or Common Phantom
Additional Unit at such time and in such amounts of such medium (including
notes, equity securities, or a combination of the foregoing) as payments are
made available to holders of Common Stock pursuant to the Realization Event or,
in the Board's sole discretion, in cash and (B) the value of the Accounts
attributable to the Phantom Incentive Units and/or Common Phantom Additional
Units shall be distributed as soon as practicable following such credit to the
Account; provided that the Board may elect to continue to defer payment of the
Account until not later than such time as the equity or other medium received in
exchange for Common Stock may be converted into cash or is otherwise
transferable and, in the event of such deferral, the Board shall determine
whether payment shall be made either in cash or in the same medium of payment as
holders of Common Stock received in the Realization Event, including notes,
equity securities, or a combination of the foregoing.
(b) PREFERRED STOCK. Notwithstanding anything herein to the
contrary, the value of the Accounts, if any, attributable to any Preferred
Phantom Additional Unit shall be paid to a Participant upon a Realization Event
only when and to the extent permitted in this Section 6(b). The Accounts
attributable to each Preferred Phantom Additional Unit shall receive a credit at
such times and in such amounts as payments are made to a holder of 0.4591 shares
of Preferred Stock in redemption thereof. The value of the Accounts attributable
to the Preferred Phantom Additional Units shall be paid to the Participants as
soon as practicable following such credit to the Account and in the same medium
(cash, equity, or any other medium) received by the holders of Preferred Stock.
The Company has the right to pay the value of the Account in
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respect of Preferred Phantom Additional Units following a Participant's
termination of employment for any reason and prior to any other event giving
rise to the payout of Preferred Stock generally as described in Section
8(b)(ii)(D) below.
(c) IPO. From and after the consummation by the Company of an IPO
that occurs prior to a Realization Event, the following shall apply:
(i) If the Company shall be required to pay out the value
of any Account or shall exercise any right it may have to pay out the value of
any Account or if any Participant shall have the right to receive any portion of
an Account, the Company may pay the value of the Account in shares of Common
Stock (in the case of Phantom Incentive Units or Common Phantom Additional
Units) or Preferred Stock (in the case of Preferred Phantom Additional Units) or
(in the case of either Phantom Incentive Units or Phantom Additional Units) in
cash (determined by using, in the case of Phantom Incentive Units or Common
Phantom Additional Units, the market price of the Common Stock, and in the case
of Preferred Phantom Additional Units, the Liquidation Value of the Company's
Preferred Stock and the accrued but unpaid dividends thereon, in each case on
the date immediately prior to the payment) or a combination of the foregoing
("Post-IPO Payout").
(ii) Except as provided in Section 8 (generally relating
to termination of employment prior to a Realization Event) and except upon the
earlier occurrence of a Realization Event, and subject to the Company's right
after the IPO to pay the value of the Account at such earlier time as it shall
determine, on the fifth anniversary of the IPO the Account will be paid to the
Participant, who will receive the Post-IPO Payout unless the Participant (or the
Participant's estate, as applicable) elected in writing no later than the fourth
anniversary of the IPO to defer the Post-IPO Payout for an additional 36 months
from the fifth anniversary of the IPO. Each Participant who remains employed
with the Company and who chooses to defer the payment of his or her Post-IPO
Payout (including, for this purpose, any Participant or Participant's estate who
otherwise deferred payment of his or her Account) no later than the fourth
anniversary of the IPO may continue to defer the payment of the Post-IPO Payout
for additional 36 month intervals, provided that the election to defer is made
no later than one year prior to the date on which the Post-IPO Payout would
otherwise be paid.
(d) TAG-ALONG EVENT. In connection with a Tag-Along Event, the
Company shall, in its discretion (A) immediately prior to the Tag-Along Event
distribute to each Participant, a number of shares of such class or classes of
the Company's Capital Stock such that the number of shares so distributed plus
the number of shares which the holder would be entitled to sell under Section
4.5 of the Stockholders Agreement without regard to the Phantom Incentive Units
or Phantom Additional Units held by such Participant (assuming that the source
for the shares to be sold constituted shares of Capital Stock, and shares
distributed with respect to Phantom Incentive Units and shares distributed with
respect to Phantom Additional Units in proportion to the number of shares or
such units held) equals the total number of shares of Capital Stock the holder
is entitled to sell (the "Pro Rata Portion") or (B) immediately following the
Tag-Along Event, credit each Participant's Account with the value the
Participant would have received from the shares that would be distributed
pursuant to clause (A) had such shares been distributed and sold in the
Tag-Along Event, and either pay such portion of the Account as soon as
practicable following the Tag-Along Event or continue to defer the payment of
the Account until the Account is otherwise payable in accordance with this Plan.
For purposes of the foregoing clause (B), the credit in respect of the Account
and any payment of the Account
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shall only be in respect of the Phantom Incentive Units and/or the Phantom
Additional Units, as applicable, to which the Pro Rata Portion applies. For
purposes of this Section 6(d), the Pro Rata Portion, to the extent it is
attributable to Phantom Incentive Units, shall apply "pro rata" to the total
number of Protected and Unprotected Phantom Incentive Units credited to a
Participant's Account.
SECTION 7. COMPLIANCE WITH DEBT INSTRUMENTS AND LEGAL
REQUIREMENTS.
(a) LEGAL REQUIREMENTS. The grant of Phantom Incentive Units and
Phantom Additional Units, payment of the value of a Participant's Account
(including a partial distribution of a Participant's Account, if applicable),
and the other obligations of the Company under this Plan shall be subject to all
applicable federal and state laws, rules and regulations and to such approvals
by any regulatory or governmental agency as may be required.
(b) DEBT INSTRUMENTS. Notwithstanding the requirements of Section
6 hereof regarding the payment of the value of the Accounts, the Company shall
not be obligated to pay the value of any portion of any Account (A) at any time
there exists and is continuing a default or an event of default on the part of
the Company or under any guarantee or other agreement under which the Company or
one of its Subsidiaries has borrowed money or (B) if such payment would
constitute a breach of, or result in a default or an event of default on the
part of the Company or any of its Subsidiaries, under any such guarantee or
agreement. In the event that payment of any portion of any Account is deferred
pursuant to this Section 7(b), the Company shall pay the value of such portion
as soon as possible following the date on which such payment would not result in
any such breach or default, with interest at the federal short-term interest
rate on the first day of the month the Participant (or his or her estate) has
the right to receive payment of the value of his or her Account pursuant to
Section 6, to be recalculated on the first day of each month thereafter until
all such payments due under the Account are made.
(c) POSTPONEMENT. The Board, in its sole discretion, may postpone
the issuance or delivery of any securities under a Participant's Account as the
Company may consider appropriate and may require a Participant to make such
representations and furnish such information as it may consider appropriate in
connection with the issuance or delivery of any such securities in compliance
with applicable laws, rules and regulations.
SECTION 8. TERMINATION OF EMPLOYMENT.
(a) PROTECTION OF ACCOUNT VALUES. Unless otherwise provided in an
Award Agreement, Accounts shall become "Protected" as follows:
(i) subject to continued employment with the Company or
one of its Subsidiaries, Participants shall initially be "Unprotected" but shall
become Protected in the value of the Phantom Incentive Unit portion of their
Accounts, as follows:
18.75% on the first anniversary of the date of the applicable
Award Agreement, if still employed.
37.5% on the second anniversary of the date of the applicable
Award Agreement, if still employed.
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56.25% on the third anniversary of the date of the applicable
Award Agreement, if still employed.
75% on the fourth anniversary of the date of the applicable
Award Agreement, if still employed.
Fully Protected upon the earlier of a Realization Event or an
IPO, if still employed.
(ii) upon the occurrence of the earlier of a Realization
Event or an IPO, a Participant who is then employed with the Company or one of
its Subsidiaries shall become fully Protected in the Phantom Incentive Unit
portion of his or her Account; and
(iii) the Phantom Additional Unit portion of each
Participant's Account, as applicable, is fully Protected as of the date of grant
of such Phantom Additional Units.
(b) PAYMENT UPON TERMINATION OF EMPLOYMENT.
(i) Unless otherwise provided in an Award Agreement and
notwithstanding any of the foregoing to the contrary, if a Participant's
employment with the Company or its Subsidiaries terminates for any reason, and
neither a Realization Event nor an IPO has occurred as of such termination of
employment, the Participant's Account will be credited with the "CASH-OUT
AMOUNT," as provided below immediately prior to the payment of the Account, and
such Account shall be paid to such Participant within 90 days following the
termination of such Participant's employment with the Company (or up to one year
following the date of termination as may be determined by the Chief Executive
Officer of the Company), as the Board may, in its discretion, determine;
provided that, in the case of death or Disability, payment of the Account will
be governed by Section 8(b)(ii)(C) and will be paid to the Participant's estate,
as applicable.
(ii) The "Cash-Out Amount" is determined as follows:
(A) CAUSE TERMINATION. In the event that a
Participant's employment with the Company or its Subsidiaries is terminated by
the Company for Cause and neither a Realization Event nor an IPO has occurred
prior to such termination of employment, then the Cash-Out Amount is equal to,
with respect to each Phantom Incentive Unit, (x) the initial value of the
Phantom Incentive Unit on the date of grant as set forth in the Award Agreement,
plus or minus (y) any change in Adjusted Retained Earnings per share from the
date of grant through the end of the most recent fiscal quarter preceding the
date of termination of employment;
(B) OTHER DISCHARGES; QUITS. In the event that a
Participant's employment with the Company or its Subsidiaries terminates for any
reason other than (i) by the Company for Cause or (ii) due to the Participant's
death or Disability, and neither a Realization Event nor an IPO has occurred
prior to such termination of employment, then the Cash-Out Amount is equal to
the sum of:
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(x) with respect to each Protected
Phantom Incentive Unit and each Common Phantom
Additional Unit, an amount equal to the quotient
obtained by dividing (I) the excess of (i) the
product of 6.6 times Consolidated EBITDA during the
Measurement Period over (ii) the Consolidated
Indebtedness as of the date of termination, by (II)
the number of shares of Common Stock then issued and
outstanding and all shares of Common Stock issuable
upon the exercise of any then outstanding Contingent
Right, whether or not such Contingent Right is at the
time exercisable on the date of termination of
employment; plus
(y) with respect to each Phantom
Incentive Unit that is Unprotected, an amount equal
to (I) the initial value of the Phantom Incentive
Unit on the date of grant as set forth in the Award
Agreement, plus or minus (II) any change in Adjusted
Retained Earnings per share from the date of grant
through the end of the most recent fiscal quarter
preceding the date of termination of employment;
(C) DEATH OR DISABILITY. In the event that a
Participant's employment with the Company or its Subsidiaries terminates due to
the Participant's death or Disability and neither a Realization Event nor an IPO
has occurred prior to such termination of employment, then the Cash-Out Amount
is the amount described in Section 8(b)(ii)(B) (above) with respect to each
Phantom Incentive Unit and the Account will be paid to the Participant (or the
Participant's estate, as applicable) one year following the termination of
Participant's employment or, in the Board's discretion, at any time prior to one
year following the termination of employment; provided that, unless the Board
shall otherwise determine, the Participant or the Participant's estate, as
applicable, may elect within 180 days following such termination of employment
to defer the payment of the Account until such time as payment is otherwise
required or made in accordance with the Plan.
(D) PHANTOM ADDITIONAL UNITS. If a Participant's
employment with the Company or its Subsidiaries terminates for any reason prior
to a Realization Event or an IPO, then (x) with respect to each Common Phantom
Additional Unit, the Cash-Out Amount is the amount described in Section
8(b)(ii)(B)(x) above and (y) with respect to each Preferred Phantom Additional
Unit, the Cash-Out Amount is 0.4591 times the sum of (I) the "Liquidation Value"
plus (II) the "Maximum Dividend" (each as defined in the Company's Certificate
of Incorporation).
(iii) Notwithstanding the foregoing, with respect to
Phantom Incentive Units valued at the Cash-Out Amount as described in Section
8(b)(ii)(B) above, (A) if during the Measurement Period the Company or any of
its Subsidiaries shall have purchased or otherwise acquired, without the
approval of the Chief Executive Officer of the Company (in a single transaction
or in a series of transactions), a business which is outside of the building
products industry, all calculations required under this Section 8(b) shall be
made on a pro forma basis to eliminate the effect of such acquisition and any
financing undertaking in connection therewith and (B) in the event that a sale
of the Company is consummated within nine months following the payment of a
Participant's Account, and if the per share purchase price (or the amount
available for distribution, in the event of a sale of all or substantially all
of the Company's assets)
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(such price or amount, the "Actual Amount") is higher than the Cash-Out Amount
used to value such Phantom Incentive Units, whether or not Protected, then the
Participant will receive, at the same time stockholders of the Company receive
payment in connection with such sale, an additional payment from the Company
equal to the excess of (x) the number of Phantom Incentive Units multiplied by
the Actual Amount over (y) the aggregate Cash-Out Amount for such Phantom
Incentive Units.
(iv) If a Participant's employment with the Company or its
Subsidiaries terminates for any reason and at any time following the occurrence
of an IPO, even if such employment terminated prior to a Realization Event, in
lieu of the amounts described in Section 8(b)(i) through (iii), the Participant
will be entitled to the Post-IPO Payout (as described in Section 6(c)(i) above)
in respect of the Phantom Incentive Units and the Phantom Additional Units
credited to such Participant's Account, which Account shall be paid to such
Participant in accordance with Section 6(c).
(v) All calculations under Section 6 and this Section 8
of the value of shares based upon the number of outstanding shares of Common
Stock and/or Preferred Stock shall be determined assuming that each Phantom
Incentive Unit and each Common Phantom Additional Unit is an outstanding share
of Common Stock and each Preferred Phantom Additional Unit is 0.4591 outstanding
shares of Preferred Stock.
SECTION 9. DILUTION ADJUSTMENTS.
(a) CERTAIN EVENTS. In the event of a reclassification,
recapitalization, stock split, stock dividend, combination of units, or other
similar or extraordinary event, the number and kind of Phantom Incentive Units
and Phantom Additional Units, in the aggregate, reserved for issuance or with
respect to which Awards may be made under this Plan shall be adjusted to reflect
such event in the same manner in which Common Stock and Preferred Stock are
adjusted to reflect such event, and the Board shall make such adjustments as it
deems appropriate and equitable in the number, kind and price of Phantom
Incentive Units and Phantom Additional Units credited to outstanding Accounts,
and in any other matters which relate to Awards or Accounts and which are
affected by the events referred to above.
(b) OTHER ADJUSTMENTS. The Board is authorized to make adjustments
in the terms and conditions of, and the criteria included in, Accounts in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 9(a)) affecting the Company, or the financial
statements of the Company or any subsidiary, or of changes in applicable laws,
regulations, or accounting principles, whenever the Board determines that such
adjustments are appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under this Plan.
SECTION 10. AMENDMENT AND TERMINATION.
(a) AMENDMENTS TO THE PLAN. The Board may amend, alter, suspend,
discontinue, or terminate this Plan or any portion thereof at any time;
provided, however, that any such amendment, alteration, suspension,
discontinuance, or termination that would materially adversely affect the rights
of any Participant with respect to any outstanding Account held pursuant to this
Plan shall not, to that extent, be effective without the written consent of the
affected Participant.
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(b) AMENDMENTS TO AWARDS. The Board may waive any conditions or
rights under, amend any terms of, or alter, suspend, discontinue, cancel or
terminate, any Account, prospectively or retroactively; provided, however, that
any such waiver, amendment, alteration, suspension, discontinuance, cancellation
or termination not expressly contemplated by this Plan that would materially
adversely affect the rights of any Participant or other holder of an Account
shall not to that extent be effective without the written consent of the
affected Participant or holder.
SECTION 11. GENERAL PROVISIONS.
(a) NONTRANSFERABILITY. Neither an Account, nor any Phantom
Incentive Unit and/or Phantom Additional Units recorded thereunder, may be
assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant other than by will or by the laws of descent and
distribution, and any such purported assignment, alienation, pledge, attachment,
sale, transfer or encumbrance shall be void and unenforceable against the
Company.
(b) NO RIGHTS TO AWARDS. No Person shall have any claim to be
granted any Phantom Incentive Unit or Phantom Additional Unit, and there is no
obligation for uniformity of treatment of Participants, or holders or
beneficiaries of Accounts. The terms and conditions of Phantom Incentive Units
and Phantom Additional Units, Accounts and the Board's determinations and
interpretations with respect thereto need not be the same with respect to each
Participant (whether or not Participants are similarly situated).
(c) GOVERNMENT AND OTHER REGULATIONS. The obligation of the
Company to settle Awards in Common Stock, Preferred Stock or otherwise shall be
subject to all applicable laws, rules, and regulations, and to such approvals by
governmental agencies as may be required. Notwithstanding any terms or
conditions of any Award to the contrary, the Company shall be under no
obligation to offer to sell or to sell and shall be prohibited from offering to
sell or selling any shares of Common Stock or Preferred Stock pursuant to an
Award unless such shares have been properly registered for sale pursuant to the
Securities Act with the Securities and Exchange Commission or unless the Company
has received an opinion of counsel, satisfactory to the Company, that such
shares may be offered or sold without such registration pursuant to an available
exemption therefrom and the terms and conditions of such exemption have been
fully complied with. The Company shall be under no obligation to register for
sale under the Securities Act any of the shares of Common Stock or Preferred
Stock to be offered or sold under the Plan until an IPO. Upon an IPO, the
Company shall undertake to register shares of Common Stock and/or Preferred
Stock pursuant to the Securities Act on a Form S-8 with the Securities and
Exchange Commission for issuance under this Plan, such that in the event the
Company makes a distribution of the Accounts in shares of Common Stock or
Preferred Stock at any time following an IPO, there will be a sufficient number
of shares registered under this Plan.
(d) TAX WITHHOLDING. A Participant may be required to pay to the
Company, at its request, and the Company shall have the right and is hereby
authorized to withhold from any payment due or transfer made under any Account
or otherwise under this Plan or from any compensation or other amount owing to
or in respect of a Participant, the amount (in cash, securities, or other
property) of any applicable withholding taxes in respect of an Account, its
distribution or settlement in cash or in kind, or any payment or transfer under
an Account or under this Plan, and to take such other action as may be necessary
in the opinion of the Company to satisfy all obligations for the payment of such
taxes.
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(e) OTHER COMPENSATION ARRANGEMENTS.
(i) Nothing contained in this Plan shall prevent the
Company or any Subsidiary or other Affiliate from adopting or continuing in
effect other compensation arrangements, which may, but need not, provide for the
grant of options, securities and other types of awards, and such arrangements
may be either generally applicable or applicable only in specific cases.
(ii) Neither the grant of Phantom Incentive Units or
Phantom Additional Units hereunder nor the payment of any amounts in respect of
any Account shall be taken into account in determining a Participant's right to
receive any additional benefits or compensation under any other plan or
arrangement.
(f) NO RIGHT TO SERVICE OR EMPLOYMENT. The grant of Phantom
Incentive Units or Phantom Additional Units shall not be construed as giving a
Participant the right to be retained in the employ or service of the Company or
any Subsidiary. Further, the Company or its Subsidiaries may at any time
terminate a Participant from any employment or other service relationship or
discontinue, free from any liability or any claim under this Plan, unless
otherwise expressly provided in this Plan or in the Participant's Award
Agreement.
(g) AWARDS AS AN UNSECURED PROMISE.
(i) The Phantom Incentive Units and Phantom Additional
Units granted under this Plan do not constitute an equity interest in the
Company or its Subsidiaries. A Participant shall not share in the voting rights
of the Company or its Subsidiaries as a result of an Award.
(ii) The Company shall not be required to and shall not
segregate any funds representing awards of Phantom Incentive Units or Phantom
Additional Units granted hereunder, and nothing in this Plan or any Award
Agreement shall be construed as providing for such segregation.
(iii) Nothing in this Plan or any Award Agreement, and no
action taken pursuant to their respective terms, shall create or be construed to
create a trust or escrow account of any kind, or a fiduciary relationship
between the Company or its Subsidiaries, on the one hand, and any Participant,
or any other Person, on the other hand.
(iv) The Participants and their beneficiaries and any
other Persons entitled to payment in respect of an Account shall rely solely on
the unsecured promise of the Company to make the payments required under the
terms of any Account, but shall have the right to enforce such a claim in the
same manner as any unsecured general creditor of the Company. The Participants
shall not have any preferred claim on, or any beneficial ownership in, any
assets of the Company. Any rights created under this Plan or any Award Agreement
shall be mere unsecured contractual rights of the Participants against the
Company.
(h) TERMINATION WITH SUBSIDIARIES. For purposes of this Plan, a
Participant's employment will be deemed terminated when he or she is no longer
employed by the Company or any of its Subsidiaries.
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(i) CONFLICTS. In the event of a conflict between the terms of
this Plan and any Award Agreement, the terms of this Plan shall prevail.
(j) GOVERNING LAW. Unless otherwise provided in the applicable
Award Agreement, the validity, construction, and effect of this Plan and any
rules and regulations relating to this Plan and any Award Agreement shall be
determined in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed entirely within such state without regard to
the choice of law principles thereof.
(k) HEADINGS. Headings are given to the sections and subsections
of this Plan solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or
interpretation of this Plan or any provision thereof.