EXHIBIT 10.18
CRUNCH HOLDING CORP.
2004 CALIFORNIA STOCK OPTION PLAN
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1. THE PLAN............................................................................................... 1
1.1 Purpose....................................................................................... 1
1.2 Administration and Authorization; Power and Procedure......................................... 1
1.3 Participation................................................................................. 3
1.4 Shares Available for Options; Share Limits.................................................... 3
1.5 No Transferability; Limited Exception to Transfer Restrictions................................ 3
2. OPTIONS................................................................................................ 6
2.1 Option Grants................................................................................. 6
2.2 Vesting; Term; Exercise Procedure............................................................. 6
2.3 Option Price.................................................................................. 8
2.4 Limitations on Grant and Terms of Incentive Stock Options..................................... 9
2.5 Limits on 10% Holders......................................................................... 10
2.6 Effects of Termination of Employment; Termination of Subsidiary Status; Discretionary
Provisions.................................................................................... 10
2.7 Option Repricing/Cancellation and Regrant/Waiver of Restrictions.............................. 13
2.8 Options in Substitution for Stock Options Granted by Other Corporations....................... 13
3. OTHER PROVISIONS....................................................................................... 13
3.1 Rights of Eligible Persons, Participants and Beneficiaries.................................... 13
3.2 Adjustments; Acceleration..................................................................... 14
3.3 Lock-Up Agreement............................................................................. 18
3.4 Call Right.................................................................................... 18
3.5 Sale of the Corporation....................................................................... 19
3.6 Drag-Along Rights............................................................................. 20
3.7 Co-Sale Rights................................................................................ 22
3.8 No Stockholder Rights Following Exercise of a Call or Repurchase.............................. 23
3.9 Compliance with Laws.......................................................................... 23
3.10 Tax Withholding............................................................................... 25
3.11 Plan and Option Amendments, Termination and Suspension........................................ 25
3.12 Privileges of Stock Ownership................................................................. 26
3.13 Effective Date of the Plan.................................................................... 26
3.14 Term of the Plan.............................................................................. 26
3.15 Governing Law/Severability.................................................................... 26
3.16 Captions...................................................................................... 27
(i)
3.17 Non-Exclusivity of Plan....................................................................... 27
3.18 No Restriction on Corporate Powers............................................................ 27
3.19 Other Compensation or Benefit Programs........................................................ 27
4. DEFINITIONS............................................................................................ 28
(ii)
CRUNCH HOLDING CORP.
2004 CALIFORNIA STOCK OPTION PLAN
1. THE PLAN.
1.1 PURPOSE. The purpose of this 2004 California Stock Option Plan (this
"Plan") is to promote the success of the Corporation and its Related
Entities and the interests of its stockholders by attracting,
motivating, retaining and rewarding certain officers, employees,
managers, directors and other eligible persons with awards and
incentives for high levels of individual performance and improved
financial performance of the Corporation and its Subsidiaries.
Capitalized terms used herein are defined in Section 4.
1.2 ADMINISTRATION AND AUTHORIZATION; POWER AND PROCEDURE.
1.2.1. ADMINISTRATOR. This Plan will be administered by and all
Options will be authorized by the Administrator. Action of the
Administrator with respect to its authority under this Plan
shall be taken pursuant to a majority vote or by unanimous
written consent of its members. Unless a majority of the
members of the Board determines otherwise: (i) if the
Corporation is subject to the Exchange Act, the Administrator
shall be constituted in a manner that satisfies the
requirements of Rule 16b-3 under the Exchange Act ("RULE
16B-3"), which Administrator shall administer the Plan with
respect to all Eligible Persons who are subject to Section 16
of the Exchange Act in a manner that satisfies the
requirements of Rule 16b-3; and (ii) the Administrator shall
be constituted in a manner that satisfies the requirements of
Section 162(m) of the Code, which Administrator shall
administer the Plan with respect to "performance-based
compensation" for all Eligible Persons who are reasonably
expected to be "covered employees" as those terms are defined
in Section 162(m) of the Code; provided, however, that the
failure to satisfy such requirements shall not affect the
validity of the action of any Administrator otherwise duly
authorized and acting in the matter. The Board or a committee
comprised solely of directors may also delegate, to the extent
permitted by Section 157(c) of the Delaware General
Corporation Law and any other applicable law, to one or more
officers of the Corporation, its powers under this Plan (a) to
designate the officers and employees of the Corporation and
its Subsidiaries who will receive grants of rights or options
to purchase shares of Common Stock, and (b) to determine the
number of rights or options to be received by them, pursuant
to a resolution that specifies the total number of rights or
options that may be granted under the delegation, provided
that no officer may be delegated the power to designate
himself or herself as a recipient of such options or rights.
1.2.2. PLAN OPTIONS; INTERPRETATION; POWERS OF ADMINISTRATOR. Subject
to the express provisions of this Plan and any express
limitations on the delegated authority of an Administrator,
the Administrator will have the authority to:
(a) determine eligibility and the particular Eligible
Persons who will receive Options;
(b) grant Options to Eligible Persons, determine the
price at which securities will be offered or awarded
and the amount of securities to be offered or awarded
to any of such persons, and determine the other
specific terms and conditions of Options consistent
with the express limits of this Plan, establish the
installments (if any) in which such Options will
become exercisable or will vest, and the respective
consequences thereof, or determine that no delayed
exercisability or vesting is required, and establish
the events of termination or reversion of such
Options;
(c) approve the forms of Option Agreements, which need
not be identical among Participants;
(d) construe and interpret this Plan and any Option or
other agreements defining the rights and obligations
of the Corporation (and the Subsidiaries) and
Participants under this Plan, make factual
determinations with respect to the administration of
this Plan, further define the terms used in this
Plan, and prescribe, amend and rescind rules and
regulations relating to the administration of this
Plan;
(e) cancel, modify, or waive the Corporation's rights
with respect to, or modify, discontinue, suspend, or
terminate any or all outstanding Options held by
Eligible Persons, subject to any required consent
under Section 3.11;
(f) accelerate or extend the exercisability or extend the
term of any or all outstanding Options within the
maximum ten-year term of Options under Section 2.2.2;
(g) determine the duration and purposes of leaves of
absence that may be granted to Participants without
constituting a termination of their employment for
purposes of this Plan; and
(h) make all other determinations and take such other
action as contemplated by this Plan or as may be
necessary or advisable for the administration of this
Plan and the effectuation of its purposes.
1.2.3. BINDING DETERMINATIONS. Any action taken by, or inaction of,
the Corporation, any Subsidiary, the Board or the
Administrator relating or pursuant to this Plan will be within
the absolute discretion of that entity or body and will be
conclusive and binding upon all persons. Subject only to
compliance with the express provisions hereof, the Board and
the Administrator may act in their absolute discretion in
matters within their authority related to this Plan.
1.2.4. RELIANCE ON EXPERTS. In making any determination or in taking
or not taking any action under this Plan, the Administrator or
the Board, as the case may be, may obtain, rely upon the
advice of, and pay all reasonable expenses related to
obtaining, experts, including employees of and professional
advisors to the Corporation or the Subsidiaries.
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1.2.5. DELEGATION. The Administrator may delegate ministerial,
non-discretionary functions to individuals who are officers or
employees of the Corporation or a Related Entity.
1.2.6. NO LIABILITY. No director, manager, member, officer,
stockholder or agent of the Corporation or a Related Entity
will be liable for any action, omission or decision under this
Plan taken, made or omitted in good faith.
1.3 PARTICIPATION. Options may be granted by the Administrator only to
those persons that the Administrator determines to be Eligible Persons.
An Eligible Person who has been granted an Option may, if otherwise
eligible, be granted additional Options if the Administrator so
determines.
1.4 SHARES AVAILABLE FOR OPTIONS; SHARE LIMITS.
1.4.1. SHARES AVAILABLE. Subject to the provisions of Section 3.2,
the capital stock delivered in respect of Options granted
under this Plan will be shares of the Corporation's authorized
but unissued Common Stock and any of its shares of Common
Stock held as treasury shares. The shares may be delivered for
any lawful consideration.
1.4.2. SHARE LIMIT. The maximum number of shares of Common Stock that
may be delivered pursuant to Options granted under this Plan
will not exceed 350,000 shares (the "SHARE LIMIT"), and will
be subject to adjustment as contemplated by this Section 1.4
and Section 3.2.
1.4.3. SHARE RESERVATION; REPLENISHMENT AND REISSUE OF UNVESTED
OPTIONS. Shares subject to outstanding Options shall be
reserved for issuance. No Option may be granted under this
Plan unless, on the date of grant, the sum of (a) the maximum
number of shares of Common Stock issuable at any time pursuant
to such Option, plus (b) the number of shares of Common Stock
that have previously been issued pursuant to Options granted
under this Plan, plus (c) the maximum number of shares of
Common Stock that may be issued at any time after such date of
grant pursuant to Options that are outstanding on such date,
does not exceed the Share Limit. Shares of Common Stock that
are subject to or underlie Options that expire or for any
reason are canceled or terminated, are forfeited, fail to
vest, or for any other reason are not paid or delivered under
this Plan, will again, except to the extent prohibited by law
(or the provisions of the Code, in the case of Incentive Stock
Options) or the terms of this Plan, be available for
subsequent Options to be granted under this Plan. Accordingly,
shares of Common Stock issued pursuant to the terms hereof
(including shares of Common Stock offset in satisfaction of
applicable withholding taxes or the exercise price of an
Option) in respect of an Option shall reduce on a
share-for-share basis the number of shares of Common Stock
remaining available under this Plan and the number of shares
remaining subject to the Option.
1.5 NO TRANSFERABILITY; LIMITED EXCEPTION TO TRANSFER RESTRICTIONS.
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1.5.1. LIMIT ON EXERCISE AND TRANSFER OF OPTIONS.
(a) Unless otherwise expressly provided in (or pursuant
to) this Section 1.5, by applicable law and by the
Option Agreement, as the same may be amended:
(i) all Options are non-transferable and will
not be subject in any manner to sale,
transfer, anticipation, alienation,
assignment, pledge, encumbrance or charge;
(ii) Options will be exercised only by the
Participant; and
(iii) amounts payable or shares issuable pursuant
to an Option will be delivered only to (or
for the account of) the Participant.
(b) The exercise and transfer restrictions in clause (a)
above shall not apply to:
(i) transfers to the Corporation; or
(ii) transfers by gift to a "family member" of
the Participant, as such term is defined in
SEC Rule 701 promulgated under the
Securities Act; or
(iii) the designation of a beneficiary to receive
benefits if the Participant dies, or if the
Participant has died, transfers to or
exercises by the Participant's beneficiary,
or in the absence of a validly designated
beneficiary, transfers by will or the laws
of descent and distribution; or
(iv) if the Participant has suffered a
disability, permitted transfers or exercises
on behalf of the Participant's duly
authorized legal representative.
1.5.2. LIMIT ON TRANSFER OF SHARES. Unless otherwise expressly
provided in (or pursuant to) this Section 1.5, by applicable
law and by the Option Agreement, Shares shall not be
Transferred except as provided as follows:
(a) transfers by gift to a member of the Immediate Family
of the Participant or a trust (or estate planning
entity) whose sole beneficiaries (or owners, as the
case may be) are the Participant and/or members of
the Immediate Family of the Participant;
(b) transfers pursuant to a pledge to secure indebtedness
provided that the pledgee agrees in writing that the
Shares subject to such Transfer shall be subject to
the terms hereof;
(c) transfers by a Participant pursuant to the provisions
of Section 3.7;
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(d) transfers pursuant to a merger, consolidation, share
exchange, scheme of arrangement or other similar
transaction by the Corporation or pursuant to an
agreement to which the Corporation is a party;
(e) transfers by a Participant pursuant to a public
offering registered under the Securities Act or
pursuant to Rule 144 promulgated under the Securities
Act; or
(f) transfers pursuant to Section 3.4, Section 3.5 or
Section 3.6 hereof.
1.5.3. BINDING ON TRANSFEREES. All permitted transferees receiving
Options and/or Shares from a Participant pursuant to this
Section 1.5 shall be subject to and be bound by the terms of
this Plan. At the request of the Administrator, and as a
condition to the Administrator's consent to a permitted
transfer of Options and/or Shares pursuant to this Section
1.5, each permitted transferee shall execute a document
reasonably satisfactory to the Administrator, whereby such
permitted transferee shall agree to be subject to and be bound
by the terms of this Plan. Such agreement by such permitted
transferee to be bound by and subject to the terms of this
Plan shall remain in full force and effect should the
employment with or services by the Participant to the
Corporation or a Related Entity be terminated pursuant to
Section 2.6 hereof or otherwise.
1.5.4. REQUIRED APPROVAL. Notwithstanding anything else in this
Section 1.5. to the contrary, but subject to compliance with
all applicable laws, Incentive Stock Options will be subject
to any and all transfer restrictions under the Code applicable
to such Options or necessary to maintain the intended tax
consequences of such Options. Notwithstanding clauses (b),
(c), (d) and (e) of Section 1.5.2 above, but subject to
compliance with all applicable laws, any contemplated transfer
referenced in clauses (b), (c), (d) and (e) above is subject
to the condition precedent that such transfer be approved by
the Administrator in order for such transfer to be effective.
Notwithstanding anything else in this Section 1.5 to the
contrary, but subject to compliance with all applicable laws,
(i) consideration for transfers pursuant to this Section 1.5
is strictly prohibited; and (ii) subsequent transfers of
Non-Qualified Options transferred pursuant to this Section
1.5.1 shall be prohibited except (x) subsequent transfers back
to the Participant, and (y) transfers to other Section 1.5.1
permitted transferees of the Participant.
1.5.5. NOTICE OF PROPOSED TRANSFERS. Prior to any permitted Transfer
of any Shares, the Participant shall (i) except in the case of
death, give at least 30 days' prior written notice (a
"Transfer Notice") to the Corporation of such Participant's
intention to effect such permitted Transfer, describing the
manner and circumstances of the proposed permitted Transfer,
and (ii) if required by the Corporation, provide to the
Corporation an opinion reasonably satisfactory to the
Corporation from counsel who shall be reasonably satisfactory
to the Corporation (or supply such other evidence reasonably
satisfactory to the Corporation) that the proposed permitted
Transfer of such Shares may be effected without registration
5
under the Securities Act. After receipt of the Transfer Notice
and opinion or other material (if required), the Corporation
shall, within ten (10) days thereof, so notify the Participant
of such Shares and, subject to Section 3.6 hereof, such
Participant shall thereupon be entitled to Transfer such
Shares in accordance with the terms of the Transfer Notice.
Each Share issued upon such permitted Transfer shall bear the
restrictive legend set forth in Section 3.9.3, unless in the
reasonable judgment of counsel for the Corporation such legend
is not required in order to ensure compliance with the
Securities Act. The Participant giving the Transfer Notice
shall not be entitled to Transfer such Shares until receipt of
the notice from the Corporation under this Section 1.5.5.
2. OPTIONS.
2.1 OPTION GRANTS.
2.1.1. APPROVAL; NUMBER OF SHARES. The Administrator may grant one or
more Options under this Plan to any Eligible Person. Subject
to the express provisions of this Plan, the Administrator will
determine the number of shares of Common Stock subject to each
Option; provided, however, that no Plan Participant shall be
granted Options with respect to more than 5,000,000 shares of
Common Stock in any calendar year, subject to adjustment as
contemplated by Section 3.2.
2.1.2. OPTION AGREEMENT. Each Option will be evidenced by an Option
Agreement, in substantially the form attached hereto as
Exhibit A, signed by the Corporation and the Participant. The
Option Agreement evidencing an Option shall contain the terms
established by the Administrator for that Option, as well as
any other terms, provisions, or restrictions that the
Administrator may impose on the Option or any shares of Common
Stock subject to the Option.
2.1.3. TYPE OF OPTIONS. The Administrator will designate each Option
granted under this Plan as either an Incentive Stock Option or
a Nonqualified Stock Option and such designation shall be set
forth in the applicable Option Agreement. Any Option granted
hereunder that is not designated as an Incentive Stock Option
will be deemed to be designated a Nonqualified Stock Option
under this Plan and not an incentive stock option under the
Code. Incentive Stock Options shall be subject to the
provisions of Section 2.4 in addition to the provisions hereof
applicable to Options generally.
2.2 VESTING; TERM; EXERCISE PROCEDURE.
2.2.1. VESTING.(1) An Option may be exercised only to the extent it
is vested and exercisable. Once exercisable, an Option shall
remain exercisable until the expiration or earlier termination
of the Option. Unless expressly provided otherwise by the
Administrator and subject to the provisions of the applicable
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(1) NOTE: OPTION AGREEMENTS IN SOME CASES WILL PROVIDE FOR FIRST YEAR
VESTING TO BE SHORTENED TO NOVEMBER 25, 2004, OR THE FIRST ANNIVERSARY
OF DATE OF HIRE, IF LATER.
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Option Agreement, each Option shall vest and become exercisable
according to the following schedule:
(a) Incentive Stock Options. Subject to continued employment as
provided in Section 2.6, an Incentive Stock Option awarded to
any employee of the Corporation or a Related Entity shall vest
and become exercisable as to (i) two-ninths (2/9) of the
shares of Common Stock subject to such Incentive Stock Option
on the first (1st) anniversary of the date of award of such
Incentive Stock Option, (ii) two-ninths (2/9) of the shares of
Common Stock subject to such Incentive Stock Option on the
second (2nd) anniversary of the date of award of such
Incentive Stock Option, (iii) two-ninths (2/9) of the shares
of Common Stock subject to such Incentive Stock Option on the
third (3rd) anniversary of the date of award of such Incentive
Stock Option, and (iv) the remaining three-ninths (3/9) of the
shares of Common Stock subject to such Incentive Stock Option
on the seventh (7th) anniversary of the date of award of such
Incentive Stock Option; provided, however, that
notwithstanding the foregoing, an Incentive Stock Option
granted to an Eligible Employee who is not an officer of the
Corporation or a Related Entity (as determined by the
Administrator) shall vest not less than 20% per year;
(b) Nonqualified Stock Options - Employees. Subject to continued
employment or service as provided in Section 2.6, a
Nonqualified Stock Option awarded to any employee of the
Corporation or Related Entity (including officers, directors
and managers of the Corporation or any Related Entity who are
also employees of the Corporation or any Related Entity) who
is regularly employed on a salaried basis and who is so
employed on the date of award of such Nonqualified Stock
Option, whom the Administrator identifies as having a direct
and significant effect on the financial development of the
Corporation or any Subsidiary, shall vest and become
exercisable as to (i) two-ninths (2/9) of the shares of Common
Stock subject to such Nonqualified Stock Option on the first
(1st) anniversary of the date of award of such Nonqualified
Stock Option, (ii) two-ninths (2/9) of the shares of Common
Stock subject to such Nonqualified Stock Option on the second
(2nd) anniversary of the date of award of such Nonqualified
Stock Option, (iii) two-ninths (2/9) of the shares of Common
Stock subject to such Nonqualified Stock Option on the third
(3rd) anniversary of the date of award of such Nonqualified
Stock Option, and (iv) the remaining three-ninths (3/9) of the
shares of Common Stock subject to such Nonqualified Stock
Option on the seventh (7th) anniversary of the date of award
of such Nonqualified Stock Option; provided, however, that
notwithstanding the foregoing, a Nonqualified Stock Option
granted to an Eligible Employee who is not an officer of the
Corporation or a Related Entity (as determined by the
Administrator) shall vest not less than 20% per year; and
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(c) Nonqualified Stock Options - Non-Employees. Subject to
continued service as provided in Section 2.6, a Nonqualified
Stock Option awarded to any Other Eligible Person who is not
regularly employed on a salaried basis with such Corporation
or a Subsidiary thereof and who the Administrator determines
has a direct and significant effect on the financial
development of the Corporation or any Subsidiary shall be
vested and exercisable as to (i) two-ninths (2/9) of the
shares of Common Stock subject to such Nonqualified Stock
Option on the first (1st) anniversary of the date of award of
such Nonqualified Stock Option, (ii) two-ninths (2/9) of the
shares of Common Stock subject to such Nonqualified Stock
Option on the second (2nd) anniversary of the date of award of
such Nonqualified Stock Option, (iii) two-ninths (2/9) of the
shares of Common Stock subject to such Nonqualified Stock
Option on the third (3rd) anniversary of the date of award of
such Nonqualified Stock Option, and (iv) the remaining
three-ninths (3/9) of the shares of Common Stock subject to
such Nonqualified Stock Option on the seventh (7th)
anniversary of the date of award of such Nonqualified Stock
Option.
As used throughout this Plan, "Time Vesting Option" means any Option
issued pursuant to this Plan and described in clauses (a)(i), (ii) or (iii) or
(b)(i), (ii) or (iii) or (c)(i), (ii) or (iii) of this Section 2.2.1.
As used throughout this Plan, "Performance Vesting Option" means any
Option issued pursuant to this Plan and described in clauses (a)(iv) or (b)(iv)
or (c)(iv) of this Section 2.2.1.
2.2.2. TERM. Each Option shall expire not more than 10 years after
its date of grant. Each Option will be subject to earlier
termination as provided in or pursuant to Sections 2.6 or 3.2.
2.2.3. EXERCISE PROCEDURE. Any exercisable Option will be deemed to
be exercised when the Corporation receives each of (a) written
notice of such exercise from the Participant (on a form and in
such manner as may be required by the Administrator) and (b)
any and all required payments made in accordance with Section
2.3.2 and Section 3.10, (c) any written statement required
pursuant to Section 3.9, and (d) any other document that the
Administrator deems necessary or desirable.
2.2.4. FRACTIONAL SHARES/MINIMUM ISSUE. Fractional share interests
will be disregarded. The Administrator, however, may determine
that cash, other securities, or other property will be paid or
transferred in lieu of any fractional share interests. No
fewer than 100 shares may be purchased on exercise of any
Option at one time unless the number purchased is the total
number at the time available for purchase under the Option.
2.3 OPTION PRICE.
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2.3.1. PRICING LIMITS. Subject to the following provisions of this
Section 2.3.1, the Administrator will determine the purchase
price per share of the Common Stock covered by each Option
(the "exercise price" of the Option) at the time of the grant
of the Option, which purchase price will be set forth in the
applicable Option Agreement. In no case will the exercise
price of an Option be less than the greater of:
(a) in the case of a Nonqualified Stock Option and
subject to clause (c) below, 85% of the Fair Market
Value of the Common Stock on the date of grant;
(b) in the case of an Incentive Stock Option and subject
to clause (c) below, 100% of the Fair Market Value of
the Common Stock on the date of grant; or
(c) in the case of an Option (incentive or nonqualified)
granted to a Participant described in Section 2.5,
110% of the Fair Market Value of the Common Stock on
the date of grant.
2.3.2. PAYMENT PROVISIONS. The Corporation will not be obligated to
deliver certificates for the shares of Common Stock to be
purchased on exercise of an Option unless and until it
receives full payment of the exercise price therefor, all
related withholding obligations under Section 3.10 have been
satisfied, and all other conditions to the exercise of the
Option set forth herein or in the Option Agreement have been
satisfied. The purchase price of any shares of Common Stock
purchased on exercise of an Option must be paid in full at the
time of each purchase in one or a combination of the following
methods:
(a) in cash or by electronic funds transfer;
(b) by personal, certified or cashier's check payable to
the order of the Corporation; or
(c) by the delivery of shares of Common Stock already
owned by the Participant; provided that the
Administrator may, in its absolute discretion, limit
the Participant's ability to exercise an Option by
delivering previously owned shares, and any shares of
Common Stock delivered that were initially acquired
from the Corporation upon exercise of a stock option
or otherwise must have been owned by the Participant
at least 6 months as of the date of delivery.
Shares of Common Stock used to satisfy the exercise price of
an Option will be valued at their Fair Market Value on the day
preceding the date of the exercise of the Option.
2.4 LIMITATIONS ON GRANT AND TERMS OF INCENTIVE STOCK OPTIONS.
2.4.1. $100,000 LIMIT. To the extent that the aggregate Fair Market
Value of stock with respect to which Incentive Stock Options
first become exercisable by a Participant
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in any calendar year exceeds $100,000, taking into account
both Common Stock subject to Incentive Stock Options under
this Plan and stock subject to Incentive Stock Options under
all other plans of the Corporation or a Related Entity, such
options will be treated as Nonqualified Stock Options. For
this purpose, the Fair Market Value of the stock subject to
options will be determined as of the date the options were
awarded. In reducing the number of options treated as
Incentive Stock Options to meet the $100,000 limit, the most
recently granted Options will be reduced (recharacterized as
Nonqualified Stock Options) first. To the extent a reduction
of simultaneously granted options is necessary to meet the
$100,000 limit, the Administrator may, in the manner and to
the extent permitted by law, designate which shares of Common
Stock are to be treated as shares acquired pursuant to the
exercise of an Incentive Stock Option.
2.4.2. OTHER CODE LIMITS. Incentive Stock Options may only be granted
to employees of the Corporation or a Related Entity that
satisfy the eligibility requirements of the Code. Any Option
Agreement relating to Incentive Stock Options will contain or
shall be deemed to contain such other terms and conditions as
from time to time are required in order that the Option be an
"incentive stock option" as that term is defined in Section
422 of the Code.
2.4.3. ISO NOTICE OF SALE REQUIREMENT. Any Participant who exercises
an Incentive Stock Option shall give prompt written notice to
the Corporation of any sale or other transfer of the shares of
Common Stock acquired on such exercise if the sale or other
transfer occurs (a) within one year after the exercise date of
the Option, or (b) two years after the grant date of the
Option.
2.5 LIMITS ON 10% HOLDERS. No Option may be granted to any person who, at
the time the Option is granted, owns (or is deemed to own under Section
424(d) of the Code) shares of outstanding stock of the Corporation (or
a parent or subsidiary of the Corporation) possessing more than 10% of
the total combined voting power of all classes of stock of the
Corporation (or a parent or subsidiary of the Corporation), unless the
exercise price of such Option is at least 110% of the Fair Market Value
of the stock subject to the Option and, in the case of an Incentive
Stock Option granted to such a person, such Option by its terms is not
exercisable after the expiration of five years from the date such
Option is granted.
2.6 EFFECTS OF TERMINATION OF EMPLOYMENT; TERMINATION OF SUBSIDIARY STATUS;
DISCRETIONARY PROVISIONS.
2.6.1. DISMISSAL FOR CAUSE. Unless otherwise provided in the Option
Agreement and subject to earlier termination pursuant to or as
contemplated by Section 2.2.2 or 3.2, if a Participant's
employment with, retention of services by, or directorship of,
as applicable, the Corporation or a Related Entity is
terminated for Cause, the Participant's Option (regardless of
whether such Option has been transferred pursuant to Section
1.5) will terminate immediately, whether or not the Option is
then vested and/or exercisable, and the Participant (and any
such transferee
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pursuant to Section 1.5), shall immediately forfeit all rights
under such Option, except as to shares of stock already
purchased thereunder.
2.6.2. DISABILITY. If a Participant's employment with, retention of
services by or directorship of, as applicable, the Corporation
or a Related Entity terminates because of his Disability, such
Participant, his Personal Representative or any permitted
transferee of such Participant pursuant to Section 1.5 hereof,
shall have the right to exercise the Option, to the extent
vested and exercisable on such termination date, in accordance
with its terms at any time and from time to time within one
(1) year after the date of such termination unless a shorter
or longer period is expressly provided in such Option
Agreement (or other contract as agreed to between the
Corporation or a Subsidiary and the Participant) or
established by the Administrator pursuant to Section 3.2.2,
but in no event less than six (6) months after the date of
such termination or after the expiration date of the Option;
provided, however, that in the case of an Incentive Stock
Option, the Participant or his legal representative shall have
no more than one (1) year after such termination of the
Participant's employment to exercise such Option, to the
extent it was vested and exercisable upon such termination
date. The Option, to the extent not vested and exercisable
upon the Participant's termination date, shall terminate upon
such termination date and no further vesting shall occur
thereafter with regard to any portion of the Option.
2.6.3. DEATH. If a Participant's employment with, retention of
services by, or directorship of, as applicable, the
Corporation or a Related Entity terminates due to the death of
such Participant, the Participant's Beneficiary or any
permitted transferee of such Participant pursuant to Section
1.5 hereof, shall have the right to exercise the Option to the
extent vested and exercisable on the date of such
Participant's death, in accordance with its terms at any time
and from time to time within one (1) year after the date of
such Participant's death unless a shorter or longer period is
expressly provided in such Option Agreement (or other contract
as agreed to between the Corporation or a Subsidiary and the
Participant) or established by the Administrator pursuant to
Section 3.2.2, but in no event less than six (6) months after
the date of such termination or after the expiration date of
the Option. The Option, to the extent not vested and
exercisable upon the Participant's termination date, shall
terminate upon such termination date and no further vesting
shall occur thereafter with regard to any portion of the
Option.
2.6.4. OTHER TERMINATION OF EMPLOYMENT: If a Participant's employment
with, retention of services by, or directorship of, as
applicable, the Corporation or a Related Entity terminates for
any reason other than those specified in Sections 2.6.1, 2.6.2
or 2.6.3 above, such Participant, or any permitted transferee
of such Participant pursuant to Section 1.5 hereof, shall have
the right to exercise the Option to the extent vested and
exercisable on such termination date, in accordance with its
terms, within 90 days after the date of such termination,
unless a shorter or longer period is expressly provided in
such Option Agreement (or other contract as agreed to between
the Corporation or a Subsidiary and the Participant) or
established by the Administrator pursuant to Section 3.2.2
(but in
11
no event less than thirty (30) days after the date of such
termination or after the expiration date of the Option);
provided, however, that in the case of an Incentive Stock
Option, the Participant shall have no more than three (3)
months after the termination of the Participant's employment
to exercise such Option, to the extent it was vested and
exercisable upon such termination date. The Option, to the
extent not vested and exercisable upon the Participant's
termination date, shall terminate upon such termination date
and no further vesting shall occur thereafter with regard to
any portion of the Option.
2.6.5. EVENTS NOT DEEMED A TERMINATION OF EMPLOYMENT. Unless the
Corporation or a Related Entity policy or the Administrator
otherwise provides, a Participant's employment or service
relationship with the Corporation or Related Entity shall not
be considered terminated solely due to any sick leave,
military leave, or any other leave of absence authorized by
the Corporation, Related Entity or the Administrator; provided
that, unless reemployment upon the expiration of such leave is
guaranteed by contract or law, such leave is for a period of
not more than 90 days. In the case of any Participant on an
approved leave of absence, continued vesting of the Option
while on leave from the employ of or service with the
Corporation or Related Entity will be suspended until the
Participant returns to service, unless the Administrator
otherwise provides or applicable law otherwise requires. In no
event shall an Option be exercised after the expiration of the
term of the Option set forth in the Option Agreement.
2.6.6. EFFECT OF CHANGE OF ENTITY STATUS. For purposes of this Plan
and any Option, if an entity ceases to be a Related Entity, a
termination of employment or service will be deemed to have
occurred with respect to each Eligible Person in respect of
such Subsidiary who does not continue as an Eligible Person in
respect of another entity within the Corporation or Related
Entity.
2.6.7. ADMINISTRATOR DISCRETION. Notwithstanding the foregoing
provisions of this Section 2.6, in the event of, or in
anticipation of, a termination of employment or service with
the Corporation or Related Entity for any reason, other than a
discharge for Cause, the Administrator may accelerate the
vesting and exercisability of all or a portion of the
Participant's Option, and/or, subject to the provisions of
Sections 2.2.2 and 3.2, extend the exercisability period of
the Participant's Option upon such terms as the Administrator
determines and expressly sets forth in or by amendment to the
Option Agreement.
2.6.8. TERMINATION OF CONSULTING OR AFFILIATE SERVICES. If the
Participant is not an Eligible Employee or a director of the
Corporation, and provides services as an Other Eligible
Person, the Administrator shall be the sole judge of whether
the Participant continues to render services to the
Corporation or Related Entity, unless a written contract or
the Option Agreement otherwise provides. If, in these
circumstances, the Corporation or Related Entity notifies the
Participant in writing that a termination of the Participant's
services to the Corporation or Related Entity has occurred for
purposes of this Plan, then (unless the contract or the Option
Agreement otherwise expressly provides), the Participant's
12
termination of services with the Corporation or Related Entity
for purposes of this Plan shall be the date which is 10 days
after the Corporation's or Related Entity's mailing of the
notice or, in the case of a termination for Cause, the date of
the mailing of the notice.
2.7 OPTION REPRICING/CANCELLATION AND REGRANT/WAIVER OF RESTRICTIONS.
Subject to Section 1.4 and Section 3.11 and the specific limitations on
Options contained in this Plan, the Administrator from time to time may
authorize, generally or in specific cases only, for the benefit of any
Eligible Person, any adjustment in the exercise price, the vesting
schedule, the number of shares subject to, or the term of, an Option
granted under this Plan by cancellation of an outstanding Option held
by such Eligible Person and a subsequent regranting of the Option, by
amendment, by substitution of an outstanding Option, by waiver or by
other legally valid means. Such amendment or other action may result
in, among other changes, an exercise price that is higher or lower than
the exercise price of the original or prior Option, provide for a
greater or lesser number of shares of Common Stock subject to the
Option, or provide for a longer or shorter vesting or exercise period.
2.8 OPTIONS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED BY OTHER
CORPORATIONS. Options may be granted to Eligible Persons under this
Plan in substitution for employee stock options granted by other
entities, in connection with a distribution, merger or reorganization
by or with the granting entity or an affiliated entity, or the
acquisition by the Corporation or Related Entity, directly or
indirectly, of all or a substantial part of the stock or assets of the
employing entity.
3. OTHER PROVISIONS.
3.1 RIGHTS OF ELIGIBLE PERSONS, PARTICIPANTS AND BENEFICIARIES.
3.1.1. EMPLOYMENT STATUS. Status as an Eligible Person will not be
construed as a commitment that any Option will be granted
under this Plan to an Eligible Person or to Eligible Persons
generally.
3.1.2. NO EMPLOYMENT/SERVICE CONTRACT. Nothing contained in this Plan
(or in any other documents under this Plan or related to any
Option) shall confer upon any Eligible Person or Participant
any right to continue in the employ or other service of the
Corporation or Related Entity, constitute any contract or
agreement of employment or other service or affect an
employee's status as an employee at will, nor shall interfere
in any way with the right of the Corporation or Related Entity
to change such person's compensation or other benefits, or to
terminate his or her employment or other service, with or
without cause at any time. Nothing in this Section 3.1.2, or
in Section 3.2.2 or 3.18, however, is intended to adversely
affect any express independent right of such person under a
separate employment or service contract. An Option Agreement
shall not constitute a contract of employment or service.
13
3.1.3. PLAN NOT FUNDED. Amounts payable in respect of Options granted
under this Plan will be payable in shares of Common Stock or
from the general assets of the Corporation, and (except as
provided in Section 1.4.3) no special or separate reserve,
fund or deposit will be made to assure payment of such
Options. No Participant, Beneficiary or other person will have
any right, title or interest in any fund or in any specific
asset (including shares of Common Stock) of the Corporation or
Related Entity by reason of any Option hereunder. Neither the
provisions of this Plan (or of any related documents), nor the
creation or adoption of this Plan, nor any action taken
pursuant to the provisions of this Plan will create, or be
construed to create, a trust of any kind or a fiduciary
relationship between the Corporation or Related Entity and any
Participant, Beneficiary or other person. To the extent that a
Participant, Beneficiary or other person acquires a right to
receive payment pursuant to any Option hereunder, such right
will be no greater than the right of any unsecured general
creditor of the Corporation or Related Entity.
3.1.4. CHARTER DOCUMENTS. The Articles of Incorporation and By-Laws
of the Corporation, as either of them may lawfully be amended
from time to time, may provide for additional restrictions and
limitations with respect to the Common Stock (including
additional restrictions and limitations on the voting or
transfer of Common Stock) or priorities, rights and
preferences as to securities and interests prior in rights to
the Common Stock. To the extent that these restrictions and
limitations are greater than those set forth in this Plan or
any Option Agreement, such restrictions and limitations shall
apply to any shares of Common Stock acquired pursuant to the
exercise of Options and are incorporated herein by this
reference.
3.2 ADJUSTMENTS; ACCELERATION.
3.2.1. ADJUSTMENTS. Upon or in contemplation of any reclassification,
recapitalization, stock split (including a stock split in the
form of a stock dividend) or reverse stock split; any merger,
combination, consolidation or other reorganization; any
split-up; spin-off, or similar extraordinary dividend
distribution ("spin-off") in respect of the Common Stock
(whether in the form of securities or property); any exchange
of Common Stock or other securities of the Corporation, or any
similar, unusual or extraordinary corporate transaction in
respect of the Common Stock; or a sale of substantially all
the assets of the Corporation as an entirety ("asset sale");
then the Administrator shall, in such manner, to such extent
(if any) and at such time as it deems appropriate and
equitable in the circumstances:
(a) proportionately adjust any or all of (1) the number
of shares of Common Stock or the number and type of
other securities that thereafter may be made the
subject of Options (including the specific maxima and
numbers of shares set forth elsewhere in this Plan),
(2) the number, amount and type of shares of Common
Stock (or other securities or property) subject to
any or all outstanding Options, (3) the grant,
purchase, or exercise price of any or all outstanding
Options, or (4) the securities, cash or other
14
property deliverable upon exercise or vesting of any
outstanding Options, or
(b) make provision for a settlement by a cash payment or
for the substitution or exchange of any or all
outstanding Options for cash, securities or other
property (or for other awards) based upon the
distribution or consideration payable to holders of
the Common Stock upon or in respect of such event.
The Administrator may adopt such valuation methodologies for
outstanding Options as it deems reasonable in the event of a
cash, securities or other property settlement. In the case of
Options, but without limitation on other methodologies, the
Administrator may base such settlement solely upon the excess
(if any) of the amount payable upon or in respect of such
event over the exercise price of the Option to the extent of
the then vested and exercisable shares subject to the Option.
The Administrator may make adjustments to and/or accelerate
the exercisability of Options in a manner that disqualifies
the Options as Incentive Stock Options without the written
consent of the Option holders affected thereby.
In any of such events, the Administrator may take such action
prior to such event to the extent that the Administrator deems
the action necessary to permit the Participant to realize the
benefits intended to be conveyed with respect to the
underlying shares in the same manner as is or will be
available to stockholders generally.
3.2.2. ACCELERATION OF OPTIONS UNDER CERTAIN CIRCUMSTANCES.
(a) Time Vesting Option Acceleration. Subject to Sections
3.2.3 through 3.2.5 and the applicable Option
Agreement, upon (or, as may be necessary to
effectuate the purposes of this acceleration,
immediately prior to) the consummation of a Liquidity
Event, each Time Vesting Option will become
immediately vested and exercisable; provided,
however, that the Administrator reserves the right,
prior to a Liquidity Event, to determine that certain
or all benefits under any or all Time Vesting Options
will not accelerate and/or establish a different time
in respect of such event for such acceleration.
(b) Determination of IRR; Acceleration of Performance
Vesting Options.
(i) Unless the vesting of Performance Vesting
Options shall be accelerated in the sole
discretion of the Administrator, the vesting
of the Performance Vesting Options shall
accelerate and the Performance Vesting
Options shall become exercisable as provided
in this Section 3.2.2(b). On the date of a
Liquidity Event, or as promptly thereafter
as practicable, the Administrator shall
determine in good faith the IRR on the
Common Stock in accordance with the
following:
15
(A) if the Liquidity Event is a Sale of
the Corporation structured as a
sale of equity interests, then the
IRR on the Common Stock shall be
determined on the basis of the Net
Proceeds actually received by the
holders of the Common Stock in such
sale of equity interests;
(B) if the Liquidity Event is a Sale of
the Corporation structured as a
sale of assets, then the IRR shall
be determined on the basis of the
pro forma Net Proceeds which would
be distributed to the holders of
the Common Stock if the
Corporation, as applicable, was
liquidated immediately following
the consummation of such asset
sale; and
(C) if the Liquidity Event is a
Qualified Market Cap, then the IRR
on the Common Stock shall be
determined as if the amount
determined under clause (ii) of the
definition of Net Proceeds was
distributed to the holders of
Common Stock of the Corporation.
All decisions by the Administrator with respect to
any determination of IRR shall be final and binding
on all such Participants.
(ii) Subject to Section 3.2.2(b)(iii) below, on
the date of a Liquidity Event, the
Administrator shall determine whether the
Target IRR has been achieved for the date on
which such Liquidity Event occurs (after
giving effect to all shares of Common Stock
issuable pursuant to Time Vesting Options
which have vested in accordance with any
Option Agreement).
If the Administrator determines that the
Target IRR has been achieved upon (or, as
may be necessary to effectuate the purposes
of this acceleration, immediately prior to)
the consummation of a Liquidity Event, all
Performance Vesting Options under Option
Agreements entered into by the Corporation
prior to the Liquidity Event which can be
vested without reducing the IRR in
connection with the Liquidity Event below
the Target IRR shall immediately become
vested Options (it being understood that
such vesting shall be allocated on a pro
rata basis among all Option Agreements based
on the number of Performance Vesting Options
subject to each Option Agreement); provided,
however, that the Administrator reserves the
right, prior to a Liquidity Event, to
determine that certain or all benefits under
any or all Performance Vesting Options will
not accelerate and/or establish a different
time in respect of such event for such
acceleration.
16
If the Net Proceeds per share of Common
Stock are less than the Target IRR for the
date on which such Liquidity Event occurs,
no acceleration of the vesting of
Performance Vesting Options shall occur and
all Performance Vesting Options shall
automatically terminate.
(iii) All Performance Vesting Options that vest
pursuant to this Section 3.2.2(b) shall
remain exercisable, subject to Section 3.5
and other applicable provisions of this
Plan, until the expiration of the applicable
Option term. Anything contained in this
Section 3.2.2(b) to the contrary
notwithstanding, with respect to each
Participant holding Performance Vesting
Options, no unvested Performance Vesting
Options shall vest and become exercisable
pursuant to this Section 3.2.2(b) at any
time after the termination of such
Participant's employment with, retention of
services by, or directorship of, as
applicable, the Corporation or a Related
Entity.
(c) Administrator Discretion. The Administrator may
override the limitations on acceleration in this
Section 3.2.2 by express provision in the Option
Agreement and may accord any Eligible Person a right
to refuse any acceleration, whether pursuant to the
Option Agreement or otherwise, in such circumstances
as the Administrator may approve. Any acceleration of
Options will comply with applicable legal
requirements and, if necessary to accomplish the
purposes of the acceleration or if the circumstances
otherwise require, may be deemed by the Administrator
to occur (subject to Sections 3.2.4 through 3.2.5)
not more than 30 days before or only upon the
consummation of the event. Any acceleration of an
Incentive Stock Option may disqualify the Option as
an Incentive Stock Option and does not require the
written consent of the holder of the Option, whether
or not the holder is adversely affected thereby.
3.2.3. POSSIBLE EARLY TERMINATION OF ACCELERATED OPTIONS. Without any
limitation on the Administrator's authority under Section
3.2.1, if the vesting of any Option under this Plan has been
fully accelerated as required or permitted by Section 3.2.2
(or would have been fully accelerated but for Section 3.2.5)
but is not exercised prior to (a) a dissolution of the
Corporation, (b) an event described in Section 3.2.1 that the
Corporation does not survive, or (c) the consummation of a
Sale of the Corporation, the Option shall terminate, subject
to any provision that has been expressly made by the Board or
the Administrator for the survival, substitution, assumption,
exchange or other settlement of the Option.
3.2.4. POSSIBLE RESCISSION OF ACCELERATION. If the vesting of an
Option has been accelerated in anticipation of an event or
upon stockholder approval of an event and such event does not
occur in the timeframe anticipated by the Administrator or the
Board, the Administrator or the Board may rescind the effect
of the acceleration as to any then outstanding and unexercised
or otherwise unvested Options.
17
3.2.5. GOLDEN PARACHUTE LIMITATIONS. Unless otherwise specified in an
Option Agreement or otherwise authorized by the Board in the
specific case, no vesting of an Option will be accelerated or
grant of an Option shall be made under this Plan to an extent
or in a manner that would result in payments that are not
fully deductible by the Corporation or Related Entity, as
applicable, for federal income tax purposes because of Section
280G of the Code. If a Participant would be entitled to
benefits or payments hereunder and under any other plan or
program that would constitute "parachute payments" as defined
in Section 280G of the Code, then the Participant may by
written notice to the Corporation designate the order in which
such parachute payments will be reduced or modified so that
the Corporation or Related Entity, as applicable, is not
denied any federal income tax deductions for any "parachute
payments" because of Section 280G of the Code.
3.3 LOCK-UP AGREEMENT.
Neither the Participant nor any permitted transferee may offer or
Transfer (or agree to offer or Transfer) Shares during the period commencing as
of 14 days prior to and ending one year, or such lesser period of time as the
relevant underwriters and the Board may agree (it being intended that the length
of each period reflect market practice at the time the length of such period is
determined), after the effective date of a registration statement covering any
public offering of the Corporation's securities of which the Participant has
notice. (The term "Participant" includes, where the context so requires, any
permitted direct or indirect transferee of the Participant.) The Participant
shall agree and consent to the entry of stop transfer instructions with the
Corporation's transfer agent against the Transfer of the Corporation's
securities beneficially owned by the Participant and shall conform the
limitations hereunder and under the Participant's exercise agreement by
agreement with and for the benefit of the relevant underwriters by a lock-up
agreement or other agreement in customary form. Notwithstanding anything else
herein to the contrary, this Section 3.3 shall not be construed so as to
prohibit the Participant from participating in a registration or a public
offering of the Common Stock with respect to any shares which he or she may hold
at that time; provided, however, that such participation shall be at the sole
discretion of the Board.
3.4 CALL RIGHT.
3.4.1. CALL RIGHT. Subject to the terms and conditions of this
Section 3.4, the Corporation shall have the right (the "CALL
RIGHT") (but not the obligation) to repurchase in one or more
transactions in connection with the Participant's termination
of employment, services agreement (whether written or oral) or
directorship for any reason at any time, and the Participant
(or any permitted transferee) shall be obligated to sell all
or any portion (at the Corporation's option) any of the Shares
to the Corporation (and/or its designees), at the Repurchase
Price. To exercise the Call Right, the Corporation must give
written notice thereof to the Participant (the "CALL NOTICE")
within 90 days from the date of termination of the
Participant's employment or service (or within 90 days of the
exercise of the Option in the case of Shares acquired upon
exercise of an Option after the date of termination). The Call
Notice is irrevocable by the Corporation and shall (a) be in
writing and signed by an authorized officer of the
18
Corporation, (b) set forth the Corporation's intent to
exercise the Call Right and state the total number of Shares
to be sold to the Corporation pursuant to the Call Right and
the Repurchase Price, and (c) be mailed or delivered in
accordance with the notice provisions of the Option Agreement.
Notwithstanding anything to the contrary contained herein,
repurchases pursuant to the Call Right may only be consummated
with respect to Shares owned by the Participant for at least
six months after the date the Shares were acquired on exercise
of the Option.
3.4.2. REPURCHASE PRICE. The price per Share to be paid by the
Corporation upon settlement of the Corporation's Call Right
(the "REPURCHASE PRICE") shall (i) in the case of a
termination (A) for Cause at any time or (B) due to the
Participant's voluntary resignation for any reason on or prior
to the fifteenth (15th) anniversary of the applicable Option
grant, equal the price paid per Share by the Participant, and
(ii) in the case of a termination (I) without Cause at any
time, (II) due to the Participant's death or Disability at any
time or (III) the Participant's voluntary resignation for any
reason following the fifteenth (15th) anniversary of the
applicable Option grant, equal the Fair Market Value of a
Share determined as of the date of the Call Notice.
Notwithstanding the foregoing, the Repurchase Price for Shares
held by a Participant who is a non-officer employee of the
Corporation or a Related Entity (as determined by the
Administrator) shall be the Fair Market Value of such Shares.
3.4.3. CLOSING. The purchase price shall be paid by the Corporation
(or, if applicable, its designee) in cash (by wire transfer of
immediately available funds or by check). The closing of such
purchase shall be on a date to be specified by the
Corporation, such date to be no later than 30 days after the
date of the Call Notice. At such closing, the Participant
shall deliver to the Corporation, free and clear of all Liens,
the certificates or instruments evidencing the Shares being
purchased, duly endorsed (or accompanied by duly executed
stock powers) and otherwise in good form for delivery, against
payment of the purchase price by the Corporation (or, if
applicable, its designee). No adjustments (other than pursuant
to Section 3.2 of this Plan) shall be made to the purchase
price for fluctuations in the Fair Market Value of the Common
Stock after the date of the Call Notice.
3.4.4. ASSIGNMENT. Notwithstanding anything to the contrary, the
Corporation may assign any or all of its rights under this
Section 3.4 to one or more stockholders of the Corporation.
3.4.5. TERMINATION OF CALL RIGHT. The Corporation's Call Right shall
terminate to the extent that it is not exercised prior to the
Public Offering Date.
3.5 SALE OF THE CORPORATION.
3.5.1. Except as otherwise expressly provided in a particular Option
Agreement, if a Sale of the Corporation is proposed to be
effected, then the Corporation (and/or its designees) shall
have the right (but not the obligation) to purchase (the
"PURCHASE OPTION") (A) any or all Options for an amount of
consideration equal to the
19
amount that could have been attained upon the exercise of the
Options which are exercisable at such time (or made
exercisable pursuant to Sections 3.2.2 or 3.2.3 hereof) and
the sale of such Shares pursuant to clause (B) below, less the
exercise price, and less the Holdback Amount, if any, and/or
(B) any or all Shares for an amount of consideration equal to
the product of (x) the fair market value per share as
determined by the Administrator based on the consideration
received in the Sale of the Corporation (with consideration
given to the structure and terms and conditions of the
transaction, including any escrows or indemnities) (less the
Holdback Amount, if any), and (y) the number of Shares which
are being purchased.
3.5.2. The Corporation (or, if applicable, its designee) shall give
notice in writing to the Participant (or any permitted
transferee) of the exercise of the Purchase Option at least 10
days prior to the proposed date of consummation of the Sale of
the Corporation (the "PURCHASE OPTION NOTICE"). The Purchase
Option Notice shall state the number of Options and/or Shares
to be purchased and the estimated Purchase Option price as set
forth in 3.5.1 above.
3.5.3. At least five (5) days prior to the consummation of the Sale
of the Corporation, the Participant (or any permitted
transferee) shall deliver to the Corporation free and clear of
all Liens the certificate duly endorsed (or accompanied by
duly executed stock powers) or instrument, as applicable,
representing the Option or Shares subject to the Purchase
Option. Within five (5) business days after the consummation
of the Sale of the Corporation, the Purchase Option price (net
of the Holdback Amount, if any, shall be paid by the
Corporation (or, if applicable, its designee) to the
Participant for the Options and/or Shares; provided, that with
respect to such Options and/or Shares, the Holdback Amount, if
any, shall be paid to the Participant in accordance with the
terms and conditions of the Transaction Documents.
3.5.4. The Corporation and the Participant (or any permitted
transferee) will promptly perform, whether before or after any
such closing, such additional acts (including, without
limitation, executing and delivering additional documents) as
are reasonably required by either such party to effect more
fully the transactions contemplated by this Section 3.5.
3.5.5. The Corporation's Purchase Option shall terminate to the
extent that it is not exercised prior to the Public Offering
Date.
3.6 DRAG-ALONG RIGHTS.
3.6.1. APPLICABILITY. In connection with any Transfer to any
non-Affiliate by CEH (the "SELLING STOCKHOLDER") of the shares
of Common Stock representing more than 50% of the Common Stock
then held by CEH (a "SIGNIFICANT SALE"), the Selling
Stockholder shall provide written notice to each Participant
(or any permitted transferee) (each, a "CO-SELLER") in
accordance with Section 3.6.3. Each Co-Seller shall consent to
(if such consent is required) and raise no objections
20
against the Significant Sale, and if the Significant Sale is
structured as (i) a merger or consolidation of the
Corporation, or a sale of all or substantially all of the
Corporation's assets, each Co-Seller shall agree to, and
hereby agrees to, waive any dissenters' rights, appraisal
rights or similar rights in connection with such merger,
consolidation or asset sale, or (ii) a sale of shares, each
Co-Seller shall agree to, and hereby agrees to, sell a pro
rata percentage (equal to the percentage of shares proposed to
be sold by the Selling Stockholder relative to the aggregate
number of Shares acquired or subject to Options outstanding
that are exercisable (or made exercisable pursuant to Section
3.2.2 hereof) by the optionee) of their Shares on the terms
and conditions approved by the Selling Stockholder and in each
such instance shall agree, and hereby agrees, to waive any
claims any Co-Seller may have against the Board and the
constituents of the Selling Stockholder in connection with the
Significant Sale. The Co-Sellers shall take all necessary and
desirable actions in connection with the consummation of the
Significant Sale, including obtaining the consent of the
Board, if necessary, to the Significant Sale and the execution
of such agreements and such instruments and other actions
reasonably necessary to provide customary representations,
warranties, indemnities, and escrow arrangements relating to
such Significant Sale.
3.6.2. CONDITIONS. The obligations of the Co-Sellers pursuant to this
Section 3.6.2 are also subject to the satisfaction of the
following conditions:
(a) if any holders of a class are given an option as to
the form and amount of consideration to be received,
all holders of such class shall be given the same
option;
(b) neither the Selling Stockholder nor the Co-Sellers
shall be obligated to (i) make any out-of-pocket
expenditure prior to the consummation of the
Significant Sale (excluding modest expenditures for
postage, copies, etc.) and (ii) pay any portion (or
shall be entitled to be reimbursed by the Corporation
for that portion paid) that is more than its pro rata
share (based upon the amount of consideration
received) of reasonable expenses incurred in
connection with a consummated Significant Sale, to
the extent such costs are incurred for the benefit of
all holders of shares of Common Stock and are not
otherwise paid by the Corporation or the acquiring
party (costs incurred by or on behalf of a holder of
shares of Common Stock for its sole benefit will not
be considered costs of the transaction hereunder),
provided, that a Co-Seller's liability for such
expenses shall not exceed the total consideration
received by such Co-Seller for its shares of Common
Stock; and
(c) neither the Selling Stockholder nor the Co-Sellers
shall be required to provide any representations,
warranties or indemnities in connection with the
Significant Sale, other than those contemplated by
Section 3.6 and those representations, warranties and
indemnities concerning each seller's valid ownership
of Shares, free and clear of all Liens, claims and
other
21
encumbrances (other than those arising under
applicable securities laws and those attributable to
actions by the purchasers thereof), and each seller's
authority, power, and right to enter into and
consummate such purchase, merger, exchange or other
agreement without violating any other agreement. Any
indemnity required to be provided by the Selling
Stockholder and each Co-Seller shall be several and
not joint.
3.6.3. NOTICE OF SIGNIFICANT SALE. The Selling Stockholder shall give
each Co-Seller at least 10 days' prior written notice of any
Significant Sale as to which the Selling Stockholder intends
to exercise its rights under this Section 3.6. If the Selling
Stockholder elects to exercise its rights under this Section
3.6, the Co-Sellers shall take such actions as may be
reasonably required and otherwise cooperate in good faith with
the Selling Stockholder in connection with consummating the
Significant Sale (including, without limitation, the voting of
any Shares to approve such Significant Sale). At the closing
of such Significant Sale, each Co-Seller shall deliver
certificates for all Shares to be sold by such Co-Seller, duly
endorsed for transfer to the purchaser against payment of the
appropriate purchase price.
3.7 CO-SALE RIGHTS.
3.7.1. If CEH receives an offer (the "Offer") to Transfer more than
50% of the Common Stock then held by CEH to any Person other
than an Affiliate (the "Co-Sale Offeror") and CEH does not
exercise its rights pursuant to Section 3.6, the parties
hereto shall comply with the following procedures:
(a) CEH shall, at least twenty (20) Business Days before
such Transfer, deliver a written notice (the "Co-Sale
Notice") to each Participant that sets forth (i) the
number of shares of Common Stock to which the Offer
relates, (ii) the name of the proposed Co-Sale
Offeror, (iii) the proposed amount and type of
consideration (including if the consideration
consists in whole or in part of non-cash
consideration such information available to CEH as
may be reasonably necessary for the Participant to
properly analyze the economic value and investment
risk of such non-cash consideration) and, (iv) the
terms and conditions of payment that the Co-Sale
Offeror intends to accept.
(b) CEH shall not Transfer any Common Stock to the
Co-Sale Offeror unless each of the Participants is
offered the opportunity to Transfer simultaneously a
number of shares of Common Stock equal to its Pro
Rata Amount to which the offer to CEH relates and on
the same terms and conditions (including price).
(c) Within ten (10) days after delivery of the Co-Sale
Notice each Participant may elect to participate in
the proposed Transfer by delivering to CEH a notice
(the "Tag-Along Notice") specifying the type and
number of shares of Common Stock (up to his or her
Pro Rata Amount, as determined in
22
accordance with Section 3.7.1(b) above with respect
to which such Participant shall exercise his, her or
its rights under Section 3.7 and the number of shares
of Common Stock to be Transferred to the Co-Sale
Offeror by CEH shall be reduced accordingly.
(d) Any shares of Common Stock requested to be included
in any Tag-Along Notice shall be Transferred at the
same time and on the same terms and conditions
(including price). If such Transfer is not made
within 60 days from delivery of the Co-Sale Notice,
the provisions of this Section 3.7 shall again become
effective with respect to the proposed Transfer.
3.8 NO STOCKHOLDER RIGHTS FOLLOWING EXERCISE OF A CALL OR REPURCHASE.
If the Participant (or any permitted transferee) holds Shares as to
which the Call Right or Purchase Option has been exercised (in connection with
the termination of the Participant's employment or otherwise), the Participant
shall be entitled to the value of such Shares in accordance with the provisions
of Section 3.4 or Section 3.5, as applicable, but (unless otherwise required by
law) shall no longer be entitled to participation in the Corporation or other
rights as a stockholder with respect to the Shares subject to the call or
repurchase. To the maximum extent permitted by law, the Participant's rights
following the exercise of the Call Right or Purchase Option shall, with respect
to the call or repurchase and the Shares covered thereby, be solely the rights
that he or she has as a general creditor of the Corporation to receive payment
of the amount specified in Section 3.4 or Section 3.5 as applicable.
3.9 COMPLIANCE WITH LAWS.
3.9.1. GENERAL. This Plan, the granting and vesting of Options under
this Plan, and the offer, issuance and delivery of shares of
Common Stock, and/or the payment of money under this Plan or
under Options are subject to compliance with all applicable
federal and state laws, rules and regulations (including but
not limited to state and federal securities laws) and to such
approvals by any listing, regulatory or governmental authority
as may, in the opinion of counsel for the Corporation, be
necessary or advisable in connection therewith. The person
acquiring any securities under this Plan will, if requested by
the Corporation, provide such assurances and representations
to the Corporation as the Administrator may deem necessary or
desirable to assure compliance with all applicable legal and
accounting requirements.
3.9.2. COMPLIANCE WITH SECURITIES LAWS. No Participant shall sell,
pledge or otherwise transfer shares of Common Stock acquired
pursuant to an Option or any interest in such shares except in
accordance with the express terms of this Plan and the
applicable Option Agreement. Any attempted transfer in
violation of this Section 3.9 shall be void and of no effect.
Without in any way limiting the provisions set forth above, no
Participant shall make any disposition of all or any portion
of shares of Common Stock acquired or to be acquired pursuant
to an Option, except in compliance with all applicable federal
and state securities laws and unless and until:
23
(a) there is then in effect a registration statement
under the Securities Act covering such proposed
disposition and such disposition is made in
accordance with such registration statement; or
(b) such disposition is made in accordance with Rule 144
under the Securities Act; or
(c) such Participant notifies the Corporation of the
proposed disposition and furnishes the Corporation
with a statement of the circumstances surrounding the
proposed disposition, and, if requested by the
Corporation, furnishes to the Corporation an opinion
of counsel acceptable to the Corporation's counsel,
that such disposition will not require registration
under the Securities Act and will be in compliance
with all applicable state securities laws.
Notwithstanding anything else herein to the contrary, the
Corporation or a Related Entity has no obligation to register
the Common Stock or file any registration statement under
either federal or state securities laws, nor does the
Corporation or a Related Entity make any representation
concerning the likelihood of a public offering of the Common
Stock or any other securities of the Corporation.
3.9.3. SHARE LEGENDS. All certificates evidencing shares of Common
Stock issued or delivered under this Plan shall bear the
following legends and/or any other appropriate or required
legends under applicable laws:
"OWNERSHIP OF THIS CERTIFICATE, THE SHARES EVIDENCED BY THIS
CERTIFICATE AND ANY INTEREST THEREIN ARE SUBJECT TO
SUBSTANTIAL RESTRICTIONS ON TRANSFER UNDER APPLICABLE LAW AND
UNDER AGREEMENTS WITH THE CORPORATION, INCLUDING RESTRICTIONS
ON SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION."
"THE SHARES ARE SUBJECT TO THE CORPORATION'S TRANSFER
RESTRICTIONS AND CALL RIGHTS TO REPURCHASE THE SHARES UNDER
THE CORPORATION'S STOCK OPTION PLAN AND AGREEMENTS WITH THE
CORPORATION THEREUNDER, COPIES OF WHICH ARE AVAILABLE FOR
REVIEW AT THE OFFICE OF THE SECRETARY OF THE CORPORATION."
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("ACT"), NOR HAVE THEY BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES LAWS OF ANY STATE. NO TRANSFER OF SUCH SECURITIES
WILL BE PERMITTED UNLESS A REGISTRATION STATEMENT UNDER THE
ACT IS IN EFFECT AS TO SUCH TRANSFER, THE TRANSFER IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE ACT, OR IN THE OPINION OF
COUNSEL TO THE
24
CORPORATION, REGISTRATION UNDER THE ACT IS UNNECESSARY IN
ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT AND WITH
APPLICABLE STATE SECURITIES LAWS."
3.9.4. DELIVERY OF FINANCIAL STATEMENTS. The Corporation shall
deliver annually to Participants such financial statements of
the Corporation as are required to satisfy applicable
securities laws.
3.9.5. CONFIDENTIAL INFORMATION. Any information relating to the
Corporation obtained by Participants in connection with or as
a result of this Plan or their Options shall be treated as
confidential.
3.10 TAX WITHHOLDING.
3.10.1. TAX WITHHOLDING. Upon any exercise or payment of any Option or
upon the disposition of shares of Common Stock acquired
pursuant to the exercise of an Incentive Stock Option prior to
satisfaction of the holding period requirements of Section 422
of the Code, the Corporation or Related Entity shall have the
right at its option to:
(a) require the Participant (or Personal Representative
or Beneficiary, as the case may be) to pay or provide
for payment of the amount of any taxes which the
Corporation or a Related Entity may be required to
withhold with respect to such Option event or
payment;
(b) deduct from any amount payable to the Participant (or
Personal Representative or Beneficiary, as the case
may be) in cash or equivalent (in respect of an
Option or otherwise) the amount of any taxes which
the Corporation or a Related Entity may be required
to withhold with respect to such Option event or
payment; or
(c) reduce the number of shares of Common Stock to be
delivered by (or otherwise reacquire shares held by
the Participant at least 6 months) the appropriate
number of shares of Common Stock, valued at their
then Fair Market Value, to satisfy the minimum
withholding obligation.
The Administrator may, in its sole discretion (subject to
Section 3.9), grant (either at the time of grant of the Option
or thereafter) to the Participant the right to elect, pursuant
to such rules and subject to such conditions as the
Administrator may establish, to have the Corporation utilize
the withholding offset under clause (c) above.
In no event will the value of shares withheld under (c) above
exceed the minimum amount of required withholding under
applicable law.
3.11 PLAN AND OPTION AMENDMENTS, TERMINATION AND SUSPENSION.
25
3.11.1. BOARD AUTHORIZATION. The Board may, at any time, terminate or,
from time to time, amend, modify or suspend this Plan, in
whole or in part, and/or any outstanding Option(s). No Options
may be granted during any suspension of this Plan or after
termination of this Plan. Unless otherwise expressly provided
in this Plan or in an applicable Option Agreement, any Option
granted prior to the termination or suspension of this Plan
may extend beyond the date of such termination or suspension,
and all authority of the Administrator with respect to Options
hereunder, including the authority to amend an Option, will
continue during any suspension of this Plan and in respect of
Options outstanding upon or following the termination of this
Plan.
3.11.2. ADMINISTRATOR AUTHORIZATION. The Administrator may, at any
time or from time to time, amend or modify this Plan, in whole
or in part, and/or any outstanding Option(s).
3.11.3. STOCKHOLDER APPROVAL. This Plan and any amendment to this Plan
shall be subject to stockholder approval to the extent then
required under Section 422 or 424 of the Code or any other
applicable law, or deemed necessary or advisable by the Board.
3.11.4. LIMITATIONS ON AMENDMENTS TO PLAN AND OPTIONS. The Board and
the Administrator may, without the written consent of the
Participant affected thereby, amend, terminate or suspend this
Plan in any manner materially adverse to the Participant's
rights or benefits under an outstanding Option or amend the
Participant's Option in any manner materially adverse to the
Participant's rights or benefits thereunder. Changes
contemplated by Section 3.2 do not and will not be deemed to
constitute changes or amendments for purposes of this Section
3.11.
3.12 PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise expressly authorized
by the Administrator or this Plan or in the Option Agreement, a
Participant will not be entitled to any privilege of stock ownership as
to any shares of Common Stock not actually delivered to and held of
record by the Participant. No adjustment will be made for dividends or
other rights as a stockholder for which a record date is prior to such
date of delivery.
3.13 EFFECTIVE DATE OF THE PLAN. This Plan is effective as of March 19,
2004, subject to approval by the shareholders of the Corporation within
twelve months after the date the Board approved this Plan.
3.14 TERM OF THE PLAN. Unless earlier terminated by the Board, this Plan
will terminate at the close of business on the day before the 10th
anniversary of the Effective Date; provided, however, that any Option,
the term of which will expire after such date, and any Share held after
such date, will continue to be governed by the provisions of this Plan
until, in the case of any such Option, such Option terminates, and in
the case of any such Share, indefinitely.
3.15 GOVERNING LAW/SEVERABILITY.
26
3.15.1. CHOICE OF LAW. This Plan, the Options, all documents
evidencing Options and all other related documents will be
governed by, and construed in accordance with, the laws of the
state of Delaware.
3.15.2. SEVERABILITY. If it is determined that any provision of this
Plan or an Option Agreement is invalid and unenforceable, the
remaining provisions of this Plan and/or the Option Agreement,
as applicable, will continue in effect provided that the
essential economic terms of this Plan and the Option can still
be enforced.
3.16 CAPTIONS. Captions and headings are given to the sections and
subsections of this Plan solely as a convenience to facilitate
reference. Such headings will not be deemed in any way material or
relevant to the construction or interpretation of this Plan or any
provision thereof.
3.17 NON-EXCLUSIVITY OF PLAN. Nothing in this Plan will limit or be deemed
to limit the authority of the Board or the Administrator to grant
awards or authorize any other compensation, with or without reference
to the Common Stock, under any other plan or authority.
3.18 NO RESTRICTION ON CORPORATE POWERS. The existence of this Plan, the
Option Agreements, and the Options granted hereunder, shall not limit,
affect or restrict in any way the right or power of the Board or the
stockholders of the Corporation to make or authorize: (a) any
adjustment, recapitalization, reorganization or other change in the
Corporation's or any Subsidiary's capital structure or its business;
(b) any merger, amalgamation, consolidation or change in the ownership
of the Corporation or any Subsidiary; (c) any issue of bonds,
debentures, capital, preferred or prior preference stocks ahead of or
affecting the Corporation's capital stock or the rights thereof; (d)
any dissolution or liquidation of the Corporation or any Subsidiary;
(e) any sale or transfer of all or any part of the Corporation or any
Subsidiary's assets or business; or (f) any other corporate act or
proceeding by the Corporation or any Subsidiary. No Participant,
Beneficiary or any other person shall have any claim under any Option
or Option Agreement against any member of the Board or the
Administrator, or the Corporation or any employees, officers or agents
of the Corporation or any Subsidiary, as a result of any such action.
The adoption of this Plan shall not be deemed to give any person a
right to be granted any Options.
3.19 OTHER COMPENSATION OR BENEFIT PROGRAMS. Payments and other benefits
received by a Participant under an Option made pursuant to this Plan
shall not be deemed a part of a Participant's compensation for purposes
of the determination of benefits under any other employee welfare or
benefit plans or arrangements, if any, provided by the Corporation or
any Subsidiary, except where the Administrator or the Board expressly
otherwise provides or authorizes in writing. Options under this Plan
may be made in addition to, in combination with, as alternatives to or
in payment of grants, awards or commitments under any other plans or
arrangements of the Corporation or any Subsidiary.
27
4. DEFINITIONS.
"ACT" has the meaning set forth in Section 3.6.3.
"ADMINISTRATOR" means, as determined by the Board, (i) the Board, (ii) one or
more committees of director(s) of the Corporation appointed by the Board
(comprised solely of one or more directors or such greater number of directors
as may be required under applicable law), (iii) to the extent permitted by
applicable law, any officer(s) of the Corporation appointed by the Board, to
administer all or certain aspects of this Plan.
"AFFILIATE" means, with respect to any Person, any Person who, directly or
indirectly, controls, is controlled by or is under common control with the
Person. For purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise.
"BENEFICIARY" means the person, persons, trust or trusts designated by a
Participant, or, in the absence of a designation, entitled by will or the laws
of descent and distribution, to receive the benefits specified in the Option
Agreement and under this Plan if the Participant dies, and means the
Participant's executor or administrator if no other Beneficiary is designated
and able to act under the circumstances.
"BOARD" means the Board of Directors of the Corporation.
"CALL NOTICE" has the meaning set forth in Section 3.4.1.
"CALL RIGHT" has the meaning set forth in Section 3.4.1.
"CAUSE" means (unless otherwise expressly provided in the applicable Option
Agreement, or another applicable contract with the Eligible Employee, such as an
employment agreement, that defines such term for purposes of determining the
effect that a "for cause" termination has on the Eligible Employee's stock
options) a termination of employment or service because of:
(a) the Participant's conviction of, or plea of nolo
contendere to, a felony or a crime involving moral
turpitude; or
(b) the Participant's personal dishonesty, incompetence,
willful misconduct, willful violation of any law,
rule, or regulation (other than minor traffic
violations or similar offenses) or breach of a
fiduciary duty which involves personal profit, in
each case, which adversely impacts or reflects badly
on the Corporation or Related Entity as determined by
the Board; or
(c) the Participant's commission of material
mismanagement in the conduct of his duties as
assigned to him by (i) the Board or the board of a
Related Entity, or (ii) the Participant's supervising
officer or officers of the Corporation or Related
Entity; or
28
(d) the Participant's willful failure to execute or
comply with the policies of the Corporation or
Related Entity or his stated duties as established by
(i) the Board or the board of a Related Entity, or
(ii) the Participant's supervising officer or
officers of the Corporation or Related Entity; or
(e) with respect to an Other Eligible Person only, the
Participant's willfully making any material
misrepresentation or willfully omitting to disclose
any material fact to the Board or the board of a
Related Entity with respect to the business of the
Corporation or Related Entity.
A termination for Cause shall be deemed to occur (subject to reinstatement upon
a contrary final determination by the Administrator) on the date on which the
Corporation or Related Entity first delivers written notice to the Participant
of a finding of termination for Cause.
"CEH" means Crunch Equity Holding, LLC.
"CODE" means the Internal Revenue Code of 1986, as amended from time to time.
"COMMON STOCK" means the shares of the Corporation's Common Stock, $0.01 par
value, and such other securities or property as may become the subject of
Options, or become subject to Options, pursuant to an adjustment made under
Section 3.2 of this Plan.
"COMMON STOCK EQUIVALENTS" means the Common Stock and any rights, warrants,
options, convertible securities or indebtedness, exchangeable securities or
indebtedness, or other rights, exercisable for or convertible or exchangeable
into, directly or indirectly, Common Stock, whether such securities are
convertible or exchangeable at the time of issuance or upon the passage of time
or the occurrence of some future event and whether or not such securities are
"in the money" at the time of determination.
"CORPORATION" means Crunch Holding Corp., a Delaware corporation, and its
successors.
"CO-SELLER" has the meaning set forth in Section 3.6.1.
"DISABILITY" means a "permanent and total disability" within the meaning of
Section 22(e)(3) of the Code and, with respect to Options other than Incentive
Stock Options, such other disabilities, infirmities, afflictions, or conditions
as the Administrator may include.
"EFFECTIVE DATE" means the date specified in Section 3.13 hereof.
"ELIGIBLE EMPLOYEE" means an officer (whether or not a director) or employee of
the Corporation or a Related Entity.
"ELIGIBLE PERSON" means an Eligible Employee, or any Other Eligible Person,
designated by the Administrator in its discretion.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time
to time.
29
"FAIR MARKET VALUE" means, as it relates to Common Stock, the average of the
high and low prices of such Common Stock as reported on the principal national
securities exchange on which the shares of Common Stock are then listed or the
Nasdaq National Market System, as applicable, on the date specified herein for
such a determination, or if there were no sales on such date, on the next
succeeding day or immediately preceding day on which there were sales, or if
such Common Stock is not listed on a national securities exchange or the Nasdaq
National Market System, the last reported bid price in the over-the-counter
market, or if such shares are not traded in the over-the-counter market, the per
share cash price for which all of the outstanding Common Stock could be sold to
a willing purchaser in an arms length transaction (without regard to minority
discount, absence of liquidity, or transfer restrictions imposed by an
applicable law or agreement) at the date of the event giving rise to the need
for a determination. Except as may be otherwise expressly provided above or in a
particular Option Agreement, Fair Market Value shall be determined in good faith
by the Administrator and such determination shall be binding on all
Participants.
"FULLY-DILUTED COMMON STOCK" means, at any time, all then outstanding Common
Stock Equivalents.
"HOLDBACK AMOUNT" means the portion of the consideration received by the
stockholders that are required to be retained by the terms of the definitive
documentation entered into in connection with such Sale of the Corporation
including, without limitation, amounts retained for purchase price adjustments
and indemnification obligations.
"IMMEDIATE FAMILY" means the spouse of an individual and the grandparents,
parents, siblings and children (and children and spouses of any of the
foregoing) of the individual or his or her spouse. An adopted child will be
treated as a child of his or her adoptive parent or parents (but only if) he or
she was adopted before he or she reached 21 years of age.
"INCENTIVE STOCK OPTION" means an Option that is designated and intended as an
incentive stock option within the meaning of Section 422 of the Code, the award
of which contains such provisions (including but not limited to the receipt of
stockholder approval of this Plan, if the award is made prior to such approval)
and is made under such circumstances and to such persons as may be necessary to
comply with that section.
"IRR" means, with respect to the Common Stock, a calculation made in accordance
with generally accepted financial practices which shows the pre-tax, compounded
annual internal rate of return realized thereon, (i) assuming all shares of
Common Stock (other than Common Stock Equivalents issued to employees or
directors of or consultants to the Corporation or any Related Entity) were
purchased by one Person on November 25, 2003 at a price equal to the Fair Market
Value of the Common Stock on November 25, 2003 and all such shares of Common
Stock were held continuously by such Person from the date of issuance through
the date of the Liquidity Event, (ii) assuming such holder receives cash on the
Liquidity Event pursuant to Section 3.2.2(b) hereof and (iii) including, as a
return on the shares of Common Stock, any cash dividends or distributions made
by the Corporation or any Related Entity in respect of the shares of Common
Stock during such period; provided, however, that in the event of any redemption
of Common Stock or sale of newly-issued Common Stock Equivalents (other than
Common Stock Equivalents issued to employees or directors of or consultants to
the Corporation or any Related
30
Entity), then cash inflows or outflows associated with such redemption or sale
shall be reflected in the calculation of IRR, notwithstanding the general rule
of clause (i) of this definition.
"LIEN" means any of the following mortgage; lien (statutory or other); other
security agreement, arrangement or interest; hypothecation, pledge or other
deposit arrangement; assignment; charge; levy; executory seizure; attachment;
garnishment; encumbrance (including any easement, exception, reservation or
limitation) right of way, and the like); conditional sale, title retention,
voting agreement or other similar agreement, arrangement, device or restriction,
preemptive or similar right; the filing of any financial statement under the
Uniform Commercial Code or comparable law of any jurisdiction; restriction on
sale, transfer, assignment, disposition or other alienation; or any option,
equity, claim or right of or obligation to, any other Person, of whatever kind
and character.
"LIQUIDITY EVENT" means the consummation of a Sale of the Corporation or the
occurrence of a Qualified Market Cap.
"NET PROCEEDS" means (i) with respect to a Sale of the Corporation, the
aggregate gross proceeds received (or deemed received) by the holders of the
Common Stock on or in consideration for such equity interests in connection with
such Sale of the Corporation, net of (A) any Holdback Amount applicable to such
Sale of the Corporation and (B) all expenses incurred in connection therewith
that are allocable to such equity interests other than taxes payable in respect
of any income or gain recognized on receipt of such net proceeds, and (ii) with
respect to a Qualified Market Cap, the implied equity market capitalization of
the common equity of the Corporation (or any Subsidiary or any
successor-in-interest to the Corporation) determined by multiplying the closing
price of a common equity interest on the first day that the Qualified Market Cap
occurs by the total number of common equity interests outstanding, net of fees
and expenses incurred by the Corporation and the Related Entities in connection
with the initial public offering of such common equity interests.
"NONQUALIFIED STOCK OPTION" means an Option that is not an incentive stock
option within the meaning of Section 422 of the code and includes an Option
designated as a Nonqualified Stock Option and any Option intended as an
Incentive Stock Option that fails to meet the applicable legal requirements
thereof.
"OPTION" means an option to purchase Common Stock authorized by and granted
under this Plan, whether a Performance Vesting Option or Time Vesting Option.
The Administrator will designate any Option granted to an employee of the
Corporation or a Subsidiary as a Nonqualified Stock Option or an Incentive Stock
Option.
"OPTION AGREEMENT" means any writing, approved by the Administrator, setting
forth the terms of an Option that has been duly authorized and approved.
"OTHER ELIGIBLE PERSON" means any director of, or any individual consultant or
advisor who renders or has rendered bona fide services (other than services in
connection with the offering or sale of securities of the Corporation or a
Related Entity in a capital raising transaction or as a market maker or promoter
of the Corporation's or Related Entity's securities) to, the Corporation or
Related Entity, and who is selected to participate in this Plan by the
Administrator. An
31
advisor or consultant may be selected as an Other Eligible Person only if such
person's participation in this Plan would not adversely affect (a) the
Corporation's eligibility to rely on the Rule 701 from registration under the
Securities Act for the offering of shares issuable under this Plan by the
Corporation or Related Entity, or (b) the Corporation's compliance with any
other applicable laws.
"PARTICIPANT" means an Eligible Person who has been granted and holds an Option
under this Plan.
"PERFORMANCE VESTING OPTION" has the meaning set forth in Section 2.2.1 hereof.
"PERSON" means, and shall be construed broadly and shall include, an individual,
a partnership, a corporation, an association, a joint stock company, a limited
liability company, a trust, a joint venture, an unincorporated organization and
a governmental entity or any department, agency or political subdivision
thereof.
"PERSONAL REPRESENTATIVE" means the person or persons who, upon the Disability
or incompetence of a Participant, has acquired on behalf of the Participant, by
legal proceeding or otherwise, the power to exercise the rights or receive
benefits under this Plan by virtue of having become the legal representative of
the Participant.
"PLAN" means this Crunch Holding Corp. Stock Option Plan, as it may hereafter be
amended from time to time.
"PRO RATA AMOUNT" means, with respect to any Participant, the quotient obtained
by dividing (i) the number of shares of Common Stock held by such Participant by
(ii) the aggregate number of shares of Common Stock held by all stockholders of
the Corporation, assuming, in each of the preceding clauses (i) and (ii), the
conversion or exchange of all securities of the Corporation by their terms
convertible into or exchangeable for Common Stock and the exercise of all vested
and "in the money" options to purchase or rights to subscribe for Common Stock
(including warrants) or such convertible or exchangeable securities.
"PUBLIC OFFERING DATE" means the date the Common Stock is first registered under
the Exchange Act and listed or quoted on a recognized national securities
exchange or in the NASDAQ National Market Quotation System.
"PURCHASE OPTION" has the meaning set forth in Section 3.5.1.
"QUALIFIED MARKET CAP" means that the Common Stock or the common equity of any
Subsidiary or any successor-in-interest to the Corporation shall have been
registered under the Securities Act and the Corporation shall have a equity
market capitalization of more than $500,000,000 for a period of at least 20
consecutive trading days (determined by multiplying the closing price of the
Common Stock or common equity, as applicable, on each such day by the total
number of Common Stock Equivalents outstanding on each such day).
"RELATED ENTITY" means, at any time, any (i) direct or indirect parent of the
Corporation, or (ii) direct or indirect subsidiary of the Corporation, provided
that the majority of such
32
subsidiary's outstanding voting stock or voting power is beneficially owned,
directly or indirectly by the Corporation.
"REPURCHASE PRICE" has the meaning set forth in Section 3.4.2.
"RULE 16b-3" has the meaning set forth in Section 1.2.1.
"SALE OF THE CORPORATION" means (i) the sale or transfer (in one transaction or
a series of related transactions) of all or substantially all of a Sale
Entities' assets, to a Person or a group of Persons acting in concert, (ii) the
sale or transfer (in one transaction or a series of related transactions) of a
significant division or product line of any of the Sale Entities (whether by
asset sale, merger, spin-off or other structure), to a Person or a group of
Persons acting in concert, (iii) the sale or transfer (in one transaction or a
series of related transactions) of a majority of the outstanding equity
interests in any of the Sale Entities, to a Person or a group of Persons acting
in concert, or (iv) the merger or consolidation of any of the Sale Entities with
or into another Person that is not an Affiliate of any of the Sale Entities, in
each case in clauses (i), (ii), (iii) and (iv) above, under circumstances in
which the holders of a majority in voting power of the outstanding equity
interests of any of the Sale Entities, immediately prior to such transaction,
own less than a majority in voting power of the outstanding equity interests of
such Sale Entities, or the surviving or resulting corporation, entity or
acquirer, as the case may be, immediately following such transaction.
"SALE ENTITIES" means (i) the Corporation, Crunch Equity Holding, LLC, Pinnacle
Foods Group Inc. or Pinnacle Foods Corporation, or (ii) any successor in
interest thereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to time.
"SELLING STOCKHOLDER" has the meaning set forth in Section 3.6.1.
"SHARE LIMIT" has the meaning set forth in Section 1.4.2.
"SHARES" means the shares of Common Stock acquired upon exercise of an Option.
"SIGNIFICANT SALE" has the meaning set forth in Section 3.6.1.
"SUBSIDIARY" of any Person, means (i) a corporation a majority of whose
outstanding shares of capital stock or other equity interest with voting power,
under ordinary circumstances, to elect directors, is at the time, directly or
indirectly, owned by such Person, by one or more subsidiaries of such Person or
by such Person and one or more subsidiaries of such Person, and (ii) any other
Person (other than a corporation) in which such Person, a subsidiary of such
Person or such Person and one or more subsidiaries of such Person, directly or
indirectly, at the date of determination thereof, has (x) at least a majority
ownership interest or (y) the power to elect or direct the election of the
directors or other governing body of such Person.
"TARGET IRR" means, with respect to any Liquidity Event, 15.0%.
"TIME VESTING OPTION" has the meaning set forth in Section 2.2.1 hereof.
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"TRANSACTION DOCUMENTS" means the definitive documentation entered into in
connection with a Sale of the Corporation.
"TRANSFER" means any direct or indirect sale, transfer, pledge, hypothecation,
assignment, gift, conveyance or other disposition of any security or any
interest therein.
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