EXHIBIT 10.4
AMENDED AND RESTATED
JAFRA COSMETICS INTERNATIONAL, INC.
STOCK INCENTIVE PLAN
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Section 1. Purpose
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The purpose of this Amended and Restated Jafra Cosmetics
International, Inc. Stock Incentive Plan is to foster and promote the long-term
financial success of the Company and the Subsidiaries and to increase materially
stockholder value by (a) motivating superior performance by participants in the
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Plan, (b) providing participants in the Plan with an ownership interest in CDRJ
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Investments (Lux) S.A., a Luxembourg societe anoyme and of which the Company is
an indirect wholly owned subsidiary, and (c) enabling the Company and the
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Subsidiaries to attract and retain the services of an outstanding management
team upon whose judgment, interest and special effort the successful conduct of
its operations is largely dependent.
Section 2. Definitions
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2.1 Definitions. Whenever used herein, the following terms shall
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have the respective meanings set forth below:
(a) "Affiliate" means, with respect to any person, any other person
controlled by, controlling or under common control with such person.
(b) "Acquisition Agreement" means the Acquisition Agreement, dated as
of January 26, 1998, by and among CDRJ Holding Company, a Cayman Islands
exempt company, Holding, The Gillette Company and the other parties
thereto, as amended.
(c) "Applicable Share Valuation" means, as of any date of
determination, the annual valuation of the Common Stock performed as of the
last day of the last Fiscal Year ending prior to such date of determination
by an independent valuation firm chosen by the Board, except that, in the
case of a date of determination occurring during the fourth fiscal quarter
of any Fiscal Year beginning with the fourth quarter of the 1998 Fiscal
Year, the term "Applicable Share Valuation" shall mean the annual valuation
of the Common Stock performed as of the last day of such fourth fiscal
quarter by an independent valuation firm chosen by the Holding Board. Such
annual valuations shall be performed as promptly as practicable following
the end of each Fiscal Year, beginning with the 1998 Fiscal Year.
(d) "Award Agreement" means the agreement evidencing the grant of any
Incentive Award under the Plan, including a Subscription Agreement and an
Option Agreement.
(e) "Board" means the Board of Directors of the Company.
(f) "CD&R Fund" means the Clayton, Dubilier & Rice Fund V Limited
Partnership, a Cayman Islands exempted limited partnership, and any
successor investment vehicle managed by Clayton, Dubilier & Rice, Inc.
(g) "Cause" shall mean (i) the continued and willful failure of the
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Participant substantially to perform the duties of his or her employment
for any member of the CDRJ Group (other than any such failure due to the
Participant's physical or mental illness) after a demand for substantial
performance has been delivered in writing to the Participant by the
executive to whom the Participant reports or by the Board, which demand
identifies the manner in which such executive or the Board, as the case may
be, believes that the Participant has not substantially performed such
duties, (ii) the Participant's engaging in willful and serious misconduct
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that has caused or is reasonably expected to result in material injury to
Holding or any of its Subsidiaries or Affiliates, (iii) the Participant's
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conviction of, or entering a plea of guilty or nolo contendere to, a crime
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that constitutes a felony or (iv) the material breach by the Participant of
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any of his or her obligations hereunder or under any other written
agreement or covenant with Holding or any of its Subsidiaries or
Affiliates; provided that in the event that the Participant is employed by
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Holding or any of its Subsidiaries or Affiliates under an effective
employment agreement on the date such Participant's employment thereunder
is terminated and such employment agreement contains a different definition
of Cause, the definition of Cause contained in such employment agreement
shall be substituted for the definition set forth above for all purposes
hereunder.
(h) "CDRJ Group" means Holding and its subsidiaries.
(i) "CDRJ North Atlantic" means CDRJ North Atlantic (Lux) Sarl, a
wholly-owned subsidiary of Holding, and of which the Company is a wholly-
owned subsidiary.
(j) "Change in Control" means, with respect to Holding, CDRJ North
Atlantic or the Company, the first to occur after the date hereof of the
following events:
(i) the acquisition by any person, entity or "group" (as defined
in section 13(d) of the Exchange Act) (other than (x) any member of the
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CDRJ Group, (y) any employee benefit plan of any member of the CDRJ
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Group, or (z) the CD&R Fund or any Affiliate of the CD&R Fund)
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through one transaction or a series of related transactions of 50% or
more of the combined voting power of the then outstanding voting
securities of Holding, CDRJ North Atlantic or the Company, as the case
may be;
(ii) the merger or consolidation of Holding, CDRJ North Atlantic
or the Company as a result of which persons who were stockholders of
Holding, CDRJ North Atlantic or the Company, as the case may be,
immediately prior to such merger or consolidation, do not, immediately
thereafter, own, directly or indirectly, more than 50% of the
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combined voting power entitled to vote generally in the election of
directors of the merged or consolidated company;
(iii) the liquidation or dissolution of Holding, CDRJ North
Atlantic or the Company (other than a dissolution occurring upon a
merger or consolidation thereof) other than a liquidation of CDRJ
North Atlantic or the Company, as the case may be, into Holding or a
Subsidiary thereof or a liquidation or dissolution that is incident to
a Reorganization; and
(iv) the sale, transfer or other disposition of all or
substantially all of the assets of Holding, CDRJ North Atlantic or the
Company through one transaction or a series of related transactions to
one or more persons or entities that are not, immediately prior to
such sale, transfer or other disposition, Affiliates of Holding or the
CD&R Fund.
(k) "Change in Control Price" means the price per share of Common
Stock paid in conjunction with any transaction resulting in a Change in
Control (as determined in good faith by the Holding Board if any part of
such price is payable other than in cash).
(l) "Committee" means the Compensation Committee of the Board (or
such other committee of the Board which shall have jurisdiction over the
compensation of officers).
(m) "Common Stock" means the Class A voting shares, par value $2.00
per share, of Holding.
(n) "Company" means Jafra Cosmetics International, Inc., a Delaware
corporation.
(o) "Disability" means a physical or mental disability or infirmity
that prevents the performance of the Participant's employment-related
duties lasting (or likely to last, based on competent medical evidence
presented to the Board) for a period of six months or longer. The Board's
reasoned and good faith judgment as to Disability shall be final and shall
be based on such competent medical evidence as shall be presented to it by
the Participant or by any physician or group of physicians or other
competent medical expert employed by the Participant or Holding to advise
the Board; provided that in the event that the Participant is employed by
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Holding or any of its Subsidiaries or Affiliates under an effective
employment agreement on the date such Participant's employment thereunder
is terminated and such employment agreement contains a different definition
of Disability, the definition of Disability contained in such employment
agreement shall be substituted for the definition set forth above for all
purposes hereunder.
(p) "EBITDA", for any period, shall, unless otherwise provided in an
Award Agreement, have the meaning assigned to such term in the Credit
Agreement, dated as of April 30, 1998, among the Company, the other
borrowers party thereto, Credit Suisse First Boston, as administrative
agent, and the lenders party thereto from time to time, as the same may be
amended from time to time.
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(q) "Effective Date" means April 30, 1998.
(r) "Employee" means any executive officer or other key management
employee of the Company or a Subsidiary.
(s) "Extraordinary Termination" means, unless otherwise provided in
the Option Agreement, a termination of a Participant's employment with a
member of the CDRJ Group by reason of the Participant's death, Disability
or Retirement.
(t) "Fair Market Value"shall mean, as of any date, the fair market
value on such date of a share of Common Stock as determined in good faith
by the Holding Board. In making a determination of Fair Market Value, the
Holding Board shall give due consideration to such factors as it deems
appropriate, including, without limitation, the earnings and certain other
financial and operating information of Holding and its Subsidiaries in
recent periods, the potential value of Holding and its Subsidiaries as a
whole, the future prospects of Holding and its Subsidiaries and the
industries in which they compete, the history and management of Holding and
its Subsidiaries, the general condition of the securities markets, the fair
market value of securities of companies engaged in businesses similar to
those of Holding and its Subsidiaries and the Applicable Share Valuation.
The determination of Fair Market Value will not give effect to any
restrictions on transfer of the shares of Common Stock or the fact that
such Common Stock would represent a minority interest in Holding.
Notwithstanding the foregoing, following a Public Offering, Fair Market
Value shall mean the average of the high and low trading prices for a share
of Common Stock on the primary national exchange (including Nasdaq) on
which the Common Stock is then traded on the trading day immediately
preceding the date as of which such Fair Market Value is determined.
(u) "Holding" means CDRJ Investments (Lux) S.A., a Luxembourg societe
anoyme, and any successor thereto.
(v) "Holding Board" means the Board of Directors of Holding.
(w) "Incentive Award" means an award of Options under the Plan or the
right to purchase Common Stock pursuant to Article VIII of the Plan.
(x) "New Employer" means a Participant's employer, or the parent or a
subsidiary of such employer, immediately following a Change in Control.
(y) "Option" means the right granted to a Participant under the Plan
to purchase a stated number of shares of Common Stock from the Company at a
stated price, not less than Fair Market Value on the date of grant, for a
specified period of time.
(z) "Option Agreement" means a management stock option agreement
between the Company and the Participant setting forth the terms and
conditions of any Options granted hereunder, which agreement shall, unless
the Board otherwise determines, be substantially in the form attached
hereto as Exhibit A.
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(aa) "Participant" means any Employee designated by the Board to
participate in the Plan.
(bb) "Performance Option" means an Option granted pursuant to the
Plan which vests in accordance with the provisions of Section 6.3(b) based
upon the financial performance of Holding and/or the Subsidiaries.
(cc) "Plan" means this Amended and Restated Jafra Cosmetics
International Stock Incentive Plan, as the same may be amended from time to
time.
(dd) "Public Offering" means the first day as of which sales of
Common Stock are made to the public in the United States pursuant to an
underwritten public offering of the Common Stock led by one or more
underwriters at least one of which is an underwriter of nationally
recognized standing.
(ee) "Registration and Participation Agreement" means the Registration
and Participation Agreement, dated as of April 30, 1998, among Holding and
certain stockholders of Holding, as the same may be amended from time to
time.
(ff) "Reorganization" means a reincorporation of Holding in another
jurisdiction, whether through a merger with or into another entity, a
transfer of substantially all of its assets to another entity or other
transactions having a similar result.
(gg) "Retirement" means a Participant's retirement from active
employment with Holding and the Subsidiaries at or after age 65.
(hh) "Service Option" means an Option granted pursuant to the Plan
which vests in accordance with the provisions of Section 6.3(a) based upon
a Participant's completion of service.
(ii) "Subscription Agreement" means the management stock subscription
agreement entered into by Holding and a Participant setting forth the terms
and conditions of any purchase of Common Stock by such Participant under
the Plan which agreement shall be substantially in the form attached hereto
as Exhibit B, unless the Board, in consultation with the Holding Board,
determines otherwise.
(jj) "Subsidiary" means any corporation or other person, a majority
of whose outstanding voting securities or other equity interests is owned,
directly or indirectly, by Holding.
2.2 Gender and Number. Except when otherwise indicated by the
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context, words in the masculine gender used in the Plan shall include the
feminine gender, the singular shall include the plural, and the plural shall
include the singular.
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Section 3. Eligibility and Participation
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Participants in the Plan shall be those Employees selected by the
Board, in consultation with the Holding Board, to participate in the Plan from
time to time. The selection of an Employee as a Participant shall neither
entitle such Employee to nor disqualify such Employee from participation in any
other award or incentive plan.
Section 4. Powers of the Board
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4.1 Power to Grant and Establish Terms of Awards. The Board shall,
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subject to the terms of the Plan, determine the Participants to whom Incentive
Awards shall be granted and the terms and conditions of such Incentive Awards,
provided that nothing in the Plan shall limit the right of members of the Board
who are Employees to receive Incentive Awards hereunder.
4.2 Administration. The Board shall be responsible for the
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administration of the Plan. Any authority exercised by the Board under the Plan
shall be exercised by the Board in its sole discretion. The Board, by majority
action thereof, is authorized to prescribe, amend and rescind rules and
regulations relating to the administration of the Plan, to provide for
conditions and assurances deemed necessary or advisable to protect the interests
of Holding and the Subsidiaries, and to make all other determinations necessary
or advisable for the administration and interpretation of the Plan or to carry
out its provisions and purposes. Determinations, interpretations or other
actions made or taken by the Board pursuant to the provisions of the Plan shall
be final, binding and conclusive for all purposes and upon all persons.
4.3 Delegation by the Board. Except as provided in an Option
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Agreement, all of the powers, duties and responsibilities of the Board specified
in the Plan may, to the full extent permitted by applicable law, be exercised
and performed by the Committee or any other duly constituted committee of the
Board, in any such case, to the extent authorized by the Board to exercise and
perform such powers, duties and responsibilities.
Section 5. Stock Subject to Plan
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5.1 Number. Subject to the provisions of Section 5.3, the maximum
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number shares of Common Stock subject to Incentive Awards under the Plan
(including shares that become available for grant pursuant to Section 5.2) may
not exceed, in the aggregate, 156,423 shares (the "Total Authorized Shares").
Up to one-third of the Total Authorized Shares may be purchased by Participants
pursuant to Section 7 and up to two-thirds of the Total Authorized Shares may be
subject to Options granted pursuant to Section 6. The shares to be delivered
under the Plan (other than shares purchased by the Participant directly from
Holding pursuant to Section 7) shall be purchased by the Company from Holding
pursuant to the Warrant Agreement, dated as of April 30, 1998, as amended
between the Company and Holding (the "Holding Warrant"), which shares may
consist, in whole or in part, of Common Stock held in treasury or authorized but
unissued shares of Common Stock, not reserved for any other purpose.
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5.2 Canceled, Terminated or Forfeited Awards. Any shares of Common
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Stock subject to any portion of an Incentive Award which for any reason expires,
or is canceled, terminated, forfeited or otherwise settled without the issuance
of such shares of Common Stock, shall again be available for award under the
Plan, subject to the maximum limitation specified in Section 5.1.
5.3 Adjustment in Capitalization. The number and class of Incentive
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Awards (and the number of shares of Common Stock available for issuance upon
exercise or settlement of such Incentive Awards) granted under the Plan, and the
number, class and exercise price of any outstanding Options, may be adjusted by
the Board, in consultation with the Holding Board, in its sole discretion, if it
shall deem such an adjustment to be necessary or appropriate to reflect any
Common Stock dividend, stock split or share combination or any recapitalization,
merger, consolidation, exchange of shares, liquidation, dissolution or
Reorganization of Holding.
Section 6. Terms of Options
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6.1 Grant of Options. Options may be granted to Participants at such
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time or times as shall be determined by the Board. Each Option granted to a
Participant shall be evidenced by an Option Agreement that shall specify the
exercise price at which a share of Common Stock may be purchased pursuant to
such Option, the duration of such Option and such other terms and conditions
consistent with the Plan as the Board shall determine, including customary
representations, warranties and covenants with respect to securities law
matters. Unless otherwise determined by the Board, such Option Agreement shall
also state that the holder thereof is entitled to the benefits of and shall be
bound by the obligations set forth in the Registration and Participation
Agreement, dated as of April 30, 1998 and as the same may be amended from time
to time, among Holding and certain stockholders of Holding, to the extent set
forth therein.
6.2 Option Price. The exercise price per share of Common Stock to be
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purchased upon exercise of an Option shall be determined by the Board but shall
not be less than the Fair Market Value on the date the option is granted.
6.3 Exercise of Options.
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(a) Service Options. Unless otherwise provided by the Board in the
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Option Agreement evidencing such Award, subject to the continuous
employment of the Participant with a member of the CDRJ Group, Service
Options granted to a Participant shall become vested in three equal annual
installments on each of the first three anniversaries of the date of grant.
(b) Performance Options. Unless otherwise provided by the Board in
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the Option Agreement evidencing such Award, subject to Section 9.1 and 10,
no portion of any Performance Options shall become vested unless and until
Holding shall have achieved the annual or cumulative EBITDA target
specified in the Option Agreement evidencing such Performance Options and
provided the Participant is in the continuous employment of a member of the
CDRJ Group from the date of grant to the date such target is achieved.
Notwithstanding the
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foregoing provisions of this paragraph (b), subject to the continuous
employment of the Participant with a member of the CDRJ Group, Performance
Options shall become vested in full, nine years following the date of
grant, regardless of whether the applicable EBITDA target shall have been
achieved.
(c) Conditions. Notwithstanding any other provision herein, the
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Board may accelerate the vesting or exercisability of any Option, all
Options or any class of Options, at any time and from time to time. On or
before the date upon which any Employee will exercise any exercisable
Option, Holding and such Employee shall enter into a Subscription Agreement
with respect to the Common Stock to be purchased upon exercise of such
Option. Notwithstanding any other provision of the Plan, no Option shall
be exercisable for more than 10 years after the date on which it is
granted.
6.4 Payment. The Board shall establish procedures governing the
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exercise of Options, which procedures shall generally require that written
notice of the exercise thereof be given and that the exercise price thereof be
paid in full in cash or cash equivalents, including by personal check, at the
time of exercise. The exercise price of any Options exercised at any time
following a Public Offering may be paid in full or in part in the form of shares
of Common Stock that have been owned by the Participant for at least six months,
based on the Fair Market Value of such shares of Common Stock on the date of
exercise, subject to such rules and procedures as may be adopted by the Board
and, if the Board deems it necessary or appropriate, subject to shareholder
approval of the Plan. Subject to Section 6.3, as soon as practicable after
receipt of a written exercise notice and payment in full of the exercise price
of any Options (including any taxes or additional amounts required to be paid by
a Participant in connection with the exercise of an Option as specified in the
Option Agreement), Holding shall deliver to the Participant a certificate or
certificates representing the shares of Common Stock acquired upon the exercise
thereof, bearing appropriate legends if applicable. Notwithstanding the
foregoing, the Company, in consultation with the Holding Board, in lieu of
delivering the shares to be acquired on exercise of an Option may return to the
Participant the exercise price tendered for such shares and pay to the
Participant an additional amount equal to the excess of (i) the Fair Market
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Value, as of the relevant date of determination, of such shares over (ii) the
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exercise price therefor.
Section 7. Terms of Offers to Purchase Common Stock
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7.1. Offers to Purchase Common Stock. Offers to purchase Common
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Stock from Holding may be made to Participants at such time or times as shall be
determined by the Board, in consultation with the Holding Board. Each purchase
of Common Stock by a Participant shall be made pursuant to a Subscription
Agreement that shall include customary representations, warranties, covenants
and other terms and conditions with respect to securities law matters and such
other terms and conditions as the Holding Board shall determine. Unless
otherwise determined by the Holding Board, such Subscription Agreement shall
also state that in respect of any shares of Common Stock purchased by the
Participant pursuant to such Subscription Agreement (i) prior to a Public
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Offering, such shares shall be subject to certain rights of first refusal and
repurchase rights of Holding and the CD&R Fund and (ii) such Participant shall
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be
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entitled to certain of the benefits set forth in the Registration and
Participation Agreement and shall be bound by the obligations set forth in such
Registration and Participation Agreement, in each case, to the extent set forth
in the Subscription Agreement evidencing the purchase of such Common Stock.
7.2. Purchase Price. The purchase price per share of Common Stock to
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be purchased under the Plan shall be determined by the Holding Board.
Section 8. Termination of Employment
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8.1. Extraordinary Termination. Unless otherwise provided in the
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Option Agreement or otherwise determined by the Board, in the event that a
Participant's employment with a member of the CDRJ Group terminates by reason of
an Extraordinary Termination, any Options then held by such Participant that
have become vested on or prior to the date of such termination shall, subject to
Section 8.4, remain exercisable solely until the first to occur of (x) the six
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month anniversary of the date of the Participant's termination of employment or
(y) the expiration of the term of any such Option. Unless otherwise provided in
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the Option Agreement or otherwise determined by the Board, any Options held by
the Participant that are not vested Options as of the date of the Participant's
termination of employment shall terminate and be canceled immediately upon such
termination, and any vested Options that are not exercised within the period
described in the preceding sentence shall terminate and be canceled upon the
expiration of such period.
8.2. Termination for Cause. Unless otherwise provided in the Award
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Agreement or otherwise determined by the Board, in the event a Participant's
employment with a member of the CDRJ Group is terminated by such member for
Cause, any Options held by such Participant (whether or not then vested or
exercisable) shall terminate and be canceled immediately upon such termination
of employment and any Common Stock purchased by the Participant may be
repurchased for a purchase price calculated in accordance with the terms of the
Subscription Agreement.
8.3. Other Termination of Employment. Unless otherwise determined by
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the Board at the time of grant, the Board shall provide in the Option Agreement
evidencing options granted hereunder that, in the event that a Participant's
employment with a member of the CDRJ Group terminates for any reason other than
(i) an Extraordinary Termination or (ii) for Cause, any Options then held by
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such Participant that have become vested on or prior to the date of such
termination shall, subject to Section 8.4, remain exercisable until the first to
occur of (x) the 30th day after the expiration of the period, if any, specified
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in such Participant's Option Agreement during which Holding or the CD&R Fund has
a right to purchase such Options from the Participant or (y) the expiration of
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the term of such Option. Any Options held by the Participant that are not
vested Options as of the date of the Participant's termination of employment
shall terminate and be canceled immediately upon such termination, and any
vested Options that are not exercised within the period described in the
preceding sentence shall terminate and be canceled upon the expiration of such
period.
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8.4. Certain Rights upon Termination of Employment Prior to Public
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Offering. Unless otherwise determined by the Board at the time of grant, the
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Board shall provide in each Award Agreement evidencing Incentive Awards granted
hereunder that, upon a termination of a Participant's employment with a member
of the CDRJ Group prior to a Public Offering for any reason, (a) Holding and the
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CD&R Fund and its Affiliates shall have successive rights to repurchase for cash
any vested Options or shares of Common Stock then held by the Participant for a
repurchase price equal to the Fair Market Value, reduced in the case of any
Options by the exercise price per share of Common Stock for such Option and (b)
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upon an Extraordinary Termination, the Participant shall have the right to
require Holding to repurchase shares of Common Stock then owned by him or her
(provided the Participant has held such shares of Common Stock for at least six
months), for a repurchase price equal to the Fair Market Value, and in each case
upon such additional terms and conditions as are set forth in such Award
Agreement.
Section 9. Change in Control
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9.1. Accelerated Vesting and Payment.
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(a) Service Options and Vested Performance Options. Unless the Board
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otherwise determines in the manner set forth in Section 9.2, in the event
of a Change in Control, each outstanding Service Option (regardless of
whether such Option is at such time otherwise exercisable) and each
outstanding Performance Option that has become vested prior to the Change
in Control, without regard to this Section 9.1, shall be canceled in
exchange for a payment in cash of an amount equal to the product of (i) the
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excess, if any, of the Change in Control Price over the Option Price,
multiplied by (ii) the number of shares of Common Stock covered by such
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Option.
(b) Performance Options. Unless the Board otherwise determines in
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the manner set forth in Section 9.2 or at the time of grant, in the event
of a Change of Control prior to the date as of which Performance Options
have become vested in accordance with Section 6.3(b), a proportionate share
(determined in accordance with the immediately succeeding sentence) of each
outstanding Performance Option shall be canceled in exchange for a payment
in cash of an amount equal to the product of (i) the excess, if any, of the
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Change in Control Price over the Option Price, multiplied by (ii) the
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number of shares of Common Stock covered by the vested portion of the
Performance Option. Unless the Board otherwise determines at the time of
grant, in the event of a Change of Control, a proportionate share of any
Performance Options that have not vested and become exercisable on or prior
to the date of such Change of Control shall vest and become exercisable as
of such date, such proportionate share to equal the product of (i) the
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percentage obtained by dividing (x) the cumulative EBITDA achieved by
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Holding as of the last day of the calendar quarter ending coincident with
or immediately prior to the date of the Change of Control by (y) the EBITDA
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target specified in the Option Agreement, multiplied by (ii) the total
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number of Shares subject to such Performance Options.
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(c) Timing of Option Cancellation Payments. The cash payment
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described in paragraphs (a) and (b) above shall be payable in full, as soon
as reasonably practicable, but in no event later than, 30 days following
the Change in Control, unless provided otherwise by the Board in the Award
Agreement evidencing such Options. Notwithstanding the foregoing
provisions of this Section 9.1, payment of the amount calculated in
accordance with this Section 9.1 shall, if so determined by the Board (as
constituted immediately prior to the Change in Control), be made in shares
of the common stock of the New Employer having an aggregate fair market
value equal to such amount and shall be payable in full, as soon as
reasonably practicable, but in no event later than 30 days, following the
Change in Control. For purposes hereof, the fair market value of a share
of common stock of the New Employer shall be determined by the Board (as
constituted immediately prior to the consummation of the transaction
constituting the Change in Control), in good faith, on the basis of the
factors described in the definition of the term "Fair Market Value," as
applied to the business, operations and financial results of the New
Employer and its subsidiaries and applicable affiliates.
9.2. Alternative Options. Notwithstanding Section 9.1, no
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cancellation, termination, acceleration of exercisability or vesting or
settlement or other payment shall occur with respect to any Option, if the Board
(as constituted immediately prior to the consummation of the transaction
constituting the Change in Control) reasonably determines, in good faith, prior
to the Change in Control that the Options shall be honored or assumed, or new
rights substituted therefor (such honored, assumed or substituted Option being
hereinafter referred to as an "Alternative Option") by the New Employer,
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provided that any Alternative Options must:
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(a) provide the Participant with rights and entitlements
substantially equivalent to or better than the rights and entitlements
applicable under the terms of the Options immediately prior to the
consummation of the transaction constituting the Change in Control,
including, but not limited to, an identical or better exercise and vesting
schedule and identical or better timing and methods of exercise or payment;
(b) have substantially equivalent economic value to the Options
(determined at the time of the Change in Control); and
(c) have terms and conditions which provide that in the event that
the Participant's employment is terminated by the New Employer for any
reason other than for Cause or by the Participant for Good Reason within
two years following a Change in Control (i) any conditions on the
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Participant's rights under, or any restrictions on transfer or
exercisability applicable to, each such Alternative Option shall be waived
or shall lapse, as the case may be or (ii) the Participant shall have the
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right to surrender such Alternative Option within 30 days following such
termination in exchange for a payment in cash equal to the excess of the
fair market value of the common stock subject to the Alternative Option
over the price, if any, that the Participant would be required to pay to
exercise such Alternative Option.
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9.3 Certain Take-Along Rights Prior to a Public Offering. Unless
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otherwise determined by the Board at time of grant, the Board shall provide in
each Subscription Agreement evidencing Incentive Awards granted hereunder that,
upon certain transactions constituting a Change in Control, the Participant will
be required to sell shares of Common Stock then owned by him or her, for a cash
payment per share of Common Stock equal to the Change in Control Price, and upon
such additional terms and conditions as are set forth in such Subscription
Agreement.
Section 10. Amendment, Modification, and
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Termination of the Plan
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The Board at any time may terminate or suspend the Plan, and from time
to time may amend or modify the Plan. No amendment, modification, termination
or suspension of the Plan shall in any manner adversely affect any Incentive
Award theretofore granted under the Plan, without the consent of the Participant
holding such Incentive Award. Shareholder approval of any such amendment,
modification, termination or suspension shall be obtained to the extent mandated
by applicable law, or if otherwise deemed appropriate by the Board.
Section 11. Miscellaneous Provisions
-------------------------------------
11.1. Nontransferability of Awards. No Options granted under the Plan
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may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution or
as expressly provided in an Award Agreement. All rights with respect to any
Option granted to a Participant under the Plan shall be exercisable during his
or her lifetime only by such Participant. Restrictions, if any, on the transfer
of Common Stock purchased pursuant to Section 7.1 of the Plan or upon exercise
of any Options shall be set forth in the applicable Award Agreement evidencing
such Incentive Award, including without limitations, restrictions described in
Section 8.4 herein.
11.2. Beneficiary Designation. Each Participant under the Plan may
-----------------------
from time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
or by whom any right under the Plan is to be exercised in case of his or her
death. Each designation will revoke all prior designations by the same
Participant, shall be in a form prescribed by the Board and will be effective
only when filed by the Participant in writing with the Board during his or her
lifetime. In the absence of any such designation, benefits remaining unpaid or
Options or Deferred Stock Units outstanding at the Participant's death shall be
paid to or exercised by the Participant's surviving spouse, if any, or otherwise
to or by the Participant's estate.
11.3. No Guarantee of Employment or Participation. Nothing in the
-------------------------------------------
Plan shall interfere with or limit in any way the right of any member of the
CDRJ Group to terminate any Participant's employment at any time and for any
reason, nor confer upon any Participant any right to continue in the employ of
any member of the CDRJ Group.
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No Employee shall have a right to be selected as a Participant, or, having been
so selected, to receive any Incentive Awards under the Plan.
11.4. Tax Withholding. A member of the CDRJ Group shall have the
---------------
power to withhold, or require a Participant to remit to such member promptly
upon notification of the amount due, an amount determined by such member to be
sufficient to satisfy all Federal, state, local and foreign withholding tax
requirements in respect of any Incentive Award and the Company may (or may cause
another member of the CDRJ Group to) defer payment of cash or issuance or
delivery of Common Stock until such requirements are satisfied. The Board may
permit or require a Participant to satisfy the Participant's tax withholding
obligation hereunder in such other manner, subject to such conditions, as the
Board shall determine.
11.5. Indemnification. Each person who is or shall have been a
---------------
member of the Compensation Committee or the Board or the Holding Board shall be
indemnified and held harmless by the Company to the fullest extent permitted by
law against and from any loss, cost, liability or expense (including any related
attorney's fees and advances thereof) in connection with, based upon or arising
or resulting from any claim, action, suit or proceeding to which such person may
be made a party or in which such person may be involved by reason of any action
taken or failure to act under or in connection with the Plan or any Award
Agreement and from and against any and all amounts paid by such person in
settlement thereof, with the Company's approval, or paid by such person in
satisfaction of any judgment in any such action, suit or proceeding against such
person, provided he or she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf. The foregoing right of indemnification
shall not be exclusive and shall be independent of any other rights of
indemnification to which such persons may be entitled under the Company's
Certification of Incorporation or By-laws, by Holding's Deed of Association or
other organizational documents, by contract, as a matter of law or otherwise.
11.6. No Limitation on Compensation. Nothing in the Plan shall be
-----------------------------
construed to limit the right of the Company to establish other plans or to pay
compensation to its employees in cash or property, in a manner which is not
expressly authorized under the Plan.
11.7. Requirements of Law. The granting of Incentive Awards and the
-------------------
issuance of shares of Common Stock shall be subject to all applicable laws,
rules and regulations, and to such approvals by any governmental agencies or
national or foreign securities exchanges as may be appropriate or required, as
determined by the Board. Notwithstanding any other provision of the Plan or any
Award Agreement, no Incentive Awards shall be granted under the Plan, and no
shares of Common Stock shall be issued upon exercise of, or otherwise in
connection with, any Incentive Award granted under the Plan, if such grant or
issuance would result in a violation of applicable law, including the federal
securities laws and any applicable state or foreign securities laws.
11.8. GOVERNING LAW. THE PLAN, AND ALL AGREEMENTS HEREUNDER, SHALL
-------------
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS WHICH WOULD REQUIRE
APPLICATION OF
13
THE LAW OF ANOTHER JURISDICTION, EXCEPT TO THE EXTENT THAT THE CORPORATE LAW OF
THE STATE OF DELAWARE SPECIFICALLY AND MANDATORILY APPLIES.
11.9. No Impact On Benefits. Incentive Awards granted under the
---------------------
Plan are not compensation for purposes of calculating an Employee's rights under
any employee benefit plan, except to the extent provided in any such plan.
11.10. Freedom of Action. Subject to Section 10, nothing in the Plan
-----------------
or any Award Agreement shall be construed as limiting or preventing the Company
or Holding or any Subsidiary thereof from taking any action with respect to the
operation or conduct of its business that it deems appropriate or in its best
interest.
11.11. Term of Plan. The Plan shall be effective as of the Effective
------------
Date. The Plan shall expire on the tenth anniversary of the Effective Date
(except as to Incentive Awards outstanding on that date), unless sooner
terminated pursuant to Section 10.
11.12. No Right to Particular Assets. Nothing contained in this Plan
-----------------------------
and no action taken pursuant to this Plan shall create or be construed to create
a trust of any kind or any fiduciary relationship between any member of the CDRJ
Group, on the one hand, and any Participant or executor, administrator or other
personal representative or designated beneficiary of such Participant, on the
other hand, or any other persons. Any reserves that may be established by a
member of the CDRJ Group in connection with this Plan shall continue to be held
as part of the general funds of Holding or such Subsidiary, and no individual or
entity other than such member of the CDRJ Group shall have any interest in such
funds until paid to a Participant. To the extent that any Participant or his
executor, administrator or other personal representative, as the case may be,
acquires a right to receive any payment from Holding or any Subsidiary pursuant
to this Plan, such right shall be no greater than the right of an unsecured
general creditor of such member of the CDRJ Group.
11.13. Notices. Each Participant shall be responsible for furnishing
-------
the Board with the current and proper address for the mailing of notices and
delivery of agreements and shares of Common Stock. Any notices required or
permitted to be given shall be deemed given if directed to the person to whom
addressed at such address and mailed by regular United States mail, first-class
and prepaid. If any item mailed to such address is returned as undeliverable to
the addressee, mailing will be suspended until the Participant furnishes the
proper address.
11.14. Severability of Provisions. If any provision of this Plan
--------------------------
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof, and this Plan shall be construed
and enforced as if such provision had not been included.
11.15. Incapacity. Any benefit payable to or for the benefit of a
----------
minor, an incompetent person or other person incapable of receiving such benefit
shall be deemed paid when paid to such person's guardian or to the party
providing or reasonably appearing to provide for the care of such person, and
such payment shall fully discharge the Committee, the Company and other parties
with respect thereto.
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11.16. No Rights as Stockholder. No Participant shall have any
------------------------
voting or other rights as a stockholder of Holding with respect to any Common
Stock covered by any Incentive Award until the issuance of a certificate or
certificates to the Participant for such Common Stock. No adjustment shall be
made for dividends or other rights for which the record date is prior to the
issuance of such certificate or certificates.
11.17. Headings and Captions. The headings and captions herein are
---------------------
provided for reference and convenience only, shall not be considered part of
this Plan and shall not be employed in the construction of this Plan.
15