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YOUTH SERVICES INTERNATIONAL, INC.
FISCAL YEAR 1997 EMPLOYEE
STOCK PURCHASE PLAN
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YOUTH SERVICES INTERNATIONAL, INC.
FISCAL YEAR 1997 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE.
This Fiscal Year 1997 Employee Stock Purchase Plan (the "Plan")
is intended to encourage and facilitate the purchase of the Common Stock of
Youth Services International, Inc., a Maryland corporation (the "Company"), by
employees of the Company and its Designated Subsidiaries, thereby providing
employees with a personal stake in the Company and a long range inducement to
remain in the employ of the Company and its Designated Subsidiaries. It is the
intention of the Company to have the Plan qualify as an "employee stock
purchase plan" within the meaning of Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code").
2. DEFINITIONS.
2.1 Board. The "Board" is the Board of Directors of the
Company.
2.2 Common Stock. The "Common Stock" is the Company's Common
Stock, par value of $.01 per share.
2.3 Designated Subsidiary. A "Designated Subsidiary" is a
subsidiary of the Company whose Eligible Employees shall be authorized to
participate in the Plan by the Board, so long as such authorization is
continued by the Board.
2.4 Eligible Compensation. The "Eligible Compensation" of
each Participant is his or her regular rate of base compensation for a Grant
Period determined as of the first Grant Date of the Grant Period on which the
Participant is an Eligible Employee. "Eligible Compensation" does not include
management incentives, variable commissions, bonuses, overtime, shift
differential, COLA adjustments, extended work-week premiums, amounts paid or
accrued with respect to any qualified or nonqualified plan of deferred
compensation or other employee welfare plan, payments for group insurance,
hospitalization and similar benefits, perquisites reported as income,
reimbursement for expenses and other forms of extraordinary pay. An employee's
base pay shall be calculated by multiplying the employee's normal rate of pay
as of the first Grant Date on which the employee is an Eligible Employee by the
number of pay periods between said Grant Date and the end of the Grant Period.
2.5 Eligible Employee. An "Eligible Employee" is an employee
of the Company or of a Designated Subsidiary; provided, however, that the term
"Eligible Employee" shall not include:
2.5.1 Employees who are scheduled to work less than
twenty (20) hours per week or less than five (5) months during a Grant Period;
or
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2.5.2 Any employee who, immediately after a Grant Date,
owns five percent (5%) or more of the total combined voting power or value of
all classes of stock of the Company or its subsidiaries as determined pursuant
to Section 424(e) and (f) of the Code. For purposes of this Subsection 2.5.2,
the attribution rules of Section 424(d) of the Code shall apply in determining
the stock ownership of an employee, and stock which the employee may purchase
under outstanding options, whether or not granted under this Plan, shall be
treated as stock owned by the employee.
2.6 Exercise Date. An "Exercise Date" is the last day of each
calendar quarter.
2.7 Fair Market Value. The "Fair Market Value" per share on
any Grant Date, on any Exercise Date or for purposes of Section 9.6 hereof, as
the case may be, shall be the fair market value of each share of Common Stock
as determined by reference to the valuation methods described in Treas. Reg.
Section 20.2031-2.
2.8 Grant Date. A "Grant Date" is the first day of each
calendar quarter.
2.9 Grant Period. A "Grant Period" shall commence on July 1
of each year and shall end on June 30 of the subsequent year.
2.10 Participant. A "Participant" is an Eligible Employee of
the Company or of a Designated Subsidiary who elects to participate in the Plan
by filing an enrollment form with the Company as provided in Section 6.
2.11 Purchase Price. The "Purchase Price" of a share of
Common Stock purchased pursuant to an option granted under the Plan shall be
85% of the Fair Market Value of a share of Common Stock on the Grant Date.
2.12 Subsidiary. A "Subsidiary" is a corporation, 50% or more
of the outstanding voting power of all classes of stock of which at the time of
granting of an option under the Plan is owned directly, or indirectly through a
subsidiary, by the Company within the meaning of Section 424(f) of the Code.
3. ADMINISTRATION.
3.1 The Plan shall be administered by a committee (the
"Committee") selected by the Board. The Committee shall consist of not less
than three (3) members who are members of the Board of Directors. An
individual will not be eligible to serve on the Committee if the individual is
a Participant. Each member of the Committee shall serve for a term commencing
on a date specified by the Board and continuing until such member dies,
resigns, becomes a Participant or is removed from office by the Board.
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3.2 From time to time the Committee may adopt such rules and
regulations for carrying out the Plan as it may deem proper and in the best
interest of the Company. All determinations of the Committee shall be made by
a majority of its members. The interpretation of any provision of the Plan by
the Committee shall be final and the Board shall adopt and place into effect
the determinations of the Committee.
4. STOCK SUBJECT TO THE PLAN.
The stock subject to options under the Plan shall be authorized
but unissued shares of the Company's Common Stock. The aggregate amount of
stock for which options may be granted under the Plan shall be four hundred
fifty thousand (450,000) shares, subject to adjustment in accordance with
Section 12. In the event that an option granted under the Plan to any
Participant is unexercised at the end of a Grant Period as to any shares
covered thereby, such shares thereafter shall be available for the granting of
options under the Plan.
5. GRANT OF OPTION.
Options will be granted on the first day of each calendar
quarter. All Participants granted options under the Plan shall have the same
rights and privileges. On each Grant Date of a Grant Period, each Participant
who is an Eligible Employee on the Grant Date may elect to be granted an option
by the Board to purchase whole shares of Common Stock. The maximum number of
shares of Common Stock for which each Participant may elect to be granted
options during any Grant Period shall equal fifteen percent (15%) of the
Participant's Eligible Compensation divided by eighty-five percent (85%) of the
Fair Market Value of a share of Common Stock on the first Grant Date of the
Grant Period on which the Participant is an Eligible Employee. In the event
that the maximum number of shares to be granted to all Participants on a Grant
Date (determined according to the above formula) exceeds the total number of
shares available for sale under the Plan pursuant to Section 4, the Committee
shall make a pro rata allocation of the available shares among all Participants
on such Grant Date based upon a uniform relationship to the Eligible
Compensation of all Participants in effect on the Grant Date. The Committee
may on the first Grant Date of each Grant Period decrease the percentage of
Eligible Compensation set forth above to calculate the number of shares of
Common Stock for which an Eligible Employee may elect to be granted options to
a minimum of five percent (5%) or increase it to a maximum of twenty percent
(20%). Notwithstanding the foregoing, in the event options are granted prior
to the approval of this Plan by stockholders owning a majority of the common
stock of the Company, such grant is expressly conditioned on subsequent
approval of the Plan by the stockholders. Furthermore, both the grant and the
exercise of any options under this Plan are expressly conditioned on the
effective and continuing registration of this Plan under the Securities Act of
1933 and effective registration or available exemption from registration under
applicable state securities laws.
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6. ENROLLMENT, PAYROLL DEDUCTIONS AND CASH PAYMENTS.
6.1 Within the thirty (30) day period prior to each Grant
Date, the Company shall notify all employees of the Company and its Designated
Subsidiaries of the dates of the Grant Period, the Grant Dates and the Exercise
Dates, and furnish them with enrollment forms and other pertinent information.
6.2 An employee who is not a Participant and who will be an
Eligible Employee (as defined in Section 2.5) on any Grant Date of a Grant
Period may become a Participant by completing the enrollment form and
forwarding such form to such employee's appropriate payroll office prior to the
Grant Date on which the employee will be an Eligible Employee.
6.3 An enrollment form will allow an Eligible Employee to
become a Participant by authorizing a regular payroll deduction from the
Participant's Eligible Compensation on each pay day during the Grant Period at
a rate which will result in not less than a Five Dollar ($5.00) deduction per
pay day and which will not exceed fifteen percent (15%) of the Participant's
Eligible Compensation. An enrollment form shall also provide each Eligible
Employee with the option of becoming a Participant by electing to fund his or
her stock purchase account, in whole or in part, by making a lump sum cash
payment pursuant to the provisions of Section 6.8 hereof.
6.4 A participant's payroll deductions and lump sum cash
payments shall be deposited in the Company's general corporate account and
shall be credited to the Participant's stock purchase account under the Plan.
No interest shall accrue on the amount credited to a Participant's stock
purchase account. Except as provided in Sections 6.5 and 6.8, a Participant
may not make any separate cash payment into his or her account. A Participant
may change the amount of the payroll deduction during a Grant Period only if
the Participant elects to increase or decrease the number of shares of Common
Stock the Participant has an option to purchase during the Grant Period.
6.5 During leaves of absence approved by the Company and
meeting the requirements of Treasury Regulation Section 1.421-7(h)(2), a
Participant may continue participation in the Plan by making cash payments to
the Company on his or her normal pay days equal to the short fall in his or her
stock purchase account caused by such leave of absence.
6.6 Payroll deductions for a Participant for each Grant Period
shall commence on the first pay day following the first Grant Date on which the
Participant is an Eligible Employee and shall end on the last pay day prior to
the end of the Grant Period, unless sooner terminated by the Participant as
provided in Section 8.
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6.7 Individual stock purchase accounts will be maintained for
each Participant in the Plan. A statement will be given to each Participant
promptly following each Exercise Date of a Grant Period which sets forth the
amount of the Participant's payroll deductions and any cash payments, the per
share Purchase Price, the number of shares purchased, and the amount of the
remaining balance, if any, credited to the Participant's stock purchase
account.
6.8 A Participant may elect to make a lump sum cash payment to
be credited to his or her stock purchase account on or before the last day of a
Grant Period in an amount not to exceed 15% of his or her Eligible Compensation
over the amount, if any, that will be otherwise credited to the Participant's
stock purchase account for the Grant Period.
7. EXERCISE OF OPTION.
7.1 Each Participant who is an Eligible Employee on an
Exercise Date may elect by written notice to the Company to exercise his or her
option to purchase up to the number of whole shares for which the Participant
then has sufficient credit to his stock purchase account, except that on the
last Exercise Date of a Grant Period each Participant shall be deemed to have
exercised an option to purchase such number of whole shares of Common Stock as
the credit to the Participant's stock purchase account on the Exercise Date
will pay for at the applicable Purchase Price. No fractional shares of Common
Stock shall be purchased. During the Participant's lifetime, the option to
purchase shares of Common Stock under the Plan is exercisable only by the
Participant.
7.2 Any amount remaining credited to a Participant's stock
purchase account on the last Exercise Date of a Grant Period, after the
purchase of shares as provided above, will be refunded to the Participant
promptly.
7.3 No Participant may be granted an option under the Plan
which would permit such employee's rights to purchase stock under all such
employee stock purchase plans of the Company or its Subsidiaries to accrue at a
rate which exceeds $25,000 in Fair Market Value of such stock (determined at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.
7.4 Shares of Common Stock purchased by a Participant under
the Plan will be issued only in the name of the Participant, or if the
Participant so indicates on his or her enrollment form or in writing, in the
name of the Participant and any other person as joint tenants with rights of
survivorship.
7.5 As promptly as practicable after each Exercise Date of a
Grant Period, the Company shall cause the number of shares purchased by each
Participant to be registered on the stock transfer records of the Company in
the name of the Participant.
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8. WITHDRAWAL.
A Participant, at any time and for any reason, may terminate
participation in the Plan by delivering written notice of withdrawal to the
Participant's appropriate payroll office. If a Participant withdraws from the
Plan, the Participant shall not be eligible to again participate in the Plan
for six (6) months thereafter, and the balance in the Participant's stock
purchase account will be promptly refunded after receipt by the Company of the
Participant's notice of withdrawal.
9. TERMINATION OF EMPLOYMENT OR ELIGIBILITY.
9.1 If the employment of a Participant terminates other than
by voluntary resignation, death or by retirement pursuant to normal Company
policies, such Participant's participation in the Plan automatically and
without any act on his or her part shall terminate as of the date of the
termination of his or her employment. The Company promptly will pay to the
Participant the amount credited to his or her stock purchase account under the
Plan, and thereupon the Participant's interest in the Plan and any options
under the Plan shall terminate.
9.2 A Participant who voluntarily resigns or retires pursuant
to normal Company policies may, at such Participant's election, by written
notice to the Company, either (i) exercise his or her options as of the
Participant's voluntary resignation or retirement date, in which event the
Company shall apply the credit to the Participant's stock purchase account to
the purchase at the Purchase Price of whole shares of the Company's stock and
refund the excess, if any, or (ii) request payment of the amount credited to
the Participant's account under the Plan, in which event the Company promptly
shall make such payment, and thereupon the Participant's interest in the Plan
and any options under the Plan shall terminate. If the Company does not
receive such notice within ninety (90) days of the Participant's resignation or
retirement, the Participant shall be conclusively presumed to have elected
alternative (ii) and the Company shall promptly make a payment to the resigning
or retired Participant in the amount credited to the retired Participant's
stock purchase account.
9.3 If the employment of a Participant is terminated by the
Participant's death, the executor of the Participant's will or the
administrator of the Participant's estate may make an election, by written
notice to the Company, either to (i) exercise the option as of the date of the
Participant's death, in which event the Company shall apply the credit to the
Participant's stock purchase account to the purchase at the Purchase Price of
whole shares of the Company's stock and refund the excess, if any, or (ii)
request payment of the amount credited to the Participant's stock purchase
account, in which event the Company promptly shall make such payment, and
thereupon the Participant's interest in the Plan and any options under the Plan
shall terminate. If the option is exercised, the date of the Participant's
death shall be deemed to
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be the Exercise Date for the purpose of computing the amount of the Purchase
Price of the Company's Common Stock. If the Company does not receive such
notice within ninety (90) days of the Participant's death, the Participant's
representative shall be conclusively presumed to have elected alternative (ii)
and the Company shall promptly make a payment to the deceased Participant's
estate in the amount credited to the deceased Participant's stock purchase
account.
9.4 In the event a Participant fails to meet the requirements
of an Eligible Employee under the Plan on any Exercise Date of a Grant Period,
as set forth in Section 2.5, the Participant will be deemed to have withdrawn
from the Plan and the payroll deductions credited to such Participant's account
will be promptly refunded to the Participant and no option to purchase shares
of Common Stock shall be granted to such Participant.
9.5 A Participant's withdrawal from participation in the Plan
during a Grant Period shall preclude (i) such Participant's eligibility to
participate in the Plan, and (ii) such Participant's eligibility to participate
in any similar plan which has been or may be adopted by the Company, for a
period of six (6) months thereafter.
9.6 Upon the termination of any Participant's employment with
the Company other than by death or by retirement pursuant to normal Company
policies, the Company shall have an option for a period of ninety (90) days
following the date of such termination to purchase all or any shares of the
authorized, issued and outstanding shares of Common Stock then registered in
the terminated Participant's name and all shares of Common Stock acquired by
the Participant pursuant to Section 9.2 after his or her voluntary resignation
even if such shares have not yet been registered in the Participant's name, at
the Fair Market Value of such Common Stock. Each Stockholder hereby agrees
that in the event the Company exercises its option pursuant to this Section
9.6, he or she shall be bound to take any and all action necessary to enable
the Company to purchase said shares of Common Stock.
10. TRANSFERABILITY.
Neither payroll deductions or cash payments credited to a
Participant's stock purchase account nor any rights with regard to the exercise
of an option or to receive shares under the Plan may be assigned, transferred,
pledged or otherwise disposed of in any way (other than by will, the laws of
descent and distribution or as provided in Section 9) by the Participant. Any
such attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as an election to
withdraw funds in accordance with Section 8.
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11. RIGHTS OF A STOCKHOLDER.
Subject to the provisions set forth in Sections 9.6 and 22
hereof, each Participant shall have the rights or privileges of a stockholder
of the Company with respect to shares purchased under the Plan when the shares
have been registered in the name of the Participant on the stock transfer
records of the Company.
12. CAPITAL ADJUSTMENT AFFECTING COMMON STOCK.
In the event of a capital adjustment resulting from a
recapitalization, stock dividend, stock split, reorganization, merger,
consolidation or other change in capitalization affecting the present Common
Stock, the Board may, at its option, terminate the Plan or make appropriate
adjustments in the number of shares which may be issued and sold under the Plan
and may make such other adjustments as it may deem equitable.
13. TERMINATION AND AMENDMENTS TO PLAN.
The Board, at any time, may terminate the Plan or from time to
time, may amend the Plan without the approval of the stockholders of the
Company; provided, however, that no such amendment shall be made without the
stockholders' approval which would (i) cause the Plan to fail to meet the
requirements of an "employee stock purchase plan" as defined in Section 423 of
the Code, or (ii) permit a Participant to be a member of the Committee.
14. TERMINATION OF THE PLAN.
Upon termination of the Plan, the amount credited to the stock
purchase accounts for all Participants shall be refunded promptly. The
Exercise Dates may be accelerated by the Company for any open Grant Period in
the event of a termination of the Plan.
15. NON-GUARANTEE OF EMPLOYMENT.
Nothing in the Plan or in any option granted pursuant to the Plan
shall be construed as a contract of employment between the Company or a
Subsidiary and its employees, or as a contractual right to continue in the
employ of the Company or a Subsidiary, or as a limitation of the right of the
Company or a Subsidiary to discharge its employees at any time.
16. EXCLUSION FROM RETIREMENT AND FRINGE BENEFIT COMPUTATION.
No portion of the award of options under this Plan shall be taken
into account as "wages," "salary" or "compensation" for any purpose, whether in
determining eligibility, benefits or otherwise, under (i) any pension,
retirement, profit sharing or other qualified or non-qualified plan of deferred
compensation, (ii) any employee welfare or fringe benefit plan including, but
not
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limited to, group insurance, hospitalization, medical, and disability, or (iii)
any form of extraordinary pay including but not limited to bonuses, sick pay
and vacation pay.
17. LIABILITY LIMITED; INDEMNIFICATION.
17.1 To the maximum extent permitted by Maryland law, neither the
Company, Board or Committee nor any of its members, shall be liable for any
action or determination made with respect to this Plan.
17.2 In addition to such other rights of indemnification that
they may have, the members of the Board and Committee shall be indemnified by
the Company to the maximum extent permitted by Maryland law against any and all
liabilities and expenses incurred in connection with their service in such
capacity.
18. GOVERNMENTAL REGULATIONS.
The Company's obligation to sell and deliver the Common Stock
under the plan is subject to the approval of any governmental authority
required in connection with the authorization, issuance or sale of such stock.
19. APPLICATION OF FUNDS.
Any payroll deductions received or held by the Company under the
Plan may be used for any corporate purpose.
20. STOCKHOLDER APPROVAL.
The Plan shall be subject to the approval of the stockholders
owning a majority of the outstanding shares of the Common Stock, which approval
must occur within the period beginning twelve (12) months before and ending
twelve (12) months after the date the Plan is adopted by the Board.
21. OTHER TERMS AND CONDITIONS.
The Committee may impose such other terms and conditions not
inconsistent with the terms of the Plan, as it deems advisable, including,
without limitation, restrictions and requirements relating to (i) the
registration, listing or qualification of the Common Stock, (ii) the grant or
exercise of options, or (iii) the shares of Common Stock acquired under the
Plan. The Committee may require that a Participant notify the Company of any
disposition of shares of Common Stock purchased under the Plan within a period
of two (2) years subsequent to the Grant Date.
22. ENDORSEMENT OF CERTIFICATE.
Each certificate of Common Stock of the Company issued to a
Participant pursuant to this Plan shall be endorsed by the Secretary of Company
as follows:
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"This certificate is transferable only upon compliance with the
provisions of an employee stock purchase plan, a copy of which is on
file in the office of the Secretary of the Company and is available upon
request of any participant without charge."
23. MISCELLANEOUS.
23.1 The headings in this Plan are for reference purposes only
and shall not affect the meaning or interpretation of the Plan.
23.2 Any provision in this Plan which affects the validity or
qualification of this Plan under Section 423 of the Code shall be deemed null
and void without affecting the remaining provisions of this Plan.
23.3 This Plan shall be governed by, and construed in accordance
with, the laws of the State of Maryland, without regard to principles of
conflict of laws.
23.4 All notices and other communications made or given pursuant
to this Plan shall be in writing and shall be sufficiently made or given if
delivered or mailed, addressed to the employee at the address contained in the
records of the Company or to the Company at the Company's principal office.
23.5 This Plan may be executed in any number of counterparts,
each of which shall be considered an original and all of which taken together
shall constitute one and the same instrument.
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