EXHIBIT 10.1
HOME INTERIORS & GIFTS, INC.
2002 STOCK OPTION PLAN
FOR KEY EMPLOYEES
1. Purpose.
Home Interiors & Gifts, Inc., a Texas corporation (herein, together with its
successors, referred to as the "Company"), by means of this 2002 Stock Option
Plan for Key Employees (the "Plan"), desires to afford certain key employees of
the Company and any direct or indirect subsidiary or parent corporation thereof
now existing or hereafter formed or acquired (such corporations sometimes
referred to herein as "Related Entities") who are responsible for the continued
growth of the Company an opportunity to acquire a proprietary interest in the
Company, and thus to create in such persons an increased interest in and a
greater concern for the welfare of the Company and any Related Entities.
Capitalized terms used but not otherwise defined are defined in Section 18 of
this Plan.
The stock options described in Section 6 (the "Options"), and the shares of
Common Stock acquired pursuant to the exercise of such Options, are a matter of
separate inducement and are not in lieu of any salary or other compensation for
services. As used in the Plan, the terms "parent corporation" and "subsidiary
corporation" shall have the meanings contained in Sections 424(e) and 424(f),
respectively, of the Internal Revenue Code of 1986, as amended (the "Code").
2. Administration.
The Plan shall be administered by the Option Committee, or any successor
thereto, of the Board of Directors of the Company (the "Board of Directors"), or
by any other committee appointed by the Board of Directors to administer the
Plan (the "Committee"); provided, that the entire Board of Directors may act as
the Committee if it chooses to do so; and provided, further, that (i) for
purposes of determining any Performance-Based Options applicable to Key
Employees who constitute "covered employees" within the meaning of Section
162(m) of the Code, "Committee" shall mean the members of the Option Committee
of the Board of Directors who qualify as "outside directors" within the meaning
of Section 162(m) of the Code, and such Performance-Based Options shall be
subject to ratification by unanimous approval of the members of the Board of
Directors, and (ii) for so long as the Company has a class of equity securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Committee shall be composed solely of two (or
such number as may be required under the Exchange Act) "Non-Employee Directors"
as defined in Rule 16b-3, as amended ("Rule 16b-3"), promulgated thereunder;
provided, that,
alternatively, for purposes of granting Options other than Performance-Based
Options hereunder, the Board of Directors may authorize such grants and may take
any other action permitted pursuant to Section 162(m) of the Code, Rule 16b-3
and applicable law and regulations.
The number of individuals that shall constitute the Committee shall be
determined from time to time by a majority of all the members of the Board of
Directors, and, unless that majority of the Board of Directors determines
otherwise, shall be no less than two individuals. A majority of the Committee
shall constitute a quorum (or if the Committee consists of only two members,
then both members shall constitute a quorum), and subject to the provisions of
Section 5, the acts of a majority of the members present at any meeting at which
a quorum is present, or acts approved in writing by all members of the
Committee, shall be the acts of the Committee. Whenever the Company shall have a
class of equity securities registered pursuant to Section 12 of the Exchange
Act, the Committee shall administer the Plan so as (i) to comply at all times
with the Exchange Act and (ii) to ensure that compensation attributable to
Options granted under the Plan to Key Employees who constitute "covered
employees" within the meaning of Section 162(m) of the Code shall (A) meet the
deduction limitation imposed by Section 162(m) of the Code, or (B) qualify as
"performance-based compensation" as such term is used in Section 162(m) of the
Code and the regulations promulgated thereunder and thus be exempt from the
deduction limitation imposed by Section 162(m) of the Code.
The members of the Committee shall serve at the pleasure of the Board of
Directors, which shall have the power, at any time and from time to time, to
remove members from or add members to the Committee. Removal from the Committee
may be with or without cause. Any individual serving as a member of the
Committee shall have the right to resign from membership on the Committee by
written notice to the Board of Directors. The Board of Directors, and not the
remaining members of the Committee, shall have the power and authority to fill
vacancies on the Committee, however caused. The Board of Directors shall
promptly fill any vacancy that causes the number of members of the Committee to
be less than two or, if the Company has a class of equity securities registered
pursuant to Section 12 of the Exchange Act, any other number that Rule 16b-3 or
other applicable rules under Section 16(b) of the Exchange Act, Section 162(m)
of the Code, or any successor or analogous rules or laws may require from time
to time.
In connection with the acquisition of any business by the Company or any
Related Entity, any outstanding grants, awards or sales of options or other
similar rights pertaining to such business may be assumed or replaced by Options
under the Plan upon such terms and conditions as the Board of Directors
determines. The date of any such grant or award shall relate back to the date of
the initial grant or award being assumed or replaced, and service with the
acquired business shall constitute service with the Company and its Affiliates
for purposes of such grant or award. Any Shares underlying any grant or award or
sale pursuant to any such acquisition shall be disregarded for purposes of
applying and shall not reduce the number of Shares available under this Section
3.
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3. Shares Available and Maximum Individual Grants.
Subject to the adjustments provided in Section 10, the maximum aggregate
number of shares of common stock, par value $0.10 per share, of the Company
("Common Stock") in respect of which Options may be granted for all purposes
under the Plan shall be 6,000,000 shares. If, for any reason, any shares as to
which Options have been granted cease to be subject to purchase thereunder,
including the expiration of any such Option, the termination of any such Option
prior to exercise, or the forfeiture of any such Option, such shares shall
thereafter be available for grants under the Plan. Options granted under the
Plan may be fulfilled in accordance with the terms of the Plan with (i)
authorized and unissued shares of the Common Stock, (ii) issued shares of such
Common Stock held in the Company's treasury or (iii) issued shares of Common
Stock reacquired by the Company from time to time.
The maximum aggregate number of shares of Common Stock underlying all
Options that may be granted to any single Key Employee during the Term of the
Plan shall be 2,000,000 shares, subject to the adjustments provided in Section
10. For purposes of the preceding sentence, such Options that are cancelled or
repriced shall continue to be counted in determining such maximum aggregate
number of shares of Common Stock that may be granted to any single Key Employee
during the Term of the Plan.
4. Eligibility and Bases of Participation.
Grants of Incentive Options and Non-Qualified Options may be made under the
Plan to Key Employees subject to and in accordance with Section 6 and/or, if
applicable, Section 7. As used herein, the term "Key Employee" shall mean any
employee of the Company or any Related Entity, including officers and directors
of the Company or any Related Entity who are also employees of the Company or
any Related Entity, who are regularly employed on a salaried basis and who are
so employed on the date of such grant, whom the Committee identifies as having a
direct and significant effect on the performance of the Company or any Related
Entity.
The adoption of the Plan shall not be deemed to give any individual, firm,
company, corporation, partnership, trust, or other entity (collectively, a
"Person") a right to be granted any Options.
5. Authority of Committee.
Subject to and not inconsistent with the express provisions of the Plan, the
Code and, if applicable, Rule 16b-3 and Section 162(m) of the Code, the
Committee shall have plenary authority to:
a. determine the Key Employees to whom Options shall be granted, the time
when such Options shall be granted, the number of Options, the purchase
price or exercise price of each Option, the period(s) during which such
Options shall be exercisable (whether in whole or in part, including
whether such Options shall become immediately exercisable on a Change
of Control), the restrictions to be applicable to Options and all other
terms and provisions thereof (which need not be identical);
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b. amend the performance goals and targets set forth in any individual
option agreements with Key Employees to reflect changes in the
Company's business, including, without limitation, to reflect the
acquisition or divestiture of a Related Entity) or for such other
reasons as it deems appropriate;
c. require, as a condition to the granting of any Option, that the Person
receiving such Option agree not to sell or otherwise dispose of such
Option, any Common Stock acquired pursuant to such Option, or any other
"derivative security" (as defined by Rule 16a-1(c) under the Exchange
Act) of the Company for a period of six months following the later of
(i) the date of the grant of such Option or (ii) the date when the
exercise price of such Option is fixed if such exercise price is not
fixed at the date of grant of such Option, or for such other period as
the Committee may determine;
d. provide an arrangement through registered broker-dealers whereby
temporary financing may be made available to an optionee by the
broker-dealer, under the rules and regulations of the Board of
Governors of the Federal Reserve, for the purpose of assisting the
optionee in the exercise of an Option, such authority to include the
payment by the Company of the commissions of the broker-dealer;
e. provide the establishment of procedures for an optionee (i) to have
withheld from the total number of shares of Common Stock to be acquired
upon the exercise of an Option that number of shares having a Fair
Market Value which, together with such cash as shall be paid in respect
of fractional shares, shall equal the aggregate exercise price under
such Option for the number of shares then being acquired (including the
shares to be so withheld), and (ii) to exercise a portion of an Option
by delivering that number of shares of Common Stock already owned by
such optionee having an aggregate Fair Market Value which shall equal
the partial Option exercise price and to deliver the shares thus
acquired by such optionee in payment of shares to be received pursuant
to the exercise of additional portions of such Option, the effect of
which shall be that such optionee can in sequence utilize such newly
acquired shares in payment of the exercise price of the entire Option,
together with such cash as shall be paid in respect of fractional
shares; provided, however, that in the case of an Incentive Option, no
shares shall be used to pay the exercise price under this paragraph
unless (A) such shares were not acquired through the exercise of an
Incentive Option, or (B) if so acquired, (x) such shares have been held
for more than two years since the grant of such Incentive Option and
for more than one year since the exercise of such Incentive Option (the
"Holding Period"), or (y) if such shares do not meet the Holding
Period, the optionee elects in writing to use such shares to pay the
exercise price under this paragraph;
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f. provide (in accordance with Section 13 or otherwise) the establishment
of a procedure whereby a number of shares of Common Stock or other
securities may be withheld from the total number of shares of Common
Stock or other securities to be issued upon exercise of an Option to
meet the obligation of withholding for income, social security and
other taxes incurred by an optionee upon such exercise or required to
be withheld by the Company or a Related Entity in connection with such
exercise unless, as determined by the Committee in the exercise of its
discretion, such procedure is not permitted by applicable law;
g. prescribe, amend, modify and rescind rules and regulations relating to
the Plan; and
h. make all determinations permitted or deemed necessary, appropriate or
advisable for the administration of the Plan, interpret any Plan or
Option provision, perform all other acts, exercise all other powers,
and establish any other procedures determined by the Committee to be
necessary, appropriate, or advisable in administering the Plan or for
the conduct of the Committee's business. Any act of the Committee,
including interpretations of the provisions of the Plan or any Option
and determinations under the Plan or any Option, made in good faith,
shall be final, conclusive and binding on all parties.
The Committee may delegate to one or more of its members, or to one or more
agents, such administrative duties as it may deem advisable, and the Committee
or any Person to whom it has delegated duties as aforesaid may employ one or
more Persons to render advice with respect to any responsibility the Committee
or such Person may have under the Plan; provided, however, that any such
delegation shall be in writing and that whenever the Company has a class of
equity securities registered under Section 12 of the Exchange Act, the Committee
may not delegate any duties to a member of the Board of Directors who, if
elected to serve on the Committee, would not qualify as a "Non-Employee
Director" to administer the Plan as contemplated by Rule 16b-3, as amended, or
other applicable rules under the Exchange Act. The Committee may employ
attorneys, consultants, accountants, or other Persons and the Committee, the
Company, and its officers and directors shall be entitled to rely upon the
advice, opinions, or valuations of any such Persons. No member or agent of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan and all members and
agents of the Committee shall be fully protected by the Company in respect of
any such action, determination or interpretation.
6. Stock Option Grants to Key Employees.
Subject to the express provisions of the Plan, the Committee shall have the
authority to grant incentive stock options pursuant to Section 422 of the Code
("Incentive
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Options"), to grant non-qualified stock options (options which do not qualify
under Section 422 of the Code) ("Non-Qualified Options"), and to grant both
types of Options to Key Employees. No Incentive Option shall be granted pursuant
to the Plan after the earlier of ten years from the date of adoption of the Plan
or ten years from the date of approval of the Plan by the shareholders of the
Company. The terms and conditions of the Options granted under this Section 6
shall be determined from time to time by the Committee; provided, however, that
the Options granted under this Section 6 shall be subject to all terms and
provisions of the Plan, including the following:
a. Option Exercise Price. Subject to Section 5, the Committee shall
establish the Option exercise price at the time any Option is granted
to a Key Employee at such amount as the Committee shall determine;
provided, that, in the case of an Incentive Option, such price shall
not be less than the Fair Market Value per share of Common Stock at the
date the Option is granted; and provided, further, that in the case of
an Incentive Option granted to a person who, at the time such Incentive
Option is granted, owns shares of the Company or any Related Entity
which possess more than 10% of the total combined voting power of all
classes of shares of the Company or of any Related Entity, the option
exercise price shall not be less than 110% of the Fair Market Value per
share of Common Stock at the date the Option is granted. The Option
exercise price shall be subject to adjustment in accordance with the
provisions of Section 10 of the Plan.
b. Payment. The price per share of Common Stock with respect to each
Option exercise by a Key Employee shall be payable at the time of such
exercise. Such price shall be payable in cash or by any other means
acceptable to the Committee, including by the delivery to the Company
of shares of Common Stock owned by the optionee or by the delivery or
withholding of shares pursuant to a procedure created pursuant to
subsection 5(e) of the Plan (but, with respect to Incentive Options,
subject to the limitations described in such subsection 5(e)). Shares
delivered to or withheld by the Company in payment of the Option
exercise price shall be valued at the Fair Market Value of the Common
Stock on the day preceding the date of the exercise of the Option.
c. Exercisability of Stock Option. Unless otherwise determined by the
Committee at the time of grant, and subject to the provisions of
subsections 6(d), (e), (f), (g) and (i) below, stock options granted to
Key Employees hereunder shall vest and become exercisable according to
the vesting schedule set forth below:
one-fifth of the shares of Common Stock underlying the stock option
grant shall vest and become exercisable on the first anniversary of the
date of grant and remain exercisable until the stock option expires;
and
an additional one-fifth of the shares of Common Stock underlying the
stock option grant shall vest and become exercisable on the second
anniversary of the date of grant and remain exercisable until the stock
option expires; and
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an additional one-fifth of the shares of Common Stock underlying the
stock option grant shall vest and become exercisable on the third
anniversary of the date of grant and remain exercisable until the stock
option expires; and
an additional one-fifth of the shares of Common Stock underlying the
stock option grant shall vest and become exercisable on the fourth
anniversary of the date of grant and remain exercisable until the stock
option expires; and
the final one-fifth of the shares of Common Stock underlying the stock
option grant shall vest and become exercisable on the fifth anniversary
of the date of grant and remain exercisable until the stock option
expires;
No Option by its terms shall be exercisable after the expiration of 10
years from the date of grant of the Option, unless, as to any
Non-Qualified Option, otherwise expressly provided in such Option;
provided, however, that no Incentive Option granted to a person who, at
the time such Option is granted, owns stock of the Company, or any
Related Entity, possessing more than 10% of the total combined voting
power of all classes of stock of the Company, or any Related Entity,
shall be exercisable after the expiration of five years from the date
such Option is granted.
d. Death. If an optionee's employment with the Company or a Related Entity
terminates due to the death of such optionee, the estate of such
optionee, or a Person who acquired the right to exercise such Option by
bequest or inheritance or by reason of the death of the optionee, shall
have the right to exercise the vested portion of such Option in
accordance with its terms at any time and from time to time within 180
days after the date of death unless a longer or shorter period is
expressly provided in such Option or established by the Committee
pursuant to Section 8 (but in no event after the expiration date of
such Option), and thereafter such Option shall lapse and no longer be
exercisable.
e. Disability. If the employment of an optionee terminates because of his
or her Disability, such optionee or his or her legal representative
shall have the right to exercise the vested portion of such Option in
accordance with its terms at any time and from time to time within 180
days after the date of such termination unless a longer or shorter
period is expressly provided in such Option or established by the
Committee pursuant to Section 8 (but in no event after the expiration
date of the Option), and thereafter such Option shall lapse and no
longer be exercisable; provided, however, that in the case of an
Incentive Option, the optionee or his or her legal representative shall
in any event be required to exercise the vested portion of such
Incentive Option within one year after termination of the optionee's
employment due to his or her Disability.
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f. Termination for Good Cause; Voluntary Termination. Unless an optionee's
Option expressly provides otherwise, such optionee shall immediately
forfeit all rights under his or her Option, except as to the shares of
stock already purchased thereunder, if the employment of such optionee
with the Company or a Related Entity is terminated by the Company or
any Related Entity for Good Cause or if such Optionee voluntarily
terminates employment without the consent of the Company or any Related
Entity. The determination that there exists Good Cause for termination
shall be made by the Committee (unless otherwise agreed to in writing
by the Company and the optionee).
g. Other Termination of Employment. If the employment of an optionee with
the Company or a Related Entity terminates for any reason other than
those specified in subsections 6(d), (e) or (f) above, such optionee
shall have the right to exercise the vested portion of his or her
Option in accordance with its terms, within 30 days after the date of
such termination, unless a longer or shorter period is expressly
provided in such Option or established by the Committee pursuant to
Section 8 (but in no event after the expiration date of the Option),
and thereafter such Option shall lapse and no longer be exercisable;
provided, that (i) no Incentive Option shall be exercisable more than
three months after such termination, and (ii) the Committee may, in the
exercise of its discretion, extend the exercise date of any Option upon
termination of employment for a period not to exceed six months plus
one day (but in no event after the expiration date of the Option) if
the Committee determines that the stated exercise date will have an
inequitable result under Section 16(b) of the Exchange Act.
h. Maximum Exercise. To the extent that the aggregate Fair Market Value of
Common Stock (determined at the time of the grant of the Option) with
respect to which Incentive Options are exercisable for the first time
by an optionee during any calendar year under all plans of the Company
and any Related Entity exceeds $100,000, such Incentive Options shall
be treated as Non-Qualified Options.
i. Continuation of Employment. Each Incentive Option shall require the
optionee to have been continuously employed by the Company or any
Related Entity from the date of grant of the Incentive Option until his
or her employment termination.
j. Interpretation of Plan. Any termination of employment of an optionee
with the Company or any Related Entity shall in no way change or amend
the Company's at-will termination policy.
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7. Performance-Based Options
The Committee, in its sole discretion, may designate and design Options
granted under the Plan as Performance-Based Options, which Performance-Based
Options shall be designed to comply with the requirements of this Section 7, if
the Committee determines that compensation attributable to such Options might
not otherwise be tax deductible by the Company due to the deduction limitation
imposed by Section 162(m) of the Code. Accordingly, Options granted under the
Plan may be granted in such a manner that the compensation attributable to such
Options is intended by the Committee to qualify as "performance-based
compensation" as such term is used in Section 162(m) of the Code and the
regulations promulgated thereunder and thus be exempt from the deduction
limitation imposed by Section 162(m) of the Code ("Performance-Based Options").
Options granted under the Plan to Key Employees who constitute "covered
employees" within the meaning of Section 162(m) of the Code shall be deemed to
qualify as Performance-Based Options only if:
a. The Option exercise price is not less than the Fair Market Value per
share of Common Stock at the date the Option is granted; provided, that
in the case of an Incentive Option, such price is subject to the
limitations described in subsection 6(a); provided, further, that the
Option exercise price shall be subject to adjustment in accordance with
the provisions of Section 10 of the Plan; or
b. With respect to a Non-Qualified Option granted at an exercise price
that is below the Fair Market Value per share of the Common Stock on
the date of grant, such Option satisfies the following requirements:
(i) the granting or vesting of such Non-Qualified Option is
subject to the achievement of a performance goal or goals
based on one or more of the following performance measures
(either individually or in any combination): net sales;
pre-tax income before allocation of corporate overhead and
bonus; budget; cash flow; earnings per share; net income;
division, group or corporate financial goals; return on
stockholders' equity; return on assets; attainment of
strategic and operational initiatives; appreciation in and/or
maintenance of the price of the Common Stock or any other
publicly-traded securities of the Company; market share; gross
profits; earnings before interest and taxes; earnings before
interest, taxes, depreciation and amortization; economic
value-added models; comparisons with various stock market
indices; increase in number of customers; and/or reductions in
costs;
(ii) the Committee establishes in writing (A) the objective
performance-based goals applicable to a given performance
period, and (B) the individual employees or class of employees
to which
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such performance-based goals apply no later than ninety days
after the commencement of such performance period (but in no
event after twenty-five percent of such performance period has
elapsed);
(iii) no compensation attributable to Performance-Based Options will
be paid to or otherwise received by a Key Employee who
constitutes a "covered employee" within the meaning of Section
162(m) of the Code until the Committee certifies in writing
that the performance goal or goals (and any other material
terms) applicable to such performance period have been
satisfied;
(iv) after the establishment of a performance goal, the Committee
shall not revise such performance goal (unless such revision
will not disqualify compensation attributable to the
Performance-Based Options as "performance-based compensation"
under Section 162(m) of the Code) or increase the amount of
compensation payable with respect to such Performance-Based
Options upon the attainment of such performance goal; and
(v) as required by the regulations promulgated under Section
162(m) of the Code, the material terms of performance goals as
described in subsection 7(b)(i) shall be disclosed to and
reapproved by the Company's shareholders no later than the
first shareholder meeting that occurs in the fifth year
following the year in which the Company's shareholders
previously approved such performance goals.
8. Change of Control.
If (i) a Change of Control shall occur, (ii) the Company shall enter into an
agreement providing for a Change of Control, or (iii) any member of the HMC
Group shall enter into an agreement providing for a Change of Control, then the
Board of Directors may declare any or all Options outstanding under the Plan to
be exercisable in full at such time or times as the Committee shall determine,
notwithstanding the express provisions of such Options. Each Option accelerated
pursuant to the preceding sentence shall terminate, notwithstanding any express
provision thereof or any other provision of the Plan, on such date (not later
than the stated exercise date) as the Committee shall determine.
9. Purchase Option.
a. Except as otherwise expressly provided in any particular Option, if (i)
any optionee's employment with the Company or a Related Entity
terminates for any reason at any time or (ii) a Change of Control
occurs, the Company and/or its designee(s) shall have the option (the
"Purchase Option") to purchase, and if the option is exercised, the
optionee (or, with respect to Common Stock acquired pursuant to the
exercise of an Option,
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the optionee's assignee, or the optionee's executor or the
administrator of the optionee's estate, in the event of the optionee's
death, or the optionee's legal representative in the event of the
optionee's incapacity (hereinafter, collectively with such optionee,
the "Grantor")) shall sell to the Company and/or its assignee(s), all
or any portion (at the Company's option) of the shares of Common Stock
and/or Options held by the Grantor (such shares of Common Stock and
Options collectively being referred to as the "Purchasable Shares").
b. The Company shall give notice in writing to the Grantor of the exercise
of the Purchase Option within one year after the earlier of the date of
the termination of the optionee's employment or such Change of Control.
Such notice shall state the number of Purchasable Shares to be
purchased and the purchase price of such Purchasable Shares. If no
notice is given within the time limit specified above, the Purchase
Option shall terminate.
c. The purchase price to be paid for the Purchasable Shares purchased
pursuant to the Purchase Option shall be, in the case of any Common
Stock, the Fair Market Value per share as of the date of the notice of
exercise of the Purchase Option times the number of shares being
purchased, and in the case of any Option, the Fair Market Value per
share times the number of vested shares (including by acceleration)
subject to such Option which are being purchased, less the applicable
per share Option exercise price. The purchase price shall be paid in
cash. The closing of such purchase shall take place at the Company's
principal executive offices within ten days after the purchase price
has been determined. At such closing, the Grantor shall deliver to the
purchaser(s) the certificates or instruments evidencing the Purchasable
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 check of the purchaser(s). In the event that,
notwithstanding the foregoing, the Grantor shall have failed to obtain
the release of any pledge or other encumbrance on any Purchasable
Shares by the scheduled closing date, at the option of the purchaser(s)
the closing shall nevertheless occur on such scheduled closing date,
with the cash purchase price being reduced to the extent of, and paid
to the holder of, all unpaid indebtedness for which such Purchasable
Shares are then pledged or encumbered.
d. To assure the enforceability of the Company's rights under this Section
9, each certificate or instrument representing Common Stock or an
Option held by him or it shall bear a conspicuous legend in
substantially the following form:
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"THE SHARES [REPRESENTED BY THIS CERTIFICATE] [ISSUABLE PURSUANT TO THIS
AGREEMENT] ARE SUBJECT TO AN OPTION TO REPURCHASE PROVIDED UNDER THE
PROVISIONS OF THE COMPANY'S 2002 STOCK OPTION PLAN FOR KEY EMPLOYEES AND A
STOCK OPTION AGREEMENT ENTERED INTO PURSUANT THERETO. A COPY OF SUCH OPTION
PLAN AND OPTION AGREEMENT ARE AVAILABLE UPON WRITTEN REQUEST TO THE COMPANY
AT ITS PRINCIPAL EXECUTIVE OFFICES."
The Company's rights under this Section 9 shall terminate upon the
consummation of a Qualifying Public Offering.
10. Adjustment of Shares and Price.
Unless otherwise expressly provided in a particular Option, in the event
that, by reason of any merger, consolidation, combination, liquidation,
recapitalization, stock dividend, stock split, split-up, split-off, spin-off,
combination of shares, exchange of shares or other like change in capital
structure of the Company (collectively, an "Adjustment Event"), the Common Stock
is substituted, combined, or changed into any cash, property, or other
securities, or the shares of Common Stock are changed into a greater or lesser
number of shares of Common Stock, the number and/or kind of shares and/or
interests subject to the Plan or an Option granted hereunder (and the per share
price or value thereof) shall be appropriately and equitably adjusted by the
Committee to give appropriate effect to such Adjustment Event. Any fractional
shares or interests resulting from such adjustment shall be eliminated.
Notwithstanding the foregoing, (i) each such adjustment with respect to an
Incentive Option shall comply with the rules of Section 424(a) of the Code to an
Incentive Option, and (ii) in no event shall any adjustment be made which would
render any Incentive Option granted hereunder other than an "incentive stock
option" for purposes of Section 422 of the Code.
In the event the Company is not the surviving entity of an Adjustment Event
and, following such Adjustment Event, any optionee will hold Options issued
pursuant to the Plan which have not been exercised, cancelled, or terminated in
connection therewith, the Company shall cause such Options to be assumed (or
cancelled and replacement Options issued) by the surviving entity or a Related
Entity.
11. Assignment or Transfer.
Except as otherwise expressly provided in any Non-Qualified Option, no
Option granted under the Plan or any rights or interests therein shall be
assignable or transferable by an optionee except by will or the laws of descent
and distribution, and during the lifetime of an optionee, Options granted to him
or her hereunder shall be exercisable only by the optionee or, in the event that
a legal representative has been appointed in connection with the Disability of
an optionee, such legal representative.
12. Compliance with Securities Laws.
The Company shall not in any event be obligated to file any registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
or any applicable state securities laws, to permit exercise of any Option or to
issue any Common Stock in violation of the Securities Act or any applicable
state securities laws. Each optionee (or,
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in the event of his or her death or, in the event a legal representative has
been appointed in connection with his or her Disability, the Person exercising
the Option) shall, as a condition to his or her right to exercise any Option,
deliver to the Company an agreement or certificate containing such
representations, warranties and covenants as the Company may deem necessary or
appropriate to ensure that the issuance of shares of Common Stock pursuant to
such exercise is not required to be registered under the Securities Act or any
applicable state securities laws.
Certificates for shares of Common Stock, when issued, may have substantially
the following legend, or statements of other applicable restrictions, endorsed
thereon, and may not be immediately transferable:
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES
EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION OF THE
ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER)
THAT SUCH OFFER, SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT
VIOLATE APPLICABLE FEDERAL OR STATE LAWS."
This legend shall not be required for shares of Common Stock issued pursuant
to an effective registration statement under the Securities Act and in
accordance with applicable state securities laws.
13. Withholding Taxes.
By acceptance of the Option, the optionee will be deemed to (i) agree to
reimburse the Company or any Related Entity by which the optionee is employed
for any federal, state, or local taxes required by any government to be withheld
or otherwise deducted by such corporation in respect of the optionee's exercise
of all or a portion of the Option; (ii) authorize the Company or any Related
Entity by which the optionee is employed to withhold from any cash compensation
paid to the optionee or on the optionee's behalf, an amount sufficient to
discharge any federal, state, and local taxes imposed on the Company or the
Related Entity by which the optionee is employed, and which otherwise has not
been reimbursed by the optionee, in respect of the optionee's exercise of all or
a portion of the Option; and (iii) agree that the Company may, in its
discretion, hold the stock certificate to which the optionee is entitled upon
exercise of the Option as security for the payment of the aforementioned
withholding tax liability, until cash sufficient to pay that liability has been
accumulated, and may, in its discretion, effect such withholding by retaining
shares issuable upon the exercise of the Option having a Fair Market Value on
the date of exercise which is equal to the amount to be withheld.
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14. Costs and Expenses.
The costs and expenses of administering the Plan shall be borne by the
Company and shall not be charged against any Option nor to any employee
receiving an Option.
15. Funding of Plan.
The Plan shall be unfunded. The Company shall not be required to make any
segregation of assets to assure the payment of any Option under the Plan.
16. Other Incentive Plans.
The adoption of the Plan does not affect any existing incentive plans or
preclude the adoption by appropriate means of any other incentive plan for
employees.
17. Effect on Employment.
Nothing contained in the Plan or any agreement related hereto or referred to
herein shall affect, or be construed as affecting, the terms of employment of
any Key Employee except to the extent specifically provided herein or therein.
Nothing contained in the Plan or any agreement related hereto or referred to
herein shall impose, or be construed as imposing, an obligation on (i) the
Company or any Related Entity to continue the employment of any Key Employee,
and (ii) any Key Employee to remain in the employ of the Company or any Related
Entity.
18. Definitions.
In addition to the terms specifically defined elsewhere in the Plan, as used
in the Plan, the following terms shall have the respective meanings indicated:
"Adjustment Event" shall have the meaning set forth in Section 10 hereof.
"Affiliate" shall mean, as to any Person, a Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with, such Person.
"Board of Directors" shall have the meaning set forth in Section 2 hereof.
"Change of Control" shall mean the first to occur of the following events:
(i) any sale, lease, exchange, or other transfer (in one transaction or
series of related transactions) of all or substantially all of the assets of
the Company to any Person or Group, other than one or more members of the
HMC Group, (ii) a majority of the Board of Directors of the Company shall
consist of Persons who are not Continuing Directors; or (iii) the
acquisition by any Person or Group other than one or more members of the HMC
Group of the power, directly or indirectly, to vote or direct the voting of
securities having more than 50% of the ordinary voting power for the
election of directors of the Company.
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"Code" shall have the meaning set forth in Section 1 hereof.
"Committee" shall have the meaning set forth in Section 2 hereof.
"Common Stock" shall have the meaning set forth in Section 3 hereof.
"Company" shall have the meaning set forth in Section 1 hereof.
"Continuing Director" shall mean, as of the date of determination, any
Person who (i) was a member of the Board of Directors of the Company on the
date of adoption of the Plan, (ii) was nominated for election or elected to
the Board of Directors of the Company with the affirmative vote of a
majority of the Continuing Directors who were members of such Board of
Directors at the time of such nomination or election, or (iii) is a member
of the HMC Group.
"Disability" shall mean (i) permanent disability as defined under the
appropriate provisions of the applicable long-term disability plan
maintained for the benefit of employees of the Company or any Related Entity
who are regularly employed on a salaried basis or (ii) if no such long-term
disability plan exists, an inability to perform a participant's employment
duties and responsibilities by reason of any physical or mental condition
for a period of 26 consecutive weeks or a period of 26 weeks during any
12-month period in connection with the same physical or mental condition or
(iii) another meaning agreed to in writing by the Committee and the
optionee; provided, however, that in the case of the optionee holding an
Incentive Option "disability" shall have the meaning specified in Section
22(e)(3) of the Code.
"Exchange Act" shall have the meaning set forth in Section 2 hereof.
"Fair Market Value" shall, as it relates to the Common Stock, mean the
average of the daily market prices of such Common Stock as reported on the
principal national securities exchange on which the shares of Common Stock
are then listed for each day during the ten consecutive trading days prior
to the date of determination, or if such Common Stock is not listed on a
national securities exchange, 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
arm's-length transaction (without regard to minority discount, absence of
liquidity, or transfer restrictions imposed by any applicable law or
agreement) at the date of the event giving rise to a need for a
determination. Except as may be otherwise expressly provided in a particular
Option, Fair Market Value shall be determined in good faith by the
Committee.
"Good Cause", with respect to any Key Employee, shall mean (i) the
optionee's conviction of, or plea of nolo contendere (or similar plea) to, a
felony or other crime which adversely affects, or may adversely affect, the
reputation, goodwill or business position of the Company or which involves
Company funds or assets, (ii) any intentional material damage to property or
business of the Company,
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(iii) the optionee's conviction of theft, embezzlement, fraud or
misappropriation of Company property, (iv) the willful failure of the
optionee to carry out his duties as an employee for a reason other than
mental or physical disability, (v) the optionee's willful commission of
material mismanagement in the conduct of his duties as assigned to him by
the Board of Directors or his supervising officers, if any, (vi) the
optionee's breach of his obligations under this Agreement, or (vii)
substance abuse or addiction on the part of the optionee.
"Grantor" has the meaning set forth in Section 9 hereof.
"Group" shall have the meaning given such term in Section 13(d) of the
Exchange Act and the rules and regulations and interpretations thereunder.
"HMC Group" shall mean Hicks, Muse, Tate & Furst Incorporated, its
Affiliates, and their respective employees, officers, partners and directors
(and members of their respective families and trusts for the primary benefit
of such family members).
"Holding Period" shall have the meaning set forth in subsection 5(e) hereof.
"Incentive Options" shall have the meaning set forth in Section 6 hereof.
The term "including" when used herein shall mean "including, but not limited
to."
"Key Employee" shall have the meaning set forth in Section 4 hereof.
"Non-Qualified Options" shall have the meaning set forth in Section 6
hereof.
"Options" shall have the meaning set forth in Section 1 hereof.
"Performance-Based Options" shall have the meaning set forth in Section 7
hereof.
"Person" shall have the meaning set forth in Section 4 hereof.
"Plan" shall have the meaning set forth in Section 1 hereof.
"Purchasable Shares" shall have the meaning set forth in Section 9 hereof.
"Purchase Option" shall have the meaning set forth in Section 9 hereof.
"Qualifying Public Offering" shall mean a firm commitment underwritten
public offering of Common Stock the result of which is that the HMC Group
shall own less than 10% of the fully diluted Common Stock of the Company.
"Related Entities" shall have the meaning set forth in Section 1 hereof.
"Rule 16b-3" shall have the meaning set forth in Section 2 hereof.
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"Securities Act" shall have the meaning set forth in Section 12 hereof.
"Term" shall have the meaning set forth in Section 20 hereof.
19. Amendment of Plan.
The Board of Directors shall have the right to amend, modify, suspend or
terminate the Plan at any time; provided, that no amendment shall be made which
shall increase the total number of shares of the Common Stock which may be
issued and sold pursuant to Options granted under the Plan or decrease the
minimum Option exercise price in the case of an Incentive Option, or modify the
provisions of the Plan relating to eligibility with respect to Incentive Options
or increase the Term of the Plan unless such amendment is made by or with the
approval of the shareholders. The Board of Directors shall be authorized to
amend the Plan and the Options granted thereunder, without the consent or
joinder of any optionee or other Person, in such manner as may be deemed
necessary or appropriate by the Board of Directors in order to cause the Plan
and the Options granted thereunder (i) to qualify as "incentive stock options"
within the meaning of Section 422 of the Code, (ii) to comply with Rule 16b-3
(or any successor rule) under the Exchange Act (or any successor law) and the
regulations (including any temporary regulations) promulgated thereunder or
(iii) to comply with Section 162(m) of the Code (or any successor section) and
any regulations (including any temporary regulations) promulgated thereunder.
Except as provided above, no amendment, modification, suspension or termination
of the Plan shall materially impair the value of any Options previously granted
under the Plan, without the consent of the holder thereof.
20. Effective Date.
The Plan shall be effective as of August 14, 2002, and shall be void
retroactively as to any Incentive Option if not approved by the shareholders of
the Company within twelve months thereafter. The Plan shall terminate on the
tenth anniversary of the date of adoption of the Plan or the date of approval of
the Plan by the shareholders of the Company, whichever is earlier, unless sooner
terminated by the Board of Directors (the "Term").
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