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EXHIBIT 10.07
CSK GROUP, LTD.
1996 EXECUTIVE STOCK OPTION PLAN
1. Purposes of the Plan.
This stock option plan including Exhibit I hereto (the "Plan") is
designed to provide an incentive to employees (including directors and officers
who are employees) of and consultants to CSK GROUP, LTD., a Delaware
corporation (the "Company") or any of its Subsidiaries or a Parent (as such
terms are defined in Paragraph 19), and to offer an additional inducement in
obtaining the services of such persons. The Plan provides for the grant of
"incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified stock
options which do not qualify as ISOs ("NQSOs"), but the Company makes no
representation or warranty, express or implied, as to the qualification of any
option as an "incentive stock option" under the Code.
2. Stock Subject to the Plan.
Subject to the provisions of Paragraph 12, the aggregate number of
shares of Class B Common Stock, $.01 par value per share, of the Company
("Common Stock") which may be issued under the Plan shall not exceed 21,000.
Such shares of Common Stock may, in the discretion of the Board of Directors of
the Company (the "Board of Directors"), consist either in whole or in part of
authorized but unissued shares of Common Stock or shares of Common Stock held
in the treasury of the Company. Subject to the provisions of Paragraph 14, any
shares of Common Stock subject to an option which for any reason expires, is
canceled or is terminated unexercised or which ceases for any reason to be
exercisable shall again become available for the granting of options under the
Plan. The Company shall at all times during the term of the Plan reserve and
keep available such number of shares of Common Stock as will be sufficient to
satisfy the requirements of the Plan.
3. Administration of the Plan.
The Plan shall be administered by the Board of Directors or by a
committee of the Board of Directors consisting of not less than two directors
(in either case, the "Committee"). During such time as the Company has a
class of equity securities registered under Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), each member of the
Committee shall be a "Non-Employee Director" within the meaning of Rule 16b-3
promulgated under the Exchange Act (as the same may be in effect and
interpreted from time to time, "Rule 16b-3"). A majority of the members of the
Committee shall constitute a quorum, and the acts of a majority of the members
present at any meeting at which a quorum is present, and any acts approved in
writing by all members without a meeting, shall be the acts of the Committee.
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Subject to the express provisions of the Plan, the Committee shall
have the authority, in its sole discretion to determine: the employees and
consultants who shall be granted options; the times when options shall be
granted; whether an option shall be an ISO or a NQSO; the number of shares of
Common Stock to be subject to each option; the term of each option; the date
each option shall become exercisable; whether an option shall be exercisable in
whole, in part or in installments and, if in installments, the number of shares
of Common Stock to be subject to each installment, whether the installments
shall be cumulative, the date each installment shall become exercisable and the
term of each installment; whether to accelerate the date of exercise of any
option or installment; whether shares of Common Stock may be issued upon the
exercise of an option as partly paid and, if so, the dates when future
installments of the exercise price shall become due and the amounts of such
installments; the exercise price of each option; the form of payment of the
exercise price; whether to restrict the sale or other disposition of the shares
of Common Stock acquired upon the exercise of an option and, if so, whether to
waive any such restriction; whether to subject the grant or exercise of all or
any portion of an option to the fulfillment of contingencies as specified in
the contract referred to in Paragraph 11 (the "Contract"), including without
limitation, contingencies relating to entering into a covenant not to compete
with the Company, any of its Subsidiaries or a Parent, to financial objectives
for the Company, any of its Subsidiaries or a Parent, a division of any of the
foregoing, a product line or other category, and/or the period of continued
employment of the optionee with the Company, any of its Subsidiaries or a
Parent, and to determine whether such contingencies have been met; whether an
optionee is Disabled (as defined in Paragraph 19); the amount, if any,
necessary to satisfy the obligation of the Company, a Subsidiary or a Parent to
withhold taxes or other amounts; the fair market value of a share of Common
Stock; how to construe the respective Contracts and the Plan; with the consent
of the optionee, to cancel or modify an option, provided, that the modified
provision is permitted to be included in an option granted under the Plan on
the date of the modification, and further, provided, that in the case of a
modification (within the meaning of Section 424(h) of the Code) of an ISO, such
option as modified would be permitted to be granted on the date of such
modification under the terms of the Plan; to prescribe, amend and rescind rules
and regulations relating to the Plan; to approve any provision which under Rule
16b-3 requires approval by a committee of Non-Employee Directors to be exempt
(unless otherwise specifically provided herein); and to make all other
determinations necessary or advisable for administering the Plan. Any
controversy or claim arising out of or relating to the Plan, any option granted
under the Plan or any Contract shall be determined unilaterally by the
Committee in its sole discretion. The determinations of the Committee on the
matters referred to in this Paragraph 3 shall be conclusive and binding on the
parties.
No member or former member of the Committee shall be liable for any
action, failure to act or determination made in good faith with respect to the
Plan or any option hereunder. In addition, the Company shall indemnify and
hold harmless each member and former member of the Committee and their
respective successors, assigns, heirs and personal representatives from and
against any liability, loss, claim, damage and expense (including without
limitation attorneys fees and expenses) incurred in connection therewith by
reason of any action,
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failure to act or determination made in good faith under or in connection with
the Plan or any option hereunder to the fullest extent permitted with respect
to directors under the Company's certificate of incorporation, by-laws or
applicable law.
4. Eligibility.
The Committee may from time to time, in its sole discretion,
consistent with the purposes of the Plan, grant options to employees (including
officers and directors who are employees) of, and to consultants to, the
Company or any of its Subsidiaries, or a Parent of the Company. Such options
granted shall cover such number of shares of Common Stock as the Committee may
determine, in its sole discretion; provided, however, that if the Company is a
"publicly held corporation" (within the meaning of Code Section 162(m)), the
maximum number of shares of Common Stock subject to options that may be granted
to any employee during any fiscal year of the Company under the Plan shall be
18,000 shares (the "162(m) Maximum"); and further, provided, that the aggregate
market value (determined at the time the option is granted in accordance with
Paragraph 5) of the shares of Common Stock for which any eligible employee may
be granted ISOs under the Plan or any other plan of the Company, or of a Parent
or a Subsidiary of the Company, which are exercisable for the first time by
such optionee during any calendar year shall not exceed $100,000. Such ISO
limitation shall be applied by taking ISOs into account in the order in which
they were granted. Any option (or the portion thereof) granted in excess of
such ISO limitation amount shall be treated as a NQSO.
5. Exercise Price.
The exercise price of the shares of Common Stock under each option
shall be determined by the Committee in its sole discretion; provided, however,
that the exercise price of an ISO shall not be less than the fair market value
of the Common Stock subject to such option on the date of grant; and further,
provided, that if, at the time an ISO is granted, the optionee owns (or is
deemed to own under Section 424(d) of the Code) stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company, of
any of its Subsidiaries or of a Parent, the exercise price of such ISO shall
not be less than 110% of the fair market value of the Common Stock subject to
such ISO on the date of grant.
The fair market value of a share of Common Stock on any day shall
be (a) if the principal market for the Common Stock is a national securities
exchange, the average of the highest and lowest sales prices per share of
Common Stock on such day as reported by such exchange or on a composite tape
reflecting transactions on such exchange, (b) if the principal market for the
Common Stock is not a national securities exchange and the Common Stock is
quoted on The Nasdaq Stock Market ("Nasdaq"), and (i) if actual sales price
information is available with respect to the Common Stock, the average of the
highest and lowest sales prices per share of Common Stock on such day on
Nasdaq, or (ii) if such information is not available, the average of the
highest bid and lowest asked prices per share of Common Stock on such day on
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Nasdaq, or (c) if the principal market for the Common Stock is not a national
securities exchange and the Common Stock is not quoted on Nasdaq, the average
of the highest bid and lowest asked prices per share of Common Stock on such
day as reported on the OTC Bulletin Board Service or by National Quotation
Bureau, Incorporated or a comparable service; provided, however, that if
clauses (a), (b) and (c) of this Paragraph are all inapplicable, or if no
trades have been made or no quotes are available for such day, the fair market
value of the Common Stock shall be determined by the Board by any method
consistent with applicable regulations adopted by the Treasury Department
relating to stock options.
6. Term.
The term of each option granted pursuant to the Plan shall be such
term as is established by the Committee, in its sole discretion; provided,
however, that the term of each ISO granted pursuant to the Plan shall be for a
period not exceeding 10 years from the date of grant thereof; and further,
provided, that if, at the time an ISO is granted, the optionee owns (or is
deemed to own under Section 424(d) of the Code) stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company, of
any of its Subsidiaries or of a Parent, the term of the ISO shall be for a
period not exceeding five years from the date of grant. Options shall be
subject to earlier termination as hereinafter provided.
7. Exercise; Adjustment of Shares Subject to Options.
No option granted hereunder shall be or become exercisable, whether
or not then vested in accordance with this Paragraph 7 and/or Exhibit I hereto,
until the earlier of (a) the occurrence of the Initial Public Offering of the
Company (the "Initial Public Offering"), as the term Initial Public Offering is
defined in the Restated Certificate of Incorporation of the Company filed with
the Secretary of State of the State of Delaware on October 30, 1996 and as the
same from time to time may hereafter be amended (the "Restated Certificate of
Incorporation") and (b) the seventh anniversary of the date of grant and, in any
event, only to the extent such option shall have vested in accordance with the
next succeeding paragraph of this Paragraph 7 and Exhibit I to this Plan.
Options granted hereunder shall vest (but shall not become
exercisable except in accordance with the first paragraph of this Paragraph 7)
in accordance with Exhibit I to this Plan, which is incorporated by reference
herein and made a part hereof. In addition, the number of shares of Common
Stock subject to each option is subject to automatic increase upon the terms and
conditions described on Exhibit I to this Plan.
An option (or any part or installment thereof), to the extent then
exercisable, shall be exercised by giving written notice to the Company (in
advance as determined by the Committee) at its principal office stating which
option is being exercised, specifying the number of shares of Common Stock as
to which such option is being exercised and accompanied by payment
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in full of the aggregate exercise price therefor (or the amount due on exercise
if the Contract permits installment payments) (a) in cash or by certified check
or (b) if the applicable Contract permits, with previously acquired shares of
Common Stock having an aggregate fair market value on the date of exercise
(determined in accordance with Paragraph 5) equal to the aggregate exercise
price of all options being exercised, or with any combination of cash,
certified check or shares of Common Stock having such value. The Company shall
not be required to issue any shares of Common Stock pursuant to any such option
until all required payments, including any required withholding, have been
made.
Notwithstanding the foregoing, the Committee may, in its sole
discretion, permit payment of the exercise price of an option by delivery by
the optionee of a properly executed notice, together with a copy of his
irrevocable instructions to a broker acceptable to the Committee to deliver
promptly to the Company the amount of sale or loan proceeds sufficient to pay
such exercise price. In connection therewith, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms.
A person entitled to receive Common Stock upon the exercise of an
option shall not have the rights of a stockholder with respect to such shares of
Common Stock until the date of issuance of a stock certificate to him for such
shares; provided, however, that until such stock certificate is issued, any
optionee using previously acquired shares of Common Stock in payment of an
option exercise price shall continue to have the rights of a stockholder with
respect to such previously acquired shares.
In no case may a fraction of a share of Common Stock be purchased or
issued under the Plan.
8. Termination of Relationship.
Except as may otherwise be expressly provided in the applicable
Contract, any optionee whose relationship with the Company, its Parent and
Subsidiaries as an employee or a consultant (a "Relationship") has terminated
for any reason (other than as a result of the death or Disability of the
optionee) after the occurrence of the Initial Public Offering, may exercise
such option, to the extent exercisable on the date of such termination, at any
time during the 30 days commencing six months after the date of such
termination, but not thereafter. If the optionee's Relationship has terminated
for any reason (other than as a result of the death or Disability of the
optionee) prior to the occurrence of the Initial Public Offering, the option
shall expire upon such termination and the optionee shall have, in lieu
thereof, the right to receive from the Company upon completion of the Initial
Public Offering or Sale (as defined in Section 13) of the Company, an amount
equal to the product of (a) the number of shares represented by the vested
portion of such option upon termination of the Relationship, and (b) the excess
(if any) of the fair market value of a share of Common Stock upon termination
of the Relationship over the exercise price per share (such product being the
"Increased FMV"); provided, however, that if the Initial Public
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Offering or Sale shall not have occurred prior to the date on which the option
would otherwise have expired, the optionee shall not be entitled to receive any
amount pursuant to this Section 8 unless, on or prior to the date the option
would otherwise have expired, the optionee pays to the Company an amount equal
to the exercise price of all options held by the optionee which are subject to
this Section 8 (the "Option Payment"); and provided, further, that if the
Option Payment is made, the amount payable by the Company pursuant to this
Section 8 shall be increased by the amount of such Option Payment.
Notwithstanding the foregoing, if such Relationship is terminated (a) for
cause, or (b) if at any time during the first six months after termination of
the Relationship the optionee shall be directly or indirectly employed by,
associated with, or affiliated with, a chain of automotive after market stores
which in the Board of Directors' judgment is a competitor of the Company, such
optionee shall have no rights to any payment with respect to such option.
For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Code. As a result, an individual on military, sick
leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of the Plan during such leave if the period of the leave
does not exceed 90 days, or, if longer, so long as the individual's right to
reemployment with the Company (or a related corporation) is guaranteed either by
statute or by contract. If the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed by statute or by contract,
the employment relationship shall be deemed to have terminated on the 91st day
of such leave.
Except as may otherwise be expressly provided in the applicable
Contract, options granted under the Plan shall not be affected by any change in
the status of the optionee so long as the optionee continues to be an employee
of, or a consultant to, the Company, or any of its Subsidiaries or a Parent
(regardless of having changed from one to the other or having been transferred
from one corporation to another).
Nothing in the Plan or in any option granted under the Plan shall
confer on any optionee any right to continue in the employ of, or as a
consultant to, the Company, any of its Subsidiaries or a Parent, or interfere in
any way with any right of the Company, any of its Subsidiaries or a Parent to
terminate the optionee's relationship at any time for any reason whatsoever
without liability to the Company, its Subsidiaries or Parent.
For purposes of this Plan, "cause" shall mean fraud or embezzlement
by the optionee, gross negligence by the optionee in the performance or
nonperformance of his duties for the Company, its Subsidiaries or Parent, or the
optionee's material failure or refusal to perform his duties at any time as an
employee of or consultant to the Company, a Subsidiary or Parent.
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9. Death or Disability of an Optionee.
Except as may otherwise be expressly provided in the applicable
Contract, if an optionee dies while he or she is an employee of, or consultant
to, the Company, any of its Subsidiaries or a Parent, or his or her
Relationship terminates by reason of his or her Disability, in either case
after the occurrence of the Initial Public Offering, the option may be
exercised, to the extent exercisable on the date of his or her death or in the
event of his or her Disability, upon the effective date of such termination, by
his or her Legal Representative (as defined in Paragraph 20) at any time within
90 days after the date of death or the effective date of such termination, but
not thereafter. If such Relationship terminates by reason of such death or
Disability prior to the occurrence of the Initial Public Offering, the option
shall expire upon such termination and the optionee or his or her legal
representative shall have, in lieu thereof, the right to receive from the
Company upon completion of the Initial Public Offering or Sale (as defined in
Section 13) of the Company, an amount equal to the Increased FMV; provided,
however, that if the Initial Public Offering or Sale shall not have occurred
prior to the date on which the option would otherwise have expired, the
optionee or his or her legal representative shall not be entitled to receive
any amount pursuant to this Section 9 unless, on or prior to the date the
option would otherwise have expired, the optionee or his or her legal
representative pays to the Company the Option Payment; provided, further, that
if the Option Payment is made, the amount payable by the Company pursuant to
this Section 9 shall be increased by the amount of such Option Payment.
10. Compliance with Securities Laws.
The Committee may require, in its sole discretion, as a condition
to any option being exercisable that either (a) a Registration Statement under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the shares of Common Stock to be issued upon such exercise shall be effective
and current at the time of exercise, or (b) there is an exemption from
registration under the Securities Act for the issuance of the shares of Common
Stock upon such exercise. Nothing herein shall be construed as requiring the
Company to register shares subject to any option under the Securities Act or to
keep any Registration Statement effective or current; provided, however, that if
the Initial Public Offering has not occurred prior to the seventh anniversary of
the date of grant, the Company will take such action as shall be necessary to
permit the exercise of such options during the 30 days following such seventh
anniversary in accordance with the requirements of the Securities Act, any
applicable state securities laws and any listing or other regulatory authority
requirements referred to in this Paragraph 10.
The Committee may require, in its sole discretion, as a condition
to the exercise of any option that the optionee execute and deliver to the
Company his representations and warranties, in form, substance and scope
satisfactory to the Committee, which the Committee determines are necessary or
convenient to facilitate the perfection of an exemption from the registration
requirements of the Securities Act, applicable state securities laws or other
legal requirement, including without limitation that (a) the shares of Common
Stock to be issued upon
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the exercise of the option are being acquired by the optionee for his own
account, for investment only and not with a view to the resale or distribution
thereof, and (b) any subsequent resale or distribution of shares of Common
Stock by such optionee will be made only pursuant to (i) a Registration
Statement under the Securities Act which is effective and current with respect
to the shares of Common Stock being sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, but in claiming such
exemption, the optionee shall prior to any offer of sale or sale of such shares
of Common Stock provide the Company with a favorable written opinion of counsel
satisfactory to the Company, in form, substance and scope satisfactory to the
Company, as to the applicability of such exemption to the proposed sale or
distribution.
In addition, if at any time the Committee shall determine, in its
sole discretion, that the listing or qualification of the shares of Common
Stock subject to such option on any securities exchange, Nasdaq or under any
applicable law, or the consent or approval of any governmental authority or
regulatory body, is necessary or desirable as a condition to, or in connection
with, the granting of an option or the issue of shares of Common Stock
thereunder, such option may not be exercised in whole or in part unless such
listing, qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.
11. Stock Option Contracts.
Each option shall be evidenced by an appropriate Contract which
shall be duly executed by the Company and the optionee, and shall contain such
terms, provisions and conditions not inconsistent herewith as may be determined
by the Committee.
12. Adjustments upon Changes in Common Stock.
Notwithstanding any other provision of the Plan, in the event of a
stock dividend, spin-off, split-up, combination, reclassification,
recapitalization (including, without limitation, the recapitalization of the
Company pursuant to the Restated Certificate of Incorporation in connection with
the Initial Public Offering of the Company), merger in which the Company is the
surviving corporation, or exchange of shares or the like which results in a
change in the number or kind of shares of Common Stock which are authorized for
issuance or which are outstanding immediately prior to such event, the aggregate
number and kind of shares subject to the Plan, the aggregate number and kind of
shares subject to each outstanding option and the exercise price thereof, and
the 162(m) Maximum shall be adjusted accordingly by the Board of Directors,
whose determination shall be conclusive and binding on all parties.
13. Sale of More than 80% of the Company.
a) In the event that at any time during the term of an option and
prior to the occurrence of the Initial Public Offering, there shall be a sale
of (a) shares of capital stock by one or more stockholders, which results in
shares of capital stock having an aggregate of 80% of the
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voting power of all outstanding shares of capital stock having been sold (by
stockholders who held such stock at the time of the option's grant) or (b) the
sale of 80% or more of the Company's assets in any one transaction or series of
related transactions, in either case to parties which at the time of such sales
were not stockholders or affiliates of any stockholder of the Company
(collectively, "Sales" and the final such sale being the "Triggering Sale"),
the Company shall purchase all of the vested portion of the option for a
purchase price equal to the difference between the average purchase price per
share of Common Stock (or if shares of Common Stock were not the shares sold,
then the value of a share of Common Stock as determined by the Board of
Directors based upon the purchase price of the shares of capital stock which
were sold) received in connection with all Sales occurring within 24 months of
the Triggering Sale (including the Triggering Sale) and the exercise price per
share of Common Stock subject to such option (the "Option Repurchase Price"),
multiplied by the number of shares of Common Stock subject to the vested
portion of the option. One half of the Option Repurchase Price shall be
payable by the Company within 30 days of consummation of the Triggering Sale
and the balance shall be payable by the Company within 30 days of the first
anniversary of the Triggering Sale, provided that the optionee's Relationship
is either continuing as of such anniversary, or has been terminated by the
Company prior thereto without cause or as a result of the death or Disability
of the optionee.
b) In addition, if the 16 corporations which purchased capital stock
of the Company on October 30, 1996 (the "Original Stockholders") realize a
compounded internal rate of return with respect to those of their original
shares of capital stock sold in the Sales (the "Internal Rate of Return") of at
least 20%, and the optionee's Relationship is either continuing as of the first
anniversary of the Triggering Sale, or has been terminated by the Company
between the date of the Triggering Sale and the first anniversary thereof
without cause or as a result of the death or Disability of the optionee, the
Company shall purchase the portion set forth below of the option which remains
unvested at the time of the Triggering Sale, at the Option Repurchase Price,
payable within 30 days of the first anniversary of the Triggering Sale.
If the Original Stockholders Internal Rate of Return is at least
20%, but less than 25%, then 50% of the unvested portion of the
option will be purchased;
If the Original Stockholders Internal Rate of Return is at least
25%, but less than 30%, then 75% of the unvested portion of the
option will be purchased; and
If the Original Stockholders Internal Rate of Return equals or
exceeds 30%, then 100% of the unvested portion of the option will
be purchased.
In the event that, at any time during the term of an option but
following the occurrence of the Initial Public Offering, there shall occur a
Triggering Sale, the portion of such option which remains unvested at the time
of the Triggering Sale shall vest upon the occurrence of the Triggering Sale.
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c) Notwithstanding anything to the contrary contained herein, until
an optionee is notified in writing by the Company that all provisions of the
Stockholders' Agreement dated as of October 30, 1996, among the Company and all
of its stockholders as of such date (the "Stockholders' Agreement") relating to
the purchase and sale of the Company's securities (other than in a public
offering) have terminated, all shares of Common Stock issued upon the exercise
of options granted hereunder shall be subject to the following restrictions and
have the following rights:
(i) If, pursuant to the terms of the Stockholders' Agreement
in connection with an arm's-length sale to an unaffiliated third party pursuant
to a written offer to purchase at least all of the securities of the Company
held by the stockholders party to the Stockholders' Agreement, certain of the
stockholders party to the Stockholders' Agreement (the "Moving Group") have the
right to require the other holders of securities bound by the terms of the
Stockholders' Agreement (the "Selling Stockholders") to sell all of their
equity securities of the Company either to the third party or to the Moving
Stockholders and/or the Company (the "Purchaser") for consideration per share
having at least the same value as the consideration proposed to be paid by the
third party, the Moving Group shall also have the right to require each
optionee to sell, and each optionee shall sell and deliver free and clear of
all liens, claims and encumbrances, all of each optionee's Common Stock in the
same transaction to the Purchaser, provided, however, that such optionee
receives the same terms, including, without limitation, the same consideration
per share of Common Stock, as is received in such transactions by the Selling
Stockholders.
(ii) If, pursuant to the terms of the Stockholders' Agreement
in connection with a proposed sale of more than 25% of the outstanding equity
securities of the Company by certain of the stockholders party to the
Stockholders' Agreement (the "Transferring Stockholders"), such sale by such
Transferring Stockholders cannot be consummated unless (y) prior to such sale
each of the other stockholders party to the Stockholders' Agreement (the "Other
Stockholders") and the Company shall have been given notice of the proposed
transaction, which notice shall specify the number of shares that the
Transferring Stockholders desire to sell, the identity of the prospective
purchaser (the "Buyer"), and the proposed terms thereof and shall also include
a copy of the written offer from the Buyer, and (z) each of the Other
Stockholders shall have been provided a firm irrevocable right, which right
shall be exercisable by written notice (which shall specify the number of
shares (up to the total number of shares held by the Transferring Stockholders)
that the Other Stockholders desire to sell) within 60 days after giving notice
to the Other Stockholders, to sell to the Buyer, at the same time and upon the
same terms and conditions offered to the Transferring Stockholders by the
Buyer, the number of shares of Common Stock of the Other Stockholders (the
"Proportionate Amount") that bears the same ratio to the total number of shares
of Common Stock held by the Other Stockholders as the total number of shares of
Common Stock proposed to be sold by the Transferring Stockholders to the Buyer
bears to the total number of shares of Common Stock held by all of the
Transferring Stockholders, the Company will not register the transfer of
securities from the Transferring
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Stockholders to the Buyer unless the Transferring Stockholders and the Buyer
shall have extended to each optionee the rights described above which are
required to be extended to Other Stockholders in connection with such a sale.
(iii) No Optionee shall transfer any shares of Common Stock
unless such Optionee complies with the provisions below; provided, however,
that following the consummation of an initial public offering of shares of
Common Stock (an "IPO"), each Optionee may sell any of its shares of Common
Stock pursuant to any applicable registration statement or pursuant to Rule 144
under the Securities Act without complying with any of the provisions below.
In the event that an optionee receives and desires to accept an arm's-length
written offer (a "Third Party Offer") from an unaffiliated third party (the
"Offeror") to purchase shares of Common Stock owned by the optionee, the
optionee shall promptly provide written notice thereof to the Company, which
notice shall specify the number of shares of Common Stock that the optionee
desires to sell and the terms of the Third Party Offer and shall also include a
copy of the Third Party Offer. The Company shall have the irrevocable option,
exercisable by written notice to the optionee within 60 days after the receipt
of notice from the optionee (for purposes hereof, the "Option Period"), to
purchase from such optionee all of such shares of Common Stock proposed to be
sold by such optionee at the same price, and on the same terms and conditions,
as contained in the Third Party Offer, or, if the Third Party Offer provides
for non-cash consideration or other terms and conditions not practically
obtainable by the Company, then for cash consideration and upon terms and
conditions no less favorable, in the sole judgment of the Board of Directors,
to the Optionee than those contained in the Third Party Offer. If the Company
shall fail to elect, within the Option Period and pursuant to the terms hereof,
to purchase all of the shares of Common Stock proposed to be transferred by the
optionee, then the optionee shall be free, for a period of 90 days thereafter,
to sell to the Offeror identified in the notice of the Third Party Offer, but
only to that Offeror, and only for consideration and upon terms and conditions
no less favorable to the optionee, in the sole judgment of the Board of
Directors, than those contained in the Third Party Offer, all of the shares of
Common Stock proposed to be transferred; provided that, the Offeror executes an
agreement whereby the Offeror becomes bound by the provisions hereof.
14. Amendments and Termination of the Plan.
The Plan was adopted by the Board of Directors on ________, 1996.
No option may be granted under the Plan after _____________, 2006. The Board of
Directors, without further approval of the Company's stockholders, may at any
time suspend or terminate the Plan, in whole or in part, or amend it from time
to time in such respects as it may deem advisable, including, without
limitation, in order that ISOs granted hereunder meet the requirements for
"incentive stock options" under the Code, to comply with the provisions of Rule
16b-3, Section 162(m) of the Code, or any change in applicable law,
regulations, rulings or interpretations of administrative agencies; provided,
however, that no amendment shall be effective without the prior or subsequent
stockholder approval required under applicable law or the Code which would
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(a) except as contemplated in Paragraph 12, increase the maximum number of
shares of Common Stock for which options may be granted under the Plan or the
162(m) Maximum, or (b) change the eligibility requirements to receive options
hereunder. No termination, suspension or amendment of the Plan shall, without
the consent of the holder of an existing and outstanding option affected
thereby, adversely affect his rights under such option. The power of the
Committee to construe and administer any options granted under the Plan prior
to the termination or suspension of the Plan nevertheless shall continue after
such termination or during such suspension.
15. Non-transferability of Options.
No option granted under the Plan shall be transferable otherwise
than by will or the laws of descent and distribution, and options may be
exercised, during the lifetime of the optionee, only by the optionee or his
Legal Representatives. Except to the extent provided above, options may not be
assigned, transferred, pledged, hypothecated or disposed of in any way (whether
by operation of law or otherwise) and shall not be subject to execution,
attachment or similar process, and any such attempted assignment, transfer,
pledge, hypothecation or disposition shall be null and void ab initio and of no
force or effect.
16. Withholding Taxes.
The Company may withhold (a) cash, (b) subject to any limitations
under Rule 16b-3, shares of Common Stock to be issued with respect thereto
having an aggregate fair market value on the exercise date (determined in
accordance with Paragraph 5), or (c) any combination thereof, in an amount equal
to the amount which the Committee determines is necessary to satisfy the
obligation of the Company, a Subsidiary or a Parent to withhold Federal, state
and local income taxes or other amounts incurred by reason of the grant or
exercise of an option, its disposition, or the disposition of the underlying
shares of Common Stock. Alternatively, the Company may require the holder to
pay to the Company such amount, in cash, promptly upon demand.
17. Legends; Payment of Expenses.
The Company may endorse such legend or legends upon the
certificates for shares of Common Stock issued upon exercise of an option under
the Plan and may issue such "stop transfer" instructions to its transfer agent
in respect of such shares as it determines, in its discretion, to be necessary
or appropriate to (a) prevent a violation of, or to perfect an exemption from,
the registration requirements of the Securities Act and any applicable state
securities laws, (b) implement the provisions of the Plan or any agreement
between the Company and the optionee with respect to such shares of Common
Stock, or (c) permit the Company to determine the occurrence of a "disqualifying
disposition," as described in Section 421(b) of the Code, of the
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shares of Common Stock issued or transferred upon the exercise of an ISO
granted under the Plan.
The Company shall pay all issuance taxes with respect to the
issuance of shares of Common Stock upon the exercise of an option granted under
the Plan, as well as all fees and expenses incurred by the Company in connection
with such issuance.
18. Use of Proceeds.
The cash proceeds from the sale of shares of Common Stock pursuant
to the exercise of options under the Plan shall be added to the general funds of
the Company and used for such corporate purposes as the Board of Directors may
determine.
19. Substitutions and Assumptions of Options of Certain Constituent
Corporations.
Anything in this Plan to the contrary notwithstanding, the Board of
Directors may, without further approval by the stockholders, substitute new
options for prior options of a Constituent Corporation (as defined in Paragraph
20) or assume the prior options of such Constituent Corporation.
20. Definitions.
For purposes of the Plan, the following terms shall be defined as
set forth below:
a) Constituent Corporation. The term "Constituent
Corporation" shall mean any corporation which engages with the Company, any of
its Subsidiaries or a Parent in a transaction to which Section 424(a) of the
Code applies (or would apply if the option assumed or substituted were an ISO),
or any Parent or any Subsidiary of such corporation.
b) Disability. The term "Disability" shall mean a
permanent and total disability within the meaning of Section 22(e)(3) of the
Code.
c) Legal Representative. The term "Legal Representative"
shall mean the executor, administrator or other person who at the time is
entitled by law to exercise the rights of a deceased or incapacitated optionee
with respect to an option granted under the Plan.
d) Parent. The term "Parent" shall have the same
definition as "parent corporation" in Section 424(e) of the Code.
e) Subsidiary. The term "Subsidiary" shall have the same
definition as "subsidiary corporation" in Section 424(f) of the Code.
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21. Governing Law; Construction.
The Plan, such options as may be granted hereunder and all related
matters shall be governed by, and construed in accordance with, the laws of the
State of Delaware, without regard to conflict of law provisions.
Neither the Plan nor any Contract shall be construed or interpreted
with any presumption against the Company by reason of the Company causing the
Plan or Contract to be drafted. Whenever from the context it appears
appropriate, any term stated in either the singular or plural shall include the
singular and plural, and any term stated in the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter.
22. Partial Invalidity.
The invalidity, illegality or unenforceability of any provision in
the Plan or any Contract shall not affect the validity, legality or
enforceability of any other provision, all of which shall be valid, legal and
enforceable to the fullest extent permitted by applicable law.
23. Stockholder Approval.
The Plan shall take effect upon its adoption by the Board, but the
Plan shall be subject to the approval of the holders of a majority of the
securities of the Company present, in person or by proxy, and entitled to vote
at a meeting of stockholders held in accordance with applicable law. No options
granted hereunder may be exercised prior to such approval; provided, however,
that the date of grant of any option shall be determined as if the Plan had not
been subject to such approval. Notwithstanding the foregoing, if the Plan is
not approved by a vote of the stockholders of the Company on or before October
30, 1997, the Plan and any options granted hereunder shall terminate.
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EXHIBIT I
VESTING OF OPTIONS AND AUTOMATIC OPTION ADJUSTMENTS
Each option granted under the Plan to optionees to purchase Plan Shares
(as defined below) will vest as follows:
(a) 28% of the shares of Common Stock (rounded up or down to the
nearest whole share of Common Stock) subject to such option will vest on the
second anniversary date of the grant of the option and an additional 28%
(rounded up or down to the nearest whole share of Common Stock) will vest, on
each of the third and fourth anniversary dates of grant.
(b) The remaining 16% of the shares of Common Stock subject to such
option will vest as follows:
(i) 6%, 5% and 5%, respectively, of the shares of Common
Stock (rounded up or down to the nearest whole share of Common Stock) subject to
such option will vest, on each of the first, second and third April 30th to
occur after the second anniversary of the date of grant (each a "Business Plan
Vest Date"), if at least 95% of the Option Target ("Option Target") applicable
to such optionee as set forth in the Company's Management Business Plan attached
hereto shall be achieved for the immediately preceding full fiscal year (each, a
"Target Year") or, with respect to the first Business Plan Vest Date, for the
immediately preceding two full fiscal years on a cumulative basis; or
(ii) In the event that between 75% and 95% of an Option
Target shall be achieved for a Target Year or, with respect to the first
Business Plan Vest Date for the first two Target Years on a cumulative basis,
then (I) with respect to such first two Target Years, for each whole percent
above 75% (and with respect to the last whole percent between 94% and 95%, 94.99
shall be considered a whole percentage point for purposes of this calculation)
of an Option Target that shall be achieved, an additional .3% of the shares of
Common Stock subject to such option shall vest in respect of such Target Years
(rounded up or down to the nearest whole share of Common Stock) and (II) with
respect to each subsequent Target Year, for each whole percent above 75% (and
with respect to the last whole percent between 94% and 95%, 94.99 shall be
considered a whole percentage point for purposes of this calculation) of an
Option Target that shall be achieved, an additional .25% of the shares of Common
Stock subject to such option shall vest in respect of such Target Year (rounded
up or down to the nearest whole share of Common Stock); or
(iii) In the event that 75% or less of an Option Target
shall be achieved for a Target Year or, with respect to the first Business Plan
Vest Date for the first two Target
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Years on a cumulative basis, then no additional shares of Common Stock subject
to such option shall vest in respect of such Target Year or Target Years.
(iv) Notwithstanding clauses (ii) and (iii) above, if the
Option Target for such optionee shall not have been achieved for any Target
Year, but at least 95% of the sum of the Option Targets for (a) the first two
Target Years and the third Target Year, (b) the third Target Year and the
fourth Target Year, or (c) the first two Target Years, the third Target Year
and the fourth Target Year, shall have been achieved as at the end of any such
period, then the shares of Common Stock that would have vested if 100% of the
Option Target had been achieved for each such Target Year in the applicable
period, but did not so vest, shall nevertheless vest on the first Business Plan
Vest Date thereafter. The Option Target for each Target Year following the
date of grant of an option shall be appended to the Contract between the
Company and the optionee.
(v) Any of the shares of Common Stock subject to such option
which shall not have vested pursuant to clauses (i), (ii), (iii) and (iv)
above, shall automatically vest 90 days prior to the end of such option's term.
(c) In the event that the Option Target applicable to an optionee
shall be achieved with respect to any Target Year represented by each of the
first four full fiscal years during an option's term, and exceeded by at least
10% (the number of percentage points of such excess over 10% being referred to
as the "Excess"), then, in addition to the shares of Common Stock that shall
vest in accordance with the preceding clauses above in subparagraph (b), the
optionee shall automatically be granted on the first Business Plan Vest Date
after the applicable Target Year (or with respect to the first two Target
Years, for each of such two Target Years on the first Business Plan Vest Date)
an additional option (the "Additional Option") to purchase shares of Common
Stock (rounded up or down to the nearest whole share of Common Stock) equal to
the product of (i) 5% of the aggregate number of shares of Common Stock
originally subject to stock options granted to such optionee and (ii) a
fraction, the numerator of which is the Excess (rounded up or down to the
nearest one-tenth of a percent) and the denominator of which is 10; provided,
however, that the maximum number of shares of Common Stock subject to the
Additional Options granted with respect to any single Target Year shall not
exceed 5% of the number of shares of Common Stock subject to the original
option granted prior thereto. Additional Options shall be 100% vested upon
their grant. The exercise price of the shares of Common stock under each
Additional Option shall be equal to the fair market value of the Common Stock
on the grant date of the original option.
(d) The term "Plan Shares" shall mean the number of shares of Common
Stock that, after adjustment by the Board of Directors in accordance with
Paragraph 12 of the Plan, would be subject to an option assuming the occurrence
of an Initial Public Offering of the Company in connection with which the
shares of common stock issued and outstanding on the date of adoption of this
Plan would be adjusted such that an aggregate of 30,300,000 shares of
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common stock of the Company would be issued and outstanding immediately prior
to the Initial Public Offering. Accordingly, an option to purchase Plan Shares
shall entitle the optionee to purchase such number of shares of Class B Common
Stock as shall be equal to the number of Plan Shares subject to the option
divided by 30.3 at an exercise price which shall be equal to the exercise price
per Plan Share multiplied by 30.3. To the extent that fewer or greater than
30,300,000 shares of Capital Stock of the Company are issued and outstanding
immediately prior to an Initial Public Offering, or the date on which the
option otherwise first becomes exercisable, as the case may be (in either case,
the "Outstanding Shares"), (i) for purposes of determining the number of shares
of Class B Stock (or, after the occurrence of an Initial Public Offering,
shares of Common Stock) the optionee is entitled to purchase, the number of
Plan Shares with respect to which the optionee holds an option shall be
multiplied by a fraction, the numerator of which is the number of Outstanding
Shares and the denominator of which is 30,300,000, and (ii) for purposes of
determining the exercise price of the option, the exercise price per Plan Share
shall be multiplied by a fraction, the numerator of which is 30,300,000 and the
denominator of which is the number of Outstanding Shares. "Capital Stock"
means the Company's Class A stock, Class B stock, Class C stock, Class D stock
and Class E stock, in each case with a par value of $.01 per share.
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