1997 STOCK OPTION PLAN
1. Purpose. HEDSTROM HOLDINGS, INC., a Delaware corporation (herein,
together with its successors, referred to as the "Company"), by means of
this 1997 Stock Option Plan (the "Plan"), desires to afford certain officers,
directors and other key employees of the Company and any parent corporation
or subsidiary corporation thereof now existing or hereafter formed or
acquired (such parent and subsidiary 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.
As used in the Plan, the terms "parent corporation" and "subsidiary
corporation" shall mean, respectively, a corporation within the definition
of such terms contained in Sections 424(e) and 424(f), respectively, of the
Internal Revenue Code of 1986, as amended (the "Code").
The stock options described in Sections 6 and 7 (the "Options"), and
the shares of Common Stock (as defined in Section 3) 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.
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 this Plan (the "Committee"); provided, however, that
the entire Board of Directors may act as the Committee if it chooses to do so.
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 Securities Exchange Act of 1934, as amended (the "Exchange Act"),
the Committee shall be comprised solely of not less than two members who
shall be (i) Non-Employee Directors and (ii) unless otherwise determined
by the Board of Directors, "outside directors" within the meaning of Section
162(m) of the Internal Revenue Code of 1986, as amended (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 in 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.
3. Shares Available. Subject to the adjustments provided in Section 10,
the maximum aggregate number of shares of common stock, $.01 par value per s
hare, of the Company ("Common Stock") which may be granted for all purposes
under the Plan shall be 2,750,000 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 such Option, the termination of
such Option prior to exercise, or the forfeiture of such Option, such shares
shall thereafter be available for grants to any individual or individuals
under the Plan as determined by the Committee. 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 in each situation as the Board of
Directors or the Committee may determine from time to time.
4. Eligibility and Bases of Participation. Grants of Incentive Options
(as defined in Section 6) and Non-Qualified Options (as defined in Section 6)
may be made under the Plan, subject to and in accordance with Section 6, to
Key Employees. 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.
Grants of Non-Qualified Options may be made, subject to and in
accordance with Section 7, to any Eligible Non-Employee. As used
herein, the term "Eligible Non-Employee" shall mean any director
or officer (who is not also an employee) of the Company or any
Related Entity whom the Board of Directors or the Committee
identifies as having a direct and significant effect on the
performance of the Company or any Related Entity.
The adoption of this Plan shall not be deemed to give any Person a
right to be granted any Options.
5. Authority of Committee. Subject to and not inconsistent with the
express provisions of the Plan and the Code, the Committee shall have plenary
authority to:
a. determine the Key Employees and Eligible Non-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), the restrictions to be applicable to
Options and all other terms and provisions thereof (which need not be
identical);
b. 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) 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;
c. 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;
d. 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 (other than an Incentive
Option) that number of shares having a Fair Market Value (as defined
in Section 18) which, together with such cash as shall be paid in
respect of fractional shares, shall equal the Option exercise price,
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 unless such shares were not
acquired through the exercise of an Incentive Option or, if so
acquired, have been held for more than two years since the grant
of such Option and for more than one year since the exercise of
such Option;
e. 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 (other than an Incentive 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;
f. prescribe, amend, modify and rescind rules and regulations
relating to the Plan;
g. 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 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 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 be
a Non-Employee Director. 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 Options for Key Employees.
Subject to the express provisions of this Plan, the Committee shall
have the authority to grant incentive stock options pursuant to Section
422 of the Code ("Incentive 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 this 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 stockholders
of the Company. Notwithstanding anything in this Plan to the contrary,
Incentive Options may be granted only to Key Employees. 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 (other than Section 7), including
the following:
a. Option Exercise Price. The Committee shall establish the option
exercise price at the time any Option is granted at such amount as
the Committee shall determine; provided, that such price shall not
be not less than the Fair Market Value per share of Common Stock at
the date such 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 such 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 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 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 Section 5.d. of
the Plan (but, with respect to Incentive Options, subject to the
limitations described in such Section 5.d.). 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. Continuation of Employment. Each Incentive Option shall require
the optionee to remain in the continuous employ of the Company or any
Related Entity from the date of grant of the Incentive Option until
no more than three months prior to the date of exercise of the
Incentive Option.
d. Exercisability of Stock Option. Subject to Section 8, each Option
shall be exercisable in one or more installments as the Committee may
determine at the time of the grant. No Option by its terms shall be
exercisable after the expiration of ten years from the date of grant
of the Option, unless, as to any Non-Qualified Option, otherwise
expressly provided in such Option; provided, however, no Incentive
Option shall be exercisable after the expiration of ten years from
the date such Option is granted; and provided, further, 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.
e. Death. If any 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 such Option in accordance
with its terms at any time and from time to time within one year
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).
f. Disability. If the employment of any optionee terminates because
of his Disability (as defined in Section 18), such optionee or his
legal representative shall have the right to exercise the Option
in accordance with its terms at any time and from time to time within
one year 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 not after the expiration
date of the Option); provided, however, that in the case of an
Incentive Option, the optionee or his legal representative shall in
any event be required to exercise the Incentive Option within one
year after termination of the optionee's employment due to his
Disability.
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(e) and (f) above,
such optionee shall have the right to exercise his Option in
accordance with its terms, within 60 days after the date of such
termination, unless a longer period is expressly provided in such
Option or established by the Committee pursuant to Section 8 (but
not after the expiration date of the Option); provided, that no
Incentive Option shall be exercisable more than three months after
such termination; and, provided, further, that, unless the Option
expressly provides otherwise, if such optionee's employment was
terminated by the Company or any Related Entity for Good Cause (as
defined in Section 18), or if the optionee voluntarily terminates
employment without the consent of the Company or any Related Entity
(other than on a basis expressly permitted by the optionee's employment
agreement with the Company or any Related Entity), such optionee shall
immediately forfeit all rights under his Option except as to the shares
of stock already purchased. 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 or unless
otherwise restricted by the optionee's employment agreement).
h. Maximum Exercise. The aggregate number of shares of stock with
respect to which Incentive Options may be granted to any Key Employee
shall not exceed one-half of the number of shares described in Section
3.
7. Stock Option Grants to Eligible Non-Employees.
Subject to the express provisions of this Plan, the Committee shall
have the authority to grant Non-Qualified Options to Eligible
Non-Employees; provided, however, that whenever the Company has any
class of equity securities registered pursuant to Section 12 of the
Exchange Act, no Eligible Non-Employee then serving on the Committee
(or such other committee then administering the Plan) shall be granted
Options hereunder if the grant of such Options would cause such
Eligible Non-Employee to no longer be a Non-Employee Director. The
terms and conditions of the Options granted under this Section 7 shall
be determined from time to time by the Committee; provided, however,
that the Options granted under this Section 7 shall be subject to all
terms and provisions of the Plan (other than Section 6), including
the following:
a. Option Exercise Price. The Committee shall establish the option
exercise price at the time any Non-Qualified Option is granted at such
amount as the Committee shall determine. 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 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 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 Section 5.d. of the Plan.
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. Subject to Section 8, each Option
shall be exercisable in one or more installments as the Committee may
determine at the time of the grant. No Option shall be exercisable
after the expiration of ten years from the date of grant of the Option,
unless otherwise expressly provided in such Option.
d. Death. If the retention by the Company or any Related Entity of
the services of any Eligible Non-Employee terminates because of his
death, 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 such Option in
accordance with its terms, at any time and from time to time within
one year 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).
e. Disability. If the retention by the Company or any Related Entity
of the services of any Eligible Non-Employee terminates because of his
Disability, such optionee or his legal representative shall have the
right to exercise the Option in accordance with its terms at any time
and from time to time within one year after the date of the optionee's
termination unless a longer or shorter period is expressly provided
in such Option or established by the Committee pursuant to Section 8
(but not after the expiration of the Option).
f. ther Termination of Relationship. If the retention by the Company
or any Related Entity of the services of any Eligible Non-Employee
terminates for any reason other than those specified in subsections
7(d) and (e) above, such optionee shall have the right to exercise
his or its 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 not after the expiration date of the
Option); provided, that, in the case of an Eligible Non-Employee
serving as a director of the Company or of any Related Entity,
unless the Committee provides otherwise, if the optionee is removed
from office for cause by action of the stockholders in accordance
with the by-laws of the Company or such Related Entity, as applicable,
and the General Corporation Law of the State of Delaware or if such
optionee voluntarily terminates his service without the consent of the
Company or any Related Entity, then such optionee shall immediately
forfeit his rights under his Option except as to the shares of stock
already purchased.
g. Ineligibility for Other Grants. Any Eligible Non-Employee who
receives an Option pursuant to this Section 7 shall be ineligible to
receive any Options under any other Section of the Plan unless such
Person becomes a Key Employee subsequent thereto.
8. Change of Control.
If a Change of Control (as defined in Section 18) shall occur, or if
the Company shall enter into an agreement providing for a Change of
Control, the Committee may declare any or all Options outstanding
under the Plan to be vested and exercisable in full at such time or
times as the Committee shall determine, notwithstanding the express
provisions of such Options. Each Option accelerated by the Committee
in connection with a Change of Control pursuant to the preceding
sentence may be terminated, notwithstanding any express provision
thereof or any other provision of the Plan, on such date (not later
than the stated expiration date) as the Committee shall determine.
9. Purchase Option.
a. To the extent and only to the extent expressly provided in any
particular Option, if any optionee's employment (or, in the case of
any Option granted under Section 7, the optionee's relationship)
with the Company or a Related Entity terminates for any reason at
any time, 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 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 60 days from the date of the
termination of the optionee's employment or engagement. Such notice
shall state the number of Purchasable Shares to be purchased and the
determination of the Board of Directors of the Fair Market Value per
share 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 times the number of shares
being purchased, and in the case of any Option, the Fair Market Value
per share, less the applicable per share Option exercise price, times
the number of vested shares subject to such Option which are being
purchased. 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 notice described in Section 9.b
has been delivered to Grantor. 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 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
Paragraph 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: "THE SHARES REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO AN OPTION TO REPURCHASE PROVIDED UNDER
THE PROVISIONS OF THE HEDSTROM HOLDING CORP. 1997 STOCK OPTION PLAN
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 an underwritten public offering of the Common Stock,
registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to which the Company receives aggregate
cash sales proceeds, before underwriting discount, of at least
$25 million or such lesser amount as the Committee shall determine.
10. Adjustment of Shares.
Unless otherwise expressly provided in a particular Option, in the
event that, by reason of any merger, consolidation, combination,
liquidation, reorganization, 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, a "Reorganization"), 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 an Option and the per
share price or value thereof shall be appropriately adjusted by the
Committee to give appropriate effect to such Reorganization. Any
fractional shares or interests resulting from such adjustment shall
be eliminated. The adjustments set forth in this paragraph shall
be applied to each successive Reorganization, if any.
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, 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 a
Reorganization and, following such Reorganization, any optionee will
hold Options issued pursuant to this 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 ofan optionee, Options granted to him or
her hereunder shall be exercisableonly by the optionee or, in the
event that a legal representative has beenappointed in connection
with the Disability of an optionee, such legalrepresentative.
12. Compliance with Securities Laws. The Company shall not in any event
be obligated to file any registration statement under the Securities
Act or any applicable state securities law to permit exercise of any
Option or to issue any Common Stock in violation of the Securities
Act or any applicable state securities law. Each optionee (or, in
the event of his death or, in the event a legal representative has
been appointed in connection with his Disability, the Person
exercising the Option) shall, as a condition to his 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 law.
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 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 Grantee is employed to withhold from any cash
compensation paid to the optionee or in 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 which shares shall have a Fair
Market Value on the date of exercise which is equal to the amount
to be withheld.
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 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:
a. "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.
b. "Board of Directors" shall have the meaning set forth in Section
2 hereof.
c. "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 a series of related transactions) of all or
substantially all of the assets of the Company to any Person or group
of related Persons for purposes of Section 13(d) of the Exchange Act
(a "Group"); (ii) a majority of the Board of Directors of the Company
shall consist of Persons who are not Continuing Directors (as defined
below); or (iii) the acquisition by any Person or Group (other than
HMTF) 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.
d. "Code" shall have the meaning set forth in Section 1 hereof.
e. "Committee" shall have the meaning set forth in Section 2
hereof.
f. "Common Stock" shall have the meaning set forth in Section 3
hereof.
g. "Company" shall have the meaning set forth in Section 1 hereof.
h. "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 this Plan or (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.
i. "Disability" shall mean permanent disability as defined under the
appropriate provisions of the 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 unless another meaning shall
be agreed to in writing by the Committee and the optionee; provided,
however, that in the case of an Incentive Option "disability" shall
have the meaning specified in Section 22(e)(3) of the Code.
j. "Eligible Non-Employee" shall have the meaning set forth in
Section 4 hereof.
k. "Exchange Act" shall have the meaning set forth in Section 2
hereof.
l. "Fair Market Value" shall, as it relates to the Common Stock,
mean the average of the high and low prices of the Common Stock as
reported on the principal national securities exchange on which the
shares of Common Stock are then listed on the date specified herein,
or if there were no sales on such date, on the next preceding day on
which there were sales, 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 arms length transaction (without regard to minority discount,
absence of liquidity, or transfer restrictions imposed by any
applicable law or agreement) at the date which is the end of the
Company's fiscal quarter preceding 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.
m. "Good Cause" shall mean (unless another definition is agreed to
in writing by the Company and the optionee) termination by action of
the Board of Directors because of: (A) the optionee's conviction of,
or plea of nolo contendere to, a felony or a crime involving moral
turpitude; (B) the optionee's personal dishonesty, incompetence,
willful misconduct, willful violation of any law, rule, or regulation
(other than minor traffic violations or similar offenses) or breach
of fiduciary duty which involves personal profit; (C) the optionee's
commission of material mismanagement in the conduct of his duties as
assigned to him by the Board of Directors or the President of the
Company; (D) the optionee's willful failure to execute or comply with
the policies of the Company or his stated duties as established by
the Board of Directors or the President of the Company, or intentional
failure to perform his stated duties; or (E) substance abuse or
addiction on the part of the optionee.
n. "Grantor" has the meaning set forth in Section 9 hereof.
o. "HMTF" shall mean Hicks, Muse, Tate & Furst Equity Fund II, L.P.
and its Affiliates.
p. "Incentive Options" shall have the meaning set forth in Section 6
hereof.
q. The term "including" when used herein shall mean "including, but
not limited to".
r. "Key Employee" shall have the meaning set forth in Section 4
hereof.
s. "Non-Employee Director" shall have the meaning specified in Rule
16b-3(b)(3) promulgated under the Exchange Act.
t. "Non-Qualified Options" shall have the meaning set forth in
Section 6 hereof.
u. "Options" shall have the meaning set forth in Section 1 hereof.
v. "Person" shall mean any person or entity of any nature
whatsoever, specifically including an individual, a firm, a company,
a corporation, a partnership, a trust, or other entity.
w. "Plan" shall have the meaning set forth in Section 1 hereof.
x. "Purchasable Shares" shall have the meaning set forth in
Section 9 hereof.
y "Purchase Option" shall have the meaning set forth in Section
9 hereof.
z. "Related Entities" shall have the meaning set forth in Section
1 hereof.
aa. "Reorganization" shall have the meaning set forth in Section 10
hereof.
bb. "Securities Act" shall have the meaning set forth in Section 9
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 unless such amendment is made by or with the
approval of the stockholders. The Board of Directors shall be
authorized to amend the Plan and the Options granted thereunder to
qualify as "incentive stock options" within the meaning of Section
422 of the Code. No amendment, modification, suspension or
termination of the Plan shall alter or impair any Options previously
granted under the Plan, without the consent of the holder thereof.
20. Effective Date. The Plan shall become effective on the date on
which it is approved by the Board of Directors of the Company and
shall be void retroactively if not approved by the stockholders of
the Company within twelve months of the date of approval by the
Board of Directors.