Exhibit 10.6
Adopted and Effective
as of June 30, 1997
LEINER HEALTH PRODUCTS GROUP INC.
STOCK INCENTIVE PLAN
SECTION 1.
PURPOSE
The purpose of the Plan is to foster and promote the long-term
financial success of the Company and materially increase shareholder value by
(a) motivating superior performance by means of performance-related incentives,
(b) encouraging and providing for the acquisition of an ownership interest in
the Company by Employees and (c) enabling the Company to attract and retain the
services of an outstanding management team upon whose judgment, interest and
special effort the successful conduct of its operations is largely dependent.
SECTION 2.
DEFINITIONS
2.1. Definitions. Whenever used herein, the following terms shall
have the respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Award Agreement" means the agreement, certificate or other
instrument evidencing the grant of any Incentive Award under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Business Day" shall mean any day on which banks located in
New York City are not required or authorized by law to remain closed.
(e) "Cause", with respect to any Incentive Award, shall have the
meaning assigned thereto in the Award Agreement evidencing such
Incentive Award or, if there is no such meaning assigned, shall mean (i)
the willful failure by the Participant to perform substantially his
duties as an employee of the Company or any Subsidiary (other than due
to physical or mental illness) after reasonable notice to the
Participant of such failure, (ii) the Participant's engaging in serious
misconduct that is injurious to the Company or any Subsidiary, (iii) the
Participant's having been convicted of, or entered a plea of nolo
contendere to, a crime that constitutes a felony or (iv) the breach by
the
Participant of any written covenant or agreement with the Company or any
Subsidiary not to disclose information pertaining to the Company or any
Subsidiary or not to compete or interfere with the Company or any
Subsidiary.
(f) "Change in Control" shall mean the first to occur of the
following events:
(i) a majority of the members of the Board at any time cease
for any reason other than due to death or disability to be persons
who were members of the Board twenty-four months prior to such time
(or, if at the relevant time less than twenty-four months has
elapsed since the Effective Date hereof, since such Effective Date)
(the "Incumbent Directors"); provided that any director whose
election, or nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the members of the
Board then still in office who are Incumbent Directors shall be
treated as an Incumbent Director; or
(ii) any "person," including a "group" (as such terms are used
in Sections 13(d) and 14(d)(2) of the Act, but excluding North
Castle Partners, the Company, its Subsidiaries, any employee
benefit plan of the Company or any Subsidiary, employees of the
Company or any Subsidiary or any group of which any of the
foregoing is a member) is or becomes the "beneficial owner" (as
defined in Rule 13(d)(3) under the Act), directly or indirectly,
including without limitation, by means of a tender or exchange
offer, of securities of the Company representing (x) prior to the
occurrence of a Public Offering, 50% or more or (y) otherwise, 30%
or more, of the combined voting power of the Company's then
outstanding securities; or
(iii) the stockholders of the Company shall approve a
definitive agreement (x) for the merger or other business
combination of the Company with or into another corporation
immediately following which merger or combination (A) the stock of
the surviving entity is not readily tradeable on an established
securities market, (B) a majority of the directors of the surviving
entity are persons who (1) were not directors of the Company
immediately prior to the merger and (2) are not nominees or
representatives of the Company or (C) any "person," including a
"group" (as such terms are used in Sections 13(d) and 14(d)(2) of
the Act, but excluding North Castle Partners, the Company, its
Subsidiaries, any employee benefit plan of the Company or any
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Subsidiary, employees of the Company or any Subsidiary or any group
of which any of the foregoing is a member) is or becomes the
"beneficial owner" (as defined in Rule 13(d)(3) under the Act),
directly or indirectly, of (1) prior to the occurrence of a Public
Offering, 50% or more, or (2) otherwise, 30% or more, of the
securities of the surviving entity or (y) for the direct or
indirect sale or other disposition of all or substantially all of
the assets of the Company; or
(iv) any other event or transaction that is declared by
resolution of the Board to constitute a Change in Control for
purposes of the Plan.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed
to occur in the event the Company files for bankruptcy, liquidation or
reorganization under the United States Bankruptcy Code.
(g) "Change in Control Price", with respect to a class of Common
Stock, shall mean the price per share of such class of Common Stock paid in
conjunction with any transaction resulting in a Change in Control (as
determined in good faith by the Board if any part of such price is payable
other than in cash).
(h) "Code" means the Internal Revenue Code of 1986, as amended.
(i) "Committee" means the Compensation Committee of the Board (or
such other committee of the Board as the Board shall designate), which
shall consist of three or more members serving at the pleasure of the
Board.
(j) "Common Stock" means the Non-Voting Common Stock and the Voting
Common Stock.
(k) "Company" means Leiner Health Products Group Inc., a Delaware
corporation, and any successor thereto.
(l) "Deferred Stock Unit" means a Participant's right to receive
pursuant to the Plan one share of a particular class of Common Stock, or,
if provided by the Board at the date of grant, cash equal to the Fair
Market Value of such share of Common Stock, at the end of a specified
period of time. The term "Deferred Stock Unit" shall include both Elective
Deferred Stock Units and Freestanding Deferred Stock Units within the
meaning of Section 7.1.
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(m) "Disability", with respect to any Incentive Award, shall have the
meaning assigned thereto in the Award Agreement evidencing such Incentive
Award or, if there is no such meaning assigned, shall mean long-term
disability as defined under the terms of the long-term disability plans or
policies sponsored by the Company or any Subsidiary which employs such
Participant.
(n) "Effective Date" means the later of (i) the date of the Plan's
adoption by the Board or (ii) the effective time (the "Effective Time") of
the consummation of the transactions contemplated by the Stock Purchase
Agreement and Agreement and Plan of Merger, dated as of May 31, 1997, by
and among the Company, North Castle Partners and LHP Acquisition Corp.
(o) "Employee" means any employee of the Company or any of its
Subsidiaries.
(p) "Fair Market Value" means, as of any date, and with respect to a
particular class of Common Stock, the fair market value on such date per
share of such class of Common Stock as determined in good faith by the
Board. In making a determination of Fair Market Value, the Board shall
give due consideration to such factors as it deems appropriate, including,
without limitation, the earnings and certain other financial and operating
information of the Company and the Subsidiaries in recent periods, the
potential value of the Company and the Subsidiaries as a whole, the future
prospects of the Company and the Subsidiaries and the industries in which
they compete, the history and management of the Company and the
Subsidiaries, the general condition of the securities markets and the fair
market value of securities of companies engaged in businesses similar to
those of the Company and the Subsidiaries. Notwithstanding the foregoing,
following a Public Offering, Fair Market Value with respect to a class of
Common Stock shall mean the average of the high and low trading prices for
a share of such class of Common Stock on the primary national exchange
(including NASDAQ) on which such class of Common Stock is then traded on
the trading day immediately preceding the date as of which such Fair Market
Value is determined. The determination of Fair Market Value will not give
effect to any restrictions on transfer of the shares of such class of
Common Stock or the fact that such shares would represent a minority
interest in the Company.
(q) "Incentive Award" means any award under the Plan of an Option,
Stock Appreciation Right or Deferred Stock Unit. Each of these
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awards may be granted alone or together with other awards under the Plan
and/or cash awards outside the Plan.
(r) "Non-Voting Common Stock" means the Class A (non-voting) common
stock of the Company, par value $0.01 per share.
(s) "North Castle Partners" means North Castle Partners I, L.L.C., a
Delaware limited liability company, and any successor investment entity
managed by Baird Investment Group, L.L.C.
(t) "Option" means the right granted to a Participant under the Plan
to purchase a stated number of shares of a specified class of Common Stock
at a stated price for a specified period of time. For purposes of the
Plan, an Option may be either (i) an "Incentive Stock Option" within the
meaning of section 422 of the Code or (ii) an Option which is not an
Incentive Stock Option (a "Non-Qualified Stock Option").
(u) "Participant" means any Employee designated by the Board to
receive an Incentive Award under the Plan.
(v) "Plan" means the Leiner Health Products Group Inc. Stock
Incentive Plan, as set forth herein and as the same may be amended from
time to time.
(w) "Public Offering" means any offering of the Common Stock to the
general public pursuant to an underwritten public offering led by one or
more underwriters at least one of which is of nationally recognized
standing.
(x) "Retirement", with respect to any Incentive Award, shall have the
meaning assigned thereto in the Award Agreement evidencing such Incentive
Award, or, if there is no such meaning assigned, shall mean a Participant's
retirement at or after normal retirement age under the terms of the
retirement plan sponsored by the Company or any Subsidiary which employs
such Participant.
(y) "Stock Appreciation Right" means, with respect to a class of
Common Stock, the right to receive a payment from the Company in cash equal
to the excess of the Fair Market Value of a share of such class of Common
Stock at the date of exercise over a specified price fixed by the Board at
the time of grant.
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(z) "Subsidiary" means any corporation or partnership in which the
Company owns, directly or indirectly, 50% or more of the total combined
voting power of all classes of stock of such corporation or of the capital
interest or profits interest of such partnership.
(aa) "Voting Common Stock" means the common stock (voting) of the
Company, par value $0.01 per share.
2.2. Gender and Number. Except when otherwise indicated by the
context, words in the masculine gender used in the Plan shall include the
feminine gender, the singular shall include the plural, and the plural shall
include the singular.
SECTION 3.
ELIGIBILITY AND PARTICIPATION
Participants in the Plan shall be those Employees selected by the
Board to participate in the Plan.
SECTION 4.
POWERS OF THE BOARD
4.1. Power to Grant and Establish Terms of Awards. The Board shall,
subject to the terms of the Plan, determine the Employees to whom Incentive
Awards shall be granted and the terms and conditions of such Incentive
Awards, provided that nothing in the Plan shall limit the right of members of
the Board who are Employees to receive Incentive Awards hereunder.
The proper officers of the Company may suggest to the Board the
Participants who should receive Incentive Awards under the Plan. In accordance
with the terms of the Plan, the terms and conditions of each Incentive Award
shall be determined by the Board at the time of grant, and such terms and
conditions may be subsequently changed by the Board, in its discretion, provided
that no such change may be effected which would adversely affect a Participant's
rights with respect to an Incentive Award then outstanding, without the consent
of such Participant. The Board may establish different terms and conditions for
different Participants receiving Incentive Awards and for the same Participant
for each Incentive Award such Participant
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may receive, whether or not granted at different times. The grant of any
Incentive Award to any Employee shall not entitle such Employee to the grant
of any other Incentive Awards.
4.2. Substitute Options. The Board shall have the right, subject to
the consent of the Participant to whom Options and/or Stock Appreciation Rights
have been granted, to grant in substitution for and in cancellation of such
outstanding Options or Stock Appreciation Rights, replacement Options or Stock
Appreciation Rights which may contain terms more favorable to the Participant
than the Options or Stock Appreciation Rights they replace, including, without
limitation, a lower exercise price (subject to Section 6.2) or base price.
4.3. Administration. The Board shall be responsible for the
administration of the Plan. Any authority exercised by the Board under the
Plan shall be exercised by the Board, in its sole discretion. Incentive
Awards granted by the Board may be subject to such conditions, not
inconsistent with the terms of the Plan, as the Board shall determine, in its
discretion. The Board, by majority action thereof, is authorized to
prescribe, amend and rescind rules and regulations relating to the
administration of the Plan, to provide for conditions and assurances deemed
necessary or advisable to protect the interests of the Company and the
Subsidiaries and to make all other determinations necessary or advisable for
the administration and interpretation of the Plan and to carry out its
provisions and purposes. Determinations, interpretations or other actions
made or taken by the Board pursuant to the provisions of the Plan shall be
final, binding and conclusive for all purposes and upon all persons.
4.4. Delegation by the Board. All of the powers, duties and
responsibilities of the Board specified in the Plan may, to the full extent
permitted by applicable law, be exercised and performed by the Committee or
any other duly constituted committee of the Board, in any such case, to the
extent authorized by the Board to exercise and perform such powers, duties
and responsibilities.
SECTION 5.
STOCK SUBJECT TO PLAN
5.1. Number. Subject to the provisions of Section 5.3, the number of
shares of Common Stock subject to Incentive Awards under the Plan may not
exceed 122,222 shares in the aggregate. The shares to be delivered under the
Plan may consist, in whole or in part, of Common Stock held in treasury or
authorized but
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unissued shares of Common Stock, not reserved for any other purpose, or from
Common Stock reacquired by the Company.
5.2. Cancelled, Terminated, or Forfeited Awards. Any shares of
Common Stock subject to any portion of an Incentive Award which, in any such
case and for any reason, expires, or is cancelled, terminated or otherwise
settled without the issuance of such shares of Common Stock shall again be
available for award under the Plan.
5.3. Adjustment in Capitalization. The number and class of Incentive
Awards (and the number of shares of a class of Common Stock available for
issuance upon exercise or settlement of such Incentive Awards) granted under
the Plan, and the number, class and exercise price of any outstanding
Options, may be adjusted by the Board, in its sole discretion, if it shall
deem such an adjustment to be necessary or appropriate to reflect any Common
Stock dividend, stock split or share combination or any recapitalization,
merger, consolidation, exchange of shares, liquidation or dissolution of the
Company.
5.4. Stockholders Agreement. The holder of any shares of Common
Stock received in respect of an Award hereunder, and anyone whose rights
derive therefrom, shall be entitled to the benefits of and shall be bound by
the obligations set forth in the Stockholders Agreement, dated as of June 30,
1997, among the Company, North Castle Partners I, L.L.C., LHP Acquisition
Corp. and each other person who is a party thereto, as the same may be
amended from time to time (the "Stockholders Agreement"), and shall be deemed
to be a Management Stockholder thereunder. For purposes of Sections 3(a) and
11 of the Stockholders Agreement, the phrase "the fifth anniversary of this
Agreement" shall mean the fifth anniversary of the date of grant of the
applicable Award hereunder.
SECTION 6.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
6.1. Grant of Options. Options may be granted to Participants at such
time or times as shall be determined by the Board. Options granted under the
Plan may be of two types: (i) Incentive Stock Options and (ii) Non-Qualified
Stock Options, except that no Incentive Stock Option may be granted to any
Employee of a Subsidiary which is not a corporation. The date of grant of an
Option under the Plan will be the date on which the Option is awarded by the
Board or, if so determined by the Board,
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the date on which occurs any event the occurrence of which is an express
condition precedent to the grant of the Option. Each Option shall be
evidenced by an Award Agreement that shall specify the class of Common Stock
to which the Option relates, the exercise price at which a share of such
class of Common Stock may be purchased pursuant to such Option, the duration
of the Option, the number of shares of Common Stock to which the Option
pertains and such other terms and conditions not inconsistent with the Plan
as the Board shall determine, including customary representations, warranties
and covenants with respect to securities law matters.
6.2. Option Price. The exercise price per share of a class of Common
Stock to be purchased upon exercise of an Option shall be determined by the
Board but shall not be less than the greater of (i) the Fair Market Value on
the date the Option is granted or (ii) $100.00.
6.3. Exercise of Options. Options awarded to a Participant under the
Plan shall be exercisable at such time or times and subject to such
restrictions or other conditions, including the performance of a minimum
period of service or the satisfaction of performance goals, as the Board
shall determine either at or after the date of grant of such Options, subject
to the Board's right to accelerate or waive any conditions to the
exercisability of any Option granted under the Plan. Unless otherwise
determined by the Board, subject to the continuous employment of the
Participant with the Company or one of the Subsidiaries, Options granted to a
Participant will become exercisable in four equal installments on each of the
date of grant and each of the first three anniversaries of the date of
grant, PROVIDED that 100% of the Options shall become exercisable at the time
and under the circumstances as described in Sections 8.1 and 8.2 or in the
event of the Participant's termination of employment with the Company and the
Subsidiaries by reason of Retirement, Disability or death, as described in
Section 6.7. Once exercisable, an Option may be exercised from time to time,
in whole or in part, up to the total number of shares of the class of Common
Stock with respect to which it is then exercisable. Notwithstanding the
foregoing, no Option shall be exercisable for more than 10 years after the
date on which it is granted.
6.4. Payment. The Board shall establish procedures governing the
exercise of Options, which procedures shall generally require that written
notice of exercise thereof be given and that the exercise price thereof be
paid in full at the time of exercise (i) in cash or cash equivalents,
including by personal check, or (ii) in accordance with such other procedures
or in such other form as the Board shall from time to time determine. The
exercise price of any Options exercised at any time following a Public
Offering may be paid in full or in part in the form of shares of
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Common Stock, based on the Fair Market Value of such shares of Common Stock
on the date of exercise, subject to such rules and procedures as may be
adopted by the Board. As soon as practicable after receipt of a written
exercise notice and payment of the exercise price in accordance with this
Section 6.4, the Company shall make (or cause to be made) an appropriate book
entry reflecting the Participant's ownership of the shares of Common Stock so
acquired and shall deliver to the Participant a certificate or certificates
representing the shares of Common Stock acquired upon the exercise thereof,
bearing appropriate legends if applicable.
6.5. Incentive Stock Options. Notwithstanding anything in the Plan
to the contrary, no term of the Plan relating to Incentive Stock Options
shall be interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be so exercised, so as to disqualify the
Plan under section 422 of the Code, or, without the consent of any
Participant affected thereby, to cause any Incentive Stock Option previously
granted to fail to qualify for the Federal income tax treatment afforded
Incentive Stock Options under section 421 of the Code.
6.6. Stock Appreciation Rights.
(a) Grant. Stock Appreciation Rights may be granted to
Participants at such time or times and with respect to such number of shares
of any class of Common Stock as shall be determined by the Board and shall be
subject to such terms and conditions as the Board may impose. Each grant of
an Incentive Award of Stock Appreciation Rights shall be evidenced by an
Award Agreement.
(b) Exercise. Stock Appreciation Rights may be exercised at
such time or times and subject to such conditions, including the performance
of a minimum period of service, the satisfaction of performance goals or the
occurrence of any event or events, including a Change in Control, as the
Board shall determine, either at or after the date of grant. Stock
Appreciation Rights which are granted in tandem with an Option may only be
exercised upon the surrender of the right to exercise such Option for an
equivalent number of shares and may be exercised only with respect to the
shares of Common Stock for which the related Option is then exercisable.
(c) Settlement. Subject to the provisions of Section 10.4 of
the Plan, upon exercise of a Stock Appreciation Right, the Participant shall
be entitled to receive payment in the form, determined by the Board, of cash,
shares of Common Stock having a Fair Market Value equal to such cash amount,
or a combination of
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shares of Common Stock and cash having an aggregate value equal to such
amount, determined by multiplying:
(i) any increase in the Fair Market Value of a share of the
applicable class of Common Stock at the date of exercise over the
price fixed by the Board at the date of grant of such Stock
Appreciation Right, by
(ii) the number of shares of Common Stock with respect to which the
Stock Appreciation Right is exercised;
PROVIDED, HOWEVER, that at the time of grant, the Board may establish, in its
sole discretion, a maximum amount per share which will be payable upon exercise
of a Stock Appreciation Right.
6.7. Exercisability Following Termination of Employment. Unless
otherwise determined by the Board at or after the date of grant, in the event
a Participant's employment with the Company and the Subsidiaries terminates
by reason of Retirement, Disability or death, all Options and Stock
Appreciation Rights then held by such Participant, whether or not exercisable
at the date of such termination of employment, shall thereafter remain
exercisable by the Participant or, if applicable, the Participant's
beneficiary, for a period of one year from the date of termination, but in no
event later than the expiration of the stated term of the Option or Stock
Appreciation Right. Unless otherwise determined by the Board at or after the
date of grant, in the event a Participant's employment with the Company and
the Subsidiaries terminates for any reason other than Retirement, Disability,
death or termination by the Company for Cause, all Options and Stock
Appreciation Rights then held by such Participant that are then exercisable
shall remain exercisable for the 90 day period immediately following such
termination of employment or until the expiration of the term of such Option
or Stock Appreciation Right, whichever period is shorter. Unless otherwise
determined by the Board at or after the date of grant, in the event of a
Participant's termination of employment with the Company and the Subsidiaries
by the Company for Cause, all Options and Stock Appreciation Rights then held
by such Participant shall immediately terminate and be cancelled, in full, on
the date of such termination of employment. All Options that are not
exercisable following a Participant's termination of employment shall
immediately terminate and be cancelled on the date of such termination of
employment and all other Options not exercised prior to such date shall
terminate and be cancelled on the date the period for exercise has expired.
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6.8. Board Discretion. Notwithstanding anything else contained in
this Section 6 to the contrary, the Board may, at or after the date of grant,
accelerate or waive any conditions to the exercisability of any Option or
Stock Appreciation Right granted under the Plan and may permit all or any
portion of any such Option or Stock Appreciation Right to be exercised
following a Participant's termination of employment for any reason on such
terms and subject to such conditions as the Board shall determine for a
period up to and including, but not beyond, the expiration of the term of
such Options.
SECTION 7.
DEFERRED STOCK UNITS
7.1. Deferred Stock Unit Awards. On fixed dates established by the
Board and subject to such terms and conditions as the Board shall determine,
the Board may permit a Participant to elect to defer receipt of all or a
portion of his annual compensation and/or annual incentive bonus ("Deferred
Annual Amount") payable by the Company or a Subsidiary and receive in lieu
thereof an Incentive Award of a number of Deferred Stock Units (the "Elective
Deferred Stock Units") equal to the greatest whole number which may be
obtained by dividing (x) the amount of the Deferred Annual Amount, by (y) the
Fair Market Value of a share of a particular class of Common Stock on the
date of grant. No shares of Common Stock will be issued at the time an award
of Deferred Stock Units is made and the Company shall not be required to set
aside a fund for the payment of any such award. The Company will establish a
separate account for the Participant and will record in such account the
number of Deferred Stock Units awarded to the Participant. The Board may
also grant a Participant an Incentive Award of Deferred Stock Units
("Freestanding Deferred Stock Units") without regard to any election by the
Participant to defer receipt of any compensation or bonus amount payable to
him. Upon the grant of Deferred Stock Units hereunder, the Company shall
establish a notational account for the Participant and will record in such
account the number of Deferred Stock Units awarded to the Participant. No
shares of Common Stock will be issued to the Participant at the time an award
of Deferred Stock Units is granted.
The terms and conditions of Deferred Stock Unit awards shall be
determined by the Board and shall be set forth in an Award Agreement entered
into by the Participant and the Company evidencing such Deferred Stock Unit
award, including customary representations, warranties and covenants with
respect to securities law matters. Unless otherwise determined by the Board,
each such Award Agreement shall
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also state that prior to the earlier to occur of (x) a Public Offering or
(y) the fifth anniversary of the date of grant, the Deferred Stock Unit
shall be subject to certain cash settlement rights of the Company upon a
termination of employment.
7.2. Dividends with respect to Deferred Stock Units. The Board
will determine whether and to what extent to credit to the account of, or to
pay currently to, each recipient of a Deferred Stock Unit award, an amount
equal to any dividends paid by the Company during the period of deferral with
respect to the corresponding number of shares of the applicable class of
Common Stock ("Dividend Equivalents"). Unless otherwise provided by the
Board, any Dividend Equivalents in respect of cash dividends payable or
dividends payable in property other than Common Stock on the shares of Common
Stock corresponding to the Participant's Deferred Stock Units shall be deemed
invested in a book entry account bearing interest, for each calendar quarter
during which such amount is credited to such account, at the prime rate as
reported in The Wall Street Journal (Eastern Edition) on the first Business
Day of such calendar quarter. Unless otherwise provided by the Board, any
Dividend Equivalents with respect to dividends payable in shares of Common
Stock on the shares of Common Stock corresponding to the Participant's
Deferred Stock Units shall be deemed invested in additional Deferred Stock
Units.
7.3. Vesting of Deferred Stock Unit Awards. The portion of each
Deferred Stock Unit award that consists of Elective Deferred Stock Units,
together with any Dividend Equivalents credited with respect thereto, shall
be fully vested at all times. Unless the Board provides otherwise at or
after the date of grant, the portion of each Deferred Stock Unit award that
consists of Freestanding Deferred Stock Units, together with any Dividend
Equivalents credited with respect thereto, will become vested in full on the
fifth anniversary of the date of grant of such Units, provided the
Participant remains in the continuous employ of the Company or a Subsidiary
through such applicable date. Notwithstanding the foregoing, the Board may
accelerate the vesting of any Freestanding Deferred Stock Unit award at or
after the date of grant.
7.4. Rights as a Stockholder. A Participant shall not have any
rights as a stockholder in respect of Deferred Stock Units awarded pursuant
to the Plan (including, without limitation, the right to vote on any matter
submitted to the Company's stockholders) until such time as the shares of
Common Stock attributable to such Deferred Stock Units have been issued to
such Participant or his beneficiary.
7.5. Settlement of Deferred Stock Units. Subject to Sections 8.3 and
9 and the last sentence of Section 7.1, unless the Board determines otherwise
at or after the date of grant, a Participant shall receive one share of the
applicable class of
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Common Stock in settlement of each Elective Deferred Stock Unit (and related
Dividend Equivalents) credited to such Participant's account under the Plan
as soon as administratively practicable, but not later than 90 days,
following the earlier to occur of (x) the fifth anniversary of the date of
grant or (y) the date of such Participant's termination of employment due to
Retirement, death or Disability (or such later date as may be elected by the
Participant in accordance with the rules and procedures of the Board).
Subject to Sections 8.3 and 9 and the last sentence of Section 7.1, unless
the Board determines otherwise at or after the date of grant, a Participant
shall receive one share of the applicable class of Common Stock in settlement
of each Freestanding Deferred Stock Unit (and related Dividend Equivalents)
that shall have become vested on or prior to the date of such Participant's
termination of employment with the Company and the Subsidiaries, other than a
termination for Cause, as soon as administratively practicable, but not later
than 90 days, following the date of such termination of employment (or on
such earlier date as the Board shall permit or such later date as may be
elected by the Participant in accordance with the rules and procedures of the
Board). In the event of the termination of a Participant's employment with
the Company and the Subsidiaries for Cause, the Participant shall immediately
forfeit all rights with respect to any Freestanding Deferred Stock Units (and
related Dividend Equivalents) credited to his account, whether or not then
vested. The Board may provide in the Award Agreement applicable to any
Incentive Award of Deferred Stock Units that, in lieu of issuing shares of a
particular class of Common Stock in settlement of the vested portion of such
Deferred Stock Unit, the Board may direct the Company to pay to the
Participant the value of the shares of Common Stock corresponding to such
Deferred Stock Units in cash. Notwithstanding the foregoing, prior to the
earlier to occur of (i) a Public Offering or (ii) the fifth anniversary of
the date of grant, a Deferred Stock Unit shall be subject to certain cash
settlement rights of the Company as are specified in the Award Agreement.
For each share of Common Stock received in settlement of Deferred Stock
Units, the Company shall deliver to the Participant a certificate
representing such share of Common Stock, bearing appropriate legends if
applicable.
SECTION 8.
CHANGE IN CONTROL; REPURCHASE RIGHTS
8.1. Accelerated Vesting and Payment. Subject to the provisions of
Section 8.2 below, in the event of a Change in Control, (i) each outstanding
Option and Stock Appreciation Right, in each case whether or not then
exercisable, shall promptly be cancelled in exchange for a payment in cash of
an amount equal to the excess of the
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Change in Control Price over the exercise price for such Option or the base
price for such Stock Appreciation Right, whichever is applicable (except
that, with respect to Stock Appreciation Rights granted in tandem with
Incentive Stock Options, the Fair Market Value shall be used in the
calculation rather than the Change in Control Price), and (ii) each
outstanding Deferred Stock Unit, whether or not then vested, shall be
cancelled in exchange for a cash payment of an amount equal to the Change in
Control Price. Any amount payable under this Section 8.1 shall be payable in
full as soon as administratively practicable, but no later than 30 days,
following the Change in Control.
8.2. Alternative Awards. Notwithstanding Section 8.1, no
cancellation, acceleration of exercisability, vesting, cash settlement or
other payment shall occur with respect to any Incentive Award or any class of
Incentive Awards if the Board reasonably determines in good faith prior to
the occurrence of a Change in Control that such Incentive Award or class of
Incentive Awards shall be honored or assumed, or new rights substituted
therefor (such honored, assumed or substituted award hereinafter called an
"Alternative Award") by a Participant's employer (or the parent or a
subsidiary of such employer) immediately following the Change in Control,
provided that any such Alternative Award must:
(i) provide such Participant (or each Participant in a class of
Participants) with rights and entitlements substantially equivalent to or
better than the rights and entitlements applicable under such Incentive
Award, including, but not limited to, an identical or better exercise or
vesting schedule and identical or better timing and methods of payment;
(ii) have substantially equivalent economic value to such Incentive
Award (determined at the time of the Change in Control); and
(iii) have terms and conditions which provide that in the event that
the Participant's employment is involuntarily terminated or constructively
terminated (other than for Cause) upon or following such Change in Control,
any conditions on a Participant's rights under, or any restrictions on
exercisability applicable to, each such Alternative Award shall be waived
or shall lapse, as the case may be.
For this purpose, a constructive termination shall mean a termination by a
Participant following a material reduction in the Participant's compensation,
a material reduction in the Participant's responsibilities or the relocation
of the Participant's principal place
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of employment to another location a material distance farther away from the
Participant's home, in each case, without the Participant's prior written
consent.
8.3. Certain Rights upon Termination of Employment Prior to Public
Offering. Unless otherwise determined by the Board at the time of grant, the
Board shall provide in each Award Agreement evidencing an Incentive Award
granted hereunder that, upon a termination of a Participant's employment with
the Company and the Subsidiaries for any reason prior to the earlier to occur
of (i) a Public Offering or (ii) the fifth anniversary of the date of grant
of such Incentive Award, the Company shall have the right to repurchase for
cash any vested Options or shares of Common Stock then held by the
Participant relating to such Incentive Award. Unless otherwise determined by
the Board at the time of grant, the Board shall provide in each stock
subscription agreement relating to an Incentive Award that, upon a
termination of a Participant's employment with the Company and the
Subsidiaries due to death, Disability or Retirement prior to the earlier to
occur of (i) a Public Offering or (ii) the fifth anniversary of the date of
grant of an Incentive Award, the Participant shall have the right to require
the Company to repurchase shares of Common Stock then owned by him for a
repurchase price equal to the Fair Market Value, and upon such additional
terms and conditions as are set forth in such Award Agreement.
SECTION 9.
AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
The Board at any time may terminate or suspend the Plan, and from
time to time may amend or modify the Plan. No amendment, modification,
termination or suspension of the Plan shall in any manner adversely affect
any Incentive Award theretofore granted under the Plan, without the consent
of the Participant holding such Incentive Award. Shareholder approval of any
such termination, suspension, amendment or modification shall be obtained to
the extent mandated by applicable law, or if otherwise deemed appropriate by
the Board; PROVIDED that, the Board will not consider any amendment or
modification of the Plan unless the Company has provided at least 30 Business
Days prior written notice of such proposed amendment or modification to North
Castle Partners.
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SECTION 10.
MISCELLANEOUS PROVISIONS
10.1. Nontransferability of Awards. No Incentive Award granted under
the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution.
All rights with respect to any Incentive Award granted to a Participant under
the Plan shall be exercisable during his lifetime only by such Participant.
Restrictions, if any, on the transfer of Common Stock received upon exercise or
settlement of any Incentive Award shall be set forth in the applicable Award
Agreement evidencing such Incentive Award, including without limitation,
restrictions described in Section 8.3 herein.
10.2. Beneficiary Designation. Each Participant under the Plan may
from time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
or by whom any right under the Plan is to be exercised in case of his death.
Each designation will revoke all prior designations by the same Participant,
shall be in a form prescribed by the Board and will be effective only when filed
by the Participant in writing with the Board during his lifetime. In the
absence of any such designation, benefits remaining unpaid or Incentive Awards
outstanding at the Participant's death shall be paid to or exercised by the
Participant's surviving spouse, if any, or otherwise to or by his estate.
10.3. No Guarantee of Employment or Participation. Nothing in the
Plan shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate any Participant's employment at any time and for any
reason, nor confer upon any Participant any right to continue in the employ of
the Company or any Subsidiary. No Employee shall have a right to be selected as
a Participant, or, having been so selected, to receive any Incentive Awards
under the Plan.
10.4. Tax Withholding. The Company and the Subsidiaries shall have
the power to withhold, or require a Participant to remit to the Company or a
Subsidiary promptly upon notification of the amount due, an amount determined by
the Company or such Subsidiary, in its discretion, to be sufficient to satisfy
all Federal, state, local and foreign withholding tax requirements in respect of
any Incentive Award and the Company may (or may cause a Subsidiary to) defer
payment of cash or issuance or delivery of Common Stock until such requirements
are satisfied. The Board may permit or require a Participant to satisfy his tax
withholding obligation hereunder in such other manner, subject to such
conditions, as the Board shall determine.
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10.5. Indemnification. Each person who is or shall have been a
member of the Committee or the Board shall be indemnified and held harmless
by the Company to the fullest extent permitted by law against and from any
loss, cost, liability or expense (including any related attorneys' fees and
advances thereof) that may be imposed upon or reasonably incurred by him in
connection with, based upon or arising or resulting from any claim, action,
suit or proceeding to which he may be made a party or in which he may be
involved by reason of any action taken or failure to act under or in
connection with the Plan or any Award Agreement and against and from any and
all amounts paid by him in settlement thereof, with the Company's approval,
or paid by him in satisfaction of any judgment in any such action, suit or
proceeding against him, provided he shall give the Company an opportunity, at
its own expense, to handle and defend the same before he undertakes to handle
and defend it on his own behalf. The foregoing right of indemnification
shall not be exclusive and shall be independent of any other rights of
indemnification to which such persons may be entitled under the Company's
Articles of Incorporation or By-laws, by contract, as a matter of law or
otherwise.
10.6. No Limitation on Compensation. Nothing in the Plan shall be
construed to limit the right of the Company to establish other plans or to
pay compensation to its employees in cash or property, in a manner which is
not expressly authorized under the Plan.
10.7. Requirements of Law. The granting of Incentive Awards and the
issuance of shares of Common Stock shall be subject to all applicable laws,
rules and regulations, and to such approvals by any governmental agencies or
national or foreign securities exchanges as may be appropriate or required,
as determined by the Board. Notwithstanding any other provision of the Plan
or any Award Agreement, no Incentive Awards shall be granted under the Plan,
and no shares of Common Stock shall be issued upon exercise of, or otherwise
in connection with, any Incentive Award granted under the Plan, if such grant
or issuance would result in a violation of applicable law, including the
federal securities laws and any applicable state or foreign securities laws.
10.8. Governing Law. The Plan, and all agreements hereunder, shall
be construed in accordance with and governed by the laws of the State of
Delaware without regard to principles of conflicts of laws.
10.9. No Impact On Benefits. Incentive Awards granted under the Plan
are not compensation for purposes of calculating an Employee's rights under
any employee benefit plan, except to the extent provided in any such plan.
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10.10. Securities Law Compliance. Instruments evidencing Incentive
Awards may contain such other provisions, not inconsistent with the Plan, as
the Board deems advisable, including a requirement that the Participant
represent to the Company in writing, when an Incentive Award is granted or
when he receives shares with respect to such Award (or at such other times as
the Committee deems appropriate) that he is accepting such Incentive Award,
or receiving or acquiring such shares (unless they are then covered by a
Securities Act of 1933 registration statement), for his own account for
investment only and with no present intention to transfer, sell or otherwise
dispose of such shares except such disposition by a legal representative as
shall be required by will or the laws of any jurisdiction in winding up the
estate of the Participant. Such shares shall be transferable only if the
proposed transfer shall be permissible pursuant to the Plan and if, in the
opinion of counsel satisfactory to the Company, such transfer at such time
will be in compliance with applicable securities laws.
10.11. Freedom of Action. Subject to Section 9, nothing in the Plan
or any Award Agreement shall be construed as limiting or preventing the
Company or any Subsidiary from taking any action with respect to the
operation or conduct of its business that it deems appropriate or in its best
interest.
10.12. Term of Plan. The Plan shall be effective as of the Effective
Date; provided that in no event shall the Plan become effective unless and
until the Effective Time. The Plan shall expire on the tenth anniversary of
the Effective Date, (except as to Incentive Awards outstanding on that date),
unless sooner terminated pursuant to Section 9.
10.13. No Right to Particular Assets. Nothing contained in this Plan
and no action taken pursuant to this Plan shall create or be construed to
create a trust of any kind or any fiduciary relationship between the Company
and the Subsidiaries, on the one hand, and any Participant or executor,
administrator or other personal representative or designated beneficiary of
such Participant, on the other hand, or any other persons. Any reserves that
may be established by the Company or any Subsidiary in connection with this
Plan shall continue to be held as part of the general funds of the Company,
and no individual or entity other than the Company shall have any interest in
such funds until paid to a Participant. To the extent that any Participant
or his executor, administrator or other personal representative, as the case
may be, acquires a right to receive any payment from the Company or a
Subsidiary pursuant to this Plan, such right shall be no greater than the
right of an unsecured general creditor of the Company or such Subsidiary.
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10.14. Notices. Each Participant shall be responsible for furnishing
the Board with the current and proper address for the mailing of notices and
delivery of agreements and shares of Common Stock. Any notices required or
permitted to be given shall be deemed given if directed to the person to whom
addressed at such address and mailed by regular United States mail,
first-class and prepaid. If any item mailed to such address is returned as
undeliverable to the addressee, mailing will be suspended until the
Participant furnishes the proper address.
10.15. Severability of Provisions. If any provision of this Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof, and this Plan shall be
construed and enforced as if such provision had not been included.
10.16. Incapacity. Any benefit payable to or for the benefit of a
minor, an incompetent person or other person incapable of receiving such
benefit shall be deemed paid when paid to such person's guardian or to the
party providing or reasonably appearing to provide for the care of such
person, and such payment shall fully discharge the Board, the Committee, the
Company and other parties with respect thereto.
10.17. No Rights as Stockholder. No Participant shall have any
voting or other rights as a stockholder of the Company with respect to any
Common Stock covered by any Incentive Award until the issuance of a
certificate or certificates to the Participant for such Common Stock.
Subject to Section 7.2, no adjustment shall be made for dividends or other
rights for which the record date is prior to the issuance of such certificate
or certificates.
10.18. Headings and Captions. The headings and captions herein are
provided for reference and convenience only, shall not be considered part of
this Plan and shall not be employed in the construction of this Plan.
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