STOCK OPTION AGREEMENT
PURSUANT TO THE
HARBORSIDE HEALTHCARE CORPORATION
STOCK INCENTIVE PLAN
THIS STOCK OPTION AGREEMENT (this "Agreement") is made as of November
19, 2001 (the "Effective Date"), between Harborside Healthcare Corporation, a
Delaware corporation (the "Company"), and _______________ (the "Optionee" or the
"Executive").
R E C I T A L S
A. The Company has adopted the Harborside Healthcare Corporation Stock
Incentive Plan (the "Plan"), a copy of which has been delivered to
Optionee.
B. The Company desires to grant the Optionee the opportunity to acquire a
proprietary interest in the Company to encourage the Optionee's
contribution to the success and progress of the Company.
C. In accordance with the Plan, the Committee (as defined in the Plan)
has as of the Effective Date granted to the Optionee a non-qualified
option to purchase shares of Class C Stock, $0.01 par value, of the
Company (the "Class C Stock") subject to the terms and conditions of
the Plan and this Agreement.
AGREEMENTS
1. Definitions. Capitalized terms used herein shall have the
following meanings:
"Act" is defined in Section 10(a).
"Agreement" means this Stock Option Agreement.
"Approved Sale" means the transfer or sale by Investcorp Bank
E.C., any affiliate thereof or any Person with whom
Investcorp Bank E.C. or any affiliate thereof has an
administrative relationship with respect to the outstanding
capital stock of the Company (collectively, "Investcorp"), in
the aggregate, in one or a series of related transactions, of
fifty percent (50%) or more of the outstanding capital stock
of the Company held by Investcorp immediately prior to such
transactions (excluding any transfers among such entities) in
exchange for cash, cash equivalents, securities that are
listed for trading on a national securities exchange or
quoted on the NASDAQ National Market System, or a combination
thereof; provided, however, that any such transaction or
series of related transactions which results in Investcorp
holding securities representing more than twenty percent
(20%) of the outstanding shares of the subject company shall
not be an Approved Sale unless fifty percent (50%) or more of
the consideration paid in such transaction(s) consists of
cash or cash equivalents, or unless, within six months
following consummation of such transaction(s), Investcorp
transfers or sells, in one of a series of related
transactions, fifty percent (50%) or more of the securities
of the subject company received by Investcorp in such
transaction(s).
"Certificate of Incorporation" means the Restated Certificate
of Incorporation of the Company setting forth the rights,
preferences and privileges of and restrictions on the Class C
Stock.
"Class C Stock" is defined in recital C.
"Company" is defined in the preamble.
"Disability" has the meaning set forth in the employment
agreement between the Company and the Optionee, or if there
is no such employment agreement, means the failure by the
Optionee to render full-time employment services to the
Company for an aggregate of ninety (90) business days in any
continuous period of six (6) months on account of physical or
mental disability.
"Effective Date" is defined in the preamble.
"Endorsed Certificate" is defined in Section 9(a).
"Executive" is defined in the preamble.
"Exercise Price" is defined in Section 2.
"Fair Market Value" means the value of a Share, as of the
Termination Date or other date of determination, calculated
pursuant to Section 9(d).
"Initial Public Offering" means the sale of any of the common
stock of the Company pursuant to a registration statement
that has been declared effective under the Act, if as a
result of such sale (i) the issuer becomes a reporting
company under Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended, and (ii) such stock is
traded on the New York Stock Exchange or the American Stock
Exchange, or is quoted on the NASDAQ National Market System
or is traded or quoted on any other national stock exchange
or national securities system.
"Investors" means those entities set forth on Schedule 1 of
the Recapitalization Agreement.
"Option" is defined in Section 2.
"Option Shares" is defined in Section 2.
"Optionee" is defined in the preamble.
"Plan" is defined in recital A.
"Recapitalization Agreement" means the Recapitalization
Agreement dated as of April 15, 1998, by and between the
Company and the Investors.
"Repurchase" is defined in Section 9(a).
"Subsidiary" means any joint venture, corporation,
partnership or other entity as to which the Company, whether
directly or indirectly, has more than 50% of the (i) voting
rights or (ii) rights to capital or profits.
"Termination Date" means the date on which the Optionee
ceases to be employed by the Company for any reason.
2. Grant of Option. The Company grants to the Optionee the right and
option (the "Option") to purchase, on the terms and conditions
hereinafter set forth, all or any part of the number of shares of
Class C Stock set forth below the Optionee's signature below (the
"Option Shares"), at the purchase price of $1.25 per share (the
"Exercise Price"), on the terms and conditions set forth herein.
3. Exercisability.
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The Optionee's right to exercise the Option shall vest to the
extent of one-fourth (1/4) of the number of Option Shares on December
31, 2001, one-fourth (1/4) of the number of Option Shares on December
31, 2002, one-fourth (1/4) of the number of Option Shares on December
31, 2003, and one-fourth (1/4) of the number of Option Shares on
December 31, 2004, provided, that the Optionee shall have been in
continuous employment by the Company from the Effective Date to, and
including, each such date. No option may be exercised for fractional
shares of Class C Stock.
4. Expiration.
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(a) Subject to Sections 4(b) and 6(a), any nonexercised Option shall
expire upon the thirtieth (30th) day following the seventh (7th)
anniversary of the Effective Date (the "Expiration Date"), provided,
however, that if it would result in the expiration of the Option prior
to the Expiration Date, (i) if the Optionee dies or is terminated due
to disability, the exercisable portion of any Option shall expire
one-year following the Termination Date, or (ii) in the event the
Company exercises the repurchase right pursuant to Section 9 hereof,
the exercisable portion of any Option shall expire on the business day
immediately preceding the Repurchase Date.
(b) The unexercisable portion of the Option shall expire on the
Termination Date.
5. Nontransferability. Subject to Section 9 hereof, the Option shall
not be transferable by the Optionee except to (a) his or her spouse,
child, estate, personal representative, heir or successor (b) a trust
for the benefit of the Optionee or his or her spouse, child or heir,
or (c) a partnership, the partners of which consist solely of the
Optionee and/or his or her spouse, child, heir, and/or successor
(each, a "permitted transferee") and the Option is exercisable, during
the Optionee's lifetime, only by him or her or his or her spouse or
child, or, in the event of the Optionee's Disability, his or her
guardian or legal representative. More particularly (but without
limiting the generality of the foregoing), the Option may not be
assigned, transferred (except as aforesaid), pledged or hypothecated
in any way (whether by operation of law or otherwise), and shall not
be subject to execution, attachment or similar process. Any
assignment, transfer, pledge, hypothecation or other disposition of
the Option contrary to the provisions hereof, and the levy of any
attachment or similar process upon the Option that would otherwise
effect a change in the ownership of the Option, shall terminate the
Option; provided, however, that in the case of the involuntary levy of
any attachment or similar involuntary process upon the Option, the
Optionee shall have thirty (30) days after notice thereof to cure such
levy or process before the Option terminates. This Agreement shall be
binding on and enforceable against any person who is a permitted
transferee of the Option pursuant to the first sentence of this
Section.
6. Effect of Approved Sale; Adjustments.
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(a) In the event of an Approved Sale, the unexercised portion of the
Option shall terminate upon such Approved Sale, provided that, unless
the agreement or plan of merger effecting such Approved Sale provides
that the Optionee shall receive upon such Approved Sale, with respect
to the entire exercisable but unexercised portion of the Option, the
same consideration that the holders of the Class C Stock shall be
entitled to receive upon such Approved Sale (less the Exercise Price
attributable to such exercisable but unexercised portion and any taxes
withheld pursuant to Section 16 hereof), the Optionee shall be given
at least thirty (30) days' prior notice of the proposed Approved Sale
and shall be entitled to exercise such exercisable but unexercised
portion of the Option at any time during such thirty (30) day period
up to and until the close of business on the day immediately preceding
the date of consummation of such Approved Sale and, upon exercise of
the Option, the Option Shares shall be treated in the same manner as
the shares of any other holder of Class C Stock.
(b) Subject to Section 6(a), if the shares of the Class C Stock, or to the
extent it affects the economic rights of the holders of the Class C
Stock, shares of Class A stock, Class B stock or Class D stock of the
Company, are changed into or exchanged for a different number or kind
of shares or securities, as the result of any one or more
reorganizations, recapitalizations, mergers, acquisitions, stock
splits, reverse stock splits, stock dividends or similar events, an
appropriate adjustment shall be made in the number and kind of shares
or other securities subject to the Option, and the price for each
share or other unit of any securities subject to this Agreement, in
accordance with Section 13 of the Plan. No fractional interests shall
be issued on account of any such adjustment unless the Committee
specifically determines to the contrary; provided, however, that in
lieu of fractional interests, the Optionee, upon the exercise of the
Option in whole or part, shall receive cash in an amount equal to the
amount by which the fair market value of such fractional interests
exceeds the Exercise Price attributable to such fractional interests.
7. Exercise of the Option. Prior to the expiration thereof, the Optionee
may exercise the exercisable portion of the Option from time to time
in whole or in part. Upon electing to exercise the Option, the
Optionee shall deliver to the Secretary of the Company a written and
signed notice of such election setting forth the number of Option
Shares the Optionee has elected to purchase, together with cash or a
cashier's or certified bank check to the order of the Company for the
full Exercise Price of such Option Shares and any amount required
pursuant to Section 17 hereof. Alternatively, if the Company is not at
the time prohibited from purchasing or acquiring shares of its capital
stock, the Exercise Price may be paid in whole or in part by delivery
of shares of the Class C Stock owned by the Optionee provided that
Optionee has owned such shares for at least six (6) months. The value
of any such shares delivered or withheld as payment of the Exercise
Price shall be such shares' fair market value as determined by the
Committee. The Committee may, in its discretion, permit payment of the
Exercise Price in such other form or in such other manner as may be
permissible under the Plan and under any applicable law.
8. Restrictions on Transfers of Shares Issuable Upon Exercise. Subject to
Section 9 hereof, prior to the earlier of (A) 180 days following an
Initial Public Offering or (B) an Approved Sale, the Option Shares
shall not be transferable or transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise)
except that the Optionee may transfer the Option Shares (i) to a
permitted transferee, as defined in Section 5 of this Agreement, or
(ii) as provided for in the Certificate of Incorporation. This
Agreement shall be binding on and enforceable against any person who
is a permitted transferee of the Option Shares except a person who
acquires the Option Shares pursuant to (y) Section 4 of Article IV of
the Certificate of Incorporation or (z) as part of the Initial Public
Offering. The stock certificates issued to evidence Option Shares upon
exercise of the Option hereunder shall bear a legend referring to this
Agreement and the restrictions contained herein.
9. Repurchase of Option Shares.
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(a) In the event that the Optionee ceases to be employed by the Company
for any reason prior to an Approved Sale, the Company, during the
sixty (60) days following the Termination Date (the "Repurchase
Period"), shall have a one-time right to purchase all, but not less
than all, of the Option Shares. The purchase price for each Option
Share shall equal Fair Market Value, or, if the Optionee is terminated
for cause, the lower of Fair Market Value or the Exercise Price. If
the Company elects to purchase the Option Shares, it shall notify the
Optionee at or before the end of the Repurchase Period of such
election and the purchase price shall be paid in cash at a time set by
the Company (the "Repurchase Date") within thirty (30) days after the
end of the Repurchase Period, provided that the Optionee has presented
to the Company a stock certificate evidencing the Option Shares duly
endorsed for transfer (the "Endorsed Certificate"). If the Optionee
fails to deliver the Endorsed Certificate, the Option Shares
represented thereby shall be deemed to have been purchased upon (i)
the payment by the Company of the purchase price to the Optionee or
his or her permitted transferee or (ii) notice to the Optionee or such
permitted transferee that the Company is holding the purchase price
for the account of the Optionee or such permitted transferee, and upon
such payment or notice the Optionee and such permitted transferee will
have no further rights in or to such Option Shares. If the Company
does not purchase the Option Shares, the restrictions on transfer
thereof contained in Sections 5 and 8 of this Agreement shall
terminate and be of no further force and effect.
(b) In the event that (i) on the Termination Date, Optionee owns Option
Shares that have not been owned by the Optionee for a period of at
least six (6) months, and/or (ii) following the Termination Date, the
Optionee exercises any then outstanding vested Option pursuant to this
Agreement, with respect to all such Option Shares, the Repurchase
Period will not commence on the Termination Date but rather will
commence on the first date on which all such Option Shares have been
owned by Optionee for six (6) months.
(c) In the event that, following the Termination Date, the Optionee
exercises an Option in accordance with Section 4(a) hereof, by notice
to the Optionee delivered during the Repurchase Period, the Company
may elect to purchase any Option Shares so acquired by notice to such
effect during the 120 day period following the Termination Date.
(d) The Fair Market Value of Option Shares to be purchased by the Company
hereunder shall be determined in good faith by the Company's Board of
Directors. The Fair Market Value shall be based on an assumed sale of
100% of the outstanding capital stock of the Company.
(e) The Optionee shall not be considered to have ceased to be employed by
the Company for purposes of this Agreement if he or she continues to
be employed by the Company or a Subsidiary, or by a company of which
the Company is a Subsidiary.
10. Compliance with Legal Requirements.
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(a) No Option Shares shall be issued or transferred pursuant to this
Agreement unless and until all legal requirements applicable to such
issuance or transfer have, in the opinion of counsel to the Company,
been satisfied. Such requirements may include, but are not limited to,
registering or qualifying such Shares under any state or federal law,
satisfying any applicable law relating to the transfer of unregistered
securities or demonstrating the availability of an exemption from
applicable laws, placing a legend on the Shares to the effect that
they were issued in reliance upon an exemption from registration under
the Securities Act of 1933, as amended (the "Act"), and may not be
transferred other than in reliance upon Rule 144 or Rule 701
promulgated under the Act, if available, or upon another exemption
from the Act, or obtaining the consent or approval of any governmental
regulatory body.
(b) The Optionee understands that the Company intends for the offering and
sale of Option Shares to be effected in reliance upon Rule 701 or
another available exemption from registration under the Act and
intends to file a Form 701 as appropriate, and that the Company is
under no obligation to register for resale the Option Shares issued
upon exercise of the Option, subject to the Certificate of
Incorporation. In connection with any such issuance or transfer, the
person acquiring the Option Shares shall, if requested by the Company,
provide information and assurances satisfactory to counsel to the
Company with respect to such matters as the Company reasonably may
deem desirable to assure compliance with all applicable legal
requirements.
11. Subject to Certificate of Incorporation.
--------------------------------------- The Optionee
acknowledges that the Option Shares are subject to the terms of the
Certificate of Incorporation.
12. No Interest in Shares Subject to Option. Neither the Optionee
(individually or as a member of a group) nor any beneficiary or other
person claiming under or through the Optionee shall have any right,
title, interest, or privilege in or to any shares of stock allocated
or reserved for the purpose of the Plan or subject to this Agreement
except as to such Option Shares, if any, as shall have been issued to
such person upon exercise of an Option or any part thereof.
13. Plan Controls. The Option hereby granted is subject to, and the
Company and the Optionee agree to be bound by, all of the terms and
conditions of the Plan as the same may be amended from time to time in
accordance with the terms thereof, but no such amendment shall be
effective as to the Option without the Optionee's consent insofar as
it may adversely affect the Optionee's rights under this Agreement.
14. Not an Employment Contract. Nothing in the Plan, in this Agreement or
any other instrument executed pursuant thereto shall confer upon the
Optionee any right to continue in the employ of the Company or any
Subsidiary or shall affect the right of the Company or any Subsidiary
to terminate the employment of the Optionee with or without cause.
15. Governing Law.
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All terms of and rights under this
Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York, without giving effect to
principles of conflicts of law.
16. Taxes. The Committee may, in its discretion, make such provisions and
take such steps as it may deem necessary or appropriate for the
withholding of all federal, state, local and other taxes required by
law to be withheld with respect to the issuance or exercise of the
Option including, but not limited to, deducting the amount of any such
withholding taxes from any other amount then or thereafter payable to
the Optionee, requiring the Optionee to pay to the Company the amount
required to be withheld or to execute such documents as the Committee
deems necessary or desirable to enable it to satisfy its withholding
obligations, or any other means provided in the Plan; provided further
that the Optionee may satisfy all aforesaid withholding tax
obligations by directing the Company to withhold that number of Option
Shares with an aggregate Fair Market Value equal to the amount of all
federal, state, local and other taxes required to be withheld, or
delivering to the Company such number of previously held shares.
18. Notices. All notices, requests, demands and other communications
pursuant to this Agreement shall be in writing and shall be deemed to
have been duly given if personally delivered, telexed or telecopied
to, or, if mailed, when received by, the other party at the following
addresses (or at such other address as shall be given in writing by
either party to the other):
If to the Company to:
Harborside Healthcare
Xxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Chief Financial Officer
With a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile: (000) 000-0000
Attention: E. Xxxxxxx Xxxxxxx, Esq.
If to the Optionee to the address set forth below
the Optionee's signature below.
19. Amendments and Waivers.
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This Agreement may be amended, and any provision hereof may be waived,
only by a writing signed by the party to be charged.
20. Entire Agreement. This Agreement, together with the Plan, sets forth
the entire agreement and understanding between the parties as to the
subject matter hereof and supersedes all prior oral and written and
all contemporaneous oral discussions, agreements and understandings of
any kind or nature.
21. Separability. In the event that any provision of this Agreement is
declared to be illegal, invalid or otherwise unenforceable by a court
of competent jurisdiction, such provision shall be reformed, if
possible, to the extent necessary to render it legal, valid and
enforceable, or otherwise deleted, and the remainder of this Agreement
shall not be affected except to the extent necessary to reform or
delete such illegal, invalid or unenforceable provision.
22. Headings. The headings preceding the text of the sections hereof are
inserted solely for convenience of reference, and shall not constitute
a part of this Agreement, nor shall they affect its meaning,
construction or effect.
23. Counterparts. This Agreement may be executed in two counterparts, each
of which shall be deemed an original, but which together shall
constitute one and the same instrument.
24. Further Assurances. Each party shall cooperate and take such action as
may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement.
25. Remedies. In the event of a breach by any party to this Agreement of
its obligations under this Agreement, any party injured by such
breach, in addition to being entitled to exercise all rights granted
by law, including recovery of damages, shall be entitled to specific
performance of its rights under this Agreement. The parties agree that
the provisions of this Agreement shall be specifically enforceable, it
being agreed by the parties that the remedy at law, including monetary
damages, for breach of any such provision will be inadequate
compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is hereby
waived.
26. Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective permitted
successors and assigns.
27. Shareholder Approval. Section 3(b)(ii) of this Agreement shall not be
effective unless shareholder approval meeting the requirements of
Section 280G(b)(5) of the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder is obtained.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date. HARBORSIDE HEALTHCARE CORPORATION
By: ___________________________________
Name: ___________________________________
Title: ___________________________________
OPTIONEE
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Name:
Address: _________________________________
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Number of Option Shares:
