Exhibit 10.20 (a)
MCMS, INC.
AGREEMENT EVIDENCING A GRANT OF A
NONQUALIFIED STOCK OPTION UNDER 1998 STOCK OPTION PLAN
Agreement made as of **** between MCMS, Inc., an Idaho
corporation (the "Company"), and **** ("Grantee"). Capitalized
terms used but not defined herein shall have the meanings
assigned to such terms in the Plan (as defined below).
1. Grant of Option. Pursuant to the MCMS, Inc. 1998 Stock
Option Plan (the "Plan"), the Company hereby grants to Grantee,
as of the grant date specified above, a nonqualified stock option
(the "Option") to purchase **** shares (which number of shares
may be adjusted as provided in the Plan) of the Company's Common
Stock, $0.001 par value per share (the "Common Stock"), at the
exercise price per share of $2.27 subject to the terms and
conditions set forth herein and in the Plan. Attached hereto as
Annex A is a summary of the terms of the Option evidenced by
this Agreement.
2. Grantee Bound by Plan. Attached hereto as Annex B is a
copy of the Plan which is incorporated herein by reference and
made a part hereof. Grantee hereby acknowledges receipt of a
copy of the Plan and agrees to be bound by all the terms and
provisions thereof. The Plan should be carefully examined before
any decision is made to exercise the Option.
3. Exercise of Option. Subject to the earlier termination
of the Option as provided herein and in the Plan and subject to
Section 7, the Option may be exercised, in whole or in part, to
the extent it has become vested, by written notice to the Company
at any time and from time to time after the date of grant. An
Option shall not be exercisable in any event after the tenth
anniversary of grant. An Option may not be exercised for a
fraction of a share of Common Stock. Options are subject to
cancellation as provided in the Plan.
4. Vesting of Option. This Option shall vest and become
exercisable with respect to the Option Shares subject to this
Option as follows:
(a) Class I Option Shares. This Option shall vest and
become exercisable with respect to 50% of the Option Shares
subject to this Option (the "Class I Option Shares") provided the
Grantee remains continuously employed with the Company after the
date hereof and through and including the vesting dates described
below as follows:
Number of Class I
Vesting Date Option Shares Vested
-------------------------------- -----------------------------
The first anniversary of the 1/4 of Class I Option Shares
Vesting Commencement Date (see
Annex A hereto)
The last day of each of the first 1/48 of Class I Option Shares
36 months after the first
anniversary of the Vesting
Commencement Date
-----------------------------------------------------------------
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(b) Class II Option Shares.
(i) Time Vesting. This Option shall vest and
become exercisable with respect to the remaining 50% of the
Option Shares subject to this Option (the "Class II Option
Shares") on the seventh anniversary of the Vesting
Commencement Date provided that the Grantee has been
continuously employed with the Company from the Vesting
Commencement Date through the seventh anniversary
thereafter.
(ii) Performance Vesting. This Option shall vest
and become exercisable with respect to the Class II Option
Shares prior to the seventh anniversary upon the attainment
of certain goals described in this Section 4(b)(ii). This
Option shall vest and become exercisable with respect to the
following percentages of Class II Option Shares on the
vesting dates set forth opposite such percentages below if
(x) the Company's EBITDA (as defined below) for the fiscal
year ending on such vesting date equals at least the dollar
amount set forth opposite such vesting date (each an "EBITDA
Target") and (y) the Grantee has been continuously employed
with the Company from the date hereof through the applicable
vesting date:
-----------------------------------------------------------------
Vesting Date EBITDA Target Percentage of Class II
Option Shares Vested
-------------------- ------------------- ----------------------
August 30, 1999 $30,548,463 50%
August 30, 2000 To be determined by 50%
further action of
the Compensation
Committee of the
Board of Directors
-----------------------------------------------------------------
"EBITDA" shall have the same meaning ascribed to
"Consolidated EBITDA" in the Credit Agreement, dated as of
February 26, 1998, among MCMS, Inc., various lending institutions
named therein, and Bankers Trust Company, as amended.
In the event the Company consummates an acquisition of
another Person the EBITDA Targets for the periods occurring after
such acquisition will be adjusted in good faith by Grantee and
approved by the Board, and such adjusted and approved EBITDA
Targets shall, once approved, be deemed the EBITDA Targets for
all purposes hereunder.
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5. Conditions to Exercise. The Option may not be
exercised by Grantee unless the following conditions are met:
(a) The Option has become vested with respect to the
Option Shares to be acquired pursuant to such exercise;
(b) legal counsel for the Company must be satisfied at
the time of exercise that the issuance of shares of Common Stock
upon exercise will be in compliance with the Securities Act and
applicable United States federal, state, local and foreign laws;
and
(c) Grantee must pay at the time of exercise the full
purchase price for the shares of Common Stock being acquired
hereunder in accordance with the terms of the Plan.
6. Right to Purchase Option Shares Upon Termination of
Employment.
(a) Repurchase Right. In the event a Participant's
employment with the Company is terminated for any reason, the
Option Shares (whether held by such Participant or one or more
transferees and including any Option Shares acquired subsequent
to such termination of employment) will be subject to repurchase
by the Company pursuant to the terms and conditions set forth in
this Section 6 (the "Repurchase Option") at a price per share
equal to the Fair Market Value thereof determined as of the
Termination Date.
(b) Repurchase Notice. The Board may elect to
purchase all or any portion of the Option Shares by delivery of
written notice (the "Repurchase Notice") to the holder or holders
of the Option Shares within 180 days after the Termination Date
(or if termination is caused by the Participant's death or
disability, 180 days after the expiration of the Options held by
such Participant). The Repurchase Notice will set forth the
number of Option Shares to be acquired from such holder, the
aggregate consideration to be paid for such shares and the time
and place for the closing of the transaction.
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(c) Closing of Repurchase. The closing of the
repurchase transaction will take place on the date designated by
the Company in the Repurchase Notice, which date will not be more
than 45 days nor less than 10 days after the delivery of such
notice. The Company will pay for the Option Shares to be
purchased pursuant to the Repurchase Option by delivering, at the
option of the Company to such Participant and/or the other
holder(s), (1) a check in the amount of the aggregate sale price
of the Option Shares to be repurchased or (2) if the aggregate
consideration to be paid to such holder(s) of Option Shares
exceeds $50,000, a check in the amount of 20% of the aggregate
sale price of the Option Shares to be repurchased (except to the
extent not permitted under that certain revolving credit facility
with various lending institutions and Bankers Trust Company of up
to $40.0 million, a note in compliance therewith) and a
subordinated promissory note in a principal amount equal to the
remainder of the aggregate sale price, bearing interest at a
floating rate of interest equal to the prime rate as stated from
time to time by Chase Manhattan Bank or any successor thereto,
and payable, as to principal and interest, in four equal annual
installments on the first four anniversaries of the closing of
such repurchase; provided that if the Company determines that
withholding tax is required with respect to the exercise of a
Repurchase Option, the Company shall withhold an amount equal to
such withholding tax from the purchase price. At the closing,
the Participant and each other seller will deliver the
certificates representing the Option Shares to be sold duly
endorsed in form for transfer to the Company or its designee, and
the Company will be entitled to receive customary representations
and warranties from the Participant and the other sellers
regarding title to the Option Shares.
7. Restrictions on Transfer.
(a) Restrictions. A Participant may not sell, pledge
or otherwise transfer any interest in any Option Shares except
pursuant to the provisions of this Section 7. At least 60 days
prior to making any transfer, the Participant proposing such
transfer shall deliver a written notice (the "Sale Notice") to
the Company. The Sale Notice will disclose in reasonable detail
the identity of the prospective transferee(s) and the terms and
conditions of the proposed transfer. Such Participant (and such
Participant's transferees) shall not consummate any such transfer
until 60 days after the Sale Notice has been delivered to the
Company, unless the Company has notified such Participant in
writing that it will not exercise its rights under this Section
7. (The date of the first to occur of such events is referred to
herein as the "Authorization Date").
(b) Repurchase Option. The Company may elect to
purchase all or any portion of the Option Shares to be
transferred upon the same terms and conditions as those set forth
in the Sale Notice (the "Right of First Refusal") by delivering a
written notice of such election to such Participant within 30
days after the receipt of the Sale Notice by the Company (the
"Election Notice"). If the Company has not elected to purchase
all of the Option Shares specified in the Sale Notice, such
Participant may transfer the Option Shares not purchased by the
Company to the prospective transferee(s) as specified in the Sale
Notice at a price and on terms no more favorable to the
transferee(s) thereof than specified in the Sale Notice during
the 60-day period immediately following the Authorization Date.
Any Option Shares not so transferred within such 60-day period
must be re-offered to the Company in accordance with the
provisions of this Section 7 in connection with any subsequent
proposed transfer.
(c) Exceptions. The restrictions contained in this
Section 7 will not apply with respect to transfers of Option
Shares (1) pursuant to applicable laws of descent and
distribution, (2) pursuant to the Shareholders Agreement or (3)
among the Participant's family group; provided that the
restrictions contained in this paragraph will continue to be
applicable to the Option Shares after any such transfer and the
transferees of such Option Shares have agreed in writing to be
bound by the terms and provisions of this Plan and the Option
grant, as amended from time to time. The Participant's "family
group" means the Participant's spouse and descendants (whether
natural or adopted) and any trust solely for the benefit of the
Participant and/or the Participant's spouse and/or descendants.
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8. Administration. Any action taken or decision made by
the Company, the Board, or the Committee or its delegates arising
out of or in connection with the construction, administration,
interpretation or effect of the Plan or this Agreement shall lie
within its sole and absolute discretion, as the case may be, and
shall be final, conclusive and binding on Grantee and all persons
claiming under or through Grantee. By accepting this grant or
other benefit under the Plan, Grantee and each person claiming
under or through Grantee shall be conclusively deemed to have
indicated acceptance and ratification of, and consent to, any
action taken under the Plan by the Company, the Board or the
Committee or its delegates.
9. No Rights as Shareholder. Unless and until a
certificate or certificates representing such shares of Common
Stock shall have been issued to Grantee (or any person acting
under Section 7 above), Grantee shall not be or have any of the
rights or privileges of a shareholder of the Company with respect
to shares of Common Stock acquirable upon exercise of the Option.
10. Investment Representation. Grantee hereby acknowledges
that the shares of Common Stock which Grantee may acquire by
exercising the Option shall be acquired for investment without a
view to distribution, within the meaning of the Securities Act,
and shall not be sold, transferred, assigned, pledged or
hypothecated in the absence of an effective registration
statement for the shares of Common Stock under the Securities Act
and applicable state securities laws or an applicable exemption
from the registration requirements of the Act and any applicable
state securities laws. Grantee also agrees that the shares of
Common Stock which Grantee may acquire by exercising the Option
will not be sold or otherwise disposed of in any manner which
would constitute a violation of any applicable federal or state
securities laws.
11. Sale of the Company.
(a) Consent to Sale of Company. If the Board and the
holders of a majority of the shareholders of the Company's then
outstanding shares of capital stock approve a Sale of the Company
(the "Approved Sale"), you will (i) consent to and raise no
objections against the Approved Sale or the process pursuant to
which the Approved Sale is arranged, (ii) waive any dissenter's
rights and any similar rights with respect thereto and (iii) if
the Approved Sale is structured as a sale of stock, you will
agree to sell all of your Option Shares and rights to acquire
Option Shares on the terms and conditions approved by the Board
and the shareholders of a majority of the shares of capital stock
then outstanding. You will take all necessary and desirable
actions in connection with the consummation of the Approved Sale
as requested by the Board.
(b) Purchaser Representative. If the Company or the
holders of the Company's securities enter into any negotiation or
transaction for which Rule 506 (or any similar rule then in
effect) promulgated by the Securities Exchange Commission
pursuant to the Securities Act may be available with respect to
such negotiation or transaction (including a merger,
consolidation or other reorganization), you will, at the request
of the Company, appoint a purchaser representative (as such term
is defined in Rule 501) reasonably acceptable to the Company. If
you appoint the purchaser representative designated by the
Company, the Company will pay the fees of such purchaser
representative, but if you decline to appoint the purchaser
representative designated by the Company you will appoint another
purchaser representative (reasonably acceptable to the Company),
and you will be responsible for the fees of the purchaser
representative so appointed.
(c) Termination of Restrictions. The provisions of
this Section 11 will terminate when the Company has sold shares
of its Common Stock pursuant to a Qualified Initial Public
Offering.
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12. Notification of Inquiries and Agreements. Grantee and
each permitted transferee shall notify the Company in writing
within 10 days after the date the Grantee or such permitted
transferee (i) first obtains knowledge of any Internal Revenue
Service inquiry, audit, assertion, determination, investigation,
or question relating in any way to the value of Options granted
pursuant to this Agreement; (ii) includes or agrees (including,
without limitation, in any settlement, closing, or other similar
agreement) to include in gross income with respect to Options
granted pursuant to this Agreement (A) any amount in excess of
the amount reported on Form 1099 or Form W-2 to Grantee by the
Company, or (B) if no such Form is received, any amount; or (iii)
exercises, sells, disposes of, or otherwise transfers (other than
to a permitted transferee) an Option acquired pursuant to this
Agreement. Upon request, Grantee shall provide to the Company
any information or document relating to any event described in
the preceding sentence which the Company (in its sole discretion)
requires in order to calculate and substantiate any change in the
Company's tax liability as a result of such event.
13. Listing and Registration of Common Stock. The Company,
in its discretion, may postpone the issuance and/or delivery of
shares of Common Stock upon any exercise of the Option until
completion of such stock exchange listing, or registration, or
other qualification of such shares under any state and/or federal
law, rule or regulation as the Company may consider appropriate.
14. Rights of Participants. Neither this Agreement nor the
Plan creates any employment rights in Grantee and the Company
shall have no liability hereunder for terminating Grantee's
employment or materially reducing Grantee's responsibilities.
15. Notices. Any notice hereunder to the Company shall be
addressed to the Company, Attention: Board of Directors, and any
notice hereunder to Grantee shall be addressed to Grantee at
Grantee's last address on the records of the Company, subject to
the right of either party to designate at any time hereafter in
writing some other address. Any notice shall be deemed to have
been duly given when delivered personally, one day following
dispatch if sent by reputable overnight courier, fees prepaid, or
three days following mailing if sent by registered mail, return
receipt requested, postage prepaid and addressed as set forth
above.
16. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of any successors to the Company and all
persons lawfully claiming under Grantee.
17. Governing Law. The validity, construction,
interpretation, administration and effect of the Plan, and of its
rules and regulations, and rights relating to the Plan and to
this Agreement, shall be governed by the substantive laws, but
not the choice of law rules, of whichever state in the United
States in which the Company is incorporated from time to time.
* * * * *
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IN WITNESS WHEREOF, the Company and Grantee have executed
this Agreement as of the date first above written.
MCMS, INC.
Name:
Title:
GRANTEE
Employee's Signature
Name of Employee (Print)
37
ANNEX A
SUMMARY OF OPTION TERMS
Name of Grantee:
Class I Options
Date of Option Grant:
--------------------------------
Total Option Shares Granted:
--------------------------------
Option Exercise Price Per Share:
--------------------------------
Total Option Exercise Price:
--------------------------------
Option Term/Expiration Date:
--------------------------------
Vesting Commencement Date:
--------------------------------
Vesting Schedule:
--------------------------------
-----------------------------------------------------------------
Number of Class I
Vesting Date Option Shares Vested
------------------------------ ---------------------------------
The first anniversary of the 1/4 of Class I Option Shares
Vesting Commencement Date
The last day of each of the 1/48 of Class I Option Shares
first 36 months after the first
anniversary of the Vesting
Commencement Date
-----------------------------------------------------------------
38
Class II Options
Date of Option Grant:
--------------------------------
Total Option Shares Granted:
--------------------------------
Option Exercise Price Per Share: --------------------------------
Total Option Exercise Price: --------------------------------
Option Term/Expiration Date: --------------------------------
Vesting Commencement Date: --------------------------------
Vesting Schedule: --------------------------------
Class II Options shall vest and become exercisable on the
seventh anniversary of the Vesting Commencement Date provided
that the Grantee has been continuously employed with the Company
from the Vesting Commencement Date through the seventh
anniversary thereafter. Class II Options shall vest and become
exercisable prior to the seventh anniversary of the Vesting
Commencement Date upon the attainment of certain goals as
follows:
-----------------------------------------------------------------
Vesting Date EBITDA Target Percentage of Class II
Option Shares Vested
-------------------- ------------------- ----------------------
August 30, 1999 $30,548,463 50%
August 30, 2000 To be determined by 50%
further action of the
Compensation
Committee of the
Board of Directors
-----------------------------------------------------------------
39
ANNEX B
MCMS, INC.
1998 STOCK OPTION PLAN
ARTICLE I
Purpose of Plan of Plan
The 1998 Stock Option Plan (the "Plan") of MCMS, Inc. (the
"Company"), adopted by the Board of Directors and shareholders of
the Company effective May 14, 1998, is intended to advance the
best interests of the Company by providing executives, key
employees and certain advisors of the Company or any Subsidiary
(as defined below) who have substantial responsibility for the
management and growth of the Company or any Subsidiary with
additional incentives by allowing such employees to acquire an
ownership interest in the Company. The Plan is a compensatory
benefit plan within the meaning of Rule 701 under the Securities
Act of 1933, as amended (the "Securities Act") and, unless and
until the Common Stock (as defined below) is publicly traded, the
issuance pursuant to the Plan of stock purchase options to
purchase shares of Common Stock ("Options"), and the issuance of
Common Stock upon the exercise of Options issued pursuant to the
Plan, are each intended to qualify for the exemption from
registration under the Securities Act provided by Rule 701.
ARTICLE II
Definitions
For purposes of the Plan the following terms have the
indicated meanings:
"Authorization Date" has the meaning ascribed thereto in
Section 5.9(a) hereof.
"Affiliate" means, with respect to any specified Person, any
other Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common
control with, such specified Person. For purposes of this
definition, "control" (including the terms "controlled by" and
"under common control with"), with respect to the relationship
between or among two or more Persons, means the possession,
directly or indirectly or as trustee or executor, of the power to
direct or cause the direction of the affairs or management of a
Person, whether through the ownership of voting securities, as
trustee or executor, by contract or otherwise, including, without
limitation, the ownership, directly or indirectly, of securities
having the power to elect a majority of the board of directors or
similar body governing the affairs of such Person.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor statute.
40
"Committee" means the Compensation Committee or such other
committee of the Board as the Board may designate to administer
the Plan or, if for any reason the Board has not designated such
a committee, the Board. The Committee, if other than the Board,
shall be composed of two or more directors as appointed from time
to time by the Board.
"Common Stock" means the Class A Common Stock, $0.001 par
value per share, of MCMS, Inc., an Idaho corporation.
"Election Notice" has the meaning ascribed thereto in
Section 5.9(b) hereof.
"Fair Market Value" per share on any given date means the
average of the closing prices of the sales of the Common Stock on
all securities exchanges on which such stock may at the time be
listed, or, if there have been no sales on any such exchange on
any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day
such stock is not so listed, the average of the representative
bid and asked prices quoted on the Nasdaq Stock Market as of
4:00 P.M., New York time, or, if on any day such stock is not
quoted on the Nasdaq Stock Market, the average of the highest bid
and lowest asked prices on such day in the domestic over-the-
counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization. If at any
time the Common Stock is not listed or quoted, the Fair Market
Value per share shall be determined by the Committee or the Board
based on such factors as the members thereof in the exercise of
their business judgment, consider relevant.
"Measurement Date" means the date on which any taxable
income resulting from the exercise of an Option is determined
under applicable federal income tax law.
"Option Agreement" has the meaning set forth in Section 6.1
hereof.
"Option Shares" shall mean (i) all shares of Common Stock
issued or issuable upon the exercise of an Option and (ii) all
shares of Common Stock issued with respect to the Common Stock
referred to in clause (i) above by way of stock dividend or stock
split or in connection with any conversion, merger, consolidation
or recapitalization or other reorganization affecting the Common
Stock. Unless provided otherwise herein or in the Participant's
Option Agreement, Option Shares will continue to be Option Shares
in the hands of any holder other than the Participant (except for
the Company), and each such transferee thereof will succeed to
the rights and obligations of a holder of Option Shares
hereunder.
"Options" has the meaning set forth in the preamble hereof.
"Participant" means (i) any employee of the Company or any
Subsidiary or (ii) any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services to such
entity who has been selected to participate in the Plan by the
Committee or the Board.
"Permitted Transferee" means those persons to whom the
Participant is authorized (1) pursuant to Section 5.9, to
transfer Option Shares, or (2) pursuant to Section 6.3, to
transfer Options.
"Person" means any individual, partnership, firm,
corporation, association, trust, unincorporated organization or
other entity.
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"Plan" has the meaning set forth in the preamble hereof.
"Qualified Initial Public Offering" means an offering by the
Corporation of its capital stock or equity securities to the
public pursuant to an effective registration statement under the
Securities Act of 1933, as then in effect, or any comparable
statement under any similar federal statute then in force
pursuant to which the public offering price per share of which is
not less than $14.00 (adjusted to reflect stock dividends, stock
splits or recapitalizations) after the date hereof and results in
aggregate gross cash proceeds to the Corporation of at least
$30,000,000 (before deduction of underwriting discounts and
expenses).
"Repurchase Notice" has the meaning ascribed thereto in
Section 5.8(b) hereof.
"Repurchase Option" has the meaning ascribed thereto in
Section 5.8(a) hereof.
"Right of First Refusal" has the meaning ascribed thereto in
Section 5.9(b) hereof.
"Sale Notice" has the meaning ascribed thereto in Section
5.9(a) hereof.
"Sale of the Company" means the sale of the Company to any
Third Party or Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting
power under normal circumstances necessary to elect a majority of
the Board (whether by merger, consolidation or sale or transfer
of the Company's capital stock) or (ii) all or substantially all
of the Company's assets determined on a consolidated basis.
"Securities Act" has the meaning ascribed thereto in Article
1 hereof.
"Shareholders Agreement" means the Shareholders Agreement
dated as of February 26, 1998 by and among the Company,
Cornerstone Equity Investors IV, L.P., MEI California, Inc.,
Xxxxxxxx Street Partners II, BT Investment Partners, Inc. and the
other investors listed in Appendix A thereto.
"Subsidiary" means any subsidiary corporation (as such term
is defined in Section 424(f) of the Code) of the Company.
"Termination Date" shall mean the date upon which such
Participant's employment or engagement, as the case may be, with
the Company terminated.
"Third Party" means any Person which is not an Affiliate of
the Company.
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ARTICLE III
Administration
The Plan shall be administered by the Committee. Subject to
the limitations of the Plan, the Committee shall have the sole
and complete authority to: (i) select Participants, (ii) grant
Options to Participants in such forms and amounts as it shall
determine, (iii) impose such limitations, restrictions and
conditions upon such Options as it shall deem appropriate, (iv)
interpret the Plan and adopt, amend and rescind administrative
guidelines and other rules and regulations relating to the Plan,
(v) correct any defect or omission or reconcile any inconsistency
in the Plan or in any Options granted under the Plan and (vi)
make all other determinations and take all other actions
necessary or advisable for the implementation and administration
of the Plan. The Committee's determinations on matters within
its authority shall be conclusive and binding upon the
Participants, the Company and all other persons. All expenses
associated with the administration of the Plan shall be borne by
the Company. The Committee may, as approved by the Board and to
the extent permissible by law, delegate any of its authority
hereunder to such persons or entities as it deems appropriate.
ARTICLE IV
Limitation on Aggregate Shares
The number of shares of Common Stock with respect to which
Options may be granted under the Plan shall not exceed, in the
aggregate, 2,500,000 shares, subject to adjustment in accordance
with Section 6.4. To the extent any Options expire unexercised
or are canceled, terminated or forfeited in any manner without
the issuance of Common Stock thereunder, such shares shall again
be available under the Plan. The shares of Common Stock
available under the Plan may consist of authorized and unissued
shares, treasury shares or a combination thereof, as the
Committee shall determine.
ARTICLE V
Awards
5.1 Grant of Options. The Committee may grant Options to
Participants from time to time in accordance with this Article V.
Options granted under the Plan may be nonqualified stock options
or "incentive stock options" within the meaning of Section 422 of
the Code or any successor provision as specified by the
Committee; provided, however, that no incentive stock option may
be granted to any Participant who, at the time of grant, owns
stock of the Company (or any Subsidiary) representing more than
10% of the total combined voting power of all classes of stock of
the Company (or any Subsidiary), unless such incentive stock
option shall at the time of grant (a) have a termination date not
later than the fifth anniversary of the issuance date and
(b) have an exercise price per share equal to at least 110% of
the Fair Market Value of a share of Common Stock on the date of
grant. The exercise price per share of Common Stock under each
Option shall be determined by the Committee or the Board at the
time of grant; provided, however, that the exercise price per
share of Common Stock under each incentive stock option shall be
fixed by the Committee at the time of grant of the Option and
shall equal at least 100% of the Fair Market Value of a share of
Common Stock on the date of grant, but not less than the par
value per share (as adjusted pursuant to Section 6.4). Subject
to Section 5.6, Options shall be exercisable at such time or
times as the Committee shall determine; provided, however, that
any option intended to be an incentive stock option shall be
treated as an incentive stock option only to the extent that the
aggregate Fair Market Value of the Common Stock (determined as of
the date of Option grant) with respect to which incentive stock
options (but not nonqualified options) are exercisable for the
first time by any Participant during any calendar year (under all
stock option plans of the Company and its Subsidiaries) does not
exceed $100,000. The Committee shall determine the term of each
Option, which term shall not exceed ten years from the date of
grant of the Option.
5.2 Exercise Procedure. Options shall be exercisable, to
the extent they are vested, by written notice to the Company (to
the attention of the Company's Secretary) accompanied by payment
in full of the applicable exercise price. Payment of such
exercise price may be made (i) in cash (including check, bank
draft, money order or wire transfer of immediately available
funds), (ii) if approved by the Committee prior to exercise (or
in the case of an incentive stock option, if approved by the
Committee and set forth in the Option Agreement) by delivery of a
43
full recourse promissory note of the Participant bearing interest
at a rate not less than the applicable federal rate determined
pursuant to Section 1274 of the Code, (iii) in shares of Common
Stock valued at their Fair Market Value as of the date of
exercise as provided in Section 5.3 below, (iv) in the
consideration received by the Company pursuant to a cashless
exercise program implemented by the Company in connection with
the Plan, or (v) in a combination of the foregoing.
5.3 Exchange of Previously Acquired Stock. The Committee,
in its discretion and subject to such conditions as the Committee
may determine, may permit the exercise price for the shares being
acquired upon the exercise of an Option to be paid, in full or in
part, by the delivery to the Company of Common Stock. Any Common
Stock so delivered shall be treated as the payment of cash equal
to the aggregate Fair Market Value on the date of delivery of
such Common Stock. In the case of incentive stock options, the
Committee shall specify in the Option Agreement whether the
option holder may satisfy the exercise price with respect to
shares of Common Stock purchased upon exercise of such Option by
delivering to the Company shares of previously acquired Common
Stock. In the case of shares of Common Stock acquired upon
exercise of an Option, such shares shall have been owned by the
optionee for more than six months on the date of surrender, and
have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the shares of Common Stock as to
which said Option shall be exercised.
5.4 Withholding Tax Requirements.
(a) Amount of Withholding. It shall be a condition of
the exercise of any Option that the Participant exercising the
Option make appropriate payment or other provision acceptable to
the Company with respect to any withholding tax requirement
arising from such exercise. The amount of withholding tax
required, if any, with respect to any Option exercise (the
"Withholding Amount") shall be determined by the Treasurer or
other appropriate officer of the Company, and the Participant
shall furnish such information and make such representations as
such officer requires to make such determination.
(b) Withholding Procedure. If the Company determines that
withholding tax is required with respect to any Option exercise,
the Company shall notify the Participant of the Withholding
Amount, and the Participant shall pay to the Company an amount
not less than the Withholding Amount. In lieu of making such
payment and at the discretion of the Company, the Participant
may elect to pay the Withholding Amount by either (i) delivering
to the Company a number of shares of Common Stock having an
aggregate Fair Market Value as of the Measurement Date not less
than the Withholding Amount or (ii) directing the Company to
withhold (and not to deliver or issue to the Participant)
a number of shares of Common Stock, otherwise issuable upon
the exercise of an Option, having an aggregate Fair Market Value
as of the Measurement Date not less than the Withholding
Amount. In addition, if the Committee approves, a Participant
may elect pursuant to the prior sentence to deliver or direct
the withholding of shares of Common Stock having an aggregate
Fair Market Value in excess of the minimum Withholding Amount
but not in excess of the Participant's applicable highest
marginal combined federal income and state income tax rate, as
estimated in good faith by such Participant. Any fractional
share interests resulting from the delivery or withholding of
shares of Common Stock to meet withholding tax requirements
shall be settled in cash. All amounts paid to or withheld by
the Company and the value of all shares of Common Stock
delivered to or withheld by the Company pursuant to this
Section 5.4 shall be deposited in accordance with applicable
law by the Company as withholding tax for the Participant's
account. If the Treasurer or other appropriate officer of the
Company determines that no withholding tax is required with
respect to the exercise of any Option (because such option
is an incentive stock option or otherwise), but subsequently
it is determined that the exercise resulted in taxable income
as to which withholding is required (as a result of a
disposition of shares or otherwise), the Participant shall
promptly, upon being notified of the withholding requirement,
pay to the Company, by means acceptable to the Company, the
amount required to be withheld; and at its election the Company
may condition the transfer of any shares issued upon exercise
of an incentive stock option upon receipt of such payment.
5.5 Notification of Inquiries and Agreements. Each
Participant and each Permitted Transferee shall notify the
Company in writing within 10 days after the date such Participant
or Permitted Transferee (i) first obtains knowledge of any
Internal Revenue Service inquiry, audit, assertion,
determination, investigation, or question relating in any manner
to the value of Options granted hereunder; (ii) includes or
agrees (including, without limitation, in any settlement, closing
or other similar agreement) to include in gross income with
respect to any Option granted under this Plan (A) any amount in
excess of the amount reported on Form 1099 or Form W-2 to such
Participant by the Company, or (B) if no such Form was received,
any amount; and/or (iii) exercises, sells, disposes of, or
otherwise transfers an Option acquired pursuant to this Plan.
Upon request, a Participant or Permitted Transferee shall provide
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to the Company any information or document relating to any event
described in the preceding sentence which the Company (in its
sole discretion) requires in order to calculate and substantiate
any change in the Company's tax liability as a result of such
event.
5.6 Conditions and Limitations on Exercise. At the
discretion of the Committee, exercised at the time of grant,
Options may vest, in one or more installments, upon (i) the
fulfillment of certain conditions, (ii) the passage of
a specified period of time, and/or (iii) the achievement by the
Company or any Subsidiary of certain performance goals.
5.7 Expiration of Options.
(a) Normal Expiration. In no event shall any part of
any Option be exercisable after the stated date of expiration
thereof.
(b) Early Expiration Upon Termination of Employment.
Any part of any Option that was not vested on a Participant's
Termination Date shall expire and be forfeited on such date, and
any part of any Option that was vested on the Termination Date
shall also expire and be forfeited to the extent not theretofore
exercised on the thirtieth (30th) day (one year, if termination
is caused by the Participant's death or disability) following the
Termination Date, but in no event after the stated date of
expiration thereof.
5.8 Right to Purchase Option Shares Upon Termination of
Employment.
(a) Repurchase Right. In the event a Participant's
employment with the Company is terminated for any reason, the
Option Shares (whether held by such Participant or one or more
transferees and including any Option Shares acquired subsequent
to such termination of employment) will be subject to repurchase
by the Company pursuant to the terms and conditions set forth in
this Section 5.8 (the "Repurchase Option") at a price per share
equal to the Fair Market Value thereof determined as of the
Termination Date.
(b) Repurchase Notice. The Board may elect to
purchase all or any portion of the Option Shares by delivery of
written notice (the "Repurchase Notice") to the holder or holders
of the Option Shares within 180 days after the Termination Date
(or if termination is caused by the Participant's death or
disability, 180 days after the expiration of the Options held by
such Participant). The Repurchase Notice will set forth the
number of Option Shares to be acquired from such holder, the
aggregate consideration to be paid for such shares and the time
and place for the closing of the transaction.
(c) Closing of Repurchase. The closing of the
repurchase transaction will take place on the date designated by
the Company in the Repurchase Notice, which date will not be more
than 45 days nor less than 10 days after the delivery of such
notice. The Company will pay for the Option Shares to be
purchased pursuant to the Repurchase Option by delivering, at the
option of the Company to such Participant and/or the other
holder(s), (1) a check in the amount of the aggregate sale price
of the Option Shares to be repurchased or (2) if the aggregate
consideration to be paid to such holder(s) of Option Shares
exceeds $50,000, a check in the amount of 20% of the aggregate
sale price of the Option Shares to be repurchased (except to the
extent not permitted under that certain revolving credit facility
with various lending institutions and Bankers Trust Company of up
to $40 million, a note in compliance therewith) and a
subordinated promissory note in a principal amount equal to the
remainder of the aggregate sale price, bearing interest at a
floating rate of interest equal to the prime rate as stated from
time to time by Chase Manhattan Bank or any successor thereto,
and payable, as to principal and interest, in four equal annual
installments on the first four anniversaries of the closing of
such repurchase; provided that if the Company determines that
withholding tax is required with respect to the exercise of a
Repurchase Option, the Company shall withhold an amount equal to
such withholding tax from the purchase price. At the closing,
the Participant and each other seller will deliver the
certificates representing the Option Shares to be sold duly
endorsed in form for transfer to the Company or its designee, and
the Company will be entitled to receive customary representations
and warranties from the Participant and the other sellers
regarding title to the Option Shares.
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5.9 Restrictions on Transfer.
(a) Restrictions. A Participant may not sell, pledge
or otherwise transfer any interest in any Option Shares except
pursuant to the provisions of this Section 5.9. At least 60 days
prior to making any transfer, the Participant proposing such
transfer shall deliver a written notice (the "Sale Notice") to
the Company. The Sale Notice will disclose in reasonable detail
the identity of the prospective transferee(s) and the terms and
conditions of the proposed transfer. Such Participant (and such
Participant's transferees) shall not consummate any such transfer
until 60 days after the Sale Notice has been delivered to the
Company, unless the Company has notified such Participant in
writing that it will not exercise its rights under this Section
5.9. (The date of the first to occur of such events is referred
to herein as the "Authorization Date").
(b) Repurchase Option. The Company may elect to
purchase all or any portion of the Option Shares to be
transferred upon the same terms and conditions as those set forth
in the Sale Notice (the "Right of First Refusal") by delivering a
written notice of such election to such Participant within 30
days after the receipt of the Sale Notice by the Company (the
"Election Notice"). If the Company has not elected to purchase
all of the Option Shares specified in the Sale Notice, such
Participant may transfer the Option Shares not purchased by the
Company to the prospective transferee(s) as specified in the Sale
Notice at a price and on terms no more favorable to the
transferee(s) thereof than specified in the Sale Notice during
the 60-day period immediately following the Authorization Date.
Any Option Shares not so transferred within such 60-day period
must be reoffered to the Company in accordance with the
provisions of this Section 5.9 in connection with any subsequent
proposed transfer.
(c) Exceptions. The restrictions contained in this
Section 5.9 will not apply with respect to transfers of Option
Shares (1) pursuant to applicable laws of descent and
distribution, (2) pursuant to the Shareholders Agreement or (3)
among the Participant's family group; provided that the
restrictions contained in this paragraph will continue to be
applicable to the Option Shares after any such transfer and the
transferees of such Option Shares have agreed in writing to be
bound by the terms and provisions of this Plan and the Option
grant, as amended from time to time. The Participant's "family
group" means the Participant's spouse and descendants (whether
natural or adopted) and any trust solely for the benefit of the
Participant and/or the Participant's spouse and/or descendants.
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5.10 Termination of Restrictions. The rights and
obligations set forth in Sections 5.8 and 5.9 hereof will
terminate upon the earlier of (A) the consummation by the Company
of a Qualified Initial Public Offering or (B) the sale of Option
Shares in accordance with the terms and conditions of Section 5.9
(except for a transfer pursuant to Section 5.9 (c)); provided
that with respect to clause (B) above, such rights and
obligations shall terminate only with respect to those Option
Shares sold.
ARTICLE VI
General Provisions
6.1 Written Agreement. Each Option granted hereunder shall
be embodied in a written agreement (the "Option Agreement")
which shall be signed by the Participant to whom the Option is
granted and shall be subject to the terms and conditions set
forth herein.
6.2 Listing, Registration and Legal Compliance. If at any
time the Committee determines, in its discretion, that the
listing, registration or qualification of the shares subject to
Options upon any securities exchange or under any state or
federal securities or other law or regulation, or the consent or
approval of any governmental regulatory body, is necessary or
desirable as a condition to or in connection with the granting of
Options or the purchase or issuance of shares thereunder, no
Options may be granted or exercised, in whole or in part, unless
such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not
acceptable to the Committee. The holders of such Options will
supply the Company with such certificates, representations and
information as the Company shall request and shall otherwise
cooperate with the Company in obtaining such listing,
registration, qualification, consent or approval. In the case of
officers and other persons subject to Section 16(b) of the
Securities Exchange Act of 1934, as amended, the Committee may at
any time impose any limitations upon the exercise of Options
that, in the Committee's discretion, are necessary or desirable
in order to comply with such Section 16(b) and the rules and
regulations thereunder. If the Company, as part of an offering
of securities or otherwise, finds it desirable because of federal
or state regulatory requirements to reduce the period during
which any Options may be exercised, the Committee may, in its
discretion and without the Participant's consent, so reduce such
period on not less than 15 days' written notice to the holders
thereof.
6.3 Options Not Transferrable. Options may not be
transferred other than by will or the laws of descent and
distribution and, during the lifetime of the Participant to whom
they were granted, may be exercised only by such Participant (or,
if such Participant is incapacitated, by such Participant's
legal guardian or legal representative). In the event of the
death of a Participant, Options which are not vested on the date
of death shall terminate; exercise of Options granted hereunder
to such Participant, which are vested as of the date of death,
may be made only by the executor or administrator of such
Participant's estate or the person or persons to whom such
Participant's rights under the Options will pass by will or the
laws of descent and distribution.
6.4 Adjustments. In the event of a reorganization,
recapitalization, stock dividend or stock split, or combination
or other change in the shares of Common Stock, the Board or the
Committee may, in order to prevent the dilution or enlargement of
rights under the Plan or outstanding Options, adjust (1) the
number and type of shares as to which options may be granted
under the Plan, (2) the number and type of shares covered by
outstanding Options, (3) the exercise prices specified therein
and (4) other provisions of this Plan which specify a number of
shares, all as such Board or Committee determines to be
appropriate and equitable.
6.5 Rights of Participants. 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 (with or without cause), or confer upon any Participant any
right to continue in the employ of the Company or any Subsidiary
for any period of time or to continue to receive such
Participant's current (or other) rate of compensation. No
employee shall have a right to be selected as a Participant or,
having been so selected, to be selected again as a Participant.
6.6 Fair Market Value Determination. Until the Common
Stock is listed on a security exchange or quoted on the Nasdaq
Stock Market, the Board or the Committee will determine the Fair
Market Value per share of Common Stock based on such factors as
the members thereof in the exercise of their business judgment
consider relevant as necessary and any Participant may receive
upon termination of his or her employment with the Company the
most recent Fair Market Value determination for the Common Stock
upon written request to the Board.
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6.7 Amendment, Suspension and Termination of Plan. The
Board or the Committee may suspend or terminate the Plan or any
portion thereof at any time and may amend it from time to time in
such respects as the Board or the Committee may deem advisable;
provided, however, that no such amendment shall be made without
shareholder approval to the extent such approval is required by
law, agreement or the rules of any exchange or national market
system upon which the Common Stock is listed, and no such
amendment, suspension or termination shall impair the rights of
Participants under outstanding Options without the written
consent of the Participants affected thereby, except as provided
below. No Options shall be granted hereunder after the tenth
anniversary of the adoption of the Plan.
6.8 Amendment of Outstanding Options. The Committee may
amend or modify any Option in any manner to the extent that the
Committee would have had the authority under the Plan initially
to grant such Option; provided that, except as expressly
contemplated elsewhere herein or in any agreement evidencing such
Option, no such amendment or modification shall impair the rights
of any Participant under any outstanding Option without the
written consent of such Participant.
6.9 Indemnification. In addition to such other rights of
indemnification as they may have as members of the Board or the
Committee, the members of the Committee shall be indemnified by
the Company against (i) all costs and expenses reasonably
incurred by them in connection with any action, suit or
proceeding to which they or any of them may be party by reason of
any action taken or failure to act under or in connection with
the Plan or any Option granted under the Plan, and (ii) all
amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding; provided, however, that any such
Committee member shall be entitled to the indemnification rights
set forth in this Section 6.9 only if such member (1) acted in
good faith and in a manner that such member reasonably believed
to be in, and not opposed to, the best interests of the Company,
and (2) with respect to any criminal action or proceeding, (A)
had no reasonable cause to believe that such conduct was
unlawful, and (B) upon the institution of any such action, suit
or proceeding a Committee member shall give the Company written
notice thereof and an opportunity to handle and defend the same
before such Committee member undertakes to handle and defend it
on his own behalf.
6.10 Restricted Securities. Unless registered as described
in Section 6.2 hereof, all Common Stock issued pursuant to the
terms of this Plan shall constitute "restricted securities," as
that term is defined in Rule 144 promulgated by the Securities
and Exchange Commission pursuant to the Securities Act, and may
not be transferred except in compliance with the registration
requirements of the Securities Act or an exemption therefrom.
* * * * *
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