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1997 Equity Incentive Plan

This is an actual contract by American Italian Pasta.

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Sectors: Food, Beverages and Tobacco
Governing Law: Delaware, View Delaware State Laws
Effective Date: January 01, 1997
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American Italian Pasta Company


1997 Equity Incentive Plan


2 Article 1. Establishment, Effective Date, Objectives, and Duration....... 1 Article 2. Definitions................................................... 1 Article 3. Administration................................................ 6 Article 4. Shares Subject to the Plan and Maximum Awards................. 7 Article 5. Eligibility and General Conditions of Awards.................. 8 Article 6. Stock Options.................................................10 Article 7. Stock Appreciation Rights.....................................14 Article 8. Restricted Shares.............................................15 Article 9. Performance Units and Performance Shares......................16 Article 10. Bonus Shares.................................................18 Article 11. Beneficiary Designation......................................18 Article 12. Deferrals....................................................18 Article 13. Rights of Employees/Directors................................18 Article 14. Change in Control............................................18 Article 15. Amendment, Modification, and Termination.....................19 Article 16. Withholding..................................................20 Article 17. Successors...................................................21 Article 18. Additional Provisions........................................21


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AMERICAN ITALIAN PASTA COMPANY
1997 EQUITY INCENTIVE PLAN


ARTICLE 1. ESTABLISHMENT, EFFECTIVE DATE, OBJECTIVES, AND DURATION


1.1 Establishment of the Plan. American Italian Pasta Company, a Delaware corporation (the "Company"), hereby establishes an incentive compensation plan to be known as the "American Italian Pasta Company 1997 Equity Incentive Plan" (the "Plan"). The Plan has been adopted by the Board of Directors of the Company (the "Board") and the stockholders of the Company. The Plan shall be effective as of September __, 1997 (the "Effective Date").


1.2 Objectives of the Plan. The Plan is intended to allow selected employees, directors and consultants of the Company and its Subsidiaries to acquire or increase equity ownership in the Company, thereby strengthening their commitment to the success of the Company and stimulating their efforts on behalf of the Company, and to assist the Company and its Subsidiaries in attracting new employees, directors and consultants and retaining existing employees, directors, and consultants. The Plan is also intended to optimize the profitability and growth of the Company through incentives which are consistent with the Company's goals; to provide employees and directors with an incentive for excellence in individual performance; and to promote teamwork among employees, directors, and consultants.


1.3 Duration of the Plan. The Plan shall commence on the Effective Date and shall remain in effect, subject to the right of the Board to amend or terminate the Plan at any time pursuant to Article 15 hereof, until all Shares subject to it shall have been purchased or acquired according to the Plan's provisions. However, in no event may an Incentive Stock Option be granted under the Plan on or after the date 10 years following the earlier of (i) the date the Plan was adopted and (ii) the date the Plan was approved by the stockholders of the Company.


ARTICLE 2. DEFINITIONS


Whenever used in the Plan, the following terms shall have the meanings set forth below:


2.1 "Article" an Article of the Plan.


2.2 "Award" means Options (including Incentive Stock Options), Restricted Shares, Bonus Shares, stock appreciation rights (SARs), performance units or performance shares granted under the Plan.


2.3 "Award Agreement" means the written agreement by which an Award shall be evidenced.


2.4 "Board" -- see Section 1.1.


2.5 "Bonus Shares" means Shares that are awarded to a Grantee without cost and without restrictions in recognition of past performance (whether determined by reference to another


4 employee benefit plan of the Company or otherwise) or as an incentive to become an employee, director or consultant of the Company or a Subsidiary.


2.6 "Cause" means, unless otherwise defined in any Employment Agreement or Award Agreement, any one or more of the following:


(A) a Grantee's commission of a crime which, in the judgment of the
Committee, is likely to result in injury to the Company or a Subsidiary;


(B) the material violation by the Grantee of written policies of the
Company or a Subsidiary;


(C) the habitual neglect by the Grantee in the performance of his or
her duties to the Company or a Subsidiary;


(D) action or inaction by the Grantee in connection with his or her
duties to the Company or a Subsidiary resulting, in the judgment of the
Committee, in a material injury to the Company or a Subsidiary;


(E) the rendering of services by the Grantee for any organization or
engaging directly or indirectly in any business which is or becomes
competitive with the Company or a Subsidiary or which organization or
business, or the rendering of services to such organization or business, is
or becomes otherwise prejudicial to or in conflict with the interests of
the Company or a Subsidiary;


(F) any attempt by the Grantee directly or indirectly to induce any
employee of the Company or a Subsidiary to be employed or perform services
elsewhere or any attempt directly or indirectly to solicit (other than for
the account of the Company or a Subsidiary) the trade or business of any
current or prospective customer, supplier, or partner of the Company or a
Subsidiary; or


(G) any other conduct or act determined by the Committee to be
injurious, detrimental, or prejudicial to any interest of the Company or a
Subsidiary.


2.7 "Code" means the Internal Revenue Code of 1986, as amended from time to time, and regulations and rulings thereunder. References to a particular section of the Code include references to successor provisions.


2.8 "Committee" has the meaning set forth in Article 3.


2.9 "Common Stock" means the Class A Convertible Common Stock, $.001 par value, of the Company.


2.10 "Company" -- see Section 1.1.


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2.11 "Covered Employee" means a Grantee who, as of the date of the value of an Award is recognizable as income, is one of the group of "covered employees," within the meaning of Code Section 162(m).


2.12 "Disability" means, unless otherwise defined in an Employment Agreement or Award Agreement, for purposes of the exercise of an Incentive Stock Option after Termination of Affiliation, a disability within the meaning of Section 22(e)(3) of the Code, and for all other purposes, a mental or physical condition which, in the judgment of the Committee, renders a Grantee unable to perform any of the principal job responsibilities which such Grantee held or the tasks to which such Grantee was assigned at the time the disability was incurred, and which condition is expected to be permanent or for an indefinite duration exceeding two years.


2.13 "Disqualifying Disposition" -- see Section 6.4.


2.13 "Effective Date" -- see Section 1.1.


2.14 "Eligible Person" means (i) any employee (including any officer) of the Company or any Subsidiary, including any such employee who is on an approved leave of absence, layoff, or has been subject to a disability which does not qualify as a Disability; (ii) any director of the Company or any Subsidiary; and (iii) any person performing services for the Company or a Subsidiary in the capacity of a consultant.


2.15 "Employment Agreement" means, with respect to any Grantee, any employment agreement by and between the Company and such Grantee.


2.16 "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. References to a particular section of the Exchange Act include references to successor provisions.


2.17 "Fair Market Value" means (A) with respect to any property other than Shares, the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee, and (B) with respect to Shares, unless otherwise determined in the good faith discretion of the Committee, as of any date, (i) the closing price on the date of determination on the New York Stock Exchange (or, if no sale of Shares was reported for such date, on the next preceding date on which a sale of Shares was reported), (ii) if the Shares are not listed on the New York Stock Exchange, the closing price of the Shares on such other national exchange on which the Shares are principally traded or as reported by the National Market System, or similar organization, or if no such quotations are available, the average of the high bid and low asked quotations in the over-the-counter market as reported by the National Quotation Bureau Incorporated or similar organizations; or (iii) in the event that there shall be no public market for the Shares, the fair market value of the Shares as determined (which determination shall be conclusive) in good faith by the Committee, based upon the value of the Company as a going concern, as if such Shares were publicly owned stock, but without any discount with respect to minority ownership. Notwithstanding the foregoing, Fair Market


-3- 6 Value for Awards made on the effective date of the initial public offering of the Company shall mean the price to the public pursuant to the form of final prospectus used in connection with the initial public offering, as indicated on the cover page of such prospectus or otherwise.


2.18 "Freestanding SAR" means an SAR that is granted independently of any other Award.


2.19 "Grant Date" -- see Section 5.2.


2.20 "Grantee" means an individual who has been granted an Award.


2.21 "Incentive Stock Option" means an option granted under Article 6 of the Plan that is intended to meet the requirements of Section 422 of the Code or any successor provisions thereto.


2.22 "including" or "includes" means "including, without limitation," or "includes, without limitation", respectively.


2.23 "Mature Shares" means Shares for which the holder thereof has good title, free and clear of all liens and encumbrances, and which such holder either (i) has held for at least six months or (ii) has purchased on the open market.


2.24 "Minimum Consideration" means $.001 per Share or such other amount that is from time to time considered to be capital for purposes of Section 154 of the Delaware General Corporation Law.


2.25 "Option" means an option granted under Article 6 of the Plan.


2.26 "Option Price" means the price at which a Share may be purchased by a Grantee pursuant to an Option.


2.27 "Option Term" means the period beginning on the Grant Date of an Option and ending on the expiration date of such Option, as specified in the Award Agreement for such Option and as may, in the discretion of the Committee and consistent with the provisions of the Plan, be extended from time to time prior to the expiration date of such Option then in effect.


2.28 "Performance-Based Exception" means the performance-based exception from the tax deductibility limitations of Code Section 162(m).


2.29 "Performance Period" -- see Section 9.2.


2.30 "Period of Restriction" means the period during which the transfer of Restricted Shares is limited in some way (the length of the period being based on the passage of time, the


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7 achievement of performance goals, or upon the occurrence of other events as determined by the Committee, in its discretion), and the Shares are subject to a substantial risk of forfeiture, as provided in Article 8.


2.31 "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) thereof.


2.32 "Plan" -- see the introductory paragraph.


2.33 "Reload Option" -- see Section 6.5.


2.34 "Required Withholding" -- see Article 16.


2.35 "Restricted Shares" means Shares that are subject to forfeiture if the Grantee does not satisfy the conditions specified in the Award Agreement applicable to such Shares.


2.36 "Rule 16b-3" means Rule 16b-3 promulgated by the SEC under the Exchange Act, as amended from time to time, together with any successor rule, as in effect from time to time.


2.37 "Retirement" means for any Grantee who is an employee, a Termination of Affiliation by the Grantee upon attaining age 65 with at least five years of service as an employee of the Company or a Subsidiary.


2.38 "SAR" means a stock appreciation right.


2.39 "SEC" means the United States Securities and Exchange Commission, or any successor thereto.


2.40 "Section" means, unless the context otherwise requires, a Section of the Plan.


2.41 "Share" means a share of Common Stock.


2.42 "Strike Price" of any SAR shall equal, for any Tandem SAR that is identified with an option, the Option Price of such option, or for any other SAR, 100% of the Fair Market Value of a Share on the Grant Date of such SAR; provided that the Committee may specify a higher Strike Price in the Award Agreement.


2.43 "Subsidiary" means, for purposes of grants of Incentive Stock Options, a corporation as defined in Section 424(f) of the Code (with the Company being treated as the employer corporation for purposes of this definition) and, for all other purposes, a United States or foreign corporation with respect to which the Company owns, directly or indirectly, 50% or more of the then-outstanding common stock.


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2.44 "Tandem SAR" means an SAR that is granted in connection with a related Award, the exercise of which shall require cancellation of the right to purchase a Share under the related Award (and when a Share is purchased under the related Award, the Tandem SAR shall similarly be canceled).


2.45 "Termination of Affiliation" occurs on the first day on which an individual is for any reason no longer providing services to the Company or any Subsidiary in the capacity of an employee, director or consultant, or with respect to an individual who is an employee or director of, or consultant to, a Subsidiary, the first day on which the Company no longer owns, directly or indirectly, voting securities possessing at least 50% of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of such Subsidiary.


ARTICLE 3. ADMINISTRATION


3.1 Committee. Subject to Article 15, and to Section 3.2, the Plan shall be administered by the Board, or a committee appointed by the Board to administer the Plan. Any references herein to "Committee" are references to the Board, or a committee established by the Board, as applicable. To the extent the Board considers it desirable to comply with or qualify under Rule 16b-3 or meet the Performance-Based Exception, the Committee shall consist of two or more directors of the Company, all of whom qualify as "outside directors "as defined for purposes of the regulations under Code Section 162(m) and "non- employee directors" within the meaning of Rule 16b-3. The number of members of the Committee shall from time to time be increased or decreased, and shall be subject to such conditions, in each case as the Board deems appropriate to permit transactions in Shares pursuant to the Plan to satisfy such conditions of Rule 16b-3 as then in effect.


3.2 Powers of Committee. Subject to the express provisions of the Plan, the Committee has full and final authority and sole discretion as follows:


(i) to determine when, to whom and in what types and amounts Awards should be granted and the terms and conditions applicable to each Award, including the benefit payable under any SAR, performance unit or performance share, and whether or not specific Awards shall be granted in connection with other specific Awards, and if so whether they shall be exercisable cumulatively with, or alternatively to, such other specific Awards;


(ii) to determine the amount, if any, that a Grantee shall pay for Restricted Shares, whether to permit or require the payment of cash dividends thereon to be deferred and the terms related thereto, when Restricted Shares (including Restricted Shares acquired upon the exercise of an option) shall be forfeited and whether such shares shall be held in escrow;


(iii) to construe and interpret the Plan and to make all determinations necessary or advisable for the administration of the Plan;


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(iv) to make, amend, and rescind rules relating to the Plan, including rules with respect to the exercisability and nonforfeitability of Awards upon the Termination of Affiliation of a Grantee;


(v) to determine the terms and conditions of all Award Agreements (which need not be identical) and, with the consent of the Grantee, to amend any such Award Agreement at any time, among other things, to permit transfers of such Awards to the extent permitted by the Plan; provided that the consent of the Grantee shall not be required for any amendment which (A) does not adversely affect the rights of the Grantee, or (B) is necessary or advisable (as determined by the Committee) to carry out the purpose of the Award as a result of any new or change in existing applicable law;


(vi) to cancel, with the consent of the Grantee, outstanding Awards and to grant new Awards in substitution therefor;


(vii) to accelerate the exercisability (including exercisability within a period of less than six months after the Grant Date) of, and to accelerate or waive any or all of the terms and conditions applicable to, any Award or any group of Awards for any reason and at any time, including in connection with a Termination of Affiliation (other than for Cause);


(viii) subject to Sections 1.3 and 5.3, to extend the time during which any Award or group of Awards may be exercised;


(ix) to make such adjustments or modifications to Awards to Grantees working outside the United States as are advisable to fulfill the purposes of the Plan;


(x) to impose such additional terms and conditions upon the grant, exercise or retention of Awards as the Committee may, before or concurrently with the grant thereof, deem appropriate, including limiting the percentage of Awards which may from time to time be exercised by a Grantee; and


(xi) to take any other action with respect to any matters relating to the Plan for which it is responsible.


The determination of the Committee on all matters relating to the Plan or any Award Agreement shall be final, conclusive and binding on all Persons. No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award.


ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS


4.1 Number of Shares Available for Grants. Subject to adjustment as provided in Section 4.2, the number of Shares hereby reserved for issuance under the Plan shall be 2,000,000. If any Shares subject to an Award granted hereunder are forfeited or such Award otherwise


-7- 10 terminates without the issuance of such Shares or of other consideration in lieu of such Shares, the Shares subject to such Award, to the extent of any such forfeiture or termination shall again be available for grant under the Plan. The Committee shall from time to time determine the appropriate methodology for calculating the number of shares issued pursuant to the Plan. Shares issued pursuant to the Plan may be treasury shares or newly-issued Shares.


(a) Options: The maximum aggregate number of Shares that may be
granted in the form of options, pursuant to any Award granted in any
one calendar year to any one Grantee shall be 500,000.


(b) SARs: The maximum aggregate number of SARs available under the
Plan shall be 500,000, and the maximum aggregate number of SARs that
may be granted in any one calendar year to any one Grantee shall be
500,000.


(c) Restricted Shares: The m
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