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EXHIBIT 10.4
EMPLOYEE STOCK OPTION AGREEMENT
This Employee Stock Option Agreement, dated as of December 19,
2006,
between Atlas Copco North America Inc. (to be renamed RSC
Holdings Inc.), a
Delaware corporation, and the Employee whose name appears on the
signature page
hereof, is being entered into pursuant to the Atlas Copco North
America Inc. (to
be renamed RSC Holdings Inc.) Stock Incentive Plan. The meaning
of capitalized
terms may be found in Section 7.
The Company and the Employee hereby agree as follows:
Section 1. Grant of Options
(a) Confirmation of Grant. The Company hereby evidences and
confirms,
effective as of the date hereof, its grant to the Employee of
(i) Service
Options to purchase the number of Common Shares specified on the
signature
page hereof under the heading "Service Options" and (ii)
Performance
Options to purchase the number of Common Shares specified on the
signature
page hereof under the heading "Performance Options." The Options
are not
intended to be incentive stock options under the Code. This
Agreement is
entered into pursuant to, and the terms of the Options are
subject to, the
terms of the Plan. If there is any inconsistency between this
Agreement and
the terms of the Plan, the terms of the Plan shall govern.
(b) Option Price. Each share covered by an Option shall have
the
Option Price specified on the signature page hereof.
Section 2. Vesting and Exercisability
(a) Service Options. Except as otherwise provided in Section 6
or
Section 2(d)of this Agreement, the Service Options shall become
vested in
five equal annual installments on each of the first through
fifth
anniversaries of the Grant Date, subject to the continuous
employment of
the Employee with the Company until the applicable vesting date;
provided
that if the Employee's employment with the Company is terminated
in a
Special Termination (i.e., by reason of the Employee's death
or
Disability), any Service Options
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held by the Employee shall immediately vest as of the effective
date of
such Special Termination.
(b) Performance Options.
(i) Annual Vesting Opportunity. Subject to the continuous
employment of the Employee with the Company until the
applicable
vesting date, up to 20% of the Performance Options may vest
with
respect to each of Fiscal Years 2007 through 2011 depending on
the
Company's achievement compared with the Annual Performance
Target for
such year, as follows:
(A) none of the Performance Options eligible to vest with
respect to such Fiscal Year will vest if the Company has
achieved
less than 80% the applicable Annual Performance Target; and
(B) between 50% and 100% of the Performance Options eligible
to vest with respect to such Fiscal Year (i.e., 10-20%) will
vest
if the Company achieves at least 80% of the applicable
Annual
Performance Target, with 50% vesting at 80% achievement,
100%
vesting at 100% (or higher) achievement and ratable vesting
of
between 50 and 100% for achievement between 80 and 100%.
(ii) Catch-Up Vesting Opportunity. If the Annual Performance
Target is not achieved for a particular Fiscal Year (a "Missed
Year"),
the amount by which the achievement fell short of such
Annual
Performance Target for such Fiscal Year (the "Shortfall") shall
be
carried forward and the Performance Options that do not vest
pursuant
to Section 2(b)(i) with respect to such Missed Year (the
"Carryforward
Options") shall, subject to the continuous employment of the
Employee
with the Company until the applicable vesting date, be eligible
for
vesting based on the achievement of the combined Annual
Performance
Targets for the two Fiscal Years ending immediately after the
Missed
Year (the "Cumulative Target"), as follows:
(A) none of the Carryforward Options eligible to vest with
respect to the two Fiscal Years
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ending immediately after a Missed Year will vest if the
Company
has achieved 100% or less of the applicable Cumulative
Target;
and
(B) between 0% and 100% of the Carryforward Options eligible
to vest with respect to such two Fiscal Years ending
immediately
after a Missed Year will vest if the Company achieves more
than
100% of the applicable Cumulative Targets, with 100% vesting
if
the Company achieves an amount equal to or greater than the
Shortfall and ratable vesting of between 0% and 100% for
achievement between 0% and 100% of the Shortfall.
(iii) Change in Control Vesting. On a Change in Control in
which
the Investors receive only cash consideration for their equity
of the
Company, Performance Options eligible for vesting with respect
to
Fiscal Years ending after the Change in Control will vest,
subject to
the continuous employment of the Employee with the Company until
the
Change in Control, if and to the extent that (after giving
effect to
vesting of all options) the Change in Control results in the
Investors
having achieved at least the actual cash return on their
investment
(for the avoidance of doubt, to be determined excluding any fees
or
other amounts paid or payable to any Affiliate of any Investor)
in the
Company ("ROI") for the applicable Fiscal Year set forth below,
with
50% vesting at achievement of the Minimum ROI, 100% vesting
at
achievement of the Target ROI, and ratable vesting of between 50
and
100% for achievement of between the Minimum ROI and the Target
ROI,
and any Performance Options that do not so vest will, unless the
Board
determines otherwise, be cancelled upon such Change in
Control.
<TABLE>
<CAPTION>
YEAR MINIMUM ROI TARGET ROI
---- ----------- ----------
<S> <C> <C>
2007 1.75x 2x
2008 2.25x 2.5x
</TABLE>
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<TABLE>
<S> <C> <C>
2009 2.75x 3x
2010 3.25x 3.5x
2011 3.75x 4x
</TABLE>
(c) Vesting Date. The applicable vesting date for a Fiscal
Year's
Performance Options or, if applicable, Carryforward Options,
shall be the
date the Audit Committee of the Company's Board of Directors
approves the
Company's annual audited financial statements for the applicable
Fiscal
Year(s).
(d) Discretionary Acceleration. The Board, in its sole
discretion, may
accelerate the vesting or exercisability of any Option, all or a
portion of
any class of Options, at any time and from time to time.
(e) Exercise. Once vested in accordance with the provisions of
this
Agreement, the Options may be exercised at any time and from
time to time
prior to the date such Options terminate pursuant to Section 3.
Options may
only be exercised with respect to whole Common Shares and must
be exercised
in accordance with Section 4.
Section 3. Termination of Options
(a) Normal Termination Date. Unless earlier terminated pursuant
to
Section 3(b) or Section 6, the Options shall terminate on the
tenth
anniversary of the Grant Date (the "Normal Termination Date"),
if not
exercised prior to such date.
(b) Early Termination. If the Employee's employment with the
Company
terminates for any reason, any Options held by the Employee that
have not
vested before the effective date of such termination of
employment
(determined without regard to any statutory or deemed or
express
contractual notice period) or that do not become vested on such
date in
accordance with Section 2 shall terminate immediately upon such
termination
of employment (determined without regard to any statutory or
deemed or
express contractual notice period) and, if the Employee's
employment is
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terminated for Cause, all Options (whether or not then vested
or
exercisable) shall automatically terminate immediately upon
such
termination. All vested Options held by the Employee following
the
effective date of a termination of employment shall remain
exercisable
until the first to occur of (i) the 90th day following the
effective date
of the Employee's termination of employment (determined without
regard to
any deemed or express statutory or contractual notice period),
(ii) the
180th day in the case of a Special Termination or a retirement
from active
service on or after the Employee reaches normal retirement age,
(iii) the
Normal Termination Date or (iv) the cancellation of the Options
pursuant to
Section 6(a), and if not exercised within such period the
Options shall
automatically terminate upon the expiration of such period.
Section 4. Manner of Exercise
(a) General. Subject to such reasonable administrative
regulations as
the Board may adopt from time to time, the Employee may exercise
vested
Options by giving at least 15 business days prior written notice
to the
Secretary of the Company specifying the proposed date on which
the Employee
desires to exercise a vested Option (the "Exercise Date"), the
number of
whole shares with respect to which the Options are being
exercised (the
"Exercise Shares") and the aggregate Option Price for such
Exercise Shares
(the "Exercise Price"); provided that following a Public
Offering notice
may be given within such lesser period as the Board may permit.
On or
before any Exercise Date, the Company and the Employee shall
enter into an
Employee Stock Subscription in such form, and containing such
transfer and
other restrictions as the Board determines appropriate. Unless
otherwise
determined by the Board, and subject to such other terms,
representations
and warranties as may be provided for in the Employee Stock
Subscription
Agreement, (i) on or before the Exercise Date the Employee shall
deliver to
the Company full payment for the Exercise Shares in United
States dollars
in cash, or cash equivalents satisfactory to the Company, in an
amount
equal to the Exercise Price plus any required withholding taxes
or other
similar taxes, charges or fees and (ii) the Company shall
register the
issuance of the Exercise Shares on its records (or direct such
issuance to
be registered by the Company's transfer agent). The Company may
require the
Employee to furnish or execute such other documents as the
Company shall
reasonably deem necessary (x) to evidence such exercise, (y) to
determine
whether registration is then required under the Securities Act
or other
applicable law or (z) to comply with or
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satisfy the requirements of the Securities Act, applicable state
or
non-U.S. securities laws or any other law.
(b) Restrictions on Exercise. Notwithstanding any other
provision of
this Agreement, the Options may not be exercised in whole or in
part, and
no certificates representing Exercise Shares shall be delivered,
(i) unless
all requisite approvals and consents of any governmental
authority of any
kind shall have been secured, (ii) unless the purchase of the
Exercise
Shares shall be exempt from registration under applicable U.S.
federal
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